Govt deliberately works blind in state house plan

Bill English. Photo / Mark Mitchell

Back in October last year, an irascible Bill English, while briefing reporters of the "property-developing Herald" on his plans to sell off an unspecified number of state houses, predicted "you guys" would be spending the next six months "kicking our arse over how many houses we own", and "what greedy developers are going to get hold of them".

Little did any of us guys suspect that the Minister of Finance was open to bids, not just from within New Zealand, but from Queensland and "possibly even the United Kingdom" where, he told The Nation last weekend, "there's lots more experience in social housing".

What remains unclear in this long, drawn-out "make-an-offer" phase is what the Government considers is the going price for a state house. Indeed, Mr English now says "we'd probably prefer sales, but if there's an opportunity that involves leasing, we wouldn't want to rule that out".

Is it any wonder critics are arguing that ideology, not price, is driving the process.

In January, Prime Minister John Key did flesh out the proposal, suggesting 1000 to 2000 state houses would be sold to iwi and other community housing providers over the next year, and they would have to be sold below book value.

In March, the proposed sell-off suffered a major setback when the Government's "preferred" purchaser, the Salvation Army, refused to participate, arguing it did not have the "expertise, infrastructure and resources to successfully manage any social housing transfer of size". The Sallies were not convinced they could offer a service "that would markedly improve the lives and living conditions of state tenants".

Scott Figenshow, director of Community Housing Aotearoa, was more to the point, saying that many in the sector believed "the only way they can make the sums work is if they are transferred at close to nil value".

In announcing its plans to reduce its role as a provider of social housing, the Government was vague about the details. It was as though they were social pioneers, with no world models to follow.

Across the Tasman, the same ideological shift was under way, adopted by governments of the left and the right. One thing they all accepted was the only way such public housing transfers to non-profit providers would occur was if transfers were on a no-cost basis.

An October 2013 report from the Australian Housing and Urban Research Institute analysed such transfers in Queensland, Victoria, New South Wales, Tasmania and South Australia, following the upsurge of public housing transfers that began in 2007.

In 2009, the federal and state governments agreed to a target of 35 per cent of social housing being in the hands of community providers by 2014. It was inspired by European and North American examples. Between 1995 and 2012, 21,278 dwellings were transferred, with another 10,000 expected by last year. Until 2010, 72 per cent of transfers had been management transfers, the state retaining the title. The other 28 per cent were title transfers. Since then, as a result of a federal government building stimulus package, 50 per cent of transfers had included house titles.

The report notes that "to date the transfer pricing applying to those public housing transfers to community housing providers ... has been nil, in consideration of current maintenance liabilities and government requirements both for the continuing use of the dwellings as subsidised social housing and to leverage additional investment in the sector."

In other words, it was accepted that the non-profit provider would obtain an asset against which it can borrow to maintain the existing stock, and to build new houses. The 2012 balance sheet of the NSW Land and Housing Corporation, for example, treated the transfer of $945 million of housing stock as a grant to community organisations.

The report concluded the political drive for transfers had, by 2013, dried up, and noted there had been little or no research into the success or failure of the transfer process. Until there was, "the policy case still has to be made".

Instead of blindly stumbling on with Mr English's experiment into ridding himself of state houses, perhaps we should spend some time surveying the guinea pigs across the Tasman first.