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.

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!

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

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.

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

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.

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!

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.

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.

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]

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.

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?

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 ?

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”.

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.

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.