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

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

By Bernard Hickey

This week's Salvation Army report into housing baby-boomers in retirement exposed the deepest fault-line opening up in New Zealand's society and its economy -- home ownership.

The report's author Alan Johnson recited the facts we all knew about the fall in home ownership from a high of 74% in 1991 to a 60-year low of 64%. On the face of it, a 10 percentage point fall doesn't sound like much and 64% is still better than the rate for most of the last century. There would also be many who argue renting is no disaster, including those who say it's an economically rational thing to do in the face of apparently unsustainably high prices.

But that 10 percentage point fall disguises the massive scale of the earthquake underneath the population since 1991.

Johnson's report focused on the fate of those nearing retirement over the next 10 to 20 years, but one fact he uncovered says an awful lot more about the kids going through our schools, hospitals, prisons and into our workforces now than anything I've seen in years.

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. Landlords buy and sell their properties much more regularly than in other more established rental markets. The average tenancy length is 15 months in New Zealand.

I had my own experience of this a couple of years ago when moving cities. Our family had to move out of two rental properties in 12 months because the landlords returned from overseas or decided to sell. In the end, the uncertainty accelerated our own move into a house we bought and we have settled ever since.

But houses owned by families are more than just stable and healthy places to bring up those families. They are also a crucial part of our national retirement infrastructure, as was pointed out by Johnson this week.

The assumption underpinning New Zealand Superannuation is that a retiree will be living in their own mortgage-free home by the time they stop receiving income from work. That means they don't have to use any of a relatively small superannuation payment to pay for a mortgage or rent, which also cushions the blow of a drop in income between working and New Zealand Superannuation. If they have to pay rent, they are much more likely to be poor and struggling.

Until now, the flow-on effect of New Zealand's higher home ownership rate in the 1970s and 1980s was that the households formed 30-45 years ago when new families were in their 20s meant their retirements over the last decade or two has been relatively comfortable. It has meant New Zealand has had one of the lowest rate of elderly poverty in the world.

But that only works when the retiree not only owns their own home, but has also paid off the mortgage.

Johnson's report illustrated the flow-on effects on this retirement system for baby-boomers, particularly those born from 1960-65, of the falling home ownership rates from 1991 onwards. He estimated the number of pensioners who will have to ask for an accommodation supplement to help pay their rents could almost triple to 100,000 by 2025.

The Government is already paying out NZ$1.2 billion in accommodation supplements. That is based on 2005 rent levels and the maximum levels for these supplements have not been changed since 2007. Meanwhile, the median rent for a three bedroom house in Avondale, for example, has risen from NZ$320 in 2005 to NZ$490 now.

Rightly, Johnson called for the Accommodation Supplement to be reviewed. Understandably, the Government is reluctant, given any increase in those maximums in combination with the rise in the numbers applying for the Supplement would add hundreds of millions of dollars to the bill.

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.

New Zealand created 'Generation Rent', as aptly described by Shamubeel and Selena Eaqub in their recent book of the same name. It also created Generation Renting Pensioner and Generation Poor Family. 


A version of this article first appeared in the Herald on Sunday. It is here with permission.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.


"That means they often grew up in mouldy, damp, cold and insecure housing"
That's a wild and emotive guess based on no evidence at all and not worthy of any true journalist.
Most landlords care about their tenants and their property and give the tenants a fair go.
Far more prevalent is the fact that too many tenants abuse their rented property, fail to pay the rent and ignore the rules. This is borne out by the fact that the vast majority of cases taken before the Tenancy Tribunal are taken by landlords against tenants .

You are kidding right...
>> mouldy, damp, cold and insecure housing
I 100% agree with Bernard.

New Zealand ranks near the bottom of the OECD in its health and safety rating for its children (Public Health Advisory Committee, 2010). One of the key drivers of this is the relatively poor state of our housing. Young children spend virtually all of their time in the home environment, much of which is poor quality rental housing (Baker, Keall et al., 2007). The Children’s Commissioner’s Expert Advisory Group on Solutions to...

Here is the paper:

Evidence, ethics and economics all point towards the need for greater investment in better housing for children. Housing should be seen as important national infrastructure, with the government using its considerable regulatory powers to improve housing quality in New Zealand. As recommended by the EAG, a good starting point would be a warrant of fitness for rental housing and a reinvigorated HNZC Healthy Housing programme. Establishing a large-scale programme for construction of mediumdensity social housing in Auckland and Christchurch would also produce many benefits, particularly if it involved the community housing sector. Not only would such housing reduce crowding and improve child health, it would also provide a valuable economic stimulus and help retain skilled labour in New Zealand.

The housing stock is very very poorly insulated.

When the govt asked the Civil Service what is the ONE thing we can do that will do most good to NZ; the answer they got was to insulate the houses.

Then the govt dropped the ball (I know your shocked right)...
1. They DIDN't up the minimum spec for insulation (so the builders will continue to build to this minimum spec as they are trying to build you the cheapest house and Kiwis are NOT aware enough to even ask about insulation).
2. They cancelled the insulation package after a couple of years to save money.

The true cost of cold damp houses will be incredible; from Asthma for life to a myriad of other health problems.

I am sure there are a lot of landlords that care; but I am sure there are many more that don't and, at a push, fit more electric fires that the occupants cant afford to turn on.

Well done Bernard for having the guts to show the emperor has no clothes.

The Minimum R Rating for Walls and ceilings should be R5.
There should be a polystyrene slab under the floor as well (preferably R5); but at least R2.5.
There should be a minimum rating of the double glazing (mandatory) for windows.

It's not rocket science; its just political will!

A house shoudl have a Star rating and a huge portion of this SHOULD be the insulation.
New houses can be calculated.
Old houses can, at least, have the walls/windows thermal efficiency tested and the ceiling inspected.

This is how we treat our future leaders (the top 5% of our population):
Dunedin's student flats really are as chilly as refrigerators during winter, according to a new report.
You reap what you sow...

Before I get the trolls saying you cant get R5 in a standard NZ stud;. I have built two houses in NZ and use Polystyrene in the external stud to achieve R5.

NO well built (well insulated) house needs anything LIKE a DVS as you will not got a build up of moisture/damp...

Raising the educational level of some NZers so they understand the mechanics of opening windows and learn how ventilation works might help as well.
If tenants are paying $400 to $600 a week rent then they would be better off buying a modest house in a lower suburb, then they can control their own environment instead of blaming someone else.
Most homeowners and tenants survived the 60s and 70s without extra insulation.
The Govt is working against potential homeowners with their high immigration, open door foreign buyer policies. So Auckland is unaffordable during household formation years - that is the real problem.


Spoken like a true landlord. My uninsulated house was accptable in the 1960s so why isn't it now? In the 1960s a rental car would have no seat belts or airbags or abs brakes but if I rented a car now I would expect to get all of those things.
Why should a renter have to pays lots in power to heat your uninsulated house just because you are too cheap to put in a small percentage of your massive tax free capital gain and bring it up to modern standards?

I was raised in a cold hole of a state house in AKL. Frost on the windows in winter. Over my entire school life of 12 years I missed exactly 1 day of school thru sickness, never wearing shoes, winter or summer, until intermediate school (we were dirt poor). Walking to primary school in bare feet with frost on the ground, walked in the gutters when it was raining hard and felt the rushing water around our feet. It was fun.

Many years later working for an industrial company in the head office in a building which was of a sealed design couldn't open the windows, all the atmospherics were electronically provided and controlled, air, heating, cooling, lighting etc. I, and everyone else in the office suffered constantly from colds and flu's.

After several years I was seconded to the office one of the factories in Penrose, a huge old corrugated steel building, freezing in winter, had to wear safety shoes with 25 mm plastic soles to keep the bone cold coming through from the concrete floor. No air conditioning, no central heating, like working in the arctic in winter and the sahara desert in summer. Was located there for 2 years. My heatlh improved overnight. No colds, no flu, nothing. It was a great regret when I had to return back to head office

Unfortunately your argument is about as statistically irrelevant as saying you once had a crash in a car without a seatbelt and didn't die so we should get rid of seatbelts. NZ has a very high rate of the types of child illnesses linked with cold damp housing.

It is the parents', not the landlord's job to provide a safe environment for their children. Here's a novel idea, if you cannot provide a safe and warm house for children, don't have any. It's not rocket science.

In my experience a lot of damp and mould issues could be avoided by tenants actually using the heating and bathroom extraction.

Or by landlords insulating them. But let's blame the tenants.

Or lets blame the landlord. We all need to realize that both sides have a part to play in this. Many property owners need to start insulating their homes better.....AND......many home occupants need educated about ventilation and appropriate ways to heat the house.
The blame games really helps no one as both sides refuse to budge without some compromise from the other.

The outcome of a life philosophy that says "spend now, worry about tomorrow later".
Why bother with thrift, saving, buying a basic house in a low socioeconomic area, retirement investment, education/professional development to increase working income, when someone else is likely to pick up the tab in the future since NZ is unlikely to allow too many people living on the street.


A basic house in a low socio economic (crime ridden) area of Auckland is still going to cost half a million. Surely everyone on minimum wage has a spare half million lying around, if not they must not be saving hard enough!!

In Auckland. If minimum wage was the best I could do, I'd do it somewhere else where the houses were not so dear.

Actually, thrift is the last thing NZ needs right now. If people started to save, the economy would sink deep into the toilet.

The Government can seed a new CITY around Huntley area (for example) by promising to move a load of Civil Servant jobs there.
Developers flock to build the offices/infastructure and houses.
Other firms rush in to get their places on the government teat
Housing is cheap (as land values are cheap).
Housing will be new (and better quality if the govt requires it)
It's all about political will and the ability to think.
Housing prices drop overall bringing down the cost of home ownership and even rental cost due to supply/demand.

Yeah why not have the government provide jobs for everyone! Or maybe allow some cheaper houses to be built near non government provided jobs. But that would upset a few rich NIMBYs.

the government and large corporations have mostly moved all their main operations to Auckland, its not cheaper far from it but they have a much bigger talent pool to pick from, also they are close by to the main port and airport, and normally close to most of their customers.
we have had a failed regional growth strategy for years,
you can go all the way back to muldons thing big, where he tried to create large industries out of Auckland,
how to solve it is a big issue because we have got past the point of the advantages of being outside of Auckland are not that big a problem as compared to the advantages of being in auckland

Yes us baby boomers have had it hard. So hard we were not able to buy our own houses. Wish we had the income levels of X and Y.

Yes yes, it's a hard life when all your wealth has been tied up in assets. Lucky a lot of the young won't have the burden of ownership isn't it Gordon.

Cellphones rah rah rah....

I agree with you. Those boomers who are lucky enough to own their own home cannot eat it bit by bit. Unlike the multiple home owning high earning X and Y who will have a great retirement.

the multiple home owning high earning X and Y will become a target in future years by the voting population especially young renters who will be looking for policies to redistribute the wealth gains

The figure that 64%of homes are owner occupied having dropped from 74% hides some further disturbing facts. If you look at the figures for people not houses - 51% of adult -over 15 years old New Zealanders live in a rental and in Auckland that number is 57%.

What this means is that 49% of kiwis live in 64% of the homes that they own, while 51% of kiwis live in the remaining 36% of homes, which they rent.

Homeowners tend to be older (having acquired homes in less restricted and cheaper housing market conditions), wealthier, more integrated into the community and living in smaller households relative to house size, which are better maintained, insulated/heated, warmer, dryer, mould free and often newer.

Renters tend to be younger, poorer, transient and living in larger households relative to house size, which are poorly maintained, often uninsulated/ineffectively heated, colder, damper, mould prone and relatively older.

These conditions make renters more prone to infectious diseases, in particular in winter when hospital admissions peak in way that is not seen in colder climates where they house people better -places such as Scandinavia, Russia.....

Professor Philippa Howden-Chapman book "Home Truths" writes about this side of the housing crisis. As a medical expert she says it is embarrassing talking about New Zealand housing conditions to overseas audiences, who are astonished that we have allowed the basic need of shelter to get so bad in New Zealand.

Bloomberg have a good article on “Your Landlord is a drag on Growth”.

That speculates a coalition from the left and right or in US terms Liberals and Conservatives can combat the vested interests of local landlords etc who are gaming local politics for their personal gain but for the cities and eventually the countries loss. It is a good read and food for thought.

In NZ's case. I think Peter Nunns on Transportblog makes a good case with today’s Sunday reading articles that we need to free up restrictions for going up not just going out in our cities.

I agree with Bernard this is a fiscal time bomb for future governments. no government is going to want story after story of elderly or children living on the street so they have two choices build more state houses or hand over more money to private enterprise to house.
the decision was made long ago to hand over to private enterprise hence the tax advantage and housing supplement for a rental home investor verses a FHB.
the problem is also the banks also preferred an investor over a FHB and generally both parties are competing for the same housing stock so why is anyone surprised that home ownership rates are falling decade after decade
either way this will cost future governments as they have increased costs to attend too and where are they going to find the revenue to deal with a housing issue?
"I know houses we can tax them in some way to provide more"
CG tax may be gone for now but expect it to rise its head again same as deductions for interest on mortgages

What a lot of moaning by the 'talker' brigade in this thread.

Bernard is a drama queen. He has selectively chosen 1991. Last week the New Zealand Herald ran a story that said home ownership rates since the mid-1960s had only fallen 6 %.

That's 6% over a much longer period of time.

Bernard is a tenant's worst friend I reckon. He bangs on about how hard done by and hopeless they are. If someone only knew about tenants from Bernard's writing , they would think tenants are the most hopeless class of person there is.

Pity Bernard can't write something about all the great landlords in New Zealand who are providing cost-efficient housing to decent people.

Landlords put their money where their mouth is. The 'tut tut' brigade, so good at talking about what 'should' happen, only talk.

its gone down as per below you can source the details from NZ stats
in 1991, almost three-quarters (73.8 percent) of total households in New Zealand lived in a home that they owned
The percentage of households who owned their home dropped to 49.9 percent in 2013 from 54.5 percent in 2006.
so we now have more voters that are renters than owners for the first time in NZ history should make for some interesting policy promises for upcoming elections

Solution: campervan.

For example, ring Clifton Beach Reserve Motor Camp and ask them how many long term residents they have....

Not even a bad place, if you don't mind the sun and the view.

Sorry but I'm not crying for people approaching retirement and that are still renting. They made a choice and decided to spend their money on other things, its as simple as that. Its not a basic human right to expect to own a house or even to have a load of kids either and expect others to pay for it. Also when it comes to dampness, especially in Auckland you need to look at the facts. We have VERY high humidity and its seldom below 70% so when you compare it to some places where they start to complain when it gets to 30% you can see the problem. No amount of heating or insulation is going to sort this problem you need loads of de-humidification. I had two de-humidifiers running last winter and it significantly reduced the need for additional heating. Warm and damp is not the solution.

Here we go again - you do realise - surely - that not everyone reaches the age of 65 in a totally healthy state (financial or otherwise). You assume they have all been gainfully employed for the entire time and life has been perfect

Simply look at the unemployment figures of 6% which is artificially depressed by excluding anyone who has worked for 1 hour per week - any number of who will be considered long term unemployed - real unemployment and under-employment is greater than 10%

and they all eventually reach 65 - if they are lucky

Then there are the disabled on disability pensions, marriage splits, financial losses - Finance co's

Guessing, but, would not be at all surprised if the percentage of people who reach the age of 65 who have had serious disasters in their lives is near 20%

Interested to know what account the Johnson report took of inheritance? Most non-home owning late baby boomers and gen xer's I know whose future looks bleak have home owning parents who are not going to live forever. So sometime in the next 20 years they'll suddenly be going from no house, little savings to mortgage free Auckland property owners.

Yes generally boomers have struggled and as they die off some will leave their houses to their children, houses that were paid off by poorly paid frugal parents. X and Y are very lucky generations.

How about raiding the ACC account and start a proper House Building programme!? It holds about $23bn of cash & assets, investments ect .... most of the people we're talking about have been the main contributors for the past 35 years. Otherwise the government's current pilot programme of "Social Bonds" which is funded partially by ACC will eat into this account until there's no more. Not rocket science!?

House of The Rising Sum
Pamela Stirling Listener

Tonight, a pumped de Roos tells his audience that he wants people to invest in property and write to him 12 months down the track and tell him they’ve “made one million or three million, or you’ve got 16 properties, or we’re taking six months off because our cash flow now exceeds our outflow!” He says, “I don’t know any other activity where the rewards are so huge. If you want to invest a million dollars in the sharemarket, you need a million dollars. If you want to invest a million in real estate, you only need $100,000.”

You can buy one property, get it revalued, use the equity to buy another property and then buy another and another. “And you do it all with OPM. Other people’s money. OPM. It’s like being high on drugs!” What’s more, the wonder of depreciation claims on the building and contents means “the government subsidises your investment! It’s delightful!”

SINGAPORE — If you hate government, want it out of your hair and held at bay, Singapore should be pure hell.

One government agency manages 80 percent of the housing stock — all called public housing. It checks your age and whether you’re married to decide whether and when you’re eligible for an apartment. It decides what you’ll pay to occupy your flat, which local services will (or won’t) be provided. It even checks your ethnicity — every housing area has a set balance among the leading local ancestries — Chinese, Malay and Indian.

So unless you’re affluent enough to own a private home — and few Singaporeans are — the government’s Housing and Development Board is your all-powerful landlord. Ignore its rules and you’re out in the cold.


When Singapore won its independence in 1960, subsistence hut-like buildings housed most of the people. Today, across the crowded citistate, one sees arrays of high-rise public housing towers, symbols of nationhood and rootedness won by conscious, consistent effort. Singapore has every right to boast that it’s “the only country in the world to achieve almost full homeownership status” — no slums, no squatter communities. And “not just public housing, but homes people can be proud of.”

Plus there’s a constant pattern of demolishing older apartment complexes, replacing them with new. To undergird community solidarity, residents are invited to move en bloc with their neighbors to brand new apartments.

So it’s obvious: government can make dire mistakes — as we Americans indeed proved with our callous placement of public housing in isolated neighborhoods, deprived of connections and services. But as Singapore illustrates, government can perform social and physical miracles too. Ultimately the issue’s not government — it is us.

Bob Jone's etc go on about spontaneous organisation but you can't have a good result without the fluidity one owner provides. The late Owen McShane used to point the finger at Eastern Germany but Singapore shows what is possible. The downside is the private sector not gathering the capital gains.

Hooray! The banks are cutting their cloth now the OCR has been slashed! Maybe now all the oldies could pool their savings together and buy a big warehouse somewhere to house themselves?! No, seriously. It's not a healthy sign cutting the OCR now when we're supposed to be in the most "productive" time/quarter of the year. It kinda says the economy's in trouble. With the devaluation of the dollar earlier this year by 20%, real dairy prices tanking in a shrinking global market share, unemployment going up ..... with the low paid service sector & hospo industry and a slowly disappearing manufacturing base which is about "all" this economy is made up of ... keeping the bubble inflated in the housing market seems to be the last bastion of hope this government has to keep the dreams and aspirations of the blind alive!