What are we doing to ensure a supply of suitable housing?

Accommodation Supplement

In 1991, the central government introduced the Accommodation Supplement. The Accommodation Supplement is a ‘demand side subsidy’ and is based on need. Access is conditional on a person being able to find housing in the first place. There are no rules or conditions around the quality or appropriateness of housing.

The Accommodation Supplement has been associated with expansion of privately owned rental dwellings. Between 1991 and 2013, rental housing stock grew by 80% from around 345,000 to 623,000 dwellings. Over the same time, the total housing total stock grew 35%. Half of this additional investment in rental housing stock has gone into new housing with the remaining half coming from the conversion of owner-occupied to rental housing.[1]

The conversion of owner-occupied dwellings into rental housing may have meant that the actual investment in new affordable housing has not kept pace with the demand for this housing. Apart from new build apartments, over the past decade or more, most new builds have tended to be larger higher quality homes. Analysis of HCC building consent data has revealed a trend over the last decade for the construction of houses over 150m sq in size. This analysis revels that the market in Hamilton is currently not supplying, smaller comparatively affordable dwellings.[2]

The extent of state support through payment of the accommodation supplement for the rental market in New Zealand is significant by international standards and appears to be ongoing at around 35% of the private rental market and just over 40% of the total rental market once social housing is included.[3]

Housing New Zealand has traditionally paid considerable amounts of tax ($528 million from 2002/3 to 2011/12). Private landlords, on the other hand, with stock worth over $200 billion dollars often pay very little if any.[4]

 

Housing Accord

The current Government has announced that Hamilton is appropriate for the creation of Special Housing Areas, and it is listed as one of the areas in Housing Accords and Special Housing Act 2013 (HASHAA).

The legislative intent of HASHAA is to speed up the process of bringing to the market additional residential land beyond that currently zoned.

The first step towards establishing Special Housing Areas in Hamilton was for the Hamilton City Council (HCC) to enter into a ‘Housing Accord’ with the Minister for Building and Construction. HCC did this on 22nd December 2016.   With the accord in place, the next step for Council is to consider the options for proposed Special Housing Areas.

The Council will negotiate outcomes for each Special Housing Area. Council will require a certain proportion of qualifying developers to comprise small subdivision allotments and/or dwellings to deliver more affordable private housing.[5]

The Special Housing Areas policy may cover a requirement that the Private Housing Providers engage with Housing New Zealand or a registered Social Housing Provider to explore options to provide social housing, and where appropriate, to provide an acceptable legal mechanism for dwellings to be retained as social housing (freehold or rental).[6]

This retention of social housing is a significant issue. The experience of Waimahia, South Auckland is telling in this instance. The Waimahia social housing project involved a substantial government grant and affordable new housing built by the consortium, Tamaki Makaurau Community Housing Ltd. A number of the first stage houses sold on the open market have already been resold and at a much greater price than the prices set by the consortium.[7]

The Special Housing Areas in Hamilton may enable the building of some affordable housing, but it is not clear how affordable housing is defined, and whether there will be any income or wealth constraints on who can buy the ‘more affordable’ homes. Philippa Howden-Chapman suggests that the formal rules in such developments are critically important to ensure that affordable homes are not snapped up for rapid resale and windfall profits.

The Hamilton Housing Accord target numbers are composed of the total number of land section and dwelling consents which HCC will seek to issue within each of the three years of the Accord.  The target consent numbers (1300 in 2017, 1400 in 2018 and 1500 in 2018) in the Housing Accord are not in addition to the expected levels of consents for each year.

The Hamilton Housing Accord targets were collectively developed and agreed by the Council and the Government.  The targets were determined by examining historical average consent levels and forecasts of demand for houses which are largely derived from population growth projections.  This analysis provided a baseline of the expected consent levels over the three years of the accord. An additional margin was then added to the baseline.  For each year of the Accord this margin increases. It is expected that this additional level of consenting will be enabled by the joint Council and Government actions outlined in the Accord (personal communication, Hamilton City Council).

Building in Hamilton

Building consents in Hamilton increased markedly between 2014 (743) and 2015 (1179) but have since been levelling off.[8]

Source: Hamilton City Council, Growth Indicator Report.

For the year to December 2016, 1196 new residential dwellings (houses, apartments, townhouses and units), valued at $315 million, were approved for construction in Hamilton. This compares to 1179 for the same period last year, representing an increase of 17 dwellings consented (1.4 per cent). The 12-month rolling average graph of monthly new dwelling consents shows an average of around 70 consents per month over the last year. This compares to a longer run average back to 2012 of between 40 – 50 consents. However, the increase on the total number of new residential dwellings is slowing down marginally. Hamilton City Council suggests that this slowing down of consents is potentially impacted by a shortage of skilled workers, increased land prices and the new Reserve Bank’s loan to value ratio (LVR).[9] It is not clear how the Housing Accord and Special Housing Areas will overcome these barriers to development.

Over the past year, the number of townhouses, flats and units decreased by 31 (10 per cent) However, there has been an overall and steady increasing trend of higher density dwellings since the 2008 financial crisis[10].

Source: Hamilton City Council, Growth Indicator Report.

Social Housing Market

More recently, government policy has shifted to the creation of a social housing market, rather than increase the stock of state-owned homes.  Non-governmental providers of social housing are now offered subsidies to provide social housing. These subsidies are offered by the Social Housing Fund, administered by a separate and independent public agency, the Social Housing Unit.

The Social Housing Unit appears to be making assessments of the social housing markets but according to Alan Johnson, this does not seem to involve an analysis of what is required. There is very little anticipation of housing need. Alan suggests that housing projects appear to be funded on the viability of applicants being able to fund 50% of the project costs. Those able include philanthropic trusts, local government, other government contracts and those needing housing. There is not necessarily a relationship between housing needs and the projects being developed.[11]

The development of the social housing market has not received the required focus in terms of project management and support, according to the review in 2015[12].

Philippa Howden Chapman suggests that the projections of social housing that will supposedly be supplied by the State and Community Housing Providers are unduly optimistic given the lack of economic incentives and slow building programmes by Housing New Zealand and community providers. She suggests that Housing New Zealand has the in-house planning and development skill to build high quality sustainable social housing but that it has been constrained by government as a developer and building at scale[13].

Not all of these social housing providers appear to have their own housing stock. LinkPeople Limited, for example, appears to be a social housing broker, linking people with housing and offering to manage tenancies on behalf of private landlords.

Home of Choice Limited provides a review of the changes in the provision of social housing, noting that the challenges of the emerging social or community housing sector, including a “limited availability of funds, a lack of clear and consistent policy direction, and the sector’s current lack of scale”. [14]

It is difficult to assess the scale and development of the social housing market.

 

What could we do?

Alan Johnson argues that the framing of NZs housing policy is based on the middle class housing career, with an underlying assumption that people will move on from social housing once that get their lives together. However, ill health, disability and insecure employment may mean that for many New Zealanders, social housing will remain a necessary support.[15]   Low wage economy, shortages and the rising cost of housing have combined to make the purchase of a home out of reach for many working people.  At least 20% of New Zealanders are likely to be in need of social housing or housing assistance. Therefore, it is important that there is an ongoing assessment of current and future social housing demand.

Overall, there appears to be lack of understanding of what New Zealand’s housing policies and actions are intended to achieve. It is important that people get to discuss and determine their understandings or conceptions of ‘adequate housing’ and the ways that housing needs may be met.

There is an urgent need for affordable, high quality, well maintained new housing to meet the undersupply. As note above, some attempts are being made to enable the supply of suitable accommodation in Hamilton and New Zealand.  In the context of our current housing realities, it is important to remember that there are always alternatives, including those advocated by Phillip Howden-Chapman[16]:

  • Encourage more state as well as community housing. Encourage innovative public private partnerships to build large scale projects of good quality, secure and universally accessible state housing.
  • Directly subsidise mortgages for low-income home buyers. Employ differential interest rates for new housing depending on whether the houses or apartments are being built sustainably on brownfield sites, close to public transport, or greenfield sites. Encourage Housing New Zealand to be one of the developers. Housing New Zealand has the capacity to build large-scale developments.
  • Implement a comprehensive rental warrant of fitness.
  • Develop a plan to monitor housing need and to implement official policies to address perceived need.

 

 

[1] ibid

[2] Hamilton City Council (March 2017). Hamilton’s Housing Market and Economy. Growth Indicator Report.

[3] Johnson, A. (2013). Give Me Shelter. An Assessment of New Zealand’s Housing Assistance Policies. The Salvation Army Social Policy and Parliamentary Unit.

[4] ibid

[5] Hamilton City Council (2017). Draft Special Housing Areas Policy.

[6] ibid

[7] Howden-Chapman, P. (2015). Home truths: Confronting New Zealand’s housing crisis. Wellington: BWB.

[8] Hamilton City Council (March 2017). Hamilton’s Housing Market and Economy. Growth Indicator Report

[9] ibid.

[10] ibid

[11] Johnson, A. (2013). Give Me Shelter. An Assessment of New Zealand’s Housing Assistance Policies. The Salvation Army Social Policy and Parliamentary Unit.

[12] Jenkins, M. (2015). Findings of a Review into the Implementation of the Government’s Social Housing Reforms. Crest Consultancy Ltd.

[13] Howden-Chapman, P. (2015). Home truths: Confronting New Zealand’s housing crisis. Wellington: BWB.

[14] http://www.spectrumcare.org.nz/about/what-we-do/homes-of-choice/

[15] Johnson, A. (2013). Give Me Shelter. An Assessment of New Zealand’s Housing Assistance Policies. The Salvation Army Social Policy and Parliamentary Unit.

[16] Howden-Chapman, P. (2015). Home truths: Confronting New Zealand’s housing crisis. Wellington: BWB.

 

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