Graph from The Press
A quick recap on the NZ and Christchurch housing affordability crises:
– 80s-present: NZ housing affordability worsens throughout the neo-liberal era (p. 13-14, 68-70).
– 24/1/2011: Auckland, Christchurch, Wellington and Tauranga house prices assessed as “severely unaffordable.”
– 2010-2012: Canterbury earthquakes reduce housing supply and increase rental housing demand.
– 20/3/2012: National and Gerry Brownlee decide to leave the market to sort out the Christchurch housing crisis.
– 18/6/2012: Brownlee suggests rent rises in Christchurch aren’t “astronomical” compared to other cities.
– 29/6/2012: Brownlee and John Key deny there’s a housing crisis in Christchurch.
– 7/7/2012: Brownlee says he can only see positives in Christchurch’s skyrocketing rents.
– 29/10/2012: John Key rules out a capital gains tax like most countries have, simultaneously showing just how out of touch he is.
– 27/8/2013: Housing is now less affordable in Christchurch than Wellington.
– 14/5/2014: Christchurch rents projected to hit Auckland levels in January 2015. Housing Minister Nick Smith suggests “the real problem” is not enough rental accommodation for tourists.
– 15/5/2014: The Budget offers a pittance and cuts for housing, and worse for Chch.
– 19/5/2014: An OECD report finds New Zealand has the most over-valued houses in the developed world. Key, true to form, disagrees with the OECD, and tries to spin the news as a positive as more people are entering the “housing market.”
A consistent theme emerges in the current government’s attitude to these developments: (a) there’s no crisis – if anything it’s a good thing, (b) if there is a crisis, the market will sort it out by itself (because dog-eat-dog individual selfishness systems are great for the vulnerable, eh).
It’s tempting to say they’re simply idiots, but it’s better to ask which groups in society are they representing, and which aren’t they?
For most groups in society, the above information amounts to a housing crisis nationwide, and particularly in Christchurch. But for one group, rapidly rising rent and house prices doesn’t amount to a crisis, but an opportunity for increased profit. This is the group that treats housing as an investment, not somewhere to live: rental property investors.
Gerry Brownlee and many other National MPs are in this group of people. Most of Brownlee’s rental properties are in his own Ilam electorate, where rents in one suburb (Aorangi) rose by 51% in a year. I think this is a pretty important conflict of interest at the best of times, but even more so amid the housing crisis Brownlee and his party are determined to ignore.
I recently wrote to Brownlee, essentially asking him to clarify the question I asked in an earlier blog:
If you’re interested, here’s Brownlee’s response. My attempt to name-drop the Official Information Act backfired – it turns out this info isn’t available under the OIA because it’s not government info. So the public don’t get any more detail than what’s listed on the register of pecuniary interests. I asked if he’d answer my questions anyway, as a goodwill gesture to one of his constituents… I’ll let you know if he replies.
If National win this year’s election, it will be because of personality and PR. If they lose, it will be because of housing. It’s the biggest issue in Brownlee’s electorate and the country. While National are denying, blaming and doing nothing, Labour are making supply-side and demand-side action on the housing crisis the centre of their campaign.
They’ve also hinted that at some stage before or after the election campaign, they may announce what makes all our hearts instinctively leap, at least before we think about it: tax cuts. This would mark the first changes to tax since 2010, when they shifted the tax burden from the rich onto poor and middle-income earners.
Mana’s John Minto has an interesting reaction. He says tax cuts are a great idea, and suggests shifting the tax burden back again: abolishing GST and tax on the first $27,000 of income, and paying for this by finally taxing the unproductive untaxed income of the 1% – capital gains and financial transactions.
Something tells me a party of property magnates and investment bankers is not going to propose those kind of tax changes – any recovery-era tax cuts will presumedly be along similar lines to their recession-era tax cuts.
Does this strike anyone else as a little strange? Not just because they’re promising tikka masala before the chickens have hatched (the surplus is tiny, and only a projection based on fudged numbers, disguised cuts and abandoning Christchurch).
The main reason it’s strange is that when we were heading into rough financial times, they thought the appropriate thing to do was to cut taxes on the rich. And now in healthier financial times, they again think the appropriate thing to do is to cut taxes (presumedly again on the rich). Never mind the fact that they haven’t paid off their debt from the last tax cuts and tough economic times yet.
The truth is that they’re not responding to the economic climate at all. In tough times or healthy times, they’re pushing a philosophical agenda to let the rich continue getting richer while paying lower taxes, and reduce the social safety net to pay for it. Bill English recently let this agenda slip in a recent speech to the party’s Southern Region conference. They’ve already let public goods and services drop from 35% of GDP to 30% – one of the lowest rates in the OECD – and they intend to reduce that even further, to 26% over the next six or seven years. This is not what NZers want.
The obvious solution is not to let them rule for the next six or seven (or three) years.
But their own numbers show that’s working about as well as Brownlee’s “let the market sort it out” worked for the Christchurch housing crisis. Yes, the economy is growing again, but that growth isn’t making its way into the pockets of ordinary workers. From 2014-2018, they’re forecasting 14.2% GDP growth, but only 4% wage growth.
In fact, this supports Thomas Piketty’s inequality thesis quite nicely: the natural and inevitable movement of capitalism is for wealth to accrue to the already-wealthy. In other words, you can’t solve inequality and poverty just by growing the economy. You need more radical interventions, as Piketty suggests. Mana’s tax policy – shifting the tax burden from poor and middle-income earners to the unproductive, untaxed income of the 1% – is a good start. Another much-needed policy is a minimum wage that allows people to live with dignity in society – the calculated Living Wage. This would mitigate against inequality across the board and end working poverty.
We can no longer use tough economic times as an excuse. We can afford these measures; we just need to decide to prioritise them, instead of letting our economic growth accrue to the unproductive parasite 1%.
Inspired by comments on the Standard, I checked out the Register of Pecuniary and Other Specified Interests of Members of Parliament here. I was particularly interested in Gerry Brownlee’s* four** properties in his (and my) stomping ground of northwest Christchurch.
In ensuing Facebook discussion, a few questions quickly presented themselves:
- How much passive income does Brownlee get for his* properties, and how much has it gone up since 2010 and him subsequently “letting the market sort out” the housing crisis?
- How is someone whose decisions have such a massive impact on the Christchurch housing ‘market’ allowed to own potentially millions dollars’ worth* of properties here?
- Is it even ok to be both landlord and local MP for several houses’ worth of people?
- Is he a ‘good landlord?’ Are his properties part of the 44% of NZ’s rental housing assessed as in poor condition?
- Who’d like to become one of his tenants? (there are ways of finding out the addresses.)
* It’s possible that Brownlee only has a small pecuniary interest in the listed properties. The Register doesn’t declare other owners, if any.
** As at 31/01/2013. Apparently it’s become five since then.
I thought this Sunday Star-Times article was quite interesting.
Three economists (from Infometrics, the NZ Institute of Economic Research and the University of Auckland) all agree that although the middle classes in the United States have been hit hard since the global financial crisis, it’s not accurate to say that the same is true here.
Despite the myth of the “middle class squeeze” and politicians’ attempts to appeal to the embattled middle classes, in New Zealand it’s the poor who have been hit hardest by the recession (and by government responses to it). The middle classes, on the other hand, have “never had it so good”. While the economists disagree about whether the rich are doing better or worse, all agree about “the growing level of inequality in New Zealand – it’s this chasm between our poorest and richest that’s probably the real issue“.
The article also provides eight stories from middle-class people about how they’ve been coping financially in recent years. Karol at The Standard points out that this undercuts the above points somewhat, because they don’t give any stories of the people actually struggling. Also, the stories are foreshadowed by this rather peculiar statement:
“Of course, this is about statistics – the average. This isn’t you, living from pay cheque to pay cheque, scraping together the school donation, the football subs, the car repayment, the Sky bill, the rent for the bach this Christmas.”
This might be an odd expression of post-modern skepticism about attempts at pure objectivity, and/or it might be ordinary garden-variety dumb reporting. It seems to be saying: never mind the facts, we know that you’re struggling, and an evocative description of your hypothetical woes can substitute for an argument. But maybe they just meant that you may be struggling even though on average the middle class aren’t.
Some of the stories do represent these exceptions… Those who have lost or quit jobs in manufacturing and the public service, or lost houses in the earthquakes, have indeed found things getting tougher, as you might expect. However, they’re all pretty philosophical about it, and even their complaints are about first-world, nice-side-of-the-tracks problems:
“An expensive holiday is shelved and Mr Barton is holding onto his ageing television and car.”
“We were lucky to have steak at all. Sky was going to get the chuck. Any slight luxuries were gone.”
“they hid their financial struggles from their son and refused to withdraw him from private school”
So what’s behind the myth of the “middle class squeeze”? Is it just lazy importing of American complaints, or is there more to it than that?
I think the best way to understand it is to see it as an ideology, in a critical or Marxist sense: it’s a worldview that functions to justify and support the present economic system and current unequal power distributions.
People from all levels almost always feel like they’re struggling to make ends meet, because their expectations rise with their incomes (usually staying just ahead). That’s how market capitalism works; dissatisfaction and desire is what keeps the wheels turning. If people were content with what they have, capitalism wouldn’t work, or at least not the way we know it (maybe it could work in a nicer, more sustainable way).
This malaise is always there; we’re born into it, and too often we let ourselves remain in it. And I guess when we’re constantly hearing about tough financial times and how our class is supposedly suffering, it’s more socially acceptable for middle class people to express it openly.
The ‘Returning Kiwi’, Emily Swan, gives voice to this plight:
Does Swan appreciate that with that income and a house, many Kiwis would see her as well-off?
“Yes! The average household income is what, $30,000? Crazy. But then a lot of people are sending their kids to school without breakfast. We are grateful for what we’ve got.”
And yet . . . “I look at my age and think, I’m nearly 40 and I’m still living from pay-cheque to pay-cheque. What do I pass on to the next generation? Will I ever pay my mortgage off? I do feel like I’ve f—ed up somewhere along the way.
If she’s “f—ed up somewhere”, it’s not in not having enough money; she and her partner earn $130,000 between them, but people earning twice as much probably feel the same way (and some people earning half as much have learned not to feel that way).
Perhaps situations like this can serve as a reminder not only that perceptions don’t also match reality, but also of just how mouldable our perceptions, desires and expectations are. Hopefully we can learn to mould them ourselves to what we think they should be, rather than letting them be moulded by advertising, conformity and the pressures of a consumer capitalist society.