Power to the tenants: re-claiming the rental market

By Ellipsister (Co-Ed.)

The housing crisis does not stop at home ownership. It is about rents. It is about landlords. And it is about tenants.

Like many in my generation, I am a serial renter. In fact, we (my whānau) currently pay rent in two places because I commute between Auckland and Wellington. Although, I only pay rent for a room in Wellington, and not an entire house. That I am in a position to commute is a privilege that very few others can afford. I get that. However, despite my privilege, my experience and the similar experiences of others is not irrelevant simply because of the wider reaching social impacts of the housing crisis on low-income families and earners. We need to get on the same page. The reality is that it is situations like mine – those of middle income that contribute to homelessness and not in the way you might think.

 The spectrum

Talk of the housing spectrum from homelessness to home ownership is common in policy circles. But it is flawed. The spectrum is not linear and treating it as such perpetuates the problem. A major assumption from policymakers and political parties alike is that if we just build more houses (supply) and make finance more readily available to prospective buyers then bingo! Everyone will have a home. We just have to look to the US sub-prime lending that led to the 2008 GFC to see the horrible consequences of that kind of an initiative. We need to understand that the housing crisis is as much about rules and the distribution of power, as it is about supply and finance.

 The middle

In the past, the housing cycle saw people move into their own homes, or upgrade their rentals as their incomes increased creating financial security. The housing crisis that began in Auckland and its cancerous spread to other regions has created a short circuit in that cycle. For my generation, only those people whose parents can help can continue on that cycle. The rest of us languish in dilapidating properties, unable to save for our own homes due to the excessive rental prices we pay, unable to upgrade to suitable rentals because we are priced out of the next rung on the ladder, and often unwilling to move because value for money properties no longer exist. This means that we – the middle-income earners – have captured the affordable rental and created a rental scarcity for low-income earners. We are the group who in practical terms not only prevent low-income whānau accessing affordable rental homes, but exacerbate the growing levels of homelessness.

I know it’s not right to talk about middle income earners moving into nice homes so that low income families can access their left over rundown rentals. I’m not proposing that we only find solutions for middle income earners. I am highlighting that part of the problem lies in the rental space and the short-circuiting of a cycle that has operated to minimise homelessness. Ignoring the hamstringing of middle-income earners prolongs the problem of homelessness, inaccessibility to suitable rentals, and the unequal share of power held by landlords.

 The key issues for renters

Some general themes that consistently arise for renters include:

  • Move in costs: These upfront costs usually involve –
  • 2 weeks rent (up to 4 weeks max) as bond;
  • 2 weeks rent in advance; and
  • 1 weeks rent plus GST as a letting fee.

For a middle-income family, the rent will often be around $500-700 per week. This amount of rent signifies these families could conceivably service a mortgage of their own. But even on good income, people don’t generally have over $3,000 just sitting around that makes it possible for them to move and given the rental costs, are not in any position to ‘save’ the 20 percent deposit needed to make them eligible for a mortgage.

For the record, I’m not interested in anecdotal policy qualifications of ‘I saved X while doing A, B and C, so everyone else is just lazy and stupid’. I mean it’s great that the system worked for those of you who think like that. You clearly had the privilege of some particularly favourable conditions. But by your own admission, it’s not working for the majority of other people. Evidenced by your view that people who don’t experience the world as you do are, um stupid and lazy.

  • Affordability:  Price is the key determinant for whether a renter will tenant a rental property. We know that rental prices vary for homes of similar size and quality and we understand that major price discrepancies are often associated with location. But this isn’t always the case, and despite some reports claiming rents are not increasing we renters are seeing spikes in prices on properties without any maintenance or upgrade. The reality is that a 3-bedroom hardy plank shit box with no upgrade since it was built in the 1970’s will now sting the renter over $500, a price that only a few years ago would get you a new build or renovated rental.
  • Quality:  Renters want and need a property that is warm, dry, safe and functional (i.e. no outstanding major repairs). What is on offer is often uninsulated (or depleted insulation), damp homes in need of some fundamental repairs (e.g. wiring, light fittings, plumbing, joinery) and upgraded furnishings such as carpets, curtains, wallpaper or paint.

 

  • Tenancy agreements: Tenancy agreements are an annoying but necessary part of being a tenant. They protect both the tenant and landlord. However, it is the landlord who will ultimately determine if the lease is for fixed or periodic tenancy. Being bound to a property for a fixed term and liable for rent if you find a more suitable property before your lease expires means that people cannot move unless they can afford to service two rental properties. Fixed term arrangements are intended to provide certainty, but they don’t they minimise the choices a renter can make.

 

Power to the tenants

rental policy

Requiring the letting fee to be payable by the Landlord not the tenant

One means of giving power back to tenants would be to amend the Residential Tenancies Act 1986 to require landlords to pay the letting fee not the tenant. See the Tenancy Tribunal website.

The work done by the letting agent, is for the benefit of the landlord. It is grossly unfair. A tenant should not have to pay a fee that deals with administrating a property that they do not own, for work that was undertaken prior to them obtaining quiet enjoyment of the property.  Landlords should not be allowed to pass on administrative costs to tenants. If they don’t want to advertise the property themselves, then that is their choice, not the tenants choice.

Implementing a rent cap and a star rating for rental properties

Like others, I have been thinking about the viability of rent cap, and the idea of a star rating for rental properties was brought to my attention in the weekend. Restricting the price and developing a robust rental property criterion gives rights back to tenants who spend a large proportion of their incomes paying rent, or in many cases, someone’s mortgage.

We know that rent is just too high and even those on good incomes are finding rentals increasingly unaffordable. While Christchurch is reported to be experiencing a reduction in rent prices, with some landlords offering a week’s free rent, Auckland and other parts of the country are ridiculously expensive and there are no signs of cooling off.

A rent cap could provide the right lever to keep people in homes that are affordable, and combined with a star rating could incentivise landlords to maintain and repair rental properties thereby improving the quality of homes in the rental market. It could be either a temporary or a permanent measure. It could include provisions for market or inflation adjustment.

I’m not going to speculate here about what the rent cap should be. However, the process might involve a price band where rental values are based on the star rating they receive from an independent property assessor.

The star rating could align with the housing Warrant of Fitness (WOF) standards. For example, a home that fully complied would receive a 5 star rating and be able to charge rent at the top end of the band. A property that only complied with part of the WOF standards and received a 1 star rating would only be able to charge at the lower end of the band. This would also give tenants an ability to negotiate the rent required to tenant the property.

I note that price bands should vary depending on location, and that should be a factor in establishing the price bands.

A groundrent for despicable landlords

A property that did not meet any WOF standards, could be deemed uninhabitable. If the landlord refused to meet those standards and left the property vacant, then the government could apply a groundrent to cover the social cost of taking a property out of the market. Doing so could help bring about stability, by ensuring vacant properties were not used to create an artificial scarcity that drives up house prices.  The intention would be to disincentivise landlords from simply land banking and encourage them to either repair the property to WOF standard, or sell it.

We need a real world solution for a real world problem not an ideological driven rant that narrows the field of investigation and subdues innovation.

An alternative to the ‘ban’ on foreign homeownership

house-icon-black

By Ellipsister

We are obsessed with home ownership. In an effort to make home ownership a reality for more people living in Aotearoa, our political parties have all proposed what they see as solutions to our housing crisis. From land taxes on foreign investors, to outright bans of foreign home ownership. But is there another option?

Banning foreign home ownership in Aotearoa is a policy option that has been circulated by opposition parties over the past few years as the Auckland housing market has become an unrealistic dream, especially for first-home buyers. It’s been peddled in varying degrees from banning foreign ownership of any land in Aotearoa, to banning foreign homebuyers, to banning foreign ownership of houses by non-resident investors.

I’m not a fan of taking punitive measures to alleviate social issues. And yes, I am arguing that preceding anything with the word ‘ban’ is punitive and that housing – renting or owning is social. Aside from the xenophobic image banning foreign [insert anything here] feeds into, it also ignores the importance that foreign investment has made and continues to make in Aotearoa.

I accept that some people visualise a utopia in which we all live on a self-sufficient plot of land, working as a community, isolated from the trappings of capitalism, and independent of foreign investment. Conversely, some people will visualise a utopia in which people are free to hoard as many resources and as much capital as they desire in partnership with uber wealthy foreign investors. As far as I can tell, neither of those utopias are a reality nor an aspiration for the majority of people in Aotearoa. So rather than a ban of foreign investment in land or homes, I propose a more compassionate option that doesn’t demonise foreign investors or investment – a ‘Letter of Justification’.

I’m imagining a society where people who want to own houses, rather than competing on price – compete on best interests.

My understanding is that when putting in an offer for a house, you can already write a letter to the vendor to support your tender. My question is then why not make this a more prominent part of a sale? Why not introduce a requirement to justify why your bid should be accepted over others?

When buyers are required to justify why they should be entitled to the privilege of taking exclusive possession of a property, we move away from the profit motive, and toward a more equitable and socially just system for property ownership. This would mean that non-resident foreign investors and domestic property speculators would have to make a strong case for why they should be able to own a property over a  homebuyer who intends to live in the home they purchase. The effect being that we reduce the typical financial advantage enjoyed by investors through the increased appeal to equity for the intend-to-live-in-it homebuyer.

How might we design a robust system that supports ‘competing on best interests’? Well, that I haven’t fully explored yet. But we all have a society toward which our actions are directed and I think this is a good place to start.

Reforming Our Whenua

By Ellipsister, Co-Editor

Are the changes to Te Ture Whenua Māori a land grab of seismic proportions, as declared by some commentators? Or a reform that will enable Māori landowners to use their whenua, according to their needs and aspirations, as suggested by the review committee? 

First of all, let’s be clear – discussions on Māori land reform must have Māori at the centre. Conversations cloaked in partisanship or that centre Pākehā voices overlook the Māori context and often fuse our diverse perspectives into one.

In July 2015, I wrote about Te Ture Whenua Māori reforms during the nationwide consultation phase: Part 1: Te Ture Whenua Māori Reforms & Part 2: Te Ture Whenua Māori Reforms. However, since then a number of significant changes have been made to the exposure draft. In brief, those changes include:

  • Option for existing Māori trusts and incorporations to continue as the same entity they are now (i.e. do not need to go through cost of establishing a rangatōpu).
  • Removal of the managing kaiwhakarite provision;
  • Revision of the purpose and principles sections to better reflect the preamble of the existing Act;
  • Option for Whānau to obtain succession to land instead of having to form a whānau trust on intestate succession; and
  • Greater discretion accorded to the Māori Land Court when considering applications to remove the status of Māori freehold land (i.e. transfer from Māori to general).

We won’t know precisely what all the changes are until the Bill is introduced to the House around March 2016. What we can surmise is that the Review Committee has taken into account the concerns of submitters.

One of the arguments I see a lot is that the reforms will enable Māori landowners to transfer their land into general title more easily to sell off. Frankly, if that is how Māori landowners wish to deal with their land, that is their choice – whether we like it or not. However, given only about 4.75% of all the land in this country is dedicated Māori land, the presumption of an impending mass sell-off following the reforms reads more like partisan hyperbole than informed opinion.

Why?

Firstly, the Māori Land Court will retain oversight to ensure any sale or transfer is done in the spirit of Te Tiriti in order to protect and retain Māori land.

Secondly, in my experience, whānau who are considering selling, are often looking at selling their shares to those within the collective or to those with a whakapapa connection to the land block. Often the arguments insist that no Māori should ever sell their land. That is over-simplistic and is as much a constraint on our rangatiratanga over our land as the arguments they are opposing. Additionally, it ignores the reasons whānau may wish to sell their shares in land, for example, to obtain the capital necessary for home ownership. Getting finance to build on Māori land also requires a license to occupy so sometimes it might be in the interest of a whānau to sell their shares in their Māori land, and use the proceeds to build on general land, or to build on another piece of Māori land where they do have a license to occupy.

Thirdly, there is a preferred recipient tender included in the reforms. This means that there is a first right of refusal to Māori with a relevant connection to the land.

And lastly, contrary to what many are suggesting, the thresholds for sale or transfer have not been reduced – they are exactly the same as the thresholds in the existing act, and include the right of landowners to increase that threshold if they wish to do so.

A bugbear of mine is when commentators are vague and use language like:

The reality however is that the land will simply be opened up to those wishing to exploit the new lax regulations…All these changes will do is make it easier to sell that Maori land, not grow it

Here, the commentator avoids centering Māori as the affected party, pushing an agenda that does not serve Māori interests in land, but rather asserts his own interest in his own ideology. In the process, painting the landowners he speaks of wanting to protect as the greedy grubby little neo-liberals that he rejects. Remember, it is Māori land, meaning only Māori can decide how they will use it. If selling is their preferred option, then that is ultimately the decision of the Māori landowner subject to the prescribed process.

Another criticism made centres around the lack of funding available to assist Māori to develop our land. This is misinformed as there are a number of funding streams available to help Māori landowners collectively and individually including Māori homeowners on general land, to address their needs. For a detailed breakdown see the Māori Housing Network Investment Strategy and KiwiBank’s Kāinga Whenua loans scheme.

In Vote Māori 2015 the Government announced:

  • a total of over $7 million to improve housing outcomes for Māori by providing practical assistance to whānau and Māori housing projects
  • a total of $7 million for Māori Housing development
  • a total of over $3 million to assist Māori land owners improve the productivity of their land

The Minister of Māori Development explained that this means there is $8.8 million per annum for Māori housing in addition to the existing funding of around $7.5 million per annum, bringing the total amount to $16.2 million per annum in 2018-19. He also announced a new fund of $12.8 million over 4 years to help Māori landowners improve the utilisation of their land and a further $3.2 million per annum to support targeted initiatives in areas where land is significantly underutilised.

I am not suggesting that these measures are a full solution to meeting Māori housing and land use needs and aspirations. Nor am I suggesting that the reforms are immune from criticism. I just think they provide an avenue for Māori to achieve rangatiratanga over our land. Our identities as Māori are linked to our whenua, and as current or prospective Māori landowners it is our voices and our perspectives that matter in these reforms. The proposed Māori land reforms are practical measures not ideological ones. There are multiple issues to consider and many whānau in many different situations so it is vitally important that we are properly informed about what is proposed and what those changes will mean for us and for our land.

GRINCHING ON CHRISTMAS

By Ellipsister, Co-Editor.

When negative life events occur around Christmas, does that make them somehow more worthy of our sympathy or is this just reinforcing Christian privilege?

You may well think that I’m just grinching. Maybe there’s a little bit of that. So I appreciate that for some of you reading this – whether you’re an absolute fanatic or a passive observer of Christmas – that my opinions here might elicit an eyeroll or two. Possibly some huffing and puffing on the internet.

Last night I posted this tweet:

For those unfamiliar with the story, it concerns two wāhine that were sacked from their jobs at Talley’s a few days before Christmas, apparently for carrying out their Union delegate duties.

As reported by Māori TV’s online news team, the NZ Meat Workers Union claimed that:

The delegates were dismissed because they went to work to calm union members upset about unfair treatment and tempers were getting short

One of the women dismissed explained that she was told by AFFCO that:

[her] visit to the Rangiuru branch breached Health and Safety policies

I don’t know the full facts of this case but I absolutely support the karanga to stand up for the rights of all workers. The Union alleged that the reasons for their dismissals were spurious. My gripe arises when we are invited by the Union to emote on the fact that their dismissals occurred three days before Christmas.

We know that employers have contractual obligations to follow through on disciplinary procedures, and that instant dismissals are reserved for the most serious breaches of an employment contract. That threshold, in my experience is very high and in all my working life, the only sacking I’ve seen followed a long procedure – where the person was put on leave, following allegations of fraud and then later sacked. Presumably, the evidence stacked up. I’ve also known many people who had seriously questionable work practices and ethics yet the only disciplinary action taken was a verbal and sometimes a written warning.

Although the full facts are not available we do know that NZ Meatworker’s are constantly battling for fairer treatment in their workplaces. And this is certainly not the first time AFFCO Talley’s has been in the spotlight for questionable treatment of their workers. I’m not in a position to say whether or not these workers rights have been breached. I do appreciate that low morale in the workplace can sometimes spill into the whānau home – in forms such as depression, substance abuse, lashing out and/or feelings of whakamomori, and given that these workers were upset and tempers were reportedly short, the delegates appeared to have been doing exactly the job their colleagues had elected them to do.

This post isn’t so much about this particular case, and it is most definitely not a criticism of the women who have been dismissed in what appears to be an incredibly unfair process.

It is the narrative that implies somehow it is less acceptable to be fired three days before Christmas, than at any other time during the year that I am grappling with. Equally important, the implied message that employers who conduct themselves in this way at Christmas, are somehow worse than those who conduct themselves that way at any other time of the year. I mean, isn’t it undesirable employer conduct no matter when it happens? And if Unions are about the rights of all workers, why then should Christmas play a role in when it is and isn’t acceptable to be dismissed from employment?

Losing your job at anytime undoubtedly places a heavy burden on both individuals and whānau. And yes, I get that Christmas is built around certain expectations. I’m not immune to the messages drummed into us that Christmas is ‘the season for giving’. I’m aware that losing your job and not being able to meet those giving expectations during this time presents certain challenges. But I’m uncomfortable with the argument that because of the expectations of Christmas, that more consideration should be given to workers who practice giving at Christmas, while the same narrative is not advanced during the significant events of other religions or cultures.  I remain unconvinced that people fired around Christmas are in a worse position, than those who are sacked at any other time during the year.

Lets reflect for a moment. Imagine if there were a law that prohibited businesses from dismissing people within a specified timeframe relative to Christmas, because of the religiously pushed, socially constructed and centrally planned and propagated season of giving?

This would absolutely reinforce the already existing Christian privilege that exists in all Western countries, including New Zealand. To explain, we are required to take certain paid days off over what we commonly call the Christmas period and over Easter. Our social spaces are littered with imagery of Christmas, baby Jesus, and old jolly white men.

And consider small businesses in this scenario, who are dealing with an employee who is in serious breach of their employment contract, but not being allowed to dismiss the person because its Christmas! We’d edge closer and closer to an impenetrable Statism.

Being under financial strain hurts no matter what time of the year it is. Dealing with the stigma and finding work after being dismissed is as hard for those during the year as it is for people who experience this at Christmas. Just because many of us are inclined to emote around Christmas because the messages of it being a time for giving and family are so embedded in our society, we need to remain steadfast that the situation hurts individuals and families equally whenever it happens. So yes, maybe I am grinching a bit but please be clear that I’m definitely not criticising the women dismissed by Talley’s. I’m incredibly dubious of the implied messages sent by the spokesperson for the Meatworkers Union, that in my opinion:

  1. Trivialised the lived experiences of those people who were fired for ‘spurious reasons’ at other times during the year – perhaps around times that were religiously or culturally significant to them; and that
  2. Reinforces the already existing Christian privilege thereby signalling that workers of a particular religious denomination should have a certain set of rights that workers of other religions or cultures do not.

I don’t know, it just doesn’t seem particularly union-y to me, or maybe it does.

Recounting why I left school

By Ellipsister, Co-Editor

Aaron Smale at Mana Magazine wrote a conversation starting article on the PPTA and what he argues is its failure to date to lift achievement of Māori students. As a Māori school leaver, I sympathise with his argument.

I left school exactly the day I turned 16 and was therefore legally allowed to drop out. My Dad was livid and I could tell he was also deeply disappointed. I enrolled in a couple of tech courses in art and design. Turns out, I wasn’t particularly talented – nor committed. My attendance rate was appalling. Eventually I completed a hairdressing course (and worked as a hairdresser for a few years). It seemed the thing to do – and I was obsessed with creating my own identity.

On reflection that speaks to the struggle I endured throughout my life – was I Māori or Pākehā (Mum is Māori, Dad is Pākehā)? For years I refused to identify as Māori because of all the negative stereotypes that were thrust on me. And also my schooling experience taught me it was better to identify with my Pākehā heritage, than with my Māori heritage. Although, that was a tight rope to walk given I was so obviously brown. It has taken me my entire adult life to disentangle those colonising notions.

Why did I leave school?

When I was 11, I had wanted to be a Lawyer or a Cardiac Surgeon. I was a pretty good student and believed that I could do it. Before you think I had a sweet as home environment – I didn’t. I’m not going to divulge details. Those dreams of becoming a Lawyer or Surgeon were my escape from the poverty trap. I also had supportive teachers that invested time in my learning.

Life changed just as I started High School. I had stability at home for the first time in a long time – but sadly that came with some drawbacks, that one day I may open up about here, but not yet.

I struggled in my first year – I did ok, but not great. I remember feeling like a massive failure. The next year my grades got progressively worse and I started acting out and got into trouble a few times. By the time I got to School C, I was completely lost. I couldn’t actually comprehend what was being asked of me. I didn’t understand how to think. I didn’t dare ask for help, for fear of being told I was dumb – and actually, I’d never been taught how to ask for help. During my time at High School not once did any of my teachers take me aside to see how I was doing and if I needed help with any of my work. I was simply ignored. I wasn’t one of those boisterous students. I was a nobody with nothing constructive or insightful to offer. I was mediocre and lost sight of all my aspirations. A piece of paper with a few letter grades, and a brief comment about me being ‘a quiet student’ was the extent of their feedback. As if somehow I wasn’t self-aware of my quietness. It is in fact, crippling shyness – a trait that I struggle with daily.

So I left school because in my mind, I was too hopeless to achieve the grades I needed to get into University. When some of my friends left (to pursue hairdressing apprenticeships) or dropped out to do a tech course, I followed suit.  I had lost complete faith and confidence in my ability to achieve in that environment.  Sure, I had gotten through School C but barely. I did half of sixth form and on my 16th birthday cleared out my locker and left. Also, I had become increasingly truant – hiding out at a friend’s house, so I imagine I was getting pretty close to suspension or expulsion.

Now, I get that the system failed me. And while I can appreciate that in many cases teachers are under-resourced and overworked – my experience was not just about that. There was no effort by teachers at my High School to try to understand the lived experiences of urban Māori in the small white provincial town I grew up in. Not once, did a High School teacher give me some hope that I was capable of achieving my aspirations. Instead, I sat in class feeling like the walking talking stereotype that I was labelled as in the primary school playground and harassed with on the street by the local skinheads.

It absolutely was my choice to leave. But that choice was complex. I had been ground down to a point where I had zero confidence. I felt my choices were leave and save my dignity or subject myself to the utter humiliation of total failure proving right all those who had ridiculed or ignored my existence. I know now how wrong that all sounds. But those were my thoughts. Turns out, my giving up and leaving had pretty much the same effect.

So the point I see Smale make is that despite the long history of involvement of the PPTA in the education system, a disproportionate number of Māori schooling and education experiences are not positive and this has an effect on our mana. I don’t blame the PPTA for the outcomes of Māori, but I certainly question the monopolising of teaching (gatekeeping) and the ‘qualification requirement’ for a function or role that our tīpuna and many others throughout history have performed ‘unqualified’.

My view on this will likely infuriate those with a vested interest in the ‘qualification’ aspect of teaching. Do I think just anyone can teach? Absolutely not. I would certainly encourage safety checking to ensure students aren’t put at risk. I would also think employers of ‘unqualified’ teachers would ensure that those applying to teach were recognised as competent to do so by their peers. Noting, there are some subjects in which I consider it is inappropriate to require a formal qualification, especially with regard to Te Reo me ōna Tikanga Māori. Many of our kuia, koroua and rangatira have years of experience transferring that knowledge – and in a culturally appropriate way. I also think someone who has worked in a particular field, who has a strong practical understanding of a subject and has demonstrated strong leadership and mentoring in their roles could also make good teachers.

Yes, I get that a teaching qualification sets a professional standard that teachers are expected to comply with and there are absolutely benefits in that, in particular accountability. I disagree however that only teachers with a qualification will adhere to those professional standards. Sure there is a risk of rogue unqualified teachers, but the same is true of qualified teachers.

I said this on Twitter and will repeat here: I have no interest in pursuing a socialist versus capitalist narrative. My interest is in finding ways that will enable Māori to be designers of our own solutions – no matter what system we have because in my mind, this is one of the key ways we can exercise our tino rangatiratanga to improve outcomes for all our whānau.

When we can build alternative social institutions that are not reliant on the State (our oppressor) and not susceptible to the corruptive practices of corporatisation (our exploiter), then we can begin to dismantle the disparity. Dismantling began with the Kura Kaupapa and Kohanga Reo movement. It’s about time the State and gatekeepers recognise the legitimacy of our epistemologies and pedagogies and stop perpetuating the myth that mainstream approaches are superior to our indigenous practices. Its time for Māori to advance that movement further.

 

Note: 

I went to University at 23 when my first baby was 18 months old. The first year was really hard. I didn’t even know how to write an introduction for an essay. Since then, I have completed a conjoint BA/LLB, my law Profs and an LLM with First Class Honours. LOL at those teachers and all those people who didn’t believe in me.

 

The Beginning and the End of the TPPA

Jordan McCluskey, Co-Editor. 

We are a nation of traders. New Zealand is a country that has, since its colonisation, been dependent on foreign trade to support our economy. Extractive industries came first for the Kauri, then gold, then whale oil, and finally seal furs. Following colonial wars of dispossession against Māori, the land was then transformed, through large foreign borrowing by the Vogel government in New Zealand from London, into being suitable for a nation of smallhold farmers. A severe slump in the 1880s and continuing economic boom and bust in the 1890s lead to what James Belich calls the ‘recolonisation’ of New Zealand for the production of meat and dairy for the market of the British Empire.

This system of imperial trade saw Britain take almost all our meat and dairy until the mid-1960s, when it signalled that it wished to join the European Economic Community (The Pre-EU economic organisation). Britain would stop taking all our mutton, wool, and cheese at guaranteed prices for New Zealand if it gained entry. The New Zealand government spent years lobbying Britain to back out, but in 1973 Britain entered the EEC, causing New Zealand to lose its largest market for its goods.

New Zealand pivoted to Asia for trade from the 1970s out of necessity and became highly respected around the world as tough but fair, innovative trade enthusiasts. The Kirk government recognised the People’s Republic of China in 1972. The Muldoon government assiduously courted fellow Commonwealth nations in Asia, trying to improve trade flows.

The crowning economic achievement of the Muldoon government (yes, they exist) was signing the CER free trade agreement with Australia. Following the Rogernomics reforms of agriculture, almost all tariffs and subsidies were removed from the New Zealand economy out of pure necessity, as we are told that the country could no longer afford them.

New Zealand’s reputation in free trade became one of the best in the world. A country with no tariffs or subsidies. A small unthreatening nation on the periphery of the globe. A country seeking to improve its trade to improve its economic livelihood, with no hidden agendas. With this context in mind, may surprise you that the TPP (Trans-Pacific Partnership) is not something being forced on New Zealand, but was in fact the creation of New Zealand trade negotiators. It is not an American invention.

Initially between the Pacific Rim countries of Brunei, Singapore, Chile and New Zealand, it gained the interest of the United States, leading to excitement of our government.

The TPP is not the world’s first RTA (Regional Trade Agreement). The European Union is a customs union with a shared currency and no tariffs between member states, though with the kind of incredibly distorting agricultural subsidies that New Zealand has long since abandoned. NAFTA (North American Free Trade Agreement) created a free trade zone between Canada, Mexico and the United States under Bill Clinton. Mercosur has created a free trade zone incorporating most of South America.

The problem with RTAs is that they tend to be dominated by the interests of the larger states. The EU as we have seen in the unfolding Greek tragedy is dominated by Germany, NAFTA by the United States, and Mercosur by Brazil. There are also weaker and more dysfunctional customs unions in Africa and the nations of the former Soviet Union. The WTO (World Trade Organisation) actually frowns on RTAs, and prefers that states work towards bilateral (state to state) trade agreements, in order to work towards the WTO’s overarching goal of a completely free trade world.

So a small, relatively niche RTA gained the interest of the United States. Following them Australia, Vietnam, Peru, Malaysia, Mexico, Japan, Taiwan, and Canada entered negotiations. China also wants to be part of TPP negotiations, but the United States is resisting them, in another episode of the adversarial symbiosis which plagues the two great powers of our age.

New Zealand has allowed the United States into the TPP negotiations to try and gain the holy grail of our trade negotiators for four decades: Free Trade with the USA. Policy Officers of MFAT (Ministry of Foreign Affairs and Trade) are conditioned from entering the Ministry, that Free Trade with the United States is something that must be attained no matter the cost, even if really does not make economic sense any more.

Previous attempts have been derailed by David Lange refusing to allow nuclear ships to enter our waters, and Helen Clark refusing to invade the Middle East with George W Bush. The TPP is our silver medal, a backdoor way to try and get free trade with the United States. It is a quest to fulfill the yearnings of the only Ministry in New Zealand besides the Treasury to resist long overdue concerted change. MFAT was formed in the 1940s, and its strategic outlook remains stuck in the 1940s.

At the beginning of the twentieth century the politics of Anglophone world were riven by debates on tariff policy. The two major political alignments in Australia were even know as protectionist or free trader. The benefits of Free Trade are so well known, they are almost a cliché. More trade, more jobs, more economic growth. If the TPP was purely about the reduction of tariffs, and the elimination of subsidies, it would have my full support. But it is not. The TPP has a dark side.

The TPP contains provisions introduced to the United States relating to intellectual property, pharmaceuticals and investor-state arbitration. There are also complaints that as trade negotiations go, the TPPA has set new standards in terms of secrecy and lack of disclosure to the citizens of states who may enter into it. I don’t agree with this complaint because trade agreements have always been negotiated in secret due to commercial sensitivity. However, fragments of leaked text continue to leak.

They show that Intellectual property changes would make it easier for members to sue each other in the other nation’s courts over issues such as copyright and patents. The provisions relating to pharmaceuticals would require New Zealand to disestablish the state pharmaceutical purchaser, Pharmac, in favour of American drugs which may be more effective, but also far more expensive.

Of the potential negatives of the TPP, the investor-state arbitration is perhaps the most damaging. I would preface what follows next by saying I am not a lawyer, and I apologise in advance if what I state next is not technically perfect. If a government changes the law in a way that disadvantages a product, say for example tobacco, the tobacco company or its host government could then sue the offending country’s government for hundreds of millions of dollars in that country’s own courts.

This is without a doubt, a damaging attack on the sovereignty of the nation state. The freedom to regulate and legislate for our own people would be seriously harmed by entering into the TPP. The TPP would also have a destructive effect on how New Zealand manages its environment, regarded as one of the most pristine biospheres left on the Earth. Water quality, energy usage and oil drilling decisions could all be challenged under investor-state arbitration provisions.

New Zealand is a nation of Free Traders, with an economy built on the lifeblood of international trade. Without trade our country would be a poor, third rate Kiwifruit republic. We have however become so invested in our reputation as the world’s most ideologically pure free traders that we have lost sight of the reason our country pursues free trade; to make our country richer, not poorer. I would argue the primary reason our country is pursuing the TPP is gain back door entry to free trade with the United States. There is no need to accept a trade agreement with the kind of huge gaping flaws the TPP has in it.

China is now the world’s largest economy according to the IMF. We already have free trade with them. We are a small country of nearly 5 million people trading with a country of 1.3 billion. This is already seeing New Zealand beginning to reach the edges of its biological and environmental limits. There is only so much land that can be converted to dairying, and cows can certainly not be stacked on top of each other.

The counter argument is that by being so locked into the Chinese economy, we risk recession if China experiences economic turmoil. So would the entire planet. There is only so much we can produce, we are quickly reaching the absolute peak of that, and having a bigger market to sell it too would probably not make much more than a marginal difference.

So we come to the point where we should try and view things coolly and dispassionately. What is the point of Free Trade? To mutually increase the wealth of nations engaged in trade with each by the reduction of barriers to trade. What is not Free Trade? Reducing barriers, but inserting fish hooks into a trade agreement so the economic gains are offset by new costs. What would New Zealand stand to gain from the TPP? Greater access for agricultural products. What would New Zealand stand to lose or pay? Greater costs for medications, greater environmental degradation, lawsuits against our government costing the taxpayer millions of dollars.

The government argues that the benefits to dairy, among other sectors would see the increased wealth filter down into the wider New Zealand economy offsetting the potential negatives of the TPP. I disagree. This is not the case. For this reason New Zealand should not sign the TPPA. The maths does not, and will not, stack up.

On the margins of our housing market

By Nicola Eccleton

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Image: Sharon Murdoch (Twitter: @domesticanimal) “The Removal Men”

The people I encounter are on the margins of our housing market. Usually single, usually with children, usually with very little hope of owning their own home in the short to medium-term, they rely on being able to rent a home from private landlords in a post-earthquake Christchurch in which public housing is a pipe dream. Private landlords who have the choice to rent to young professionals on a good wage or a mother with three preschool children, a limited income and a chequered credit history will, nine times out of ten, choose the professionals. When the mother is finally offered a house with mouldy curtains and mould on the walls, she thanks her lucky stars and pays the extortionate rent knowing that she can get foodbank parcels or Work and Income vouchers for food. This is the market in action.

We know it’s not working. The government spends millions propping up demand through subsidies (both directly e.g. Accommodation Supplement, and indirectly e.g. Working for Families), as well as entering the supply side in the form of public housing, yet we remain hell bent on maintaining the market as our primary mechanism for providing houses. Property remains an attractive investment for those wishing to make a quick buck by providing someone a home, with less requirement to provide a decent product than the local restaurant. We invest heavily in a system that is not providing adequate returns.

The narrative needs to be overhauled as much as the policies do. “Government can’t touch this because people will lose their equity” needs to read “Government is already touching this” and “You over-extended in a market you knew was over-valued and it is not the role of government to guarantee your risk.” This sounds really harsh. Maybe it is. Yes I am a homeowner. But the current narrative is based on a market that works only one way; it should be left to its own devices because it is the best mechanism for determining value, however we need to ensure values don’t slip. Landlords are not the same as home owners – the difference between requiring a house to live in and requiring a house to provide a return, is a key driver of price increases.

I’m a sucker for some genuine turn-it-on-its-head type thinking; expanding and exploring as many different ways of doing things as we can. Can we learn from Singapore, minus the benevolent dictatorship? What can we learn from the Netherlands where in some cities, a form of social housing comprises more than half of the total accommodation? We have a fairly successful model of parallel provision in healthcare – maybe this could offer some insight into how Government and the private sector provides both rental properties and properties for sale? This is not a specialty area for me, but from what I know about policy-making, this has all been discussed before. The trouble is, we haven’t figured it out yet. Many successive governments have failed us with their substandard policies. Labour’s Kiwibuild is closer to the type of re-think that we need and was, in my opinion, the standout policy from Labour’s last campaign.

When we require the existing level of state subsidies, we should stop pretending that the property ‘market’ in its current form, is not just an elaborate charade. When our most vulnerable are suffering at the margins, we should stop stalling and start being genuine about our commitment to the solution.