Alan Johnson says we must acknowledge that the value of state, or publicly-owned, housing is so much more than its balance sheet worth, and significant efforts must be put into increasing our publicly funded housing stock

Alan Johnson says we must acknowledge that the value of state, or publicly-owned, housing is so much more than its balance sheet worth, and significant efforts must be put into increasing our publicly funded housing stock

The following article is the fourth chapter from Progressive thinking, ten perspectives on housing, a Public Service Association (PSA) publication. Interest.co.nz is publishing all 10 chapters from different authors on various aspects of housing.

By Alan Johnson*

When it comes to state housing, the current government has an ideological blind spot: it cannot move beyond its fundamental belief that state housing is simply a financial asset.

The theory goes that this “financial asset” – and it’s a substantial asset, with Housing NZ’s (HNZ) 2016 valuation coming in at $19.2 billion, or 20 per cent of net Crown wealth – would be better owned and managed by the private and community sector.

Thus we have seen the direct privatisation of thousands of state houses.

Alongside this we are seeing the “soft” privatisation of our public housing assets whereby land formerly occupied by state housing is largely given over to private ownership.

Solutions to our housing crisis must include the acknowledgement that the value of state, or publicly-owned, housing is so much more than its balance sheet worth, and significant efforts must be put into increasing our publicly funded housing stock.

As part of the National Government’s Social Housing reform programme a great deal of effort is going into reconfiguring the existing state housing stock.

This reconfiguration is well overdue, in part because much of the stock is old and poorly maintained, but mainly because it is the wrong sort of housing in the wrong place.

Essentially much of HNZ’s stock is three-bedroom detached dwellings, many of which are in small provincial cities with relatively low demand.

Demand presently is greatest in Auckland, Wellington and Christchurch and it is for one, two and five bedroom units.

HNZ's 'impossible task'

The Government has given HNZ an almost impossible task as it attempts this reconfiguration.

HNZ has been required to undertake massive capital spending projects, while continuing to address growing demand and at the same time pay dividends to the Crown.

Between 2011 and 2015, the Government extracted $414 million in dividends from HNZ and contributed just $31 million in additional capital.

While this dividend policy changed in 2016 - with only $4 million in dividends being paid - essentially this financial equation has meant that HNZ’s reconfiguration has had to be funded by asset sales. But this is only where a soft privatisation begins.

In 2015, the Government’s social housing agenda became more focused on dividing up Housing New Zealand’s assets.

In early 2016, the Government transferred 2,700 state houses located in the Auckland suburbs of Glen Innes, Point England and Panmure into the Tamaki Regeneration Company (TRC).

This is a joint venture between the Government and Auckland Council to oversee the redevelopment of Tamaki over the next 20 years.

In early 2017, 1,138 state houses in Tauranga were sold to a consortium headed by Accessible Properties – a subsidiary of IHC, but which also involved merchant bankers, possibly as equity partners. Later in 2017 the Government is planning to sell off 2,500 state houses in Christchurch, possibly to a foreign buyer.

Loss of development potential

Perhaps the worst effect of the soft privatisation of state housing is the loss of development potential on land occupied by state houses.

This is especially the case in Auckland, where, for example, in the Tamaki regeneration 2,500 former state houses will be demolished to make way for 2,500 social housing units, 1,000 so-called affordable units which are valued at under $650,000, and 4,000 units that will be sold on the open market.

In other words, for all this effort - which may extend over 20 years - there is no additional social housing provided.

This exercise can really be seen as state sponsored gentrification where public assets are made available for private development and investment.

These sell-offs are happening against a background of a quiet reduction in state house numbers since 2011.

In 2011 Housing New Zealand owned 66,352 units, but by 2016 this number had fallen to around 64,600, including those transferred to TRC.

'Failing our most vulnerable'

The tragedy is that this is occurring at a time when the private rental market is failing our most vulnerable citizens, with rising house prices and rents, weak tenancy protection laws and a tax regime that rewards the treatment of housing as an investment rather than as a home.

The need for government housing assistance is growing at an alarming rate: between March 2016 and March 2017 the number of housing applicants to the Ministry of Social Development with a critical or serious housing need grew from 3,549 to 4,865 - a 37 per cent increase.

Addressing this failure has become a generational challenge.

With the best efforts of government and the greatest patience from the electorate, it will take 10 to 20 years of investment and development to address our now critical shortages in social and affordable housing.

Such a challenge will not be met without substantial and long-term public investment which will be in the order of tens of billions of dollars.

A belief that it can achieved without such a commitment is either naïve or cynical.

Abandon the programmes

We need to abandon the reform programmes and soft privatisations of the present government and avoid the vague strategies of the previous one. Instead, we need credible plans and realistic budgets to expand the social housing stock, to develop new suburbs and redevelop old ones, and to provide people with the necessary skills and career paths to build these.

The challenge of addressing our housing shortage will almost certainly fall to Generation X.

This is somewhat ironic given the legacy they have been left by the Baby Boom Generation. But as a challenge, it may define this generation if it sets aside the 30 years of neglect of the neo-liberals and begins again to focus on nationbuilding.

This nation-building is of course more than building houses. Nation-building can be about the things we build with houses - new and revitalised communities, prosperous cities based in sustainable infrastructures and most importantly, lives enhanced by the opportunities offered by safe and secure housing. 

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*Alan Johnson is a social policy analyst for The Salvation Army’s Social Policy & Parliamentary Unit. He is author of Off The Track, The Salvation Army’s 2017 State of the Nation Report. He is a community activist in South Auckland where he is active as an administrator in local sports clubs and as a school trustee. He has been a trustee of the Auckland Community Housing Trust and Chair of Community Housing Aotearoa.

Note: The views expressed in Progressive thinking, ten perspectives on housing belong to the authors and do not necessarily represent the view of PSA members or the organisation.

The foreword is here.
The first chapter is here.
The second chapter is here.

And the third chapter is here.

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The whole concept of HNZ paying a 'dividend' is stupid when most of the 'revenue' is tax payer money in the form of the accommodation supplement anyway.

Agree, and it shows a rather undesirable ideological bent to it, something also reflected in wider discussions where terminology seems to have shifted from being about housing, shelter and stability to being more about assets, portfolio etc. that can be disposed of for a short term gain.

This is why National should be told to clear their desks and leave.

Its nonsense .

Firstly , we have some people who are earning good money living in state houses, paying very soft rents .

Then you have some who just abuse the system with an awful culture of entitlement .

Then those who are outright destructive .

Many years ago we lived house next door to a State house and it was a circus and a constant source of entertainment .

No one in the house ever did a days work, and they did not even bother to keep the place tidy and never once mowed the lawn ( I offered them my lawnmower )

Drunken family arguments which spilled into the street and Police visits were a regular occurrence .

They had a few cars , mostly broken down in the yard

They were all ( 3 adults and 4 kids ) able bodied , the "father " of about 35 and the mothers son from previous relationship was 18 or 19 . They both played rugby at the local rugby club , but never had a job .

Eventually the 19 year old got into trouble with the law and got home detention , which made him cockier than ever before proudly leaving his ankle thing exposed to all to see .

All the while we were working hard to pay off our mortgage ( between 15 and 17% ) and they seemingly had more disposable income than us .

It actually caused me to vote National for the first time .

13
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John Key, his friends, and his mum?

Such hate.

Sometimes I think RickStrauss is actually David "dead fish"Shearer - such is the depth of his unhealthy obsession with John Key.

Hate? Absurd. I voted for the fellow twice.

I simply used him as an example of why we shouldn't generalise and demonise the poor in state housing.

The demonisation of the poor and vulnerable with stories like Boatman tells is one reason NZ is becoming such a divided society. Boatman gives no context to his victimisation. Of course there will be some bad eggs in the state house tenant community. Just like their is bad eggs in the landlord community and bad eggs in the farming community..... But to write off an entire community, well that makes it real easy to mistreat them, to chuck them out into the cold, to ignore the problems that our dysfunctional housing market is causing them.....

I am sure that most people in State houses are really good folk and the case of my neighbours many years ago are just a tiny insignificant minority .

And Brendon , we must ensure that the really poor among us have shelter, food and clothing .

But we cannot just house everyone , we are not, have never been , nor will we ever be a Socialist utopia where everyone gets a free house , free food , free money etc, and idly while away our days aimlessly doing nothing at all .

I'm sure there's a mixture.

But surely it's the same as writing off every person in DGZ's beloved 1050 because some of them are of poor character, hiding their wealth in trusts while ripping off investors, dodging taxes, and getting full student allowances for their kids who can drive one of the trust's Porsche's to university. The finance company debacles in recent years certainly showed us that any correlation of morality with wealth is highly suspect.

Re impoverished situations, I reckon there's a tightrope often walked between hopelessness / hopefulness and the winning out of good character traits over bad. Hillbilly Elegy captures this really well through a voice that came from poverty but found a way out through a few key interventions.

I do worry we demonise state housing a lot more than was the case in the past, when it was a more acceptable part of Kiwi lives. I highly doubt John Key's mum was demonised for being a beneficiary in a state house. But take it forward a few decades and John Key called the idea of having any state housing at all in Hobsonville Point "economic vandalism".

John Key likely saw the way his neighbours behaved when he was a kid , and luckily he rose above that .

If he was able to do it , why are the rest of us not ?

We have free education for all , and special dispensation for certain groups to help them get ahead in life.

His Mum , who held down 2 jobs , probably encouraged him to get out of the cycle in which they found themselves .

Yeah, and there are likely plenty doing the same today, along with the ones who are in downward spirals or multi-generational cycles of poverty in both finances and behaviour. I don't necessarily think you or I born into such a household would do any better.

Likely back in Key's day it wasn't as looked down upon to have a state house either, from what I've read about it's place in the decades following WW2. (Obviously, he's slightly later than that.)

You are probably right , and there are significant differences between cultures too , and those whose families migrated from England and elsewhere in Europe to get away from the class system, wars and famine likely have done very well .

Basically those with " get up and go , got up and went "

Some cultures have a very communal way of doing things , so income is shared , families help each other , and the outcomes are slightly different to those of our ingrained Anglo Saxon Christian or Calvanist stand-on your-own -two -feet way of doing things .

And I mean this in the broadest sense , because I am pretty much an agnostic when it comes to religion , but those influences remain

Some really interesting factors, eh.

I guess NZ had some particularly interesting factors in there. Not criminals, like the neighbours to the west, but free migrants who were fleeing the feudal and often exploitative and unjust situation in the UK. NZ seems to have developed some really great characteristics as a result - e.g. a real concern for fairness and fair treatment (it's incredibly rare to have had a show like 'Fair Go' being a top-rated show for decades), looking after one's neighbour etc.

I found these passages in a book about one of the great ANZAC soldiers quite interesting re our history of land:

In the 1880s and 90s, land speculators - including two local MPs, Walter Symes and Felix McGuire - were carving out large estates from the virgin bushlands of Taranaki. The Liberal Government of the 1890s reversed this trend by encouraging - or compelling - speculators and other landowners to sell undeveloped land privately or to the Crown. As a result, Taranaki was to become the domain not of the big runholder but the small farmer.

...the party of trade unions, small farmers, 'the hungry and the land-hungry' had swept away the alliance of big landholders, merchants and speculators that had ruled the colony for over twenty years. In office, the Liberals delivered a radical legislative programme that would establish New Zealand for a time as the social laboratory of the world - votes for women, old age pensions for the deserving poor, new labour laws, and legislation to break up the big estates and give thousands of unemployed men and their families the chance to go farming. As historian Keith Sinclair put it, the 1891 election was one of the momentous elections in New Zealand's political history.

New Zealanders had a real drive to get away from the English model where few owned land or homes and most were serfs and renters working for a pittance, and used policy to give more people a chance. The attitude of caring for one's neighbours and for the poor saw NZers looking after the poor and elderly fairly early on the world stage too - beyond just the family unit as you note is common elsewhere.

But I am getting sidetracked here...

Re poverty and culture, I particularly liked Hillbilly Elegy because it's all the Scots/Irish who were the impoverished rednecks in Kentucky and Ohio, and who constituted the dysfunctional background from which the author emerged (graduating in law from Yale). So...a lot in common with Dunedin, I guess, but completely different outcomes following the loss of economic prosperity in their region.

My partner is from a different culture, and she sees much to admire in NZ around honesty, low levels of corruption, care for each other (though this feels like it's reducing), and equality of opportunity (also seems to be reducing).

Boatman I have never advocated for pure socialism/communism where the means of production are nationalised. That is a failed concept. I like social democracy and I believe in giving people a hand up. A lot of good New Zealanders who have gone on to do good things have a background of being bought up in state housing. As a country we should be proud that we provide this service to our fellow kiwis.

So are you endorsing mistreating the taxpayer who has to fund this behaviour Brendon?
Have you ever looked back at the taxpayer you take from and the situation you placed them in from pushing for your favoured recipients.

We live in a social democracy. I highly doubt anyone is endorsing mistreating the taxpayer. That seems a curious motivation to ascribe.

The whole of Green party parliamentary group ( minus the 2 MPs who took the honorable decision to resign ) DOES endorse mistreating the taxpayer. They appear to have wide support in the party as the whole.

Everyone benefits from taxpayer expenditure -not just the direct recipients. It is a nonsense/arrogant thinking to believe in some sort of black and white manner that some groups pay while others benefit from tax and spending.

Oh I see, if *I* take someone else's property that is stealing.

But if the government takes someone else's property that is for their own good and a *benefit*.

This explains why socialists ended with the idea of making *all* the property theirs.

Ralph -if there was no laws, no courts, no police force, no education to understand the laws...... would anything be 'owned'?

All our rights, privileges and responsibilities ultimately are derived from society. I think it is good that society is run democratically, in a way which gives everyone an opportunity. The alternatives are all worse. Rule of law, property rights etc are good things, but no one should kid themselves that this means they are an island with no responsibility to give back to society which has allowed them such privileges.

Go too far down the no responsibility route and you may find you are in danger of losing your social license which creates those privileges....

Given that state house communities are the same as any other community there would be no disadvantage to building huge suburbs full of apartment blocks which are the state houses. It would actually be very cost effective!

It's what this government should have done in Mount Albert recently;

http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11908933

But the land was, according to the National government "too valuable" - making the construction of state houses on it "uneconomic".

I reckon they should have sold the Mt Albert land to get money to build an entire suburb of state appartments somewhere like hellensville where land is relatively cheaper so that they could get more people housed for the same amount of money. The plot in Mt Albert is too small to make a really large scale housing development. If we sold up a few other such state house plots (I heard that there was one state house worth 4million in Parnell housing a single family) we could help so many more people. You'd want to fit at least about 50,000 dwellings per development to really enable the economies of scale to kick in.

No, I really dislike the 'whole suburb' approach. Very negative effects on social cohesion and impedes the development of bridging capital;

http://wikiprogress.org/articles/poverty-development/social-cohesion/

http://www.oecd.org/insights/37966934.pdf (see page 103)

I seem to recall that Otara was set up as a satellite suburb back in the early '70's ; But I don't know if it really went according to plan.

Why would it be negative. To me it seems like it would reduce inequality amongst those who live together. Reduce relative poverty. Enable huge economies of scale in both the construction of the suburb and the administration costs there after, dozens of MSD offices aggregated into fewer larger ones. We established above that state tenant's can be good or bad just like private tenants, so a suburb of state tenants should be no different from a suburb of private tenants. With such a large population that is more likely to use public transport than own their own car it would be economic to run higher than average levels of public transport to such a suburb. You could even offer targeted benefits such as free public transport to and from such a suburb. It would be easier to target schools in the area so that they could deal with the issues specific to those in state housing ( such as broken / dysfunctional families ). With a suburb of 50,000 you'd get local industry forming as well!

Alan Johnson should be seconded into the HNZ CEO role to oversee the dissolution of the Crown Entity and the reincorporation of it and its assets into a Ministry of Social Housing, then establishing the new objectives and terms of reference as well as the Vote budget.

And while we are at it we should also appoint a vampire to run the Ministry for Vulnerable Children.

That's a bit sick/disturbing.

and just as likely.

As per Bob Clarkson's suggestion, we should be encouraging the state house occupants to purchase the houses that they rent because he found that the cost of owning and maintaining these houses is far far higher than the rent received. People take far more care of homes that they own and will maintain them far more cost effectively than any organisation. Once people are set up with their mortgage the capital can be immediately recycled to build more state houses and so on. There is also a long term saving to the tax payer because these people will, in time, move out of dependency on housing supplements and welfare as their mortgage becomes a smaller proportion of their income. Hard to see that happening with the present set up. When you consider the present worth of the various welfare payments to the people who are trapped into this situation, using some of this to fund a deposit for these state dependants may well offer a lower long term cost for the government.
The security of ownership will also be reflected in the security and well-being of the families. This better home environment must result in long term social cost savings.
Of course there will always be a certain population of people who the government will have to provide housing for because they are simply not equipped own a house independently. Some education may reduce this, but not eliminate it.

NZ has swung back and forth between creating stock and selling it off over the decades. Wouldn't be the first time there's been a sell-off to those in the houses.

So correct me if I am wrong , but did Helen Clark not encourage property investors to supply rental stock to Housing New Zealand offering 10 year leases with gauranteed rents ?

And did she not do this because the New Zealand Government simply could not do this due to financial constraints during her long Labour administration ?

At some point crown debt is going to have to substantially increase to fund all the differed maintenance and absent infrastructure that National has allowed to build up. State housing only one example. Landlords will never prioritize solo mothers, the disabled & unemployed, or people who appear to make poor life decisions. it's ridiculous to think the private sector would take care of everything.

Social services are just a convenient way for politicians to establish identities and carve up the vote. In reality, it's just a subsidy for business. It's better to have more market participants than fewer, even if you have to bank roll them.