Housing as a Human Right: Restoring New Zealand’s Egalitarian Dream?

“While Adam delved (dug) and Eve span, who then was the gentleman?” John Ball priest — hung, drawn and quartered, 1381.

There was no privileged landed gentry in Adam and Eve’s time so why are they favoured in later times?

Source. Real health Price Index versus Real Personal disposable Income (2000Q1=100)

New Zealand is bad at housing its people — very bad. Relative to income, homes in the country are among the most expensive in the world.

New Zealand’s average house value has gone from $25,500 in Dec 1980 to an estimated $715,500 at the end of last year. Source Business Desk — “Looking back: The NZ housing boom — when and how it all began

Yet for decades housing as a capital gains investment commodity has provided bumper returns — far exceeding other investment options.

Source

The bottom 20 percent of New Zealand income earners have the highest housing costs in the OECD, an economic organisation with 37 member countries.

The disparity in emotions different groups feel about the above graphs cannot be overstated. For some the graphs represent a horror — real, visceral socioeconomic pain. For others it is a booming bonanza. Overall they depict — an explosion of the country’s egalitarian ideals.

This disparity has continued since the onset of Covid — the wealthy are now sitting on property and savings that have risen by $271.7bn, and poor families received an extra $2000 or so in benefits and winter energy payments over the last 12 months. That increase of $38 per week was easily gobbled up by a $50 per week increase in the median rent to $500 in 2020.

Renting in New Zealand is bad. Rentals are more likely to be cold, damp and mouldy than owner-occupied homes. Housing poverty diseases like rheumatic fever that have almost been eliminated in other develop countries are still prevalent in New Zealand’s rental accommodation communities — nationwide the incidence of rheumatic fever is increasing. Eviction is a real threat and tenancies are short — on average less than two years. And there is a real power imbalance: 25 percent of rental household moves are instigated by landlords.

Source

Rents are rising faster than wages for the lowest income groups.

Many low and middle-income workers in our most successful towns and cities can only afford a room in a shared rental. If renters face a financial setback, especially if they have dependent whānau, rent can quickly take the majority of income — leading to difficult budget choices as necessities become unaffordable. The situation can even deteriorate so badly the tenant becomes homeless. An all too prevalent problem in New Zealand.

The unmet need for affordable, good-quality, well-located housing is massive.

Figures from 2018 show more than 180,000 households — 10 percent of all households — are in financial stress because they spend more than 30 percent of their gross income on rent. Given that lower quartile rent is inflating faster than wages, that number is likely to be larger now.

Currently, there are over 4000 kiwi children living in emergency motel accommodation with their whānau. Emergency accommodation is now costing the government $1million per day, as revealed by Opposition Housing Spokesperson Nicola Willis. This expense is a reflection of how housing has become a significant driver of poverty.

Nicola Willis is concerned that this year between January and February, median house prices have increased by another $50,000.

The National Party suggest these immediate actions:

  1. Strengthen the National Policy Statement on Urban Development
  2. Remove the Auckland Urban Boundary
  3. Make Kāinga Ora capital available to community housing providers
  4. Establish a Housing Infrastructure Fund
  5. Implement new finance model

Nicola Willis should be applauded for making constructive suggestions. The issue though is not with the merit or otherwise of each action. The problem is strategy should come before tactics and the National party has not explained what their housing strategy is. The government have the same problem.

Discussing tactics without agreeing on strategy — is like going through the last year of Covid debating the merits or otherwise, of lockdowns, quarantines, testing, tracking and trace… without agreeing on whether the strategy was suppression, elimination or herd immunity.

For instance the housing strategy could be that affordable accommodation (spending less than 30% of income on housing) is a human right for all New Zealanders.

This strategy could be achieved by planning reforms, infrastructure provision, and government capital injection into the housing market (so similar tactics to what National is suggesting). This will build more houses which will affect rent levels. When rent falls it is important to keep building public housing at pace. Don’t slow even if the balance of power shifts — for example if the market expectation became that landlords submit references to tenants not the other way around.

For the ‘housing as a human right’ strategy to be achieved, then expectations of capital gain need to be eliminated with the same degree of ruthlessness that general inflation expectations were removed in the 1980’s and 90s. This is especially important now because house price expectations are back at 2015 highs.

If expectations are not constrained the housing crisis has the potential to get much worse.

Tenants as a group pay much more of their income on rent than homeowners pay in bank interest charges. Homeowners collectively pay just 6 percent of their disposable income in mortgage interest costs, down from a high of 14 per cent in 2008. This and other favourable conditions, that business journalist Bernard Hickey details here, means those already owning property have the financial ability to keep driving house and rent prices up if the current housing settings and expectations remain unaltered.

In 2020 landlords and homeowners collectively borrowed more and paid down less. Given last years strong house price gains and the expectation of more housing inflation those in ‘the game’ can continue to use debt to inflate the housing market further.

The situation is so favourable to landlords and homeowners, it is no exaggeration to say the market is rigged.

For decades when tenants’ incomes rose, when accommodation and other grants increased or when landlord costs fell — in particular, borrowing costs — this benefit went to the landlord not the tenant.

This rigged rental housing market drives landlord greed for capital gains, and it drives first home buyers FOMO — fear of missing out — the fear that if they do not buy now, they will be in a worse situation in the future.

And the rigged rental market increases demand for state and emergency housing.

This process is a long term drag on the economy. It misdirects borrowing and investment, and it imposes costs on employment and business.

It is the inequality effects of the housing crisis, though, that are the most worrisome.

Discussions about the crisis are fraught, characterised by blame-shifting, finger-pointing and can-kicking. In many rental households, merely talking about buying a home is taboo because of the stress and tension it unleashes. Yet in the wider community there seems to be more housing market reckons than there are people.

For many at the sharp end of the housing crisis there is a feeling of despair — a resignation that society does not have their back. For others, there is sadness at the erosion of New Zealand’s ‘fair go’ culture, the idea that even those with modest means can make a go of it. The inequality effects of the housing crisis are so great, some believe, that it amounts to an existential societal crisis.

But discussion about the housing crisis need not be fraught. New Zealand has been here before and social democracy solved the problem by extending universal human rights.

The first Labour government led by Prime Minister Michael Joseph Savage faced a terrible existential crisis to the global economy: the Great Depression. Their solution was to extend universal rights to free healthcare, education and social security — rights that we now take for granted but which, at the time, triggered a social and economic transformation.

The Savage government was the first to provide: free hospital care; free secondary school education that was compulsory to the age of 15; and universal superannuation for all who reached retirement age.

In housing, affordable, good-quality homes became another right. The state built 29,000 houses between 1937 and 1949, including a break due to World War II. Adjusted for population, that equates to over 90,000 houses now.

These homes were universally accessible to a wide range of workers (the first house went to a Wellington tram driver’s family); unfortunately, that right to quality housing faded away, first gradually and then suddenly with the 1980s reforms.

We can see what a difference maintaining ‘housing as a human right’ has made in societies like Austria and Singapore. Their mixed state and market economies have achieved better housing outcomes. Collective action has supported the market and the common good. There are, of course, Soviet Union-type examples where government and markets became completely disconnected but success stories like Austria and Singapore show a middle ground does exist.

There are even some local politicians in the US looking at solving their housing crisis by employing the social democracy ‘housing as a human right’ approach — specifically looking at the Austrian public housing model. When Vienna housing officials explain what they do, it is clear how competent and common sense their actions are (this provides a stark contrast with how irrational New Zealand’s housing market has become).

New Zealand does not need a fraught discussion about which affordable housing model is viable — we have done it before, and it still exists overseas.

When it comes to housing reform, the Government and market forces are not as disparate as some might think. When Auckland Council’s unitary plan was being developed, for instance, free market advocates and public housing officials were aligned in requesting a more liberal planning regime. Housing affordability activism can be a broad church.

The Black Death of 1348–49 killed about two-fifth of everyone in England. As a result, the remaining workers had their bargaining power increased — outraging the aristocracy. They responded by persuading King Edward III to pass the Statute of Labourers Law, which made it an offence for landless men to seek new masters or be offered higher wages. Workers, of course, hated it (the legislation was referred to as a contributing factor in the 1381 Peasants’ Revolt).

New Zealand has its own 21st-century version of the Statute of Labourers: regulatory and economic settings that have added needless expense and restrictions on building affordable housing near the best employment opportunities.

There is no right to affordable housing enshrined in legislation. At most levels, the rights and bargaining position of the propertied class are privileged over the landless. Even where housing affordability is specified, such as the Reserve Bank’s Monetary Policy Committee remit, it is a long way from being a universal right — for instance, the remit (see below) does not include renters in the housing affordability goal.

(d) assess the effect of its monetary policy decisions on the Government’s policy set out in subclause (3).

(3) The Government’s policy is to support more sustainable house prices, including by dampening investor demand for existing housing stock, which would improve affordability for first-home buyers.

How can freedom of movement for workers be respected when affordable housing is so hard to access? How can the bargaining position of the landless versus the propertied be made fairer? How can housing be a right for all New Zealanders, like it is in Austria? How do we prevent the right from fading away again?

The right to housing needs to be deeply embedded in New Zealand’s system of governance.

Housing in New Zealand is based on a system of land contracts inherited from feudal times as described by Alastair Parvin in his fantastic — A New Land Contract where he describes;

Mostly when we talk about the spiralling cost of housing, we refer to it as the ‘housing crisis’. But the truth is that our housing crisis is actually a land crisis; of which the housing crisis is just one of the many symptoms….And actually, it’s not really a Land crisis, it’s a Land system. It’s the rules of the game, hard-coded into the firmware of our society and economy.

New tools — such as public land buy-backs for the purposes of land value capture — are needed. This is one of the tools suggested by Alastair Parvin and is also a tool recommended in Part Two of the New Zealand’s Rack-Rent Housing Crisis series.

New Zealand needs to take a bold, innovative approach to addressing the housing crisis. As described in Parts Two and Three of New Zealand’s Rack-Rent Housing Crisis, the Government could create a powerful housing tsar, a housing commissioner who — as their legislated goal — would advance the idea of housing being a human right for all New Zealanders. This firm principle could be the basis of a coordinated state and market housing accord that over time would eliminate the housing crisis.

Ultimately, solving the housing crisis comes down to public support and the political will of elected officials. Hopefully, it does not get to the stage where the ‘peasants’ have to revolt.

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A collection of essays about cities, housing, land, the built environment and transport which collectively make the case for New Zealand to implement a wide ranging urbanisation project

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Brendon Harre

Brendon Harre

Trying to optimise amenity and affordability values for urban areas

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