Chris Trotter on how middle class housing subsidies overwhelmed the social housing priorities of the Labour Party's rank-and-file members

By Chris Trotter*

The abject policy failure represented by the Coalition Government’s KiwiBuild Programme is, on the face of it, inexplicable.

Governments are privileged to have at their disposal not only a solid complement of highly qualified policy advisers, but also – and especially in relation to projects on the scale of KiwiBuild – private sector players eager to participate (and profit) in the State’s service.

Upon being handed the reins of government, therefore, the expectation of most observers was that KiwiBuild would be suitably reconstructed and made fit-for-purpose by a combination of public and private professionals; and that the new government would reap a bounteous political harvest.

Why hasn’t it worked out that way? What is it about KiwiBuild that has rendered it – and its minister – more or less impervious to all attempts to make the programme a success?

The answer lies in the fractious circumstances of KiwiBuild’s birth. From its very inception, the programme has been much less about providing affordable homes for New Zealanders locked out of the property market, and much more about the defence and consolidation of the dominant position of the Labour Right. The bright and shiny centrepiece of David Shearer’s campaign to politically neuter his principal rival, David Cunliffe, KiwiBuild has never been more than a means to end – and a pretty cynical end at that.

The 2012 Labour Party Conference held at the Ellerslie Conference Centre opened with factional hostility at full throttle. Even before the fireworks started going off on the Conference floor, the Opposition Whip, Chris Hipkins, was warning at least one member of the press corps that “our problems aren’t external – they’re internal”. If by “internal”, Hipkins was referring to the rank-and-file members of his own party, then he was right on the mark.

In the aftermath of the 2011 election, the Labour Party was required to choose a new leader. The battle to replace Phil Goff was between David Shearer (whose presence at Matthew Hooton’s celebrated post-election party spoke volumes about the broad and accommodating nature of his political comfort zone) and David Cunliffe. Few would dispute that, Shearer’s inspirational “back-story” notwithstanding, the rank-and-file’s choice to replace Goff was Cunliffe. The Labour Caucus’s decision to over-ride the rank-and-file set a match to the party’s flax roots. The Ellerslie conference represented the inevitable conflagration.

At this point, with the benefit of hindsight, it is entirely reasonable to object that the Labour Caucus was right to opt for Shearer over Cunliffe. When the constitutional reforms locked into place at Ellerslie finally delivered the Labour leadership to Cunliffe in September 2013, the MP for New Lynn’s failings were soon on very public display. Certainly, there are many who say that Shearer could hardly have done worse in 2014 – and may have performed considerably better.

But hindsight has a nasty habit of obscuring almost as much as it reveals. In 2012, Cunliffe was an object of widespread fear and loathing; condemned by the Labour Right as a shameless panderer to the party’s politically clueless – but also highly dangerous – Left. Things were coming to a head, as they always do in the Labour Party, for the very simple (though not often admitted) reason that the most important fault line in New Zealand politics runs not between National and Labour, but between the right- and left-wings of the Labour Party itself. The bitter floor-fights of the Ellerslie Conference, won largely by the Left, unleashed blind panic in Labour’s mostly right-wing caucus. Something big was needed to rescue Shearer’s leadership – and that big something was KiwiBuild.

In the bluntest terms, KiwiBuild was a policy thrown together by devotees of the soft-edged neoliberalism of Helen Clark and Michael Cullen, in order to blunt the appeal (and mask the imminent demotion) of the man who, in a series of thoroughly heretical speeches, had suggested that neoliberalism – hard and soft – was a busted flush. KiwiBuild sounded like a classic Labour policy: one guaranteed to make the ghost of that great state house builder of the late-1930s, John A. Lee, smile. It was, of course, no such thing. KiwiBuild was intended not for the poor and marginalised, but for the financially-thwarted sons and daughters of the educated middle-class. That the first people to win the KiwiBuild lottery turned out to be a trainee doctor and an on-line marketer said everything about the sort of voters that the Labour Right was targeting.

Returning, one last time, to the 2012 Ellerslie Conference, it is possible to recognize in the furious response of the Labour Right to its acute discomfiture at the hands of left-wing rank-and-filers, the shape and complexion of the Labour Party that joined with NZ First in 2017 to form the present Coalition Government.

In a column published in The Dominion Post on 1 March 2013, the author of this posting described the “pack” of MPs who fanned out across the conference in hopes of re-educating delegates who had voted the wrong way:

“Leading the pack was Labour’s employment relations spokesperson, Darien Fenton, and her grim lieutenant, the Dunedin South MP, Clare Curran. No surprises there. Ms Fenton and Ms Curran were among the Caucus members most alarmed by the Labour Party rank-and-file’s sudden outbreak of democratic distemper.

“The other members of the pack, however, came as a surprise. I had never thought of Jacinda Ardern, Megan Woods, Kris Faafoi or Phil Twyford as attack dogs, but my sources assure me that they were there – chewing people out.”

Six years later, it is interesting to compose a list of all of the principal players in the struggle to neutralise the “threat” posed by David Cunliffe at the Ellerslie Conference – and compare it with a list of Labour’s current Cabinet line-up.

Ranged against Cunliffe were Shearer and his deputy, Grant Robertson, and, as already noted, the Opposition Whip, Chris Hipkins. Another key player in the fight to stop Cunliffe was the Opposition’s acknowledged “hard man”, Trevor Mallard. Add to these four the names of Clare Curran, Megan Woods, Kris Faafoi, Phil Twyford and Jacinda Ardern, and what you have is an impressive compilation of the most important players in the current government.

KiwiBuild remains impervious to every attempt to reconstitute it as something more attuned to the Coalition Government’s promises of “transformation” and “kindness” for the same reason that its Minister of Finance remains impervious to all suggestions that he relax his “Budget Responsibility Rules”. Such a shift in policy would signal that the Coalition’s social and economic priorities were being re-ordered towards the Left. And if the political history of Labour’s last seven years is about anything, it is about the intransigence of the Labour Right: its unwavering determination to hold in place the Clark-Cullen approach to governing New Zealand.

Six years ago, this country’s political faultline moved slightly to the left. Two years ago, it shifted decisively back towards the right.

Only a similar, sizeable, ideological shake-up could transform KiwiBuild into what it should always have been: a massive, state-led building programme to construct 100,000 new dwellings for New Zealand’s poorest citizens to call home.


*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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38 Comments

Building more social housing would also have the effect of removing low end tenants from the private rental market, which would give landlords more confidence to provide higher quality rentals if they didnt have to worry about tenants who can't pay the rent. The private rental market would then just be a stepping stone for those who consider renting to be a short term solution on the path to home ownership (as it used to be) rather than something they will be doing for life. This reduces the need for restrictions on property rights of private owners, as "security of tenure" becomes a non-issue. So landlords would be happier, poor people would be taken care of, and private developers can take care of private buyers as they should.

Only if the accommodation supplements are unwound. They're effectively a price floor for rentals.

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So a bunch of internal infighting is the reason KiwiBuild is not working?

They were never going to build 100,000 homes in 10 years, but you would think they could be 1000 per year? Not like, the 300 they might have (currently 33 or whatever) after he first year?

As someone who has dared to build a few apartments before, I can tell you the regulatory process is a nightmare and costs are huge from planning to construction.

But this government has the right to ignore all the planning rules now (through it's Ministry of Housing and Urban Development). And surely they could get materials a bit cheaper if bought in bulk?

Someone posted this link the other day: https://www.sightline.org/2017/09/21/yes-you-can-build-your-way-to-affor...

It shows how various cities around the world have (and have not) solved the affordable housing problem. We just need to copy one of those.

Doing so would be a tacit message that the Labour-controlled Councils have delivered urban plans or development strategies that were unmitigated failures. Currently local body politics is where Labour MPs are put out to stud. First National didn't have the will, when it did it didn't have the allies, and Labour just flat out won't at all. But hey, you can just keep revising immigration numbers down, right? That might do...something.

Great link - but NZ is 'different'...so 'can't copy'

And nothing of the differences which were highlighted and Twyford insisted were possible - $350K for apartments, $550K for three bedders. Yet after they were elected and suddenly had to deliver, the prices quietly went up by $100K on the basis that the campaign costings were regrettably two years out of date.

And what from the media? Nothing. Silence. An enormous back-pedal, which had it come from the mouth of Joyce, would have attracted scathing criticism. The impossible building program, which was definitely possible, that turned an election. Only after which, we found out it wasn't possible at all. And some quarters still go on about how Joyce and the hole and ignore the one they're trying to dig themselves out of.

And for a more Interesting view of Kiwibuild, with some actual Research behind assertions, try 'Twyford's Tar Baby'....

A great wall ute size 1.8x5.3 = 9.5 sqr mtrs. Cost $20k. Square meter rate = $2100. Low cost house in NZ $1800.

Theres something wrong with the building industry when you can build, ship and retail a car for not much more per square meter than a "low" cost house.

I bought a pair of work boots for $150. The box measured 33 cm x 20 cm. This equates to $2250 per square meter. There's definitely something wrong here.

The ute example is illustrative I think. Lots of things are not. From books to cell phones.

That's an odd comparison to make... better to use a smaller car such as a Corolla or Prius, most families don't need 9.5 square metres of car.

I thought that the point of the modern Labour Party was to provide a place for lefty intellectuals to argue amongst themselves about what to do about the terrible state of the world those filthy capitalists had created? The last thing they are there for is to help the vulgar and deplorable. No, they are there to defend the rights of local and national government employees, themselves included.

Such is the result of adopting a culture of blaming others. When exactly did the Labour movement lose its grounding in the self help cooperatives and building societies and Quaker banks?

It occurs to me that 80% of MPs couldn't organise a piss up in a Brewery, maybe some parties are a little worse than others in this regard.

This sums up why KB was born to fail
"It was, of course, no such thing. KiwiBuild was intended not for the poor and marginalised, but for the financially-thwarted sons and daughters of the educated middle-class. That the first people to win the KiwiBuild lottery turned out to be a trainee doctor and an on-line marketer said everything about the sort of voters that the Labour Right was targeting."

Regardless of the target, the intended Sons and daughters of the middle class. The middle class that has a proportion of incomes that need to be subsistised as they dont get a large enough share of the total NZ wage and salary take.. Who are the key part of the population to buy homes, consume goods to grow industry and services...dont earn enough to buy homes..
It Failed because a political sure thing based on past home build projects of the 30s and 60s/ 70s, not because of not "affordable" but because the middle 50% of our population no longer earns 50% of the wage take.. even after subsidies and tax beaks.

Yes and if the Coalition does not pull a white rabbit out of the Magicians hat the Sons and daughters of the middle class will turn them into mince meat and send them out into the wilderness where they belong. The introduction of a CGT will be enough to tip them out.

To replace them with National/Act? Talk about cutting off your nose to spite your face.

Your middle class are destined to become the poor and marginalized, just exactly how many of the poor and marginalized now became that, if the cost of a home gets out of reach.
Many of those we see as poor and marginalized today were, to a much greater degree able to own back in my younger days. The rentier class has about wrung all they can from them, now need welfare to carry on, the next step up is the place to look for people to prevent owning their own to keep them in manner to which they have become accustomed.
It makes sense to get those who are just not quite able to buy something to get them into houses, but for the poor and marginalized a massive state house build is needed. I think that may have gone down like a cup of cold sick with voters, but it still needs to be done, unless we are planning areas where cardboard boxes could be deemed ok for housing.

"Your middle class are destined to become the poor and marginalized, just exactly how many of the poor and marginalized now became that, if the cost of a home gets out of reach."

History shows when this happens, unrest turns to revolution...
French Revolution..what was the 'government' attitude of the time ? "let them eat cake" so they chopped their heads off.
American Revolution, Russian revolution... well all revolutions stem from the same cause
Regardless of What Government.. and lets face it they are lead by not much more than high school jnr party 'leaders'... if the distribution of the national wage salary income is not corrected, we will (Are) seeing middle class teachers, doctors , civil servants, retail lower management stomping feet.
Then the right wing, head in the sand takes an attitude of " oh no back to the 70s unionism.. totally missing the core reason why growth is dying , why growth depended on immigration, and that uniformity is a myth, low income is the problem.
Upping the min wage is not a soln
Taxation , redistributing and sunbisties is not a soln.
The soln lays with a party and politicians who have the real interests of the country at heart.. not being on the treasury benches being priority, and has the balls to make the right calls to bring 50% of the national wage and salary bill back to the middle 50% of the population.
How we got into this situation, finger pointing is not the way.
Looking to how to fix without 'revolution', major industry and service disruption is.

After 9 years in power National's housing and immigration policies made our housing problem considerably worse. Now Judith Collins and Co. have all the answers now they are not in power. I can remember just how incompetent Nick Smith was with the housing portfolio.
The NZ public are treated with complete contempt by these "beneficiaries" in Parliament.
Even Labour does not seem to treat housing with the seriousness it deserves.
We will all be paying long term for the people who do not have adequate access to housing with welfare payments, prisons and other major social problems!

I am sure Labour do take housing seriously, however there is quite simply no, no cost fix. Someone somewhere has to pay for and no one is willing to pay.

Lets take one aspect, land. This is the biggest and easiest fix, its simply way to expensive so change the price. However how do you get huge swathes of land on the market cheaply? (say $50k, 20,000 sections).

The only way to do that is compulsory purchase huge tracts of land currently owned by land bankers, re-designate it "residential" and release it en-mass at what ever % that works out at, ie at cost. This of course means the land bankers aiming to make a killing in the future take huge "paper" losses.

Lets take the next big aspect, council charges. Who then pays for this other significant cost of infrastructure? existing rate payers cannot and should not be expected to cough up (or do we do so?). If you are not going to lump sum this up front then this means some sort of extra cost recovery system like a MUDs which in effect charges extra rates over the lifetime of the infrastructure debt and then hands it al over to the council when its paid off. Such a system would probably be more expensive than the upfront lump sum, but there you go.

All this is doable, but politically un-swallow-able.

Land is artificially scarce. You can decrease the cost of land by doing away with the RUB, as Twyford was up in arms on while in opposition. He just needs to do it.

The problem then is you pass the artificial restriction to the private land bankers who will then release land in small packets to ensure the prices are just as high as they are now.

The only way to game change this is to nationalise the land enmass and re-sell it after re-zoning at cost.

Like I keep saying and saying, you'll just give the ability to those who have bought land waiting for such an event to make a killing. The only other option is making holding onto this land un-palatable ie do something like a CGT and a land tax. TOP has discussed this but non one wants to listen.

I do otherwise agree, lets knock the boundary back 50km or something. The next issue even if that works is who pays for the roads and pipes? schools? shops?

Shorter roads will be much less expensive than the ones Phil Goff is building now. You seem unfamiliar with the current Auckland Unitary Plan, where (1) there are strong prohibitions on building adjacent to the contiguous metropolitan Auckland City and (2)t is open slather around every other town in the Auckland Region.
The current plan makes building in Auckland horrendously expensive, imposes a small 5-15 km gap where building is forbidden and then allows complete open slather of construction for all towns outside Auckland. We are paying the price of constructing roads across a 5-10 km gap that does not need to exist.

Voluntary land readjustment would achieve the same end as compulsory acquisition without the controversy Steven.

MHUD could use its consenting, infrastructure and master planning powers to offer land owners in potential new housing areas the chance to swap one large property title with no infrastructure and no residential zoning for many smaller property titles with residential zoning and infrastructure. MHUD taking the rump of the newly creates small plots as 'payment', which it uses for KB and state housing.

This way everyone is better off. The original landowners plus KB and HNZ who would get the land at basically the infrastructure cost (a targeted rate or upfront charge paying for the required infrastructure).

CT, back to his far left rants on Labour being to centralist all the time ignoring that that is where the big voting block that decides who governs is. HC understood that all be it un-palatable "truth" and evidence abounds to back that stance up (Tony Blair's success etc).

Is kiwibuild a disaster? yes but that's because its un-solvable without drastic measures (mass nationalisation of land) that either Labour is un-willing or un-able to take.

So the voter who could not do basic arithmetic, and thought he would get a taxpayer sponsored home , was ................hoodwinked .

I commented on this forum during the election ( go back and check ) that this idea of building mass housing for all those who could not afford to buy a house on a quarter acre section , was arithmetically, logistically, and practically an impossibility.

Nothing has changed .

"Nothing has changed "

Including your delusional interpretation of what other people thought.

"Nothing has changed "

Twyford changed the bit where he promised to remove the RUB and smash the land-bankers. Today Twyford bends over backwards to support the land-bankers and keep prices high.

Lying politicians.

He probably realised that removing the RUB is a categorically stupid idea.
That's why.

It just won't have the effect you think it will.
All it will do is:
- Have the greatest price effects on land at the fringe, incentivising sprawl (which you already hate).
- Any effects on land costs closer to the city will effectively increase redevelopment premiums, resulting in less brownfields development.
- Only occur in areas where infrastructure can handle new development. Developers love to socialise risk.

So. Why the fixation with removal of the AUP?
What you should be arguing is a further relaxation of the building codes required under it and making the consenting process cheaper and more efficient.

Hmmm,
- We have had this disagreement before - I think massive suburban development 20-25 km from the city centre results in less sprawl than massive suburban development 30-35 km away. You think that sprawl 20-25 km away is going to be less compact than sprawl 30-35 km away. I want to see a collapse in demand for the far-flung outer sprawl and opening up closer land will cause that to happen.
- As Auckland prices the cost of land through the stratosphere, it stymies redevelopment. Lowering a substantial cost barrier against brownfield development is likely to result in more of it occurring. (I really do not understand your conclusion above.)
- Yes, developers will exploit the existing infrastructure of Auckland City and build closer to the city. That is the hoped for result.

Our current AUP subsidises far-flung sprawl, if we reduce costs under this plan we will build more and more sprawl. I do not like sprawl.

We have argued about it before. I think it's because I look at it from an economist's persepective and you look at it from a Dale Smith perspective. The two are very different.

- Firstly, I agree.
However, there is contention as to whether that is true 'sprawl', given that the development is occurring around economic hubs; Puke, Warkworth, etc. The notion being that an increase in the supply of labor within these regions will incentivise a firm/employment response (arbitraging the cost of labour). The result being more jobs closer to the new development area. The AUP development outcomes thus far are still far too immature to see the result of this.

- Wrong.
Brownfield developers are especially sensitive to the redevelopment premium - the deadweight loss of buying a plot of land arising from the requirement to demolish the existing capital improvements. Reducing the cost of land effectively increases the premium, meaning that less brownfields development will occur.

- Build closer to the city? But how? Like I said, you literally cannot build at Whenuapai because of the absence of critical infrastructure. This is also the case elsewhere. Or in other cases, lower density catering to current infrastructure capacity will be the preferred avenue of development; increasing sprawl.

The AUP incentivises more development close to town centres; something that is not possible by removing the RUB. I agree, it most definitely pumps the price of land but the main reason it does so is due to the fact that it was so overdue to be introduced. The damage was already done in the mid 2000s - Auckland had no plan for the exploding growth.

As I say, the AUP is far from perfect. Very far. But it's a plan that's had to work within many constraints. What needs to happen is that building restrictions under it need to be further relaxed along with efficiency in the planning and consent process.

- Wrong.

My approach is to increase demand by a reduction of costs.

An "effective" relative premium price increase is a good sign. An absolute cost reduction (land cost) creates an increase in brownfields development and does so in the way you perceive (and then misinterpret). As the cost of acquiring the property falls the demand for the land increases and it is this demand increase that effectively raises the premium. We want to increase the demand.

We "literally" cannot build in Silverdale, Pukekohe, Kumeu, Clarks Beach, Clevedon, Kaukapakapa and Beachlands without critical infrastructure, but yet we are building there. This is how cities develop. A benefit of building closer than any of those places is that the connecting infrastructure costs less. A road of 1 km costs less than a road of 20 km.

There were no promises about building on a 1/4 acre section.

It's all space, Brendon, and that is a finite commodity.

And if you're going to hit a brick wall, the best time to button-off is early.

Labour will fail this one, because exponential growth is already in trouble globally, and the fall-out will engulf them. We need to be talking about re-housing city folk in food-producing areas, post-crash. Someone has to have a plan - and it sure as ---- isnt this lot. Nor was it the last lot.

Pretty sure space is infinite.

Phil Twyford on TV is an absolute riot .... jutting his chin out , and steadfastly defending the Kiwi-build scheme .... cannons to the left of him , cannons to the right of him , indominately gripping the Labour flag and swearing " we will overcome " .... ye gads he's a right plonker ....

... they could give the portfolio to David Parker ... to tease some sense out of this ... but at the end of the day , Kiwi-build is a dog ... an upper middle class subsidy ....

What surprises me is that Labour didn't simply increase the housing trust stock , after the Gnats had sold off so many homes during the Jolly Kid days ... if Labour had rebuilt the state home portfolio , and increased it further , they'd had genuinely been assisting the poor on Struggle Street .... instead of pandering to the trainee doctors and their online marketer partners ...

Fascinating article. For once I think CT is showing his true value as a Journalist - factual reporting of political history. I loved it, even though i am unable to see if his often blatant political bias slanted his writing. i do have a question though - "That the first people to win the KiwiBuild lottery turned out to be a trainee doctor and an on-line marketer said everything about the sort of voters that the Labour Right was targeting." Is this saying the lottery was rigged, or that the whole project is too little, too late? That these two had to have a decent combined income goes without saying.

https://ourworldindata.org/agricultural-land-by-global-diets

land is always being used for something - each housed person requires supporting acreage, even if it's overseas or 'down acres' from underground (most of our food iscurrently dependent on 'down acres'). So who is doing the math about long-term support acreage, per housed head? Are they adding in the solar energy-collecting acreage reuired to supplant fossil energy?

We haven't even begun to have that debate......