Remember the 1960s and 1970s? For those of us around at that time it was a time of pretty well full employment and a time when homelessness was rare and easily fixed.
My own personal experience is that my dad, who was a boilermaker and my mum who had to cope with five of us, but we had a modest but reasonable home to live in, plenty to eat. I grew up in a real working class area, where families of all socio-economic statuses could set up a home for their kids. Our education did not suffer from the effects of overcrowding or temporary residences. And the cost of putting a roof over everyone’s head was not a major draw on incomes that increased every year.
Fast forward to today. We now have a crisis, one that has been brewing for decades. In the past decade we have seen the number of homeless people begging on our streets explode. And we have had the emergence of families whose parents have jobs sleeping in cars with their kids because they cannot afford to buy or rent.
This recent article by Simon Wilson in the Herald dug into the reasons. It is behind the paywall which is unfortunate because it needs to be read as widely as possible.
The answer to what caused the housing crisis is contained in this graph:
See what happened? The state used to provide significant support to first home buyers and young families and used to pour capital into the construction of lower value housing.
My family was one of those helped by a 3% loan and capitalisation of Child Support. It had a profound beneficial effect on my life and that of my sisters.
It used to be part of the political consensus. The Nash Labour Government instituted the scheme, the Holyoake National Government kept it going and the Kirk Labour Government put it on steroids. Even the Muldoon National Government kept it going.
Please remember there is a lag of a couple of years between funding and expenditure given the delay in obtaining titles and construction.
Under Rogernomics the scheme was cut to the bone. There was no alternative they said. Then Ruthenasia killed it off.
There was a small increase under the Clark Labour Government, mainly I presume through the shared equity scheme. But then National cut even that provision.
You can see by the way the trends in the lower quartile construction lags the expenditure by a couple of years how profound the relationship between the two is.
It is clear that the market of itself will deliver us more of the same. Which is why Kiwibuild and also the Government’s construction of more social housing is so important. The former is going more slowly than we would like, the latter is going really well.
So are there any other reckons we should add to this most important of subjects?
How about former Minister of everything Steven Joyce whose fiscal analysis skills led him to believe there was an $11.5 billion hole in Labour’s draft budget figures, one that has not materalised.
He has the cheek to ask us not to get partisan on it. If “partisan” means “thinking anything but a pure market solution to the problem” then he may be right otherwise he is being facetious.
He asks us to look at policy changes over the past decade when it is clear we have to look at the past 40 years.
He says that the problem was not enough houses being built from 2000 to 2010. Reality would suggest he is out by a decade in his apportionment of blame.
He basically blames “red tape” and Auckland Council for trying to have a compact urban form for the problems. He then claims that passing of the Unitary Plan in 2016 has led to a surge in construction occurring. The figures would not bear that out.
He claims that the Global Financial Crisis contributed because it dried up the supply of available money. It is good to see that he no longer blames Labour for the GFC inspired “decade of deficits”.
His third proposition is weird. He says:
The third, and arguably biggest lesson from the last decade is the now obvious role low interest rates play in driving high house prices, and indeed all asset prices. Every time interest rates have got ridiculously low, house prices have shot through the roof as people bid up prices to the limits of the mortgage they can now afford. This price inflation seems fine if you already own a house, but it perpetuates the wealth gap between those that own houses and those that don’t.
This ignores the fact that interest rates are currently at historically low levels yet through a number of Government initiatives, some started by National, house inflation is lower than wage inflation.
His conclusion suggests he may occupy an alternative reality to the rest of us. He says:
There are lessons out of the rental housing and social housing markets. It is crazy to persist with a single monopoly state housing provider when it has never in its history managed to successfully meet the demand for social housing. It’s also not sensible to let one person have the same state house for life irrespective of changes in their family and personal circumstances. The rapidly growing social housing waiting lists compared to two years ago provide the evidence there.
Can I ask Steven to check out what happened in the 1960s, the 1970s and the early 1980s? He is my age. I presume he was aware of what was happening around him.
This is an important debate. The future of hundreds of thousands of kiwis depend on getting it right. I just hope that the debate occurs with an understanding of what has happened in the past and what has worked. And that it is motivated by achieving what is best for our communities, not what will drive the biggest profits for land developers and land owners.