The 1950s National government rejected state housing as a mainstream form of tenure, seeing it instead as a provision only for those unable to afford to house themselves. It introduced an income limit for new tenancies – filtering out middle-class applicants – and tightened allocation criteria to favour those most in need.
State house bargain
The government offered generous terms to encourage tenants to buy their state houses: a 5% deposit, a state-provided mortgage with an interest rate of only 3%, and 40 years to pay it back. Among the buyers were the first state-house family: the McGregors. They bought their home in 1952, declaring it their ‘little piece of New Zealand’.1
A property-owning democracy
National championed home ownership, believing it to be the aspiration of most New Zealanders. It moved quickly to allow state housing tenants to buy their homes and raised the number of State Advances loans for private house building. By 1954 state home loans accounted for 34% of all new-home mortgages. Demand for housing continued to outstrip supply.
Group Building Scheme
To increase the flow of suburban housing, the government introduced the Group Building Scheme. Builders constructed houses in groups of six or more and those that were unsold two months after they were completed were purchased by the state at a prearranged price. Plans and builders were vetted to maintain high standards. Some 20,000 homes were built under the scheme, which helped 1960s mass-housing firms such as Neill Housing get started.
Family benefit capitalisation
The Labour government of 1957–60 continued support for home ownership, and in 1959 gave low-income families the right to capitalise their family benefit (have it paid in advance) to provide a deposit on a house. Together with low-interest state mortgages, this enabled many low-income families to become homeowners. Between 1951 and 1966 the national rate of home ownership rose from 61% to 69%.
To further meet demand, the state built mass-housing suburbs at Porirua (north of Wellington) and South Auckland. These were meant to be a blend of state and private housing, but state housing was concentrated in particular areas. The requirement for state housing to provide for the neediest created low-income communities, which from the 1960s included groups of urbanised Māori and Pacific Island peoples. These communities often experienced social problems associated with poverty and deprivation, changing the wider perception of state-housing communities from desirable places to live to undesirable places. However, this view was not necessarily shared by those who lived there. For instance, the concentration of Māori in South Auckland’s Ōtara helped foster a new urban-based Māori culture.
In the 1970s the government widened its lending criteria – based on financing new homes on urban peripheries – to provide loans for improving old housing near city centres. Many middle-class home buyers jumped at the chance to do up an old villa or cottage, gentrifying inner-city neighbourhoods in the process.
In the 1970s the government believed the housing shortage was largely solved. While it continued to lend to low-income home buyers, its focus changed to promoting private-sector lending. In 1984 a reforming Labour government deregulated the banking sector, significantly increasing the number of players in the mortgage market. It also stopped the family-benefit capitalisation scheme and introduced market rents for higher-income state-house tenants to encourage them to seek private accommodation.
In 1991 a new National government extended market rents to all state-house tenancies and introduced a rental subsidy (the accommodation supplement) for all low-income households. National believed this system was better because it treated public- and private-sector tenants equally. However, many state-house tenants could not afford the market rents (even with the accommodation supplement) and were forced to cut back on food and other necessities, or live in overcrowded conditions. National also increased state-house sales and liberalised building regulations to make it easier to build or modify dwellings. When a Labour-led government took office in 1999, it reintroduced income-related rents (based on 25% of a tenant’s income), stopped state-house sales, and (later) announced plans to construct further state houses.