For many, life in New Zealand’s capital, Wellington, has largely returned to normal. Its windy streets are teeming with shoppers and office workers without masks, the bars are overcrowded and the economy continues.
In the signature “Honeycomb” parliament building, Prime Minister Jacinda Ardern and her government have garnered excessive global praise for bringing under control the COVID-19 pandemic where many other leaders have failed.
But across the city, staff at Wellington City Mission are struggling to cope with rising homelessness and inequality as the pandemic – and the government’s response – ignites what is already one of the world’s most affordable housing markets.
“This is a crisis,” said Murray Edridge, head of a charity trust affiliated with the Anglican Church. “Inequality is always increasing, but COVID-19 is a saying that breaks the camel’s back.”
The number of people seeking emergency housing in the city of 211,000 has tripled in the past 12 months as rents hit record highs and the pandemic is disproportionately impacting low-income jobs.
Across the country, motels and other temporary boarding facilities converted into makeshift housing are increasingly overcrowded by desperate families seeking refuge, with some 4,000 children now in state accommodation.
“Most of the cases that come to my table are situations that will break our hearts,” said Edridge of City Mission. “I met someone with two children this summer who was in emergency housing for 15 months.”
Karen Hocking, General Manager of Housing at the Ministry of Social Development, admits that motels are not ideal places to live, especially for children.
“Families facing homelessness are in a vulnerable position and we aim to find them accommodation quickly. Once the family’s urgent need for accommodation has been taken care of, we look for more suitable options as they become available,” said Hocking.
Others struggled too. Shaun lost his job as a farm worker four months ago and moved to Wellington to find a fresh start.
The 27-year-old woman is still unemployed and lives on the streets because of unaffordable rents and long waits for emergency housing.
“It’s all just about housing here. Nobody is going to hire me as long as I live on the streets, but I can’t find a house,” he said, asking Reuters not to use his last name.
New Zealand is experiencing what economists call a ‘K-shaped’ recovery, where those at the top benefit while those on the bottom see their prospects deteriorate.
It’s a global phenomenon, with the wealthy using cheap access to capital and government coronavirus stimulus spending to rake in assets from stocks to art and property.
New Zealand’s pandemic-inspired policies have translated into cheaper mortgages, allowing wealthy “kiwis” to enlarge their homes and build a portfolio of rental investment properties, sparking a further spike in house prices.
The 24% year-on-year increase, on top of the 90% increase in the previous decade, has locked in first home buyers and those on low incomes.
In contrast, flooded investors have become the biggest property buyers – about 40% of homes purchased in the last quarter of 2020 were owned by multiple property owners.
“The boom in wealth inequality in the New Zealand context is linked to the housing boom,” said ANZ Chief Economist Sharon Zollner. “The increasing wealth of people who are fortunate enough to own property, and those who are very fortunate to own more than one, is extreme.”
Rents are also rising across the country, driven by a legacy of years of underinvestment in new homes and strong immigration.
Even before the most recent spike, housing costs were 45% of household income in the fifth lowest for income distribution, according to the 2019 Organization for Economic Co-operation and Development (OECD) report.
The South Pacific nation of 5 million people now tops the list for least affordable housing among OECD countries.
Rising inequality triggered by the housing crisis is arguably the biggest political challenge facing Ardern’s center-left government in his second term.
The 40-year-old’s popularity has surged with his response to a pandemic that took countrywide cases to nearly 2,500 and led to a resolute election victory for his Labor Party last year.
But opinion polls have since shown slumping support as housing shortages and high property prices undermine New Zealand’s egalitarian self-image.
“Ardern still has a clear advantage over his competitors, but he is losing moral authority and he is in danger of losing a lot of confidence on his own part,” said Bryce Edwards, a political analyst at the residence of Victoria University of Wellington. “Housing is one of those core left-wing problems and it is amazing to see the Labor Party getting it wrong on this point.”
Housing and inequality were already major issues when Ardern came to power in 2017, and he promised to tackle both.
But the government’s flagship KiwiBuild project ran aground, and a well-loved project like the ‘Welfare’ budget had little impact on the ground.
Māori natives, who largely supported Ardern’s leadership, were most affected because they tended to be propertyless and less likely to be accepted as tenants, said Ali Hamlin-Paenga, chief executive of Kahungunu Whānau Services, a provider of Māori social housing in Wellington.
“Māori are in a housing crisis. There is enormous inequality, and we are always forced to fight the system,” said Hamlin-Paenga.
Housing Minister Megan Woods said the government was catching up after the previous administration had reduced the amount of public housing available.
“Nobody in our Government thinks that people living in motels are the ideal situation, but it is better for people to have shelter and a bed to sleep in, than to sleep well or in crowded situations,” he said, explaining his public housing program. as the largest in a generation with more than 18,000 public housing places and a new transition targeted by 2024.
The government and central bank are supporting the economy through a combination of measures that will allow it to recover quickly once the virus is eradicated.
The Reserve Bank of New Zealand (RBNZ) is pumping the economy with record low lending rates, a NZ $ 100 billion ($ 70 billion) quantitative easing program and holiday mortgage payments for homeowners.
The government’s NZ $ 50 billion pandemic response package saved jobs, but added fuel to house price fires.
Brendon Blue, a geographer at Victoria University of Wellington, said the government’s efforts to stimulate the economy mostly involved measures that pushed up house prices, rather than significantly increasing infrastructure and welfare spending.
“There is a kind of unfavorable consensus in New Zealand politics that it is better to raise house prices than to help the country’s poorest people,” he told Reuters.
Under pressure, Ardern launched a series of measures in March targeted at taxing property investors and discouraging speculators.
So far, the measures have had little impact on the housing market and the government has promised further steps.
“The need for further action is clear,” Ardern said at a press conference last month. “The last thing our economy needs right now is a dangerous housing bubble. But a number of indicators point to that risk.”
($ 1 = 1.3998 New Zealand dollars)
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