By Geoff Simmons*
There’s been discussion lately about the Labour Government slipping through a loophole in its self-imposed debt target. Rather than borrow $2.9 billion itself to build new state homes, it’s instructed Housing NZ to borrow the money on its own.
It’s a clever trick, to be sure, because it puts the money on Housing NZ’s books instead of the Government’s. Never mind that the markets will see through it and their borrowing costs will be higher, the Government is only concerned with sticking to its net debt target. But here’s a better idea: why don’t we get rid of Housing NZ entirely?
Personally, I’m less concerned with whose books the debt sits on and more concerned with the outcomes it delivers. I think we can give our low-income residents a much fairer deal by replacing Housing NZ with not-for-profit, community-owned housing associations. This is a common policy overseas.
Here’s how it would work. We’d split Housing NZ up into regions. Each region would become a housing association, charged with delivering affordable housing in that region.
The first advantage of this approach is much more flexibility. It’s easier to react to things and get things done when you’re a smaller, regional association than when you’re beholden to Wellington bosses.
They’d also enjoy more trust than Housing NZ, because they’d be community owned. This doesn’t make them any cheaper to run but it does give them distance from Government. Overseas that means they often end up doing a better job.
Yes servicing debt would be more expensive for community housing than the Government. But there are ways around that. For example, during the set up phase Government could offer to underwrite the community housing sector borrowing from the private and philanthropic sector. That would really get the housing sector cracking.
Wider funding sources
Community Housing could also leverage philanthropists and trusts. It does this already but lacks scale. The charitable sector alone manages $60b in investments, with over half of that asset base invested in financial assets like bank deposits (25%) or property (45%). Investing in housing associations could be a way for them to get a financial return and also do good at the same time. The charitable sector wouldn’t invest in Housing NZ as it is used as a political football every time there is a change of government.
There is also a large and growing pool of private capital looking for investments that make a positive difference. These sorts of “impact investments” are actually the fastest growing type of investment internationally. Community based housing associations would be able to tap into this growing funding source.
Changing the remit - for better
We could also change the remit. Right now, Housing NZ (generally) provides state houses. But what if we changed that a bit, to “provide lower-cost housing”? This means that our housing associations could do more than just provide state houses. They could also build rental homes at the lower end of the market and rent them out at cost, creating some real competition for our current landlord class.
This is one way to stop private landlords ripping off our most deprived families. Overseas this approach is seen as more effective than subsidising private rentals (like we do with the Accommodation Supplement) because that only pushes up rents.
We shouldn’t saddle Housing NZ with debt as a way to get around debt targets as Labour is doing. Nor should we sell it off as National wanted to. It may sound strange at first blush, but overseas experience suggests we should give it away.
*Geoff Simmons is an economist and The Opportunities Party's leader.
20 Comments
yes outside of the three main centers i could see down the track government stepping in as the scale is too small and the capital needed would be difficult to obtain. example queenstown the most expensive place in NZ to own, and a very small place 25K residents, how will they get enough funds to build the quantity needed, most of the rich owners down there live overseas
Queenstown? Easy! Just do what they have been doing for yonks - chop up another part of Queenstown Hill ( or another suitable plot - there's heaps of the stuff down there!) and sell it off to primary developers, who will sell to more absentee owners.
But point taken re the Rest of Smaller New Zealand.
Isn't the Queenstown Lakes Community Housing Trust the model Geoff is proposing? http://www.qlcht.org.nz/
You just need to open your eyes to see the evidence. Have a quick look around HNZ areas in Auckland (even the more central suburbs) and you will see crappy tiny houses on massive oversized sections worth millions. These should have been developed decades ago (most private investors would have) - instead HNZ sat around doing nothing. They are finally doing something now after political persuasion - too little, too late. Sometimes 'scale' is a bad thing...
I thought HNZ started to do that just before the Key govt came in at which point HNZ was treated like a cash cow and forced to deliver a dividend instead of modernising the housing stock? Given so many properties were privatised from HNZ between 09 to 17 its my guess the Govt didnt want to sinknthe capital in only to sell further down the line?
Great ideas Geoff. Look overseas at what works and then copy it her in Noo Zealund. Whatever next?
Interesting to see which groups come out of the shadows to oppose it and why. The Gloomy Green Tribe, perhaps, or the Angry Red with Envy tribe, or the Jealous Blue Tribe (envy being wanting other people's stuff and jealousy being wanting to keep other people from taking your stuff)? I suspect the Money from Outrage Tribe, aka the media, will simply ignore the idea.
In order for it to work it needs a tough, no nonsense, tribe to champion it and I don't see that at the moment. Product champions and the power of small intolerant groups by the wonderful (but bloody hard to read, he likes to make his readers work for the insights he shares) Nassim Taleb:
https://medium.com/incerto/the-most-intolerant-wins-the-dictatorship-of…
This fellow wrote two books with/for Morgan, that I have read. Both (Ice, mice, men and Hook line blinkers) are well-reasoned intelligent pieces. I haven't read the other two, but there's enough there to suggest we listen to him.
But this comment seems to be oxymoronic in the big picture. Yes, we need to address housing. But we are heading over and past the physical Limits to Growth globally, and both the present housing stock and anything we build, has to be post-growth appropriate. The most direct appropriateness is energy-efficiency; addressing the most likely deficit. Given that we will go through the Growth-to-Degrowth bottleneck wilth 80%+ of our housing being existing stock, we should be addressing retro-efficientising them in a low-hanging-fruit-first manner. Applying Passivhaus or (locally) Homestar criteria would kick-start that process.
Then we need to look at population, because you never 'fix' housing if you don't.
Then we have to ask about built square metreage per head - not long ago it was quite normal to raise a dozen children in 1100 square feet - with no second toilet......
Then we have to ask whether rentier activities are going to be supportable in a degrowth future.
But we have to do it without debt at all - because debt is a demand on the future - indeed it is a displacement/curtailment of the options available to future generations. Community may well be a key to a 'no debt' pathway.
Then there is the plethora of compliance that house-owners have brought on themselves, by way of defending their major asset (against leaky homes etc). Hoist with their own unintended consequence.
Also in the discussion is displacement of other-use land (usually farming) and how long the agribusiness model holds, and whether a different land-use model is needed.
But while we talk of 'affordable' rather than 'long-term ecologically neutral' we're not having the discussion we need. Given the depletion of the planet versus the escalation of debt and forward bets, we need to change the terminology.
ut what if we changed that a bit, to “provide lower-cost housing”? This means that our housing associations could do more than just provide state houses. They could also build rental homes at the lower end of the market and rent them out at cost, creating some real competition for our current landlord class.
This is one way to stop private landlords ripping off our most deprived families. Overseas this approach is seen as more effective than subsidising private rentals (like we do with the Accommodation Supplement) because that only pushes up rents.
Not bad. Sounds like a blast from the past, where the government actively fostered affordable housing both directly and indirectly. Worked once in terms of getting Kiwis in home ownership, could work again.
I think this idea has some real merit. It could empower communities to find solutions and deliver real results. The amount we spend on the Accommodation Supplement should be a scandal but it is just accepted now. It would be a way for different groups to pool resources and also allow charities to make a return on a investment. the issue is that this would empower individuals and smaller communities so the socialists would be against that.
I'm distantly familiar with a few of the Housing Associations (as they are termed there) in the UK, and they seem to do a solid job against a plethora of social ills, the likes of which we simply do not see in NZ. The latest survey shows 2.8m units/bedspaces distributed over 1432 providers: that's an average of 1942 each. But the largest 5 providers had 288,048 units - that's 57,610 each on average.
Seems like there's space for using that as a model: there's certainly software which handles the entire spectrum of requirements - I worked over there for one such firm - and the volumes put little NZ in the shade.
All in all, it sounds like a really sensible suggestion to me.
But the public service types will scuttle it - it threatens their cosy leetle Empires so it will be brushed under the same dusty old carpet that HNZ is hiding their $2.9b borrowing under.....
This is a far too sensible idea to ever gain traction in this dream world we call home.
I've been calling for the regionalisation on NZ for a few years now, and housing would make the perfect start point. Then slowly, over time, other services could be regionalised. Winz for one. Sure there is still a role for central government, defense, law, standards etc, but I'd be keen to try health and education regionally in time as well. This could only happen with the upskilling of the people who are charged with running the cutters. These people are not politicians. They are regional directors with good business savvy and mana, hard earned within the region they represent. These are the same people who would periodically gather in Wellington, to become our 'elected parliament' knowing full well, that these folk at least have half a brain to begin with.
Some good ideas in there. The massive accommodation supplement subsidization of private profits needs to be dismantled, if landlords want to buy houses which would have negative yields without gov subsidies then they are welcome to find their own way to finance it as they are loath to share the capital gains they plan on making. The taxpayers money would be better investing in increasing public housing stock, in particular intensifying HNZ land. TOP could make some real headway with some sensible policies like this on housing. Judging by all the commentary on the building materials scam a policy in that area would be a vote getter also!
How about HNZ:
1) is set up as a hybrid SOE/Local Government Entity so its arms length from government
2) has a statement of corporate intent that it provides low income housing & make 0 profit (no loss or gain)
3) local government housing is added
4) 50% of the shares are gifted to community providers, Crown gets 25%, Local government 25%
5) Is setup as 4 regions (1.2m each) - roughly South Island, Lower North, Middle & Upper North, Auckland
6) its given land development agency status so that it can ignore RMA rules (until a government finally fixed them) but still has to do a proprortionate & publically available impact assessment for any development.
Why would you revert to regionalism in NZ (a small Country with a small population thats EASILY coerced) in an era when communication (ain't no telegraph and Cobb n Co Stagecoaches no more...) has never been faster? If anything we should centralise to concentrate leadership and policy making to the highest calibre. Sure keep a regional footprint as thats quite beneficial to local economies etc but don't spin off entire operations to each region. The potential for mini feifdoms being established, siloed away far from head office where the murkiest of unaccountable behaviours brew is far to great...
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