The Luxon-lead government continues its attack on anything that the Labour Party ever managed to do, with the release today of news about the Kainga Ora housing projects. Most of them, it seems, have been killed off. “Brakes put on more than 370 Kāinga Ora housing developments nationally”. While they are spread out around Aotearoa, most are in Auckland, while in Wellington they note the following projects are stopped: Arlington redevelopment and Evans Bay Parade, with other projects stopped in the Hutt, Naenae, Wainuiomata, and Porirua. The list says “paused” but I know a dead duck when I see one.
Do I blame Luxon? Well, no, like much of National policy, he’s not in control here. Who is the Minister for Housing? Why, that’s Chris Bishop of course, the Minister for Nearly Everything, who commissioned a report from Bill English, who tried to kill NZ’s public housing before, by selling off the public housing stock. This time they may succeed. The issue, of course, is money.
National is taking the line that Kainga Ora is out of control, and has spent too much money, saying that KO is not making a profit. Let’s not fuck spiders here: it certainly is a lot of money. “Kāinga Ora’s debt grew from $2.7 billion in 2018 to $12.3 billion in June last year. It’s forecast to grow to $23 billion in four years’ time. The current asset-to-debt ratio is about 0.25.” says Tom Kitchen at Newsroom. Sounds like a massive amount of debt. But, as Bernard Hickey is quoted in the article:
“You could argue actually that there isn’t nearly enough debt inside Kāinga Ora, because for most people, they are able to borrow quite a bit more than 25 percent of the value of their home. Certainly, if you valued Kāinga Ora like any other home, you’d say to yourself, actually, it’s been a stonking financial success over the last five or six years, because the value of its homes, in particular the value of its land, has risen much faster than the value of its debt, just as every other homeowner in New Zealand can claim credit for unearned gains, because land prices rose dramatically.”
He says it’s “magical thinking” on the part of both the government and voters to think the government could increase the number of homes and not take on extra debt.
“If you said that to a regular person who was looking to buy a new house, they would say that’s not possible and [so] would the bank. That’s the irony here – the Government says it wants to build lots of new houses but doesn’t want to do it with any of its own borrowings – which would be totally impossible for a regular home buyer.”
I’m of a similar opinion. While the debt is a mind-boggling high amount of money, when would you ever expect to be running a public housing department that actually ran at Zero, or made a profit? New Zealand has to be in this for the long term, building houses for New Zealanders who can’t afford a house – which, let’s face it, is most of us these days. That’s not to say that the system needs to provide ALL the houses – but it does need to provide some of them. And you won’t get there by stopping their construction, or by selling them off.
National-Act-NZFirst want the private sector to do all the heavy lifting, with private rental properties being the answer for all the housing needs. And not just the Mum and Dad landlords NZ has had in the past, but corporate investors, so that the system can be financed by the big lenders and borrowers who are friends of National. The problem with that is that they either need to be setting rents at market value, which is way out of the league of many people, or the other solution: subsidised housing. So that means that instead of the Government paying for the houses and also owning them, now the Government would be paying for the housing, but owning nothing in return.
That is the ideological rub right there – Natactfirst see this as a good solution, while I see it as dumb. It’s the long term vs the short term. It’s the Eye of the Fish versus the Rotting Fishead of Mr Bishop, boy wonder, meathead supreme. While the projects have been “paused” at present, that is just corporate speak meaning “for sale to the private sector at a loss” which is the more likely outcome. How do I know? Well, like many of you out there who have been working on KO projects over the last couple of years, projects that have now been stopped, we have been asked if we (architects) want to buy the project and take it private. It’s a tempting deal, sweetened by the promise that it will be sold at a loss, so in theory we would make profit on the deal. So, public money down the drain, move it off the public books, draw a line under the loss, and meanwhile the Fish takes on the property debt and the development risk. Perfect! Just the thing I need – more mortgage.
In reality, what of course will happen is that a corporate investor, someone with oodles of money, will buy the scheme instead, dilute any good design out and squeeze more houses in, or build smaller, shittier houses which are fine by Chris Bishop, virtually guarantee a future slum, fund its completion privately, and then suck on the government’s sagging milky teat for the next five decades, pulling in a healthy profit along the way. Corporate backers are happy. Tax breaks for Landlords and all that. Foreign money will pour in, probably from China, to reap the benefits of a NZ Gov backed investment stream guaranteed for decades of steady returns. Personally, I despair.
