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Housing and government

by Ben Schrader

Solid and dependable, the state house has become a New Zealand icon and is a symbol of the government’s involvement in housing. Successive governments have had different ideas about their role in housing, but as well as being a landlord to many of its citizens, the state has also helped New Zealanders buy their own houses through many different schemes.


Immigration barracks to workers’ dwellings

Immigration barracks

The New Zealand government’s first major housing initiative was to build immigration barracks to accommodate new settlers for a short period while they found their feet and secured employment. Originally colonising companies provided barracks – sometimes belatedly. In 1840 Wellington’s first European settlers lived under canvas while New Zealand Company officials engaged local Māori to erect huts for them to live in. A decade later Canterbury’s pioneer settlers moved straight into barracks beside Lyttelton’s wharf.

With the beginning of self-government in 1854, provincial governments became responsible for immigration and immigration barracks. This responsibility passed to the central government in 1870, when Colonial Treasurer Julius Vogel (later premier) stepped up government-assisted immigration.

Passing through

In 1870s Christchurch all government-assisted immigrants passed through Addington’s immigration barracks. After being declared fit by a doctor, new arrivals had two days to wash and mend clothes before job interviews at the barracks on the third day. On accepting a position, immigrants promptly left. Those who declined to accept the going wage rate were expelled. This was to prevent loafers and malcontents from indulging themselves at the government’s expense.

During their stay immigrants were expected to complete daily chores and abide by the rules. Conditions were basic, but people were well fed and provided for – the government recognised that negative reports could deter future immigrants. In 1874 Harriet Herbert described the Christchurch barracks as ‘a splendid place, so comfortable and everyone so kind to us’.1

With the end of Vogel’s assisted immigration scheme in the late 1880s, the barracks were no longer needed and were either put to other uses or demolished. Since then, most immigrants have found their own accommodation on arrival in New Zealand or have been housed in dedicated refugee camps. In 2010 new refugees spent six weeks at the Māngere Refugee Resettlement Centre learning about New Zealand life before entering the wider community.

Native hostels

From the 1840s Māori regularly visited towns to trade. Pākehā prejudice meant few hoteliers welcomed them as guests. The government therefore built ‘native hostels’ in major towns where visiting Māori could stay free of charge. The Auckland hostel was opened in 1850 in Mechanics Bay. Traders could land their waka (canoes) and quickly transfer their produce to a covered market area outside the hostel. The hostel was well-frequented and survived into the 1930s.

The colonial housing market

While the government continued to supply specialist accommodation – such as asylums and military barracks – it did not provide general housing. This was due in part to a widespread conviction that this was the role of private enterprise. Most New Zealanders either rented their home from an investor-landlord or owned it themselves. The government restricted its role to (lightly) regulating the housing market, for example by giving municipalities (town councils) the power to prevent overcrowding and cleanse filthy houses – measures that were rarely used.

Intervention

The 1890 election of the reformist Liberal government saw the state take a more interventionist line. Growing concern over slum-like housing conditions and extortionate rents in the main cities led reformers to claim the market was failing to deliver good-quality and affordable housing. They argued that New Zealand should follow Britain and erect municipal rental homes for city workers. In 1900 the government gave local councils that power, but municipalities were too busy building streets and sewers to take on housing as well, so the state took the lead instead.

Workers’ dwellings

In 1905 Premier Richard Seddon pushed through legislation enabling the state to erect workers’ dwellings in the main cities. Suburban land was acquired, away from inner-city pollutants, and the first houses were completed in Petone, near Wellington, the following year. However, distance from city workplaces and high rents (due to superior construction standards) deterred tenants and the scheme was not successful.

Seddon’s successor, Joseph Ward, favoured home ownership. He set up a scheme offering low-interest state loans for land-owning workers to erect their own houses. By 1910 nearly 1,300 loans had been taken out, compared to the erection of just 126 workers’ dwellings. In an attempt to bolster the workers’ dwelling scheme, the state offered to build houses for landless city workers on a mere £10 deposit. Workers had the option to rent, lease or buy. William Massey’s Reform Party had opposed the state being a landlord. When it came to power in 1912 it ended the state’s first venture into workers’ rental housing by selling the remaining stock.

Footnotes
  1. Quoted in Rollo Arnold, The farthest promised land: English villagers, New Zealand immigrants of the 1870s. Wellington: Victoria University Press, 1981, p. 240. Back

State loans and state houses

The Liberal government’s venture into housing provision, while unsuccessful, provided the basic model for later state intervention in the housing market. This involved two major forms of housing assistance:

  • the erection of state rental houses (direct assistance)
  • the state funding of private housing (indirect assistance).

Policy circles

Government housing assistance might be represented by two circles: the first is state rental housing provision, and the second is state finance for private housing. The circles grow or shrink in relation to government resourcing. Historically, Labour governments have enlarged the first circle; National governments, the second. Sometimes the circles have intersected, such as when governments have lent money to individuals to purchase state houses.

Suburban boom

During the 1920s the government promoted indirect assistance through 95% loans from the State Advances Department for suburban homes. New bungalows sprang up across former fields as home buyers rushed to realise the dream of home ownership. By the end of the decade the state was financing nearly half of all new homes being built in New Zealand.

Railway housing

The main exception to state-sponsored private housing was railway housing. The Railways Department had provided rental houses for some of its workers since the 1880s, but increased provision in the 1920s to meet growing demand. Houses were prefabricated in its factory in Frankton, near Hamilton, and were assembled on site. The department built streets of railway houses in Hamilton and Wellington. Small settlements of railway houses straddled the North Island main trunk railway line.

Suburban bust

The 1930s economic depression burst the suburban housing bubble. Lenders foreclosed on mortgage defaulters, forcing many back to renting the decrepit inner-city dwellings they had recently left. With new house building at a standstill, overcrowding in the main cities became acute. The coalition government believed private enterprise would solve the problem, but in 1935 it began lending on new homes again. By then the government was deeply unpopular and was voted out of office in November.

State housing

The new Labour government, elected in 1935, blamed the housing shortage on market failure and argued that only the state was able to fix the shortage. In 1936 it drew up plans to use private enterprise to build 5,000 state rental houses across New Zealand – a return to direct housing assistance. A new Department of Housing Construction would oversee building and the State Advances, now a corporation, would manage the houses. The initiative formed part of a wider plan to slash unemployment and stimulate the economy. The scheme would:

  • give the jobless a trade
  • boost manufacturing industries
  • raise New Zealand housing standards
  • give tenants a security of tenure equal to home ownership.

Too much fuss

The opening of the first state house, where Prime Minister Michael Joseph Savage carried furniture into the new home, remains a famous image. Less well known is the tenants’ reaction to the opening fuss. After hosting not only the prime minister but 300 others – muddying floors and leaving finger-marks on fixtures – house-proud Mary McGregor ordered all guests to leave. The family nonetheless had to endure streams of visitors peering through their windows for days afterwards.

Encouraging families

Labour’s programme was aimed at low- to middle-income nuclear families – partly to encourage breeding. Rents were set on a cost-recovery basis, which priced state houses beyond the reach of the poor. (At the same time Labour strengthened existing rent controls to benefit the poor.) Typical of state-house families were the McGregors of Wellington: two adults and two children – a boy and a girl – who moved into the first state house in suburban Miramar in September 1937.

State suburbs

By 1939 state houses were being completed at a rate of 57 each week, and there were 10,000 applicants on the state-house waiting list. The Second World War halted building until 1944, after which whole suburbs were constructed. This included the (garden-city inspired) suburb of Naenae, in Lower Hutt. It was built around a shopping centre, designed to foster social bonding and community life.

Housing Māori

During the 1930s state housing assistance to Māori largely comprised loans to build houses on ancestral rural land. The increasing rate of Māori urbanisation after the Second World War led the government to admit Māori into state housing in 1948. Māori families were placed (or ‘pepper-potted’) into Pākehā neighbourhoods to encourage their assimilation into mainstream society.

Backlash

At the end of the 1940s there was a backlash against state housing. Rents were now covering only half the cost of new state houses – that meant that middle-income state housing tenants received hefty subsidies, while the poor, who could not afford to rent state houses, paid market rates for private rentals of lower quality. Labour said that raising rents would breach its security-of-tenure promise, but the wider public saw the situation as warped and unfair. During the 1949 general election the National Party exploited this discontent by promising to reform the system and provide tenants with the opportunity to buy their state houses. It won in a landslide.


A property-owning democracy

State-housing reforms

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%.

Deprived communities?

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.

Urban renewal

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.

Reducing intervention

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.

Market rents

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.

Footnotes
  1. Quoted in Ben Schrader, We call it home: a history of state housing in New Zealand. Auckland: Reed, 2005, p. 47. Back

Council housing

Early municipal initiatives

In the early 1900s city councils in the main cities followed the central government’s lead and became more interventionist. Believing private enterprise had failed in the delivery of some services – from public transport to town milk supply – councils either took them over or set up in competition. A chronic housing shortage in the 1910s led them to move into housing provision as well.

  • In 1916 Auckland City Council built six rental houses in Ponsonby. In 1920 it used a government loan to erect 60 houses in Grey Lynn for young families to buy.
  • In 1920 Wellington City Council built 10 houses for sale in the suburb of Northland. Interested buyers entered a ballot for purchase.
  • In 1921 Christchurch City Council was advanced government finance to build eight rental dwellings in Sydenham. A further six were opened in 1922.
  • In 1924 Dunedin City Council erected seven rental cottages in North Dunedin.

These mirrored the earlier government workers’ dwellings schemes in providing houses for both rent and sale – some councils stressing one over the other. They show how the state supported municipal initiatives.

Home ownership is better

In the early 1940s Wellington City Council supported home ownership over renting. Councillor M. F. Luckie expressed a widely held view: ‘You don’t make good citizens if you make them permanent rentpayers and you don’t have slums where people have their own homes.’1

Schemes expand

There was then a hiatus in building until 1937, when the first Labour government advanced new loan money. Both Dunedin and Wellington opted for subsidised private housing. In September of that year Prime Minister Michael Joseph Savage opened the first three of hundreds of council-built homes in Dunedin. In 1940 Wellington introduced a scheme for low- to middle-income residents. If they could provide a 10% deposit on the cost of the land and house, the council would guarantee a 90% low-interest mortgage. The aim was to provide an affordable alternative to the government’s state rental-housing scheme.

Housing the elderly

Meanwhile, Christchurch’s council had pioneered a new direction. In 1938 it erected the first complex of rental ‘cottages’ (flats) for old-age pensioners. This led to an informal distinction between state and council housing provision, the former focusing on accommodating families and the latter on housing single and elderly people. After the Second World War, councils reduced or stopped subsidising private housing and built up their rental portfolios. One reason for this was to re-house elderly residents displaced by urban renewal projects. In Auckland, large areas of historic Freemans Bay were flattened to accommodate a new motorway, with many affected residents relocated to purpose-built pensioner flats beside it. Inspired by modernist developments overseas, Wellington built several high-rise blocks of flats in the 1960s and 1970s, before reverting to lower-scale developments in the 1980s.

A spruce-up

In 2007 Wellington City Council entered into a $220-million memorandum of understanding with the government to upgrade its housing portfolio over the next 20 years. This included insulating and double-glazing dwellings to improve their warmth, and landscaping their outside areas to make them more inviting and pleasant.

Diversification

From the 1970s councils diversified provision to accommodate those in most need of housing – such as disabled people. In 2003 Auckland City Council sold its public housing stock to the government to relieve debt; other Auckland councils retained their portfolios and these became part of the assets of the new Auckland Council in 2010. At this time Christchurch City Council was the single largest provider of public housing after Housing New Zealand, followed by Wellington City Council. Smaller municipalities, such as Hamilton, Timaru and Invercargill, also provided public housing – mainly for the elderly.

Footnotes
  1. Evening Post, 2 May 1941, p. 8. Back

21st-century developments

In the early 21st century government housing policy was centred on ensuring a sustainable housing supply. In the early 2000s population growth created a housing shortage, especially in large cities and resort areas. This led to skyrocketing prices that made housing unaffordable for many first-time home buyers. Rising house prices flowed through to increased rents, further decreasing housing affordability.

To improve affordability the government provided two major forms of assistance:

  • direct assistance in the form of state housing and income-related rents that provided for people in greatest need
  • indirect assistance in the form of the accommodation supplement for those whose housing costs were too high to be met by their own income alone.

Nation of homeowners?

Between 2002 and 2005 New Zealand house prices increased by about 53%. This benefitted existing homeowners and investors at the expense of first-time home buyers, many of whom were priced out of the market and forced to rent. The long-term trend in house prices widened the wealth gap between those who owned property and those who did not.

Community housing sector

The government has supported the growth of the community-housing sector, sometimes called the third sector (after government and private provision). It consists of non-government organisations such as community trusts, Māori and iwi organisations, and socially oriented businesses. The government’s Housing Innovation Fund gave grants for such providers to build or buy community rental housing and supply affordable home options. An umbrella organisation, Community Housing Aotearoa, was set up in 2004 to provide leadership and services to the community housing sector.

Home-ownership assistance

In 2010 the government supported low- to moderate-income earners to buy homes through a number of schemes.

  • The Welcome Home Loan gave home loans to people with low or no deposits. The government provided participating lenders with mortgage insurance.
  • The Gateway Scheme enabled first-time home buyers and community providers building or buying houses on government land to defer payments on the land for 10 years.
  • Kāinga Whenua loans were available to Māori to build homes on multiply owned ancestral land.
  • KiwiSaver provided subsidies to home buyers who had contributed to the government-subsidised superannuation scheme for at least three years.

Private rental market

As home ownership became less affordable, the proportion of renters increased. In 2010 the private rental market was characterised by short-term tenancies, making it difficult for tenants to maintain schooling and community participation. The government was working with landlords and investors to improve renting as a tenure choice through such things as long-term leases.

Tenancy Tribunal

The Tenancy Tribunal is a special court that rules on disputes between landlords and tenants who are unable to reach agreement in formal mediation.

Housing quality

An important aim of government was raising the quality of New Zealand’s housing stock. Many houses were cold, damp and energy-inefficient, leading to annual winter spikes in respiratory and other illnesses. The early 2000s leaky building crisis – where poorly built new houses developed leaks and rotted – was partly blamed on insufficient regulation. In response the government:

  • updated regulatory frameworks and building standards, such as the Building Act 2004
  • implemented energy efficiency initiatives
  • supported innovation in design and development.

Warmer homes

In 2009 the government launched its ‘Warm Up New Zealand: Heat Smart’ scheme. It aimed to enhance energy efficiency in more than 180,000 homes by providing a subsidy to improve ceiling and under-floor insulation. This would achieve warmer, drier and healthier homes.

Better housing mix

The government also promoted a broader housing mix to better meet the needs of New Zealand’s diverse population. The standard three-bedroom home of the past was often not suited to single-person households or communities who preferred intergenerational housing. Housing for disabled people was another area of growing need.

State housing

In 2010 the government announced that financial constraints meant that state rental housing provision would be restricted to families in greatest need. New tenants would have regular tenancy reviews to ensure their home still best suited their housing needs. Those whose circumstances had changed would be placed in more suitable homes, or evicted. This policy increased the importance of the community-housing sector in providing affordable rental housing for those locked out of government, council and private provision.


External links and sources

More suggestions and sources


How to cite this page: Ben Schrader, 'Housing and government', Te Ara - the Encyclopedia of New Zealand, http://www.TeAra.govt.nz/en/housing-and-government/print (accessed 20 September 2019)

Story by Ben Schrader, published 20 Jun 2012