OnPoint by Keith Ng

JTF: Housing and Electricity

"The Housing Minister all but confirmed that first home buyers will have to earn at least $70,000 a year to get into one of Labour's 'affordable homes'. Of course the average household income is less than $70,000." - National Housing Spokesperson, Phil Heatley

Heatley got the house prices right - Minister of Housing Maryan Street confirms that the 500 houses in the Hobsonville project allocated as "affordable housing" are going to have a price tag "in the low $300,000s", and banks would generally require a household income over $70,000 to approve such a loan.

The debate took a strange turn, though, when one survey said that the average household could borrow enough for the Hobsonville house, but according to another, they couldn't. Street quoted the 2007 NZ Income Survey, which said it was $75,140, while Heatley looked at the 2007 Household Economic Survey, which showed the median household income to be $67,973.

Aucklanders have the second highest level of income in the country, and young couples generally have a higher-than-average household income. This suggests that the kind of people who would buy one of the affordable house in Hobsonville - young couples working in Auckland - probably earn more than $70,000.

Just because they can get a mortgage doesn't mean it's affordable, though. One of the key indicator of housing affordability looks at how much of the household income is being spent servicing their mortgage. If it's over 40%, a household is defined as being in "mortgage stress". A $320,000 mortgage would cost over $600 each week to service, which is more than 45% of a $70,000 per year income. That's tough going for any household.

Street acknowledges that Auckland is a tough market for housing, but points out that there's plenty of government help available. The government will match Kiwisaver contributions for deposits on first homes, the Welcome Home Loan scheme can also help with deposits, and the new Shared Equity scheme can reduce the borrowing amount.

But Heatley says that these schemes don't address the core issue that housing is too expensive. He says that National will reduce taxes and bring down interest rates to increase what households can afford to borrow, and streamline the RMA to lower the cost of development.

Another point of conflict is the Metropolitan Urban Limit (MUL), which restricts the land available for development. Street says that it's needed because "the prospect of urban sprawl, particularly with the traffic problems that that would create, is just too horrible to contemplate." National, on the other hand, supports extending or abolishing the limit, which would reduce land prices.

"If the MUL shifts," says Heatley, "and more money has to go into infrastructure, we're well aware that we have to do that. Infrastructure investment does not scare us."

"Labour’s failure to future-proof our energy infrastructure is to blame for looming electricity shortfalls this winter. They should admit there’s a problem and plan to get through it, avoiding public shock at cold showers, industrial shut-downs, and dimmed street lighting." - National Energy Spokesperson, Gerry Brownlee

Electricity shortfalls are not looming. There is concern about the capacity to meet peak demand, but this is a normal part of the system functioning.

A lot of things would have to go wrong simultaneously for the emergency measures to take effect, says Stephen Gale, an energy sector specialist at strategic consultancy firm Castalia. "You'd have to have the [inter-island] cable be unusuable, unusually calm weather so that the wind generating capacity we have was of no use, and then you'd have to have some other [power] plant fall down."

"But you'd know it's happening, and you get on the phone and do something about it." Power-intensive industrial users get the call and a deal is made. When peak supply is tapped out, some of these major users cease operations for a short time. Normal users are unaffected.

Why don't we just build more peak capacity? Because it would sit around doing nothing for the other 362 days of the year. "It's unhealthy for the system to have so much spare capacity that you never even have the sniff of a problem," says Gale, "it's vastly expensive to do that, and it's a hidden cost that everyone would be carrying."