How Can We Achieve Affordable, Secure Homes For Everyone?

Much has been written about the reasons contributing to the crisis in housing affordability in New Zealand and its immediate and longer term consequences. This paper draws on research and commentary about how we got here and what can be done to help people in Aotearoa New Zeaand have a decent home, whether through owning it or renting/leasing it.

“There is no easy or quick fix to New Zealand’s over-valued housing market. Whether house prices spiral up or down, the impacts of the necessary policy solutions will not be seen immediately. Not one single change will be enough. The solutions need to be a complementary set – it’s like taking a Swiss army knife to a knotty problem” ( Ref: NZIER (NZ Institute of Economic Research) Public discussion paper – the home affordability challenge, Working paper 2014/4 July2014 pg 1 Prepared by Shamubeel Eaqub).

“Housing Unaffordability is an enormous problem in New Zealand, with especially significant consequences for our young and most vulnerable – and trends continue to move in the wrong direction. Making meaningful change is urgent, and change needs to be bold to reverse the tide.” (Ref ANZ New Zealand Property Focus, Dec 2020).

Consequences include:

• The median house price is now around seven times the average income, compared with three times in the early 1990s (Ref: ANZ New Zealand Property Focus, Dec 2020).
• It takes 15 years to save for a $20% deposit even if house prices stand still, about twice as long as a few decades ago.
• Mortgage rates have trended down, making debt servicing easier.
• Supply or building of homes has not kept pace with our population growth or been sufficiently responsive to changes in demand, financial conditions and price.
• Scarcity of buildable land has been an increasing problem, due to planning and zoning restrictions, land banking, urban drift, poor infrastructure provision and other land-use pressures, partly because of very strong immigration cycles.
• Real income growth has been sluggish in large part due to our poor productivity record.
• Significant rise in house prices.
• Homeownership has fallen, especially for those in their 20s and 30s. Homeownership is at its lowest in almost 70 years (Ref Statistics NZ Homeownership rate lowest in almost 70 years, 8 December 2020).
• Extensive disparity between Māori and New Zealand European over decades in homelessness, high rental costs compared to income, low home ownership rates (28% compared to 57% for the general population in the 2013 census). Māori are 36% of public housing tenants despite being just under 15% of the general population and resulting low equity and intergenerational policy. Māori are five times more likely to be homeless than Pākehā. Overcrowding and multi-generational housing pressures are also more likely to be felt by Māori and Pacific. Māori women and their children are also more likely to experience housing deprivation. In 2018 10% of people in New Zealand households lived in a crowded dwelling. This was the situation for 21% of Māori.
• High homelessness (about 1% of the population at least – including overcrowding, couch surfing, staying with friends). It particularly impacts on Māori, young people and women and also increasingly people aged over 65. )
• Significant portion of incomes taken up with housing costs from owning or renting.
• When interest rates fall, house prices are pushed up significantly. If housing and land were more responsive more stimulus would be channelled towards home building and improvements instead.
• Large housing cycles are the norm because building is slow to catch up when demand increases. Countries with more responsive housing supply have lower rates of house price inflation and smaller cycles.
• The market is vulnerable to short-term, painful corrections when interest rates rise, income prospects change, supply responds, population adjusts or risk-taking behaviour changes, exacerbated by high debt levels.
• Productivity is weaker than it otherwise would be, with households having to spend more time saving for a deposit, which diverts funds away from business ownership and investment. (Ref: ANZ Research Housing affordability – unlocking the solution, December 2020).
• A significant portion of incomes is taken up with housing costs from owning or renting.
• Intergenerational inequity gap in purchasing power, impacting detrimentally on younger peoples’ ability to save up a deposit; own a house, pay back a mortgage; weathering financial shocks and being able to save for retirement.
• “…there is an intergenerational gap in the ‘purchasing power’ of first home buyers now and twenty years ago. Those purchasing homes in the early 1990s could have saved a deposit and paid off the mortgage within 30 years. But for a home purchaser in Auckland now, it will take at least 50 years to buy a home– leaving little time to accumulate other retirement savings. It also means the home owner is in debt, and thus more vulnerable to financial shocks, for a longer period of their working life.” (NZIER, 2014 Eaqab, Pg 6)
• Housing unaffordability, whether renting or purchasing causes individuals and families misery and distress. High prices also carry risks to New Zealand’s financial stability, economic stability and social stability and cohesion. The latter particular affects younger generations; cultural expectation of home ownership is ingrained in New Zealand and inability to afford housing is likely to lead to increased inequity amongst younger generations, with high housing costs affecting their ability to save for the future, weather financial shocks and have a reasonable standard of living. This is likely also to impact on social cohesion.
• This could persist across generations; children of existing home owners can hope to inherit valuable homes or have equity to purchase their own. But as Eaquab points out children of non-home owners may never own their own homes – depriving them of a traditional route of saving through a house and the possibility of social mobility.

Climate change is increasingly impacting towns and cities, with 675,000 people living in flood prone ares (Ref Briefing paper). Providing infrastructure (eg water); demographic changes including an aging population means different housing types will continue to be needed.

How we got here.

This section is based on several sources, particularly the in depth paper: “Transformative Housing Policy for Aotearoa New Zealand, Jacqueline Paul, Jenny McArthur, Jordan King, Max Harris and Scott Figenshow, Public Policy Institute, University of Auckland, October 6 2020.”

“The housing crisis is neither inevitable nor inescapable. Allowing the crisis to continue unabated will do lasting damage to health, inequality, levels of debt and the hopes of a generation, to take action to prevent this from happening we need to understand how we got here. We need to be clear about what kind of society we want to move towards and how housing fits into that vision.”(Ref: Transformative Housing Policy for Aotearoa New Zealand, Jacqueline Paul, Jenny McArthur, Jordan King, Max Harris and Scott Figenshow, Public Policy Institute University of Auckland, October 6 2020, pg 3.)

Paul et al 2020 point out that Māori land is considered to be taonga tuku iho, a treasure handed down through the generations. Acts of colonisation enabled land loss which is at the core of every Indigenous people’s struggle and injustice. There is only five percent of Māori land remaining under the custodianship of Māori and alienating consequences of this result in poorer standards of living, social and health status. Settler colonisation brought different ideas of land and resource ownership which disrupted Māori ideas and practices relating to land, and became embedded through land/civil wars and the court/legislative system.

Land became commodified, with the country seeing speculative frenzy and significant profits for urban land holders, but also significant inequity grow in a relatively unregulated market as the new land owning elite benefited and grew politically powerful. Eventually poor housing conditions for many saw the state step in, taking responsibly for housing availability, quality and affordability. The first Labour government (1935-1949) prioritised the social value of housing, developing the large-scale public housing programme in response to constrained housing supply, poor conditions and the effects of financial instability of housing finance during the Great Depression (Paul et al, 2020). Despite significant challenges, not least the Second World War, 32,000 state houses were built by the Labour government between 1937 and 1949. “State housing represented a paradigm shift in New Zealand’s housing system. State planning, finance, construction and maintenance delivered decent, affordable housing to many who had previously experienced insecurity, high rents, poor design and overcrowding.” (Paul et al, 2020,Pg 5.)

Homeownership became framed as the norm, associated with’ freedom’ and ‘security’, a key tenet of the ‘kiwi’ dream (Paul et al, 2020). Public policy and state finance supported the expansion of private homeownership, through low rate mortgage finance via the Housing Corporation and families being able to capitalise the family benefit towards a home deposit. State housing was recast as an option for those who were not able to secure home ownership. By the mid-1990s, homeownership reached 74%, but state rentals were only 5% of housing stock.

The role of the state in housing, and in other public policy areas, was rolled back following the election of the fourth Labour Government (1984-1990), and marked a major turning point in how housing has been regarded valued. The Treasury advocated for housing supply to be coordinated by the private sector, with little reason for the state to be involved as a renter or lender. Financial and banking sectors were deregulated, with overseas borrowing restrictions on banks abolished and the BNZ and PostBank were privatised.

The National government of the 1990s brought in housing reforms designed to “alter radically the state’s involvement, in line with neoliberal approaches to social welfare and international trends in housing policy, where direct provision of state housing was supplemented by direct income supplementation.” (In Paul et al, 2020 pg 6. State Housing tenants had received an Income-Related Rent Subsidy (IRRS) which capped rents at 25% of a tenant’s income but National viewed it as a market distortion privileges state housing tenants over private rental tenants and encouraging dependency on the state rather than self-reliance and personal choice. It introduced an Accommodation Supplement in 1993 to empower tenant choice as part of a policy to elevate the role of the market, considered to produce greater efficiency. Other policy included legislation requiring the housing Corporation to run primarily as a business turning a profit for the government, rather than a social delivery agency and no longer able to offer subsidised rents. This lead to large rent increases for state tenants. The Housing Corporation’s state housing stock was reduced by 16% (70,000 down to just under 59,000) and its mortgage portfolio was sold to private banks including Westpac, ANZ and TS, further extending their involvement in the housing system.

The fifth Labour government (1999-2008) reintroduced the IRRS and returned social objectives to the Housing Corporations governing legislation as well as resuming the development of state housing stock by acquiring more property, bringing stock numbers to 66,000 by 2005. State housing remained a residual support for those in greatest need. Housing prices doubled between 2000 and 2007 and a major rise in household debt was facilitated by poorly regulated mortgage lending practices, low Reserve Bank interest rates and access to low-cost overseas funds.

A social housing reform programme was introduced by the National lead government (2008-2017), intending to increase supply of affordable housing through increasing involvement of the community housing sector. They were underpinned by the neoliberal belief that establishing a social housing market would deliver better social outcomes in contrast to direct public sector delivery. However the policy failed to support the community housing sector with the financial back necessary to assume the primary role in growing social housing. Little new social housing was added (with the government resorting to using motels for emergency accommodation), prices continued to rise, doubling in Auckland between 2008 and 2016. Paul et al, 2020 identify this occurred because of an under regulated mortgage lending system, which is extended significantly to wealthiest New Zealanders and few constraints on wealthy investors speculating on price increases This allows tax free capital gains investments in rental housing and fuels a speculative bubble underpinned by bank lending (Paul et al, 2020, pg7) .

The Financialization of Housing

As noted Aotearoa New Zealand is also part of international trends where the expanding role and ‘unprecedented dominance of financial markets and corporations in the housing sector is generally referred to as the ‘financialization of housing’ (Ref: Report of the Special Rapporteur on adequate housing as a component of the right to and adequate standard of living, and on the right to non-discrimination on this context, UN Human Rights Council 34th Session, 27 February-24 March 2017). Below are a number of quotes from this reference.

“One meaning for the term refers to structural changes in housing, financial markets and global investment whereby housing is treated as a commodity, a means of accumulating wealth and often as security for financial instruments that are traded and sold on global markets. It refers to the way capital investment in housing increasingly disconnects housing from its social function of providing a place to live in security and dignity and hence undermines the realisation of housing as a human right. It refers to the way housing and financial markets are oblivious to people and communities and the role housing plays in their well-being.’pg 3.

“A report on the topic is timely as States embark on the implementation of the Sustainable Development Goals. If the commitment in target 11.1 to ensure access for all to adequate, safe and affordable housing and basic services is to be achieved by 2030, it is essential to consider the role of international finance and financial actors in housing systems. That will help to identify and address more effectively patterns of systemic exclusion, to ensure more meaningful human rights accountability for issues of displacement, evictions, demolitions and homelessness, and the engagement of all relevant actors in the realization of the right to adequate housing.” Pg 4.

“Increased prices of housing and real estate assets have become key drivers in the creation of greater wealth inequality. Those who own property in prime urban locations have become richer, while lower-income households confronting the escalating costs of housing become poorer. Surveys of ultra-high-net-worth individuals show that more than half have increased the proportion of their investments allocated to residential properties, with the most common reasons being in order to sell at a later date and to provide a safe haven for wealth. The “economics of inequality”, in fact, may be explained in large part by the inequalities of wealth generated by housing and real estate investments.38 Buying a home with a mortgage becomes a speculative investment depending on volatile financial markets, which may generate considerable wealth on leveraged equity or, alternatively, deprive households of a lifetime of savings.” Pg 11

The UN report goes on to say the impact of wealth and private investment also creates and perpetuates spatial segregation and inequality in cities. Examples of gentrification in inner suburbs abound, where long term lower income people who have developed local communities are displaced out to the margins, one reason being public/local government spending to improve inner cities attracts private wealthy investment such as luxury housing developments.

Paul et al 2020 argue there is too much emphasis on the role of housing and land supply (supply side) which fail to adequately recognise the role of demand-side divers such as speculative investment, no taxation on capital gains and permissive mortgage lending. There needs to be more focus on the need for policies which provide disincentives to speculative investment.

Furthermore they argue ‘the focus on housing supply ignores the strategic centrality of real estate and property to the New Zealand economy, noting Reserve Bank figures show 59% of all loans made by the banking sector is for mortgages and around 37% of the total value of mortgage lending is for property investors, not owner occupies, showing the prominence of investors in the housing market (Paul et al, 2020).

The grip the importance of the housing market has was noted by Bernard Hickey in a recent article ‘The brutal catch 22- politics of trying to move to affordable housing’ (Stuff, January 16 2021). where he reported on a significant reason in the context of the Prime Minister being asked what would be so bad about a fall in house prices In a press conference in late 2020

Prime Minister Adern replied it was much more sustainable to have those much smaller increases of around 4% rise than to have them actually fall, because ‘we [the government) accept that for most New Zealanders, their house is their most significant asset. So if you see, for instance –as was predicted at the beginning of the year – a significant crash in the housing market, that impacts, of course, people’s most significant access.’ She went on to say that why so many New Zealanders turned to the housing market, rather than other forms of investment such as shares, was because of the expected increase, whereas shares go up and down.

Hickey wrote “She essentially said her Government could never really improve housing affordability by forcing or allowing house price falls because voters expected unending inflation in the value of their most important asset and it was her job to guarantee that.”

“…the brutal catch-22 politics [is] trying to move to affordable housing after a quadrupling of prices in 20 years that now means so many voters depend on untaxed capital gains to support their small businesses and their retirements.

“To illustrate this, the value of houses rose $136b in 2020, which was worth three quarters of total household disposable income from actual work. House values rose nearly 17 times more than incomes rose over the last 12 months. Most home owners now “earn” far more from their houses than their jobs or New Zealand Superannuation, and have done for most of the last decade.”

Housing as a Human Right

Aotearoa New Zealand has come under scrutiny from a human rights perspective for how well it houses its citizens.

On 19 February 2020 the United Nations’ Special Rapporteur on the right to adequate housing to New Zealand, Leilani Farha[1], presented her preliminary observations and recommendations. A more comprehensive report will be presented to the Human Rights Council in early 2021. (Ref https://www.ohchr.org/en/NewsEvents/Pages/DisplayNews.aspx?NewsID=25574&LangID=E

She noted several positive steps to dealing with the housing and homelessness crisis in Aotearoa New Zealand including the announcement of the Aotearoa New Zealand Homeless Action Plan 2020-2023; the Residential Tenancies Amendment Act becoming law on 11 August 2020 and coming into effect in February 2021. [the change limiting rent increases to once every 12 months came into effect in August 20202 other changes see here: https://www.hud.govt.nz/residential-housing/tenancy-and-rentals/changes-to-the-residential-tenancies-act-1986/rta-reforms/ ). The phasing in of Healthy Homes Standards was another positive step.

However she noted that while it was widely recognized there was a housing crisis and it was being experienced most acutely by particular groups:

What is less recognized is that the housing crisis in Aotearoa New Zealand is, in fact, a human rights crisis. The housing conditions – high rates of homelessness, inaccessible housing stock, unaffordability and escalating rents, substandard conditions including overcrowding, a lack of security of tenure for tenants, and lack of social, affordable, and community housing for those in need, alongside an abundance of unaffordable family dwellings available for homeownership - are all inconsistent with the enjoyment of the right to housing.

“While New Zealand has ratified various international human rights treaties obliging all bodies exercising government authority to respect, protect and fulfil the right to adequate housing, there is insufficient expression of this right in law, in related policy and programmes, and in their implementation. These conditions would never have arisen to this extent had housing been fully understood, recognized and implemented by Governments as a human right and a social good rather than as an asset for wealth accumulation and growth over the last decades.”

“While New Zealand has ratified various international human rights treaties obliging all bodies exercising government authority to respect, protect and fulfil the right to adequate housing, there is insufficient expression of this right in law, in related policy and programmes, and in their implementation. These conditions would never have arisen to this extent had housing been fully understood, recognized and implemented by Governments as a human right and a social good rather than as an asset for wealth accumulation and growth over the last decades.”

She noted that particularly since the global financial crisis in the late 2000s , home ownership had translated in housing having lost its function as a place to live and instead it has become a speculative assess. “Housing finance has morphed into consumer finance. Low interest rates, coupled with an under-developed rental housing system with weak tenant protections[2], have allowed housing speculation to continue in a relatively unbridled fashion.”

She further noted

1. While New Zealand has ratified the International Covenant on Economic, Social and Cultural Rights, there are currently no legislated protections for economic, social and cultural rights, including the right to adequate housing, which are comparable to the protections of civil and political rights – robustly protected by the Bill of Rights Act. For example, while the Attorney General is required to assess whether new legislation tabled in Parliament is compliant with various civil and political rights, there is no obligation to assess compliance with the right to adequate housing or any other economic, social and cultural right.
2. I therefore echo the concern expressed by the Committee on Economic Social and Cultural Rights of the United Nations that “economic, social and cultural rights do not enjoy equal status with civil and political rights”. I recommend that the right to adequate housing be enshrined in legislation to render it justiciable in domestic courts and enable victims to have access to effective administrative or non-judicial remedies, as well as judicial remedies where necessary.

Among several recommendations Farha made to the Government were:

• Implementing a Capital Gains Tax to disrupt the current speculative system and address the financialization of housing.
• Ensuring that housing and social benefits are sufficient to actually cover the cost of living for low income households and reduce energy poverty so that they may be ensured a life of dignity.
• The impact of COVID-19 has highlighted these anomalies and gaps in response.

Tackling the Issue

Paul et al (2020) argue that several things need to happen to shift the debate and thinking about housing. Currently “there remains a deep-seated deference to ‘the market’ in discussions about housing” (pg 9)” stemming from the deregulation and privatisation policies from the 1980s forwards; timidity and unwillingness on the part of governments to intervene more robustly, partly because of the centrality of the housing market as noted before and forces tilting the debate away from government intervention, whether its regulation, taxation or state house-building.

The following are suggestions by Paul et al (2020) to shift this paradigm, which they call the 4 pillars (or the 4 D’s) against which the future our housing sector must be judged.

Decentering home-ownership – moving the discourse and response away from home-ownership being the ultimate goal.

Homeownership will be unachievable for many especially for Māori and Pasifika. Furthermore adequate and affordable private rental housing is also inaccessible. Both are priced out of reach for many. If housing security is a human right and an overriding goal of housing policy, shifting our expectations from homeownership to much more emphasis on secure tenure of rental housing will be one method for operating tino rangatiratanga over kāinga[3] (village/settlement) for Māori and also deliver secure housing for all. “Collectively owned secure housing (held through the state but organised in a decolonised and democratic way) could provide the everyday benefits of private home ownership.”(pg 10)

Decolonising housing policy – recognising rangatiratanga to housing.

Te Tiriti o Waitangi needs to underpin the decolonising of housing policing because it recognises rangtiratanga to housing. It is for whanau, hapu, marae and iw to determine the types of housing that meets their needs and it is the responsibility of the Crown as Treaty partner to facilitate the development of these housing options to support optimal Māori health and wellbeing.

Māori have pursued a judicial remedy and sought findings and recommendations through the Waitangi Tribunal Housing Policy and Services Kaupapa Inquiry (WAI2750). The cabinet paper on the MAIHI Framework for Act, released by then Associate Minister of Housing Nanaia Mahuta, noted these impacts on the rights of Māori and Pacific Peoples to have access to adequate housing (Ref: Cabinet Paper Te Maihi o te Whare Māori - the Māori and Iwi Housing Innovation (MAIHI) Framework for Action, 2019).

The Te Maihi o te Whare Māori –the Māori and Iwi Housing Innovation (MAIHI) Framework for action, developed through the Ministry of Housing and Urban Development, is single door approach and opportunity to operationalise the Crown- Māori partnership. The post-election briefing paper to incoming Ministers from the Ministry of Housing and Urban Development noted $20 million had been provided for kaupapa Māori services on homelessness and $40 million to supplement work that targets and impacts Māori, aided by the MAIHI framework (Ref: Briefing for Incoming Ministers, Ministry of Housing and Urban Development, 3 November 2020).

Democratising housing policy

Paul et al 2020noted that state housing tenants and renters observed life-changing decisions about housing are made by unaccountable decision-makers – landlords, distant policy makers/administrators or disconnected politicians. A shift in power from the market to public services could ensure greater accountability and control. The authors also noted that while the Reserve Bank has important roles to play in relation to financial stability and oversight the Governor of the Reserve Bank is unelected. However governments are elected and they are the location of where social policy should be made. “It is orthodox for the government to play an active role in managing housing policy around the world.” Pg 12.

Decommodifying Housing

As previously noted housing has become a commodity in the eyes of many economic players, where rising prices and housing as investment are sources of profit. The role of housing as filling a basic human need for shelter has been lost.

Paul et al argue opportunities for speculating and profit-making on housing must be minimised and the right to secure housing must be protected and upheld against competing interests. A greater governmental role in overseeing housing policy and discouraging housing as a commodity will help this outcome.

Policy Options

Paul et al 2020 suggest the following initiatives to ensure a genuinely transformative approach is taken to housing.

1. A Ministry of Public Works

In 1988 the Ministry of Works which had oversaw major infrastructure projects in New Zealand, was a major employer, and supervised building standards, was disestablished under the then Labour government. . Reintroducing a Ministry of Works would boost the capacity of the sector and oversee public private partnerships that have emerged. For example a civil works alliance named Piritahi was formed in 2018 between several construction companies to deliver work over a five year period for Kāinga Ora – Homes and Communities (previously Housing New Zealand). A Ministry of Works could play a role to overseas incentives for green construction, efficiency, oversight of the development of trade skills and workers’ rights and of building regulation and inspection.

1. A Green Investment Bank

A Green Investment Bank alongside the Ministry of Works could form key parts of Aotearoa New Zealand’s Green New Deal according to Paul et al, 2020, who state national development or investment banks are common around the word. The Labour lead government in 2017 set up Green Investment Finance L to kick-start green investment through $100 million of Government capital. However the first investment was announced only in August 2020. We have had a precedent: the Development Finance Corporation which was disbanded and privatised in 1988.

Paul et al (2020) suggest the Green Investment Bank could have a particular focus on lending for state and affordable housing and to small and medium enterprises, focusing on building relationships with community housing providers. German has a development bank KfW which has a focus on lending for and kick-starting the development of solar energy.

1. A State lending Agency

Retail banks are major mortgage financiers, contributing to increased prices and corporate profits. As previously noted much mortgage lending is for investment properties and also oriented towards detached homes, rather than for example apartments or other forms. These trends contribute to locking low income people out of housing. Alternative sources of finance for housing would be similar to the State Advances Corporation, such as a state-based Housing Finance Corporation to support the allocation of housing finance to low income citizens in the interests of secure, affordable housing, across a range of housing types, for all New Zealanders. This policy should include an equivalent institution administered by Māori.

The Government has a Progressive Home Ownership programme – the First Home Loan and First Home Grant which provides support to first home buyers who encounter lending barriers due to low deposits. (Briefing Paper)

1. Transferring responsibility for regulating mortgage lending to Parliament

The Reserve Bank has the power to regulate the lending market for housing through for example imposing loan-to-value ratios (LVRs) that private banks had to follow. Paul et al 2020 suggest it is increasingly incongruous that unelected officials should have the power to regulate the lending market for housing. They think there is a strong case for Parliament to be returned the powers to set LVRs and other forms of mortgage lending.

1. Enabling Greater Public Sector Leadership

Increased diversity and imagination of thinking in public sector agencies such as the Treasury and a greater democratisation of housing policy development is required to produce and embed a new housing paradigm. It is not to suggest those currently working in the public service lack capacity for creativity and imagination, but that institutional and cultural ways of thinking about and doing things are a block to unleashing it.

1. Housing Policy in the Tino Rangatiratanga Sphere

There is a significant need for state interventions to support Māori to exercise tino rangatiratanga over their lands and kāinga as required under the Te Tiriti o Waitangai. This could include a significant increase in state housing, making alternative financing options to support Māori home ownership, regulation to improve quality of rentals, pricing and security of tenure and so on. Also noted by Paul et al is that the right to housing is not specifically provided for in any New Zealand legislation.

1. Fair Taxation of Housing.

Introduction of a Capital Gains Tax has been ruled out by the Prime Minsiter Jacinda Adern under her leadership. However Paul et al argue the grossly unfair impact of this remains with large untaxed profits being made of housing and gains inherited by the children of property owners while others are locked out of the housing market. Paul et al (2020) suggest three options should remain policy options.

Firstly the bright-line test could be modified (that income gained on a property could be subject to income tax if sold within five years ) so that it applies to all second or third homes bought and sold with no set time frame.

Secondly, alternatively, assets on which capital gains are made could be brought progressive under the income tax system, and income from these gains could be taxed under that system.

Thirdly, alternative, a broad based wealth tax could apply which would count the value of housing within assessments of wealth. The Green Party proposed a wealth tax of 1% for individuals with a net worth of over $1 million.

Paul et al favour the first of these options: “extending the bright-line test further uses and existing mechanism and is fair. It may be accused of a ‘capital; gains tax by the backdoor’, but it is not a broad-based tax on capital gains. We encourage campaign groups and commentators to continue to build the political base for all three options, to ensure fair taxation of housing is regarded as a palatable political option in the coming years.” Pg 19.

1. Expanding State and community Housing.

Their major recommendation for state housing is that we need to have greater ambition and move state housing from a residual ‘add-on’ within the housing system to a central project designed to provide high quality housing for all. Strong state housing guarantees housing security for all and when delivered in the right way place downward pressure on rents in the private market. Current numerical targets will not meet the need. Establishing a National Investment Bank and Ministry of Public Works will contribute to building the skills and capacity to allow high quality housing be delivered over the medium- to long-term.

A strong, financially supported community housing sector and complement, innovate and be a critic and conscience of the state on housing. The Government is taking a place based approach to housing and urban development to better understand and meet the diverse needs of towns, cities and rural regions, including through improved local collaboration (Ref: Briefing Paper to Incoming Ministers, Ministry of Housing and Urban Development, November 3 2020).

1. Enhancing the Rights of Renters.

It is estimated just over a third of New Zealanders rent their homes but New Zealand does not have the emphasis on the rights and protection of tenants that many other countries do. More attention needs to be paid on encouraging longer term tenancies (In Germany for example, tenancies average 11 years whereas in this country it is bout two) and renters’ rights.

Others also argue for more attention on renting as a viable long-term approach to having a home. ‘Based on a sample of international comparisons by the Grattan Institute5 , Australia and New Zealand are some of the most ‘restrictive’ rental jurisdictions from the viewpoint of the renter. Lease terms are short, tenants can be asked to move with short notice, leases can be terminated on almost any condition as long as notice is given, and personal customisation is often difficult (pets, minor alterations, etc.).’ (Ref: NZIER public discussion paper Eaqab, pg 17))

These conditions provide protection for landlords and make it attractive (and feasible for small investors) to supply rentals. This suits specific segments of the market, but it is one reason why renting is different from owning. By contrast, in countries like Germany and the Netherlands it is not uncommon for people to have long tenures and to refurbish their rented house or flat. These jurisdictions place high requirements on both tenants and landlords. Until renting is a comparable option to owning – in terms of the design of rental contracts, professionalism of landlords and the various institutions related to renting – home ownership will continue to be seen as superior to renting.( Ref: NZIER Eaqab, pg 17)

• Renters on average have lower incomes than owner-occupiers and spend a greater share of income on housing.
• In New Zealand 12 month tenancies are most common and an average rental duration of 2 years and three months according to 2018 figures. This is only slightly lower than average rental duration in England but far below an average 11 years in Germany. By comparison 70% of owner occupies had been in their current property for five or more years. Duration of tenure is associated with better outcomes, notably for children. Older renters are particularly vulnerable to rental insecurity, as well has need for warm functional and comfortable homes. There numbers will rise with the aging of the population and decreasing home ownership rates.

New Zealand should improve tenant landlord regulation with the country ranking equal fifth lowest among 31 OECD countries for the restrictiveness of rental control and tenure security requirements. ( Ref: Andrew Barker Improving Well-being Through Better Housing Policy in New Zealand, OECD Economics Department Working Papers No 1565, September 2019)

In Germany and the Netherlands security of tenure is strong for tenants who meet their contractual obligations and is not a considerable disincentive to rental investment

1. Tackling Homelessness

Maori and youth are over represented in areas of unmet and emergency housing needs and strong focus is required in action plans on Te Tiriti o Waitangi and human rights as well as good collection of data. Paul et al also suggest more funding is needed for the evidence based Housing First programme providing homeless people with homes first and then followed by tailored wrap around support for other needs as required. $260 million has been allocated to the programme ((Ref: Briefing Paper to Incoming Ministers, Ministry of Housing and Urban Development, November 3 2020). More generous social security income policy is also part of addressing these issues.

In conclusion Paul et al 2020 note that housing is essential to the health and well-being of everyone – shifting the paradigm to thinking about housing as being a form of wellbeing creation, rather than a a form of commodified intergenerational wealth creation.

Other commentators, including banks also think a significant shift in how we think about housing is required. For example ANZ research suggests the solution is to have a plan to efficiently house and provide infrastructure for the growing population and a productive economy so that our incomes can grow.

We need to make meaningful change to elicit sustained stabilisation or even gradual decline in real house prices.

The ANZ argues that our attitudes need to change – political buy-in for a fundamental change within the housing market is needed.

• We – homeowners, local and central government and the general public- need to be willing to accept a lack of capital gains in housing or even be willing to stomach a fall In our asset values.
• We need a gradual decline in real house prices, engineered out of continued expansion in construction which could lead to increased growth and spending.

There are local examples of how this can be done.

The Selwyn district provides a successful example of orderly progress to addressing housing affordability problems.

Following the need to rehouse following the Canterbury earthquakes, the Selwyn district had very strong population growth (60% increase since 2011), a buoyant regional economy and yet expanding housing supply with real house prices being pretty flat.

Since 2015 real house prices in Selwyn have risen just under 2%, while across New Zealand they rose 37%.

The crux of the response in Selwyn has been making land available to house the growing population and facilitating new building. Government and local council have worked together to do the following, and have done this efficiently and effectively:

· Release significant parcels of land in accordance with the Selwyn Housing Accord.

· Develop parcels with a minimum net density to use land efficiently.

· Release large parcels under single ownership to encourage building at scale.

· Streamline resource consents to speed up and simplify the process.

· Develop a 30-year infrastructure growth plan. (ANZ pg 8)

Land and Building Solutions

1. Free up buildable land.

• This needs to be done in a way to minimise environmental impact. There are currently few penalties for land banking or locking up large tracts of housing zoned land and releasing it slowly to increase prices and profits. The ANZ claims many developers release land slowly to create the appearance of limited availability when in reality the pipeline is ongoing. This has been capitalised into very high land prices for example 56% of the cost of a house in Auckland is the cost of the land.
• Unnecessary land use restrictions need to be urgently relaxed and penalties introduced for passively holding housing-zoned land for long periods without developing it.
• Smaller less bespoke housing options and building smarter and more densely around public transport hubs.
• Home owners need to be willing or forced to embrace combinations of urban expansion and intensification, reducing ‘not in my backyard thinking and the power of vested interests. Central government needs to play a bigger role to support changes that local government find difficult to push through.

2. Build more houses and infrastructure

• Incentives need to be aligned to fund infrastructure and encourage property development, including easing financial constraints. Potentially using central government funding.
• Increase construction industry capacity and reduce costs, including recent incentives to encourage people to work in trades, such as the Targeted Training and Apprenticeships Fund (TTAF) making many sub-degree construction and trades qualifications free to study until the end of 2022.
• Encouraging scale, innovation better coordination of sub-contractors and build of more homogenous homes (prefabricated) could help. A new certification scheme for manufacturers of prefabricated houses introduced will also reduce the number of building consents needed (Ref: Addressing affordable housing crisis in NZ, Construction & Sustainability, 6 October 2020 https://capable.nz/blog/construction-and-sustainibility/addressing-affordable-housing-crisis-in-nz/).
• More competition in building supplies rather than near-monopoly in certain products when good alternatives are available.
• Social housing should be high priority, including government organised build of cheap mass-produced options to make it happen. Some good progress has been mad but much more remains to be done (ANZ)
• Greater standardization of homes is more cost effective, including prefabrication or off-site manufacture Timber construction

3. Align demand and supply settings

- New Zealand has struggled with poor aligning of demand and supply – for example big increases in immigration unaccompanied by housing supply. Topography is one issue with building more homes; The Selwyn district noted before has flat land to build on whereas cities such as Auckland and Tauranga have very challenging topography. Legislation is another factor and there are also challenges such as needing to replace a significant number of houses due to climate change.

- review immigration especially in light of current COvid-19 border closures and what is best for New Zealand now and into the future

Incentives to reduce the attractiveness of property investment, such as a capital gains tax, particularly for broader reasons like intergenerational equality, with the younger generation being shut out of housing.

Late last year Otara, one of the lowest socio-economic suburbs in Aotearoa had a 1960s weatherboard house on less than a quarter acre section sell for $1.01m. Manukau Ward councillor Efeso Collins pointed out that more than 80% of Pacific people did not own their own homes but

Endorse economists’ call for changes such as the Reserve Bank considering price stability when setting financial policy for the economy (Ref: Cameron Bagrie from Bagrie Economics reported in RNZ 12 January 2021): Urgent government intervention needed to address housing supply shortage – economists). While there Reserve Bank is reintroducing a loan to value (LVR) on risky lending from March, with limits on new lending to people buying a house, as well as investors needing a 30% deposit. Several banks have already lifted LVR requirements to 30 percent for investors. Other economists think the rate should be 40% to take some heat out of investors bidding up prices across the market.

According to ANZ, investors have taken 32% of property lending in the last two months of 2020 compared to 18% for first home buyers. In December the average house price was $789,000 according to Core Logic, property research firm. 18% than a year ago. (Ref: RNZ 15 December 2020, ANZ tightens lending to property investors to help ‘bring balance’ to property market).

Reduce artificial scarcity of land -

Needs political leadership that is committed to getting house prices much lower than they are now.

Building more houses is a way to reduce costs.

Christchurch is an example of where urgent recovery following the 2011 earthquake more flexible planning rules enabled the city to have a flatter property values and less strain on housing affordability. It takes 6.7 years to save for a deposit in Christchurch, compared to 8.6 years on average elsewhere (up from 8.2 a year ago). The share of income required to (Ref: New affordability measures show why property has got political so fast; CoreLogic, Kelvin Davidson, 3 December https://www.corelogic.co.nz/news/new-affordability-measures-show-why-property-has-got-political-so-fast#.X_9rS-gzaUk

An international perspective on tackling housing issues

Below are conclusions and recommendations from the ‘Report of the Special Rapporteur on adequate housing as a component of the right to an adequate standard of living, and on the right to non-discrimination in this contect’ Human Rights Council, 34th session 27 February -24 March 2017.

Conclusions and recommendations: the way forward (UN report)

Despite the positive elements of some States’ policy responses, overall responses have tended to be sporadic and reactive, addressing overheated markets or providing limited initiatives to expand access to credit. The broader systemic issues of financialization and commodification of housing remain largely unaddressed. What is lacking is for States to reclaim the governance of housing systems from global credit markets and, in collaboration with affected communities and with cooperation and engagement by central banks and financial institutions, redesign housing finance and global investment in housing around the goal of ensuring access to adequate housing for all by 2030.

Many States have been too deferential to the dynamics of unregulated markets and have failed to take appropriate action to bring private investment into line with the right to adequate housing. By providing tax subsidies for homeownership, tax breaks for investors, and bailouts for banks and financial institutions, States have subsidized the excessive financialization of housing at the expense of programmes for those in desperate need of housing. There seems to be a gross imbalance between the attention, mechanisms and resources that States have developed to support the financialization of housing and the complete deficit of housing for the implementation of the right to adequate housing.

The Special Rapporteur suggests that the way forward requires a shift to take hold so that States ensure that all investment in housing recognizes its social function and States’ human rights obligations in that regard. That requires a transformation of the relationship between the State and the financial sector, whereby human rights implementation becomes the overriding goal, not a subsidiary or neglected obligation.

The Special Rapporteur believes that can be achieved with more constructive engagement and dialogue between States, human rights actors, international and domestic financial regulatory bodies, private equity firms and major investors. In order to create those new conversations and achieve that shift, the Special Rapporteur recommends the following:

(a) New initiatives should be developed in order to bridge the worlds of corporate and government finance, housing, planning and human rights. The Special Rapporteur recommends that an international high-level meeting of States, international financial institutions, human rights bodies, civil society organizations and relevant experts be organized to design a strategy for engaging financial regulatory bodies and actors in the realization of the goal of adequate housing for all by 2030;

(b) Strategies developed by States and local governments to achieve target 11.1 of the Sustainable Development Goals and the New Urban Agenda should include a full range of taxation, regulatory and planning measures in order to re-establish housing as a social good, promote an inclusive housing system and prevent speculation and excessive accumulation of wealth;

(c) Trade and investment treaties should recognize the paramountcy of human rights, including the right to housing, and ensure that States are fully empowered to regulate private investment so as to ensure the realization of the right to housing;

(d) Business and human rights guidelines should, on a priority basis, be developed specifically for financial actors operating in the housing system;

(e) States should review all laws and policies related to foreclosure, indebtedness and housing, to ensure consistency with the right to adequate housing, including the obligation to prevent any eviction resulting in homelessness;

(f) States must ensure that courts, tribunals and human rights institutions recognize and apply the paramountcy of human rights and interpret and apply domestic laws and policies related to housing and housing finance consistently with the right to adequate housing;

(g) International, regional and national human rights bodies should devote more attention to the issue of financialization and clarify for States, through constructive dialogue during periodic reviews and in consideration of individual cases, their obligations in relation to the financialization of housing.

[1] Leilani Farha is a Canadian lawyer and was the United Nations as special rapporteur on adequate housing between June 2014 and April 2020). She is the Global Director of THE SHIFT, a housing initiative https://www.make-the-shift.org/ )

[2] Farha noted that New Zealand has institutional underdevelopment of tenant protection. She compared the situation to what occurred in Cologne, Germany, a city of 1.1m inhabitants which has seven tenant association offices with 48 staff providing 32,000 free of charge consultations.

[3] Paul et al refer to Professor Mason Durie’s framework ‘te mauri o te kāinga’ which speaks to a framework shaped around whanau (the people who will live in the kāinga, around whenua (the land on which k kāinga will stand ; and around whanaungatanga: the connections that will enable the kāinga to flourish. As a normative housing outcome aimed at long-term, stable tenancy, tenure security relates directly to the kāinga principle of ongoing human occupation. (pg 10.

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