Ghost houses and the spectre of communism

In late January, the Labour Party mayor of Auckland, Phil Goff, made a bizarre, shocking proposal: Given that there is a housing crisis in the city, with thousands of people sleeping rough on the streets, or in cars and garages, and given that according to census figures there are currently up to 40,000 houses in the city (7.3% of all private dwellings) which are empty long-term, might it not be possible – Goff mused – to contact the owners of the empty houses and propose to them that they rent out these so-called ‘ghost houses’ to some of the many people seeking rental accommodation? Maybe the electricity supply companies could help identify them – those houses which have used no power for several months? It could be “it could be a “win-win situation” that puts money in owners’ pockets and helps the community,” he said reassuringly.

Auckland Mayor Phil Goff. Photo: Getty images

To be sure, Goff was not talking about housing ordinary working people. With an indulgent nod towards the landlords, and their loudly-expressed hatred towards the working class and all the alleged difficulties and problems they pose as tenants, Goff made it clear that he was only talking about renting the ghost houses to ‘key workers’ like nurses, teachers, and police officers. He also stressed that his proposal would be “absolutely voluntary” and there would be “no compulsion on anybody.”

These assurances were not enough to calm the fears of the defenders of capital, whose most sacred right – the right of the individual capitalist to dispose of their property as they see fit, free of all constraints and influences, including rational persuasion and annoying phone calls from the mayor’s office – was apparently being called into question. One particularly perspicacious commentator in the columns of the New Zealand Herald, Kerre McIvor, saw lurking in the ghost houses an even more terrifying apparition: the spectre of communism. “Ghost house idea smacks of Karl Marx,” screamed the headline. To get the point across, she even quoted the Communist Manifesto (with her own insertions). “You are horrified at our intending to do away with private property. (Damn tooting we are!) But in your existing society, private property is already done away with for nine-tenths of the population; its existence for the few is solely due to its non-existence in the hands of those nine-tenths.”

With a little more reading, McIvor might have found this in the pamphlet on the housing question written by Frederick Engels, Marx’s lifelong collaborator: “the housing shortage can be remedied immediately by expropriating a part of the luxury dwellings belonging to the propertied classes and by quartering workers in the remaining part.” Oh, the horror, the horror! And it gets worse – Engels also says, “only by the solution of the social question, that is, by the abolition of the capitalist mode of production, is the solution of the housing question made possible.”

Still, McIvor and other stout defenders of capital can sleep easy in their beds – for now at least. Goff’s proposal was quickly forgotten. But this comedic interlude actually came closer to revealing the nature of the housing crisis, and the reasons behind the spectacular failure of the present Labour government to take even the tiniest step towards solving it, than all of the voluminous commentary on it in the bourgeois press.

After all – isn’t the purpose of building houses to meet the human need for housing? In a sane world, why would Goff’s proposal not work as a simple short-term fix for an acute housing shortage? Wouldn’t a government accountable to the working class take such a step immediately, and then go much further?

But we do not live in a sane world, nor one where the government is accountable to the working class. We live in a world where governments, including “Labour” governments, are beholden to the exploiting class, and to it alone, while production – including production of houses – is geared not to meeting human needs, but to maximising profit. That fact over-rides all, and must be the starting point for coming to grips with the housing crisis.

The housing crisis contains in microcosm the present conjuncture of the crisis of world capitalism. At this point the world economy is not in recession. The Covid-19 crisis may well plunge it into just such a worldwide recession, but are not in the midst of it yet. These, believe it or not, are boom times, the ascending phase of the capitalist business cycle, with full employment.

Mortgage interest rates, already low, took a further dive after the Global Financial Crisis of 2009

No, the malaise we already see around us is a product of the long-term decline in the average rate of industrial profit. The rate of profit has been declining since early in the post-World War 2 boom, at least from the late 1960s. The true situation was laid bare with greater clarity by Global Financial Crisis of 2009, and the measures taken by governments and central banks in the most of the imperialist countries to lower interest rates to historic lows. (The response to Covid-19 has been to drop them even further).

The stated purpose of these low interest rates is to encourage investment of capital in production. But the problem of the decline in the rate of industrial profit has not been solved. There is more profit to be made elsewhere than in expanding the productive capacity of factories and farms. Therefore, the effect of the low interest rates is to shift capital even further into non-productive forms of investment, such as speculating in stocks and shares, trading in a dazzling array of paper values, debt packages, bonds,  and currencies including crypto-currencies. (In the process, all this speculation brings even greater instability to the entire financial system.) None of these forms of speculation employs new human labour, and therefore none produces new value, they only re-distribute existing values. However they can turn a higher rate of profit. And one of the all-time favourites among these unproductive investments is speculation in real estate. Based on the median house price of $935,000 the capital locked up in Auckland’s ghost houses comes to a total value of $37 billion. And that’s just the empty ones.

Banks, meanwhile, make their profits from the interest they receive on loans. The more they lend, the more profit they can make – provided they can be sure of the loan being repaid. They lend to house-buyers up to the limit of what the borrower’s income permits them to squeeze out in repayments, based on current interest rates. The lower the interest rates, therefore, the more you can borrow on a given income, and the more you can spend on a house. Low interest rates have thus become the engine of skyrocketing real estate prices, the boom feeding on itself.

And the result is that while the speculators reap super-profits, housing in Auckland, and even in some of the smaller cities like Tauranga, has become less affordable (measured by the ratio of median house price to median income) than in the biggest, most expensive cities in the world. Meanwhile, the median rent across both large and small centres breaks all records.

Thus, the falling rate of industrial profit is at the root of the housing crisis, including its ‘ghost houses.’ As long as the speculative frenzy continues, there is sufficient profit to be made by speculating on the ever-rising prices of houses that many capitalist-speculators don’t even need to bother with the hassles of tenanting them. It is not a ‘cultural thing’ associated with ‘some Asian cultures’, as claimed in a ludicrous ‘explanatory’ article in Stuff last year. Nor is it the inevitable result of immigration, nor is it a policy decision by the government. It is simply the natural path of capitalist investment in the epoch of capitalist stagnation and decay.

And for that reason, it is a powerful imperative of capital, which sweeps aside all attempts to regulate it. The present government was elected promising to implement a capital gains tax to discourage exactly the kind of speculation that the ghost house owners are engaging in. The Labour Party had campaigned on this policy for three elections, and on taking the reins of government set up a Tax Working Group which  made such a tax the centrepiece of its recommendations. But in April 2019 the government ignominiously backed down, and dropped the proposal.

Even the mildest of the government’s reforms comes under ferocious attack. In February the government proposed a package of palliative measures called the Residential Tenancies Amendment Bill, which included such stunningly bold changes as raising the minimum period between rent increases from six months to a year, requiring landlords to give a reason for evicting tenants, and allowing tenants to add minor fittings to their premises. These changes would “improve tenants’ security and stability while protecting landlords’ interests” and “ensure the law appropriately balances the rights and responsibilities of tenants and landlords and helps renters feel at home.”

Despite its abject timidity, the Bill was roundly denounced by the landlords’ organisations, who warned darkly of ‘unintended consequences.’ Landlords announced their intention to increase rents, keep more properties empty, and even pre-emptively evict ‘marginal tenants’ before they lost the right to do so unimpeded. They were backed by the opposition National Party, whose leader, Simon Bridges, promised that the tenancy reforms would be among the first he would throw on the “regulation bonfire” on being elected.

Labour Party Prime Minister Jacinda Ardern. Photo: Newshub

The landlords and their National Party backers are not bluffing. They are simply making it as clear to the government of Jacinda Ardern as they did earlier to the hapless Phil Goff that there is no reconciling the interests of capitalists and workers on this issue. The idea that it is possible to “improve tenants’ security and stability while protecting landlords’ interests” is a foolish illusion. There is no “win-win situation,” no “balancing the rights and responsibilities of tenants and landlords” – only clashing class interests and a relentless, more or less open class struggle.

The speculator-capitalist-landlords themselves could not be clearer about the reality of this class struggle. It is only the working class that is paralysed by such sentimental illusions and false hopes of ‘balancing the rights and responsibilities of tenants and landlords.’ And it is the Labour Party government of Jacinda Ardern, with its mouse-like fussing on the housing question, which is the chief promoter of these illusions in the ranks of the working class. It is difficult to see anything but a worsening of the housing shortage, until such time as a substantial section of the working class makes a decisive political break from this party, which is labour in name but capitalist in every other respect, and embarks on a new course of working class political independence.

One historical fact remains to be explained: How was it that the Labour Party government elected in 1935, which in its programme and leadership was every bit as much bound to the prerogatives of capital as is the present one, was able to effect the most sweeping reform in the field of housing in the history of New Zealand – the state housing scheme?

In fact, the first several years of the Great Depression announced by the 1929 stock market crash were characterised by much the same passivity and resignation on the part of workers in New Zealand – for an even longer period in fact, because the New Zealand economy was already in the throes of a severe depression at least two years prior to the stock market crash. Unions, corrupted and enfeebled by submission to the Arbitration system, were powerless to prevent wages being driven down to the equivalent of $2 per day in today’s money. The Labour Party representatives in parliament had debased themselves by supporting the capitalist Liberal Party.

Social tensions reached breaking point in 1932. In Dunedin, Auckland, and Wellington, demonstrations by unemployed workers were violently attacked by police, and broke down into rioting, smashing of shop windows, and looting. The government enrolled thousands of special constables to maintain order against the unemployed workers, just as it had twenty years earlier to combat the waterfront strikers. Naval detachments and the Waikato Mounted Rifles were mobilised to patrol the streets, and the government granted itself sweeping new emergency powers.

Suddenly, the class character of the crisis had become glaringly apparent. The weakness of the unions, together with the violent suppression of civil liberties, especially the right to public protest, forced workers’ discontent into electoral channels. Election meetings now offered one of the few opportunities workers had to meet and discuss solutions to the crisis without being attacked and broken up by police. Political struggle seemed to offer better prospects of immediate relief than union struggles.

As the capitalist economy slumped to rock bottom, the Labour Party ended its support of the Liberal Party, and a mass working-class political movement developed, centred around a drive to elect a Labour government. The movement drew in support from working farmers and other exploited petty-bourgeois layers. And in 1935 Labour was elected to government by this movement.

While the continuity of capitalist rule was never challenged in the least by this government, nor could the sweeping reforms it introduced be accurately described as ‘palliatives.’

Michael Joseph Savage, Prime Minister in the Labour Party government elected in 1935

The Labour Party in power abolished degrading ‘relief work’ in favour of an unconditional payment for all workers left unemployed, and introduced an expanded programme of public works at full rates of pay. It passed a series of laws that established annual holidays, reduced maximum hours of work (to 40 hours per week for most workers), regulated factory safety and extended compensation for workplace accidents. It abolished fees for most forms of health care and drugs, including dental care for children. An accelerated construction programme provided desperately needed state-owned housing for workers at low rents. Dairy farmers were given guaranteed prices for butter and cheese. Education was made free and compulsory up to 15 years, and access to education at higher levels was expanded and made more affordable. Reduced rates of benefits and pensions for Māori were abolished. Old-age pensions were restored, the age of eligibility was reduced to 60 years, and exclusions for “Chinese and other Asiatics” were abolished. Universal superannuation was introduced in 1940. In Samoa, the new government lifted the ban on the Mau and ended the banishment of its leader Olaf Nelson in 1936.

These measures became entrenched as long-term conquests of the working class in New Zealand. Even today, after eighty years, these gains in the social wage have been severely eroded, but not entirely lost. The deepest erosion has been in the consciousness of these conquests as social rights.

Under the state housing scheme, tens of thousands of good-quality houses were provided at low rents to workers within a few years, and the building continued throughout the years of the Second World War. It had its faults right from the start – the main one being that the supply of state houses was never sufficient to meet the demand – but nonetheless remained in place for decades, not only providing housing directly in the form of the state houses themselves, but also, indirectly, exerting a downward pressure on rents in the private sector.

The state housing programme also had the character of a state intervention to stimulate domestic industry and employment, coming in the depths of the depression. This was the kind of measure the capitalist class will tolerate only in the depths of a slump, when their grip on political power is weak. Today the capitalists have no basis to use state intervention to stimulate the economy, nor any need to capture and head off a rising working class movement – so the government of Jacinda Ardern will not be permitted to take this road.

It was the mass political movement of the working class which drove the state housing reform, and which sustained it as long as it did. That movement developed under the banner of the Labour Party, which had been created by the organised workers movement twenty years earlier. Today, the Labour Party has long ago severed its last connections with the working class. Nothing remains except its fraudulent signboard.

It is clearer than ever that the solution to the housing crisis today rests on building a new movement of the working class – a movement of the propertyless nine-tenths that Marx describes – which breaks with the Labour Party and its hangers-on, rejects with contempt their failures on the housing question, and demands cheap good-quality housing as a social right, along with other protections from the ravages of the deepening economic and social crisis.

One response to “Ghost houses and the spectre of communism

  1. Pingback: The economic crisis that caused the pandemic | A communist at large·

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