Q + A Susan Wood Interviews Michael Bassett

SUSAN Good morning to you, Michael Bassett.

DR MICHAEL BASSETT – Political Historian
Good morning, Susan.

SUSAN Fascinating. Why, with all your research, are we so in love with houses? Because this seems to me a big part of it – our love affair with housing, our desire to own our own homes.

MICHAEL Well, I think it’s been a pretty basic thing, really, in New Zealand history. People want to have their piece of dirt, they want to have a roof over their heads, the security in tenure of a house. And, I mean, the interesting thing about housing, though, in this study is the way in which over the years the state’s involvement has changed, and that has altered the way— the levels of ownership. It’s put the supply and the demand out of kilter, where prior to about the mid-1970s, they were fairly evenly balanced.

SUSAN Because way back, if we’re looking in the ‘60s and ‘70s, it was much easier to get into a house, wasn’t it?

MICHAEL Oh yes.

SUSAN Lovely old 3% State Advances loan, you could capitalise the family benefit.

MICHAEL Yes, yes. And what it did is it helped people to sort of get that first rung on the ladder, what we call the entry-level housing, where Neil Homes and Reid Homes and Beazley’s and all the rest of it were available, and you came along with your capitalisation, which helped you get the deposit for the section and the house, and then you got a 3% loan from the government. And by and large, supply and demand kept in balance, and so prices didn’t move unreasonably. It’s after ’75 that you start to see changes.

SUSAN And that leads to my next question. My parents did that – they bought a house on the North Shore of Auckland. I think it was $14,000 sometime in the ‘60s, and they capitalised the family benefit, and they got the cheap loan. That house now would be well into seven figures – I don’t know, a million and a half, maybe a bit more. How did it get so expensive?

MICHAEL For two reasons— three reasons, possibly more. The first – the government’s involvement started to decline about 1977, ’78, because the economy went AWOL. In 1979, capitalisation of the family benefit started to be able to be used for an existing house. Now, what that meant was that not so many new houses were being built, and the construction industry starts to lay off people. And so you find that the total number of houses coming along is going down on an annual basis, but the demand is going up.

SUSAN So it’s simple supply and demand that’s pushing those prices up?

MICHAEL Simple supply and demand.

SUSAN Because you look now – we’re building about the same number of houses that we did in 1974.

MICHAEL I don’t think we are building quite as many as we were in ’74. In fact, since that 34,600, I think it was, in 1974, that figure in a year has been surpassed only once by, I think, Helen Clark’s Government on one occasion. So by— And over recent years, you know, you’re lucky if it’s been between 14,000 and 20,000. So we’ve got an accumulation of 37 years of inadequate supply, and, funny, prices have risen. And anybody who knows anything about supply and demand knows that that’s the way it works. So we’ve got a big backlog to deal with.

SUSAN We’ve mentioned government, or you’ve mentioned government, a lot already in this interview. Is that the answer? Does the Government have to be cheap loans, building houses?

MICHAEL No.

SUSAN What is the answer?

MICHAEL You couldn’t get much cheaper loans, given the interest rates these days.

SUSAN 5%.

MICHAEL No, it really— There really is a need for a new development on the fringe of the cities, and that is going to be facilitated by a removal of the metropolitan urban limits, particularly in Auckland. There is also going to have to be a huge cranking up of the construction industry, and that requires investment. And Local Government has to participate in all of that, because they are part of the problem. They have not been so far part of the solution.

SUSAN When you say they’re part of the problem, how do you mean?

MICHAEL Part of the problem because they introduced the metropolitan urban limit, and what that did was it made it very very difficult to develop beyond the specified limit.

SUSAN So within this area becomes more expensive?

MICHAEL And within the area it becomes more expensive. I actually have a personal interest in some properties in Mt Albert, where I lived, where over a 15-year period, the value of the house almost doubled; the value of the land underneath it went up by almost five times. Now, that was a direct result of the metropolitan urban limit forcing up the value of land inside the skirt.

SUSAN So if they just got rid of that? They’re not going to, but they are talking about going out still. Would it force prices down? Because people who are in the market don’t want the prices down. People who own homes don’t want them to drop.

MICHAEL No, no. Well, that’s quite right. And, I mean, you’ve actually got a situation where all the politicians and the planners, so help me, most of them own their own homes, and most of them have a financial interest in keeping the metropolitan urban limit, while the struggling young people – the sort of people that I represented when I was MP for Te Atatu – find it almost impossible to get that first rung on the ladder. There’s almost an immoral aspect to it.

SUSAN There’s an intergenerational thing going on too, isn’t there? Sort of the grey greedies, if you like, our generation hanging on to the wealth.

MICHAEL Yes.

SUSAN This— We’ll just talk about Auckland specifically – there’s a lot of talk about Auckland at the moment, because we know with Christchurch, this is the hot place. They’re talking about a bit of up and a bit of out. Is it going to be enough for Auckland?

MICHAEL Well, there aren’t any options that I can think of – a bit of up and a bit of out. I mean, I don’t think that we should get rid of the push to go upwards altogether, but the emphasis that has been placed on it is altogether over the top, and there’s got to be a lot of movement out, and there’s got to be some careful planning so that there are employment opportunities for people in the new areas.

SUSAN Another of your conclusions I found fascinating – you say the green agendas have overtaken, if you like, that egalitarian social agenda where everyone had a house. What do you mean?

MICHAEL Well, quite a lot of regulations have been added into the mix over the years, for instance, insulation rules, various other things that have had the effect of pulling up the development levies, and they are just then simply added on to the cost – end cost – of the house, and they have to be met by the young couple, the entry-level buyer who finds that instead of $14,000 as you remember, it’s now you’re very lucky in most parts if you can get in for about $400,000 to $500,000 in a new house.

SUSAN Are we unrealistic, though? I mean, getting back to that $14,000 house – three bedrooms, very small bedrooms, one bathroom.

MICHAEL Yeah.

SUSAN You know, they were basic.

MICHAEL Yes, and that is definitely a factor in all of this. There is no doubt about it that most of the young actually want a house that is rather better than the one that you remember and which I remember. They want two bedrooms. They—

SUSAN Two bathrooms.

MICHAEL Two bathrooms, rather. And so, you know, expectations have risen and in part driving things, but the basic house still is a place for it so that people can actually improve it over time as their circumstances change.

SUSAN So will this generation— Our generation have been great homeowners. Will this generation be the same, or will many of them be forced to be renters?

MICHAEL Well, the indicator is that is what is actually happening. Home ownership got to almost 80% a few years ago. Now it’s down to 66%, I think it is, and in Auckland down to 57%. There are large numbers of families out there who just can’t afford to get a roof over their head.

SUSAN And won’t.

MICHAEL And won’t until Local Government gets cracking. And if Local Government won’t get cracking, then the Government’s got to make them crack.

SUSAN Very nice to talk to you, Michael Bassett.

MICHAEL A pleasure.

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