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New Zealand was once a homeowner's dream, now just 60 percent of households own the house they live in - and that's on the slide, a housing advocate says.
Now New Zealand has some of the least affordable housing in the OECD and is experiencing a "collapse of tenure," says Charles Waldegrave.
Waldegrave is coordinator of the Family Centre Social Policy Research Unit, a former member of the Welfare Expert Advisory Group and recently authored a report for the Waitangi Tribunal on Māori home ownership.
It wasn't always this way, Waldegrave told RNZ Nights. Up until the early 1990s there was bipartisan support for homeownership and secure social housing, he said.
A history of New Zealand housing affordability
"Governments provided security for people by ensuring they could get into houses and pay for it over the course of their lifetime.
"And they also had state houses for life, so that if you couldn't manage that, you actually had a state house and were able to stay there for life. Now both those conditions have been removed.
"There's no longer the subsidies to help you with home ownership and the state house, you're only in there, as long as someone else in greater need doesn't come along - and they always come along."
One of the subsidies for home ownership, he said, was the capitalisation of family benefit into the future as a deposit on a home.
"It's hard to believe today, but in the 1960s the capitalisation of the family benefit was the equivalent to a third of the price of the average house in New Zealand."
Various subsidies for home ownership continued right up until the 1980s, he said.
"Despite the fact that Britain had joined the EU there'd been two oil shocks, New Zealand had moved from the sixth highest per capita income country in the world down to the 19th despite that, the government was still subsidising 20 percent of the cost of an average house."
The private rental market was negligible, Waldegrave said.
"It was cheaper to buy a house in many cases than to rent. The private rental market was quite small.
"There was more tied housing, more council housing. So tied housing, if you had a job in the railways you could get a house.
"But it just made much more sense to purchase your own house. And so that's what most people did."
Consequently, home ownership peaked at 75 percent, he said,
Houses were typically about three times annual salary, he said, now that ratio, with average house prices in the $800,000 range, is "out of control".
"Australia and New Zealand have the highest ratio of income to house price, and it's severely unaffordable. It's considered internationally severely unaffordable.
"And apart from Australia, no other country in in the OECD world has prices as high as that. So, it's out of control in New Zealand."
A "collapse of tenure" is the consequence, he said.
"As home ownership reduces, it collapses down into private rentals.
"Private rentals, there isn't sufficient supply, so the price is very high. So that collapses down with the group moving into state housing. There's not enough of that, even though they're building as fast as they can, and so you get emergency housing.
"And so, it's absolutely critical we do something to stabilise home ownership and to start building it again."
Solutions, he said, include rent-to-buy schemes and shared equity.
"The focus, in my view, has not been sufficiently on developing security for people, which would occur through processes like shared equity.
"So, if you can't afford the full price of a home, you might be able to afford half of it, or 75 percent and so you go in with the government, and when it's sold you get the proportion of the improved equity, and the government gets the other part. The government would do well out of it, but you've got to be prepared to put money up front."
Māori were, by 1991, beginning to move towards a closer proportion in home ownership, he said.
"And then came those neoliberal reforms that changed the whole housing package and got us on this disastrous track that we're on now. And it all went down, which is very unfortunate."
New Zealand is adding inequality of assets to inequality of income, he said.
"For poor people, the only way you get an asset is basically through housing in our sorts of societies, and so we're denying people wealth.
"We're now developing a society of those with assets and those without assets, and those without assets are growing much faster than those with assets, and it's a really serious problem and the biggest cause of poverty."