Public Housing Tenants Confront Deregulation Lessons from New Zealand

by Jacqueline Leavitt

In New Zealand, there is no nonprofit third sector between public housing and the market. Tenants are organizing to keep rents down, limit privatization and create new “third-stream” alternatives.

The Labour Party: The Unlikely Handmaiden

In 1984, under the Fourth Labour Party government, New Zealand became the cradle of the great experiment in privatization, sold its assets and to paraphrase Jane Kelsey’s aptly titled book, rolled back the state. Little formal opposition was initially voiced to this officially sanctioned public disinvestment. After Labour turned government-owned enterprises (including Electricity, Telecommunications, Coal) into business corporations and sold these assets to the private sector, the National Party returned to power in 1990. Their attention turned to non-commercial areas that many New Zealanders consider birthrights — housing, education, and health. This market orientation was not reversed when the New Zealand First Party, with strong Maori support, formed an alliance with National after the 1996 elections.

New Zealand — The Extreme

Privatization (a.k.a. commercialization, corporatization) efforts are starkly revealed in New Zealand because: (1) the governmental structure is central and local with no state/province intermediaries, and (2) the policy is sharply framed — individual needs are to be met through the private sector without state intervention. Apart from impressive community organization among Maori, and an ongoing religious presence among the homeless, nonprofits and community-based-organizations are the exception.

Baldly put, official housing policy is: tenants who cannot afford rent raises in high-priced areas should find somewhere else to live. Limited state assistance through a targeted income supplement is insufficient to meet the rent increases. This assistance contrasts dramatically with the state policies that helped many achieve the “New Zealand dream” of homeownership in the post-World War II period. During that time, public housing served as a lever: tenants paid lower rents, saved money when their income streams were less, and then bought houses with state-subsidized mortgages. Today’s privatization policies remove the housing buffer at a time when full employment no longer exists and other state-provided benefits are shrinking.

To fully appreciate this situation from the vantage point of progressive housers/community developers in the United States, imagine the following: no federal funds of any sort, no state or local funding to replace federal dollars, no national foundations as resources of last resort, no or few nonprofits to provide models and offer prototypes, and few community organizers.

State and Local Structures

The Housing Restructuring Act of 1992 reorganized the housing owned, financed, and administered by the central government. The non-commercial Housing Corporation was taken apart and Housing New Zealand (HNZ) was directed to be “as profitable and efficient as comparable businesses that are not owned by the Crown,” and to balance its commercial objective with social concerns. Four years later and after selling about 4,000 units, HNZ owned 66,634 units. In 1996-97, HNZ’s net operating revenues showed a surplus after taxes of $45 million, largely the result of setting rents at market rates, general rental market inflation, and sales, many of which are in prime locations in Auckland and where tenants couldn’t afford rent increases.

In addition to HNZ units, some cities provide Council Housing. The three largest metropolitan areas — Auckland, Wellington, and Christ Church — illustrate diverse positions toward privatization. In June 1996, the Auckland City Council passed a resolution to sell its 604 units at market rates and tested the waters in Freemans Bay, a desirable inner city location that once was a stronghold for Maori and Pacific Island households. Wellington’s Council, with control over more than 2,000 units, has threatened to sell them each year for the past six years or so, but organized tenants have successfully prevented the Council from passing resolutions. Christchurch City Council, with 387 public housing rental units and 2,174 elderly persons’ housing units, voted to allocate about $8 million (NZ) to increase its affordable housing stock.

Tenant Surveys Show Impacts

Auckland is by far New Zealand’s most expensive housing market and the ring of neighborhoods surrounding the inner city steadily gentrifies. The Council sold 604 units (two-thirds of which are concentrated in the inner city’s Freemans Bay area) at the same time Housing New Zealand raised rents, diminishing the overall supply of housing for low income people. Lower rents are more likely to be found further out, increasing travel times to jobs, disrupting use of community services such as halfway houses and medical clinics for psychiatric survivors and Maori language immersion programs in the elementary school across the street, and removing possibilities for single mothers to balance child care, work, and job training. The “squeeze” effect was somewhat abated as long as the moratorium on rent rises occurred in the Housing New Zealand stock. (It was lifted on July 1, 1997.)

Against this backdrop, Patricia Austin and I, with student assistants, developed a survey instrument and between June and August, 1997 interviewed 50 tenants living in either Auckland City Council or Housing New Zealand units, all in proximity to each other in Freemans Bay. The preliminary findings more closely reveal impacts on daily life. Because Housing New Zealand tenants were not yet subjected to an aggressive sales strategy as compared to Council tenants, we were also able to compare responses to privatization policy among tenants with different public landlords. These findings shed light on ways in which tenants view their options, from individual household survival to collective action.

The effects of privatization are enormous when viewed from the perspective of individual households. They include increased stress, and feelings of insecurity and powerlessness. Many households had specifically chosen a public sector landlord in search of stability. Some households had directly or indirectly experienced discrimination in the private sector and reported anxiety about having to face such obstacles again.

Forty-two of the 50 households interviewed had experienced a rent increase or were about to get one when the interviews were conducted. Forty-three of the 50 households said new rents will be unaffordable or on the borderline of affordability. Methods of surviving include reducing food budgets, cutting out health services, eliminating telephones, minimizing the use of heaters, selling cars or only using them for essential trips, minimizing contributions to churches or other organizations, and no longer sending money home.

The strategy in Council housing of forcing tenants out by raising rents is countered by the growing strength of local community networks, which may be tied to the presence of a Tenant Action Group which has sued to reverse rent increases, and the Auckland Housing Association Trust (AHA), a nine-month-old tenants group which organized to buy units and maintain them at affordable rents.

Taking the Offensive

As a participant-observer to the Auckland Housing Association Trust, I followed their actions as they explored alternatives to counter the Council’s individual sales to private buyers and/or speculators, or bulk sales to a private for-profit developer. The AHA has been fighting on several fronts, including successfully obtaining a grant from the Department of Labour’s Community Employment Group. This small grant enabled them to hire two staff people to augment volunteer resident organizers, coordinate political outreach (including a bill introduced into Parliament to support the third-stream housing sector). It helped them tackle the thorny issues arising from a resident body with low and frequently unstable incomes. The AHA has formalized an agreement with a commercial real estate firm whose financial consultant has worked with residents to develop a cross-subsidy scheme. They have identified different tiers of tenants including those who have no resources to buy, those with a down payment but insufficient earnings, and those with no down payment but steady earnings. As of October 1997, the AHA put forward an option to buy 87 units. Whether rents will remain affordable for people on fixed incomes remains to be seen.

Meanwhile the AHA is being watched by other tenant groups who are protesting rising rents and looking toward a third-stream alternative between the market and the state.

Lessons for the U.S.

There are at least five lessons to be learned here given the Democratic Party’s reinvention of the U.S. Department of Housing and Urban Development (HUD) and the efforts made to demolish public housing units, mix incomes, and raise rents:

  • First, question local housing authority assumptions about demolitions that are based on physical surveys and result in a citywide loss of units.
  • Second, connect this to local housing authority assumptions about relocation, vacancy rates, location of new units, and document the ways in which community networks are fractured, impacts on transfer of children to new schools, loss of special programs, care of the elderly, etc. Assess whether racial ethnic groups are disproportionately displaced.
  • Third, emphasize the relationship between the existing poverty of on-site tenants and the need for increased incomes at living wages on a permanent basis; redirect attention to tenants’ needs for jobs, job training, and education.
  • Fourth, support organizing efforts that bring tenants together in order for them to put forward their own set of demands, plans, and processes.
  • Fifth, seek support from legislators, academics, and the commercial world in developing creative methods of packaging and obtaining financial resources.

The first three lessons can be codified into a social impact report that includes tenant surveys and interviews as well as base surveys. The fourth and fifth lessons require the drawing in of a pool of people who work collaboratively with tenants and understand linkages between developing technical reports, translating the contents into tools for popular education, organizing, and identifying where and how to best tap into resources needed to finance and implement the ideas.

Jacqueline Leavitt is a Professor in the UCLA Department of Urban Planning and one of the original members of PN. This article draws from research she undertook in New Zealand in 1997 as a Fulbright Scholar and reflects collaboration with Patricia Austin, a faculty member in the Department of Planning at the University of Auckland.

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