Managing Expectations – the NZ Housing crisis and Labour’s response.

Written By: nickkelly - Date published: 6:15 am, October 6th, 2023 - 42 comments
Categories: election 2023, elections, housing, labour, national - Tags: housing crisis, KiwiBuild, labour, Managing Expectations, nick kelly

Originally published on Nick Kelly’s blog

Watching the 2023 election campaign in New Zealand, one of Labour’s challenges appears to be that it has failed to manage voters’ expectations over the last six years.

Recalling the election campaign in 2017, Jacinda Ardern gave people hope that politics could be different. Moreover, the most significant social problems facing the country could be overcome by electing a government that promotes kindness and relentless positivity.

In early 2018 I wrote a post about the politics of hope, calling it a powerful and dangerous tool. In this blog post, I said the following:

In 2023, many in New Zealand have lost hope. While the political and economic situation is arguably better in many ways than in other parts of the world, the difference in New Zealand is that people feel let down. And as I wrote in 2018, the results of people feeling this way can be devastating.
http://nickkelly.blog/2018/04/01/hope-powerful-but-dangerous-tool/

When NZ Labour won its historic majority in 2020, I wrote the following:

The coming term will not be an easy one for Labour, as the COVID-19 pandemic continues to rumble on and the world plunges into the worst financial crisis in decades. On Saturday Labour were rewarded for their handling of the crisis so far, but the hard part is yet to come. On the one hand, they need to rebuild the NZ economy at a time when international tourism is dead and export markets are volatile. But even prior to this the New Zealand economy was unbalanced and in a precarious state. Its over-reliance on dairy exports has made it vulnerable if anything happens to this market and resulted in over-intensive dairy farming which has harmed the environment – not a good look for a country that brands itself as clean and green. It also faces growing inequality with significant growth in homelessness and poverty in recent years.
http://nickkelly.blog/2020/10/19/nz-election-2020-labour-win-is-a-watershed-moment-in-the-countrys-history/

This has indeed been a difficult term in government, and all the challenges described above came to be. Whilst this was never going to be an easy time to govern, after six years in power, three of which with a massive parliamentary majority, hard questions need to be asked about whether NZ Labour lived up to voter’s expectations.

There are two areas where the Labour-led government in New Zealand could have done a better job of managing expectations. One is Housing, and the second is the government’s handling of the COVID-19 pandemic. This post will focus on housing, and the next one on COVID.

Prior to the 2020 election, I wrote the following regarding the NZ Government’s handling of the housing crisis:

It is easy for both Labour and the Green Party’s to say they could not achieve all they wanted in their first term in government because of a difficult coalition partner. But this can only go so far. There are certain policy areas where the current Labour-led government have simply not yet delivered. At the beginning of 2019, Jacinda Ardern announced that it would be the year of delivery. Yet in policy areas such as decreasing homelessness, or the now ill-fated Kiwibuild program to build houses to combat the NZ Housing Crisis – delivery simply has not happened. Yes, these are difficult policy areas, but they are also policy areas where Labour took a strong stance in opposition.
http://nickkelly.blog/2020/08/09/jacinda-arderns-labour-government-style-over-substance-or-a-guiding-light-for-progressive-politics/

The reality was and is that addressing the housing crisis was never going to be quick. A problem over three decades in the making was never going to be fixed within one parliamentary term. NZ lacks skilled construction workers due to apprenticeship programmes being cut in the 1990s. Since selling off the Ministry of Works in 1994, NZ has been reliant on large international companies for major public works, including major housing projects. These international firms have no sense of obligation to New Zealand and are price setters.

Even if the above were not issues, there still needs to be planning consents, environmental impact reports and other processes which means housing developments take time.

The problem with Kiwibuild was not only the slow pace at which progress was made but also that as a policy programme, it did not on its own mean thousands of low-income people could afford housing. It addressed a supply issue, but not related issues such as lifting people’s incomes and lowering deposit rates for mortgages.

In 2017 Labour and Green Party voters in New Zealand believed that Kiwi Build would tackle the housing crisis. The then opposition underestimated the challenge a mass building programme such as this would take. This does not mean it was the wrong policy, but that Jacinda Ardern and the Labour frontbench over-promised and under-delivered. Had they not done so, Labour’s vote may not have risen to a level where entering government was viable. But long term, this has now contributed to the challenges Labour are facing in this election.

The National Party’s track record on housing is abysmal. Nobody expects the National Party in power to do anything other than allow the wealthy few to own more and more property. In this way, National and the Right are much better at expectation management. They win not by exciting voters and giving hope, but through many voters becoming depressed to the point where they disengage.

The housing crisis is not unique to New Zealand as I wrote about back in 2018. Governments in English-speaking democracies in particular struggle with this complex problem, that has no single fix. Instead, it will take significant policy changes, but more importantly changes to public attitudes on home ownership, regulation of the rental market and in-fill housing. It takes a strong government to achieve such a change within the limits of parliamentary democracy. Until this happens, expect governments to keep falling at the ballot for inaction.

42 comments on “Managing Expectations – the NZ Housing crisis and Labour’s response. ”

Comments are now closed

lprent 1

6 October 2023 at 8:53 am

Reformatted using the block editor.
- nickkelly 1.1
  
  6 October 2023 at 9:20 am
  
  Thank you.
Dennis Frank 2

6 October 2023 at 9:05 am

Labour's fatal error was not providing Aotearoa with a recovery plan post-pandemic. I pointed that out often onsite here at the time and the chickens have since come to roost.

They also never explained why they couldn't duplicate the effort and results achieved by the first Labour govt re building ample houses. Inability to learn from experience became their most distinguishing characteristic!

Still, Labour did manage to establish a track record as place-holders for National, so it's not as if they were a total bunch of losers. Neolib solidarity has become their primary legacy. Hipkins trying to both signal consensus with Luxon while simulating a brand differential ought to teach bright youngsters about the democracy sham.
- Ad 2.1
  
  6 October 2023 at 9:12 am
  
  No the failure in housing goes back to 2017 and 2018.
  
  It's pretty evident that even with a national health pandemic, the public patience for massive state intervention no longer exists outside of a very very tight duration.
  - Dennis Frank 2.1.1
    
    6 October 2023 at 9:22 am
    
    Fair enough. If they had made an effort to communicate with the people instead of taking refuge in sloganeering I wouldn't feel so critical.
    
    They seem to have no idea about authenticity. If they really were in it for the people, as their billboard implies, they’d explain stuff using realism instead of bs…
- mikesh 2.2
  
  6 October 2023 at 10:24 am
  
  Labour's fatal error was not providing Aotearoa with a recovery plan post-pandemic. I pointed that out often onsite here at the time and the chickens have since come to roost.
  
  I thought they followed the advice of Ashley Bloomfield and the Health Dept..
  - Dennis Frank 2.2.1
    
    6 October 2023 at 11:08 am
    
    That was critical earlier & I remain a supporter of Ardern on that, but she failed to message the people in the aftermath due to having no exit strategy to inform them.
    - Chris 2.2.1.1
      
      6 October 2023 at 11:42 am
      
      And no provision to protect jobs after the mandates were lifted. Communicating the mandates were temporary wasn't the greatest, either, but leaving people without their job even after the mandates were lifted was a crucial mistake.
    - mikesh 2.2.1.2
      
      8 October 2023 at 9:30 am
      
      The exit strategy, after omicron struck, seemed to be to get everyone vaccinated, and then to return to normal. What “exit strategy” would one expect?
      
      Lack of an exit strategy would seem to be a “straw man” argument.
Ad 3

6 October 2023 at 9:08 am

The endless bloated speeches and promises from Minister of Housing Phil Twyford were also deeply unhelpful.

Also forming a new implementation house construction ministry from scratch and different from Kainga Ora, with a leader of the organisation that plainly failed from the start, was also unhelpful.

Also the Minister of Finance superheating the economy with tens of billions of stimulus causing a speculative spike, while at the same time changing the tax depreciation for landlords who would purchase and operate rentals, was unhelpful.

Also failing to admit that the government generated no mechanism for Kainga Ora and NZTA to work faster on masterplanning and building large-lot areas wasn't helpful.

Morgan Godferey has made a parallel point recently that the capacity of the state to deliver has shrunk massively, but the government COVID response showed clearly that if the state wanted to intervene at scale and alter society, it had both the power and the will to do so. Which when it came to addressing any other crisis wasn't true. Let alone helpful.

Does anyone still remember when housing was the main crisis, when now we also have crises in health, education, crime, and water? It is so hard to list the litany of failures in this government from where they started in 2017.

Twyford failed in housing but Ardern was the source of the failure from the beginning.
- KJT 3.1
  
  6 October 2023 at 11:21 am
  
  "Crises" in health, education, water and housing date back to decades before this Government. Covid simply bought it to a head.
  
  Unrealistic to expect it all to be "fixed" in six years.
  
  However the discounting of wealth and capital gains taxes is one of several spectacular "own goals".
  
  As is the reluctance to come out strongly to support policies that rebuild our society and infrastructure, and the increase in Government share of the economy that is required.
  - Ad 3.1.1
    
    6 October 2023 at 11:30 am
    
    "Unrealistic" is the theme of the post: the Labour-led government failed to convince that its promises were realistic. I don't think anyone will dispute that even in Labour, on October 15th.
    
    They did not have a coherent policy delivery platform and 100 Day Plan as part of their 2017 campaign. Too many people with fat policy ideas and no executive experience.
    
    Government response to COVID showed that you really can take people through a massive societal change and come out the other end. Arguably their success in it gave a template to do more in other policy areas. Hence Ardern as Smeagol hoarding her golden pile of political capital.
    
    Labour really did implement massive changes which we will only evaluate in many years to come, and really did rebuild major parts of our society. Only in specific months did it need to increase the total Government share of the economy.
    - lprent 3.1.1.1
      
      6 October 2023 at 1:30 pm
      
      Too many people with fat policy ideas and no executive experience.
      
      It is specifically was and is having no executive experience in government, because I consider that private enterprise executive experience counts as a complete and large negative in getting things done in government. I don't think that anyone who has worked almost entirely in the private sector (ie like me) has any previous competence at making anything happen government (which I have observed for decades).
      
      The nearest we got to to it recently was the Key government. But this was the government who managed to do 9 years of doing absolutely no positive policies (building motorways with ensuring any extra user funds to maintain them against truck damage doesn't count as positive in my view) , but allowed previous problems to expand exponentially.
      
      If National goes over the line into government – then having a dearth of competent governmental executive experience is exactly the same position they will be in.
      
      National has the worst of the Key governments ministers – the most experienced are Judith Collins and Gerry Brownlee – both of whom are worse than useless. There are a number of the most ineffectual Key junior ministers and parliament secretaries imaginable who are available.
      
      Paul Goldsmith (believe it or not) is probably the best of them.
      
      Certainly more competent than Mark Mitchell or Todd McLay – which is an extremely low bar.
      - Ad 3.1.1.1.1
        
        6 October 2023 at 1:55 pm
        
        I don't want to imagine the next government yet.
        
        Not all can be attributed to lack of experience one way or the other.
        
        Prime Minister Ardern played to her historic strengths in public speaking, media fronting, and international affairs, so she got away without private sector experience. In specific fields she was outstanding.
        
        The smoothest transitions under the current government from relevant public service to Ministerial level must surely be Ginny Anderson and Ayesha Verrall. They have had command of their portfolios from the get-go.
        
        Even a deep academic experience in a narrow field like tax means Deborah Russell could have performed better given her specific background.
        
        Andrew Little took on major executive fields in Defence, intelligence and security and get some big purchases delivered, big successful reforms, and major alliances set up. His massive signal move to merge all health into one will be a massive legacy. So he confounds lack of relevant experience simply with sound competence at task delivery and cross-sector diplomacy.
        
        The minister that also confounds the need for any major public or private sector experience however must surely be Megan Woods, who without much big leadership experience managed to take on more and more, and do so with strong policy ambition and without significant mistake.
        
        Just to argue against myself for a moment.
        
        lprent 3.1.1.1.1.1
        
        6 October 2023 at 2:32 pm
        
        You notice that these were all people from professions outside the private sector management. They have less to unlearn.
        
        I was never surprised about Andrew Little or Megan Woods. Both had worked in roles that required immense amounts of non-private political/managerial roles.
        
        The particular problem that I see is that a the direction of a government and competence at achieving it is pushed by its previous experience of pushing those things. So the 1984, 2008 and 2017 elections were notable for political abilities but limited competent senior experience in government. And it showed. The governments all drifted through lack of expertise.
        
        Rodger Douglas provided the main expertise in 1984-1990 and there were a series of mistakes etc etc
        
        Ad …
        
        6 October 2023 at 4:38 pm
        
        Most state agencies have been made as close-to identical with a business as possible. That was a part of the State Sector Act and Crown Entities Act, including appointing board members, forming reasonable SOIs, investment proposals, shareholder expectations, and the like. That was the point of New Public Management in both theory and practise. And engage with staff only through Departmental Chief Executives.
        
        So most Ministerial work so far as I can tell would have corporate relevance if it were in a major company.
        
        adam …
        
        7 October 2023 at 11:30 pm
        
        If you have the time Ad.
        
        Bloody good interview with former Premier Bob Carr.
      - adam 3.1.1.1.2
        
        7 October 2023 at 11:20 pm
        
        Paul Goldsmith (believe it or not) is probably the best of them.
        
        That statement made me rethink my aversion to smokable cocaine as a solution to help the total and complete hopeless.
    - Belladonna 3.1.1.2
      
      6 October 2023 at 2:15 pm
      
      "They did not have a coherent policy delivery platform and 100 Day Plan as part of their 2017 campaign."
      
      In reality, this was because, until Ardern took over 6 weeks before election day, there was no possibility that Labour would be forming the next government.
      
      I still feel that Kiwibuilt was a political stick to beat the National government with, rather than a fully worked out plan from a party expecting to deliver on it. An electioneering slogan, rather than a policy.
      - Ad 3.1.1.2.1
        
        6 October 2023 at 4:34 pm
        
        Oh come on, you either prepare to run the government or you don't.
        
        Belladonna 3.1.1.2.1.1
        
        6 October 2023 at 5:59 pm
        
        That's the point. They weren't prepared to run a government…. because they didn't think they had a hope of being elected.
      - mikesh 3.1.1.2.2
        
        8 October 2023 at 10:32 am
        
        The original kiwibuild plan was probably a good one, but they probably underestimated the time it would take to execute such a plan.
        
        Belladonna 3.1.1.2.2.1
        
        9 October 2023 at 7:25 pm
        
        Not only the time, but also the cost, number of tradies required, and bureaucratic hurdles to overcome. It wasn't a costed plan – more an election promise, that they were, no doubt, horrified to be expected to deliver on.
        
        Aspirational goals are all well and good, but don't present them as hard targets (unless you want your Minister to be the target for the outrage of broken promises).
        
        What I would have liked to have seen (long after Kiwibuild had gone the way of the dodo), is the government purchasing motels at book price during the Covid lockdowns – instead of paying the owners ridiculous prices to house the homeless. They could then have re-developed these under Kainga Ora (once lockdown was past) into multi-story public housing (some for families, some for singles, some for people with complex needs). Virtually all of the motels were in high-traffic areas (so good public transport), and already zoned as high-density accommodation.
        
        Sensitive development, bringing the community along with them – rather than the hell-holes which some of the motels turned into (cf Rotorua and Tiny Deane's security company)
        
        An opportunity wasted.
pat 4

6 October 2023 at 9:40 am

The Labour (led) government of 2017 discovered (if they didnt understand already) that the housing bubble was the basis of our economy and was consequently off limits to be 'repaired' even should the tools be available to do so….tinkering was all that was available to them.

Nothing has changed
- Dennis Frank 4.1
  
  6 October 2023 at 9:52 am
  
  I like it – the neolib wimp theory of politics, political scientists take note!
  - pat 4.1.1
    
    6 October 2023 at 9:58 am
    
    Not a lot to like…and its practice rather than theory.
    
    The difficulty is getting from here to there, especially as a bit player trapped in the current paradigm….and understanding the consequences of attempting to swim against the tide.
- mikesh 4.2
  
  6 October 2023 at 10:42 am
  
  The housing "bubble" if it was a bubble, is yet to burst. The recent increase in prices was due to circumstances brought about by the pandemic. I understand that prices are now back to pre-pandemic levels.
  - arkie 4.2.1
    
    6 October 2023 at 10:49 am
    
    Your understanding is wrong:
    
    The latest figures from the OneRoof-Valocity House Index show the nationwide average property value is, at $958,000, 23.9% ($185,000) higher than it was in March 2020, just before Covid-19 struck.
    
    https://www.oneroof.co.nz/news/oneroof-house-price-report-may-2023-43471
  - Drowsy M. Kram 4.2.2
    
    6 October 2023 at 11:09 am
    
    I understand that prices are now back to pre-pandemic levels.
    
    No, although house prices have been dropping – which is not the right direction.
    
    House asking prices dropping $10k per month on average – report
    [3 Oct 2023]
    - Nic the NZer 4.2.2.1
      
      6 October 2023 at 12:25 pm
      
      I think this chart is nominal values. This means that the earlier prices might need to be inflation adjusted to make comparable house prices (or your more or less just comparing inflation, not house price changes). This is why the majority of the left of that chart is quite flat.
      
      There is a similar house price index here, and you can see it has somewhat different shape.
      
      https://www.rbnz.govt.nz/statistics/key-statistics/housing
      
      As Nick mentioned the price of housing in NZ is a 30 year saga, and some of the biggest increases in house prices began circa 2000.
      - Drowsy M. Kram 4.2.2.1.1
        
        6 October 2023 at 10:35 pm
        
        The chart @4.2.2 covers 2007 onwards.
        
        I might be misinterpreting, but in the RBNZ link, isn't that a graph of the House Price Index (HPI) (annual % change), rather than actual prices?
        
        Yes, there were some big % increases between 2002 and 2007, but the HPI graph indicates the largest % increases (June – December 2021) occurred during the pandemic.
        
        Between March 2020 and March 2023 (when that graph ends), the area above zero (indicating increasing house prices) in considerably greater than the area below zero – the HPI (annual % change) doesn't turn negative until around August 2022, so the time spent in negative territory since then isn't enough to correct/offset the larger % increases up to August 2022.
        
        It's going to take quite a few more months of negative % changes to lower house prices back to pre-COVID levels, but there are already moves afoot to reverse the current partial correction.
        
        As I said, I could easily have this wrong, in which case my apologies.
        
        Nic the NZer 4.2.2.1.1.1
        
        10 October 2023 at 9:04 am
        
        The value of housing stock chart is similar enough to the house price index. The point your making with either chart is correct, and prices have fallen only as far as 2021 levels at this stage and even with the elevated inflation rate after the pandemic this brings the equivalent level back by only a few months.
        
        But its important to understand that any chart of nominal levels should likely be understood to have an implicit exponential series underlying it as well as the actual series your examining. The left of your chart is always going to be the flat part of an exponential curve, and if your comparing 2004 and 2021 and 2009 and 2022 these increases and decreases are all close (while in your chart they don't appear equivalent at all).
    - mikesh 4.2.2.2
      
      8 October 2023 at 11:08 am
      
      No, although house prices have been dropping – which is not the right direction.
      
      "The right" being an obvious pun.
      - Drowsy M. Kram 4.2.2.2.1
        
        8 October 2023 at 11:13 am
Binders full of Women 5

6 October 2023 at 11:05 am

The best housing policy is the Greens Progressive Ownership- best of both worlds. But not gonna vote for them cos I am stupid (white). I used to love them and cast my first ever vote for the Rev Ray Galvin in the old Greens about 1987.
- arkie 5.1
  
  6 October 2023 at 11:15 am
  
  “Voting isn’t marriage, it’s public transport. You’re not waiting for “the one” who’s absolutely perfect: you’re getting the bus, and if there isn’t one to your destination, you don’t not travel- you take the one going closest.”
  
  https://medium.com/@vickipps/voting-isnt-marriage-it-s-public-transport-b7630e6b210a
  - Patricia Bremner 5.1.1
    
    6 October 2023 at 11:55 am
    
    100% Arkie.
  - weka 5.1.2
    
    6 October 2023 at 12:45 pm
    
    that's so good.
- weka 5.2
  
  6 October 2023 at 12:45 pm
  
  So the Greens have the best housing policy and you won't vote for them because some idiot newbie at #30 out of 31 on the list has somewhat radical politics?
Descendant Of Smith 6

6 October 2023 at 2:30 pm

Kiwibuild was a mess of a policy – overly complicated and captured by neo-liberal middle class objectives as to what affordable housing was. So many rules and complications and an over-inflated sense of what working class could afford. Not uncommon from both politicians and highly paid CEO's to underestimate the struggle that others face.

If they wanted affordable housing for purchase then as I said at the time – retain ownership of the land by the state in perpetuity and just have people buy the house.

If they needed to transition the baby boomers away from their 3 and 4 bedroom homes build small units close to amenities and do a swap – brand new units were not dissimilar in price to old 3-4 bedroom homes.

Lastly build more state housing with a long term view articulated to make up for years of immigration and lack of maintaining volumes as population increased.

I have not met anyone who can actually articulate Kiwibuild in simple terms. Ordinary people just don't wish to dig into the detail of it.

I actually think they have done a reasonable job building more actual state houses. If that was their main policy they would now likely be in a position of strength.

Kiwibuild was the neo-liberal capitalist solution that no-one needed.
- mikesh 6.1
  
  8 October 2023 at 11:00 am
  
  If they wanted affordable housing for purchase then as I said at the time – retain ownership of the land by the state in perpetuity and just have people buy the house.
  
  That would entail buying land back from its private owners. The government would not have had sufficient cash to do that, though one possibility may have been to issue bonds in lieu of cash. Another approach may have been to pass legislation to allow only the government the right to buy and sell land; anyone then wishing to sell a property would have to sell the land component to the government while they sold the house to the buyer.
  
  I have not met anyone who can actually articulate Kiwibuild in simple terms. Ordinary people just don't wish to dig into the detail of it.
  
  The plan, in simple terms, was to build some houses, sell them, and use the proceeds to build more, continuing the process until 100,000 had been built.
barry 7

6 October 2023 at 4:56 pm

Kiwibuild may not have delivered so many houses by itself, but it created an environment of house building. Often a subdivision would have a small proportion of the houses as kiwibuild houses, which helped the developer get funding. Sometimes a developer could take a risk with kiwibuild as a backup option if their houses didn't sell.

It also encouraged builders to take on apprentices, thus growing the industry.

Has anybody crunched the numbers? How many does the number of houses built under Labour compared with the last government? How many new builders did we train?