Hard News: Housing, hope and ideology
166 Responses
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Sacha, in reply to
Poverty sucks. And by the way, it has almost nothing to do with children rocking up to school in barefoot.
That is however one of the official measures in the ELSI living standards survey.
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Jack Harrison, in reply to
Yellow card.
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Kumara Republic, in reply to
I wonder whether Key and English read from the same (song-) balance sheet.
Apparently not.
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Marc C, in reply to
The media reports quoting what English and Key say change by the day, at present, and it seems that Bill English, who I think was the first to mention the target of up to 20,000 state houses up for sale, was a bit ahead of himself. But then again, Key has at times defended the sales of up to 20,000, and at other times denied any such large number of planned sales.
Key also claims, selling a third of Housing NZ stock is "not asset sales". Here some news stories:
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11344052
http://www.3news.co.nz/nznews/state-housing-sell-off-worth-5b-2014100618
http://www.radionz.co.nz/news/national/258382/'too-many-gaps'-in-state-housing-planI think that English got a bit overly bold after the election win, and made an announcement, while they have not really got their grips about it yet, what exactly they will do, and how they will go about it. This is an opportunity for the opposition to attack, as National is showing all these contradictions and a serious lack of reliable planning ahead.
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The model for income-based rental housing exists in Japan. But the issue of affordable housing is confounded by that NZ's private savings has been heavily invested in the existing housing stock. The problem with this is that with so much of the country's wealth wrapped up in houses, any social housing initiative is going to potential stymie the whole mechanism by which NZers have lived and saved for financial independence. House prices relative to income are so high now that people will feel aggrieved if the "price" of their houses fall or go through a period of deflation as witnessed in countries that have suffered through property crashes.
The irony is that investors often suggest that negative gearing is a subsidy for renters as opposed to a tax benefit for the landlord (no evidence exists to suggest that it is. Rents cannot rise above the ability to pay).
To blame Key and the National Government for this mess is short-sighted. Sure, their support base is likely to be negatively affected by a large-scale social housing initiative, but the problem started with the liberalization of finance for people to invest in the existing housing stock. There is little to incentive for the private sector to build new housing. It doesn't make economic sense. The Labor Government was aware of what was happening in the 2000s, but it was far to easy to keep the punters happy with rising house prices and shifting the onus of debt burden from the public to the household.
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linger, in reply to
What is this “Labor Government” of which you keep speaking? NZ has no such party. (It barely has a functional Labour Party at the moment.)
That aside, you’re probably right that National don’t want to build state houses at least in part because they don’t want property prices to fall. But they’ve already had six years in charge; it’s no longer “short-sighted” to blame National for the worsening problem.
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Jim Cathcart, in reply to
The 5th Labour government (1999-2008). You know, the ruling power that sat through one of the most destructive credit bubbles in human history and let the FIRE industry fuel the fire without any thought to how it might impact NZ into the future.
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The damage had already been done by the time the GFC hit. QE, the pervasive carry trade, and the freewheeling banks have enabled the scenario to get worse.
In Australia, the major banks hold about $10 of equity capital for every $100 of business loans they make (so they are circa 10 times leveraged) For housing, they can have as little as $1.50 of equity for every $100 of home loans financed (thereby permitting 67 times leverage). I cannot quote for NZ but you should expect the same.
Can you seen an issue here if property values fall and we experience an external shock to the banking system?
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Sacha, in reply to
by linking to that survey, as if it equals a point, rather than giving his point of view
Fact, not opinion. People here can follow sources themselves. We all get things wrong from time to time, no need to get defensive about it.
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Sacha, in reply to
the survay places shoe ownership as an important poverty assessment tool
Decisions like that are professionally statistically validated and compared with similar government hardship surveys around the world (fact, based on having done some work with the people who made that survey).
I reckon they get some things wrong, but that's not one of them (opinion).
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WH,
Great post Russell. Phil Twyford's reaction was spot on as well.
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On the poverty front, I would see the lack of shoes being included in the index as being a way of measuring extreme poverty. Poverty isn't a on/off thing, it has degrees, and I would see all three of those questions (overseas holidays, automatic washing machines, shoes) as being useful clues to where on the poverty continuum people sit.
The problem with this is that with so much of the country’s wealth wrapped up in houses, any social housing initiative is going to potential stymie the whole mechanism by which NZers have lived and saved for financial independence.
That depends on how you manage it. At present unmet housing need in Auckland alone is measured at about 30,000 houses now, and 13,000 houses a year subsequently. Meeting that need should mean house prices just stop going up so bleeding fast, rather than dropping in value. You can deal with the high prices by letting time and inflation reduce the real value of property.
If people are living in the houses they own, any drop in real value won't make a difference to them. If they're not living in them, then it's too bad. Every bit of financial advice over the decades has warned property investors that they're not immune to changes in the market: they made their investments knowing that risk, and if that risk is to a small extent realised and leaves them with a smaller nest egg than they were counting on (though it's still likely to at least be the value they originally invested plus inflation), they'll still be better off than people who had their retirement savings in anything-corp in the 80s, or finance companies in the noughties.
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I’m not quite sure what your point was there steven, but your “fact” is a bit off.
The average salary of policy analysts in June 2013 was $88,912. If we assume 37.5 hours/week, that's 1950 hours over the course of a year (including paid holidays), which is $45.60/hour. Before tax (relevant because shoes are not tax deductible).
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I doubt shoe-less kids in this country refers to high school kids at all. Seems more likely to be about primary schools, which mostly don't have uniforms.
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Joe Wylie, in reply to
It would be easy to make assumptions about people’s economic well being by simply looking at there feet.
Missing or discoloured adult teeth seem to be a reliable indicator of social caste. NZ dentistry is pricey, and WINZ doesn't offer much by way of assistance.
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Jim Cathcart, in reply to
So, off the top of your head, you believe that micro-managing supply "should mean" that you can control price rises keeping everybody happy. You would be popular in a Len Brown regime, but I think that's an unrealistic claim, even if you have the econometric modelling to support you. In fact, it is that mentality that has got us to this point that we're in now. And I will call you on it.
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Ian Dalziel, in reply to
a plaque on their house...
NZ dentistry is pricey, and WINZ doesn’t offer much by way of assistance.
I got the impression they were heading WINZ towards
an 'indentured worker' model...
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I spent my childhood in a rural provincial village. Everyone there prioritised having a pair of gumboots pretty highly, and would also have prioritised having a pair of "good" shoes (for weddings and funerals and dances and trips to Auckland) and a pair or ordinary shoes (possibly jandals if they were feeling poor) for going into town when it was too warm for gumboots. . At school we were in gumboots in the winter and barefoot in the summer, but we did aim to own a pair of shoes that fit - though occasionally poverty prevented that aim.
The survey doesn't make assumptions about people's economic well-being by looking at their feet. It makes assumptions based on what people have, or have done. I have yet to meet anyone who has no shoes out of choice (and if I did, I'd be wanting to know whether they could afford shoes if they wanted to). Even the guy at work who goes barefoot all the time out of choice has a pair of shoes that he keeps in his car because it's illegal to drive in bare feet. Of course you may know someone who is an exception to this, but that's why surveys ask lots of people rather than just one - and also why there are questions later in the survey about what people think are important, which would help identify whether not having an item on the flashcard list was a choice/priority rather than a question of affordability. -
Joe Wylie, in reply to
I got the impression they were heading WINZ towards
an ‘indentured worker’ model…
;- ELast I checked, which was back in the St Helen era, WINZ might help with a no-interest loan for repairs, but you buy your own.
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Lucy Telfar Barnard, in reply to
So, off the top of your head, you believe that micro-managing supply “should mean” that you can control price rises keeping everybody happy. You would be popular in a Len Brown regime, but I think that’s an unrealistic claim, even if you have the econometric modelling to support you. In fact, it is that mentality that has got us to this point that we’re in now. And I will call you on it.
Call me on whatever you like. I wasn’t trying to address the question of controlling price rises, and I’m not interested in micro-managing supply or in “keeping everybody happy”, I’m interested in making sure everyone has somewhere decent to live. At the moment that would require something macro, not micro. The reality is that even if the government were interested in building new houses, which it’s not, we’d be lucky to get anywhere close to building enough to get to the point where we’re treading water with matching supply and demand. However, in the unlikely event that we did manage to catch up, and prices fell as a result, and people lost money because they chose to invest in property, well, they can’t say they weren’t warned that property as an investment has risks like any other investment.
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Jim Cathcart, in reply to
OK, that's fine and I agree with you to some degree, but that goes back to the point that I was trying to express: If you want a paradigm shift and the government to provide social housing, the general population is going to have to wear the consequences. The idea that the government cannot build enough housing for everyone is garbage. Of course they can. What it will mean is that the public deficit will explode, but it can be done. NZ is a sovereign nation with its own currency.
As for property investors being responsible for their own actions, sure, that's a fair point...if property investment wasn't jury rigged by a construct of risk-weighted bank policy, tax policy, and restricted land supply. Investors are in the game because our institutions have geared the system to become what it is. They're getting feel mighty aggrieved if that is taken away. And the implications are huge for an economy where demand and spending is driven to a large degree by asset prices, not by what people actually earn. Disagree with me? Then explain why household debt is among the highest among developed countries.
I very much doubt NZ is ready for self-sacrifice to ensure social housing, including those at the most benevolent end of the political spectrum.
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BenWilson, in reply to
It was the same in Ponsonby. I seldom wore shoes to Primary School, by choice. I had shoes, just didn't wear them.
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BenWilson, in reply to
The reality is that even if the government were interested in building new houses, which it’s not, we’d be lucky to get anywhere close to building enough to get to the point where we’re treading water with matching supply and demand.
Yup. Every time I hear a solution proposed, I think "hmmm, that might affect prices by maybe 1% at best". Our unaffordable housing is a whole economy problem, and it's been allowed to fester for so long that it's bordering on insoluble.
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BenWilson, in reply to
I very much doubt NZ is ready for self-sacrifice to ensure social housing, including those at the most benevolent end of the political spectrum
I agree with this. Not because people are hard hearted here but because they really have no idea of the scale of the problem, or the amount of money actually required to solve it. When posed with the real costs, they would be shocked, because people just don't realize how much of our wealth is actually tied up in property. Essentially, it's almost all of it.
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The idea that the government cannot build enough housing for everyone is garbage. Of course they can. What it will mean is that the public deficit will explode, but it can be done.
Didn’t Labour have their decade-long building programme fully costed as part of their detailed election policy? Can’t be any less affordable than giving ongoing top-skewed personal tax cuts and other things govts choose to invest in.
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