John Armstrong: Nats riding tailwind on housing reforms

Housing Minister Phil Heatley. Photo / APN

National's first move towards gutting state housing? Or the long-overdue overhaul of the means by which the state provides those in need with a roof over their heads?

The response of the political left to National's reforms of state housing, elements of which took effect this week, has varied from guarded backing for change to claims the governing party's plans are designed to open up housing assistance to commercial providers and exploit those at the bottom of the socio-economic heap for profit.

Given National's market-driven experiments with state housing in the 1990s, the privatisation charge is easily made and harder to refute.

Sure, ideology does lurk as a factor driving National's reforms. It would be naive to think otherwise. This is a National Government, after all. And the influence of the Minister of Finance - National's ideological heartbeat - looms large in this case.

However, unlike National's open advocacy of private prisons, the selling down of state assets and the pending tightening-up of welfare entitlements, the rationale for the revamp of state housing is more complex.

For starters, Labour would have had to seriously contemplate doing many of the things National is doing had it still been in Government after the last election.

Post-election briefing papers show Housing New Zealand warning of an inadequate, mismatched housing stock and likely growing waiting lists.

The corporation was clearly urging a tightening-up of the duration of tenancies and arguing for more houses to be built by not-for-profit housing providers - two major features of National's reforms.

It is unlikely that Labour would have had National's gumption and ended the long tradition that tenants can stay in a state house for life. Labour would have used voluntary incentives to shift into private sector accommodation the not insignificant 9 per cent of tenants who can afford market rents.

National is saying "time's up" to those tenants. New tenants will be put on reviewable three-year leases. National will extend that to existing leases if it wins the November election.

When this is placed alongside the wiping of thousands of people off the bottom of Housing New Zealand's waiting lists, the wonder is that National has got this far with little opposition.

One reason is that instead of rushing change, the housing reforms have followed a now familiar process which might be termed the "Bill English Handbook on Managing More Market Reform".

The first step was to set up a panel of experts - the innocuous-sounding Household Shareholders' Advisory Group. It duly came to the required conclusion that the current model was "not well-positioned" to respond to the declining affordability of housing, the changing demographic profile of households and the inadequate supply of what is largely ageing state housing stock.

The difference with this taskforce compared with the likes of Paula Bennett's welfare working group was that there was widespread agreement in the housing sector with the advisory group's analysis.

Another reason why the reaction to the Government's reforms has been far more muted is that unlike his National Party predecessors in the portfolio in the 1990s, Housing Minister Phil Heatley has not found himself strapped to such explosive policies as the introduction of market rents and the fire-sale of state houses.

In the year since the advisory group reported, Heatley has moved quietly and cautiously to implement recommendations which found favour with the Government.

The tenancies of the elderly, the infirm and the disabled are exempt from review. The political selling job is consequently much easier. Why should someone be able to claim to be entitled to stay in a state house for life when they can afford to seek alternatives in the private sector and they are keeping those much more in need on the waiting list?

The real question is whether National will have the political will to evict those who refuse to go. In New South Wales - which introduced fixed tenancies five years ago - less than 1 per cent of such leases have been terminated.

One reason for having reviewable leases is to shift people into more appropriately sized homes rather than shifting them out of state provision altogether.

However, reviewable tenancies go only a small way towards Housing New Zealand having the right houses in the right locations, and in the right condition, to better match demand.

It is to meet that demand that National is turning to so-called "third sector" providers such as the New Zealand Housing Foundation and the Salvation Army.

These currently contribute only a tiny fraction of the stock of social housing. However, Budget-related documents released this week are revealing in spelling out how the Government sees that sector as helping to create a "market" for both the provision and management of social housing.

The problem is that private providers are currently too under-capitalised to make a significant contribution. The advisory group thus recommended that a "critical mass of [housing] assets" be transferred to third-sector organisations so they can secure commercial loans to start building much more housing stock.

The Government decided against taking such a radical step. But it found around $45 million in May's Budget towards helping private providers - as against the $25 million set aside for capital expenditure by Housing New Zealand on new housing stock.

National has also taken the social housing unit out of Housing New Zealand and made it a semi-autonomous part of the Department of Building and Housing. The reason behind making the unit independent of Housing New Zealand is to make state funding contestable, rather than being gobbled up by Housing New Zealand.

The new thrust towards greater private provision has been further reinforced by the chairman of the Housing Shareholders' Advisory Group - Fletcher Challenge director Alan Jackson - last December being appointed as chairman of Housing New Zealand.

All this will be grist to those arguing National is running a not-so-secret agenda. In looking to provide more cost-efficient social housing, National would argue it is only replicating similar moves in Australia and Britain - and that while it is looking to the future in terms of what works, its critics are living in the past.