Dunne's Weekly: ACT Looks Backwards

The debate about privatising state assets has reared its head again, with calls by the ACT leader for the government to sell off more assets to help balance its books and the Prime Minister’s now typical vaguely ambiguous, non-committal response.

However, it is largely yesterday’s debate, more reminiscent of the late 1980s and early 1990s than today. At that time, there was a case for the government to divest itself of many assets and businesses that successive governments had acquired over time, only to see their performance fail to improve significantly under government ownership.

However, those days have gone. Many of those entities have been sold, but that process has been the subject of ongoing criticism because the sales themselves were botched. The net result was often a worse business and service outcome. In some instances – railways and Air New Zealand, for example – a subsequent government has had to buy back the assets to prevent their total collapse.

In any case, as many analysts, including Sir John Key, have pointed out, there are not that many assets remaining that it would be appropriate to sell in part or in whole, and that the economic impact of doing so is unlikely to be substantial. So, all we are really left with is what Sir Michael Cullen would have described as an “ideological burp” from the ACT Party.

However, that is not to say that there is not a strong case for considering the performance of some of the government’s largest business assets. That performance can certainly be improved.

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Housing is a good example. There has long been a tradition, famously initiated by the first Labour Government in 1938, of comprehensive public housing provision by the state to help people in need. Today, the government’s housing agency, Kāinga Ora – Homes and Communities, owns around 72,000 rental properties across New Zealand. It is the country’s largest landlord. In addition, local authorities own around 14,000 rental properties. Taken together, central and local government agencies provide rental accommodation for around 400,000 people.

But the system is not without substantial problems. Although the waiting list for public housing has been declining, Ministry of Social Development figures still show more than 22,000 people waiting an average 344 days to get into public housing. Differing eligibility criteria between Kāinga Ora housing and local authority housing mean the situation is uneven across the country. Because of those variable standards, the quality of accommodation provided is also often uneven and not well-suited to the needs of tenants.

The original premise of state housing was that it would be transitory, to help people through difficult circumstances. That has been long lost sight of. Concessional rental rates and non-fixed-term tenancies mean that for many tenants public housing has become a long-term way of life, rather than a transition, often shutting out deserving cases on the waiting list.

Maintenance of the housing stock has been a perennial problem, leading previous governments and councils to sell properties, rather than invest in their upgrading. Successive governments have sold more than 31,000 state houses in recent years. On the other hand, more than 16,000 new houses have been added to the government’s stock since 2017, and a further almost 2,700 are planned to be built over the next eighteen months, with 3,000 existing homes being upgraded. Even so, total public housing stock is still declining.

All this raises the question of whether there is a better way for managing the country’s under-pressure central and local government housing stock more consistently and even-handedly. Consideration should be given to bringing the entire central government and local government public housing stock under one organisation – a revamped Kāinga Ora – Homes and Communities. The new Kāinga Ora could then be more sharply focused as a property management company. It would be required to utilise the skills and expertise of the private sector home construction companies, advertising the homes of one’s dreams on television every night, to help better manage the existing stock and plan the future development of public housing in New Zealand.

This is not a new idea, even if it has fallen into disuse in recent years – it was, after all, a partnership between Fletcher Construction and the first Labour Government that enabled the design and building of the state housing programme from the late 1930s.

The same model of involving the private sector in the operation, management and upgrading of government property could equally be applied to other areas where the government is struggling to manage and maintain substantial property portfolios – schools and hospitals, for example. Here again, the government could establish a separate property management company, drawing on relevant private sector asset management expertise to maximise the government’s return on its health and education assets and improve overall economic performance.

The focus on this new entity would be on the buildings and would exclude the delivery of health and education services and staffing so as not to compromise the continued public ownership of those services. It would be solely about managing public assets better.

Discussion around these concepts, and how they could be applied to the contemporary public benefit, appeal as far more relevant than reverting to yesterday’s ideological prescriptions the way the ACT Party is.

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