Well Done – More Needed

Andrew Little and the Labour party will no doubt receive deserved plaudits from the general public, and perhaps even grateful thanks from the homeless and from first-time buyers, for the housing policy initiatives they announced last week.  They are at least on the front foot, whereas the government seems paralysed by indecision and by a reluctance to upset their friends in property development and speculation.

The significance of Labour’s proposals, however, significant as they are, goes well beyond the housing issue.  They offer the prospect of a new – or perhaps resurrected – approach to the political debate in this country.

Like much of the rest of the developed world, New Zealand has spent the last 30 years or more operating within a neo-liberal agenda.  The central feature of that agenda is the assertion that major decisions are for the market to make, not the government.

The corollary of that assertion is that there is no role for government in the growing areas of policy where the market is now accepted as dominant.  The market, it is said, is infallible; to second-guess it would necessarily mean that outcomes would not be as good.  The best thing a government can do is to get out of the way, and let the market do its job.

Never mind if there are losers as well as winners.  The dice should be allowed to lie where they fall.  It would be wrong to deprive the winners of their gains, or to frustrate them in their exploitation of market forces, just as it is not the responsibility of the market to look after those who can’t foot it and must pay the price for their failure.

And so it has been in the housing market.  The unregulated and un-supplemented “free” market has certainly delivered major prizes to the winners.  But it is increasingly clear that the market ignores the interests of a growing sector – those who can never hope to buy a house at today’s ever-inflating prices or even meet the rapidly rising rents produced by inflated capital values. These people are simply left behind to fend for themselves.

The Labour party’s proposals are a major rejection of the doctrine of market infallibility.  It accepts that it is society’s responsibility, through the government we elect, to remedy the market’s failures and excesses, so that our fellow-citizens are not left without somewhere to live.

This is not a novel idea.  The notion that we needed as a country to ensure that all our families and children were decently housed was for decades a hugely significant aspect of life in New Zealand, something that was thought to be an essential manifestation of our national character.  It is only in the last four decades that we have lost sight of this important New Zealand value.

It is not surprising, therefore, that the Labour housing initiatives have struck a chord.  It may be that Labour will be encouraged by the public response to show a greater willingness in other areas as well to intervene where the market fails to deliver acceptable outcomes.

Even in the field of housing, there is room for more courage, positivity and new thinking.  Labour’s initiatives are still limited and hedged in by market concepts.  They do not propose the building of publicly-owned state houses available at low rents to young families (which are really what are needed), but the subsidised development of “affordable” (at half a million dollars minimum) houses for sale to selected first-time buyers.

And Labour’s house-building programme, commendable though it is, will do little by itself (and will in any case take a long time) to make any impact on fly-away prices.  It would be nice if Andrew Little were right when he says that a properly functioning housing market would mean house prices grew no faster than the CPI, at 2-3%.  But the housing market, by virtue of the way it is financed, will always rise much faster than any other.

There is no other market – for boats, cars or tin tacks – where the banks will lend up to nine times one’s annual income, with the result that that there is a guarantee of continually rising prices and of a substantial capital gain for those who can deploy, with the help of the banks, such inflated purchasing power.  That will not change, and the problem will remain unresolved, for as long as the structure of housing finance remains unchanged.

Labour’s new (or at least resuscitated) thinking about housing, in other words, needs to go much further.  If we are to solve the problem of a malfunctioning housing market, in terms of both homelessness and unaffordability, we need to correct the reasons for that malfunction.  The government is manifestly not willing to do so.

Labour’s readiness to re-open the political debate on its own terms, as it has on homes for first-time buyers, should be just the start.  We need more of the same courage, on housing and on other matters of great social significance, like health, education and the environment.  Such courage, on the part of a party willing to accept the responsibilities of government rather than always deferring to the market, could pay rich political dividends.

Bryan Gould

12 July 2016