Buying your own state house

It’s not often I agree with National on the issue of state housing but I reckon its policy as apparently described by Phil Heatley yesterday seems fairly sensible:

Housing spokesman Phil Heatley told a Housing Institute seminar in Waitakere yesterday that National would give back to Housing New Zealand tenants the right to buy their houses.

They had this right until the Labour Party won the 1999 election.

But he said National would not sell state houses to outside investors, as it did in the 1990s, and would use the proceeds of sales to tenants to buy or lease new state houses.

“If they purchase their state home, we will replace that home within the housing stock so as to lift someone else off the waiting list,” he said.

 National has also said it will retain the policy of fixing rents at 25% of tenants’ income.

The two key parts of the policy for me that make it acceptable are:

  • it should only be the people living in the home that have the right to buy it, not outside investors and speculators.
  • and the proceeds from the sale of the house should be used to buy to build more state houses to replenish the existing stock. Increasing the housing sock in this way may even help lower rents over time.

It would also allow the government to eventually spread state houses more evenly throughout our towns and suburbs rather than creating clusters of state house suburbs separated from the rest of the community and possibly ghettoised. It’s important though that we also significantly increase our state housing stock to help people who currently are struggling from unaffordable accommodation.

In the end the proposal has the potential to be a good system for for getting people into their own homes.

22 Comments Posted

  1. They are shooting themselves in the foot a bit by not allowing foreign investors in. This would lift more people off the waiting list and get more homes built while making more money and better homes.

  2. Thanks Janine for providing another perspective on state house sales.

    I hope that my comments have not been misconstrued. When I wrote about the idea that state housing is a “privilege? which tenants “neither need nor deserve?, I hoped to make it clear that is an idea with which I strongly disagree.

    And neither do I believe that either pity or envy are appropriate attitudes to adopt towards state house tenants. But, regretably, envy seems to figure very largely in the attitude of some, particularly those on the political right.

  3. Interesting thoughts on state housing and how it is a privilege that tenants ‘neither need nor deserve”. Or were pitiable etc.

    I grew up in a state house in a regional town – never thought of it as being anything unusual and my parents faithfully paid their State Advances money every week so that eventually they would own it. It took them 30 years but own it they did, which means my widowed Dad could afford to sell it once we’d left home and buy himself a small pensioner flat and be beholden to no-one. Speculation didn’t come into it, just security.

    I think that for many of their generation the state house was about security for their families. Naive possibly but it worked for a while. No factories near us, just paddocks that eventually became more state and non-state houses. And shops and schools. It was pretty much what you’d call working-class though (another term that meant nothing to me until I went to university).

  4. it would be good if any new state houses were ‘eco designed’ (or any new houses for that matter).

    Most of today’s houses are not designed with energy in mind, as far as i can see (looking at dreary new subdivisions in west christchurch). I am wondering what is wrong with the nation’s house designers as they are churning out very standard single story hip-rooved houses, which dont do the business.

    weedeater has got a neat ‘shareware’ design for a small footprint 2 story eco house, if anyones interested. solar gain is what it does in winter, reflects heat away in summer.

    I call it a ‘sun catcher’ barn, based on fair dinkum’s [url=]quaker[/url] series and resembling their verandah model…but whereas most conventional punters would put the front of the barn facing North, Weedeater’s goes ‘side-on’ to the North with solar panels/windows on steep part of north side roof (catching that low-in-the-sky winter southland sun) .

    a 3rd story ‘crows nest’ is possible by pushing up section of roof on north side adding a broad dormer window/panels, catching even more sun. I cant wait to get this built -my one will be roughly 8 metres high, long and wide (hope i pass the resource consents!)

  5. Geoff,

    Good summary. Problem for the people is that we are constantly told to save, save, save. We are spending more then we earn.

    Well us baby boomers have been caught in the past by shonky finance companies and hence put our savings into property.

    How many savers today do you think will put their savings into finance companies. None, the burnt ones will look at a more solid investment (property) while the ones on the sidelines will look at?.

    Problem is there is nowhere to get an honest return to make saving worthwhile. (even KiwiSaver, not being government guarenteed like Australias’ is not immune from falling over).

    Totally agree with your last paragraph. Sadly I think only a major crisis such as a war will bring that about, and ten only for 10-20 years before the cycle starts again.

  6. Some of the perceived problems which have been raised concerning state house tenants who supposedly take advantage of a privilege which they neither need or deserve do not strike me as being problems at all. Take my own case. I own a solid older house in a regional town with a capital value of $250,000. I let it to some young people for $150 a week. That covers the rates, insurance, and necessary maintenance. It doesn’t cover the so-called “cost of capital? but why should it? From my perspective, I am not doing the tenants a favour, neither am I exploiting them. They are meeting the fair and reasonable costs of living in the property. If state tenants have a similar contractual arrangement with their landlord, then I do not see any problem, and I do not see why they should not remain in occupation indefinitely and regardless of their circumstances. But I have no influence over the New Zealand state and so will not engage in a debate over what the state should do with respect to its tenants. That is for the state itself to decide.

    Looking at the wider social picture, of which the housing question is only one element, I do not believe that the New Zealand state is able to offer any solution to the problems of New Zealand society. The state and society are caught up in a vicious cycle, with the state saying to its subjects (at least since the time of the fourth Labour government) “You must take care of yourself? (i.e you must provide for your own housing, your own education, your own health, and your own retirement) and society responding by embracing the dictum “Look after Number 1″. But the “Looking after Number 1″ has not worked, and will not work in a social context. There are no personal solutions to social problems. In vain pursuit of a personal solution to the problems of life in society, the baby boomer generation has obsessively coveted real estate (with the avowed intention of “providing for old age?), poured their money into shonky finance companies, and condemned subsequent generations – often their own children – to a life of deprivation. We are facing a failure of both state and society, but I believe that New Zealand society, or at least a significant section thereof, has the capacity to redeem itself. I have no such confidence with respect to the state which has in my view become incorrigibly corrupt.

    I believe that there are no personal solutions to the social crisis, but there are, and always will be, personal responsibilities and moral obligations, and by fulfilling those obligations we can begin to re-establish the basis for a collective solution to the problems confronting our nation.

  7. Gerrit Says:
    July 24th, 2008 at 1:20 pm

    > Do you have any answers for the problem of the state providing housing for the needy, but having a real problem getting the tenants to move on when their financial position sees them back on their feet?

    most council housing is rented at market-based rates, a certain percentage below market value. I suppose you could say that the lower your income, the lower the percentage of market value you pay. That way, if your income rose too high, you would end up paying a rent set at above market value, which would probably be a good incentive to leave.

  8. Geoff Fischer Says:
    July 24th, 2008 at 9:53 am

    > National’s proposal to allow state house tenants to buy the property they occupy would, as thomasf observed, would result in immediate on-sale of many of those properties at a discount to speculators and private landlords. The way it works is: the state offers to sell to the state house tenant at below market value (there is normally no point in the state offering a sale at market value, since if the tenant can afford to at market value he can afford to buy anywhere and from any other vendor).

    I’m wondering if they could get around that by selling the house at market value, but subsidising it by giving the tenant/buyer a mortgage at a special rate (The government can’t offer these cheap mortgages for people buying homes from private sellers, because that would just inflate the sale prices)

  9. Geoff,

    Nicely outlined the potential and possibly very real outcome of the policy.

    Do you have any answers for the problem of the state providing housing for the needy, but having a real problem getting the tenants to move on when their financial position sees them back on their feet?

    While to policy outlined has the fishhook as outlined in your comment,

    What is the answer?

    Should a state tenant be allowed to live in a state house till they die? There are many anomolies in that system (a single older person sitting in a four bedroom house for example).

    Not sure but I suggest that history will show that once someone is in a state house they show little inclination to save for their own (home ownership cost put aside).

    Does the state just keep building more and more housing?

    How big a burden on the tax payer will you go to? Till everyone is in a state house?

  10. National’s proposal to allow state house tenants to buy the property they occupy would, as thomasf observed, would result in immediate on-sale of many of those properties at a discount to speculators and private landlords. The way it works is: the state offers to sell to the state house tenant at below market value (there is normally no point in the state offering a sale at market value, since if the tenant can afford to at market value he can afford to buy anywhere and from any other vendor). Meanwhile the speculator approaches a state house tenant with an offer “I will advance you the funds to buy your state house, and at the same time agree to buy it off you for $10,000 more than the price which you pay to the state?. The speculator then on sells at a handsome profit, while the former tenant eventually returns to the state house waiting list. It is a formula which does not work to the long term benefit of either the state or its tenants, but it does work well for real estate speculators and private landlords. Which is why the National Party is promoting the idea.

    There is a common misunderstanding about state housing, promoted by the regime itself, to the effect that state housing is a charitable initiative of the state, designed to ensure, as far as is possible, the happiness and well being of the state tenants. The reality is that in New Zealand, and the rest of the developed world, the state house system was instituted primarily for reasons of state, not as a charitable exercise. The first purpose of state housing is to provide the basis for a stable and affordable industrial labour force. Thus we have the Penrose state housing area adjacent to the Penrose industrial area, and the Glen Innes state houses next to the Mount Wellington industrial zone, Otara next to East Tamaki, and so on throughout the country. Every industrialist knows the importance of adequate and cheap working class housing to the competitive success of industrial enterprises, which is why nations such as Singapore invested hugely in state housing in support of private industry. The second purpose of state housing was to increase business activity and retain construction capacity in times of recession – state housing contracts were a lifeline thrown to the Fletcher Construction Company by the first Labour government. And the third purpose was to help provide a measure of social stability – widespread homelessness being a major cause of social unrest. From this third consideration has evolved the idea that state housing is a form of charity, and as charity it should, as far as possible, be restricted to the most worthy cases and withdrawn whenever practicable.

    Coincidentally, the idea of housing as charity gained traction as the nature of the regime itself was undergoing fundamental change in the nineteen eighties. (Anyone old enough to remember when state house tenants were objects of pity, rather than envy, to the lower middle classes?). Up until the term of the fourth Labour government there was a consensus within the regime that industry should be encouraged by the state, and state housing was a necessary adjunct of this policy. But from the time of the fourth Labour government the regime consensus shifted away from the idea of promoting industry, and towards the idea of promoting “business?. The wider notion of “business? allowed room for speculation of all sorts, in money, shares and property, and for the growth of the landlord class. These changes had repercussions which were inimical to the interests of productive industry, and arguably to the long term interests of the regime itself. Finance capitalists like Don Brash and John Key instituted policies which were designed to appeal to the interests of the emergent upper middle classes of financial investors, speculators and landlords at the expense of traditional productive industries, which have been badly hurt by the very factors which have benefitted the financial capitalists – rising rents and interest rates along with falling commodity prices.

    This is the context in which John Key’s proposals must be seen. It has nothing much to do with giving a “fair go? or “an opportunity? to state house tenants. It is about advancing the interests of a particular class with which the regime is now most closely identified. This, ironically, when the policies so vigorously pursued by that class are in the process of causing a massive economic meltdown.

  11. Peter Quixote’s got a good point, actually. There is a huge difference between the subsidy the government is giving to people in state houses and the amount of accomodation assistance they are giving to people on low incomes who are in private rentals. As far as I can tell, the only way to change that is to supress prices by dramatically increasing the number of state houses. While I like the idea of former state tenants made good living among current state tenants, it does make it even harder to increase the total state housing stock enough to make a difference and stop income based rents being a special privelege for a small section of the underpriveleged.

  12. yous dead in the swamp over this fwwog .. what happen is this .. them people what get subsidised in house for about like $100 per week .. either through state or local subsidy according to credentials ..
    have the next door neighbour man working for $450 per week and paying up to $300 per week for rental .. fwwog it don’t work ..
    then not only that but what you want is that the NZ Govt give them free load preferential bookings into ownership and next generation of losers capital gain … no no no fwwog forget about it now .. NAt entirley opposed .. get sense .. yous in the house now

    NAT firm on this …. representing NAT housing policy are different what Heatley [ who?] has said, check me out whenever fwwog

  13. d4j, I wouldn’t get too excited. At least the Nats housing policy is unlikely to harm anyone, unlike their 1990s housing policy, I suppose.

    But I can’t see it assisting too many state house tenants to buy their homes. The average annual income of a state house tenant is about $16K, and by my calculations a person with that sort of income could service a mortgage of only about $60K. I think the average state house in Auckland is valued at about 5 times that.

  14. Well I’ll be darned the greens agree with common sense policy. Surely it’s in the best interests of all kiwi communities that state house tenants are given an incentive to better themselves as house owners? I just can’t get over the greens liking blue policy. Well, it made my day. Cheers.

  15. “If they purchase their state home, we will replace that home [from] within the housing stock”

    This sounds a bit weasely to me- it doesn’t come out and say that they will construct or buy more state houses, and inserting that one word makes it sound like they will just renovate existing stock.

    I would expect that the properties will be sold at bargain basement prices to property developers to flog off while the poor get kicked out. There’s gotta be a buck in this for someone…

  16. Hi Sap
    What’s wrong with vertically stacked homes?

    Not the concrete jungles of England, but the DesRes apartment buildings of Toronto say, where life-style as well as accomodation are catered for and people start to lift their community as well as living standards. (Some would say that is a backward step, but I’m all for good steps back to the future.)

  17. seems fine to me so long as the market price for the location is paid. of course unless the new houses are built vertically as opposed to horozontally it doesint really solve the problems of urban sprawl or the ever increasing size of cities in proportion to productive land

  18. In the UK under Thatcher the right to buy your home was a complete disaster. Some people who happened to have a “state” house in say Windsor made an absolute killing.
    But buying your home in say Port Talbot was a terrible idea.
    The good houses still ended up with speculators
    This policy substantially reduced the housing stock available for low paid people.
    “If they purchase their state home, we will replace that home within the housing stock so as to lift someone else off the waiting list,? he said.
    I can feel a TUI advert coming on.
    Yes we need more houses to get people of the waiting list but this is certainly not the way to do it

  19. Not only policy, but good policy. Kudos to the Nats on this one.

    Given we’re about to enter some hard times, and the Nats are liklely to form the next government, this is good news to hear.

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