By Geoff Simmons*
There’s been discussion lately about the Labour Government slipping through a loophole in its self-imposed debt target. Rather than borrow $2.9 billion itself to build new state homes, it’s instructed Housing NZ to borrow the money on its own.
It’s a clever trick, to be sure, because it puts the money on Housing NZ’s books instead of the Government’s. Never mind that the markets will see through it and their borrowing costs will be higher, the Government is only concerned with sticking to its net debt target. But here’s a better idea: why don’t we get rid of Housing NZ entirely?
Personally, I’m less concerned with whose books the debt sits on and more concerned with the outcomes it delivers. I think we can give our low-income residents a much fairer deal by replacing Housing NZ with not-for-profit, community-owned housing associations. This is a common policy overseas.
Here’s how it would work. We’d split Housing NZ up into regions. Each region would become a housing association, charged with delivering affordable housing in that region.
The first advantage of this approach is much more flexibility. It’s easier to react to things and get things done when you’re a smaller, regional association than when you’re beholden to Wellington bosses.
They’d also enjoy more trust than Housing NZ, because they’d be community owned. This doesn’t make them any cheaper to run but it does give them distance from Government. Overseas that means they often end up doing a better job.
Yes servicing debt would be more expensive for community housing than the Government. But there are ways around that. For example, during the set up phase Government could offer to underwrite the community housing sector borrowing from the private and philanthropic sector. That would really get the housing sector cracking.
Wider funding sources
Community Housing could also leverage philanthropists and trusts. It does this already but lacks scale. The charitable sector alone manages $60b in investments, with over half of that asset base invested in financial assets like bank deposits (25%) or property (45%). Investing in housing associations could be a way for them to get a financial return and also do good at the same time. The charitable sector wouldn’t invest in Housing NZ as it is used as a political football every time there is a change of government.
There is also a large and growing pool of private capital looking for investments that make a positive difference. These sorts of “impact investments” are actually the fastest growing type of investment internationally. Community based housing associations would be able to tap into this growing funding source.
Changing the remit - for better
We could also change the remit. Right now, Housing NZ (generally) provides state houses. But what if we changed that a bit, to “provide lower-cost housing”? This means that our housing associations could do more than just provide state houses. They could also build rental homes at the lower end of the market and rent them out at cost, creating some real competition for our current landlord class.
This is one way to stop private landlords ripping off our most deprived families. Overseas this approach is seen as more effective than subsidising private rentals (like we do with the Accommodation Supplement) because that only pushes up rents.
We shouldn’t saddle Housing NZ with debt as a way to get around debt targets as Labour is doing. Nor should we sell it off as National wanted to. It may sound strange at first blush, but overseas experience suggests we should give it away.