World New Zealand AWSM - Origin of the Housing Crisis By Kaye Richards

Aotearoa is in the midst of a housing crisis. In parts of the country, especially 
Auckland, there is a serious shortfall in housing availability. Rents are high and 
property speculation is rife. None of this arose in a vacuum. Things didn't get into the 
present condition overnight or by accident. This article explores a point of historical 
change during which housing policy shifted in New Zealand. It looks at the actions of the 
National government in 1991 in the context of the neo-liberal ideology that was heavily 
influencing the government at the time and their consequences in terms of poverty levels 
and inequalities in the housing market in the 1990's and beyond. I begin with a brief 
overview of the history of state housing policies and intervention in the housing market. 
What follows are examples of how successive policies effected people on the receiving end 
of them.

The 1980's saw a major change in the consensus among the ruling class in New Zealand. I 
will put the reasons for this in an international context and briefly note the role of the 
fourth Labour Government in implementing the changes. The next part concentrates on the 
role of the 1991 National government in exacerbating the changes begun by Labour, through 
its change in housing policy. I conclude with a statement about alternatives to the 
privatisation based ideology that still holds sway in this country.

Successive New Zealand governments in the 20th century intervened in the housing market. 
The first state houses were built in 1905 by the Liberal government, after passing the 
Workers Dwelling Act. The aim of the Act was to provide low-cost housing to city workers 
to deal with squalid living conditions in working class districts. The schemes were not 
very successful. From 1912-28 the right -wing Reform government sold off the remaining 
dwellings and promoted private home ownership. Then in the 1930's Labour introduced state 
housing. Many of the houses were actually built by private construction companies such as 
Fletcher Construction, which made huge profits and became a multi-national as a result of 
the patronage the state gave it. So-called state housing has therefore never been entirely 
about the state acting on its own. This serves as a reminder that under capitalism all 
housing policy is determined by the relative weighting between private and government 
actors, rather than being truly social or communal in nature.

Since the 1950's state tenants were able to purchase state rental properties. By the mid 
1980's home ownership was 74% and was 76% by 1991, with state housing consisting of only a 
small minority of dwellings. The Housing Corporation was established in 1974 and became 
the main vehicle for state intervention in the housing market. It managed the stock of 
state housing rental properties and provided mortgage finance for low income households. 
The Housing Corporation became the largest agent for mortgage lending in Aotearoa until 
de-regulation by the Labour Government in 1984, when other finance agencies and banks were 
permitted to compete in the market. By 1990 Housing Corporation held only 16.9% of all 
housing loans.

The 1980's ushered in an era of contestation within the ruling class, which saw a move 
towards much greater privatisation and neo-liberalism. The period from the end of World 
War II until the early 1980's was characterised by secure economic growth, stable labour 
markets and the male bread-winner model. Changes came in the form of a rise in 
unemployment, slow economic growth, a shift from manufacturing to service industries, 
technological changes, alterations in family structures and composition, a rise in the 
number of women in paid employment, changes in migration patterns, an increase in consumer 
capitalism, the collapse of a bi-polar ordering of the world on the scale of geo-politics 
and an intensification of globalisation. These changes lead to alterations in social 
policies in light of what was essentially a fiscal crisis.

The dominant economic ideology became neo-liberalism, with its emphasis on individualism, 
privacy self-reliance, and responsibility. This was accompanied by the affirmation that 
the free market is the best mechanism to provide social services. Under this ideology the 
state gave philosophical support to the market as a provider of social services rather 
than taking on that role itself or using public funds to help private companies as it had 
done in the 1930s.

In 1984 the fourth Labour government undertook a programme that de-regulated and 
restructured the economy. In terms of housing, the policies of the Housing Corporation 
changed to a more targeted approach. Those defined as in 'serious need' became a focus and 
thus assistance became residual in nature.

The National government that took power in 1990 undertook to push and extend the agenda 
Labour had started. They transformed the Housing Corporation into a State Owned Enterprise 
(SOE). This meant that as well as meeting social obligations the SOE was to be run as a 
business with the goal of generating profits. The system of providing low-income 
households with income related and therefore cheaper rents was changed. It became a system 
of charging market rents for these properties and installing an income supplement in the 
form of a means tested Accommodation Supplement. Thus assistance for housing moved from a 
direct 'bricks and mortar' house to directly providing cash. The working poor and 
beneficiaries could still rent a state house in theory but would be paying more for it. 
Further alterations were that prime mortgages held by the Housing Corporation were offered 
for sale to the public finance sector and subsidised mortgages in which repayments were 
related to income were also changed to market mortgage rates. In 1990 42% of beneficiaries 
and 30% of female solo parent households were paying subsidised mortgages.

The rationale behind the foregoing changes was that within the neo-liberal paradigm 
cheaper subsidised rents for state tenants was deemed 'unfair' because they were viewed as 
a privileged sector receiving extra help. The ideology argued that the rise in market 
rents would bring equality to all low-income households. They would then all be paying 
market rents regardless of whether they were in a state house or private rental. However 
formal equality of treatment does not guarantee equality of outcome. This is because of 
the unequal conditions of certain sectors of society such as tangata whenua, the disabled, 
LGBT identifying people, Pasifika, the elderly and solo-mothers. A high proportion of 
these groups are represented among the poor and face discrimination in the housing market. 
Further, they represent a high proportion of state tenants, particularly Maori women. Any 
chance they had of being protected was removed. Many state housing tenants were worse off 
under the new system as a high proportion of them were state beneficiaries. Their incomes 
were reduced and then reduced even further by rent increases, causing problems in the 
affordability of housing for these groups as well as others generally. This attempt at 
supposedly creating a 'level playing field' meant that the special needs of Maori were 
subsumed into the broader context of low- income housing assistance rather than given 
priority or specific assistance. This would adversely affect Maori housing circumstances 
especially in rural areas such as Northland.

The system of subsidised rents was seen as encouraging dependency. People would just stay 
in their cheaper state house rather than find other accommodation. However, having cheaper 
rent had actually helped low-income families become more self-reliant as housing costs 
were not such a large proportion of their income. They could look after themselves when it 
came to other costs such as food and amenities without seeking state help or charity. Also 
the subsidised mortgage scheme helped many on low-incomes into home ownership they might 
otherwise not have achieved. The system of abatement rates for beneficiaries who worked 
for extra money or who had cash assets created a dis-incentive to try and earn extra money 
or to save funds. This effected their capacity to buy their own home and had long-term 
consequences for home ownership and actually helped create dependency.

When it comes to consumer choice for housing, having a low-income and minimal assistance 
curtails such 'choice'. You have to take what you can afford. The rhetoric of 'choice' 
assumes having sufficient information to be able to make a rational choice. Housing 
Corporation became a 'one-stop-shop' for state rentals which entailed unequal access to 
alternative availability. Also 'choice' does not take into consideration discrimination in 
the housing market and the difficulties faced by non-English speakers such as working 
migrants who may lack resources such as time, money or transport. Further, it does not 
take into account the substantial cost involved in moving such as bond and rent advance, 
the cost of moving furniture, having power re-connected and so on, much of which is 
difficult to fund on a low income.

Under the system of market rents there was concern for efficiency. The policy was to match 
supplies of housing stock to families. This was in order to avoid the situation of a 
single person or childless couple for example living in a three or four bedroom house, 
which amounted to an uneconomic use of resources. The system of market rents meant a three 
or four bedroom house would attract a larger rent and if the rent became unaffordable the 
existing tenants would be forced to move. This policy did not take into account the lack 
of single bedroom properties available in the housing stock so therefore people requiring 
smaller properties were disadvantaged. There is also the social cost of disrupting 
existing communities to consider and the displacement of disadvantaged groups. Under the 
older system tenants had security of tenure, but this was removed since their ongoing 
tenancy could be construed as 'inefficient' by the powers that be. This has a big impact 
on disadvantaged groups such as the disabled as they no longer had protection from the 
vagaries of market forces. The rhetoric of 'choice' in fact hides a coerced exchange as 
people are forced to take whatever the market provides.

Much of the early state housing was built on the urban periphery, such as parts of Lower 
Hutt, Otara and Porirua. However, there was also state housing within areas of private 
housing and also inner-city state housing in Auckland and Wellington. The first Labour 
government operated a 'pepper potting' policy of scattering the locations of state housing 
so as to encourage a sense of community rather than ghettoization. The change to market 
rents resulted in rents for state houses in prime locations such as inner city Wellington 
becoming very expensive. This had the effect of making such houses unaffordable and then 
untenanted. The National government then saw them as surplus to requirements and sold 
them. Whilst houses were being sold off, there were people on waiting lists. From 1992-99 
Housing Corporation's stock of rental properties declined by 16% and there was public 
criticism of the government because they were making a profit from what was perceived as a 
public investment. These policies meant that state tenants had less choice about where 
they rented. They became socially segregated into housing stock located at the bottom of 
the price range. They were pushed out into the urban periphery. A 1991 report on Maori 
women's housing found that they faced discrimination from housing officials and were 
allocated housing in what were commonly known as the 'ghetto areas' of towns and cities.

The combined effects of the 1991 benefit cuts and the change to market rents had a huge 
impact on low-income households and beneficiaries. 1992-1999 state rents increased 106% 
compared with 23% in the private rental sector. These groups experienced considerable 
financial hardship under the more market-led regime. State tenants became some of the more 
economically and socially marginalised groups in the country in the 1990's. That decade 
saw an increase in housing related poverty and an increase in the use of food banks by 
people who had been hard hit by the changes. Because the changes made housing 
affordability an issue for low-income households, there was increased need and demand on 
Accommodation Supplement and Special Needs Benefits. This had the potential to lead to a 
fiscal blow-out as the costs of the scheme increased. The need to cut government 
expenditure was one of the justifications for introducing the changes but was having the 
opposite effects. The poverty caused had detrimental effects on lifestyles and entailed 
social costs. There were reports of people going without food, having their phone or power 
cut off or not being able to access medical care. Families were placed under great strain 
trying to deal with limited financial resources, which had consequences for relationships. 
Some broke under the strain and others experienced violence in the home.

One of the ways low income groups tried to survive and manage poverty levels was to alter 
their living arrangements. They did this by having boarders or for people to share 
accommodation. Alternatively, large families were living in cheaper, smaller houses, in 
order to increase income and minimise housing costs. This lead to issues of overcrowding 
and attendant health issues associated with overcrowding.

In conclusion, New Zealand governments have maintained a role in the housing market since 
the early Twentieth century. The housing policy changes made by the National government in 
the 90's altered the mix between the private and state sector and the way they interacted 
to a greater degree than in the past. The changes were motivated by a neo-liberal paradigm 
which saw the profit driven market as the primary agent in the process. Housing assistance 
was reduced to a single issue, that of financial cost. A basic democratic social goal of 
protecting the vulnerable in society was deliberately ignored. Further, the government was 
pre-occupied with fiscal savings at the expense of social objectives. Restructuring The 
Housing Corporation into an SOE meant there would be conflict between meeting social goals 
of providing help with accommodation for those in need and operating a commercially 
successful business. The fiscal objective and its underlying ideology won out. However, 
this was in tune with the mantra of self-sufficiency and was not perceived by its 
practitioners as a deficiency.

In 2015 we are again living under a government that sees privatisation as the essential 
way to deal with housing. The state and elements of the private sector have always 
co-existed and co-operated in the housing market. The historical survey outlined above 
shows that the current situation has not magically appeared from nowhere. It is true there 
are shorter term and more immediate triggers for the crisis. However we should be aware 
that it is rooted in a long period of ideological warfare on the part of the ruling class. 
We need to see the dangers inherent in these approaches, study the effects of previous 
government actions and learn lessons from that. The task for those opposed to the current 
system is to explore ways of breaking away from the failed policies of the past and 
present and to struggle for viable long-term alternatives.

Biographical Note

Kaye Richards is an independent socialist-feminist and solo mother living in the 
Wellington region. She was interviewed by AWSM in the October 2011 issue of our newsletter 
Solidarity.

http://awsm.noblogs.org/files/2012/07/Solidarity-17.pdf

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http://www.awsm.nz/2015/05/20/origin-of-the-housing-crisis/