Monday, May 27, 2024

Damien Grant: What to do with a problem like Kāinga Ora

I do like a good governmental annual report. They are interchangeable for the most part; shining faces smiling at other shining faces, all with wonderful teeth and enjoying a wonderful life thanks to the honest hard work of the Ministry for Administrative Development.

Mostly the faces are brown. It isn’t clear why but I suspect that many Wellington civil servants believe brown people would be living in cardboard huts and eating boiled cabbage without government assistance.

Paternalism is a nasty form of racism that wraps the do-gooder in a cloak of virtue whilst hiding their contempt for those they are tossing alms.

Few agencies display this better than Kāinga Ora – Homes and Communities. Formerly this was called Housing New Zealand and it is in the news because someone asked Sir Bill English to have a look under the hood.

I don’t know why this was necessary. For all of my criticism of the state, its various agencies produce excellent reports that tell you exactly how badly they are performing.

Sir Bill produced his own report. It wasn’t as good as the one produced by Kāinga Ora itself and his recommendations were weaker than homeopathic wine.

Let’s look at the numbers produced by the agency.

It owns 72,000 houses with 185,000 residents therein. Or ‘customers’ as Kāinga Ora calls them. They are wrong about that. A customer, according to my dictionary is ‘someone who buys’, although there is an informal definition to cover a ‘cool customer’, but I think we are off track.

Kāinga Ora’s 72,000 houses are worth $45 billion. From this they receive $526m in rental income. That is a return of 1%. These ‘customers’ are not buying anything.

Sir Bill, in his report shows revenue of just over $2b, which is true, but most of this revenue was ‘Crown income-related rent subsidy’. A transfer direct from Treasury to reflect the difference between the market rent and what the tenant actually pays.

On top of this the Crown funds capital spend, running at $3b annually. Kainga Ora spends more on repairs and maintenance than it receives in rent. On average, it gets $140 a week from each residential property.

Are we to believe that 3.5% of the population are unable to cover more than a nominal contribution to the cost of their housing, or is it more likely that there is no incentive to enforce financial discipline?

It is, I am suggesting, easier to give people free housing when the taxpayer is covering the cost than make a serious effort to access the financial capability of your ‘customer’.

English did observe that the current scenario was unsustainable and needed to be addressed, and I’d have some confidence in his analysis if the situation was materially better at the end of his nine years in government. But from what I can see from the old Housing New Zealand reports it was a mess back in 2017. The only serious change has been the name.

The problem with National is they believe the solution to a poorly run government agency is to put people like them in charge, which is why he suggests a refresh of the board and some managerial improvements. This will not work because the model remains the same; the state micromanaging the lives of those it deems unfit to manage their own affairs.

Why not do something that will have a material improvement of the lives of those 185,000 Kiwis living almost rent-free in state accommodation. Why not sell them their houses? The nominal value of the assets is $45b, but the state is losing money on this investment. So long as we recover the $15b in debt the Crown will be better off in cash terms and so will most of the current tenants.

National claims to be the party of personal responsibility. Here is an opportunity to do something consistent with that ideology. Sell the state houses. Give those 185,000 people a stake in New Zealand beyond being a beneficiary of other people’s tax dollars.

Give them an opportunity to own something that is theirs, a legacy for their children, the chance to build capital and wealth.

People who own property take care of it. They maintain, improve, and treasure what is theirs. Giving those in state houses, many who have had challenging lives, the chance to take an economic stake in this beautiful country would be the most powerful change beyond improving education that Wellington can achieve for those trapped on the margins of society.

Neither Labour or National are attracted to this idea because they both hold in silent contempt those living in state accommodation and believe their quality of life is dependent on the generosity of the state and the wise management of Wellington civil servants.

They are wrong. It is easy to write people off, which is what leaving them in state housing does. It is harder to take a risk on them, but we should. No-one can succeed without an opportunity.........The full article is published HERE.

Damien Grant is an Auckland business owner, a member of the Taxpayers’ Union and a regular opinion contributor for Stuff, writing from a libertarian perspective


Anonymous said...

Well, that could be a good idea, but perhaps we should look at the law of unintended consequences. In the UK, the Right to Buy gave tenants a substantial discount to purchase their council homes provided they stayed in them for at least 5 years. By 2021 of the homes sold in London under the scheme, apparently around 4 in 10 of them were back in the rental market.

Ray S said...

Didn't we have a scheme whereby tenants could by the state house they were occupying?
Seems like reinventing the wheel to me.

Erica said...

I gather there is a big problem with damage to state houses. It should be considered a privilege to live in one. not an entitlement. If you cause much damage regularly then you should be perhaps given a government owned accommodation at a camping ground set up with shared concrete kitchen and ablution block until you reform and become more civilized and appreciative.

My parents first home in the 1940s was at a MOW construction site and they lived in a tent with a baby with communal facilities.

Robert arthur said...

Some years back many tenants were able to buy on generous terme But state tenata are not irrational mugs like us; they do not live for the benefit of their estate. After a suitable delay many houses were on sold to landlords or deveopers, the money blown, and the tenats rejoin the queuw not for a 1970s unlined concrete block unit, but for one of the prmium price modern Kainga Roa luxury flatsfor a worry free life of ease.

Anonymous said...

Sounds sort of okay, but assumes all can be legally subdivided and sold and just how would the financials work? Does it assume that they would pay more to own? And just imagine the headaches you'll create in those multi-unit blocks?

But I do like Erica's idea. We keeping hearing of this ideal of "a warm dry home" (wouldn't we all like one of those?), but a certain cohort of society have more than proved they don't deserve one.

And to assist with the crime that usually accompanies that kind of lifestyle, perhaps a new concrete facility (heated of course), on say, Auckland Island would be the answer?