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Posts Tagged ‘housing affordability’

Steven Joyce rails against low mortgage interest rates; claims higher interest rates “beneficial”

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National is increasingly on the back-foot with New Zealand’s ever-worsening housing crisis. Ministers from the Prime minister down are desperately trying to spin a narrative that the National-led administration “is getting on top of the problem“.

Despite ministerial ‘reassurances’, both Middle and Lower Working  classes are feeling the dead-weight of a housing shortage; ballooning house prices,  and rising rents.

Recently-appointed Finance Minister, Steven Joyce,  has found a new unlikely scapegoat, blaming the housing bubble and worsening housing affordability  on current low interest rates.  On 11 May, on Radio NZ’s Morning Report, he said;

“We have very, very low interest rates historically, and as a result that’s directly linked to how much house prices are being bid up around the world. It’s not the sole reason for why we have high asset prices around the world, it’s not just houses, it’s shares and everything else. But it is certainly one of the dominant reasons for that. And unfortunately it’s going to be a little bit of time yet before that changes, although there’s indications that this period of ultra-low interest rates that the world has seen is coming to an end. And so I think that, that, will improve affordability over time.”

Radio NZ’s Guyon Espiner reacted with predictable incredulity that Joyce was relying on interest rates rising to “improve affordability over time“.

Joyce’s finger-pointing and blaming “very, very low interest rates historically” is at variance with a speech that former Dear Leader, John Key, gave in January 2008 where he specifically indentified higher interest rates as a barrier to home ownership;

* Why, after eight years of Labour, are we paying the second-highest interest rates in the developed world?

[…]

* Why can’t our hardworking kids afford to buy their own house?

Good questions, Mr Key

Got any answers, Mr Joyce?

Because according to Statistics NZ, home ownership rates have worsened since John Key gave his highly-critical speech, nine years ago;

Home ownership continues to fall

  • In 2013, 64.8 percent of households owned their home or held it in a family trust, down from 66.9 percent in 2006.

  • The percentage of households who owned their home dropped to 49.9 percent in 2013 from 54.5 percent in 2006.

Home ownership reached a peak of 73.8% by 1991. Since then, with  the advent of neo-liberal “reforms” in the late ’80s and early ’90s, home ownership has steadily declined.

Those who have benefitted have tended to be investors/speculators. In 2016, 46% of mortgages were issued to property investors/speculators in the Auckland region. Despite a watered-down, pseudo-capital gains tax,  referred to as the “bright line” test implemented in October 2015, investors/speculators still accounted for 43% of house purchasers by March of this year.

The same report revealed the dismal fact that first home buyers constituted only 19% of sales.

John Key’s gloomy plea, “Why can’t our hardworking kids afford to buy their own house?” rings truer than ever.

Poorer families are fairing no better.

National’s abysmal policy to sell off state housing has left a legacy of families living in over-crowded homes; garages, and cars. This scandal has reached the attention of the international media.

From the Guardian;

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From Al Jazeera;

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As with our fouled waterways, we have developed another unwelcomed reputation – this time for the increasing scourge of  homelessness.

But it is not just the sons and daughters of the Middle Classes that are finding housing increasingly out of their financial reach. The poorest families in our society have resorted to living in over-crowded homes or in garages and in cars.

National has spent millions of taxpayer’s dollars housing families in make-shift shelters in motels. At the behest on National ministers, WINZ have made it official policy to recoup money  “loaned” to beneficiaries to pay for emergency accommodation;

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National’s track record on this growing community cancer has been one of ineptitude.

In 2015, Dear Leader Key made  protestations that  no problem exists in our country;

“No, I don’t think you can call it a crisis. What you can say though is that Auckland house prices have been rising, and rising too quickly actually.”

He kept denying it – until he didn’t;

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Unfortunately, former-and current State beneficiary, and now Social Housing Minister, Paula Bennett, apparently ‘did not get the memo’. She still denies any housing crisis in this country;

“I certainly wouldn’t call it a crisis. I think that we’ve always had people in need. So the other night on TV I heard the homeless story was second in and then the seventh story was a man who’d been 30 years living on the streets.”

Despite  being in full denial, in May last year Bennett announced that National would be committing $41.1 million over the next four years  for emergency housing and grants.

By April this year  it was revealed that National had already spent $16.5 million on emergency accomodation. It had barely been a year since Bennett issued her Beehive statement lauding the $41.1 million expenditure, and already nearly a third of that amount has been spent.

This is clear evidence as to how far out-of-touch National is on social issues.

The stress and pressure on Ministers and state sector bureaucrats has become apparent, with threats of  retribution flying.  This month alone, a MSD manager and associate minister of social housing, Alfred Ngaro, were revealed to have warned critics of the government not to talk to the media;

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Bennett went on to make this extraordinary statement;

“I spend the bulk of my time on social housing issues and driving my department into seriously thinking about different ways of tackling this.”

Her comment was followed on 20 May, on TV3’s The Nation, when current Dear Leader, Bill English tried to spin a positive message in  National’s ‘fight against homelessness’;

“Our task has been to, as we set out three or four years ago, to rebuild the state housing stock. And that’s what we are setting out to do.”

English and Bennett’s claims would be admirable – if they were not self-serving hypocrisy.

In 2008, Housing NZ’s stock comprised of  69,000 rental properties.

By 2016, that number had fallen to 61,600 (plus a further 2,700 leased).

In eight years, National has managed to sell-off 7,400 properties.

No wonder English admitted “we set out three or four years ago, to rebuild the state housing stock“. His administration was responsible for selling  off over ten percent of much-needed state housing.

No wonder families are forced into over-crowding; into garages and sheds; and into cars and vans.

Confronted by social problems, National ministers duck for cover. Especially when those same social problems are a direct consequence of their own ideologically-driven and ill-considered policies.

National ministers English, Bennett, Joyce, Nick Smith, et al are responsible for our current homelessness.

Parting thought

Left-wing parties and movement are generally proactive in identifying and resolving critical social problems and inequalities. It is the raison d’etre of the Left.

The Right seem only able to belatedly react to social problem and inequalities.

Especially when they caused it.

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References

Interest.co.nz: PM says no housing crisis in Auckland

NZ Herald: Housing shortage growing by 40 homes a day

Fairfax media: House prices rise at an ‘eye-popping’ rate for 6 NZ regions – Trade Me

Interest.co.nz: Median rents up $50 a week over last 12 months in parts of Auckland

Radio NZ: Lessons for NZ in Australia’s Budget

NZ Herald: John Key – State of the Nation speech

Statistics NZ: 2013 Census QuickStats about national highlights

Statistics NZ: Owner-Occupied Households

Radio NZ: Homeless family faces $100k WINZ debt

Interest.co.nz: New official Reserve Bank figures definitively show that investors accounted for nearly 46% of all Auckland mortgages

Simpson Grierson: New “bright-line” test for sales of residential land

Property Club: First buyers still missing out in Auckland’s most affordable properties

The Guardian: New Zealand housing crisis forces hundreds to live in tents and garages

Al Jazeera: New Zealand’s homeless – Living in cars and garages

NZ Herald: No house, not even a motel, for homeless family

Radio NZ: Key denies Auckland housing crisis

Radio NZ: No housing crisis in NZ – Paula Bennett

Beehive: Budget 2016 – 3000 emergency housing places funded

Mediaworks: Homeless crisis costing Govt $100,000 a day for motels

Radio NZ: Emergency housing providers instructed not to talk to media

Radio NZ: Ngaro apologises for govt criticism

TV3: The Nation – Patrick Gower interviews Bill English

Housing NZ: Annual Report 2008/09

Housing NZ: Annual Report 2015/16

Previous related blogposts

Can we do it? Bloody oath we can!

Budget 2013: State Housing and the War on Poor

Budget 2013: State Housing and the War on Poor

National recycles Housing Policy and produces good manure!

Our growing housing problem

National Housing propaganda – McGehan Close Revisited

Housing; broken promises, families in cars, and ideological idiocy (Part Tahi)

Housing Minister Paula Bennett continues National’s spin on rundown State Houses

Another ‘Claytons’ Solution to our Housing Problem? When will NZers ever learn?

Government Minister sees history repeat – responsible for death

Housing Minister Paula Bennett continues National’s spin on rundown State Houses

Letter to the Editor – How many more children must die, Mr Key?!

National under attack – defaults to Deflection #1

National’s blatant lies on Housing NZ dividends – The truth uncovered!

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Problem…

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Solution.

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This blogpost was first published on The Daily Blog on 21 May 2017.

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The Mendacities of Mr English – Social Services under National’s tender mercies

12 February 2017 2 comments

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On 25 January, as Radio NZ returned to it’s normal broadcasting schedule (and putting away it’s dumbed-down “summer programming” until next December/January), John Campbell had his first interview with John Key’s replacement, Bill English.

Campbell raised several issues with English; the US withdrawal from the TPPA; the Pike River mine disaster; and the housing crisis. At this point, English made this staggering claim;

@ 5.58

“We’ve got a government actually with a good record on addressing, in fact, some of the toughest social issues. There may be disagreement over means by which we’re doing it, ah, but our direction is pretty clear. And you know over, certainly heading into election year we think that the approach the government’s developed around social investment, around increasing incomes is the right kind of mix – “

English’s bland assertion that “government actually with a good record on addressing, in fact, some of the toughest social issues” is at variance with actual, real, mounting socio-economic problems in this country.

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Key indicator #1: Unemployment

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The latest HLFS unemployment stats show an increase from 4.9% to 5.2% in the December 2016 Quarter. However, in all likelihood, the unemployment numbers are actually much, much, higher since Statistics NZ arbitrarily altered the way it  calculated what constituted  unemployment.

On 29 June 2016, Statistics NZ announced that it would be changing the manner in which it defined a jobseeker;

Change: Looking at job advertisements on the internet is correctly classified as not actively seeking work. This change brings the classification in line with international standards and will make international comparability possible.

Improvement: Fewer people will be classified as actively seeking work, therefore the counts of people unemployed will be more accurate.

The statement went on to explain;

Change in key labour market estimates:

  • Decreases in the number of people unemployed and the unemployment rate

  • Changes to the seasonally adjusted unemployment rate range from 0.1 to 0.6 percentage points. In the most recent published quarter (March 2016), the unemployment rate is revised down from 5.7 percent to 5.2 percent 

  • Increases in the number of people not in the labour force 

  • Decreases in the size of the labour force and the labour force participation rate

The result of this change? At the stroke of a pen, unemployment fell from 5.7% to 5.2% for the March 2016 Quarter (and subsequent Quarters).

If the “current unemployment figures” from Stats NZ are reported as “5.2%’, they may well be back to the original March 2016 figure of 5.7%, before the government statistician re-jigged definitions.

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Key indicator #2: Housing

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– Home Ownership

According to the 1984 NZ  Yearbook, in 1981 the number of rental dwellings numbered 25.4% of housing. 71.2% were owner-occupied. Nearly three quarters of New Zealanders  owned their homes.

Home ownership reached it’s maximum height in 1991, when it stood at 73.8%. Since then, it has steadily declined.

By 2013 (the most recent census survey), the numbers of rental dwellings had increased to 35.2% (up 33.1% in 2006). Home ownership had decreased to  49.9%  (down from  from 54.5% in 2006). If you include housing held in Family Trusts, the figure rises to 64.8% of households owning their home in 2013, down from 66.9% in 2006.

Whether you include housing held in Family Trusts (which may or may not be owner-occupied or rented out), home ownership has fallen steady since the early 1980s.

Renting has increased from 25.4% to 35.2%.

More and more New Zealanders are losing out on the dream of home ownership. Conversely, more and more of us are becoming tenants in our own country.

As Bernard Hickey from Interest.co.nz said in December last year;

Nearly two thirds of the 430,000 households formed since 1991 are tenants.

Think about that for a moment. It is a stunning revelation of how the young and the poor have been hit the hardest by the changes in New Zealand since the mid-1980s, and on an enormous scale.

It means two thirds of the kids born in those families grew up in rental accommodation, and more than 80% of those are private rentals (although the Housing NZ homes are often no better). That means they often grew up in mouldy, damp, cold and insecure housing. It’s true that some homes occupied by their owners are also below par, but it’s a much lower proportion and owners have the option to improve their homes through insulation and ventilation.

The NZ$696 billion increase in the value of New Zealand’s houses to NZ$821 billion between 1991 and 2015 means the 64% of owners in live-in houses have also had plenty of financial flexibility to improve those houses. Renters have had no access to that wealth creation and are not allowed to put a pin in the wall, let alone put in a ventilation system or some batts in the ceiling. The take-up for the Government’s home insulation and heating subsidies were vastly higher among home-owners than they were for landlords.

Those 284,000 renting households formed since 1991 have also often been forced to move schools and communities and all the roots that build families because New Zealand’s rental market is so transient.

[…]

It illustrates the scale of the fallout from that collapse in home ownership from 1991. Not only has it handicapped the education, health and productivity of a entire generation of New Zealanders, but it is set to magnify the likely growth in pension and healthcare costs of our ageing population. And that’s before the wealth and income inequality effects.

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– Affordability

In 2016, the 13th Annual International Demographia International Housing Affordability survey rated New Zealand as one of the most unaffordable housing markets in the world;

The most affordable major housing markets in 2015 are in the United States, with a moderately unaffordable Median Multiple of 3.9, followed by Japan (4.1), the United Kingdom (4.5), Canada (4.7), Ireland (4.7) and Singapore (4.8). Overall, the major housing markets of Australia (6.6), New Zealand (10.0) and China (18.1) are severely unaffordable. (p2)

[…]

In New Zealand, as in Australia, housing had been rated as affordable until approximately a quarter century ago. (p24)

A 2014 report by the NZ Institute for Economic Research stated  the “the average house price rose from the long-run benchmark of three times the average annual household income to six times“;

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The NZIER report refers to several reasons for increasing housing prices; slow supply of land; demographic demand (from ‘Baby Boomers’); and investor demand caused by lack of a capital gains tax. Interestingly, the Report also refers to an “over-supply of finance”;

The loosening of financial standards and rising household debt relative to income has happened over a long period of time. The increase in indebtedness has coincided with rising house prices relative to incomes. This suggests that increased household indebtedness has at least partly contributed to the increasing price of homes. (p14)

Prior to Roger Douglas de-regulating the banking/finance sector, New Zealand banks could only lend depositor’s funds as mortgages.

As a result, mortgage money was “tight”, and scarcity helped keep house prices down. Vendor’s expectations were kept “in check” by scarcity of bank funds. Prior to the mid 1980s, Vendor’s Finance (by way of a Second Mortgage) were commonly-used financial tools to assist house-owners to sell and buyers to complete a purchase.

Once the banking sector was opened up, and monetary policy relaxed, cheap money flooded in from overseas for banks to on-lend to house-purchasers. As property investor, Ollie Newland vividly explained in the 1996 TV documentary, Revolution;

“I got a phone  call from my bank manager to say some bigwigs were coming up from Wellington to have a chat with me. I thought it was just one public relations things they do. I had a very small office, it wasn’t much bigger than a toilet cubicle, and those five big fellows  crowded in with their briefcases and books and they sat on the floor and the arms of the chairs – I only had one chair in the place – and stood against the walls. Their first words to me were, we’re here to lend you money. As much as you want. For somebody like me, and I’m sure it’s the same for everybody else, to suddenly be told by the bank manager that you could have as much money as you want, help yourself, that was a revelation. We thought we had died and gone to heaven.”

Unfortunately, the side affect of this was to increase vendor’s expectations to gain higher and higher prices for their properties. Combined with recent high immigration, and a lack of a comprehensive capital gains tax, and the results have been troubling for this country;

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As well as increasingly unaffordable housing, we – as a nation – are sitting on a trillion-dollar fiscal bomb.

Think about that for a moment.

Little wonder that in September last year, the Reserve Bank issued the sternest warning yet that we were headed for impending economic mayhem;

A sharp correction in house prices represents a key risk to the financial system, and one that is increasing the longer the current boom in house prices persists. A severe downturn in house prices could have major implications for the banking system, with over 55 percent of bank loans secured against residential property. Moreover, elevated household debt levels and a growing exposure of the banking system to investor loans could reinforce a housing downturn and extend reductions in economic activity, as highly indebted households are forced to reduce consumption and sell property.

As with many other individuals, institutions, organisations, business leaders, left-wing commentators, media, political pundits, political parties, the NZIER was (and still is) calling for a comprehensive capital gains tax to be implemented.

Even then, this blogger suspects we may be too late. National (and it’s predecessor, to be fair) have left it far to late and the economic horse has well and truly bolted.

Even a Capital Gains Tax at 28% – New Zealand’s current corporate tax rate – may be insufficient to dampen speculative demand for properties.

Meanwhile, the dream of Kiwis owning their own homes continues to slip away.

Depressingly, New Zealanders themselves have permitted this to happen.

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– State Housing

If the Middle Classes and their Millenial Offspring are finding it hard to buy their first home, think of the poorest  families and individuals in our communities. For them, social housing consists of packing multiple families into a single house; living in an uninsulated, drafty,  garage; or in cars.

Last year, the story of mass homelessness exploded onto our media and our “radar” as New Zealanders woke up to the reality of persistent poverty in our cities;

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Although on occassion, the mainstream media found them themselves  in embarrassingly ‘schizophrenic’ situations as they attempted to reconcile reporting on our growing housing crisis – whilst raising advertising revenue by  promoting “reality” TV programmes that were far, far removed from many people’s own disturbing reality;

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According to UNICEF;

295,000 New Zealand kids are living beneath the poverty line, which means they are living in households where income is less than 60% of the median household income after housing costs are taken into consideration.

One way to alleviate poverty is to provide state housing, at minimal rental, to families suffering deprivation. Not only does this make housing affordable, but also strengthens a sense of community and reduces transience.

Transience can have deletarious effects on families – especially on children – who then struggle with the stresses of losing friends; adjusting to new neighbourhoods, and new schools.

A government report states that transience for children can have extreme, negative impact on  their learning;

Nearly 3,700 students were recognised as transient during the 2014 year. Māori students were more likely to be transient than students in other ethnic groups.

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Students need stability in their schooling in order to experience continuity, belonging and support so that they stay interested and engaged in learning.

All schools face the constant challenge of ensuring that students feel they belong and are encouraged to participate at school. When students arrive at a school part-way through a term or school year, having been at another school with different routines, this challenge may become greater.

Students have better outcomes if they do not move school regularly. There is good evidence that student transience has a negative impact on student outcomes, both in New Zealand and overseas. Research suggests that students who move home or school frequently are more likely to underachieve in formal education when compared with students that have a more stable school life. A recent study found that school movement had an even stronger effect on educational success than residential movement.

There is also evidence that transience can have negative effects on student behaviour, and on short term social and health experience

Writing for The Dominion Post, in April 2014, Elinor Chisholm and  Philippa Howden-Chapman pointed out the blindingly obvious;

Continuity of education and supportive relationships with teachers are critical for children’s educational performance.

“Churn” is not good for educational performance or enrolment in primary health care, where staff can ensure children are properly immunised and chronic health problems can be followed up.

It was for this reason that, in our submission on the Social Housing Reform Bill late last year, we strongly recommended that families with school- age children should be excluded from tenancy review.

Secure tenure and stability at one school would allow children the best chance of flourishing. In high- performing countries such as the Netherlands, children are explicitly discouraged from changing schools in the middle of the school year.

The bill had announced the extension of reviewable tenancies to all state tenants (new state tenants had been subject to tenancy review since mid- 2011). However, the housing minister, as well as the Ministry of Business, Innovation and Employment, had made clear that the disabled and the elderly were to be excluded from tenancy reviews.

In our submission, we acknowledged the Government for recognising the importance of secure tenure.

People who are compelled to move house involuntarily can experience stress, loss, grief and poorer mental health. Housing insecurity is also associated with poorer physical health.

National’s policy of ending a state “house for life”;  increased tenancy reviews for state house tenants, coupled with the sale of state houses, is inimical to the stabilisation of vulnerable families; the well-being of children in those families; and to communities.

In 2008, Housing NZ owned 69,000 rental properties.

By 2016, that number had dropped significantly to 61,600 (plus a further 2,700 leased).  National had disposed of some 7,400 properties.

Between 2014 and 2016, at least 600 state house tenants lost their homes after “reviews”.

This, despite our growing population.

This, despite John Key’s own family having been provided with the security of a state house, and Key enjoying a near-free University education.

This, despite John Key, ex-currency trader,  and multi-millionaire, admitting in 2011 that New Zealand’s under-class was growing.

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Key indicator #3: Incomes & Inequality

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In June 2014, Oxfam reported on New Zealand’s growing dire child poverty crisis;

The richest ten per cent of New Zealanders are wealthier than the rest of the population combined as the gap between rich and poor continues to widen.

Oxfam New Zealand’s Executive Director Rachael Le Mesurier said the numbers are a staggering illustration that the wealth gap in New Zealand is stark and mirrors a global trend that needs to be addressed by governments in New Zealand, and around the world, in order to win the fight against poverty.

“Extreme wealth inequality is deeply worrying. Our nation is becoming more divided, with an elite who are seeing their bank balances go up, whilst hundreds of thousands of New Zealanders struggle to make ends meet,” said Le Mesurier.

Figures for the top one per cent are even more striking. According to the most recent data, taken from the 2013 Credit Suisse Global Wealth Databook, 44,000 Kiwis – who could comfortably fit into Eden Park with thousands of empty seats to spare – hold more wealth than three million New Zealanders. Put differently, this lists the share of wealth owned by the top one per cent of Kiwis as 25.1 per cent, meaning they control more than the bottom 70 per cent of the population.

Oxfam New Zealand’s Executive Director, Rachael Le Mesurier, was blunt in her condemnation;

“Extreme inequality is a sign of economic failure. New Zealand can and must do better. It’s time for our leaders to move past the rhetoric. By concentrating wealth and power in the hands of the few, inequality robs the poorest people of the support they need to improve their lives, and means that their voices go unheard. If the global community fails to curb widening inequality, we can expect more economic and social problems.”

A 2014 OECD report placed New Zealand as one of the worst for growing inequality;

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Not only was inequality a social blight, but according to the report it impacted negatively on economic growth;

Rising inequality is estimated to have knocked more than 4 percentage points off growth in half of the countries over two decades. On the other hand, greater equality prior to the crisis helped increase GDP per capita in a few countries, notably Spain.

According to the OECD assessment,  income inequality had impacted the most on New Zealand, with only Mexico a close second;

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The OECD Report went further, making this “radical” observation;

The most direct policy tool to reduce inequality is redistribution through taxes and benefits. The analysis shows that redistribution per se does not lower economic growth.

The statement went on to “qualify”  any suggestion of socialism with a caveat. But the declaration that “analysis shows that redistribution per se does not lower economic growth” remained, constituting a direct contradiction and challenge to current neo-liberal othodoxy.

In August 2015, former City Voice editor, and now NZ Herald social issues reporter, Simon Collins revealed the growing level of child poverty in this country;

The Ministry of Social Development’s annual household incomes report shows that the numbers below a European standard measure of absolute hardship, based on measures such as not having a warm home or two pairs of shoes, fell from 165,000 in 2013 to 145,000 (14 per cent of all children) last year, the lowest number since 2007.

Children in benefit-dependent families also dwindled from a recent peak of 235,000 (22 per cent) in 2011, and 202,000 (19 per cent) in 2013, to just 180,000 (17 per cent) last year – the lowest proportion of children living on benefits since the late 1980s.

But inequality worsened because average incomes for working families increased much faster at high and middle-income levels than for lower-paid workers.

The net result was that the number of children living in households earning below 60 per cent of the median income after housing costs jumped from a five-year low of 260,000 in 2013 to 305,000 last year, the highest since a peak of 315,000 at the worst point of the global financial crisis in 2010.

In percentage terms, 29 per cent of Kiwi children are now in relative poverty, up from 24 per cent in 2013 and only a fraction below the 2010 peak of 30 per cent.

In September 2016, Statistics NZ confirmed the widening of  income inequality from 1988 to 2015,  between households with high  and  low incomes;

  • In 2015, the disposable income of a high-income household was over two-and-a-half times larger than that of a low-income household.
  • Between 1988 and 2015, the income inequality ratio increased from 2.24 to 2.61.  

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The neo-liberal “revolution” took place from the mid-to-late 1980s. Hardly surprisingly, the rise in income inequality takes place at the same time.

Income inequality dipped from 2004 when Labour’s “Working for Families” was introduced.

However, income inequality worsened after 2009 and 2010, when National cut taxes for the rich; increased GST (which impacts most harshly on low-income families and individuals); and increased user-charges on essential services such as prescription fees, ACC levies, court fees, etc. Increasingly complicated WINZ requirements for annual re-applications for benefits and complex paperwork may also have worsened the plight of the country’s poorest.

Despite all the promises made by the Lange government; the Bolger government; and every government since, our neo-liberal “reforms” have not been kind to those on low and middle incomes.

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Key indicator #4: Child poverty

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According to Otago University’s Child Poverty Monitor in 2014;

Child poverty has not always been this bad – the child poverty rate in the New Zealand many of us grew up in 30 years ago was 14%, compared to current levels of 24%.

Thirty years prior to 2014 was the year 1984. David Lange’s Labour Party had been elected to power.

Roger Douglas was appointed Minister of Finance. The Member for Selwyn, Ruth Richardson, was also in Parliament, taking notes.

The term “trickle down” entered our consciousness and vocabulary. It promised that, with tax cuts; privatisation; winding back state services; and economic de-regulation, wealth would trickle down to those at the bottom of the socio-economic ladder.

How is that working out for us so far?

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So much for  the “aspirational dream” offered to us by “trickle down” economics.

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Key indicator #5: The Real Beneficiaries

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In June last year, Radio NZ reported  the  latest survey of household wealth by Statistics NZ. It found;

“…the country’s richest individuals – those in the top 10 percent – held 60 percent of all wealth by the end of July 2015. Between 2003 and 2010, those individuals had held 55 percent. The richest 10 percent of households held half of New Zealand’s wealth, while the poorest 40 percent held just 3 percent of total wealth.”

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Following hard on the heels of the Stats NZ report,  Oxfam NZ made a disturbing revelation;

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Three years after her previous public warning,  Oxfam New Zealand’s, Rachael Le Mesurier, was no less scathing. Her exasperation was clear;

“The gap between the extremely wealthy and the rest of us is greater than we thought, both in New Zealand and around the world. It is trapping huge numbers of people in poverty and fracturing our societies, as seen in New Zealand in the changing profile of home ownership.”

National minister, Steven Joyce responded. He was his usual mealy-mouthed self when interviewed on Radio NZ about the Oxfam report;

“There’s always inequality but again you have got to look at those reports carefully because in that report a young medical graduate who has just come out of university would be listed as somebody who is in the poorest 20 per cent because they have a student loan.They’ll pay that student loan off in about four years and they’ll be earning incomes of over $100,000 very quickly.

So although they’re in those figures today, they won’t be in those figures in five years’ time.”

Which appears to sum up the National government’s head-in-sand attitude on child poverty and income inequality.

Economist, Shamubeel Eaqub, though, had a different “take” on the issue and warned;

“Every time we see a new statistic on inequality, whether it’s in terms of income, opportunities or wealth, it shows very clearly that New Zealand is being ripped apart by our class system.”

When economists begin to issue dire social warnings, you know that matters have taken a turn for the worse.

So where does that leave our New Dear Leader Bill English  with his insistence  that “we’ve got a government actually with a good record on addressing, in fact, some of the toughest social issues”?

English’s assertion to John Campbell on Radio NZ, on 25 January, (outlined at the beginning of this story) makes sense only if it it is re-phrased;

“We’ve got a government actually with a good record on addressing, in fact, some of the toughest wealth-accumulation issues. There may be disagreement over means by which we’re doing it, ah, but our direction is pretty clear. And you know over, certainly heading into election year we think that the approach the government’s developed around private investment, around increasing incomes for the wealthiest ten percent is the right kind of mix – “

Not a very palatable message – but vastly more truthful as income inequality continues to wreak appalling consequences throughout our communities and economy.

Otherwise, English appears to reside not so much in the Land of the Long White Cloud, but in the Realm of Wishful Thinking.

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References

Radio NZ: Checkpoint – Bill English on the challenges of his first month as PM

Scoop media: Unemployment rate rises to 5.2 percent as labour force grows

Statistics NZ: Household Labour Force Survey – Revisions to labour market estimates

NZ 1984 Yearbook: 3A – General SummaryCensus of population and dwellings 1981 (see “Tenure of Dwelling”)

Statistics NZ: Owner-Occupied Households

Statistics NZ: 2013 Census QuickStats about national highlights – Home Ownership

Interest.co.nz: Bernard Hickey says the collapse in home-ownership rates among families formed since 1991 is an unfolding disaster for NZ’s economy, our society and the Government’s finances

International Demographia: 13th Annual  International Housing Affordability

NZ Institute for Economic Research: The home affordability challenge

Monetary Meg: What is vendor finance?

Radio NZ: NZ immigration returns to record level

NZ On Screen: Revolution

NZ Herald: New Zealand residential property hits $1 trillion mark

Reserve Bank: Regulatory Impact Assessment of revised LVR restriction proposals September 2016 – Adequacy Statement

The Guardian: New Zealand housing crisis forces hundreds to live in tents and garages

Fairfax media: One in 100 Kiwis homeless, new study shows numbers quickly rising

Al Jazeera: New Zealand’s homeless: Living in cars and garages

NZ Herald: Homelessness rising in New Zealand

Radio NZ: Homeless family faces $100k WINZ debt

TV3 News: The hidden homeless – Families forced to live in cars

TV1 News: Housing crisis hits Tauranga, forcing families into garages and cars

UNICEF: Let’s Talk about child poverty

Education Counts: Transient students

Dominion Post: Housing policy will destabilise life for children

NZ Herald: State housing shake-up – Lease up on idea of ‘house for life’

Radio NZ: Thousands of state houses up for sale

Housing NZ: Annual Report 2008/09

Housing NZ: Annual Report 2015/16

Fairfax media: Nearly 600 state house tenants removed after end of ‘house for life’ policy

NZ Herald: Key admits underclass still growing

Oxfam: Richest 10% of Kiwis control more wealth than remaining 90%

NZ Herald: 300,000+ Kiwi kids now in relative poverty

Statistics NZ: Income inequality

Law Society: Civil court fee changes commence

Fairfax media: Prescription price rise hits vulnerable

Salaries.co.nz: ACC levies to increase in April 2010

Radio NZ: Thousands losing benefits due to paperwork

Scoop media: Health Issues Highlighted in Child Poverty Monitor

NZ Herald: Hungry kids foraging in pig scraps ‘like the slums of Brazil’

Fairfax media: Damp state house played part in toddler’s death

NZ Herald: More living in cars as rents go through roof

NZ Doctor: Tackle poverty to fight rheumatic fever

Radio NZ: 10% richest Kiwis own 60% of NZ’s wealth

Fairfax media: Wealth inequality in NZ worse than Australia

Radio NZ: Steven Joyce responds to Oxfam wealth inequality report

Additional

Dominion Post: Kids dragged from school to school

Other Blogs

The Standard: John Key used to be ambitious about dealing with poverty in New Zealand

Previous related blogposts

Lies, Damned lies and Statistical Lies

Lies, Damned lies and Statistical Lies – ** UPDATE **

National exploits fudged Statistics NZ unemployment figures

2016 – Ongoing jobless tally and why unemployment statistics will no longer be used

CYF – The Hollowing Out of a State Agency

The Mendacities of Mr Key # 18: “No question – NZ is better off!”

Foot in mouth award – Bill English, for his recent “Flat Earth” comment in Parliament

The Mendacities of Mr English – Fibbing from Finance Minister confirmed

Rebuilding the Country we grew up in – Little’s Big Task ahead

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200415bodycartoongif

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This blogpost was first published on The Daily Blog on 7 February 2017.

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When Life is a Lottery

20 November 2016 2 comments

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american-gothic-homelessness

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Fun Fact #1: Between 2006 and 2013,  the number of homeless grew by 25%. Based on Census data;  one in 100 were homeless in 2013; one in 120 in 2006, and one in 130 in 2001.

Fun Fact #2: In 1986, home ownership in New Zealand stood at 73.5%. By 2013, Census data showed home-ownership had fallen to 64.8%.

Fun Fact #3: In August this year, Auckland’s average house price reached – and passed – the $1,000,000 mark.

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Make no mistake, housing has become a crisis in New Zealand as this May poll for  a TV3/Reid Research Poll highlighted;

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tv3-news-housing-poll

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Even 61% of National voters accepted the new reality in our once-egalitarian nation. Housing unaffordability (for the middle classes) and homelessness (for beneficiaries and the working poor)  could no longer be ignored.

Stepping back to 20 August 2007, National’s newly-elected leader, John Key, made an impassioned speech to the  Auckland branch of the New Zealand Contractors Federation. In it, he excoriated the then-Clark-led Labour government;

“Over the past few years a consensus has developed in New Zealand. We are facing a severe home affordability and ownership crisis. The crisis has reached dangerous levels in recent years and looks set to get worse.

This is an issue that should concern all New Zealanders. It threatens a fundamental part of our culture, it threatens our communities and, ultimately, it threatens our economy.

The good news is that we can turn the situation around. We can deal with the fundamental issues driving the home affordability crisis. Not just with rinky-dink schemes, but with sound long-term solutions to an issue that has long-term implications for New Zealand’s economy and society.

National has a plan for doing this and we will be resolute in our commitment to the goal of ensuring more young Kiwis can aspire to buy their own home.”

Nine years later, Key’s description of New Zealand’s housing crisis has changed markedly. It is now a “challenge“, as he painfully tried to explain on TVNZ’s Breakfast programme;

“I don’t think it’s a crisis, but prices are going up too quickly. There are plenty of challenges in housing, and there have been for quite some time.”

On 9  November, a Hibiscus Coast couple were the incredibly lucky couple to win the latest multi-million dollar Lotto prize;

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claimed-44-million-lotto-prize-radio-nz

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The Radio NZ story further reported;

The man’s wife said at first she thought her husband was joking about the win.

“My head started spinning, my heart was racing and I got the shakes.”

The couple claimed their prize at Lotto’s head office on Thursday afternoon.

“As we sat in the winner’s room, he kept turning to me and saying ‘Am I in a dream?’ and I kept turning to him and saying ‘is this real?'” the woman said.

“We’ve been busting our guts trying to buy our first home,” the winner said.

“We just went to the mortgage broker earlier this week to see what they could do to help. But they just couldn’t make anything work for us.

“We were absolutely gutted and I just said ‘maybe that ship has sailed’.

“But my wife tried to stay positive and said ‘don’t worry, something good will happen for us’.

“I don’t think either of us thought that the something good would be $44 million.”

Note what the woman said here;

“We’ve been busting our guts trying to buy our first home. We just went to the mortgage broker earlier this week to see what they could do to help. But they just couldn’t make anything work for us. We were absolutely gutted and I just said ‘maybe that ship has sailed’.”

When couples have to rely on winning Lotto to be able to afford to buy their first home,  there is something seriously askew in society.

Remember Dear Leader Key’s own words;

“We are facing a severe home affordability and ownership crisis. The crisis has reached dangerous levels in recent years and looks set to get worse. This is an issue that should concern all New Zealanders. It threatens a fundamental part of our culture, it threatens our communities and, ultimately, it threatens our economy.”

In the United States, commentators from the msm, politics, dissident community; and further afield, have rapidly come to the realisation that Donald Trump’s unlikely, unforeseen, and up-till-now improbable victory in the 2016 Presidential  race was predicated on the belated understanding that globalisation and neo-liberalism  have left behind millions of people.

In the Voting Booths across the United States, Consumers became Citizens again, and cast their ultimate sanction against the political establishment and those who supported the neo-liberal orthodoxy. The status quo of Margaret Thatcher and Ronald Reagan (the latter, ironically a Republican like Trump) was utterly repudiated.

The disenchantment and alienation of the Working and Middle classes germinated during the 2008 Global Financial crisis and resulting Great Recession – the effects of which are still with us, eight years late. In the United States, millions of Americans lost their homes.

More than four million Americans have lost their homes since the housing bubble began bursting six years ago. An additional 3.5 million homeowners are in the foreclosure process or are so delinquent on payments that they will be soon. With 13.5 million homeowners underwater — they owe more than their home is now worth — the odds are high that many millions more will lose their homes.

Most telling was this criticism by

Housing remains the biggest impediment to economic recovery, yet Washington seems paralyzed. While the Obama administration’s housing policies have fallen short, Mitt Romney hasn’t offered any meaningful new proposals to aid distressed or underwater homeowners.

Writing for the Huffington Post a year later, David Coates pointed out

“… the vast majority of those four million lost their homes because they lost their jobs, not because they had in better times taken out mortgages that they could not afford.

[…]

It is not the rich who are being foreclosed. It is those on the margin of the core middle class. It is particularly middle class minorities who have taken the greatest hit on both their personal wealth and their associated credit scores. Falling house prices since 2008 have pulled median white net-worth down by 27 percent but median black net-worth down by anywhere between 40 percent and 53 percent.”

All the promises of neo-liberalism had come to nought. Instead millions had lost their jobs and those lucky enough found new work in low-paid service industries. Take-home pay was cut – and Humiliation applied in abundance as ‘compensation’.

The Working and Middle Classes not only lost their job and homes – their new status in low-paid work was precarious.

Events post-2008 hastened the  demise  of the American Dream and the rise of the Precariat, as Richard  McCormack wrote, in February of this year for the Manufacturing and Technology News;

The effects on the U.S. economy caused by 30 years of offshore outsourcing of production and jobs is starting to drive major changes in the American political system. The rise of a “precariat” class of Americans — those who are living “precarious” lives — has created a populist movement that shows no sign of acquiescing to the “establishment” in both the Democratic and Republican parties.

The new precariat comprises a growing class of people who are going nowhere in their jobs, who are insecure and unstable. The group is “experiencing the breaking apart of the American Dream, which is what historically held the country together — the rise of the middle class, with everyone doing better,” notes visiting scholar John Russo of Georgetown University’s Kalmanovitz Initiative for Labor and the Working Poor. “It’s not working that way any more.”

Driving the rise of the precariat is a society that is not generating enough wealth. De-industrialization, the shift of major goods-producing industries to foreign nations, and both the Republican and Democratic establishment’s embrace of free trade, are leading to a populist uprising.

The precariat is becoming one of the largest classes of Americans, encompassing far more than blue-collar workers who have been slammed by economic forces outside of their control. It now includes millions of Americans with college degrees who are under compensated or can’t find full-time employment with benefits.

As white-collar jobs have been outsourced, Americans with more than high-school degrees are starting to see their prospects “mirror those of the working class,” says Russo. “That insecurity and instability is now part of their life. That is why this new group is not yet a class in itself. It hasn’t defined what it is going to be.”

It is fragmented, but it is big, and much of it is angry.

In his article, McCormack quotes John Russo from the Georgetown University’s Kalmanovitz Initiative for Labor and the Working Poor;

“As steady formal work has been disappearing over time, informal work began to move beyond traditional concepts such as consulting, internships, subcontracting, privatization and intermittent employment,” Russo explains. “Rather than the continued rise of the formal economy, it is the informal economy that is growing.”

The precariat is “potentially all of us united by the fear of insecurity,” he notes. It is made up of “individuals living precarious and insecure existences lacking employment security, job security, income security, skill security, occupational security and labor market security.”

This is no longer the underground economy, but includes displaced individuals from the public and private sectors, millennials dealing with mountains of student debt, and baby boomers forced into early retirement without enough savings to support themselves.

There is little public assistance for the precariat class and “they’re not making demands to get better wages or improved benefits [because they] are replaced easily,” Russo notes.

Three years after Coates’ story,  and nine months after McCormack’s insightful analysis of the public mood, Trump’ ascendance as America’s 45th President was complete. Trump won the States where blue-collar workers had suffered the most.

The story of globalisation and neo-liberal “reforms” of our own economy has followed a familiar story; loss of long-term employment; ever-increasing need for re-training; the rise casualisation and contract piece-work; and the increase of lower-paid service-work.

Depressingly, economist Shamubeel Eaqub has predicted;

“The workplace is likely to be further casualised. “

Which adds further hopelessness to New Zealanders increasingly locked out of what was once known as the Great Kiwi Dream of home-ownership.

The National government ostensibly understands the notion of aspiration, as Dear Leader Key said six years ago;

“I want New Zealanders to be aspirational – to want more for themselves and their families, and to know that they have opportunities to do that.”

Those words ring hollow as National scrambles frantically to make itself  “look busy”, trying to alleviate the dual crisis of  worsening home ownership and homelessness.

Bennett’s suddenly-announced  policy of bribing state house tenants with (up to) $5,000 was widely seen as a panic-driven, ad hoc policy. It certainly caught Finance Minister Bill English by surprise, having no forewarning of Bennett’s media announcement on the issue.

The twin tsunami-waves of homelessness and housing unaffordability appears to have utterly over-whelmed National Ministers.

As Trump’s victory in the US Presidential election has demonstrated with crystal clarity, Consumers can easily become  Citizens again, re-discovering the power of their Vote. When Citizens’ anger becomes focused, and a perceived solution (or even just an opportunity to say “FUCK YOU!” to the Establishment) is put before them – they will vote for it.

Especially when they have lost so much, and have little left to lose.

Such was the case of  the US presidential elections, and before that, the ‘Brexit’ Vote.

As New Zealanders become more and more conscious of how much they have lost in the last thirty years, they too, will find themselves pissed off.

The opening lines of the song  from ‘Les Miserables’ – Do You Hear The People Sing? – should serve as a reminder to the political establishment in this country;

“Do you hear the people sing?
Singing the song of angry men?”

The Great Kiwi Dream of home ownership was never predicated on the long-odds offered by  a little yellow piece of paper;

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lotto-ticket

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Home ownership should not be a Lottery.

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References

Otago Daily Times: Homelessness increasing in NZ

Fairfax media: NZ home ownership at lowest level in more than 60 years

Radio NZ: Auckland’s average house value tops $1 million

TV3 News: Government gets thumbs down on housing

Scoop: Key – Speech to New Zealand Contractors Federation

TVNZ: Is there a housing crisis? John Key fails to say yes or no after being put on the spot

Radio NZ: Claimed – $44 million lotto prize

NY Times: The One Housing Solution Left – Mass Mortgage Refinancing

Huffington Post: America’s Half-Forgotten Housing Crisis

Manufacturing and Technology News: The Rise Of The American ‘Precariat’ – Globalization And Outsourcing Have Created A Combustible Political Culture

Chicago Tribune: How Trump won the presidential election – Revenge of working-class whites

Fairfax media: Shamubeel Eaqub – Job casualisation a global phenomenon

NZ Herald: John Key’s speech to the National Party convention

Interest.co.nz: Paula Bennett announces plan to offer $5,000 to homeless Aucklanders and state house tenants to leave Auckland

TV3 News: Govt to help fund Auckland homeless to move

Metrolyrics: Les Miserables – Do You Hear The People Sing?

Previous related blogposts

Can we do it? Bloody oath we can!

Budget 2013: State Housing and the War on Poor

Budget 2013: State Housing and the War on Poor

National recycles Housing Policy and produces good manure!

Government Minister sees history repeat – responsible for death

Housing Minister Paula Bennett continues National’s spin on rundown State Houses

Letter to the Editor – How many more children must die, Mr Key?!

National under attack – defaults to Deflection #1

National Housing propaganda – McGehan Close Revisited

Housing; broken promises, families in cars, and ideological idiocy (Part Tahi)

Housing; broken promises, families in cars, and ideological idiocy (Part Rua)

Housing; broken promises, families in cars, and ideological idiocy (Part Toru)

Another ‘Claytons’ Solution to our Housing Problem? When will NZers ever learn?

National’s blatant lies on Housing NZ dividends – The truth uncovered!

National and the Reserve Bank – at War!

The seductiveness of Trumpism

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This blogpost was first published on The Daily Blog on 15 November 2016.

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Letter to the editor – Do National voters want us to be tenants in our own country?

12 September 2016 Leave a comment

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Frank Macskasy - letters to the editor - Frankly Speaking

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The latest on housing unaffordability made worse by speculation. It seems our Canadian cuzzies are on the right track;

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Vancouver's property market - foreign speculators - radio nz - housing prices

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Which merited this response from me, addressed to National voters;

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from: Frank Macskasy <fmacskasy@gmail.com>
to: Dominion Post <letters@dompost.co.nz>
date: Mon, Sep 5, 2016
subject: Letter to the editor

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The editor
Dominion Post

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Canada’s Vancouver has been suffering a mirror-image of Auckland’s runaway housing price boom. Like Auckland, average house prices were past the $900,000 mark. Canadians were being locked out of buying their own home by cashed-up foreign speculators.

Last month, the State government of British Columbia imposed a 15% sales tax on foreign house buyers (Chinese, Americans, etc) and the result has deterred foreign speculators.

Here in New Zealand, National is obsessed with it’s free-market doctrine and is willing to sacrifice our tradition of home-ownership. Foreign (and homegrown) speculators are inflating a housing bubble that is not only unfair to New Zealanders wanting to buy their own home, but is ultimately unsustainable.

Unless we literally want to become tenants in our own country, the sale of houses to non-New Zealanders must be banned immediatly. The free-market doctrine serves wealthy overseas investors, as well as local speculators, but not New Zealanders wanting their own homes.

I urge those who vote National to consider what sort of country they want to live in, and what sort of country they want to leave their children.

If National voters think that money is all that matters, then we truly will get the kind of society we deserve.
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-Frank Macskasy

[address and phone number supplied]

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Let’s hope the ‘light goes on‘ with National voters…

 

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References

Radio NZ: Lending restrictions start to take effect on Auckland’s housing market

Radio NZ: Vancouver’s property market slumps after new foreign buyers tax

Previous related blogpost

That was Then, this is Now #10

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plutonians protect their own housing

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This blogpost was first published on The Daily Blog on  6 September 2016

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Rebuilding the Country we grew up in – Little’s Big Task ahead

17 July 2016 1 comment

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1949-state-house-in-taita b

 

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2007: John Key says Housing is in crisis

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On 20 August 2007, National’s new leader, John Key, made a stirring speech to the  Auckland branch of the New Zealand Contractors Federation. In it, he lambasted the then-Clark-led Labour government;

“Over the past few years a consensus has developed in New Zealand. We are facing a severe home affordability and ownership crisis. The crisis has reached dangerous levels in recent years and looks set to get worse.

This is an issue that should concern all New Zealanders. It threatens a fundamental part of our culture, it threatens our communities and, ultimately, it threatens our economy.

The good news is that we can turn the situation around. We can deal with the fundamental issues driving the home affordability crisis. Not just with rinky-dink schemes, but with sound long-term solutions to an issue that has long-term implications for New Zealand’s economy and society.

National has a plan for doing this and we will be resolute in our commitment to the goal of ensuring more young Kiwis can aspire to buy their own home.”

(Hat-tip: Bert)

In 2007, Key described “home affordability and ownership” as a “crisis”.

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2016: John Key says Housing is a more like a “challenge”

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Almost exactly five years, one of my first blogposts involved the looming housing crisis. On 3 August, 2011, I wrote;

The shortage of state housing is a serious matter, though. This critical problem of decent, affordable housing is not helped by the fact that the Fourth National government (1996-1999) sold around 13,000 State Houses in the 1990s.  These properties were supposedly made available to tenants – but actually went mostly to property speculators (who later sold them for tax-free capital gains).

When Labour was elected to power in November 1999, they immediatly placed a moratorium on the sale of state housing. According to HNZ, they currently ” own or manage more than 66,000 properties throughout the country, including about 1,500 homes used by community groups”

This government has re-instated the sale of state houses.  It does not take rocket science to work out that selling of state housing reduces the availability of housing stock.   Housing Minister Phil Heatley said that,

“… about 40,000 of the 69,000 state house stock will be available for sale,”  but then added,  “that the vast majority of tenants do not earn enough to be required to pay market rent means relatively few will be in a position to buy“. (Source.)

There seems to be nothing stopping tenants from buying their state house and immediatly on-selling it to a Third Party.

Is it any wonder that the shortage of state housing is not being addressed in any meaningful way?

That was five years ago.

The housing crisis appears to have only recent dawned on National ministers. As Social Housing Minister, Paula Bennett  said on 25 May this year;

“Certainly what we’ve seen is it has been more acute in the last two years.”

It is most certainly not a recent problem.  It is only “new” if you are a well-paid National minister, living in a tax-payer-funded residence.

In my blogpost five years ago, I offered a solution to the housing crisis confronting this country;

Solution: build more houses.

This may seem like a ‘flippant’ answer to a desperate problem – but it is not.

The building of 10,000 new state houses may seem an outrageously expensive idea.  But it would address at least three pressing problems in our economy and society;

1. Persistantly high unemployment.

2. Low growth.

3. Inadequate housing for the poorest of our fellow New Zealanders.

At an average housing cost of $257,085 (calculated at DBH website @ $1,773/m for a 145 square metre, small house), the cost (excluding land) is $2.57 billion dollars,  including GST (approximate estimate).

By contrast, the October 2010 tax cuts gave $2.5 billion to the top 10% of income earners.

For roughly the cost of last year’s tax cuts, we could have embarked on a crash building-programme to construct ten thousand new dwellings in this country. …]

It would be a boom-time, as two and a half billion dollars was spent on products and services.

Would it actually end up costing taxpayers $2.57 billion dollars? The answer is ‘no’.  Government would actually re-coup much of that initial outlay through;

  • gst
  • paye
  • other taxes
  • reduced spending on welfare for unemployed
  • and investment re-couped by rent paid for new rentals

Would it work?

Yes, it would.  An NZIER survey expects a strong pick-up in 2013 when the rebuilding phase hits full-flight, with 3.9% annual growth predicted from a previous forecast of 2.6%.

[…]

There is no reason why a determined government cannot adopt a bold programme for economic growth.

Instead of borrowing to pay for tax cuts we can ill afford, we should be investing in jobs.  The rest will almost invariably take care of itself.

We have the resources. We have the money. We have the demand for new housing. What else is missing?

The will to do it.

National has been half-hearted in it’s will to address this crisis. It has implemented a few lukewarm, ad hoc measures, but they are five years too late and too little.

Some of National’s announcements have been panic-driven;

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Paula Bennett announces plan to offer $5,000 to homeless Aucklanders - interest

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At other times, National has indulged in it’s favourite past-time of “blame-gaming”;

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housing crisis - national - blame game

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By 2016, under Key’s watch, homelessness has increased; housing affordability has worsened, and home ownership has plummeted. Our esteemed Dear Leader no longer calls it a “crisis“. It is now just a “challenge“;

“I don’t think it’s a crisis, but prices are going up too quickly.”

“There are plenty of challenges in housing, and there have been for quite some time.”

Make no mistake, this is a direct consequence of National’s laissez-faire approach and an opportunistic reliance on mass immigration to keep the economy afloat at a time when dairying is no longer the main driver of economic growth.

By any definition, National’s “hands off” approach to housing – whether social housing for the poor or affordable housing for the Middle Classes – has been an abject failure.

The mood for change has never been as palpable since the dying days of the Shipley-led National government in 1999.

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The Labour Response

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On 10 July, Labour leader Andrew Little congratulated Labour on it’s 100th year birthday. He also put the boot firmly and fairly up National’s backside for it’s hopeless track record on housing.

If the supply of food were in short-supply and expensive as is housing for poor and middle-class New Zealanders, there would be rioting in the streets by now. By morning there would be a revolutionary government sitting in the Ninth Floor of the Beehive and Key and his ministerial cronies would be in hiding, exile, or under arrest.

Little began with a brief, but accurate refresher course in New Zealand history;

“We’re here to celebrate Labour’s creation of the welfare state, the achievements of widespread home ownership and the creation of state housing, a free health system and a free education system.

In short, we celebrate the building of a nation.

We celebrate and we remember the image of Michael Joseph Savage carrying the very first furniture into the very first state house.

Offering hope to people that the years of depression were over and there were brighter days ahead.

We’re here to celebrate the beginning of the reconciliation between Maori and Pakeha and the restoration of the mana of the Treaty of Waitangi.

We’re celebrating the decision to make New Zealand nuclear free. We celebrate the courage shown by thousands of New Zealanders who marched against the Springbok Tour.

We’re celebrating KiwiBank. Kiwisaver. Working for Families. The Cullen Fund.

We celebrate Homosexual Law Reform and we remember the scene of the packed galleries in Parliament rising in song after we passed Marriage Equality.

These are Labour achievements.

This is the legacy of our party.”

Little omitted Labour’s de-railing in the 1980s at the hands of a small cadre of Neo-liberal fifth columnists. They who delivered our country into the hands of  global finance. They who were the  authors of a failed economic experiment that caused generations of misery, and rewarded the top 10% with unearned wealth. They whose names will pass into history and be quietly forgotten.

This was a moment where Little – like his predecessor David Cunliffe –   turned his back on neo-liberalism and announced to the country that the experiment was over. Labour would take back the reigns of responsibility for ensuring housing for all;

“After eight years, this government’s lost touch.

And nowhere, nowhere, is this government more out of touch and out of ideas than on housing.

Housing is at the core of a good life.

It provides security and stability.

It helps families put down roots in their communities and save for retirement

It is one of the most common sources of capital for people setting up their own small business.

The ambition of widespread homeownership sits at the heart of our social contract. It is at the heart of the Kiwi Dream.

The promise that if you work hard and do the right thing, you can earn a place of your own.”

A few salient statistics drove home the worsening crisis to anyone who needed convincing;

“Since 2008, when this government came to office, the average house price in Auckland has nearly doubled.

But over the same period, incomes have increased by only 24%.

In the last year, house prices in Auckland have increased by $2600 a week.

Twenty six hundred dollars a week.

It’s crazy. How on earth do you save enough to keep up with that?

[…]

The proportion of Auckland houses being bought by investors has now reached 46% – around twice the level of first home buyers.”

Little went on to explain how the housing crisis went in tandem with other worsening social indicators;

“And then there is the hard edge of the crisis.

The rising poverty and homelessness that National turns a blind eye to.

We’ve all heard the stories of Kiwi kids admitted to hospitals with respiratory illnesses because the cold damp homes they have to live in are making them sick.

We’ve all seen the awful media reports in the last few weeks about what life is like for those who can’t find any home at all.

Of the 42,000 people living in overcrowded conditions or in garages or in cars.

Of children sleeping under bushes in South Auckland.

We’ve seen the story of the 11 year old girl, whose mother has a job, but whose family spent months living in a van before they were taken in by Te Puea Marae.

She said that the hardest part is actually not being able to read in the van, because you don’t have space. And there’s not much light because it would waste the battery.”

These are matters raised that Labour’s opponants on the Right cannot easily dismiss or explain away. These are real events from real New Zealanders living under the currently all-too-real neo-liberal system.

Increasing child poverty; income/wealth disparity; and a worsening housing crisis – all of which are the spawn of thirty years of neo-liberalism.

Those who maintain that poverty has deepened because the “market” has not been sufficiently de-regulated, nor government reduced, nor taxes sufficiently cut, need to ask themselves; “At what point does an experiment that is showing no signs of positive improvement have to be concluded as an abject failure”?

As Little demanded from the party-faithful;

“When did this become the New Zealand we lived in?”

Little then laid out what he called Labour’s comprehensive plan to take to the  election next year. He said that a Labour government would;

 

  • …urgently address the shortage of emergency housing – with $60 million to provide 1400 new beds in emergency accommodation – enough for 5100 extra people a year. With the existing support that will take the number of people helped each year to over 8,000.

 

  • …reform housing New Zealand – so that instead of being run like a corporation making a profit off the most vulnerable, we can invest hundreds of millions of dollars in building thousands of new, modern, high quality state houses instead.

 

  • …will build 100,000 new affordable homes to be on sold to first home buyers.

 

  • …will set up an Affordable Housing Authority to deliver ambitious new urban development projects, at scale and at pace. We are going to change the face of our towns and cities, and fix this housing crisis. The Authority will have a target to meet: 50% across all of the homes in its developments will have to be affordable. The Authority will look after the Government’s urban land holdings, and will make sure there is a pipeline of land for future needs – for housing, business, schools, parks and hospitals.

 

  • …ban offshore buyers from the market unless they are willing to build a new home and add to the stock..

 

  • …will extend the bright line test so that if you sell an investment property within five years, you’ll pay the full tax on it. That means the short term speculators won’t be able to get away tax free anymore. It means ending the tax incentives to speculate in short term property gains at the expense of families trying to get into a home.

 

  • …will begin consulting on how to end the loop hole of negative gearing.

 

Perhaps Labour’s most audacious plan is to set up a new “Affordable Housing Authority”.

If one reads his speech a certain way, he is planning on reviving a newer, 21st century version of the old Ministry of Works (which was privatised by National in late 1996.) If so, it could be the most direct  way to build houses for people in desperate need.

Considering that most of this country’s infra-structure was built by the old Ministry of Works (or similar state bodies), including the telecommunications systems being used to upload this blogpost onto this website, it would not be a far-stretch of the imagination that it could be done again.

If so, this wasn’t just a speech – it was a Manifesto for the Last Rites of Neo-liberalism.

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Property Investors throw their toys out of the cot

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The reactionary response from the NZ Property Investors Federation was utterly predictable. They were miffed. All of a sudden, their tax-free pot of gold was about to be denied to them

The Federation’s executive officer, Andrew King, bleated like a spoiled brat who had just been told to share his toys;

“In one part of his speech, he said there were homeless people and people living in overcrowded conditions and they wanted to do something about that.  How does making it harder to provide rental homes to these people achieve it? Unbelievable.”

It may have escaped King’s somewhat narrow-attention, but homelessness and over-crowding has worsened during the time that his members have enjoyed spectacular tax-free gains. What were they doing in the last eight years?

He also compared businesses, shares, and farms with housing;

“No other investment is like that. If you do the same with a farm, with shares, with a business, all of those wouldn’t be affected, just rental properties – it’s just wrong.”

Generally speaking, people do not live in “shares”,  “businesses”, or farm paddocks (yet). People live in houses. That is the critical difference.

On top of which, astronomical rents are directly contributing to homelessness and over-crowding;

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High Auckland rents forcing people onto the streets - Sallies

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So to whine that, all of a sudden, Labour’s housing policies will “ make it harder to provide rental homes to these [homeless] people” is contemptible.

His members should be held to account for their part in our housing crisis. The sooner that a capital gains tax is introduced at the same rate as New Zealand’s company tax (28 cents in the dollar), the better.

Mr King’s absurd “pity me” comments have crossed the borderline into territory commonly known as;

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hypocrisy definition

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National discovers Problem & Solution!

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Last year, as stories of homelessness; over-crowding; fewer available  Housing NZ homes; and worsening housing affordability began to make headlines around the country,  National was grabbing money from a government department tasked with caring for the most vulnerable people in our society;

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Housing NZ to pay Crown $118m dividend

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In all, National has raked in over half a billion dollars from Housing NZ;

Housing NZ dividends under National

HNZ Annual Report 2009-10 – $132 million   (p86)

HNZ Annual Report 2010-11 – $71 million   (p66)

HNZ Annual Report 2011-12 – $68 million   (p57)

HNZ Annual Report 2012-13 – $77 million   (p47)

HNZ Annual Report 2013-14 – $90 million –  (p37)

HNZ Annual Report 2014-15 – $108 million –  (p33)

HNZ Statement of Performance Expectations 2015/16 – $118 million – (p12)

Total: $664 million (over seven years)

See more here: National’s blatant lies on Housing NZ dividends – The truth uncovered!

Labour took dividends as well, around a third of National’s figure. The difference between the two is that Labour builds State housing, whilst National continually flogs them off.

This amounts to looting a critical government organisation that is akin to thieving from a charity.

This year’s 2016 Budget indicated that Housing NZ would pay a  dividend  of $38 million  and $54 million next year, for 2017.

Twenty four hours after Andrew Little gave his speech to the country, Housing NZ suddenly announced no dividends would be paid for the next two years;

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RNZ - Housing NZ confirms it will not pay govt dividend

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Labour’s Grant Robertson offered his rationale for National’s policy U-Turn;

“The first we hear from National that they suddenly believe Housing New Zealand needs to retain that money to invest in state houses is the morning after an announcement by the Labour Party that Housing New Zealand will never be required [by Labour] to provide a dividend to the government.

This is not a coincidence, this is a panicked, desperate response from the government.

What we know is that National has extracted dividends from Housing New Zealand over recent years and it’s quite clear that National has seen Housing New Zealand as a cash cow in the past.”

Bill English refuted allegations that National was panicking over Labour’s housing announcement only 24 hours previously;

“It’s nothing to do with Labour and the Greens. This is a $20 billion entity – you don’t come up with capital plans for the next five years because Labour puts out a press release.”

He also denied that National was  looting Housing NZ;

“We don’t accept that taking the dividend is stealing from state housing, because the dividend is not the constraint on what gets built…

…If there was less dividend, we’d just put in more capital – it’s not driven by the availability of the cash.”

National takes money in the form of dividends and taxes  from Housing NZ – whilst non-government charities are tax-free? And he earnestly claims it is not “stealing”?!

English then issued the most ridiculous explanation ever heard, that the figures in this year’s May 26 Budget “appear to be based on older HNZ numbers dating from almost a year ago“.

Yeah, right, Bill.

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flying-pig-clipart-1

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Is the Finance Minister really expecting New Zealanders to believe that the government’s May 2016 budget was full of inaccurate figures?

What is really galling is that Bill English, Steven Joyce, and other National Ministers expect us – the public – to believe this rubbish. It is revealing just how stupid they think we are.

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Who is in charge anyway?!

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Whenever National implements unpopular legislative changes, they often point to Labour having carried out similar policies.

In 2014, National “borrowed” Labour’s policy by implementing free health-care for children under 13.

Last year, National raised benefits by $25 (to take effect this year) for people on welfare.

This year, having their ‘hand forced’ by Labour’s housing policy, the Nats have cancelled dividends from Housing NZ for the next two years.

National seems to be highly influence by Labour.

Which  raises the question; who is actually setting policy and governing the country? Because it appears we almost have a de facto Labour Government pulling the strings.

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A Cautionary Note for Labour

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On TVNZ’s Q+A on 10 July, Corin Dann quizzed Andrew Little on Labour’s policy toward Housing NZ tenants. Corin  Dann specifically asked Little about whether or not tenants should have state houses for life;

Corin Dann: You talk about state houses – an extra thousand state houses. Does Labour believe that someone should have a state house for life?

Andrew Little: I think we think when people are in circumstances where they can’t afford to buy their own home, can’t afford to rent, they’ve got to have a home. They’ve got to have a home, get their life on track, underway.

Corin Dann: Do they have it for life?

Andrew Little: If they’re at a point in their life where their circumstances have changed, and actually, they can afford to buy, my view is I would rather work with them to get them to buy that house so we could then release some funds to build the next state house.

Corin Dann: So you keen National’s policy? They don’t keep them for life?

Andrew Little: Well, I don’t agree with the policy that says we’ll target elderly people on fixed incomes in a state house and see if we can toss them out. That’s not a solution to anything. But what I would say is people who have gone into a state house early, got their lives sorted out,…

Corin Dann: They should move on if they can.

Andrew Little: …the circumstances are right, if we can sell that house to them, why wouldn’t we? And use the funds then to build the next state house for the next vulnerable person.

Selling State houses to tenants is text-book privatisation policy for National, and was a prime plank for the Bolger and  Shipley-led governments in the  1990s.

It is a dangerous road for a Labour government to go down.

Selling a state house to a tenant may seem a kindly gesture from a  benevolent left-wing government.

But eventually a National-led government will be elected back into power. Their track record on selling State houses is evident and they would have no hesitation in taking a Labour policy of selling State housing to tenants and expanding on it.

This is thin-edge-of-the-wedge, slippery-slope stuff.

This is mis-guided to the extreme, and will provide a future right-wing government a ready-made policy to act upon. And not in a nice way.

If Labour is serious in returning to it’s social democratic roots, it would do well to think carefully before embarking on such a naive policy.

Instead, it should consider the following;

[1] Transience

Transience is one of the greatest problems affecting low-income, poverty-stricken families. Moving from one house to another is debilitating to such families – especially for children.

A government report states that transience for children can have extreme, negative impact on  their learning;

Nearly 3,700 students were recognised as transient during the 2014 year. Māori students were more likely to be transient than students in other ethnic groups.

[…]

Students need stability in their schooling in order to experience continuity, belonging and support so that they stay interested and engaged in learning.

All schools face the constant challenge of ensuring that students feel they belong and are encouraged to participate at school. When students arrive at a school part-way through a term or school year, having been at another school with different routines, this challenge may become greater.

Students have better outcomes if they do not move school regularly. There is good evidence that student transience has a negative impact on student outcomes, both in New Zealand and overseas. Research suggests that students who move home or school frequently are more likely to underachieve in formal education when compared with students that have a more stable school life. A recent study found that school movement had an even stronger effect on educational success than residential movement.

There is also evidence that transience can have negative effects on student behaviour, and on short term social and health experience

Encouraging families to stay long-term in State housing not only creates a sense of community amongst tenants; stability for fragile, vulnerable families,  but assists in the long-term stability and education of children.

Not only is a state house “for-life” fair, it provides real, tangible, long-term benefits.

[2] Guaranteed Tenancy

Low-income, vulnerable families in State housing must be given guaranteed, protected security-of-tenure.

Currently, tenants are exposed to the winds-of-change whenever there is a change in government. Their tenure is at the pleasure of right-wing governments, and mass-evictions have been commonplace under John Key’s administration;

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state housing insecurity

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A progressive government must do all within it’s power to protect such vulnerable families. Otherwise what is the point of throwing out right-wing regimes when their ideologically-driven policies no longer palatable, and well past their Use-By date?

Tenancies must be secured. Either by the use of long-term contracts, enforceable in Courts of law, or by some other means such as entrenched legislation.

Labour-led governments come and go.

But tenancies for our most vulnerable must be protected from the whims of others.

[3] State Housing Protected

As well as protection for tenants of state housing, state houses themselves must be entrenched and protected from the rapaciousness of right-wing governments.

In modern, First World societies, the power of contract is supposedly sacrosanct.

It should not be beyond a progressive government to use some means of contract-law to safe-guard state housing. Once this is accomplished, it should make it near-impossible for a right-wing regime to wreak havoc with the lives of the poor.

Perhaps it is time to look at how we can make the concept of contract-law work in the favour of those who have least wealth to lose.

There is much more work to be done.

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References

Scoop media: Key – Speech to New Zealand Contractors Federation

theyworkforyou.co.nz: State Houses—Sale and Disposal

NZ History: Construction and sale of state houses, 1938-2002

Housing NZ Corporation: Rent, Buy or Own – overview (archived page)

Beehive: State houses available to buy from today

TV1 News: First home buyers set to be disappointed with Budget

Department of Building & Housing: Estimated building costs (archived page)

Dominion Post: Inequality report ignores tax cuts for rich – Goff

NZIER: Home

TVNZ News: NZ economic outlook grim until 2013 – NZIER (archived page)

Interest.co.nz: Paula Bennett announces plan to offer $5,000 to homeless Aucklanders

Hive News: Hive News Tuesday – Key blames ‘Dirty Politics’ for lack of state house sale debate

Reuters: NZ Prime Minister says central bank should get on with housing measures

Parliament Today: Housing NZ’s Woes Blamed on Labour

TV3 News: Housing blame game flares up in Parliament

NewstalkZB: Govt accused of blaming Auckland Council for its own failings on housing

Sharechat: Key blames Labour for barrier to foreign buyer ban

Youtube: Bill English Blames Greens for Housing Crisis

Otago Daily Times: Homelessness increasing in NZ

NZ Herald: Auckland has the fifth least-affordable houses in the world

Fairfax media: NZ home ownership at lowest level in more than 60 years

TV3 News: Key – No housing crisis, foreign buyers’ influence ‘minor’

Labour Party: Andrew Little’s Centenary policy speech

Treasury: Income from State Asset Sales as at May 2014

Fairfax media: Labour’s plan to tax property investors slammed as ‘attack’ on rental property providers

Radio NZ: High Auckland rents forcing people onto the streets – Sallies

IRD: Company Tax Rate

Radio NZ: Housing NZ to pay Crown $118m dividend

Radio NZ: Housing NZ confirms it will not pay govt dividend

Fairfax media: Bill English denies U-turn after Steven Joyce reveals Housing NZ won’t pay dividend

National Business Review:  Govt blames outdated Budget figures for Housing NZ dividend U-turn

Metro mag: Opinion – Is John Key the finest actor of his generation?

NZDoctor.co.nz: Free care for the under-13s features in growth Budget

Radio NZ: Welfare increases – what $25 buys you

TVNZ: Q+A – Corin Dann and Andrew Little (video)

TVNZ: Q+A – Corin Dann and Andrew Little (transcript)

Te Ara NZ Encyclopedia: Housing and government – Total Housing Stock

Education Counts: Transient students

Dominion Post: Housing policy will destabilise life for children

Fairfax media: State tenants face ‘high need’ review

NZ Herald: Elderly, disabled included in state house review

NZ Herald: State tenants to make way for workers

Previous related blogposts

Can we do it? Bloody oath we can!

Budget 2013: State Housing and the War on Poor

National recycles Housing Policy and produces good manure!

Our growing housing problem

National Housing propaganda – McGehan Close Revisited

Housing; broken promises, families in cars, and ideological idiocy (Part Tahi)

Housing; broken promises, families in cars, and ideological idiocy (Part Rua)

Housing; broken promises, families in cars, and ideological idiocy (Part Toru)

Another ‘Claytons’ Solution to our Housing Problem? When will NZers ever learn?

Government Minister sees history repeat – responsible for death

Housing Minister Paula Bennett continues National’s spin on rundown State Houses

Letter to the Editor – How many more children must die, Mr Key?!

National under attack – defaults to Deflection #1

National’s blatant lies on Housing NZ dividends – The truth uncovered!

State house sell-off in Tauranga unravelling?

Upper Hutt residents mobilise to fight State House sell-off

Park-up in Wellington – People speaking against the scourge of homelessness

National and the Reserve Bank – at War!

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wheel estate

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This blogpost was first published on The Daily Blog on 12 July 2016.

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= fs =

National and the Reserve Bank – at War!

15 July 2016 4 comments

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reserve bank vs government

 

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Open warfare has broken out between the National regime and  the Reserve Bank. Recent media statements indicate that we are seeing an increasingly bitter  war-of-words; a battle of wills, taking place over the growing housing crisis.

National is demanding that the Reserve Bank implement policies to “get on with it” to rein-in ballooning Auckland housing prices. The Reserve Bank is resisting, in an almost Churchillian-way.

In April this year, Key denied flatly that there was any “housing crisis” in this country;

“No, I don’t think you can call it a crisis. What you can say though is that Auckland house prices have been rising, and rising too quickly actually.”

But a year ago, on 15 April 2015, Reserve Bank deputy governor Grant Spencer warned that investors/speculators were becoming a major problem in the housing market;

“Investors are often setting the marginal market prices that are then applied to the full housing stock within a regional market.”

Spencer went on to issue what must be the most prescient statement ever uttered by a senior civil servant;

“Indicators point to an increasing presence of investors in the Auckland market and this trend is no doubt being reinforced by the expectation of high rates of return based on untaxed capital gains.”

Predictably, Key rejected taxing capital gains as an instrument to control rampant speculation;

“I remember when everyone said to [introduce] the equivalent of a [capital gains] bright line test, it will solve the issues. Well, it really didn’t.”

Key also rejected calls by the Reserve Bank to curb high levels of  immigration which was exacerbating demand for housing. Key was blunt;

“We’re going to stick with the plan we’ve got.”

Of course Key is not prepared to reduce immigration . It is one of the few drivers for current economic growth that is stimulating the economy. Curb migration and the economy stalls. Stall the economy and National would have nothing to take to the election next year.

As National’s own minister, Jonathan Coleman stated in 2011;

“It’s important to highlight the economic value of Immigration here…

[…]

…New migrants add an estimated $1.9 billion to the New Zealand economy every year.

Immigration recognises the strategic importance of the tourism and export education sectors and the direct links they provide to employers.

Given these compelling figures, my number one priority has been to ensure Immigration is contributing to the Government’s economic growth agenda.”

Coleman’s 6 May 2011 press release was entitled, “Immigration New Zealand’s contribution to growing the economy”.

Key deflected criticism and instead blamed the Auckland Council. In a blustering attack reminiscent of the late Robert Muldoon, Key threatened the Auckland Council with over-riding it’s Unitary Plan;

“The effect of the [government] National Policy Statement would vary around the country, but in essence it linked the price of land to demand in the economy. If the land price is going up too quickly (councils) have to amend their plans to release enough land, and if they don’t do that they’ll breach the law. If the Unitary Plan doesn’t meet the demands of Auckland, the National Policy Statement because of the way it works will drive it, mark my words.”

His solution? Build more;

“Look, in the end, we’ve been saying for some time it is not sustainable for house prices to rise at 10, 12, 13 percent a year. The only answer to that is do what we’re doing: allocate more land and build more houses.  It certainly will stop it, there’s no question about that, because if you build enough supply, you eventually satisfy demand.

The mantra to ‘build more, build more‘ overlooks recent statistics which showed that nearly fifty percent of housing in Auckland was being purchased by  investors/speculators;

The Reserve Bank has for the first time unveiled official figures that break out the Auckland market from the rest of the country’s mortgage lending figures. The figures confirm what some previous research and anecdotal evidence has pointed to. Investors are huge in the Auckland market.

The figures show that in April, investors committed to $1.623 billion of the $3.536 billion worth of mortgages advanced in Auckland. That’s just a tick under 46% of the total.

Labour’s Phil Twyford said that in some areas of Auckland, up to 75% of housing was being grabbed by investors/speculators. Twyford said;

“They should start immediately by banning non-resident foreign buys from speculating in New Zealand property, unless they build a new dwelling. That’s the Australian Government policy and we think it makes a lot of sense.”

So unless National is prepared to ban foreigner and local  investors/speculators from purchasing around half of all new housing in Auckland, building new homes will not address the growing crisis.

On the issue of foreign-ownership of residential property, Key was adamant that his open-door, free-market policy of foreign ownership of housing  would be unchanged. Even if it meant New Zealander’s would find  it harder and harder to buy their own home, in their own country. As he said to Corin Dann on TVNZ’s Q+A last year;

“But the point here is simply this – I don’t want to ban foreigners from buying residential property.”

But Deputy Mayor, Penny Hulse, was having none of  Key’s bullying tactics. She responded with her own tough message;

“We’ve got six and half years of land planned for, infrastructure in the ground and ready to go. Government themselves have got more than 20 special housing areas that belong to Housing New Zealand that are ready to go.  There’s no shortage of places to build. Our question to government would be, perhaps you just need to get on with it.”

The reality is that National is unwilling to implement any policy that might lower property prices. As Key has said previously;

“If it is left unchecked, some buyers could find themselves substantially overexposed in an overvalued market, and we all know what happens if those values start to fall.” –  John Key, 23 July 2013

“Let’s just take the counter-factual for a moment. Would you want your house price going down?  And what most Aucklanders say to me is ‘I’d rather my house price went up, but I’d rather it went up a little more slowly than this’.” – John Key, 6 August 2015

So Key is in a bind. His government’s  continuing popularity is at the pleasure of property-owners with bloated housing values.

Build too many houses or implement too many restrictions (including new taxes), and property values in Auckland and elsewhere in New Zealand might begin to fall, as they did in the late 1990s. That would be a financial shock for many New Zealanders who, through rising property values, are feeling like “millionaires”, albeit on paper.

If that happens, National’s popularity – riding high on 47% – would finally crash and burn, paving way for a Labour-Green(-NZ First?) coalition government next year.

However, National’s desperation to resolve what has become a major public crisis has apparently found a new scape-goat – the Reserve Bank.

National’s cunning plan is for the Reserve Bank to do their “dirty work” for them. If the RBNZ were to implement policies that would result in property values levelling off – or even dropping – then Key and English would have “plausible deniability”. They could point to the Reserve Bank as an independent body and wash their hands of its actions.

Recent demands from John Key for the RBNZ to “get on with it” are not the first time that National has interfered with  the independence of the bank.

In April last year, in a classic example of nepotistic cronyism, Bill English’s brother was appointed to the RBNZ as an “advisor”;

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Finance Minister Bill English's brother to advise Reserve Bank on interest rates

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A year later, in April this year, Bill English took an unprecedented step in demanding greater over-sight of Graeme Wheeler, the RBNZ’s Governor;

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Bill English seeks talks on Reserve Bank governor's performance 'from time to time'

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According to the Fairfax report, English said;

“The duties of the board include keeping under review the performance of the governor. I would expect to discuss your assessment of the governor’s performance from time to time.”

On National’s* own website, English went further;

“Ministers typically send letters of expectation to the Boards of entities in their portfolio. This letter was prepared after The Treasury identified an opportunity to bring the accountability framework into line with other Crown agencies.”

This is naked interference in an institution that, since 1989, was to be protected from partisan-political interference. The RBNZ supposedly acts according to legislation – not the demands of the Finance Minister. Not since the Muldoon era has the RBNZ been controlled directly by a government minister.

It can only be assumed that National is meeting stiff resistance from the bank’s Governor, Graeme Wheeler, as English attempts to assert direct ministerial “over-sight” (ie, control) over the institution.

The fact that a recent war-of-words has erupted over the RBNZ’s involvement in Auckland’s housing crisis suggests that English’s Very Kiwi Coup may not have been successful.

In fact, the Cold War has become a Hot Conflict.

In the last week, the ‘battleground’ between National and the Bank became more public, as government minister and chief Head-Kicker, Steven Joyce and Grant Spence continued their war-of wills.

6 July, 1.10 AM

John Key;

But my sense is potentially one of the risks is you have got people buying rental properties at the moment, borrowing more money but fearful that the Reserve Bank is going to move. If they are going to make changes, probably they should just get on with it.”

7 July

Grant Spencer (RBNZ);

“Increased housing demand has been driven by record net immigration, low mortgage interest rates and increasing investor participation. Net migration flows continue to hit new records, with annual net PLT migration now approaching 70,000 persons…

[…]

A dominant feature of the housing market resurgence has been an increase in investor activity. In recent months, investors have accounted for around 43 percent of sales in Auckland and 38 percent in other regions […] The prospect of capital gains appears to remain a key driver for investors in the face of declining rental yields. 

The declining affordability of New Zealand housing and increasing investor presence have seen a downward trend in the share of households owning their own home. This ratio has fallen steadily since the early 1990s, reaching 64.8 percent at the 2013 Census. The recent increase in investor housing activity suggests that the home-ownership rate may have declined further since 2013.

The Reserve Bank considers that rising investor participation tends to increase the financial stability risks relating to the household sector in severe downturn conditions.

[…]

…However, we cannot ignore that the 160,000 net inflow of permanent and long-term migrants over the last 3 years has generated an unprecedented increase in the population and a significant boost to housing demand. Given the strong influence of departing and returning New Zealanders in the total numbers, it will never be possible to fine-tune the overall level of migration or smooth out the migration cycle. However, there may be merit in reviewing whether migration policy is securing the number and composition of skills intended. While any adjustments would operate at the margin, they could over time help to moderate the housing market imbalance.”

8 July, 7.46am

Don Brash (Former Reserve Bank governor);

The Reserve bank has no statutory responsibility for Auckland house prices or indeed house prices anywhere else…

[…]

The Prime Minister wants to pretend this is somebody else’s responsibility.  I think the Reserve bank is absolutely right, that this responsibility for Auckland house prices lies first and foremost with local government Auckland and central government in Wellington.

Central government, because it controls the rate of migration, which is by any international standards a very high level, that pushes  demand for housing.  And of course the Auckland Council,  not just now, but for the last couple of decades has restrained the availability of land on which to build Auckland houses...”

8 July, 7.51am

Steven Joyce (Minister for Economic Development);

“Migration is a contributing factor to housing demand…

[…]

The prime minister’s comment was entirely fair, which is to to suggest to the Reserve Bank [that] if you’re going to these things then, then  do move on them quickly…

[…]

The Prime Minister’s comments on Tuesday were just to highlight the fact that actually if you’re going to make these sorts of changes, do make them reasonably  quickly…

8 July, 7.57am

Grant Spencer (RBNZ);

“What we’re saying is that the, what we’re seeing in the last three years is 160,000 net  in-flow is unprecedented and it’s an important driver of the current housing situation and therefore it  can’t be ignored….

[…]

“You can’t manage or fine tune the migration cycle, we know that, but all we’re saying is that given it’s an important driver that we should be taking a look at that policy – making sure that we’re getting the numbers and the skills that government’s really targeting.”

It’s an important driver in the housing market, yes. There’s no doubt about that. But we’re also saying there’s no easy solution. You can’t manage or fine tune the migration cycle, we know that, but all we’re saying is that given it’s an important driver that we should be taking a look at that policy – making sure that we’re getting the numbers and the skills that government’s really targeting.”

[…]

We’re running at a rate of 60,000 at present, but how many years can we continue running at a rate of 60,000 and continue to absorb that rate. It get’s more and more difficulty when the country doesn’t have that absorbtive capacity.”

Current battle-status: stalemate.

Controlling house prices, as former Reserve Bank governor, Don Brash said, is beyond the bank’s statutory responsibility. On top of which, the RBNZ is unwilling to be the “patsy” for implementing policies (even if it could) that might crash house prices, and make them the Bad Guys in this worsening crisis.

Only a government can act decisively in such matters – but to do so would be political suicide for Key and his fellow ministers.

Fran O’Sullivan is usually sympathetic to the National government, but her column on 6 July was damning of Key’s inaction;

Most National Cabinet ministers and MPs are well invested in “real property”. So are many of their counterparts from other political parties.

Like most of us who are “established” – that is those of us who bought into the housing market a decade or more ago – the MPs have seen their own on-paper wealth double.

Having rejoiced at the wealth effect, neither the MPs nor the rest of us want to take a financial haircut. Key is right on that score.

But it is a pretty crap society that pulls the ladder up on younger people or those less well off just because they want to preserve their new unearned wealth.

[…]

Key again duck-shoved the issue, suggesting it was the Reserve Bank’s responsibility to “have a look at the question around investors”.

What’s notable is his Government will not slap investors with an effective capital gains tax, preferring a “bright line” test which is easily avoided by holding a housing investment for more than two years; refuses to introduce specific taxes to punish land bankers; and will not introduce rules to preserve the acquisition of existing residential housing for citizens or curb migration.

Key could pass special legislation to do this.

The question is why won’t he.

“Why”? Because Key doesn’t want to lose the 2017 election.

This is National’s Achille’s Heel, and it is fully exposed.

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Addendum1

In May this year, a TV3/Reid Research Poll was scathing of National’s inaction on the housing crisis. Even National voters were getting ‘grumpy’;

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tv3-news-housing-poll

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Addendum2

Current ballooning property prices are the highest in the developed world;

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Real house price growth - annual % change

Ad

Addendem3

Latest house price figures:

• $975,087- Auckland: Average house price, up 4.7% in past three months and 16.1% since June last year

• $492,403- Hamilton: Average house price, up 6.9% in past three months and 29% since June last year

• $599,915- Tauranga: Average house price, up 4.9% in past three months and 23.6% since June last year

Latest Inflation Rate:

Inflation is currently at 0.4%, according to Statistics NZ.

Notes

* I have downloaded and retained a copy of the National Party webpage. In the past, National Party webpages tend to “disappear”, and are no longer searchable, making referencing and verification of quotes problematic. If this webpage disappears, English’s comments can still be verified to anyone requesting it. – Frank Macskasy

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References

Radio NZ: Key denies Auckland housing crisis

Fairfax media: Reserve Bank call to look at untaxed property gains

NZ  Herald: John Key to Reserve Bank – Housing measures ‘not terribly effective’

Radio NZ: No change on immigration, says John Key

NZ Herald: Housing crisis – Reserve Bank calls on Government to curb immigration

Beehive.govt.nz: Immigration New Zealand’s contribution to growing the economy

Fairfax media: Key gets tough on Auckland with new policy forcing councils to release land

Interest.co.nz: Investors accounted for nearly 46% of all mortgage monies in Auckland

Radio NZ: Auckland’s home ownership rates ‘collapsing’ – Labour

Scoop media: PM – I don’t want to ban foreign buyers from buying

Radio NZ: Get on with it – Auckland Council tells govt

Fairfax media: Key expects LVRs to go ahead

Interest.co.nz: Key says non-Aucklanders tell him they would love it when house prices are rising

QV.co.nz: How fast is the current property market rising compared to the past? (2013)

TV3: Newshub poll – Key’s popularity plummets to lowest level

Fairfax media: Finance Minister Bill English’s brother to advise Reserve Bank on interest rates

Fairfax media: Bill English seeks talks on Reserve Bank governor’s performance ‘from time to time’

National.co.nz: English releases RB Board letter of expectations

NZ Herald: Auckland property: $400k deposit please

Reserve Bank: Housing risks require a broad policy response

Radio NZ: RBNZ wants immigration review to rein in house prices

Radio NZ: Government responds to RBNZ housing speech

Radio NZ: Reserve Bank – Housing risks require a broad policy response

NZ Herald: Fran O’Sullivan – Why won’t Key act on housing?

Fairfax media: Why MPs may want house prices in New Zealand to keep rising

TV3 News: Government gets thumbs down on housing

NZ Herald: Auckland property – $400k deposit please

Statistics NZ: Consumers Price Index: March 2016 quarter

Additional

Radio NZ: Reserve Bank refuses to play housing ball with government

Previous related blogposts

Can we do it? Bloody oath we can!

Budget 2013: State Housing and the War on Poor

National recycles Housing Policy and produces good manure!

Our growing housing problem

National Housing propaganda – McGehan Close Revisited

Housing; broken promises, families in cars, and ideological idiocy (Part Tahi)

Housing; broken promises, families in cars, and ideological idiocy (Part Rua)

Housing; broken promises, families in cars, and ideological idiocy (Part Toru)

Another ‘Claytons’ Solution to our Housing Problem? When will NZers ever learn?

Government Minister sees history repeat – responsible for death

Housing Minister Paula Bennett continues National’s spin on rundown State Houses

Letter to the Editor – How many more children must die, Mr Key?!

National under attack – defaults to Deflection #1

National’s blatant lies on Housing NZ dividends – The truth uncovered!

State house sell-off in Tauranga unravelling?

Upper Hutt residents mobilise to fight State House sell-off

Park-up in Wellington – People speaking against the scourge of homelessness

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reserve bank - rbnz - national government - housing affordability

Cartoon acknowledgement: Tom Scott, Dominion Post

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This blogpost was first published on The Daily Blog on 10 July 2016.

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Foot in mouth award – Bill English, for his recent “Flat Earth” comment in Parliament

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idiot bill english

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I won’t be wanting to see any hint of arrogance creeping in… One of the big messages I’ll be wanting to give incoming ministers and the caucus is that it is incredibly important that National stays connected with our supporters and connected with the New Zealand public.John Key, 22 September 2014

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It appears that Finance Minister, Bill English did not get the memo from Dear Leader Key’s office:  “Dont get arrogant!”

On 29 June, near two years after Key’s warning, Bill English’s cockiness has landed him in deep, fetid water when he responded to a question from Labour’s Grant Robertson in Parliament;

Grant Robertson: “Does he agree with the statement of Pope Francis I that “Inequality is the root of social evil”,  given that inequality has risen in New Zealand on his watch, and is it not time he got back to confession?”

Hon Bill English: “ There is no evidence that inequality in New Zealand is increasing.

A day later, interviewed by an exasperated Guyon Espiner, English again denied that inequality was increasing in this country. English’s tortuous mental and verbal gymnastics to deny rising inequality was utterly unconvincing and judging by the tone of his own voice, he wasn’t convincing himself either;

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Porirua family can only afford biscuits - bill english - radio nz - inequality - poverty

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English’s assertion that inequality in New Zealand is not rising beggars belief, when nearly every metric used has come precisely to that conclusion.

From the Salvation Army, last year;

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income inequality - salvation army - child poverty

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The Children’s Commissioner reported on increasing child-poverty, rising by  45,000 over a year ago to now 305,000  children now live in poverty;

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A third of NZ children live in poverty - childrens commissioner

 

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Statistics NZ’s report on the problem was unequivocal – “Between 1988 and 2014, income inequality between households with high incomes and those with low incomes widened“;

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income inequality - statistics nz - poverty

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1988 – When Rogernomics began in earnest. What a surprise.

Interestingly,  income inequality fell slightly in 2004, when Working for Families was introduced by the Clark-led Labour Government. Working For Families was the same policy derided by then-Opposition Finance spokesperson, John Key, as “communism by stealth“.

From the last bastion of “radical marxism”, the OECD, came this damning report on rising inequality in New Zealand impacting on our economic growth;

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income inequality - oecd nz - poverty

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The Report stated that “rising inequality is estimated to have knocked more than 10 percentage points off [economic] growth in Mexico and New Zealand“.

And even our Dear Leader once admitted that New Zealand’s “underclasses” was growing;

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key admits underclass still growing - poverty - foodbanks - homelessness

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So, is everybody – including Bill English’s boss – wrong?!

Is Bill English the sole voice-in-the-wilderness trying to spread The Truth, whilst everybody else – including faraway OECD – is wrong?!

Or has he run foul of Dear Leader’s prescient warnings not to become arrogant?

Enjoining the poor to ignore hunger and simply “Let them eat cake” did not work out well for a certain person 223 years ago. Bill English may not lose his head over his obstinate refusal to see the world around him – but he may lose the election next year.

So for Bill English, on behalf of those who are low-paid; homeless; unable to afford to buy a home; unemployed; poor; and will be spending tonight in a car or an alleyway, I nominate Bill English for a Foot In The Mouth Award;

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Foot In Mouth Award

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References

NZ Herald: Election 2014 – Triumphant PM’s strict line with MPs – Don’t get arrogant

Parliament Today: Questions & Answers – June 29

Radio NZ: Porirua family can only afford biscuits (audio)

Fairfax Media: Child poverty progress ‘fails’, Salvation Army says

Radio NZ: A third of NZ children live in poverty

Statistics NZ: Income inequality

MSD: Future Directions – Working for Families

NZ Herald: National accuses Government of communism by stealth

OECD: Trends in Income Inequality and its impact on economic growth

NZ Herald: Key admits underclass still growing

Newstalk ZB: Demand for food banks, emergency housing much higher than before recession

Additional

Office of the Children’s Commissioner:

Previous related blogposts

When National is under attack – Deflect, deflect, deflect!

State house sell-off in Tauranga unravelling?

The Mendacities of Mr English – Fibbing from Finance Minister confirmed

Why is Paula Bennett media-shy all of a sudden?

Park-up in Wellington – People speaking against the scourge of homelessness

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national's free market solution to housing

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This blogpost was first published on The Daily Blog on 5 July 2016.

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