National is trying to the 'nothing to see here' line when it comes to its social housing policy, but the truth is it's in a tangle and has no mandate for sale

When Genesis was sold earlier this year, John Key repeatedly said it would be the last asset his government would put on the block, be it in that term or the next. He said he wanted to be very clear about that, lest those tricky opposition parties try to say otherwise. So how come his ministers didn't get the memo?

Both Bill English and Paula Bennett have raised the prospect of up to a third of state houses – that's more than 22,000 homes valued at over $5 billion – being sold because they are in the wrong place or are the wrong size. Well, the last time National talked about selling assets worth $5 billion, it was the power companies and the promise was 'no more'. Now the pieces are smaller – homes rather than companies – and National seems to think that somehow voters will accept that doesn't amount to an asset sale.

But of course it's an asset sale (as I wrote about a couple of weeks ago, knowing this issue was a tar pit waiting for National to stumble into), and it reveals an old-fashioned Rogernomic free-market push by a government that likes to sell itself as non-ideological. In many cases that's a fair pitch, but not in its social housing policy.

The premise is that the government has a lot of money tied up in housing – Key the banker sees unrealised value trapped in those sections that could be freed up and spent in other ways, while English the ex-Treasury man sees lots of zeroes clogging up his balance sheet. Like everyone, they want more houses built, especially in Auckland. So their answer is to remove the government and let the market come in and work its magic. (Was that the ghost of Ruth Richardson I hear?).

Only the Nats don't seem to have thought this through properly and are now on the defensive and, frankly, in a bit of a muddle. Let's look at some of the contradictions.

First and foremost, it's a question of scale. There are over 5500 families on the urgent waiting list for a state house, so to make any tangible difference to that the government needs to sell quite a few houses and open up quite a few large, neighbouring sections to redevelopment. Yet a large sell-off on the scale English wants is politically dangerous – it's another asset sale. So is it big and bold and significant (ie an asset sale) or just a few houses (ie ideological but pointless)? National's in a bind.

So you get the situation where in the same interview, Paula Bennett says "thousands" could be for sale, and when pushed on the politics retreats to language like "this is not a big asset sale" and talk of selling "a few state houses". But the cat was out of the bag when she said "You can name it [that] if you like, but..."

Then there's a matter of who they're selling to. All the spin is of community housing providers. Most often the Salvation Army and Presbyterian Support are mentioned. But then Bennett goes and admits iwi are in the front of the queue for some (where treaty settlements require it). And they want developers involved, who may or may not be required to build a percentage of social houses and could go ahead and build whatever they want on those sites. Oh, and some first home-buyers.

Suddenly this push to help the most vulnerable is looking like a way to also ease the middle class crisis of an over-heated housing market. Just look at Pt England and Glen Innes in Auckland. The housing stock in both is over 50% state-owned, but they're gentrifying and developers and first-home buyers will be salivating to get their hands on any 'ex-staties' that go on the market; how quickly will "social housing" needs be forgotten?

And we're not done with the contradictions. On one hand National's saying there's nothing new here, it's been working on this for years and it was "quite clear", Key says, about its move to more social (and less state) housing before the election.

It's true that it has has been overhauling the state housing sector since its first term and pushing to get social providers more involved. In its second term it even passed legislation to that effect. 

But it wasn't as transparent as it likes to make out. Look at its social housing manifesto and its releases about social housing in the campaign and earlier this year. There is nothing more than talk of the sector "undergoing significant change" and "growing the social housing sector".

Its social housing manifesto said, National would "Continue to investigate other ways to improve the community provision of quality social housing” and that it would "support a growing role for community housing providers in delivering social housing through the Social Housing Fund and Housing NZ".

At the release  of its housing, minister Nick Smith said:

“National is in the process of overseeing a major shift from state housing to social housing this term. In the next term, we will build on the our innovative approach we have taken to deliver housing that better meets the needs of people most in need for as long as they are in need."

But nowhere has the party or its ministers talked about selling thousands of state houses.  Bits of code about "redeveloping" and, as above, investigating "other ways", but nothing about selling "thousands" of houses. Really, not one word on selling. That is new.

And if you still want to argue that point and, as Key does, argue it was all "quite clear" before the election, you'll have to explain why even now National can't say where the profits from any sales will go, how long the selling process will take and precisely how many houses will be sold and to whom. You can't claim it was all out before the election when weeks after it you still can't answer core questions.

In short, National has no mandate for this. It reeks of 1987. But more on that in a tick.

Two other tangled areas. First, it was only a few years ago that Local Government ministers such as Rodney Hide, Nick Smith and David Carter were talking and passing laws about requiring councils to stick to their knitting, or "core services". When John Banks sold Auckland Council's remaining social housing there was applause in the Beehive. Housing was central government's job.

Now this same government is urging Councils (and others) to do more. Flip-flop? Yes.

And an earlier-term Bill English said he was worried about the size and growth of the accommodation supplement and how it was costing the government $2 billion a year. The implication was that this runaway subsidy needed to be reined in. Now he wants to extend it as a way of letting the money follow the person, even into the private rental market, rather than being tied up in bricks and mortar. Flip-flop II.

If that thinking sounds familiar, that's because it is. It's the same logic behind school vouchers, something National won't dare touch. Its tentative few charter schools is a step in that direction, but no more.  The political risk of bringing the free market and the profit motive into education is too high.

But houses for poor people? That seems to be fair game. The market will solve all.

Which takes us to the final problem for the government. This is a return to the ACT-style thinking of the '80s and '90s. It essentially says 'government bad, market good'. It says it's not only OK but good for private companies to profit from housing the country's most vulnerable, even though logic suggests that will push up costs. It is red meat for the right and goes down the ideological path Key has been do eager to distance himself from as a 'post-politics' politician.

As Bennett argued on The Nation, private companies can "move quicker" than SOEs and "we have some really quite good examples" of the market doing better than the state.

But we also have examples of exactly this sort of sell-off going terribly wrong. Look at New Zealand Rail, look at ForestryCorp, look at Air New Zealand.

What guarantees can the government give that private developers won't syphon off this land and these houses for the middle-classes, won't flip houses for short-term gain and won't do the least they can in social housing to maximise their profits? Or that the community housing sector won't get caught with a portfolio of rundown, badly placed houses that they can't handle? Or that we won't see bail-outs or rescue funds down the road as we have with some of those other asset sales?

Despite National claiming before the election that Labour's policy was "a shambles" it now has a shambles all of its own making and one that pins its colours firmly on the right and away from its cherished centre ground.

Comments (8)

by Jane Beezle on November 04, 2014
Jane Beezle

A big sell-down of state houses is an accident waiting to happen.

by Tim Watkin on November 04, 2014
Tim Watkin

I tend to agree Jane. Where do you see it coming a cropper? I can see how a lot of these homes disappear into the middle classes (where the bigger profits lie) and suddenly the state is left with an even bigger problem.

by Megan Pledger on November 04, 2014
Megan Pledger

  None of the social agencies will have the IT infrastructure to keep track of large swathes of house so there are going to be lots of agencies looking after relatively few houses. The clients are going to have to deal with multiple agencies to find a house that is suitable to rent which is quite costly in terms of their time and with transport.  It's also costly for the agencies as they have to deal with multiple repeats of "we have nothing that is suitable".   Their person-power costs are going to go through the roof. 

  The agencies will take on the most profitable of the vulnerable because they need the money to keep their high cost agency going so the most vulnerable will miss out.

   But the National party base might like it - anything that raises the accomodation supplement is money in the bank fior the landlords voting for National (they certainly didn't vote for labour's CGT) - who needs tax cuts for the rich when the acc sup funnels the money their way.

 

by Bruce Ellis on November 04, 2014
Bruce Ellis

I may have missed it, but I haven't seen anything on the funding of the Salvation Army et al to acquire these houses, to maintain them and to administer the tenants. It just doesn't make sense.

These are our assets as taxpayers and we should have the right to properly consider and voice our opinion on what we want to happen to these social assets. But given the record of the earlier asset sales by this Government I guess there is fat chance of such a thing happening. Perhaps the only hope lies in the hands of the focus groups. I'm not holding my breath.

by Tim Watkin on November 05, 2014
Tim Watkin

Bruce, the thing is that they're also liabilities. English sees the cost of maintaining these properties, even if they're in the wrong place and are empty, and thinks 'why not let someone else carry the risk and responsibility'. He doesn't see the wrong houses in the wrong places as assets.

by Tim Watkin on November 05, 2014
Tim Watkin

Oh, and one other way in which National is out of kilter on this. Key says Housing NZ has "hardly been a ringing success" while Bennett says it's "outstanding and they're doing a great job".

It seems National doesn't trust HNZ to deliver houses to the most vulnerable so Key is probably being more honest about the true opinion within cabinet.

by Richard Aston on November 05, 2014
Richard Aston

Good work Tim in assembling the facts to show that this government's “social housing policy” is really just another asset dump dressed in different clothing.  I hope we get more on this angle in the media.

It certainly looks like an asset sell off when we have
“Finance Minister Bill English says the proceeds from selling state houses are unlikely to be spent on new state houses and may go into the Consolidated Account.

This fuller Herald interview with English is an interesting read is as much as it show how much faith he has in the “market” to sort out the issue of social housing.  It also reveals just how much crucial detail has not been nailed down like; what happens to sale proceeds , who – private or non profit – will get them, what will happen to existing tenants, will they discount to non profit providers etc .

He says the actual provision of social housing to meet demand will take 10 years. I bet the sale of state house will be done and dusted before the next election thereby leaving the social housing mess to another government.

It all sounds good , English talks about giving social housing tenants more choice by moving govt support away from providing the house to providing a rental subsidy  ie rent = no more than 25% of income , govt tops that up to the market rent level via the income-related rent subsidy (IRRS) .

I haven’t seen projections on what that IRRS will cost taxpayers but it will be significant amounts of real cash for years to come as opposed to utilising existing states houses that while having a high market value have in fact been paid off years ago ie their real book value must be zilch.

Yup smells like an asset sale. 

 

by Jane Beezle on November 05, 2014
Jane Beezle

What you said, Tim.

Downsizing of the housing stock.  Variable quality of private provision.  Gradual shrinking of the "voucher" allocation.

And when the people who need to live in these houses hit the skids - i.e., end up in hospital, or long-term on the dole, or before the courts - whose responsibility will it be help them?  The state, who should have guaranteed some good quality state housing in the first place.

 

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