Co-operative housing associations could go a long way towards alleviating New Zealand’s housing shortfall, but there has to be a change in thinking – away from private developers
With the Treasury estimating a current shortfall of 60,000 dwellings in New Zealand and this shortfall growing by 40 houses a day, it is likely housing issues will be a topic of discussion for years to come. Short of the Labour Party’s promise to build 100,000 homes if it were elected, it is clear current property development models are insufficient.
No matter how much the conditions for property development are streamlined by central and local government, the reality is making anything happen on the ground is still largely reliant on private initiatives, motivated by profits.
Several years ago, the Productivity Commission was invited to examine the conditions that conspire to make New Zealand housing so unaffordable. Its report discussed the need for more effective management of greenfield land and for overly restrictive planning controls to be reconsidered, all of which we’ve heard before. In the end, 13 recommendations for change were put forward, but none discussed our extensive reliance on private developers.
When we consider that this part of the industry adds between 20 and 25 percent to the cost of each housing unit and that the decisions made about housing have more to do with financial risk than quality, it may be time to look for alternatives. One could be for people to work together to eliminate the middle person; cooperative housing associations have been doing just this for more than a century in many parts of the world, including Australia.
The idea of residents cooperating to build their housing emerged early last century in response to market conditions similar to those affecting us today. Swedish workers had flooded into cities around the time of the First World War and found that the housing being offered to them was short in supply, poor in condition and expensive. The first cooperative project was undertaken by a group of tradespeople who not only funded the project but also helped build it. From this grassroots beginning, cooperative associations have spread throughout Scandinavia to become a major player in the housing market today. As much as 40 percent of all housing in Norway’s capital, Oslo, a city of more than 600,000, is owned and managed through such associations.
Housing cooperatives can take several forms; perhaps the most well-known of these would be the one-off development undertaken by a small group of like-minded individuals in pursuit of a particular lifestyle. The Earthsong community in Auckland, built on ecological principles, is one such development. However, Scandinavian models are more enduring than these one-off projects, enabling the association to trade on its size and economic capacity to benefit its members. In Norway, where more than a million people currently belong to housing cooperatives, their size enables them to assemble large sites for redevelopment even if it takes years to achieve. Cooperative housing associations operate in competitive markets and are managed by members for the benefit of members.
Could cooperative housing associations become established and thrive in New Zealand?
In some social and economic contexts, cooperatives are already accepted. Take, for example, cooperative community-based playgroups, which many of us will have experienced as kids or as parents. In the business world, one of the country’s largest organisations, Fonterra, is cooperatively owned by its members. Then, if we look at the different home ownership models currently on offer, unit-titled developments can be seen as a limited form of cooperative ownership. While individuals own their units outright, they also have a share in the common areas and the responsibility of maintaining them. A difference is that owners come into a body corporate well after key decisions about the form of the development have been made. Cooperative associations put those key decisions back into the hands of members.
There was considerable interest in cooperative housing models back in the 1970s and 80s, at a time when New Zealand was also going through a crisis of housing affordability. Auckland City Council even saw sufficient merit in the cooperative tenure model to have commissioned a discussion paper, which it published in 1981. As today, the writers of that report saw a very useful precedent for cooperative ownership in the papakainga model.
In recent years, a number of iwi up and down the country have begun to pursue this form of collective ownership on behalf of their members. Recently, Wellington’s Te Aro Pā Trust built 14 papakainga housing units on a site in the city’s Evans Bay. However, developing such collective forms of housing is not without its challenges, even when the owners are well resourced. This is where the Productivity Commission’s recommendation discussing the need for financial and legal institutions to change in order to facilitate the papakainga housing model could also help other forms of cooperatives become established.
If potential benefits of collective housing are to be realised, the Government will also need to respond. In a recent paper comparing the effectiveness of cooperative housing in Sweden, India and the United States, the authors found success to be strongly affected by the political context and the relationships the cooperatives formed with their governments.
The most successful were found in Sweden, where the Government has worked closely with housing associations to ensure their viability. While cooperatives have remained autonomous, they have also enjoyed protective and enabling legislation. These relationships have never been one-way only and the Swedish Government has been found to have shed some of its responsibility for housing onto housing cooperatives in a truly effective partnership.
Cooperative housing associations may not solve all the problems we are facing with housing in New Zealand, but may be an option worth pursuing. What is clear is the current developer-led model is not meeting our needs. The constrained environment house building for profit operates in must shift.