Saturday, May 02, 2015

Andrew Little, my father-in-law, and New Zealand's housing crisis

[Over the past few weeks a series of politicians, media commentators and academics have discussed New Zealand's overheated housing market, and suggested ways of making homes less attractive to speculators and more affordable for families. Fran O'Sullivan has urged John Key and Andrew Little to get together and craft a capital gains tax that might prick the housing bubble; Bernard Hickey has suggested a tax on land, rather than capital gains; and Penny Hulse has called for rent controls and a massive housebuilding programme in Auckland. 

New Labour leader Andrew Little has not played a prominent role in the debate over housing. Little is aware of the intensity of the debate over housing, and the frustration of so many New Zealanders at runaway prices, but he believes that Labour lost the last election partly because the public disliked its proposals for a capital gains tax. He wants to throw away that policy, but has not yet devised anything to take its place. 

Recently my father-in-law, the educationalist Alan Wagstaff, e mailed Andrew Little to outline a policy that he believes might help alleviate New Zealand's housing crisis. I've reproduced Alan's e mail to Little, Little's reply, and I comment that I sent to Alan that tries to put his proposals into an historical context.]

Dear Mr. Andrew Little

Assuming you deal with many hundreds of messages I’ve expressed myself in minimalistic terms. The high cost of land holds many New Zealand families in poverty. There are approximately 1,265,000 families living in New Zealand in 2015. In 2015, about 19,000 NZ families live in poverty. LINZ manages over 1.5 million hectares of pastoral land in the South Island on behalf of the Crown.

The idea:
Give 800 square metres of land to 19,000 families. 
This would be 15,200,000 square metres or 1,520 hectares
The Crown would still manage 1,498,480 hectares of land. 
Who gets which parcel of land could be determined by chance. 
What poor families do with their land would be up to them.
Alan Wagstaff

After Andrew Little sent a quick and interested reply, Alan explained his idea in more detail:

Hello Andrew
I’m grateful and amazed you were able to respond so promptly.

To elaborate further:
  1. The land would not need to be accessible – or necessarily/even used by the new owners - it would be an asset that might be sold by them or used as collateral.
  2. The system would not try to be ‘universally fair’; merely 19,000 lots would be given away and thus would impact some struggling families in NZ – but not all.
  3. The system might impact (slow the rise or even lower the cost) the high price of land in this country via reduced demand.
  4. The allocation could be by random lottery type numbers to families only identified by code.
As you are aware young New Zealanders – even those in employment – are finding it increasing difficult to get on the property ladder. I suspect we are in danger of creating a dispirited generation of young families. I suspect that such a bold and unexpected move might inject a wave of hope into young NZers.

Food for thought!
Alan Wagstaff

Here's my message to Alan:

Hi Alan,

thanks for sharing that fascinating exchange with Andrew Little. It is encouraging to see him engaging with a voter who offers some policy advice. I've got my head in the nineteenth century right now, because of a research project, and I can't help but think of some precedents for the scheme you advocate.

I'm sending this message from my parents' place in Drury. A couple of kilometres away, at the edge of a forest, are a few dozen old and untended graves. They are the only visible remains of Peach Hill, one of scores of communities established by soldier-settlers and assisted migrants in the years after the Waikato War. 

After invading and conquering the Waikato in 1863 and '64, the colonial government in Auckland needed to settle its new territories with loyal members of the British Empire. It gave blocks of land away to thousands of soldiers, and offered free passage as well as free land to Australians, Britons, and Irish willing to settle the Waikato.

Peach Hill was the new name for Te Maketu, an ancient pa and village that had been used as a lookout by Maori guerrillas during the early stages of the Waikato War. Te Maketu was part of the two million acres confiscated by the colonial government after the war. Its groves of fruit trees and terraced fields were divided into small plots and handed to a group of assisted emigrants from southwest Ireland. The emigrants raised dozens of houses and a Catholic church, took over the orchards Maori had established, and ran stock in their fields. Without a port or a good road, though, they struggled to find a market for their produce. Their settlement soon declined, as families left for the Coromandel, where gold had been discovered, or Auckland, where jobs could sometimes be found. The departees sold their plots for tiny sums to the Auckland moguls who had fomented the Waikato War.

Peach Hill was only one of a dozen or so settlements that were abandoned in the 1870s and '80s. Some of these settlements have been forgotten; others persist as misleading names on maps. Camerontown, which was named after the elderly British general who reluctantly led the invasion of the Waikato, is a few acres of bush behind Pukekohe; the blocks of nearby Harrisville, which bears the name of one of Cameron's subordinates, are filled with onions and potatoes rather than houses and shops.
You might argue that the Waikato settlements I've been discussing are not really relevant to the scheme you advocate, because you don't foresee the families who receive small pieces of land from the state actually having to occupy that land. These families might lease their plots, or use them as collateral for loans, or sell them outright.

But I think there is a second piece of New Zealand history that shows some of the difficulties involved in handing isolated fragments of land to people with few resources to develop that land. 

In 1906 the Seddon government guided the South Island Landless Natives Act through parliament. The Act gave four thousand members of Kai Tahu, the main iwi of the South Island, ownership of nearly sixty thousand acres of land. These 'native reserves' were supposed to provide an economic base for South Island Maori, who had lost almost all of their land in the nineteenth century. But the land handed over in 1906 was inaccessible and often infertile, and much of it lay unused for decades.

Kai Tahu's reserves included a few pieces of the rainforest in the Caitlins region of Southland. When the iwi announced plans to log its forests, though, environmentalists protested, and the government intervened to protect the trees.

Only when Kai Tahu signed a Treaty settlement in 1998 did it win some genuinely valuable pieces of South Island countryside from the Crown.

I suspect that families who were gifted small pieces of land in remote parts of New Zealand would suffer some of the same frustrations as twentieth century Kai Tahu. If a family's plot of land could not be reached by a road, then it would surely be useless for most purposes. Even if it could be connected to a road, then zoning laws and environmental regulations would make its economic exploitation difficult, and make it impossible to use as collateral. An acre or so of scrubland on the side of a Fiordland mountain is not likely to fund the purchase of a house in Auckland.

I think that the examples of the postwar Waikato settlements an the Kai Tahu reserves show that the gifting of land is not the same, in New Zealand, as the gifting of economic security. (I could use other, and more recent, examples to try to make my point - the famous ohu scheme that saw Norm Kirk and Matiu Rata handing remote scraps of land to hippies who wanted to found communes, for example - but I'm sure I've gone on long enough already.)

I think that the housebuilding and buying schemes run by the Massey government after World War One and the first Labour government in the 1930s and '40s offer better models for a government serious about dealing with the housing crisis in Auckland and other New Zealand cities.
Although William Massey was a very conservative leader, he was afraid of the industrial conflict that poverty and poor housing conditions helped create in pre-war New Zealand. The Housing Act he introduced in 1919 saw local governments being paid to build low-cost houses that could be acquired without deposits. The first Labour government softened the pressure of market forces on the housing sector by building tens of thousands of state homes. Even the Key government seems belatedly and reluctantly to have admitted that it needs to intervene in the housing market: this week it offered two hundred million dollars to build low-income homes in East Auckland.

New Zealand history suggests to me that building in the cities, rather than gifting remote pieces of land, is the way to help families into homes. 


[Posted by Scott Hamilton]


Anonymous re SILNA said...

It should be noted that not all the forests handed to South Island Maori in 1906 remained unlogged. In fact, some have been logged for decades. In other cases environmentalists and governments have prevailed. Some background here:

10:47 am  
Anonymous Anonymous said...

The most significant progressive land reform in NZ occurred in the 1890s, when the Liberal government 'busted up' the huge estates of neo-feudal sheep farmers in the South Island, and handed them to small farmers. The Cheviot estate in north Canterbury was broken into one hundred and fifty pieces after being taken by the state.
The Liberals led what might be termed a middle class revolution in the rural South Island. Today NZ farms are once again swelling in size, an the cockies who ran stock on small blocks are gone.

10:52 am  
Blogger Paul Janman said...

I agree with you Scott, that this problem has many historical layers. A large state housing project is being opposed by Wai o Hua next to the Otuataua Stonefields in Ihu-o-Mataoho in Mangere. The ostensible reason is that it contains and neighbours wahi tapu, which is true. Another reason is that such a development will push up rates in the area and possibly further alienate local people who have been mucked around for over 150 years with land confiscations, an airport, sewerage treatment plants, after previous centuries of successful occupation. But we need the houses right? The houses are there, it's the privileged and greedy class that needs to be reeled in. I regret Little's retreat on capital gains tax in the face of a near complete ideological triumph of self interest in contemporary Auckland.

10:55 am  
Blogger Richard said...

They should outlaw auctions of housing. My house, an ex state house (and rather run down, my father bought it off the National Government in the 50s), would auction now for a very large sum but I really don't like that system. It means prices continue to inflate. In addition, of course they should introduce big capital gains taxes or increase those already in law. Also handing over State Houses and ejecting people is quite wrong. People who have the income should be encouraged to buy but not forced into large mortgages. Older people and those who are struggling should be left alone.
But it seems they want to work with private Capital who will 'gentrify' where I am (this happens all around the world).

The State Housing system and the Welfare State, properly managed, together with good credit systems will keep NZ from collapsing into a major economic collapse. It is just 'fiddling' to sell off State Housing and it is stupid to allow speculators to keep young people out of new homes or affordable accommodation. In the long run it is not good for the economy or the 'soul' of this world to do such things.

12:01 am  
Anonymous Anonymous said...

Have read reports, over the years, about a bird as big as a Cessna seen flying in Canada and Alaska.
Not a pterodactyl, but modern bird looking, very big thing.

8:59 am  
Anonymous Jack said...

At a rural candidates' debat I attended last year, a Conservative Party candidate mentioned what he thought was an underplayed part of the party's manifesto, namely the return of a ballot of LandCorp and for prospective farming families.

It interested me, and makes me wonder if the most distinctive part of the Conservative platform was a guiding vision of an economy comprised of family/business units.

9:58 pm  
Anonymous Scott said...

Thanks for that Jack! I've passed your report on to Alan Wagstaff. It's a pity that the Conservatives didn't give more emphasis to their economic ideas, as they well have found them more saleable than the theocratic stuff...

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