HOUSING STILL THE MAMMOTH IN THE ROOM

In the last couple of days, poverty and inequality have been in the news.

Yesterday, Simon Wilson wrote in the Herald about the Salvation Army’s latest State of the Nation report, released two days earlier. That report told us that last year 23,000 more children were living in benefit-dependent households than the year before. Wilson noted that there are now 22,000 households waiting for “social housing”, and that that number has risen in every quarter since late 2015.

He claimed that the Government is not “sitting on its hands”, and applauded free school lunches, more visits from mobile dental clinics, mental health support and “other initiatives”, such as the provision of free period products, but admitted it is not good enough.

Decent housing, he noted correctly, impacts health, education, employment and community cohesion and “despite all the activity, we’re not really making a difference”. He argued for “emergency planning based on good social and environmental principles. With the rapid rollout of prefabrication and other new technologies to speed up building. With tax and financial reform. And with politicians in central and local government who have the skills to get it done.”

In the same issue of the Herald, Brian Fallow discusses the impact of housing costs on income inequality and poverty. He notes that the data released by Statistics New Zealand this week for the period to the end of March 2020 – in other words, largely before the impact of the pandemic – showed a picture of “entrenched income inequality, with more of the population falling below all but one of the seven statutory measures of a poverty line”. And a significant part of the economic stress experienced by low income New Zealanders relates to the very high cost of keeping a roof over their heads: “for 33 per cent of the poorest fifth of households ranked by income (which are those with an after-tax income of $36,000 or less), housing costs gobble up 40 per cent or more of their income.”

And in today’s Weekend Herald, Nick Mowbray lamented the effect of very low interest rates on house prices, and suggested that raising interest rates would be a way of moderating house prices.

By chance, I had a phone call from a woman in Tauranga last evening talking about how lucky she is to be paying “only” $480 per week for her modest accommodation, noting that similar houses for rent in Tauranga now command rent of up to $600 per week. Well, I don’t know what her income is but I suspect she is not earning much more than the minimum wage. But let’s say she is earning $22 per hour, and working 40 hours per week for gross weekly income of $880. She won’t be paying very much income tax, but she will certainly be paying some. No matter how you cut it, she’s paying well over half her household income in rent – and thinks she is among the fortunate ones!

The utterly disgraceful reality is that local governments have conspired to drive up housing costs to absurd levels – among the highest in the English-speaking world relative to incomes – by tightly constraining the availability of land (in a country among the least populated in the world) and by imposing long and expensive delays on the construction of houses.

If a bare section of 400 square metres in Flat Bush sells for $800,000, no amount of tinkering with free school lunches and free period products will make any significant difference to the stress which very large numbers of New Zealand households are under – both those who are paying rent and those who are trying to service enormously large mortgages and who are terrified that interest rates might return to more normal levels.

And while local governments could very largely fix the situation, particularly given that central government has at last recognized the need to create ways whereby infrastructure can be financed without burdening local government balance sheets with debt, central governments of both major parties, National and Labour, must carry a significant part of the responsibility for this appalling situation.

When the John Key Government took office in 2008, the median house price in Auckland was six times the median household income. He regarded that as excessive, and pledged to reduce it. When he left office eight years later, the median house price in Auckland was nine times the median household income.

The Labour-led Government also pledged to get house prices under control, and apart from their nonsensical commitment to build 100,000 KiwiBuild houses, they promised to free up the availability of land for housing In Auckland by scrapping the so-called Metropolitan Urban Limit – indeed, that was a quite explicit promise in that Government’s Speech from the Throne in 2017. Very quickly it was obvious that nobody believed their promise because land prices in Auckland kept going up, and now the Government has quite explicitly walked back their promise. The Limit will not be scrapped, and on the contrary both the Prime Minister and the Minister of Finance have said quite explicitly that they actually want house prices to keep rising, only “more slowly”.

Nobody should take Jacinda seriously when she says she is concerned about child poverty. Until she is willing to face the reality that child poverty is going to continue to get worse as long as house prices continue to rise faster than incomes, she’s crying crocodile tears.