‘Grossly inadequate’ social housing stock at core of housing problem

Sunday, 29 October 2023

A shortage of social and affordable homes is at the heart of the country’s housing crisis, and more needs to be done to address the problem, experts say.

House price movements dominate the dialogue around affordability, with the largely upward trajectory of prices over the last ten years locking many buyers out of the market.

But access to an affordable home is about renting as well as buying, and as home ownership rates have dropped and rents have increased, the demand for social housing has skyrocketed too.

There are 25,283 households on the waiting list, according to the latest Ministry of Housing and Urban Development (HUD) figures. That is up from 9536 five years ago.

While the outgoing government has significantly increased social housing building activity, it is playing catch-up and much more is needed.

Sense Partners economist Shamubeel Eaqub says there are layers to the “not enough” story, as within it there is “not enough” of particular types of social housing.

“Many people in social housing have complex issues and need wraparound services, but many others do not, and are there because of the increased cost of rents and houses, and a lack of affordable homes in the private market.”

Here’s a look at some of the key questions around the affordable housing problem, and what can be done about it.

How much social housing is there?

A HUD spokesperson says it is not possible to give a percentage of how much of the total housing stock is social housing because the definition is subjective and can vary from different sources.

Its latest figures show there were a total of 79,985 public homes in September. Of these, 67,450 are Kāinga Ora homes, while 12,535 are community housing provider homes.

But a 2022 OECD report found that social housing makes up 3.8% of New Zealand’s total housing stock, compared to the OECD average of 7%, according to a Human Rights Commission housing report.

Community Housing Aotearoa chief executive Paul Gilberd estimates social housing stock is about 4% of the total stock, and in contrast, nearly 17% of the UK’s stock is social housing.

“It is grossly inadequate, and it is failing to fulfil its function because it is at such a low level. There are thousands of people in transitional and emergency housing.

“We don’t have sufficient stock to cushion our nation from any future shocks we may have. At a minimum, community housing stock should be four times higher, and there should be about 40,000 more affordable, subsidised homes.”

Why do we need many more affordable homes?

The well-being benefits of long-term, secure, affordable homes are well-known, with recent research showing this is true whether the home is social housing or owner-occupied, he says.

“When people are not moving around, they make community connections, the kids stay in one school, they get to know their neighbours, and they treat the house as a home.

“Every outcome gets better, whether it is health, education, or employment.”

But those benefits are out of reach for many, with housing insecurity growing, and tearing up the social fabric, Gilberd says.

“With ‘middle New Zealand’ starting to realise their children will struggle to own their home, we should articulate the type of country we want to live in.

“We are concerned about the rise of Nimbyism, and think we need to make it safe for politicians to implement the stuff needed to fix the problems.”

Ultimately, building more affordable housing across the spectrum will ease the pressures on the housing market, and the community housing sector will campaign for it, and play its role in providing it, he says.

What’s the situation overseas?

New Zealand is not alone in its shortage of social and affordable housing, and comparable countries such as Australia and the UK are also struggling.

But some countries, or cities provide a much higher ratio of social housing, or require greater amounts of affordable housing in developments.

Austria is one example. About 24% of the country’s housing stock is social housing, and in its capital Vienna, about 60% of the population live in some form of it.

The city has zoning rules with high thresholds for affordable housing provision when land is used for residential development, has different types of social housing available, and has not depleted the stock with mass sell-offs.

Barcelona, Brussels, and Zurich, which have high percentages of renters, are using community land trust models to boost the affordable housing available.

Sweden famously built itself out of a housing shortage, using prefabrication and scale to build a million homes over 10 years.

Eaqub says overseas models can not simply be uplifted and imposed here, instead they need to be adapted to the local context.

But there are models that could be learned from, and that includes some of the approaches, particularly inclusionary zoning, being trialled in Australia, he says.

Why haven’t we built more affordable homes?

There has always been a need for affordable housing, and that prompted the large-scale social housing building programme that began in the 1930s, and continued for decades.

Community Finance chief executive James Palmer says that programme ground to a halt in the 1990s, and the government dropped the ball when it stopped buying or building for 30 years.

“It took a long time to break that system, but it is now going to take a long time to fix it.”

The outgoing government did boost the social housing stock, with the total number of public homes available increasing by 12,411 over the last five years.

Most of the 100,000 homes in its original KiwiBuild policy have not been delivered, but 1915 affordable KiwiBuild homes had been built by September this year.

Programmes, such as the Land for Housing programme and the Build Ready Development pathway, have been implemented to support different stages of the housing development continuum.

The HUD spokesperson says the Land for Housing programme sites are expected to deliver 9891 homes, and of these 15% are for social housing while 25% will be at prices affordable for first home buyers.

A Housing Acceleration Fund was also established to provide $2.3 billion of infrastructure funding to support Kāinga Ora deliver six large scale projects with a mix of public, affordable and market houses.

Ockham Residential co-founder Mark Todd says kudos should be given to the outgoing government for recognising what the under-investment in social housing meant, and attempting to address it.

“So a bouquet for that, but a brick bat to them for setting up Kāinga Ora to do it. Despite the best intentions of many of its staff, it has been a failure in terms of delivery.

“The housing it has developed has been twice the cost of that built by the private sector, built twice as slowly, and executed poorly, due to lack of experience.”

So what more can be done?

The government should not stop building social and affordable housing, but there should be a change in how they are doing it, he says.

“Kāinga Ora should only be responsible for building about 20% of new stock, and 80% should be contracted out to private developers, with clear specifications.

“They need to harness the experience and skills of private housing developers who know what they are doing, and will get it done at half the cost, and with better outcomes.”

Ockham has contributed to Auckland’s affordable housing stock via HUD’s Land for Housing Programme, and in partnership with Marutūāhu Iwi, a Hauraki Collective of tribes.

Marutūāhu Ockham has completed four developments, with the fourth, Manaaki in Onehunga, set to officially open next week. Of the 541 apartments, 199 are affordable KiwiBuild homes.

But they could have built more if Kāinga Ora had not changed the Kiwibuild underwriting terms and cut off funds, he says.

“Long-term partnerships with experienced private developers with clear annual targets would drive an increase in affordable supply.”

There is support for different approaches from others in the sector. Gilberd and Eaqub favour inclusionary zoning, although Todd is opposed to it as he sees it as a tax for developers.

Inclusionary zoning requires developers to make a proportion of houses in residential developments “affordable”. It has been used effectively in Queenstown and now looks to be on the cards for Waipā.

Eaqub says it does enable more affordable housing, but there is often resistance to it from landowners and developers, even though when the land is upzoned it increases in value.

“For that reason, there needs to be incentives to make it attractive. There also needs to be communication and collaboration around what is trying to be achieved.”

He says inclusionary zoning should be broad-based and consistent around the country, rather than piecemeal, while Gilberd says it is an opportunity that should be implemented nationally.

How can new ways of funding make a difference?

Salvation Army social housing national director Greg Foster says over recent years the building of social and affordable housing has been incentivised well, but the government could do more for such builds.

If the government guaranteed loans for community housing developments, that would make a big difference, he says.

“If the Salvation Army was going to build 40 homes it might cost $20 million. So we would borrow 100% of the building costs, and pay it back over 20 years, a bit like a mortgage.

“We can get a contract with HUD for 25 years, and pay the loan back with the rent generated over that time. But a guarantee from the government behind that would ease the pressure and the risk for the lender.”

Currently, the rise in interest rates from around 3% to over 7% is causing community housing developers pain, just as it is homeowners, he says.

“Until rates drop back a bit, and funding costs ease, less new building will go on generally.

“But the Salvation Army made a decision to borrow to build to make a real difference to the people who come through our doors, and that’s the driver for others in the sector too.”

Palmer’s organisation provides low-cost finance to community housing providers, so they can build affordable homes, and its model allows people to invest ethically and to help communities.

It has been successful since its launch in 2019, and now has funds of nearly $150m, but it would need significantly more to fund the house building required to meet current needs, he says.

“HUD has made a positive impact, but we are not building at the scale we need to. There needs to be more certainty, and bi-partisan agreement, to support the sector.

“It would be useful to have support from the government for what we are doing too. In Australia, bonds are guaranteed and that covers funding costs, while here we tend to rely on people like the Tindalls.”

What Simplicity Living is doing with its build-to-rent developments is leading the way in New Zealand, but it is quite normal by international standards, and more of it is needed, he says.