Labour and housing supply liberalisation

In a post the other day, I noted in passing that the political Opposition parties seemed to be as lacking as the government in any serious ideas or analysis as to how New Zealand’s dismal post-war economic performance might begin to be reversed.

That prompted a commenter to suggest that the Labour party did seem to be offering fresh ideas for dealing with the housing market, drawing my attention to a recent substantial post by Labour’s highly-regarded housing spokesperson Phil Twyford.  Twyford’s post is written with a left-wing audience in mind, but for anyone interested in housing policy issues it is worth reading.

There have been some encouraging words, at times, from Twyford on getting at the root cause of the housing problems –  the pervasive land use restrictions imposed or facilitated by central and local governments of both parties that have driven what should be quite a cheap product (suburban land) into one of the most expensive around.  It isn’t just a New Zealand phenomenon, but one seen in the United Kingdom, Australia, Canada, large chunks of the United States, and no doubt plenty of other non-Anglo parts of the advanced world.  Deal to those restrictions and houses will be as affordable as they still are in many other parts of the United States, or as they used to be here before the planners (bureaucratic and political) got control.

Twyford goes as far as to say that

The next Labour Government, led by Andrew Little, will be defined by how we respond to the housing crisis.

Of course, the current housing “crisis” got underway under the last Labour government  –  and neither that government, nor the current National-led government, have done anything much structural about it.

I’ve been a bit skeptical about quite how serious Labour is about structural reforms to make the housing market work better over the longer-term.  Unfortunately, Twyford’s latest piece doesn’t give me any reason for greater optimism.

He outlines a five point plan, as follows:

  1. “Bring back active government again” –  which means having the state building lots of houses for first-home buyers
  2. Tax changes

    (“We are going to tax speculators who sell a rental property within five years

    We are going to shut down the tax breaks that allow speculators to write off their losses.”)

  3. Restrict foreign buyers  (“We will ban non-resident foreign buyers from buying existing homes. And we will review the immigration settings to find a better balance between the country’s need for skilled workers and the impact on housing and the labour market”).
  4. Free up the planning system
  5. Build lots more state houses


Sure enough, doing something about the planning system is on his list, but (a) it is a long way down the list, and (b) it is the shortest section of any of those in his post.  Here is the total of what he had to say on the topic

4. We should be pragmatic about finding solutions and willing to adjust our policies when the facts change.

The right have constantly blamed Councils and planning laws for expensive housing. The left has always reflexively defended planning. But it’s a fact that restrictive land use controls have stifled building, and choked off the supply of land driving up prices.

We will reform the planning system so it can both protect the environment, while allowing us to build more and build better.

Which is fine, I guess, but says almost nothing of substance at all.  It has the feel of a ritual incantation –  feeling the need to acknowledge the point –  rather than being any sort of centrepiece of a housing reform programme.

Some of the other things on Twyford’s list may, arguably, be useful, or not harmful, in a transition (I’ve argued myself that if governments won’t/can’t reform the planning system they should pull back on immigration targets to give young New Zealanders more of a chance), but none get to the heart of the issue: allowing individuals and firms, and private markets, to much much more easily build houses in locations, and of densities, that suit them.

I hope I’m wrong.  Perhaps Twyford just felt the need to play down the market-oriented reforms because of his left-wing audience, but even if so that hardly fills one with confidence that his party has grasped where the fundamental problem is.

So I’m skeptical.  And for a number of reasons.  First, and a point I’ve made often before, there has been no case anywhere –  here or abroad – that I’m aware of where once the planning mentality has taken hold it has been enduringly unwound.  Perhaps the debate is a little further advanced in New Zealand than in some places –  although even the Obama Administration has made good, and sophisticated, noises on the importance of the issue –  but I see little reason to hope that New Zealand is about to lead the reforms.  At other times, and on other issues, New Zealand has been a reform leader, but there is no sign of any such appetite this decade.  Bad ideas and bad policies usually get discarded eventually, but it can take a very long time.

And for all the talk about the housing crisis, the National Party remains pretty popular.  It could well lose the election next year –  lots can happen in a year – but right now there is little evidence of a popular groundswell demanding far-reaching change.  For all the talk, bread and circuses –  and a few small measures to temporarily paper over specific cracks – seems to be enough to distract the populace.

And whatever the Labour Party genuinely thinks, if it should lead a government after the next election, it seems most unlikely that Labour will overwhelmingly dominate the government.  Perhaps they will have two-thirds or even three-quarters of the seats, but the Greens, and/or New Zealand First would have the rest.  In such an arrangement, each party has to decide what really matters to it, and what they can trade.  Perhaps far-reaching liberalization of planning law will be one of those things for Labour, but Twyford’s speech content doesn’t give one much confidence of that.  And the Greens aren’t known for supporting the physical expansion of our cities, or allowing markets to make such choices.  The other items on Twyford’s list look much more like the sort of stuff Labour and the Greens could happily agree on as a common housing policy: suppress demand, further mess up the tax system, and fall back on government as a chief provider of new housing.

And lest anyone think this is just an anti-Labour piece, it is also worth remembering that Opposition parties have talked a good talk on fixing the housing market before.     The National Party used a parliamentary select committee to run an inquiry into housing affordability in 2007 –  over the objections of the then Labour government –  and went into the 2008 election suggesting that it would fix the system.  Despite dominating all three governments since then, almost nothing has happened –  just more first home buyer subsidies, various demand suppression tools, and now talk of large government house-building programmes.

Labour and National are almost equally to blame for the mess we are in –  although of course, any incumbent government has to take a bit more of the blame.  But, no doubt, neither has done any far-reaching reform because there just isn’t the public demand for it –  and because neither really believes it enough to (a) properly prepare the ground, and (b) take some political risks and expend some political capital in a cause they think would genuinely advance the long-term well-being of New Zealanders.

I’d like to think I was wrong, and that Phil Twyford’s words really do foreshadow a Labour-led government that would lead a process of substantially freeing-up the housing supply market.

But if Labour is serious, perhaps they should think about the leadership opportunities they now have in local government.  Of our three largest cities, two now have Labour mayors, and the third has a mayor who was a former Labour Cabinet minister.  Central government might be an enabler of the land use restrictions, but it is local governments that put, and keep, the specific rules in place.  And local governments could lead the charge in removing those rules, freeing up land use restrictions in ways that could make a real difference.  Those three mayors can’t do everything in just a year, but if Labour is serious about liberalizing land use restrictions, Justin Lester, Phil Goff, and Lianne Dalziel could surely go quite some way before next year’s General Election to show us that Labour is serious about this stuff.  Sure, mayors don’t control councils, and only have one vote, but they have a  fresh mandate, and a bully pulpit (media cover mayors), and they lead our three largest cities.

Sadly I don’t expect much.  Here is the housing policy of the new Labour Party mayor of Wellington.

For starters, I’ll be sending a bill through to parliament to make rental WoF a reality in Wellington. If you’re paying rental for a house it’s only fair that house meets basic standards. Living in a warm, dry house that’s free of mould should be a right for every Wellingtonian.

I’ll also invest in social housing, so there’s more available for the people who need it most. This means a long term building program, partnering with third sector housing providers to increase the number of live-to-own dwellings. It also means improving the 2500 existing Wellington council owned social housing units, making them safer and better to live in. 

But that’s not enough. It’s vital that we look after those in need, but we also want Wellington to grow and prosper. That’s why I’m offering a $5000 rates rebate for anyone building their first home in Wellington. Newer homes means better quality homes, and Wellington needs to encourage fresh young talent and new families to move here if we want to keep thriving. 

Plus, I’m committed to establishing Build Wellington, an urban development agency that will utilise existing green-field land holdings for affordable, good quality residential development in the tradition of state and Council housing in years gone by.

Nothing, at all, about freeing-up land supply, just more statist “solutions”, and a local version of the sort of first home buyer grant central government offers –  the sort of tool that has been proved, time and time again, to do precisely nothing to improve housing affordability.

For those interested in housing policy and urban planning issues, I’ve been meaning to draw attention to the  stimulating new website/blog Making New Zealand