State House Tenants can now buy their homes

September 16th, 2009 at 1:36 pm by David Farrar

Phil Heatley announced yesterday:

From today those state house tenants in a position to buy the house they live in can do so, says Housing Minister Phil Heatley.

Over the next week, Housing New Zealand will be approaching about 3,800 state tenants who pay market rent and live in a home that is available for purchase, to make them aware of the opportunity.

Letting a family who may have lived in a state house for years and years, maybe even decades, buy the house is such common sense, you have to wonder if anyone could possibly think it is a bad idea. Well Labour do of course/

Marty G at The Standard has said he is not oppossed automatically to state house sales, and proposes four conditions:

must use all revenue from sales to buy new houses – we don’t want the amount of housing available for the most needy decreasing.

I’m surprised he does not realise that is Government policy – that the money from sales will go to purchase new housing.

It must not sell all the houses in wealthy areas only to construct state house only neighbourhoods – the poor and the wealthy should not be physically separated by government policy.

Now having just argued for the importance of not decreasing the amount of state housing available, Marty then argues for a measure that will decrease the number of available houses.

The median house price in Manurewa is $250,000. In Mt Eden is is $600,000. If you sell 10 houses in Manurewa and replace them with houses in Mt Eden you can only afford four houses.

I’d rather have ten families in , than four, for the same investment.

There are more than enough modestly priced areas to have state houses, without creating state house only neighbourhoods.

The houses must only be bought by their current tenants – we don’t want them claimed by wealthy investors, locking out the poor.

That also happens to be Government policy. I note Marty makes a classic mistake by assuming that people living in state houses are poor. They certainly were poor when they first moved in, but the 3,800 paying market rents are no longer poor. You could argue that their houses should be sold to anyone, with them just given first option.

This is the problem of providing housing assistance through having lower rentals for state houses, as opposed to income assistance regardless of who your landlord is.  To provide maximum equity, you really should evict tenants from their state houses once their income rises so they no longer are “poor”, But no one does that because of the fuss it would create. But what this means is that you have people on a waiting list for a state house who are far worse off income wise than the current tenants.

Likewise when the number of people living in a state house reduces (as kids leave home), you should ideally shift them to a smaller house. Not doing so again leaves more needy tenants on the waiting list (and there will always be a waiting list). This is one reason why I think income assistance rather than lower rentals is a better policy approach.

There must be a caveat on the titles to the properties preventing them being rented out by a private landlord – that way they can’t be bought out by property investors as happened in the 1990s.

Now this is just bizarre. If for example an elderly couple need to more into a retirement home, they can’t rent out the house they own. responds to this point on his blog:

What Marty G wants to do is sell the house to the tenant—because the tenant is Needy and home-ownership is A Good Thing—, but then dictate who this buyer may sell the asset to at a future date. This kneecaps the value of the house: to restrict the pool of potential buyers is to decrease demand artificially. The needy tenant is disadvantaged by this.

There is envy implicit in Marty G’s calculus: property investors must not be allowed to own ex-state houses because they’re rich and that’s bad. This leads him to a policy preference designed to restrict the wealth of the wealthy by diminishing their economic opportunities, but has as a side-effect: it also restricts the wealth of the needy by diminishing their economic opportunity. It turns out you can’t have one without the other.

Repeat after me: if you outlaw a voluntary transaction, you’re hurting all the parties that would benefit from that transaction, and not just the ones you’re trying to hurt.

Blaise sums it up well.

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21 Responses to “State House Tenants can now buy their homes”

  1. big bruv (13,887 comments) says:

    This may seem an obvious question, but why on earth would we mug tax payers being housing ANYBODY who can afford to purchase the property they have been living in?

    Any tenant who applies to WINZ to purchase the state house they live in should be immediately handed an eviction notice.

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  2. dime (9,972 comments) says:

    “the poor and the wealthy should not be physically separated by government policy.”

    ummmmmm i dont want to live around poor people. id live in a gated community if i could.

    i dont want my kids having their bike stolen, unsafe streets etc

    make bad decisions in life – live in manurewa! seems fair to me

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  3. burt (8,269 comments) says:

    I have a lot of time for Blaise, he’s also a talented chess player ;-)

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  4. kaya (1,360 comments) says:

    I’m sure a system such as this is open to abuse like many others but our experience of a scheme along these lines in Northern Ireland was a positive one. My father worked all his life but with four kids and mum at home he never earned enough to save for a deposit on a house so we were renters from day one.
    The scheme there was based on giving a discount depending on length of time you had lived in that property. We were in the same place for 15 years so qualified for a good discount.

    I think there are good reasons for this sort of scheme, one of the main ones being that many people’s attitudes change when they see something as their own. My parents taught had good morals so our house and garden was usually tidy, but the improvement in the housing estate we lived in over the next few years was astonishing. It transformed into a pretty desirable suburb of Belfast after about 10 years.

    I know people will see many problems with something like this but as I said, from 1st hand experience I saw much good come from it.

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  5. Johnboy (16,529 comments) says:

    Socialists don’t want people to become homeowners they prefer them to be dependent on the state for everything. Most people who have worked hard to buy their own homes develop a sense of pride and self worth, this tends to make them less fertile ground for breeding the socialist mantras of envy and jealousy.

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  6. Mr Nobody NZ (391 comments) says:

    The median house price in Manurewa is $250,000. In Mt Eden is is $600,000. If you sell 10 houses in Manurewa and replace them with houses in Mt Eden you can only afford four houses.

    I’d rather have ten families in state houses, than four, for the same investment.

    DPF the problem with this is you then up creating slums.

    40 years ago South Auckland had a good mix housing values and families living in the area however over the period of 1975-1985 this mix was radically altered by large quanities of state housing being created, the consequences South Auckland (if not the whole Auckland region) is still dealing with.

    If you really are interested learning a bit about the area drop me an email and I would be more show you a bit of the area and introudce you to a cop who has spent most of his 30+ year career working there.

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  7. kaya (1,360 comments) says:

    dime – “ummmmmm i dont want to live around poor people. id live in a gated community if i could.

    i dont want my kids having their bike stolen, unsafe streets etc – make bad decisions in life – live in manurewa! seems fair to me”

    Your statement are pretty gross generalisations. Not all poor people are thieves and many are there through no fault of their own, not through bad decisions. Attitudes like yours are the ones that make the problems worse and cause even more divisions in society.

    Just to give you an example of what can come from poor thieving communities when you have good social policy.

    I have lived and worked in NZ since 1991, I love the place.
    I am self employed with my own (very) small company (just me!), My partner and I own a house in Auckland and a bach on Great Barrier Island. We are almost freehold.
    My brother and his partner in Ireland both work and own two properties.

    My 1st sister and her husband both work and own their own home. Both their kids are at university.

    My youngest sister and her husband own their own home in Norwich and both work. He is a manager in a large insurance company.
    My sister has an honours law degree from Dundee University, she went there so she could be with her friends. At school her grades were so high in her ‘A’ levels she was offered a place at Oxford. She declined to take it because of elitist and snobbish attitudes of many she encountered there on an introductory visit. Attitudes not dissimilar to yours.

    You shouldn’t generalise so much.

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  8. emmess (1,428 comments) says:

    Why do we need State house at all?
    There is roughly enough money tied up in them to pay off the national debt

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  9. oxymoron (32 comments) says:

    I am surprised that those against the current government’s policy aren’t pushing this hard in their arguments. I thought that state housing was for needy people. There are plenty of needy people who could use a state house. If one is in a position where one can purchase a house, how is that one needy?

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  10. Lawrence Hakiwai (119 comments) says:

    “There is envy implicit in Marty G’s calculus”

    I don’t think the issue here is envy.

    There seems to be some belief that the poor should accept their lot and vote Labour so they can be given their “fair” share.

    Aspirations to get out of the poverty trap are to be discouraged.

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  11. Viking2 (11,470 comments) says:

    Evern if a tenant pays market rents to HNZ (which they never are), its still way cheaper than owning your own home. NO RATES TO PAY, NO INSURANCE TO PAY, NO REPAIRS AND MAINTENANCE TO PAY .
    Enough left to live well on in many cases particularly when their could be multiple incomes in the same house.

    Downside of course is no ownership and therefore no gains in value, no discretion on improvements etc.

    The big problem is that the rules allow a tenant to remain forever rather than a timetabled review of their need.

    As for the desire to buy I can name three people that I know who wanted to before Herr Clarke came along and stopped it happening. They are still there and I know that at least two will proceed. They have saved for the day.

    One of the good effects of this is to break up the mass of rental housing and spread them around. This has a good effecton the neighbor hood and things like schools.

    Would have thought though that there should have been a no sell clause of a minimum 5 years unless affected by hardship or such. Not a hard do.

    We should also recognise that in at least some places the need for HNZ housing has shifted from one area to somewhere else as cities and towns have grown or changed. This will allow for better location of the houses the HNZ needs.

    Heatley should make a couple of other changes while he is in the mood. He should require a periodic needs review and
    people should be told to move along once their status changes thus causing the renters to save for a deposit.
    He needs to increase the number of front line tenancy managers. In Tauranga for example their were ( early this year) only two of these people to look after nearly 800 tenancies. Many of which are difficult tenancies. They just can never do the job properly. Given inspections need to be done every three months these days that’s 2400 a year or 12 a day. Most are never done because the tenant is not home and HNZ do not have keys as a normal agency does. So programmed for failure, which it does.

    Heatley should also amend the RTA to allow landlords including HNZ to charge local body rates to the tenants. This would ensure that all residents of a town or city contribute to local Govt. costs rather than rate payers, one of who is HNZ.
    So far he has declined to make this move continuing the scamming of the rate payers by socialist councils who love doing things for people who vote for them especially when they know the resident is getting a free ride on the rate payer.

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  12. burt (8,269 comments) says:

    Viking2

    <sarcasm>

    Downside of course is no ownership and therefore no gains in value

    Gains in value are inconsequential for residential property and that is why no govt thinks it is important to have a capital gains tax.
    </sarcasm>

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  13. Viking2 (11,470 comments) says:

    Absolutley correct in that assessment. It is not important to have a CGT. Doesn’t work and plenty of ways to avoid.
    Go do some learning.

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  14. burt (8,269 comments) says:

    Was that a bitch slap by a property owner who wants to keep telling the lie that residential investment property has no tax advantages over other forms of investment OR someone who genuinely thinks they have the high ground to assert other people don’t know what they are talking about?

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  15. burt (8,269 comments) says:

    Viking2

    BTW: I generally agree with all you have said about state housing.

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  16. Viking2 (11,470 comments) says:

    Its a business like any other and gains no tax advantages that any other form of business cannot get. And that’s the trouble with this argument. Its seen as investment rather than business. If you bother to view it from a business perspective there are few differences.
    As a business , which it is, you then do things for the reason of increasing wealth. Investing is mostly about increasing incomes and as such most investments are failures. Shares, gold, bank deposits.etc.

    When I started in housing it wasn’t for tax advantages and still isn’t.
    No different from starting a new business or rebuilding a purchased one. You do it for the longterm wealth creation.

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  17. burt (8,269 comments) says:

    Privately owned residential property that is rented out allows the claiming of maintenance costs as expenses and imposes no tax on profits made when the property is sold. I can’t do that with commercial property.

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  18. Viking2 (11,470 comments) says:

    Since when did you pay tax on the increased value of commercial property at sale?

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  19. CharlieBrown (1,011 comments) says:

    This is something I have wondered for some time, so can anyone answer this:

    Why are the left opposed to the state subsidising people to rent instead of poorly run, managed and serviced state housing, which only houses a selected number of people leaving thousands on a waiting list?

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  20. egesther (1 comment) says:

    @Mr Nobody NZ I would be keen to have a chat to you about this more (and meet this cop) – drop me a line at esther.goh.nz@gmail.com if you can!

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