Making Sense of the Government’s Housing Numbers

By Alan Johnson

In a press release of June 1 2017, Social Housing Minister Amy Adams claimed her Government was “planning to increase the number of social houses from 66,000 today to 72,000 over the next three years.” A closer scrutiny of such a claim suggests that it is at best fanciful and at worse misleading. Over the past month the Government has made other somewhat extravagant claims over its commitment to housing. These claims are perhaps part of a Government strategy to assuage New Zealanders’ growing concern over the housing crisis by throwing a few large numbers at them in order to create the impression that something is being done.

Firstly there was the audacious claim made by Ms Adams on May 16 that Government was to build 34,000 new houses in Auckland over the next ten years. This number included 13,500 social housing units – although to achieve that and to release Crown land for private developers 8,300 existing state houses would be demolished. In other words a net gain of 5,200 social housing units, which – if it does eventuate – will be a very useful contribution to Auckland’s existing state housing stock of around 29,000 units.

Of the remaining 20,500 new houses to be built or rather facilitated by Government, Ms Adams has promised that at least 20% will be affordable – which means selling for less than $650,000. This suggests that around 16,000 houses will be sold onto the open market most likely at the expense of 16,000 houses that otherwise would have been supplied by private developers elsewhere in Auckland. The net gain in Auckland’s housing stock from the Government demolishing almost one third of the region’s state housing will be fewer than 10,000 units over ten years. But the 34,000 figure will stick in the public’s mind and this is what matters.

A second misleading claim appeared on Budget day when Ms Adams issued a press statement claiming that her Government had provided “$100 million in new capital funding to allow vacant or under-utilised Crown land to be freed up for additional housing developments.” Accountants might believe such a claim because while in their terms it may be correct, in economic terms the $100 million is a paper transaction between one agency of government and another. Moreover the final intent here is to sell Crown land to private developers so really we have a sly privatisation being presented as a capital investment under the guise of addressing Auckland’s housing shortage.

But Ms Adam’s claims of 72,000 social housing units by 2021 deserves special scrutiny because this number doesn’t exist in the real world.

Ministry of Social Development (MSD) reports that in September 2016 it funded 61,407 social housing units of which 28,591 were in Auckland. The Ministry, in its 2016 Social housing purchasing strategy 2016, indicated that it expected to fund a further 3790 social housing units over the next three years or so – of which 1900 are planned for Auckland. This means that with the best will in the world we will have around 65,000 social housing units receiving Income Related Rents by 2020.

The actual numbers could be fewer than this and on any account something of a sleight of hand with the expected numbers for additional units being presented by MSD.

The Ministry reports that it has an expected 2626 units in its supply pipeline for income-related rents. This number includes an additional 3211 units being provided by community housing providers and a loss of 585 from Housing New Zealand. This net loss from Housing New Zealand is due mainly to the sale in early 2017 of 1124 units in Tauranga to Accessible Properties – a IHC subsidiary.

However the numbers are not as rosy as all that if we consider where these additional 2626 units exist or are likely to come from. Of these 2626 units, 1323 (half) result from transfer of housing for elderly units from local councils in Auckland, Hamilton, Horowhenua and Christchurch. These are not new social housing units – they have simply been brought into the Income Related Rent programme. A further 481 units are existing ones provided by community housing providers which will also come into this programme. In other words 1804 of the 2626 additional social housing units being claimed by the Government already existed. Furthermore of the remaining 822 units which are truly additional ones, just 765 are actually new builds with the remainder being leased from the private rental stock.

To its credit the Government committed more to housing support programmes in its 2017 Budget. The budget for Accommodation Supplement subsidies will increase from $1129 million in 2016/17 to $1515 million by 2020/21 although the actual increases don’t commence until April 2018. These increases are overdue given the maximum amounts paid to households under the programme which have not been adjusted since 2007. This increase – of almost $400 million per year, creates an excellent natural experiment that will expose the extent to which this $400 million disappears into landlords’ pockets as higher rents.

The Government is also committing more than $250 million per year extra to Income Related Rent subsidies with this budget rising from $848 million in 2016/17 to $1105 million by 2020/21. This increase – of around 30%, is substantially more than the forecast MSD increases in the numbers of social housing units in the Income Related Rents programme. These are expected to grow by about 8% over this period. Clearly then the subsidy rate is increasing by over 20% in nominal terms although the reason for this increase has not been given. However, such an increase will improve Housing New Zealand’s operating position and will allow it to fund the $1.1 billion in extra debt which it will incur to pay for the Government’s Auckland housing promises.

It would be quite unfair to claim that the Government is not responding to the housing crisis, even though it does not acknowledge it as a crisis. The increase in housing support budgets of $650 million per year over the next four years is significant. The additional social housing units being built in Auckland are tangible and the modernisation of the state housing stock is overdue.

Certainly these responses have come far too late to avert the crisis we are now experiencing and the question remains as to whether or not they are adequate or appropriate to the challenges faced.

The immediate problem with the Government’s approach to housing is the misinformation which at times borders on deceit. The overstatement of numbers is deliberate and wilful and appears designed to inflate the scale of the response in order to take political pressure off the Government in election year. But the quiet sell-off of Crown land to developers under the guise of building housing for homeless people is cynical and nowhere is this demonstrated better than in sale of Point England Reserve.

At the heart of Government’s housing response is the now discredited trickle-down theory; if enough $800,000 houses are built on public land then eventually the poor will benefit. In the meantime the big numbers distract us and create the illusion of a commitment by Government which is at best flimsy.