Hard News by Russell Brown

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Hard News: Housing, hope and ideology

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  • ChrisW,

    Attachment

    A local expression of this Government's social housing policy via Housing New Zealand - seen through a glass darkly.

    Gisborne • Since Apr 2009 • 851 posts Report Reply

  • AndrewH, in reply to BenWilson,

    I disagree Ben. Yes, land price is a factor but certainly not the single biggest. Multi-tenancy construction gives efficiencies in land use, in permitting and approvals, in services delivery. We're just largely stuck in a pavlova paradise construction model of individual houses.

    Wellington • Since Nov 2008 • 33 posts Report Reply

  • BenWilson, in reply to AndrewH,

    We’re just largely stuck in a pavlova paradise construction model of individual houses.

    We are. I'm not intending my statements to span all time. Just the rest of my life.

    Yes, land price is a factor but certainly not the single biggest.

    It's the only way you can explain that two identical houses situated one in Grey Lynn and one in the backblocks of a small remote South Island town could have a price difference of a million dollars. It's not the building of a modest house that accounts for the vast bulk of the difference.

    We can actually build physical houses extremely cheaply, and that's without even really applying the economies of scale in mass production, which should make them cheaper still. But if they're situated in Erewhon, people won't want to live there. If you make Erewhon nicer, then people will want to live there, but their very desire to do so will make the land under those houses much more valuable. Very rapidly, the value of the housing stock itself will only be a small part of the picture.

    Multitenancy increase the usage of the land, and if it's multilevel it's even equivalent to making more land. But in doing so, the value of the land under it is simply multiplied again. The value of land that can be developed into high rise factors this possibility in.

    Essentially, what I'm saying is that when market forces dictate house prices, and those forces are basically unconstrained, and the market is the entire world, then there ain't no amount of technology improvement that's going to make house prices come down by large fractions. Even if the house itself was entirely free to build, the property could still be worth millions. In fact, it could be worth even more because of that, because it could be developed more.

    Auckland • Since Nov 2006 • 10657 posts Report Reply

  • AndrewH, in reply to BenWilson,

    All good points, the financial ones abetted by the banks ability and incentive to lend against residential housing at multipliers vastly higher than, say, for business lending.

    My underlying points were really around - since the Housing NZ stock is substantially inadequate, then a large-scale, aggressive approach to building was likely to be far more cost-effective than any piddling-round-the-sides "market-driven" solution. Though I agree the sense of urgency seems to be lacking.

    Which is an interesting question in and of itself - WTF has that gone. A few decades back, the US put men on the moon in the space of a few short years and using the processing equivalent of a couple of pocket calculators. The difference was they WANTED to. As a society we just don't seem to want in that way any more.

    Wellington • Since Nov 2008 • 33 posts Report Reply

  • tussock, in reply to Richard Aston,

    eg The 3 Strikes policy , simple ( dumb) solution to a complex problem but I bet it pulled in the punters ( um voters) .

    3 Strikes was ACT policy when they got under 1%. National passed it because ACT is the vehicle for their policies that voters hate.

    @Land values.
    See, building housing is profitable, because you buy bare land and put houses and roads and sewers and communications on it which makes the land worth a lot more money.

    People do it for a living, because it's profitable (and you can hand off the risks to all sorts of suckers), but it's even more profitable to build mansions rather than public housing. Which is why National has been tearing down public housing to build private mansions.

    They know building houses for poor people is profitable to the state, they'd just rather not. Like their tax system starves them of money for public health and education, but there's plenty of money for huge new public spending on private schools and hospitals. Like the beneficiaries have to be treated like criminals all the time, but those regulations on employers are a bit tough because obviously none of them would ever abuse weak-ass employment laws.

    They say it's about cost. In a way that's even true, being a decent society would make it more expensive to get people to fluff their pillows for them. How inconvenient is it that the poor don't give you free housemaids any more? Benefit cuts, that's what we need. Market rents. Got to keep "costs" down.

    That's what people vote for. Privilege. Not how rich you are, but how much richer. Having a few things that other people can't have is much nicer than having more things, don't you know.

    Since Nov 2006 • 611 posts Report Reply

  • BenWilson,

    I don't think our problem is that we don't have enough houses at all. Adding houses might help matters a bit, indirectly (or it might not, as people will just move to fill those houses), but the problem is that the housing that we do have costs way too much. It's by far the largest chunk of economic activity in this country - either paying interest on your mortgage or rent to your landlord. The biggest chunk of most people's incomes by far goes into this. In my case it's more than half of everything we earn. And it's having not enough money to pay, or nothing left after paying, that makes people impoverished. It's not that people don't have a house, it's that they don't have enough money to make that house a good place to live after scraping together enough money to live in it at all. At the extreme end, just before actual homelessness, is the inability to heat the house, do any maintenance or repairs, to furnish it properly, to keep clothes and bedding clean, to keep fresh air circulating, to pay for good food to eat whilst in it.

    Survival manuals give the prioritization clearly: Shelter, then water, then food. All other concerns are rather secondary. And that really is the order in which human existence is prioritized. The only one we've really got right from a social equity point of view is water, and even then only because it's a superabundant natural resource, literally falls from the sky. Humans can be held to ransom over decent shelter. They always have, and unless we actually choose to change that, they always will. That is the reason that housing is such a massive concern and such a source of wealth, and such a massive indicator of social position. Because it's absolutely vital. You can turn humans into animals by denying it to them.

    Auckland • Since Nov 2006 • 10657 posts Report Reply

  • Sacha, in reply to BenWilson,

    It’s the only way you can explain that two identical houses situated one in Grey Lynn and one in the backblocks of a small remote South Island town could have a price difference of a million dollars.

    If you make Erewhon nicer, then people will want to live there, but their very desire to do so will make the land under those houses much more valuable.

    Agree it’s about relative location rather than land as such – access to valued things like social and educational infrastructure, interesting jobs, a critical mass of people who like the same things.

    That’s the fundamental nuttiness of thinking the answer is adding more boxes made of ticky tacky on the fringes, rather than rethinking dwellings as compact homes, terraced houses and apartments with higher-value shared public amenities around them and strong transport options. Pumping funding into a bubble without constraining financialised demand is nothing more than ideological lunacy.

    the value of the land under it is simply multiplied again.

    Not by so much. Not linear.

    Ak • Since May 2008 • 19740 posts Report Reply

  • Richard Aston, in reply to Ross Mason,

    German Housing Policy….

    Thanks for the link Ross. The German approach to rental housing seems way better than ours.

    The German system moreover is deliberately structured to encourage renting rather than owning. Tenants enjoy strong rights and, provided they pay their rent, are virtually immune from eviction and even from significant rent increases.

    I have German friends who inherited rental houses from grandparents that's how secure they are.

    Its seems our tenancy laws are draconian - to tenants - by comparison hence the big drive to buy... and sell... and buy again.

    Northland • Since Nov 2006 • 510 posts Report Reply

  • Jim Cathcart,

    The NZ housing issue is discussed at Macrobusiness today. The whole issue of political will is summarized in the Youtube video. Yes, it's a little amateurish but some of the most important themes related to land supply are covered.

    http://www.macrobusiness.com.au/2014/11/the-new-zealand-housing-nightmare/

    Since Nov 2006 • 228 posts Report Reply

  • Joe Wylie, in reply to ,

    How old was the car when you got it?

    36 years old. I was 15.

    flat earth • Since Jan 2007 • 4593 posts Report Reply

  • Kumara Republic, in reply to Joe Wylie,

    36 years old. I was 15.

    That would have been the hot-rod era, if I'm not much mistaken?

    The southernmost capital … • Since Nov 2006 • 5441 posts Report Reply

  • Kumara Republic, in reply to Jim Cathcart,

    The NZ housing issue is discussed at Macrobusiness today. The whole issue of political will is summarized in the Youtube video. Yes, it's a little amateurish but some of the most important themes related to land supply are covered.

    http://www.macrobusiness.com.au/2014/11/the-new-zealand-housing-nightmare/

    It also happens to be an Andrew Atkin piece - I dug some dirt on him not too long ago. While he's rightly concerned about housing affordability, he concerned for all the wrong reasons.

    The southernmost capital … • Since Nov 2006 • 5441 posts Report Reply

  • WH,

    It would be good to have an urban planner comment on that critique of restrictions on land availability, if only to hear the other side of the argument. Planning for intensification must be hideously complex, particularly in places without comprehensive public transport systems, such as Auckland. There must be more to it than simply changing the zoning and hoping a desirable urban environment will emerge from the accretion of private development.

    Wikipedia says that, back in the 1950s, Winston Churchill set Harold Macmillan to building 300,000 new homes a year, saying:

    It is a gamble—it will make or mar your political career, but every humble home will bless your name if you succeed.

    There are a number of large scale private sector housing developments under construction within a short walk of my home in central London. Within a few years whole blocks will be comprised of relatively expensive private apartments. It would be hugely challenging, I admit, but it must be possible to design and build a new generation of high quality, high density public housing that incorporates modern desires for spacious living, green recreational areas and community amenity.

    You could start in a particular neighbourhood or just work your way down an existing transport corridor, like New North Road, and iteratively improve the designs and implementation as you went along. It would probably mean building a real public transport system, though.

    I realise this is a wholly uninformed and pie in the sky sort of suggestion, but it's got to be better than simply selling everything off and calling it progress.

    Since Nov 2006 • 797 posts Report Reply

  • jh, in reply to Jack Harrison,

    I think treasury needs to move to Auckland. It needs to be louder and staffed with a higher standard of worker.

    Economics is a lot clearer than even ten years ago. The GEC shone so much light into the bullshit of moving money around for the sake of short-term profit. We need adults with qualifications to expose money stupidity from the right.

    According to Tony Alexander

    3. The government is explicitly aiming to grow Auckland’s population as a means of achieving “agglomeration” benefits for economic growth which accrue from high interaction amongst economic players.

    Treasury Papaer 14-10 says:

    3. 2.3 Changing policy expectations
    While useful, models do not capture all the effects policymakers expect from immigration.
    When New Zealand moved to increase the numbers and skills of immigrants in the 1980s and 1990s, policymakers appear to have considered that these changes had the potential to have major beneficial impacts on the New Zealand economy, reinforcing the gains from
    22
    the other liberalising and deregulating economic reforms undertaken during that period.
    At that time, it was considered that skills-focused inward migration could: improve growth by bringing in better quality human capital and addressing skills shortages; improve international connections and boost trade; help mitigate the effects of population ageing; and have beneficial effects on fiscal balance. As well as “replacing” departing
    New Zealanders and providing particular help with staffing public services (for example, medical professionals), it was believed that migration flows could be managed so as to avoid possible detrimental effects (such as congestion or poorer economic prospects) for existing New Zealanders.

    Since then, New Zealand has had substantial gross and net immigration, which has been relatively skill-focused by international standards. However, New Zealand’s economic performance has not been transformed. Growth in GDP per capita has been relatively lacklustre, with no progress in closing income gaps with the rest of the advanced world, and productivity performance has been poor. It may be that initial expectations about the potential positive net benefits of immigration were too high.

    Based on a large body of new research evidence and practical experience, the consensus among policymakers now is that other factors are more important for per capita growth and productivity than migration and population growth. CGE modelling exercises for Australia and New Zealand have been influential in reshaping expectations.

    http://www.treasury.govt.nz/publications/research-policy/wp/2014/14-10

    Also
    4.2 Housing market impacts

    On balance, the available evidence suggests that migration, in conjunction with sluggish supply of new housing and associated land use restrictions, may have had a significant effect on house prices in New Zealand.

    Looks like Treasury aren't the problem; more likely policy is the result of vested interests; combined with a progressive elite who stifle debate on immigration.

    Since May 2007 • 103 posts Report Reply

  • jh, in reply to Caleb D'Anvers,

    What has happened to the esteemed Dr Greg Clydesdale?

    Proved right?

    While immigration played a key role in house inflation in the three years after 2001 (Reserve Bank 2007), it is unknown to what extent on-going immigration continued to drive price rises.
    The housing boom has meant good profits for many New Zealand companies supplying materials and building services, but it implies investors would rather invest in their country’s
    homes rather than its businesses (Bollard 2005). The high returns for property has attracted finance and reduced the capital available for productive investment (Moody, 2006). The consequence is investment is going in to industries with limited capacity to increase per capita incomes. For example, real estate and building are domestically bound and do not have the
    market potential of export industries. They also have less opportunity to increase productivity through new processes and products. The irony is, as these sectors grow, they have incurred skills shortages which in turn has increased demand for skilled immigrants. The Department of Statistics ‘Long Term Skill Shortage List’ of 28/3/2006 includes carpenter/joiner, plumber,
    electricians, fitter and turners, fitter welders; all indicative of a nation building its construction/property sector.
    There is a danger that a sector of the economy is being augmented that is totally reliant on a small domestic economy. Not only do these industries have limited potential for per-capita growth but ‘deriving growth via factor inputs such as labour places pressure on infrastructure such as transport and land supply, and ultimately have a further negative impact on growth
    (ARC 2005). Finally, as the sector gets larger, it gains in lobbying/political strength and can lobby for immigration regardless if it is the best interests of the economy as a whole. This could be seen in Canada where the development industry has lobbied hard for high sustained immigration levels (Ley and Tutchener 2001).

    Since May 2007 • 103 posts Report Reply

  • Lucy Telfar Barnard, in reply to BenWilson,

    I don’t think our problem is that we don’t have enough houses at all.

    Alas, lack of houses is actually a problem. That’s part of the reason that the housing we do have costs way too much. It’s also the reason there’s household crowding, which comes not just from big families living in small dwellings, but average-sized families doubling up in dwellings together, and why people “couch-surf”, and why households are stressed by having to share a dwelling with another household when they don’t want to (even if they’re not overcrowded). The reason they do that is not because they want to, and not simply because they can’t afford to rent something separate: there are not enough separate dwellings* in the country to house all the households that would like to, and should be able to, live separately.

    *I don’t mean physically separate, I mean notionally separate, i.e. an apartment counts as a separate dwelling.

    Even if we only look at severe housing need, an estimated 34,000 people are inadequately housed. They won’t become adequately housed just by shuffling people round in the existing housing stock.

    Adding houses might help matters a bit, indirectly (or it might not, as people will just move to fill those houses)

    Adding houses would help matters directly. Yes, people will move to fill those houses. That’s why they’d be built. People being able to move to fill new houses (or the other houses left empty by people moving into the new ones) could meet the unmet housing need if there were enough new houses built. At that point we could judge whether there was a price issue, but at the moment it’s not just price, it’s also lack of supply (or possibly price because of lack of supply).

    Wellington • Since Nov 2006 • 585 posts Report Reply

  • Richard Grevers, in reply to Lucy Telfar Barnard,

    (coming to this thread late, as usual :-)
    I think it's not so much lack of houses as lack of houses in the right place (where the jobs are). Or, perhaps more tellingly - lack of jobs where the houses are. I have joked that my solution to the Auckland housing problem is: 10,000 in Invercargill, 1000 in Gore... etc. etc. - and while moving more people to the provinces would create more jobs there, not enough unless you can also move industry (remember that?) there.

    New Plymouth • Since Jul 2011 • 143 posts Report Reply

  • Richard Grevers,

    The shoe thing: Do they apply geographical correction to the data? Without it, it’s useless: Living in Christchurch, it was very rare to see people barefoot about 10 months of the year – it’s either too bloody cold underfoot or tar-melting hot. Here in the balmy ’naki I see barefoot kids going to decile 10 schools – in winter. Yes, those kids will own shoes, but if they aren’t wearing them constantly they won’t wear out.

    ...and at NPGHS it seems to be a badge of honour that you don't wear a raincoat, just walk to school in the wet in your woolly jersey. The classrooms must smell interesting on a wet day.

    New Plymouth • Since Jul 2011 • 143 posts Report Reply

  • Richard Grevers,

    While searching for loopholes in the building laws, I came across a published submission to the Tasman District Council from people at the Tui community. It proposed a category of owner-built houses:
    - Rural or semi-rural areas
    - One meeting with Council to establish nature of house and which set of practises you will be following, with no further inspections - and fee reflective of that.
    - Owner-build consent would waive Council of all responsibility re performance and safety of the house. Status would be recorded on LIM
    - As you wouldn't be able to get insurance, a moptgage would probably be out of the question.
    I doubt if it got anywhere, but the ability to build your own house for $30 - 50K would be appealing.

    New Plymouth • Since Jul 2011 • 143 posts Report Reply

  • Ross Mason,

    Auckland is going to be too big. Even if the urban boundaries are expanded it will still mean no public transport plan and more cars. It is so bloody central as well. One day we are going to realise decentralisation has advantages.

    it is crazy having a 400m isthmus splitting the place into north and south. There are no options of where one can spread out.

    I seriously think that other "mega cities" need to be created in other parts of the country. Even on the south of the Bombays would be useful.

    Power is south, space is south, food is south.......

    Upper Hutt • Since Jun 2007 • 1590 posts Report Reply

  • Kumara Republic, in reply to Ross Mason,

    I seriously think that other "mega cities" need to be created in other parts of the country. Even on the south of the Bombays would be useful.

    NZ might be able to handle maybe 3 of these "mega-cities" - Auckland, Wellington, and Christchurch. It'd be even more feasible if the aerospace industry can develop planes that can carry ATR/B737/A320 passenger volumes over B747/A380 distances.

    The southernmost capital … • Since Nov 2006 • 5441 posts Report Reply

  • artemisia, in reply to Lucy Telfar Barnard,

    Where do you get the info that there are just not enough properties available? I had a look on TradeMe this morning and there are over 450 rentals listed in Manukau City and about 350 in Waitakere City with 2 or more bedrooms.

    That might not be enough to completely solve overcrowding in those areas, but it would probably make a big dent in it. So why aren't these overcrowded folk conditions moving in to these places?

    I accept that new housing has not kept pace with population growth, but not that all people in overcrowded conditions are there solely because there are no properties available.

    New Zealand • Since Nov 2014 • 8 posts Report Reply

  • Kumara Republic, in reply to artemisia,

    That might not be enough to completely solve overcrowding in those areas, but it would probably make a big dent in it. So why aren’t these overcrowded folk conditions moving in to these places?

    Could it be because the rent for those places is out of their financial reach?

    The southernmost capital … • Since Nov 2006 • 5441 posts Report Reply

  • artemisia, in reply to Kumara Republic,

    Certainly could be the case, but I was replying to the post that said household crowding is caused by lack of supply, pointing out there seem to be a lot of vacant properties about.

    Could also be that some families are not going to be top of the landlord's list of applicants.

    New Zealand • Since Nov 2014 • 8 posts Report Reply

  • Sacha, in reply to artemisia,

    There's also this thing where at any one time people are moving between homes, so a snapshot shows some empty ones. Official figures show without any doubt there is more demand than supply.

    Ak • Since May 2008 • 19740 posts Report Reply

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