A House of Cards: Meet the Jane Family
John Key has a personal fortune in excess of $50 million, a nice house in Auckland and a holiday home in Hawaii. No doubt the latter is a bit better than the average bach.
Professional middle-class types might inherit a house or spend an entire working lifetime trying to get into the housing market and do sometimes succeed. Increasingly though, for a large number of us, we just don't have these options.
To explain the nature of the housing situation faced by working class families let me introduce you to the Jane family. The Jane family consists of two parents. One works as a supermarket checkout operator and earns the minimum wage per hour for 30 hours a week and her partner works as a caregiver for an average of 30 hours a week. Combined, their income is $825 a week In addition they have two primary school age children. The total amount they get in the hand for family tax credits is $157.17 a week. After tax, the family would have $817.17 a week.
The Jane family live on the Kapiti Coast, about an hour north of Wellington. I decided to do a quick bit of research and found that the average rent for a three bedroom house on the Kapiti Coast is $300 a week. The average rent in Auckland for a three bedroom place is about $502 a week (based on 124 listings). In Christchurch the average rent is $487 a week (based on 51 listings). In Wellington the average rent is $371 a week (based on 26 listings). However, this does not take into account the range of rents. On the Kapiti Coast there is virtually no deviation in the amount charged in rent but Christchurch had wildly differing rents that were anything from about $250 to over $1080 a week. What is interesting isn't so much the rents but the simple lack of availability of housing. Based on their income the Jane household would struggle in Christchurch or Auckland..
The Janes are fed up with paying rent so they decide to apply for a Welcome Home Loan which is a low interest and low deposit home loan scheme aimed at assisting low income families into their first home. The rate of interest is low, they only require a 5% deposit and they have 30 years to pay it back including interest of about 5.74% per annum. Based on their combined income the maximum they would be able to borrow is $166,000 for a new home. My search could only find ONE house within the price range on the Kapiti Coast. In Auckland there was nothing within that price range. In Christchurch there were five homes within the range which were either mortgagee sales or damaged. In Wellington there was nothing in the entire region.
However, it would be unfair to say that the Janes family would never own their own home. The problem is they would have to relocate to somewhere like Te Kuiti, Taumarunui or Opotiki to find a house to buy and these places aren't exactly noted for having lots of jobs. For most working families the dream of owning their own home is nothing more than a daydream because the cost of housing where most of jobs are being created are priced out of the range of most low income earners.
In order to be able to get the maximum permitted for a Welcome Home Loan ($350,000 depending on where a person lives) the Janes would need a combined income of $70,800 per year.
Let's say Jane Family have an increase in pay because Mrs Jane got promoted to supervisor at her job and they now earn $70.800 a year combined. On the Kapiti Coast they would be able to choose from 25 homes. In Auckland they could pick from 68 homes. In Christchurch they could pick from 83 homes. In Wellington they could pick from 16 homes.
It doesn't require a real estate qualification to work out that most families on low incomes who want to own their own home had better like living in small towns because they're about the only place they will be able to afford to buy their first home. And there is a very good reason why housing is cheap in small towns: there are very few jobs in these places.
The explanation most commonly given for the shortage in affordable housing is the simple lack of homes and land to build the housing on. The government's answer is to open up conservation land to build more homes..
Anti-immigration groups have blamed the recent arrival of many migrants from overseas for the shortage in affordable housing. As with all such claims there is an element of truth to it but local people are also driving up housing prices as they relocate to Auckland and Christchurch in search of work as the rest of the country experiences major job losses. Labour of course likes to pose as a viable alternative to National but often their views differ only by degree, not in substance. Sometimes they even get even deeper into the political sewer than their rivals. On the issue of housing, they recently went so far as to propose a limit on foreign ownership of local housing stock. In doing so, Labour potentially alienated itself from elements of its support base and exposed its basic opportunism.
The key reason for the shortage of affordable housing, though, is due to property investment not being taxed through a capital gains or property tax, as highlighted in an article in Yahoo! News on September 12th, 2013. The result is that investors and companies are buying up hundreds of homes, partly to rent them out at a rate to discourage low income earners and to attract wealthier tenants. The latter are prepared to pay exorbitant rents. This action also partly keeps the house prices artifically high so their properties retain their investment value. Of course, what these speculators fail to understand is that if people can no longer afford to pay such rents or the property values undergo a major slump for whatever reason, they will find themselves making a major loss and stuck with properties that are worth less than they were purchased for. In the dry language of economics it is called negative equity..
There is more than enough housing to ensure that every person could afford to have a home to live in. However, not surprisingly there is no resolve on the part of the government to take the steps needed to crack down on the rampant property speculating, skyrocketing rents and grossly inflated house prices prevalent out there. This ensures that families like the Janes will never be able to buy their own home or afford to rent a place where they could realistically find work..
Both Labour and National market the Welcome Home Loan as the means by which low income families can join the property owning classes. However, it is a cruel sham as the maximum most low income families can earn is so low there are few places they can actually afford to buy their own home.
But that isn't the real obscenity. It is a fact the working classes cannot afford to rent or buy a home and we find ourselves either having to move in with parents or live in squalid living conditions at the same time as speculators are snapping up local housing and Housing New Zealand are demolishing houses under the dubious claim they're earthquake risks.
Needless to say, in an anarchist society this would not happen but the working class need affordable and liveable housing now, not at some time in the future when the revolution finally takes place. The question that needs to be answered is what must be done within the limitations imposed by a capitalist society to get workers into housing? In Europe and elsewhere squatting has been a time honoured method of taking over homes that have been abandoned or seized by the banks. Direct action by people in their own communities, sharing skills, time and resources to provide for their real needs can be a powerful method of getting things done.
Perhaps now is the time New Zealand to do the same on a mass scale.
All calculations regarding Family Tax Credit were obtained from Work and Income's Manuals and Procedures Family Tax Credit tables.
The information regarding the availability of housing within the price ranges were obtained using quick search functions on several real estate websites, mostly Harcourts. Ditto for rents for three bedroom homes EXCEPT for the Kapiti Coast where rents were based on "To Let" advertisements in the Kapiti Observer.
Welcome Home Loan calculations were based on home loan borrowing calculations done on ANZ website which take into account Welcome Home Loan criteria. All payments etc calculated on a 30 year home loan at 5.74% interest with a 5% deposit.
The wages of the Jane family were calculated on both parents earning the minimum wage per hour of $13.75 before tax calculated on a thirty hour week, which is the official definition of full time work as used the Ministry of Social Development, and Family Tax Credits for two primary school age children.
Comments regarding housing affordability based on articles on the housing shortage including "Auckland in grip of housing crisis" (Stuff, 21st October, 2012).
From the Aotearoa Workers Solidarity Movement website. Guest post by Pink Panter.