Old and new state housing in Northcote. After a long hiatus, a large new-build programme is underway in Auckland. Photo / Michael Craig
Old and new state housing in Northcote. After a long hiatus, a large new-build programme is underway in Auckland. Photo / Michael Craig
This is a story of collapse, all told in one remarkable graph.
The graph was created by Kay Saville-Smith, a social scientist who specialises in housing. Saville-Smith knew there had been a long-term decline in the construction of low-cost housing. The Productivity Commission had already identified it. The purple lineon her graph shows it.
But she wanted to know why, so she pored through decades of raw data, looking for the cause.
NEWBUILDS2
She found it. The vertical bars on the graph show government spending on house construction, in 2017 dollar terms. There are periods where it rises but the overall direction is down. The line follows the same pattern: everything that happens in the bars happens in the line too, a couple of years later. There's a lag between funding and construction, and it has several causes, but the relationship is clear.
The graph runs from 1960 to 2012. It includes state housing and lending to councils and community housing providers. Importantly, it also includes loans to help people buy their first homes from private-sector companies. It shows that we largely stopped building all these low-cost homes and it explains why.
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The government stopped investing in them. Or, as Saville-Smith titled her graph, "Sucking out housing finance is what happened".
Housing researcher Kay Saville-Smith. Photo / Louise Thomas
The crisis in housing in New Zealand is, primarily, a crisis of supply: there is not enough low-cost housing for the people who need it. Some of them are the emergency homeless, rough sleeping or living in cars and garages, or in a motel paid for by the State. Others are people with good jobs and prospects who still can't see how they could ever save enough to buy their own home. And there are many in between.
Saville-Smith talks about "key workers": people doing work essential to the economy and society, without whom the wellbeing of everyone unravels. Teachers, police officers and nurses, say, but also workers vital to key industry sectors.
Example: Marlborough is struggling to support its expanding wine production because winery workers can't get the homes they need at prices they can afford. The Queenstown Lakes area faces a similar problem with tourism sector workers.
There are explanations galore for this crisis. Some people blame councils, for refusing to free up greenfields land outside the urban limits. Others blame construction costs or a shortage of construction skills. Banks and other lending agencies, it's said, have loan policies that skew the market. Developers are accused of having too much greed and not enough social responsibility.
The Resource Management Act is often blamed, for making planning and consenting too hard. And the homeless themselves are blamed too: perhaps they got themselves into this mess.
In various ways, all those things do complicate the housing sector. But planning isn't too hard and, Saville-Smith says, construction costs in real terms have barely risen at all. None of these factors, she says, has caused the crisis and "resolving" them will not fix it. Her graph reveals the true culprit.
Doing it rough on the streets of Auckland. Photo / Jason Oxenham
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SAVILLE-SMITH is the director of the social research company Cresa and did this work as a programme leader for the Building Better Homes, Towns and Cities National Science Challenge.
On the graph, the line shows the percentage of new homes built in the "lower quartile" by value, in 2017 dollars. If, just for argument's sake, all houses cost somewhere between zero and $1 million to build, the lower quartile would be those costing less than $250,000.
In the early 1960s, around 32 per cent of new homes were in the lower quartile.
That's how New Zealand was, not really so long ago. We built a lot of modest but decent homes and everybody who worked and saved had a reasonable expectation they would be able to live in one, probably as the owner.
"There was a whole raft of instruments to allow that," says Saville-Smith. Families could capitalise their family benefit – a universal payment for each child – to raise the deposit for a home. Those on low incomes could get a mortgage at just 3 per cent interest (the banks charged 5.5 per cent). Repayments were set in relation to your ability to pay: commonly at 30 per cent of your income.
Big parts of the North Shore were built under these programmes.
Councils and community groups could also borrow at 3 per cent, for 30 years, to build flats for pensioners and, in Auckland and Wellington, for working people on low incomes. Builders could get low-cost financial help too.
And the state housing sector boomed. Glen Innes, Te Atatū, Māngere and many other suburbs sprung up. Rents were also tied, to 25 per cent of income.
There was a political consensus in this postwar period. Support for a mixed-supply model, belief that for New Zealanders to enjoy the decent life they deserved, they needed a decent home. It was also widely held that when people own their home they feel more invested in society. They contribute and they protect. It's called the property-owning democracy.
National and Labour also both understood that residential construction was a valuable means to stimulate the economy and keep people employed, especially when times were hard.
The specific policies were largely the work of the second Labour Government, under Walter Nash, in 1957-1960. But Keith Holyoake's four-term National Government that followed kept them and funded them.
Spending did decline steadily through most of the 1960s, for several reasons, but the policies were not abandoned. Saville-Smith says it's likely the boom in construction after World War II naturally slowed as supply caught up with demand.
In 1972, Labour won the election under Norman Kirk and spending rose again. By 1976, the last year for which that government wrote the budget, spending on low-cost housing had hit a record $2.91 billion (in 2017 values).
Lower-quartile construction actually fell during Labour's term, largely because of the delay between funding and building. But by 1975 it was rising and it continued to do so.
The housing minister in charge of that commitment to low-cost housing was Roger Douglas.
A camp set up by rough sleepers on the streets of Auckland. Photo / Peter Meecham
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IN 1975 National swept back to power under Robert Muldoon. Spending fell, to a new low in 1980, and construction fell as well. Then they both rose again. National lost the 1984 election to Labour, led by David Lange, but not before Muldoon's last budget pushed the spend on low-cost housing in 1985 back up near $2b.
Saville-Smith says there are lots of reasons for these spending variations and they don't usually have much to do with policy settings. Demand, construction costs and more all played a role.
But as her graph shows, the pattern remained remarkably consistent: the proportion of new homes in the lower quartile rose when government spending on housing rose, and fell when the spending fell.
Then it all went off a cliff. In one year, 1986, more than two-thirds of the funding was stripped out. The long-term downward trend under Holyoake became a catastrophic slide and it continued all the way into the 1990s.
Roger Douglas was back, but he didn't see the world the same way he had in 1975. Now the minister of finance, he took to the dusty New Zealand economy with a revolutionary new broom: "corporatising" and privatising state assets, deregulating the economy and removing barriers to imports.
He also argued long and hard against the benevolent welfare system of the previous 50 years, although he did little to change the way that system worked. He did, however, manage to stop the family benefit being universal, and eventually he eliminated it altogether.
He also abolished the system of independent commissioners, backed by what Saville-Smith calls a "strong statistical capacity" in the Housing Corporation which produced "very informed" forecasting of housing need. And in 1986 he slashed spending on housing.
Because of the delay between funding and construction, the impact was not immediately apparent. In fact, every year between 1984 and 1989 saw higher proportions of new homes built in the lower quartile. Partly that was a residual effect of Muldoon's spending. Partly, Douglas met opposition from cabinet ministers who retained their belief in the value of the state providing low-cost housing.
The housing ministers who oversaw that growth in lower quartile construction were Phil Goff and then Helen Clark.
But the damage was done. Low-cost construction peaked at 29.5 per cent of the total home construction sector in 1989, home ownership peaked two years later at 73.8 per cent, and then the money ran out. Construction, like funding, also fell off a cliff.
And it kept falling. By 1994 the spend was negligible and within a few years so was low-cost construction as a proportion of new builds. They stayed that way until 2018.
Home ownership followed suit, dropping steadily to today's 63 per cent. It's roughly the same as it was in 1951, before the social goal of building decent houses for everyone was adopted.
Housing researcher Kay Saville-Smith. Photo / supplied
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THE REASON for the collapse in the 1990s is that the policies were reset. Finance Minister Ruth Richardson, with the support of Prime Minister Jim Bolger and Housing Minister John Luxton, reformed the housing sector in her "mother of all budgets".
Instead of state investment that would give people a leg up into society, helping them to gain an asset and the security that goes with it, people were to be given "choice". Instead of programmes that grew the home construction sector and ensured it would build the houses society needed, the "market" would be allowed to rule.
Low-cost mortgages were out, accommodation supplements were in. It was similar to a voucher system.
Saville-Smith: "The theory was that everyone would have money so the private market could provide. Some people made a lot of money out of that. And it was supposed to stimulate new building. But it didn't. There's no evidence for that at all."
State house rents tied to income were out as well: market rentals would now be charged. Roger Douglas had not been able to convince his colleagues, but Richardson did not have that problem.
Saville-Smith says another factor also came into play: home ownership for the less well off was frowned upon. "One view was that low-income people like sole parents could never afford a home, but what they needed was good state housing. It was argued that's where the focus should be."
She says in the 1980s and 1990s it was also believed workers shouldn't own homes, because an economy busy restructuring itself needed a flexible workforce and home ownership would tie them down. "If you owned a home in Invercargill and the jobs were in Auckland, you might not be prepared to move."
That was nonsense too. She says other research has shown workers were more likely to travel for a job if they knew they could return to their own home later.
Every low-decile school in the country will tell it to you plainly now: when parents are itinerant, having to keep moving in search of work, the lack of a stable home is one of the most distressing and disruptive features of their children's lives.
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THE DAMAGE they did. The Helen Clark Government, 1999-2008, removed market rents and introduced more affordable rents for state housing. But it did not jump start the low-cost building programme.
The John Key Government that followed did even less. In the middle of 2016, the winter that families living in cars became a national scandal, just 282 state homes were under construction. His Finance Minister, Bill English, flatly denied there was a housing crisis at all.
From the point of view of social need, for most of the last 30 years the wrong houses have been built in the wrong places, and not nearly enough have been built. Migration has increased demand and property values have wilfully been allowed to soar.
In 2015, according to data reported by the Building Research Association, a couple aged 25-29 would have needed to spend 50 per cent of their annual income to repay a mortgage for a lower quartile home. It's probably got worse since then.
Those without have been comprehensively left behind.
Prime Minister Jacinda Ardern at Parliament with Housing Minister Megan Woods and Associate Housing Minister Kris Faafoi. Photo / Mark Mitchell
But there is, now, change. The current government has stopped the net sale of state houses and started building them: 3000 are now under construction and in Auckland alone close to 40,000 more are on the books. Housing Minister Megan Woods calls it the biggest home build programme since the 1970s.
Another $300m has been committed to "addressing homelessness", including provision of 1000 more transitional housing places this year. Several programmes are in place to help first-home buyers.
And the old policy of tying rents to 25 per cent of income will be reintroduced for emergency and transitional housing. That will replace the punitive system of repayable grants. Sometimes, what goes around does come around.
It's not enough. The community sector, ready, willing and pleading to help, remains, for reasons no one can explain, largely shut out.
The UN special rapporteur for housing, Leilani Farha, recommended this week that New Zealand should shift its thinking about housing and acknowledge it as a human right. If we did that, she said, the Government would have a duty as a signatory to the UN Convention on Human Rights to do much more.
What kind of country would we have if the Government had continued to accept that duty?
With an ongoing programme of building new low-cost housing and helping people buy into it, the past three generations of children would, as entire generations, have grown up in warm, dry homes.
Their health would have been better; schooling would have been easier; family and community relations would have been under far less stress.
This is a story of collapse. But it wasn't just the low-cost home construction industry that collapsed. The moral purpose we expect of politicians went with it. The damage has been incalculable. It will take years, decades, to fix.
