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OPINIONPoliticsOctober 10, 2022

The great boomer backlash of 2022


The weekend’s local government election results are a big ‘no thank you’ from older home owners to future generations, writes Bernard Hickey.

This article was first published in Bernard Hickey’s newsletter The Kākā.

So it turns out older homeowners in the suburbs quite like things just the way they are. They don’t want any big new housing developments near them. They don’t want their motorways turned into cycleways and walkways. And they certainly don’t want the centralisers in the beehive taking their assets off them and ordering them to change without giving them much help. And they hate traffic cones.

Council election results over the weekend in Auckland, Christchurch and Dunedin produced sharp turns away from more progressive mayors and councillors to mostly older, pākehā men who had campaigned to block more housing densification, big public transport and mode-shift projects, and a broader shift to co-governance with tangata whenua.

In line with previous council elections, homeowners aged over 50 and living in standalone homes in the leafy suburbs voted at three to four times the rate of young renters in the inner city areas. After three years of parliamentary legislation ordering councils to allow more homes near town centres and plans to disrupt suburban streets with new rail lines and cycleways, the beneficiaries of the status quo said “No more.”

New Auckland Mayor, the 76-year-old Wayne Brown, summarised the mood of most of those who voted in a statement calling for the rest of the Auckland Transport (AT) board to resign (AT Chair Adrienne Young Cooper resigned on Saturday night) and pledging to cut “rising costs and council waste”.

“Let me be very clear: Wellington’s job is to listen to what Aucklanders say are our priorities, and to fund them – not impose ideological schemes like the $30 billion airport tram, untrammelled housing intensification and Three Waters on a city that doesn’t want them.” – Wayne Brown.

Brown then went on to sing songs with his supporters in Saturday night celebrations, including this one (F… off Goff), and then cancelled scheduled media appearances on Sunday to spend time with family and go surfing.

Despite the latest results showing two left-leaning candidates overtake their opponents in the Albert-Eden and Whau wards, Brown will still have a more centre-right council to work with, given at least half of the 20 on council are seen as also opposed to densification and want to cut back on council spending. He said yesterday he would put out a statement on the council’s finances today after a briefing this morning from officials.

The new Christchurch Mayor, 56-year-old Phil Mauger, told The Press this morning he did not want to see the congestion charging and road tolls in a recent council transport plan aimed at reducing emissions, and wanted to ditch a levy on new private car parks. He also opposed a $22.6m cycleway on Harewood Rd that removes two lanes for cars and 300 car parks.

“I would like to think we can soften it up a bit. We do have to get people in town.”

He said the plan would make it too hard for motorists and he wanted to make it so “everybody was happy”.

New Dunedin mayor, 67-year-old Jules Radich, campaigned against council spending and to reduce debt. He beat one-term Green mayor Aaron Hawkins, who presided over heavy capital spending in the city in favour of mode shift. Radich opposed an inner-city plan to create a cycleway as part of a one-way system for cars.

Of the other major cities, only Wellington saw its council retain its centre-left majority and elect a centre-left mayor. Former Green Party leaders’ office chief of staff, Tory Whanau, won decisively over Labour MP Paul Eagle and previous centre-right mayor Andy Foster. Hamilton’s more progressive mayor Paula Southgate scraped back in against a conservative candidate.

Ousted Dunedin mayor Hawkins summarised the reaction across the country as a reaction against the government’s reforms around Three Waters, densification and mode shift yesterday via RNZ:

“It always seemed obvious that the breadth of the reform agenda was going to make it difficult for progressive candidates up and down the country. I don’t like to be proven right but it seems that are what we are seeing.”

So how and why did this backlash happen?

The scale of the backlash this year was inevitable in light of the democratic deficit now underpinning council elections and what I call the broken financial relationship at the heart of Aotearoa’s political economy since 1989.

Firstly, the weight and size of the imbalance of power and agency between older home owners in the leafy suburbs and young renters has to be understood. The continued low overall turnout of 40% that was focused on yesterday disguises the immensity of the gap between voting rates between the young and the old, between owners and renters, and between pākehā and the rest.

Last year’s General Social Survey (civic and cultural participation) found 71.3% of owner-occupiers said they voted in the last local elections and 47% of non-owner occupiers said they voted. Council voting rates for those aged over 55 ranged from 71% to 86%, while voting rates for those aged under 44 ranged from 43% to 61%.

Voting rates in the weekend’s elections in Ōtara fell to 19.6% from 22.7% in 2019 and fell to 21.4% in Papatoetoe from 25.5%. Voting rates in the leafier suburbs such as Devonport and Parnell were over 40%.

The Democratic Deficit of young, poor renters

Previous analysis of local turnout rates in Auckland from the 2016 election found a close connection between deprivation scores, home ownership rates and voting rates. Those in the richest neighbourhoods with the highest percentage of home owners voted the most, while those in the poorest with the lowest home ownership rates voted at the lowest rates.

Source: Auckland Council research after 2019 elections.

Turnout rates in council elections are even lower than in general elections, as are enrolment rates. Overall enrolments nationwide have slumped for young cohorts over the last 20 years. Local government participation has been falling in recent years, even relative to general election turnout.

Home ownership is also a key indicator of voting in local elections, with those councils with high ownership rates having the highest voting rates. The biggest “blob” of low home ownership and low turnout in the chart below is Auckland.

The broken relationship at the heart of our political economy

The democratic deficit above would not be so much of a problem if councils and governments had invested in the infrastructure necessary to ensure plenty of good quality and affordable housing supply, along with strong, well funded and well-used networks for public transport and cycling.

I think that the democratic deficit is actually intertwined with the infrastructure deficit, which the Infrastructure Commission has estimated at worth more than $100b over the last 30 years, with another $100b needed over the next 30 years.

This is all about decisions made in the late 1980s that effectively reversed a multi-decade political settlement from the 1930s to the 1970s which saw the central government run a high-tax and high-investment strategy aimed at investing in housing, electricity, water and transport infrastructure to ensure children born in the late 1940s, 1950s and early 1960s were well catered for.

It was a generational decision of those who fought in the wars, as well as their parents, to sacrifice consumption for investment. That meant the government used those relatively high tax revenues to invest in dams, railroads, motorways, new suburbs and power networks.

The centrally-directed Ministry of Works and electricity departments planned and often built the railways, motorways, lines networks and substations to enable fast population growth with affordable housing. The central government provided subsidies and guarantees for house-building, along with building tens of thousands of state homes and subsidising the building of thousands of social home by councils.

Government helped to build the infrastructure and councils were not taxed or given extra regulatory functions ensuring water and environmental quality. They had a financial partnership designed to ensure population growth and the welfare of the young families of the heroes who came back from the wars were prioritised.

So how did everything change in 1989?

In 1989, a collection of Douglas-Richardson-era legislative reforms were either passed or started that fundamentally changed that key relationship between central and local government, extending an imbalance in place for most of our Pākehā-era history. It has been unequal ever since the disestablishment of the more Federal-style provincial governments in 1875 by Julius Vogel, who wanted more centralised development driven mostly by debt-funded investment in railways.

There had been six separate provincial governments between 1853 and 1876, including Auckland, Taranaki, Wellington, Nelson, Canterbury and Otago. This meant provincial governments never attained the power to tax incomes or spending in the way central government did, which is in stark contrast to more federal-style and localised governments overseas, where income and sales taxes are fully or partially collected by or granted to council, provincial and state governments.

The crown’s dominance of all government spending in Aotearoa is the highest in the OECD, while the amounts granted councils are among the lowest in the world.

Those changes introduced in 1989 deepened and extended that imbalance by both adding to council responsibilities and reducing the availability of taxes. They included:

  • the amalgamation through the Local Government Commission of 850 local bodies into 86 local authorities under local government Minister michael Bassett;
  • the passing of the Public Finance Act, which re-regulated and centralised control of government spending, taxation and borrowing in a way that led to low public investment and relatively low income tax rates;
  • the launch of the Resource Management Act (eventually passed in 1991) that put responsibility for resource and building consenting onto the shoulders of councils, district councils and regional councils;
  • the increase in the GST rate to 12.5% from 10%, which was applied to council rates, while councils were not allowed to charge rates on crown land;
  • the launch of the Reserve Bank Act to create an independent body to drive inflation and interest rates lower, thus massively increasing values of supply-constrained revenue-generating assets such as rental properties; and,
  • the failure of then-Labour finance minister David Caygill to enact a proposed Capital Gains Tax, which would have filled the hole between the "broad-based and low rate" income and consumption taxes brought in by Roger Douglas.

The end result was an increasing fiscal dominance by the crown at the expense of local government, and a weakening of councils’ ability to invest in infrastructure, as this 2014 chart shows. Perhaps not surprisingly, voters could see where the real power and consequence lay: at the central government level, rather than with councils. That growing imbalance in fiscal power has coincided with the relative decline of council voting rates and the infrastructure investment drought relative to population growth.

This shows Aotearoa’s decline in tax-GDP ratio since the mid-1980s and the even greater decline in rates relative to GDP.

How did this lead to inter-generational wealth transfer?

The toxic combination over the last 30 years by Labour and National governments of:

  • not taxing capital gains on residential property while removing subsidies for business investment via pensions;
  • not investing enough in infrastructure while also engineering two migration-led population growth booms (1% to 2% in 2000-2005 and 0.5% to 2.2% 2011-2019); and,
  • limiting the size of core government spending and debt to around 30% of GDP while limiting council spending and debt to around 3% and 6% of GDP:

led to;

  • over $1t of leveraged and untaxed increases in residential land values for those owning property from 2000 onwards because of a lack of housing land supply in tandem with falling interest rates and the tax advantages;
  • growing disillusionment with councils' ability to deliver the transport, housing, water and roading infrastructure needed to cater for strong population growth;
  • a growing distrust between central and local government as the beehive mocks dysfunctional councils and councils bemoan being told to do ever more with ever less financial support.

So what now?

This electoral backlash is the result of Labour’s attempts (and partially one National attempt) to deal with some of the housing supply, transport and water problems by trying to force councils to agree to invest in and permit housing growth, and by trying to take water assets (and liabilities and political risks) off councils via Three Waters.

"You must do it without enough consultation or funding"

The trouble is Labour (and National via the bipartisan Townhouse Nation law) tried to ram through its densification and mode shift agendas without either getting the permission of councils or providing the necessary funding and revenue sharing.

The reaction was inevitable from home-owning baby boomers who don’t want their tax-free gains from housing supply shortages or their motorways taken away from them by a bunch of woke, young renters who prefer cycling and buses to a decent double cab ute and a nice house in the suburbs with a backyard, a barbecue and a boat in the drive. They also hated the idea (if not the reality) of co-governance with iwi.

This rejection of the densification and mode shift agendas is a harbinger of worse things to come for Labour at next year’s general election, although to a lesser extent because the democratic deficit is not as wide. Look out for co-governance to be thrown under the bus. It’s also a problem for National with its support of Townhouse Nation. That too may be shuffled under a large oncoming vehicle.

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