Jacinda Ardern has failed on housing

New Zealand Prime Minister, Jacinda Ardern, was elected in 2017 on a platform of fixing New Zealand’s chronic housing crisis.

However, Ardern’s Labour Party failed dismally on housing in its first term, failing to deliver on key election promises.

Labour’s promised ‘KiwiBuild’ program to build 100,000 public houses descended into a farce, with the government abandoning its building target and instead announcing a bunch of demand-side measures to inflate prices.

Labour also abandoned capital gains tax reforms and back-slid on the promise to abolish Auckland’s urban growth boundary and reform infrastructure financing.

As a result, New Zealand house prices have surged to a fresh record high and home ownership has plunged to a 70-year low:

Over the weekend, a ex-Labour Party MP and cabinet member, Peter Dunne, published a scathing attack on Labour’s housing failures:

The current housing debate has a pathetic sense of déjà vu about it. Before the 2017 election Labour successfully hyped the then housing situation into a crisis and implied it had all the answers if elected to government.

But now, one term of Labour-led government later, the situation is worse than ever. Housing prices have sky-rocketed, nowhere near enough houses are being built, and waiting lists for public housing have soared. And the responsibility for this deteriorating situation apparently lies with everyone else.

Labour still keeps blaming the previous government… The government that alleged it had all the answers before it came to power now seems all at sea, with little idea what to do next. It has long since abandoned its previous flagship Kiwibuild policy as a disaster but has done nothing to replace it. Instead, the Prime Minister now promises to “take advice” which looks increasingly plaintive, and hardly inspires confidence…

The escalating sense of drift is becoming intolerable. The government must move beyond just wanting to take more advice and show some leadership on the issue…

So, it surely makes sense to bring them all together in a National Housing Summit to develop a single, comprehensive, integrated national housing strategy, to which they would all be required to commit to and take ownership of…

If the government really wants to do more than just continue to “take advice” on the issue, convening urgently a National Housing Summit of all the relevant interests to develop a plan for the future would be a very good place to start.

It’s hard to see how a National Housing Summit talk fest will achieve anything but hot air.

The reality is that nothing genuine ever happens on housing policy because “affordable housing” requires prices to fall. And nobody in the government nor home owners or the industry want this to happen. It’s exactly the same in Australia.

So instead we get “affordability” measures like first home buyer grants, which only succeed in artificially inflating demand and prices.

Heck, this morning Jacinda Ardern told The AM Show that the Government would continue “looking for ways to encourage and support first home buyers”, which is code for more demand-side subsidies.

In the lead-up to last month’s election, Jacinda Ardern once again vowed to tackle the nation’s housing crisis.

Don’t expect anything concrete to happen.

Unconventional Economist
Latest posts by Unconventional Economist (see all)

Comments

    • Shelter should not be an investment class.

      Shelter shouldn’t be a means to buy your way into a country or to launder your ill gotten gains.

      • She suffers the same challenge of Australian politicians. Destroying housing prices destroys people’s wealth as the majority of wealth is tied up in their property. Some countries chose businesses and manufacturing, AU and NZ chose sticks and bricks. Now, if only we could figure out how we can get our houses to employee millions of people

  1. At face value, she gets an “F” for Fail on her current performance – as recently as her public utterances this morning on this very topic (and I had such naive high hopes!).
    But previous PM, John Key – from the opposite end of the political spectrum to Labour’s Ardern, also had a change of heart on the same topic after getting elected. The two had identical manifestos on Housing before getting elected and then both did a volte-face.
    It’s hard to escape the conclusion that both new leaders were taken as aside ‘got at’ as soon as they took over Government, and had the cold, hard facts of life explained to them by some unelected party that has ultimate control of our economy – Davos Man, in effect “Do as the rest of us are doing; none of this reducing the amount of Private Debt malarkey, or else!”

    • If you look at the above graph, from 2008 to 2016 house prices barely moved, so there was no need for National to do anything. The exponential growth that happened under the previous Labour Govt had stopped, no thanks to the GFC. This Labour Govt did not “inherit” a housing crisis, it has all occurred in the last 3 years, and gone exponential in the last six months.

      • Key was no different to what Ardern has turned out to be. (NB: Key’s Governments ran though well into late 2017) so I wouldn’t agree that Labour didn’t inherit the mess. But it was elected to do something about it; and now that the ‘excuse’ for 3 years of failure – NZ First and MMP, have been removed, it hasn’t and doesn’t look like it will. Hence my comment above. She, and he, were ‘got at’.

        Prime Minister John Key has been challenged about why he was willing to talk about a housing crisis in 2007, but not now (2016) when prices have since almost doubled…..figures showing prices rising at their fastest rate in 12 years, and the average price in Auckland hitting nearly $1 million.

        https://www.rnz.co.nz/news/political/308084/housing-'challenge'-still-not-a-'crisis

  2. Dumped in the too hard basket. Don’t expect any real constructive, economical strategies.
    She is just part of the young, giddy, celebrity circle of woke leaders consisting of Macron, Trudeau and Ardern.

  3. Yep, which as sad as it is, is exactly why I decided to purchase my own home. Waiting for action on this and you’ll be waiting for a long long time. Probably long after I’m dead at the current rate of progress.

        • robert2013MEMBER

          Fortunately my job gives me a great deal of flexibility about where I live – rises won’t be uniform or universal. However, I have watched you and others capitulate and constantly worry that I am the proverbial last bear!

          • I think we all feel we are the last near until we buy. Then someone else is the last bear. We need a full blown financial crisis which could be coming to really set things in motion.

  4. NEW ZEALAND: IRRESPONSIBLY LOADING UP FIRST HOME BUYERS WITH GROSSLY EXCESSIVE MORTGAGE DEBT …

    Reserve Bank Governor Adrian Orr ( note John Campbell TVNZ interview incorporated below ) urges government to deal with longstanding supply constraint issues with well understood solutions ( land supply and infrastructure debt financing ) …

    First home buyers on the rise despite soaring house prices … TVNZ

    https://www.tvnz.co.nz/one-news/new-zealand/first-home-buyers-rise-despite-soaring-prices-corelogic-report

    Are the risks of excessive mortgage debt adequately understood ? …

    What lessons have been learnt from Ireland ’07 … with the subsequent Central Bank of Ireland general 3.5 times household income mortgage cap ? …

    How much debt is too much for Kiwi households to bear? … Daniel Dunkley … Stuff NZ

    https://www.stuff.co.nz/business/opinion-analysis/300155588/how-much-debt-is-too-much-for-kiwi-households-to-bear

    • When can we expect $50,000 median North American pricing for serviced lots / sections to be restored in New Zealand ? …

      Get the land price wrong and everything else is wrong …

      Lot Values Hit Record Highs (U.S 50,000 median price per serviced Lot) … Natalia Sineavskaia … U.S National Association of Home Builders

      http://eyeonhousing.org/2019/11/lot-values-hit-record-highs/
      .
      .
      Note the September Update at http://www.PerformanceUrbanPlanning.org .

      The buyers are in reality the planners … and the polies are just a sideshow. The covid accelerated dispersal and decentralization are massive … and unstoppable.

      • I was chatting to a property lawyer the other day, who advised that the cost of subdividing a normal residential section into two is now $100k.

  5. Jumping jack flash

    “…the government abandoning its building target and instead announcing a bunch of demand-side measures to inflate prices.”

    It was the right move. In a debt economy you can’t have “too expensive” anything. Everything is affordable if the bank bestows the correct amount of debt onto you to be able to afford it.

    Therefore the problem is never “affordability”, the problem is always “eligibility” for the correctly sized pile of debt.

    The sooner everyone realises this, the better.
    Maybe after everyone acknowledges this simple fact we can start really focusing on tuning the eligibility criteria for debt maximisation, rather than “accidentally” getting it right every so often. The first thing they need to do is to lower that ridiculous 5% ponzi buy-in fee. That fee is only ever going to severely restrict the amount of debt that people are eligible for, and therefore severely restrict economic growth in the long term.

    It is simple to see the effect: As the amounts of debt that must be obtained approach infinity, the ponzi buy-in cost does as well, eventually nobody will ever be able to save up the fee and therefore the ponzi will die spectacularly.

    We will need 98% and 99% LVR loans very shortly.
    Don’t worry about the risk, there is absolutely none as long as the amounts of debt handed out are of the correct size to ensure there is no risk. That is squarely in the hands of the banks and the government.

    The people need debt!