It has a “rock star” economy, a pristine environment and has become a bolthole for the global super rich. But New Zealand is struggling to house its citizens and is preparing a radical shake-up of housing policies, which could make it a test case for other nations.
“The market for housing in New Zealand is completely broken,” says Grant Robertson, New Zealand’s minister for finance, who is part of a Labour-led coalition that returned to power in October after a nine-year absence.
“The price of land and building has been increasingly exorbitantly while the level of building of affordable homes has dropped off enormously.”
This week Wellington will publish legislation to ban foreigners from buying existing homes — the first plank in a suite of policies designed to tackle a chronic shortage of affordable homes that has sparked a homeless crisis.
The problem is mirrored across many western nations — including Canada, the UK and Australia — where low interest rates have supercharged house prices, removing the prospect of home ownership for many on lower incomes. An influx of foreign home buyers, fast-rising rents, stagnant wages and cutbacks to public housing schemes following the 2008 financial crisis are all taking a toll on housing supply and affordability.
But it is particularly acute in New Zealand, where a recent report by Yale University concluded the country is suffering the highest rate of homelessness in the developed world with 40,000 people, nearly 1 per cent of the population, living on the streets or in emergency housing or substandard shelters.
“We lived in one room at my mother-in-law’s home for months, with the kids on the floor,” says Maleesha, a mother of six children who returned to live in New Zealand with her husband last year.
“But we had to move out and have made dozens of rental applications. Even though my husband has a job no landlords have accepted us.”
Maleesha, who asked that her surname was not published, is one of thousands of New Zealanders, who have returned home from Australia to cash in a decade of robust growth that prompted HSBC Bank to label New Zealand as the west’s “rock star” economy.
But surging rents, record immigration and a failure to invest in public housing has created a crisis, which dominated the recent election that swept away nine years of conservative governments.
“We have a rock star economy for those lucky enough to enjoy rock star wages,” says Jan Rutledge, manager at De Paul House, a charity in Auckland. “But New Zealand is a low wage economy and for those on the margins finding affordable housing is a challenge.”
Maleesha’s family is one of 18 living at De Paul House’s Auckland emergency accommodation centre, a collection of units that provide support services such as budgeting advice, as well as a roof over their heads. Nine of the families have at least one member of the household in work but are still unable to find affordable housing.
“The big change in homelessness is the number of working families struggling to find homes and pay rent,” says Ms Rutledge, who adds the situation is the worst she has seen in her 13 years working in homeless services in Auckland.
Nationwide, some 5,844 people were on the social housing waiting list in September, a 42 per cent increase on the same month two years ago.
The housing crisis was a key issue in September’s election, which ousted the National party from power after almost a decade in government.
“There is going to be a change and a clear signal sent internationally that New Zealand is no longer for sale in the way it has been,” says Winston Peters, deputy prime minister and leader of the New Zealand First party, which is in coalition with Labour.
Chinese property investors have targeted New Zealand, which has seen property prices increase 57 per cent over the past decade. In Auckland prices surged 90 per cent. The country has also earned a reputation as a haven for the global super-rich with billionaires such as technology entrepreneur Peter Thiel buying vast estates in a country far from the world’s trouble spots.
Like many countries in the aftermath of the 2008 financial crisis, the former New Zealand government sold off state housing and has failed to build enough affordable homes. The number of social houses owned by Housing New Zealand peaked at 68,148 in 2011, compared with 61,323 in 2017.
Last year the deteriorating situation saw dozens of families in Auckland sleeping in their cars, prompting the former conservative government to allocate NZ$300m towards emergency measures, including putting up homeless families in motels.
“They sleep in parks, supermarket car parks or in friends’ driveways. It’s hard to know just how many people live like this,” says Nicki Dutton, a Salvation Army worker, who provides support to people living in vehicles. “Typically, one of the family has a job and can’t move away, even though they can’t afford rent.”
As well as banning foreigners from buying existing homes, the coalition plans to build 100,000 affordable homes, stop sell-offs of state housing, and provide more funding for homeless initiatives. It also wants to tax housing speculators, who will be defined as anyone who sells a house within five years of buying it.
But delivering these policies, while maintaining its promise of retaining a budget surplus, will be a challenge for the fledgling government. House prices have already stalled with Auckland experiencing a 0.6 per cent fall in prices in October — the first annual decline in six years. Some economists have warned falls in house prices could drag down the economy.
“My view is that a sustainable growing economy can’t be based on housing speculation,” says Mr Robertson. “I want a functioning housing market — I want to ensure that people move through from renting to ownership.”
Housing challenges
Philip Hammond, UK chancellor, made fixing Britain’s “broken housing market” a centrepiece of his November Budget, allocating £44bn over five years to build 300,000 net homes a year.
Affordability is a big issue. It costs the average Londoner 14.5 times their average salary to buy a home, according to Hometrack, a research company. The budget scrapped stamp duty on the first £300,000 of a house for first-time buyers — a measure that economists’ say has drives prices higher.
Australia suffers from a housing shortage in certain areas — the government estimates there is an undersupply of 100,000 homes in the state of New South Wales alone.
Sydney has the second least affordable housing in the world after Hong Kong, according to Demographia, the research group.
The Australian federal government is providing tax incentives for first-time buyers, by enabling them to save for a home deposit within their pension schemes. Canberra bans foreign buyers from purchasing existing homes.
Copyright The Financial Times Limited 2017
2017 The Financial Times Ltd. All rights reserved. Please do not copy and paste FT articles and redistribute by email or post to the web.
