If Megan Woods really is a left-wing housing minister, then pushing for a left-wing shift in housing policy is the last thing she will do, Chris Trotter argues

If Megan Woods really is a left-wing housing minister, then pushing for a left-wing shift in housing policy is the last thing she will do, Chris Trotter argues
Megan Woods, by Jacky Carpenter.

By Chris Trotter*

Is Megan Woods truly, as one commentator insists, “the first genuine left-wing housing minister in ages”? And, if so, is a left-wing shift in this government’s housing policy imminent? The answer to both questions depends entirely on one’s definition of a “left-wing housing minister” and, even more importantly, on what a “left-wing shift” in government housing policy might entail.

It is difficult to discern what the political scientist who claims Woods for the Left, Dr Bryce Edwards, is actually saying. The most obvious interpretation is that he believes that Woods, a former member of the Alliance, and then of Jim Anderton’s Progressive Party, offers left-wing ideological credentials considerably more robust than just about all of her colleagues in the current Labour caucus. Folded into that explanation is the additional fact that Woods’ doctoral dissertation interrogates the record of state housing in New Zealand. Taken together, these two pieces of information lend more than a little credence to Edwards’ claim.

A politician’s personal history does not, however, say very much at all about her approach to policy-making in the present. The former broadcasting minister, Marion Hobbs, was once a card-carrying member of the Communist Party of New Zealand. Did that did mean Helen Clark’s Cabinet included a communist? Absolutely not. People – even politicians! – change. The policies we believed possible in our youth, no longer seem so achievable in middle-age. Indeed, by the time we enter old age, they may strike us as completely barmy!

The Megan Woods who joined the Alliance was a very different person to the newly appointed Minister of Housing. Her years in Parliament have taught her much about the New Zealand political system’s tolerance for radical economic and social change.

Always, at the back of her mind (especially as a former Alliance member) will be the example of Rogernomics. Not since the 1930s had a New Zealand government unleashed such a concerted burst of radical reform. Roger Douglas’s neoliberal revolution changed New Zealand forever: proving beyond the shadow of a doubt that “transformational government” is possible. What makes today’s politicians so leery of such vaunting political ambition is its punishing social, economic and political cost. The electoral system that put Woods where she is today, MMP, is proof of just how little appetite New Zealanders have for changes that turn their world upside down.

Which is exactly what would happen if a genuinely left-wing housing minister was invited to implement a genuinely left-wing shift in this government’s housing policy.

It would kick-off with the complete scrapping of KiwiBuild. In its place, a state-planned and executed programme of state house construction would be announced. Instead of 100,000 “affordable homes” for the frustrated sons and daughters of the middle-class, Woods’ programme would commit to constructing 100,000 state houses for the nation’s poorest families to move into. A state-owned construction company would be required, along with state-owned prefabrication plants. Such a programme would necessitate casting aside practically all of the policy assumptions of the last 35 years.

The construction of so many housing units, their rentals fixed at 25% of the tenant’s income, would very quickly impose massive downward pressure on rents. The business model of the ordinary property investor would be wrecked – forcing more and more of those landlords at the margins to sell-up and exit the market. With more and more properties being offered for sale, prices would plummet. The very people for whom KiwiBuild was originally created would now be able to purchase their first home at an affordable price. By placing its thumb firmly on the supply side of the market’s scales, the state would have solved the housing crisis. At least, that is how a “left-wing shift” in housing policy is supposed to work.

But at what economic, social and political cost? To answer that question is to discover why a left-wing shift in housing policy will never get the green light from the Jacinda Ardern-led Coalition Government. Quite simply, such a programme would lead to the sudden immiseration of a dangerously large proportion of the New Zealand middle-class.

Plunging property prices would produce widespread panic among New Zealand’s homeowners. Even those who owned their properties outright would feel poorer – much poorer. Many of those still paying-off their mortgages would find themselves confronting negative equity. The entire “Wealth Effect” which, more than any other single factor, has contributed to the widespread conviction – particularly among the Baby Boom generation – that their financial and social status is rock-solid-secure, would be blown to pieces. In its place would arise something infinitely more dangerous – The Poverty Effect.

A middle class suddenly beset with terrifying feelings of economic and social insecurity would instantly turn politically feral; rounding on the government politicians it held responsible for its ill-fortune with lethal electoral force. Parties on the right of the political spectrum would have no choice but to put themselves at the head of this electoral lynch-mob. The much prized “middle ground” of politics would collapse into the resulting void like a Rotorua sink-hole. Very quickly, life in New Zealand would turn very nasty.

But this didn’t happen in the 1930s, the social historians might object. The state housing programme of the First Labour Government (representing a very genuine left-wing shift!) was met with general approbation by most New Zealanders – which is why Labour’s vote went up in 1938. True. But the difference between then and now is that Michael Joseph Savage and John A Lee were not contending with a large middle-class sitting pretty on what it believed to be sure and certain affluence. Huge numbers of middle-class New Zealanders had lost everything in the Great Depression. Many of them turned, if only briefly, to Labour as the best hope of recovering their lost prosperity.

The best guide to what might overtake New Zealand is provided by the fate of the German middle-class in the early 1920s. The German Government’s attempt to pay the victorious allies’ war reparations, and keep the economy running, by printing more and more Reichsmarks, unleashed the most devastating hyper-inflation Europe has ever witnessed – wiping out the savings of huge swathes of the middle-class overnight. These embittered victims of the Great Inflation, impoverished a second time by the Great Depression just six years later, became the electoral backbone of Adolf Hitler’s Nazi Party.

Prime Minister Ardern and her close friend and ally, Megan Woods, have no desire to unleash such a political tsunami against their rickety regime. Both politicians understand that keeping the support of the New Zealand middle-class, which votes, is far more important than meeting the needs of New Zealand’s benighted underclass, which doesn’t. With her firm intellectual grasp of what is at stake (strengthened by her left-wing political analysis) Megan Woods is not about to force Winston Peters and NZ First out of the coalition by obliging him to ride her political tsunami to electoral safety.

If Megan Woods is, indeed, “the first genuine left-wing housing minister in ages”, she will understand only too well why a left-wing shift in the Coalition’s housing policy would unquestionably prove to be a fatal political error.


*Chris Trotter has been writing and commenting professionally about New Zealand politics for more than 30 years. His work may be found at http://bowalleyroad.blogspot.com. He writes a fortnightly column for interest.co.nz.

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42 Comments

Well for starters , the Government simply does not have the money to embark on a left-wing -state- housing -for everyone programme .

And why should they ?

There are enough houses for everyone right now , they are simply too expensive for many .

And there in lies the rub

The cost of subbing and servicing a section, and building a house have spiraled out of control with all manner of costs , ($20,000 for an Auckland water meter for example )

So government is confined to work within the parameters of the cost -structures and rules they have created, and they have to pay the stupid prices charged by the anti-competitive building supply cartel ( which they refuse to address)

Yes plus the 15% GST is probably the single biggest component of a house's cost (plus land). Of course there is GST in the land too so the young people govts claim to represent fork out the price that includes $90,000 GST on average and commit to a 25 year mortgage too, thus paying even more in interest on the GST. Big money for rapacious govts.

Amen. If government would just stick to the job of government - providing cost efficient laws and regulation, providing cost efficient infrastructure, preventing tendency of numerous bureaucracies involved to grow and expanding their remit (and cost) and fighting tendency for monopolies and cartels to form and exploit markets (particularly in small countries) then they would have a far more positive impact on the housing cost problem than they will by trying to get into the house building game. They are the only ones who can address these real driving problems, and they (Labour and Nats are asleep at the wheel.

Chris has finally realised the insanity of true left wing politics, especially in this late stage of the current cycle of humanity - since WWII finished. The people who have worked hard & been lucky have saved enough to retire on. Wealth is hard to earn & easy to lose. Most people who have money are older than 50. In fact, if you had children it's at 50 you begin to save money. That was certainly our case. Most of us have spent the last 40-50 years working.
Those that have no wealth were never going to have it anyway. They spent it living. It was their choice. If they couldn't earn enough, that too was their choice. Still today, there are tens of thousands who do not take their continuing education seriously enough. In fact, education never stops. Poor decision-making combined with taking no personal responsibility leaves them vulnerable & in some cases destitute. I do not feel for them. Their lives are a result of their choices, responsible or not - your choice.
I think CoL should target the bottom end of society for housing. If they don't, no one else will. Kiwibuild was always a bad idea, shown up in being selected to govern by a grumpy old man, out of the blue. An idea that has kicked Labour up the bum & shows us just what an utterly poor opposition they were for 9 years, totally wasting that time in not creating any new policy for moments like now.
They are, I think) the worst government I've seen for the last 35 years.

You're right, those poor people should just stop being poor and decide to be rich. Simple! And yes Kiwibuild has been a bit of a disaster, but to be fair it was pretty ambitious to expect it to deliver so soon. They may not have come up with a deliverable plan so far, but at least they have acknowledged the problem and are attempting a solution. National denied there was even a problem in the first place. Nonetheless, the nation is having to deal with a situation where prices are too high and there has been decades of under investment in housing. Something has to be done and the same old thinking isn't going to deliver. We have a government and market failure at our hands. Hopefully our elected representatives can come up with a long-term solution. I suspect this will take some time given the complexity of the situation, and the radically misjudged perceptions of people like yourself whom believe people have ultimate control of their own destiny. I believe people are largely victims of circumstance, especially at an early stage of life. Most kiwis would struggle to make ends meet after a couple of weeks if they lost their job. I don't think most would choose to be in that situation. This is clearly a structural problem.

The housing crises is not a market failure; it is a government and regulatory failure. Governments, of all stripes, have consistently meddled and created the environment where the cost of building is so high and land use is so restricted. Get the government out and we might actually get a market. What the above commentator was referring to was that governments usually fail at the actual "doing", such as building houses. Poverty is the natural state and it takes the right environment (legal and social) to ensure that individuals, families, and communities get out of poverty. Government has a role to play but it is the rule setting (which they usually fail at) and individuals will do the actual building. The actual long-term solution to our problems is empower individuals to take control of their destinies - the good and the bad.

Absolutely correct. My story replicates yours. Worked self employed for 46 years full time (no employer to fund super, no holiday pay etc) and still working part time because the super is so poor. Own two valuable houses including the one I live in. The Labour govt (who I only voted for once in 1988 but got shafted by Lange 's socialist turn), used to be the party for the working, now it's the party for the non-working.

It's certainly good timing that you were able to benefit from the relative levels of housing affordability achieved with the help of earlier government efforts (up to and including direct builds) in the latter half of the 20th century.

Chris Trotter correctly observes that the knock on effects of a large scale state run building program would obliterate the coalition but nevertheless an appetite remains within the electorate for the state to actively 'do something', despite kiwibuilds spectacular crash and burn. Younger voters with limited appreciation of the hash so many socialist governments make of managing social infrastructure programs and also FHB's will, with the support of a leftie media, overlook Ardern's disastrously bad judgement on backing Twyford's scheme and allow Wood's more space than Trotter may think, to channel Savage and Lee.

Savage and Lee, my how times have changed. The old cloth cap Labour large voting blocs have long disappeared. For instance, meat workers, wharfies, seamen. CT is simply stating the obvious. If you want to be in government you have to win the middle ground of the electorate. To be fair National under Key did just that but they cocked it up in the last term. Couldn’t see out of their Corporate Box on the Ivory Tower, and given an unexpected, almost a novice in fact, late alternative, the electorate turned against them sufficiently. Even though Labour’s habit of “spouting” in abundance is irritating to say the least, especially when coupled with the behind the curtain utterances of the old couple, Clark and Cullen, they will return to power next year if they keep the coalitions yard arm clear.

@ Foxglove. Labours voting bloc has become civil servants of which there is a vast number. Which is why they get so well paid with few demands upon them.

KH. Yes, that is true, tks for filling in the gap . Vive The Brown Cardigan Brigade! God Defend New Zealand!

Not sure I see the problem. I'm pretty sure the vast majority of property investors inhabit the right of the political spectrum so they can be safely ignored. The ever increasing numbers of renters and potential first home buyers would welcome such a plan with open arms, likewise anyone trading up as the decrase in price paid would outweigh the lower price received. Anyone who has no plans to move should be ambivalent while decreased rents should put downward pressure on retirement villages who have been rorting retirees. Yes people looking to trade down to release equity would squeal but it's only paper money, likewise it would help end the current obsession of passing wealth to the next generation which is the prime driver of inequality.

Trotter created the Waitakere man concept. From your comments I suspect you don't appreciate how big and politically influential the cohort of Kiwis is, who identify with this mythical guy. Whack the value of his bungalow and you are dead meat politically. Even the naive Ardern finally perceived this and canned CGT.

Chris is right.
Poor and those who do not like to have to think about policy and implications, do not vote.
Young and renting do not vote enough either.
People vote more the older they are and age makes us all more Conservative.
So, under MMP, nothing left wing will wash for long.
Notice National rock solid on 44% since election.
Labour is in severe danger from Greens and NZF going below 5%

That is a very interesting point and if it eventuated NZ would have the extremely odd situation of an MMP system out turning a FPP parliament. Believe though the Greens will have sufficient voting from the left to get them over the line. I mean last time they made in the face of almost a self destruction. Then that in turn would see votes going to NZF (provided WP is still featuring) so as to stymie an outright Labour/Green government. Next years election is set to be a very strange affair!

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It's the price of land , Chris : the crux of the problem lies in the exhorbitent price of land..

.. why , in such an underpopulated country , do we have such horrendously high section prices ...

You can't construct affordable houses when you start with a $ 400 000 section ..

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We have high land prices because we have low interest rates. We have low interest rates because we have high debts. We have high debts because we have high land prices. Gotta keep juggling, can't stop.

The only way low interest rates affect land prices is when they are available in conjunction with land availability restrictions. Simple because they increase demand on a limited supply. Same goes for FHB Home start loans, allowing early access to Kiwisaver etc. Any saving you achieve with a lower interest rate gets capitalised into the price you pay for the property, the debt of which is locked in at that price, but the possibility of a higher future interest is still free to increase.

They have no effect on house prices in those jurisdictions than do not have supply constraints, ie zoning restrictions.

A fine article. What has happened to the real Chris Trotter? Is it that Chris is older and wiser or is this an imposter?

My only contention is with his depiction of the war reparations as being from the "victorious allies". My take is a bit more complex.

Yes, the French wanted revenge for their humiliation, both in battle (I mean, it's just demeaning to have to ask the Brits to help the mighty Grande Armee out, let alone the Yanks) and for 1871, the previous conflict between France and Germany. This was stupid, as German gold flowing into France means less French exports, but then, the French enarques still don't believe in such low brow things as double entry mathematics governing finance.

The US was much more cunning. In previous european wars, each country dealt with its own debts and the allies usually forgave the debts between them, on the basis that some countries had contributed more treasure and less blood and some the other way around. The US saw the opportunity to indebt the French, Germans and Brits in one go, thus paving the way to becoming the major world power.

The Brits, not being stupid, saw the US power play for what it was, but were in no position to object. Like the French, they needed German gold to repay their debts to the US bankers who had financed all sides. Maynard Keynes rose to fame on his treatise on the foolishness of the Versailles treaty.

.. I like the new Chris Trotter ; 'cos although he's clearly coming from the left perspective, he's not an entrenched ideologue.... not blinkered by a strict socialist agenda . .

Pity that more in Labour and Greens aren't like him ...

He's always been an honest trader in ideas. Not entirely ideologically hidebound and as a result probably most hated by the ideological purists of the left rather than anyone on the right. A valuable contributor to the discourse in NZ.

Yes Harding and then Coolidge were unrelenting and there was certainly an aspect of “Imperial” ambition simply, by the weakening of the European powers financially, it meant Uncle Sam could grow really big internationally bystepping into the void. Thus began the pathway to super power status, first evolved by McKinlay & T. Roosevelt. By the time Hoover was president just about all the Europeans had had enough and were ignoring their debt. The USA then passed legislation to prevent those countries ever borrowing from them again. Of course WW2 turned it all inside out again. And finally the Marshall Plan, ironically, did the complete opposite.

Even Labour know Trotters socialist left wing garbage is no way to run a prosperous country. Unfortunately, Labours non existent talent in any subject remotely useful to run a successful country including a socialist, naive PM reliant on former socialist hacks like Clark and Cullen, means the party is no longer the party for the workers but has become the party for the non-workers.

Yeah Labour's support is not anyone connected to productive industries in NZ, but rather civil servants and beneficiaries. They are working hard to make more of both.

Well if you have a soul at all you'd want the construction of that social housing. What kind of people are we that let our children live in cars amidst plenty? How has this country become so cruel and miserly? It's utopian to think the housing crisis can be left to fester as it is. It will decay our nation and unleash forces far worse than a drop in house prices. Trotter ignores the drag on demand from high housing costs. And the stimulus a social housing construction boom would create. These two would offset a drop in house prices and the spending a wealth effect supposedly generates.

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If you had a soul at all you'd stop the madness of allowing a flood of migrants to enter a superheated undersupplied AKL housing market that is having a severely negative flow on effect to those at the bottom of the heap. Robertson recently declared that he viewed a likely overshoot of treasury's migration projections as being an 'upside' outcome.

From MBIE stats webpage a ten year comparison
2009-05-31
◆ Recent Resident & Skilled: 106,158
◆ Student & Fee Paying: 41,379
◆ Recent Resident & Partnership: 31,152
◆ Work & Essential Skills: 28,482
◆ Work & Working Holiday Scheme: 16,254
2019-05-31
◆ Recent Resident & Skilled: 96,372
◆ Student & Fee Paying: 58,977
◆ Recent Resident & Partnership: 39,246
◆ Work & Essential Skills: 52,038
◆ Work & Working Holiday Scheme: 33,207
Not much can be done about residents, students and partners but the work visas have doubled. So raise the price until numbers return to 2009 levels and lose some bus-drivers but a population drop of 40,000. That would empty many houses at the bottom end of the market. The extra money raised on the work visas can go to Kiwibuild.
Even larger effect if work visas were dropped below 2009 figures and some of the more dodgy students culled.

Haven't seen the word immigration in any of the comments. Slash that to one or two thousand for at least a year probably better for three years and watch a big reset. There is no one silver bullet to solve affordability and quantity of houses and many of the comments, land price being the biggest factor and for a number of reasons are valid. Both Labour and Winston first have not fulfilled any "promise" to reduce immigration. Winston is enjoying the baubles of office and I thought he would reign in Labour's excesses. More of a rubber stamp. I'm going to have difficulty in who to vote for, if at all, next time. Will never vote Green and Nats will only see to their developer and property owner mates.

Promised to reduce permanent residency and it has gone down by ~20%. But caused by changes introducd by the Nats. Still remains about highest legal immigration in the OECD (if it is such a good idea why doesn't anyone copy us?). However that good work is undone by ever increasing work visas (need a builder, chef, nurse, baker, tourist guide - lets recruit abroad they are more diverse, docile and cheaper).

We have near historic lows in unemployment. In our most productive farming districts like mid canterbury unemployment is under 2%. We need immigration to provide the workers that businesses of all stripes need to grow.

What a frustrating piece this is.
I take his point that a 'truly' left wing party would build a huge amount of social housing. But a party further to the left than Labour could find middle ground between that and the status quo.
Also he's making some big calls about 'the middle class'. That's an awfully big categorisation. It assumes that 50-something middle income households who bought a house 30 years ago at affordable prices are one and the same as 30-something middle income households today.

$ 600 000 are not affordable homes !

... Kiwi Build is a complete failure as a policy ...

These homes are neither going to the people nor to the areas that need them most ...

What is the alternative? Subsidise the poor with hundreds of thousands of dollars worth of house while the middle class still have to fork out full price? I doubt that would incentivise anyone to work hard.

Government mandates that middle class pay high taxes so that poor people can have heaps of children. The high taxes required to do this mean that middle class can't afford it themselves (2-3 is the financial/logistical limit for middle class even for the successful). Perverse anti-eugenics in action.

Immigration is the elephant in the room that no one wants to talk about. No one is prepared to address the fact that we keep importing more and more low skilled workers who displace local low skilled workers due to their willingness to work for lower and lower wages in return for qualifying for permanent residency, then we wonder why our local workers are the ones who cannot afford to rent and end up at the bottom of the heap. Study after international study has proven that increasing immigrants lowers wages for all workers in the industries where they are employed. Currently the UK is a real word experiment of what happens when low skilled immigrants stop coming - and voila, wages go up, unemployment goes down, and workers are spoilt for choice when it comes to finding a better job than the one they have.
But hey, lets run with the idea that the solution is to give away free houses and more welfare to all the poor people rather than raising the incomes of people with low skill jobs. And if you have enough people with free houses, receiving enough welfare to get by, why would any of them be incentivised to give all that up and go get a job?

I'm far from convinced of Trotters idea that increased rental supply would lead to a huge vote against a government. Also we had high home ownership, which decreased some. If home ownership % came back up as landlords exited, I can't see that causing the electorate to revolt.

Do you want that increased rental supply to be near you? It might have worked for John key but in general state housing areas are not the nicest of places.

What ?

The price of land in NZ is high because developers land bank, not because planning and the RMA are restricting supply. We have heaps of land that is zoned for residential, but the developers buy up chunks, hold it and work together to ensure prices remain comfortable for them and there is no real competition.

It's AND, not OR. Yes, there is land-banking (which would be dismantled tout suite if anti-trust action was taken or held land was taxed out of existence and the tax proceeds held as credits towards purchase). But the AND is that, unfortunately, Clueless Councils have aided and abetted the process at every step. The RMA says zip, zilch, nada about Spatial Zoning, but the original implementers all those years back just could not conceive of anything but the Town and Country Planning Act-style squiggles on maps. So we have lotsa Maps, lotsa Zones, and lotsa gaming of the entire system.