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secondToday, millions of dollars are being transferred to wealthy New Zealanders in the government’s attempts to stimulate the economy. The Reserve Bank has essentially committed to printing up to $ 128 billion (US $ 90 billion) of new money, lending much of it as cheap credit to banks, which then lend it to those who can afford to buy more. and more houses and thus seize capital gains.
The result is a skyrocketing rise in house prices, making accommodation unaffordable, especially for those looking to buy a first home or rent accommodation. In fact, this week New Zealand was named the 7th most expensive place in the world to buy a home.
Although Finance Minister Grant Robertson has just written to the Reserve Bank to suggest that they should consider their impact on house prices, there actually seems little that Labor is willing to do to fix the escalating crisis. . In fact, it is as if the government is shrugging its shoulders, believing that market forces alone can magically correct the crisis in some way.
This is very strange for a Labor government. Traditionally, progressive governments intervene in the market to make housing cheaper, not more expensive. In the early 20th century, the liberal government passed the Workers’ Housing Act of 1905, and embarked on a state-run housing program that led the world. Then in the 1930s, under the first Labor government of Michael Joseph Savage, the construction of the state house was accelerated and the concept of a “home for life” was introduced.
Prime Minister Jacinda Ardern has been particularly keen on partnering with that first pioneering Labor government, using a portrait of Savage as support behind her in official communications. But unfortunately faced with the same problem, she firmly draws the line by emulating his bold approach.
The problem is basically a housing shortage, especially for those at the bottom of the housing market. An economist has estimated that New Zealand is short of some 500,000 low-cost homes. This has proven to be a boon for homeowners, causing rents to skyrocket.
The answer clearly is that the government begins a program of mass production of state houses. Something on the order of 100,000 new state chambers is needed.
The current government is building new state houses, but the numbers are crazy: around 4,000 were built in Ardern’s first term, and while they are committing to build more in the coming years, this is on such a small scale that it is barely you will notice. . The waiting list of the neediest families has tripled under Labor surveillance to some 20,000.
Current levels of state housing stocks are completely inadequate: New Zealand has one state house for every 70 citizens, when even in the 1990s there was one for every 50. The national and labor governments have failed to build houses to keep up. with population increases and increased need. We have the lowest level of state chambers since the 1950s, and the OECD tells us that we are now behind other countries instead of leading.
It could be argued that New Zealand does not have the building capacity. However, on the issue of increasing the number of state chambers, the director of Kāinga Ora (formerly Housing New Zealand) has bluntly stated: “We have the capacity to build whatever the government wants us to build.” However, a large expansion of quality social housing would likely require the establishment of a state-owned construction company, using mass prefabrication.
This will cost money. Many billions of dollars. And that’s the problem: During the first term of the Ardern government, his fiscal conservatism ruled out any significant increases in spending. However, in the Covid era, the government can suddenly afford to spend billions on wage subsidies and can print billions to provide cheap credit to banks. The crucial difference is that building homes would create a lasting asset, rather than simply a gift to the rich.
What’s more, governments continue to spend huge sums on supplementing low-income housing for private rentals, or even renting motels for the homeless. Without a doubt, this money is better destined to the construction of social housing.
There is an argument that dealing with housing demand at the bottom of the market would also “trickle down” to help alleviate the problem for first-time home buyers. Some members of the political left argue that the massive expansion of social housing would put significant downward pressure on rental prices. As a result, many homeowners would have to sell rentals, increasing the number of homes available to first-time home buyers and driving prices down for all.
Of course, there are many vested interests in keeping prices rising. Politicians, including the current prime minister, seem fearful of upsetting homeowner voters and property developers who rely on inflated asset prices.
State housing is a genuinely leftist and progressive response to the current housing crisis. However, the government persists in its discredited KiwiBuild flagship scheme because it was designed to cost the state so little. The KiwiBuild concept is essentially the antithesis of state housing: the state is supposed to underwrite private developers to supply moderately expensive houses to sell to the middle classes. This was always a fairly centrist political initiative disguised as something progressive. And its inherently flawed design means that while 100,000 homes were promised over ten years, it has only produced a few hundred so far.
Now there is massive pressure on Labor to admit that their hands-off approach to housing construction has failed. And while it’s good that there is panic about plummeting levels of homeownership, the debate has paid very little attention to those at the bottom of the market, especially the homeless. To deal with this, a genuinely progressive government would simply return this country to the large-scale state housing New Zealand used to be known for.
Dr. Bryce Edwards is a resident political analyst at Victoria University of Wellington, New Zealand, where he is the director of the Democracy Project.
