National’s Housing Policy

July 23rd, 2008 at 11:30 am by David Farrar

It should be of no surprise to anyone that is not planning to go back to market rents for state house tenants. It was arguably the most unpopular (yet most misunderstood) of ’s policies in the 1990s. did not plan to change back in either 2002 or 2005.

Phil Heatley has outlined some aspects of National’s policy.

Housing spokesman told a Housing Institute seminar in Waitakere yesterday that National would give back to Housing New Zealand tenants the right to buy their houses.

They had this right until the Labour Party won the 1999 election.

Labour call this privatisation but I think allowing state tenants to buy the homes they may have lived in for decades is a great thing.

“If they purchase their state home, we will replace that home within the housing stock so as to lift someone else off the waiting list,” he said.

“We won’t be running down the state housing stock. We acknowledge that we need it.”

If one has income related rents for state houses, then there will be great demand for them and hence stock does need to be maintained or increased. I personally prefer housing assistance being delivered to low income households regardless of who their landlord is – but that is now what the public will accept, so one has to make the current system work.

Labour’s Housing Minister, Maryan Street, told the seminar that 9 per cent of tenants already paid market rents because of their high incomes.

So no social benefit is being generated by those tenants being in Housing NZ houses. In theory they should be evicted to make room for a lower income family. But that is politically unviable. But National’s policy of allowing them to buy the state house will allow a new house to be purchased which can be targeted to low income families.

UPDATE: The Green’s Frog Blog say they support the policy as sensible and a good system for getting people into their own homes.

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29 Responses to “National’s Housing Policy”

  1. Lindsay (141 comments) says:

    Is that a badge of honour now? Having the most extreme leftists in parliament approving of your policy?

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  2. Gashlycrumb (7 comments) says:

    It is a pretty good compromise. Help migrate those that no longer need to be in a state house into self sustainability, retire older over-valued state houses and reinvest the money back into renewing the housing stock with more efficient, newer houses. That way those that are in need of a state house get a clean, modern house that doesn’t cost a fortune to heat and that they can take some pride in looking after. Thereby reducing the need for electricity subsidies and damage repairs.

    One question: How will they set the sale price? Market value, rateable value or replacement cost?

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  3. stephen (4,063 comments) says:

    Probably more notable/unusual than anything wouldn’t you say Lindsay?

    Also the link to your website through your name doesn’t have ‘.com’ at the end of it…

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  4. GPT1 (2,087 comments) says:

    Almost an understatement to say it was one National’s most misunderstood policies and a classic example of a good policy but political failure. Labour only had to say “market related rents” and they had won the argument. Any answer, no matter how good, that starts with “but” (as in but there is universal low income support) means that the argument is lost. Even National supporters misunderstood the policy.

    This is a victory for pragmatism but a loss for good policy.

    More generally, but this is a good example, i was musing to myself last night (there was nothing on TV) that there seems to have been a shift completely away from politics being the conflict of ideas to politics being almost purely marketing (as opposed to market) and poll driven. So few politicians from any side are prepared to take on the task of debating merits and trying to persaude the public that one policy is better than another. ACT and the Greens perhaps get close but ACT particularly is a shadow of its political think tank self (having found out that research papers are all very well but don’t get headlines the way scandals do).

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  5. dave strings (608 comments) says:

    Interestingly, National’s “Market Rents’ policy was the most mis-understood imaginable.

    The bottom line was that tennants who could not afford the rent received supplements through WINZ, and those who could paid. It stopped some quite interesting dichotomies, such as a family of Mum, Dad and two sons in their 20s, with a total family income of over $150,000 getting charged 25% of the mother’s wage, because the house was in her name!

    Personally, I think they should go back to it, but the game now seems to be “get elected at any cost”, I hoped for higher principals. I guess that goes along with JK not being prepared to rule Winston out of any future government he forms, again, he’s making it look like power at any cost, and that could cost him exactly what he is looking for.

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  6. Bryan Spondre (554 comments) says:

    “Labour call this privatisation but I think allowing state tenants to buy the homes they may have lived in for decades is a great thing.”

    I find it very disturbing that “privatisation” is such a dirty word in this increasingly backward looking country. For 68% of poll respondents to approve of nationalising the railways shows that the problem with economic performance in this country is not the politicians setting the rules, its the low quality of thinking among voters.

    Selling off the HCNZ stock ( though perhaps difficult in the current slow market) would help to improve home loan affordability by pushing down prices.

    Dave String you make an excellent point with your dichotomy example. This is a good example of the unintended (and expensive) consequences of the patronizing policies of the left.

    If the doomsday scenarios outlined last week by DPF & Matt McCarten come to pass and we do end up with a coallition of the chilling in power after the election I predict we will be seeing an the numbers of ambitious kiwis heading across the ditch moving from a flood to a tsunami :-)

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  7. stephen (4,063 comments) says:

    Would selling them off improve affordability for those who needed the state houses in the first place?

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  8. emmess (1,368 comments) says:

    The interesting thing about the poll on the nationalization of the railways was how much it differed from a poll on the NZ Herald (or Stuff?) site which was a statistical dead heat (51-49) in favour. This suggests to me that most people who are rung up have virtually no opinion, and just say yes anyway because it vaguely sounds like a good idea. People who choose to vote on a website would generally a bit be more informed on the whole. And people who have seriously followed the issue would if polled be dead against it.

    And selling 66000 houses at 300000 each could pay off the National debt

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  9. gd (2,286 comments) says:

    More Common Sense policy from the National Party son eto be the National Government.

    Of course the Socialists and most of tehir supporters dont know what common sense policy is Their policy is to have as many citizens as possible in STATE OWNED housing so theyc an lord it over their TENANTS.

    Only one question When will we see the very expensive HC houses sold off to releasae more capital to purchase lower cost houses.

    Ohhhh I forgot Tenants living in $1m plus houses in Aucklands Eastern surburbs cant possibly be relocated to allow for more needy citizens to have a roof over their head. That would never do in the Socialists twisted policy.

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  10. llew (1,533 comments) says:

    It stopped some quite interesting dichotomies, such as a family of Mum, Dad and two sons in their 20s, with a total family income of over $150,000 getting charged 25% of the mother’s wage, because the house was in her name!

    Assessing household income stopped that.

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  11. Bryan Spondre (554 comments) says:

    stephen: “Would selling them off improve affordability for those who needed the state houses in the first place?”

    As DPF,Dave String, etc discuss those who really can’t afford market rents would be eligible for accommodation supplements.

    Home loan affordability is a function of both house prices and incomes. Selling off the HCNZ stock increases supply and therefore contributes to reducing prices. Reducing the size of government reduces the burden on the taxpayer freeing up more cash for debt retirement and investment contributing to increasing incomes.

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  12. Bryan Spondre (554 comments) says:

    “Ohhhh I forgot Tenants living in $1m plus houses in Aucklands Eastern surburbs cant possibly be relocated to allow for more needy citizens to have a roof over their head.”

    gd: you forget that in socialist land “rich pricks” need to be punished. One way of punishing “rich pricks” is forcing them to live next to state house tenants. Never mind that fact that you flog the land off and build 4 brand new well insulated houses in a cheaper area: the “rich pricks’ must have their their faces rubbed in socialism in action.

    There is a HCNZ block of 12 small 1 bedroom units in Ponsonby ( between POnsonby Terrace & Cowan Street) that occupy a piece of land that I would estimate is worth about $6 million (based on adjacent land values). Each 1 bedroom unit is therefore worth about $500,000. HCNZ could flog off the land ( assuming it could find a “rich prick” developer in the current finance company climate) and buy at least 60 1 bedroom apartments for $6 million.

    Of course that would be discriminatory according to the overpaid Wellington bureaucrats over at “The Standard”.

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  13. grumpyoldhori (2,410 comments) says:

    Corporate welfare for private landlords ?
    Why the hypocrisy by the Nats, they are against taxpayer money being spent on state housing but so many want private landlords to benefit at
    no risk to the landlords with the rent being paid by WINZ.
    Why the lack of courage from National, if they believe state housing is
    wrong fine, sell them all off.
    But trying to say they do not believe in socialism while at the same time
    practicing the same is the height of hypocrisy.
    Lacking courage of your convictions National ?

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  14. Lee C (4,516 comments) says:

    Or perhaps National is not as far-right as the comic-book illustrators would have us believe…

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  15. Bryan Spondre (554 comments) says:

    grumpy: “Corporate welfare for private landlords ?”

    How is giving welfare beneficiaries accommodation supplements any different from giving beneficiaries money to buy food or a fridge ? Both end up ion the pockets of private industry but its the beneficiaries who get the benefit. Hope you are not suggesting we nationalise supermarkets now ?

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  16. grumpyoldhori (2,410 comments) says:

    If socialism is so wrong as so many Nat supporting types say it is, why
    not a push to have all benefits dropped ?
    Or, do you lack the courage of your convictions ?

    Oh, I know those units in Ponsonby you posted about, the tenants are in the main elderly, with some ill.
    You believe it is wrong to have those types living along side the so called normal people of Ponsonby ?
    Any other areas that should be cleansed of the old and ill?

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  17. llew (1,533 comments) says:

    You believe it is wrong to have those types living along side the so called normal people of Ponsonby ?

    Well, if they’re elderly & ill & stay indoors & have their caregivers & social services park their shitty cars well away from the BMWs… I guess they can stay.

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  18. jafapete (766 comments) says:

    DPF: “It was arguably the most unpopular (yet most misunderstood) of National’s policies in the 1990s.”

    Don’t know about that. Can think of the ECA, benefit cuts, bulk funding of schools… Oh, all right, have it your way!

    [DPF: Bulk Funding was very popular outside the PPTA and NZEI. Labour never reversed the benefit cuts and many of the changes the ECA introduced remain]

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  19. Owen McShane (1,226 comments) says:

    I do not see how selling state houses increases the supply.
    It only changes the ownership of some of the stock.
    The only way to increase supply is to manufacture more house lots and construct more houses.

    Sadly the collapse of the property sector is bringing virtually all company projects to a halt while the falling prices and huge compliance costs are pricing the family subdividers and builders out of the market too.
    This combination will make it very difficult to build out way out of depression.
    Maybe someone will bomb Auckland harbour. Worked last time.

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  20. grumpyoldhori (2,410 comments) says:

    llew, I am sure they will be humble and do a bit of forelock pulling if they
    happen upon one of their betters :-)

    Funny that, I know a state house tenant in one of the so called better
    areas in Auckland, Vietnam vet, ill from agent orange.
    Must be difficult for the normal types in that suburb to have to live near
    him.

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  21. llew (1,533 comments) says:

    Must be difficult for the normal types in that suburb to have to live near
    him.

    They should live near a university! It can be difficult living near some of tomorrow’s leaders, I can tell you!

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  22. Bryan Spondre (554 comments) says:

    Grumpy: “You believe it is wrong to have those types living along side the so called normal people of Ponsonby ?”

    It is wrong for the government to squander taxpayer resources by having 12 people living on an asset that could be liquidated and used to house 60 people.

    I own a house few doors away from the units and the tenants cause me no concern. THey are part of the colour that is Ponsonby including their Friday afternoon drinking sessions and sing alongs. Frankly they are a lot less trouble than a reasonably well known radio & nerwspaper journo was when she lived in the street and had frequent drunken parties with abusive guests.

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  23. Bryan Spondre (554 comments) says:

    “I do not see how selling state houses increases the supply.”

    Owen: it does if the govt uses the money to build more state houses on cheaper land.

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  24. grumpyoldhori (2,410 comments) says:

    Bryan Spondre

    Yes selling of some state house land could work well, Mt Roskill for
    example, shift a lot of those state houses out of the area, then sell
    some of the land for lots of booty, the cash can then be used to build
    a mixture of private and state owned terrace housing.
    Build them so they have say an acre of land in the center of say one
    hundred homes built in a square.
    The acre only being available through the homes or a locked service gate.
    A look at google earth shows a hell of a waste of land with the old
    quarter acre per dwelling.

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  25. Owen McShane (1,226 comments) says:

    Bryan
    You are quite right.
    But with our dense thinking Smart Growth policies where do they find the cheaper land?

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  26. gd (2,286 comments) says:

    So Owen if the developers have stopped developing but the numbers of people looking to either buy or rent a house keeps increasing then does that mean than in a period of time…………………………wait for it house prices and rents will rise.

    So whose saying that house prices will drop 30% and when was the last time they dropped 30%?

    IMHO supply and demand will see current rents rising in 09 and house prices rising in 010.

    Bloody good time to buy if you have the cash. Auckland apartments are a steal 2 bed 1 carpark returning $350pw going for under 200 clicks. Luvely gubbly

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  27. Anthony (766 comments) says:

    I thought market rents for state housing had become fairly ho hum under the last National government. Are the poor so useless that the state has supply special houses for them and guarantee they will never get kicked out – unless they are very naughty?

    Anyway, given the ability to stay in a state house for life and have it regularly maintained, etc I would argue that the market rental for a state house should be higher than for the equivalent private sector house. So those 9 percent of tenants who pay market rates so should be charged maybe a 20 percent premium. Then they might be more motivated to leave the houses for those more deserving – if we really have to have a system of supplying houses to the poor than just financial assistance!

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  28. Owen McShane (1,226 comments) says:

    gd 1282
    You may be right. In the US house prices are tumbling catastrophically in the SMart Growth states such as California and Florida and Oregon because Americans can flee to nearby non Smart Growth states where houses are affordable and in plentiful supply.
    Here in NZ our market is highly integrated (although not totally) so I have been advising people that because land development companies are folding left right and centre, while families cannot afford to subdivide for their families etc that the resulting constraint on supply may provide a buffer platform and stop prices falling as far as they might if there was less “sand in the gears”.
    The situation will vary from Council to Council.
    We can watch and see.

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  29. toad (3,669 comments) says:

    Hmmm. Although it’s a vast improvement on National’s housing policy over the last 16 years, I’m not sure that all Greens will be as enthusiastic about National’s policy as frog appears to be. Geoff Fischer from The Republican had this to say over at frogblog, and I think he has some valid points:

    National’s proposal to allow state house tenants to buy the property they occupy would, as thomasf observed, would result in immediate on-sale of many of those properties at a discount to speculators and private landlords. The way it works is: the state offers to sell to the state house tenant at below market value (there is normally no point in the state offering a sale at market value, since if the tenant can afford to at market value he can afford to buy anywhere and from any other vendor). Meanwhile the speculator approaches a state house tenant with an offer “I will advance you the funds to buy your state house, and at the same time agree to buy it off you for $10,000 more than the price which you pay to the state”. The speculator then on sells at a handsome profit, while the former tenant eventually returns to the state house waiting list. It is a formula which does not work to the long term benefit of either the state or its tenants, but it does work well for real estate speculators and private landlords. Which is why the National Party is promoting the idea.

    There is a common misunderstanding about state housing, promoted by the regime itself, to the effect that state housing is a charitable initiative of the state, designed to ensure, as far as is possible, the happiness and well being of the state tenants. The reality is that in New Zealand, and the rest of the developed world, the state house system was instituted primarily for reasons of state, not as a charitable exercise. The first purpose of state housing is to provide the basis for a stable and affordable industrial labour force. Thus we have the Penrose state housing area adjacent to the Penrose industrial area, and the Glen Innes state houses next to the Mount Wellington industrial zone, Otara next to East Tamaki, and so on throughout the country. Every industrialist knows the importance of adequate and cheap working class housing to the competitive success of industrial enterprises, which is why nations such as Singapore invested hugely in state housing in support of private industry. The second purpose of state housing was to increase business activity and retain construction capacity in times of recession – state housing contracts were a lifeline thrown to the Fletcher Construction Company by the first Labour government. And the third purpose was to help provide a measure of social stability – widespread homelessness being a major cause of social unrest. From this third consideration has evolved the idea that state housing is a form of charity, and as charity it should, as far as possible, be restricted to the most worthy cases and withdrawn whenever practicable.

    Coincidentally, the idea of housing as charity gained traction as the nature of the regime itself was undergoing fundamental change in the nineteen eighties. (Anyone old enough to remember when state house tenants were objects of pity, rather than envy, to the lower middle classes?). Up until the term of the fourth Labour government there was a consensus within the regime that industry should be encouraged by the state, and state housing was a necessary adjunct of this policy. But from the time of the fourth Labour government the regime consensus shifted away from the idea of promoting industry, and towards the idea of promoting “business”. The wider notion of “business” allowed room for speculation of all sorts, in money, shares and property, and for the growth of the landlord class. These changes had repercussions which were inimical to the interests of productive industry, and arguably to the long term interests of the regime itself. Finance capitalists like Don Brash and John Key instituted policies which were designed to appeal to the interests of the emergent upper middle classes of financial investors, speculators and landlords at the expense of traditional productive industries, which have been badly hurt by the very factors which have benefitted the financial capitalists – rising rents and interest rates along with falling commodity prices.

    This is the context in which John Key’s proposals must be seen. It has nothing much to do with giving a “fair go” or “an opportunity” to state house tenants. It is about advancing the interests of a particular class with which the regime is now most closely identified. This, ironically, when the policies so vigorously pursued by that class are in the process of causing a massive economic meltdown.

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