19 July, 2012
New Zealand Housing Futures Conference
Thanks for the invitation to your conference. I’m glad to be here.
To start by going back a bit . . . in 1937, Mickey Savage carried a dining table through the front door of 12 Fife Lane, Miramar, here in Wellington, and opened New Zealand’s first state house.
He backed an excellent model. It kicked off the development of mass state housing, provided shelter for generations of New Zealanders, and for several decades the state picked up the tab for good quality social housing used by working people.
My point is that, 75 years later, spaceships, computers, cellphones and the internet have all been invented and New Zealand society has come of age – but our social housing model is still much the same as the one Mickey began.
Certainly, the 1990s brought a significant change, to a demand-side approach. In that time, the Accommodation Supplement was introduced and social housing moved to mainly providing rental accommodation for people on welfare.
When we moved into the new millennium an entirely different, supply-side, picture began to emerge, culminating in the situation we face today.
For an objective point of view of where New Zealand sits, a reliable international observer is a good starting point. Over the past decade, the Demographia International Housing Affordability Survey has issued ratings for metropolitan markets.
The Demographia survey concludes that for many housing in New Zealand was unaffordable, with a median multiple of 5.4, more than the historic affordability norm of 3%.
Not surprisingly, it found that Auckland was the least affordable market, with a median multiple of 6.4, with Christchurch, Tauranga-Western Bay of Plenty, Dunedin and Wellington termed severely unaffordable.
If you add to those findings the fact that New Zealand houses are among the largest in the world, that we have a historically low new-build rate, and those newly-built houses are mainly large and fairly expensive, you start to see the extent of the problem.
The reason we face this situation can be summed up in one word: supply. We are simply not supplying enough housing to meet the demand.
It’s a new century and a new world. The solutions that have worked for New Zealand housing for decades no longer work, and we have to find a new approach to our housing problems.
We have already made a solid start to finding a way forward. Housing New Zealand has restated its role and focus as providing good quality, subsidised rental houses to people in the greatest need of housing, for the duration of their need. Its customers are people who have no other housing options, and it focuses on the efficient and effective management of state houses and the tenancies of those living in them.
We have taken the first steps toward growing non-government housing providers by setting up the Social Housing Unit. This unit brings together a team of people who have worked on social and affordable housing projects both internationally and in New Zealand. They have sound business experience and the commitment to create a platform for non-government providers to play a bigger role in providing social and affordable housing, to complement Housing New Zealand’s role.
SHU director Michael Pead will be talking to you shortly about the Social Housing Fund - the Government’s investment of $104 million over the next three years. This is intended to be matched by the same or more from providers, doubling or tripling this investment. This multi-year investment, the first of its kind, demonstrates this Government’s commitment to developing a more robust and competent non-government housing sector. It is on top of the $700 million on IRR, $1.2 billion in the Accommodation Supplement, and %15billion in state housing.
As Michael will explain, the SHU has a dual objective: to adapt and change the social housing market by introducing and developing non-government providers, and to respond to changing demand with a targeted increase in supply. This means the way that $104-plus million investment is applied will be critical.
In return we expect a strong, cohesive performance from this sector. We want these housing providers to recognise the huge opportunity before them, and to take advantage of it with sound, future-oriented planning.
The next step is to develop a broad range of initiatives. Let me paint a picture of the social housing sector we aim to create.
First, it will be locally driven. We believe local people are the best judges of the kind of housing that will work best in their community. We don’t want to impose a concept dreamed up in Wellington on a completely different part of the country. This means social housing created for Manukau might look completely different to social housing created for Whangarei or Wairoa.
We’re looking for vibrant, competitive social housing. We will welcome innovation. We will strive to achieve a better balance between supply and demand. Fostering a locally driven, innovative, vibrant and competitive social housing sector will, we consider, slowly expand the supply available.
When we look at the housing continuum and supply of affordable housing in some markets, it is clear that some low income households are struggling to find affordable housing.
The state housing portfolio is rightly focused on families with greatest needs, so that's not an option for all. The private rental supply is often limited at that end of the market, which lower income households can afford.
This is a gap in supply which can effectively be met by non-government providers that already have strong linkages with their local communities and broader support services.
Michael Pead will talk a little more about the work the Social Housing Unit is doing on the housing continuum.
The scale of unmet demand is considerable. The level of need is too high to continue to expect the taxpayer – the state – to fund alone. As well, the new millennium has given us two entirely new problems.
One is that a new group of people, not in the welfare system, are finding home ownership out of reach and face a lifetime of renting. This group includes people their 30s and 40s, who are working and, in previous generations, would have been able to afford their own home.
Second, two housing pressure points have emerged. One, in Christchurch, was a completely unexpected event. We are dealing with it, and I was encouraged to see recently that more than 30 new building projects – both residential and commercial - worth more than $80 million, were approved for Christchurch in the three months between April and June.
The other social housing pressure point is in Auckland. The draft Auckland Plan estimates an immediate shortfall of 10,000 houses, and possible annual demand of 11,000 new houses a year, over the 30 years to 2040.
So we’re pleased to see, in the Auckland Plan, identification of the need for urgent, large-scale, bold, multi-sector action to meet housing supply and demand.
This is a plan with real vision, and translating its ideals plan into reality will need bold action and strong community support.
I’m pleased to see that plan acknowledging that land supply is an issue in Auckland, and that the original position on the greenfields boundary has changed. It now aims to ensure that at all times there will be five to 10 years of development land available in Auckland, and that 20 years of capacity will be in the planning pipeline at all times. It’s a step in the right direction, but we would like even more movement. We also agree about the need for intensification of housing in the existing urban area.
The Tamaki Transformation Programme provides a massive opportunity for economic development. The Transformation programme will make better use of the land and improve the community facilities that meet the needs of the people who live there now and in the future. The vision for Tamaki is to be a place where people thrive and prosper for generations, with a strong and vibrant community spirit.
Throughout the country there are options to develop “brownfield” sites such as Tamaki and also completely new greenfield sites, on existing Crown and territorial authority land. These offer considerable potential. We will take a careful approach to developments, possibly using pilots to test out concepts.
Moving on from Auckland, the changes we are seeking in social housing are not a quick fix. They are complex and will affect people’s lives. We need to ensure any measures we introduce are robust, durable and well-designed, and we need to find the best way to achieve our goals without causing unnecessary disruption to vulnerable households.
What is working in our favour is the economic climate - interest rates are at a record low, which is making housing more affordable. In fact, the New Zealand economy has now grown in 10 of the past 11 quarters, despite the ongoing European debt crisis, the Canterbury earthquakes and a high exchange rate, and will continue to expand this year.
That economic climate is a help for affordable housing, but a number of factors drive the high cost of housing. One is the high cost of construction. Another is some local government processes – for example, some consenting processes.
The Government will play its part – but it doesn’t control all these elements. It needs strong, committed partners who understand the vision and will work together – and that includes local government.
As we work to improve our country’s social housing it’s vital we keep remembering our primary motivation: to improve New Zealanders’ housing and therefore their lives.