New Zealand is enduring a housing crisis. The chance of buying a home is out of reach for many, while at the same time rents remain high. Gautami Sithambaram spoke with Dr. Campbell Jones about the state of housing in New Zealand and what initiatives young people can take to get into the property market.
Campbell Jones is an Associate Professor of Sociology at the University of Auckland. He is an expert in the social and political dynamics of economics and thought.
This interview has been edited for clarity and length
Gautami Sithambaram: What, in your view, is the current state of the New Zealand housing market?
Campbell Jones: What we are in at the moment is a situation where we have got a historically very high value of housing and historically very low interest rates. And it might look superciliously that this is a good time to buy if those prices are not increasing and we hope they will increase in the future. That, however, assumes a few things. It assumes, for example, that those interest rates are going to remain low over the long-term. But given that most individuals are borrowing for thirty or thirty-five years on a mortgage it is unlikely that those interest rates will remain that low for that long whereas when the interest rates increased, which in the US was due to the Federal Reserve raising the interest rate, what happened there was there started to be default on properties and there was a financial crisis.
GS: I would like to go to the point where you talk about how there is a possibility of a financial crisis. Do you see there is a possibility of a financial crisis happening in the near future similar to the 2008 levels?
CJ: When we discuss any aspect of capitalism and in particular capitalism in the post-war period from 1945 onwards, capitalism has an inherent tendency towards crisis, towards there being a breakdown and that is because of the transformative aspect of capitalism. Now in some ways capitalism brings many good things because of that transformative aspect, but one of the things we cannot doubt is that capitalism has a crisis tendency. And those crisis tendencies have been unleashed, if you like, since the 1970s through a set of regulatory changes and changes in monetary policy so the prospects for crisis increase today. When you ask ‘Is there a prospect for a financial crisis?’, the question really is ‘When will there be a financial crisis?’.
GS: Currently mortgage brokers tend to see a lot of the positives of this, especially with them talking about how we can take money from Kiwisaver and superannuation to fund housing. What do you see as the negatives of that happening?
CJ: There’s the negative of taking money from people of course, but also the question of who gets access to that, and also bearing in mind that Kiwisaver was set up as a kind of supplement or a top-up to superannuation. So as successive governments depleted superannuation and moved away from that over the last thirty years, Kiwisaver was proposed as an alternative, to now propose that we ditch that and move into investing in housing in other ways is entirely risky. But then all the things we are talking about now are presupposing the legitimacy and normality of a capitalist market and a capitalist market in housing, and unfortunately a capitalist market in housing is one of the key problems that we have got.
GS: If you see a capitalist market in housing as a negative or a problem to the free market, what do you suggest as an alternative to this?
CJ: Capitalist markets have always been controlled in some kind of way, they have always been regulated or monitored so it is not like you have a strict opposition between capitalist markets and the state on the other hand, what you have really got is a question of the way in which the state relates to the capitalist market. Now for a good part of the immediate post-war period through to the 1970s in this country through to 1984 you had state intervention that was driven by an interest to provide public housing. Investment in state housing was an incredible initiative in this country and also during that period you had a concern over things like low interest rates. Since that period, the kind of politics that we have had from the 1980s through till now at the state level has been one that has encouraged and supported investors. So what you have got effectively is a state capitalist formation where what the state is doing is that it is propping up and supporting investor activity. And with that there is a very strong lobby group that wants to support that, there a definite concrete interests and those are the owners of property, the investors, the aspirational groups who want to get into that, but most significantly as well these are the financial institutions, these are the banks, these are the lenders, these are the mortgage brokers who have a concrete interest in this market operating in something like the way it does now.
That interest is diametrically opposed to most people because most people are in a situation of having to pay rent or having to pay incredible amounts of interest to their banks and that is not in the interest of those people, that is a relationship of exploitation in which most people are paying other people who benefit not by working but because they own capital. And that is the relationship of exploitation that we have at the heart of the capitalist market right now and the state is supporting that to the extent that the state is afraid to even think about alternatives that would even modestly challenge those groups. It took a long time for the current government to come to the idea that we would even have healthy homes as a basic right, and this government remember has been crippled by its inability to even talk about in a sensible way a tax on capital gains on homes.
GS: Mortgage brokers that we have spoken to have blamed the Healthy Homes initiative as one of the key reasons that investors are holding on to their housing stock and not selling because they don’t want to upgrade and do the modifications that the government has asked them. How did we come to this point that we don’t have good homes to sell and we are in a situation where we have artificial inflation because people are holding on to housing stock?
CJ: I mean the Healthy Homes initiative is very complex, there are many aspects to it and I think if we are going to approach it in a sensible kind of way we need to understand that when people are making money, when people are investing, they are not necessarily making money because they are providing something that is good they are making money because they are in a situation of control. And for many years there were very few other options in New Zealand for housing, and there are a very few options, the selling off of public housing is one of the reasons why there are few options for many people and that is why people are put into paying extortionate rents.
Why haven’t we had healthy homes in New Zealand historically in the past? Well that is in good part because of the low levels of regulation we have had about housing for many years. Minimum standards have been well established across the developed west for many years and by comparison New Zealand has been well behind the game on that. And one of the reasons for that is because people who own property have an interest in getting rent and that might mean that they need to provide a decent house but it might mean that they don’t. And in many cases we have had landlords who have been screaming blue murder at the idea that they would provide heating, insulation, even a toilet or running water in their home. And so we have landlords who are letting out garages, caravans, cabins in camping grounds, totally sub-standard accommodation by what you can expect today because they have not been pressured to do anything about that and because there are so few options for real people in real situations of need.
GS: What advice would you give young people who are trying to get into the housing market?
CJ: I am loathe to give advice to young people. I think generally people of my generation, I am someone who was born in the 1970s, we need to be listening to young people and hearing what they are saying. We need to get out of the habit of telling young people what to do and what to think. They should be finding out what is happening in youth culture and listening to young people. What I would say to young people and in particular those who are angry, those who are organising, those who are fighting in the streets I would say be strong and change this world. This government we have in power now is totally unfit for purpose, so make another party, that is what young people should be doing. If you only think about getting on the housing ladder then you will have idiotic advice from mortgage brokers saying most people get given money from their parents. That is not true, a small group of people get given some money or inherit some money, but most people are locked out of the market forever. So I encourage young people to do what they are already doing which is thinking creatively about the way in which we can have collective ownership, we can have housing for all, and it can be decent quality. To do that requires some challenges. And the challenges are massive.