Imagine that the housing and transport initiatives of the major political parties over the past five years could be represented as one big celebration taking place on a single night. The early part of the evening would be represented by the last couple of years of the previous National Government with people everywhere, loud music, and everyone up and dancing – and now, under the Coalition, it’s 3am in the morning, the music has stopped, most of the revellers have gone home, and apart from a few people sitting around talking and crying into their glasses, not much is happening.
Whatever you might think of National under John Key – his Government had a clear focus on roading and infrastructure and kicked off a social housing program which is continuing to deliver new dwellings two years after the Nats left office - so it should come as no surprise that some of Nationals proposed new policy is a repeat of what made their last ‘party’ so successful.
But is it enough to "fix" the housing market?
In my view the answer is no – but it will still be a big improvement on what we have right now.
The proposed policies (which actually take the form of two companion discussion documents – one dealing with housing and the other with roading and infrastructure) contain some innovative and bold new ideas and are notable for the sheer volume of ideas being proposed. There isn’t space to cover them all – but there are a few which demonstrate that the Nats have listened and that they understand some of the key market issues and what it will take to fix them. These include:
Supporting Home Ownership
Make no mistake – getting as many kiwis as possible into their own home is the key to resolving our housing issues. A strong culture of Home ownership strengthens the fabric of society, reduces poverty and gives people choices that they simply wouldn’t otherwise have. The National discussion document acknowledges this and outlines some ideas around helping State tenants to buy their home – an obvious place to start because the Government already owns these properties and can therefore set the terms of any ‘rent-to-buy’ type schemes.
Reforming State Housing (again)
The Coalitions ridiculous decision to make it almost impossible to evict bad State House tenants is an example of the kind of woolly thinking which leads to a slew of unintended consequences and destroys communities. The Nats have recognised this and are proposing a range of reforms including a ‘Remind, Remedy and Remove’ system for bad tenants so that there are consequences for anti-social behaviours such as violence and drug use. They’re also proposing underwriting some of the financial risks facing Community Housing Providers, transferring the management of some State housing to these providers and potentially splitting the Building and Property Management functions of Housing NZ – possibly into different agencies. This is all sensible stuff which would significantly improve the effectiveness of the state housing sector.
Anyone who has researched the issue of homelessness in New Zealand understands that it isn’t the result of poverty or some imagined shortage of houses – but rather, is largely caused by a complex mix of physical and mental health challenges. The Nat discussion paper also appears to get this and supports remedies which not only give the homeless somewhere to call ‘home’ – but also address their social, medical, physical, spiritual and emotional needs.
The are many other worthy proposals, such as these – but, for me, the discussion document is equally notable for what it doesn’t mention. For example, there are no specific proposals around doing anything to constrain house prices or curb house price inflation. This is important because every attempt to do this, over the past few years, has failed and it’s now obvious that the best way to address house prices is to let each cycle run its course and to allow prices to find their own equilibrium. Lack of any reference to house prices suggests that the Nats now understand this.
There is also no mention of a housing shortage which suggests that the Nats have recognised what some of us already know – that there is no shortage of housing. I say that as someone who was, at one time, an outspoken champion of building 100,000 new homes – but who now recognises that the shortage was never real. History will show that this mistake was one of the biggest policy failures of the Coalition Government and it will become a case study in how flawed ideas can lead to bad (and expensive) public policy. Lack of mention of it in the National policy documents represents an important maturing in the policy evolution of one of our major parties.
Sadly, for all of the very positive aspects of National's proposed housing policy – there are two further omissions which, in my opinion, are so important that they could derail what would otherwise be a very effective set of proposals.
Firstly - there is no recognition of the very serious issues confronting private landlords and the looming crisis coming upon that sector. This oversight matters. The private rental sector provides around 440,000 rental properties – the overwhelming majority of all rental homes in New Zealand – and recent draconian changes to the Residential Tenancies Act, onerous new compliance requirements and the ring-fencing of tax losses are all significant challenges which need to be addressed before they lead to a shortage of rental housing in the years ahead. The failure to even mention these issues in the policy document represents a serious, and concerning, blindspot in National's housing plans.
Secondly – and perhaps most importantly - there is no mention of the failed ‘Loan-to-Value’ ratio deposit restrictions. These ill-considered rules are, without question, the single biggest thing standing In the way of many young people buying a first home – particularly in Auckland - and renegotiating them, with the Reserve Bank, should be one of the first steps of any new government. The lack of a reference to them in the National policy discussion document means that our biggest housing issue – affordability – will continue to be a major problem.
- Ashley Church is the former CEO of the Property Institute of New Zealand and is now a property commentator for OneRoof.co.nz. Email him at [email protected]