Hard News by Russell Brown

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Hard News: Housing, hope and ideology

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  • artemisia,

    It is cheap to lodge an application with the Tenancy Tribunal, and resolution can be very speedy via the mediation option. The Residential Tenancies Act may not be 100% comprehensive but does have a lot of detail and generally seems to be working pretty well for all parties. (Most applications to the TT are from landlords, BTW).

    Good tenants are highly valued by landlords of course, So are unlikely to be turfed out for no reason at all.

    Not sure about the law being mainly for 'accidental landlords'. Who in any case are required to have a local agent if out of the country for more than a short time. Why do you think that?

    New Zealand • Since Nov 2014 • 8 posts Report Reply

  • Kumara Republic,

    Most agree the CEO of Barfoot & Thompson has been living in a fallout shelter. And to Artemisia: if you don't mind me asking, how many properties do you own?

    Herald readers said Thompson was out of touch, had ignored high student loans, the hardship of saving $100,000 on a low wage, being out-paced by house price rises, complained about foreign buyers pushing up prices and too many landlords.

    Eaqub said there was no quick fix to the over-valued housing market.

    "Whether house prices spiral up or down, the impacts of the necessary policy solutions will not be seen immediately.

    "No one single change will be enough," he said.

    Game-changer?
    Shamubeel Eaqub says housing will become more affordable when there is:
    Rental policy reform to make being a tenant a viable alternative to ownership.
    • Easing of planning and other rules which restrain land and house supply.
    • Better funding options to efficiently supply infrastructure for new land.

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

  • Kyle Matthews,

    OK, but demand is a function of how much money you have for something you want, not just of how many people want or need those things. So saying “supply does not meet demand” absolutely does not mean that there are not enough of the things to go around. It means people haven’t got enough money to pay for the things that there are to go around. Which means a great deal of the supply is completely idle.

    Here's the Housing NZ waiting list stats from earlier this year. That's thousands of people on the waiting list. See category C and D - those are people whose needs were judged not urgent in 2012, at which point we stopped even worrying about non-urgent people and stopped putting new people on those lists. Some of them are still on the list over two years later, having not moved from their inappropriate but not urgent current housing situation. Who knows how long they were on the list before June 2012.

    It's the same as our hospital waiting lists - we just don't put people on the lists any more so it looks better without actually being better.

    I find it bizarre that people are saying that there's no shortage of suitable housing problem, despite the overwhelming evidence that this is entirely the case. Even the National government admits that our housing stock is thousands of buildings short of where it should be.

    OK, so a little bit of data to bolster my point. From the 2013 Census, there are 141,366 unoccupied dwellings. That’s not unoccupied because the residents were away at the time, or unoccupied because under construction, both of which are separate categories. They are unoccupied because nobody lives there most of the time. This covers holiday homes.

    The fact that there are holiday homes that are unoccupied 90% of the time doesn't really help us at all though. They probably own it because they intend to use it. The only reason they would sell it would be if they couldn't afford it any more or didn't want it any more. But the buyer isn't likely to be the person that is currently packed two or three families to a rental in Auckland. Moving into a beach front property in Langs Beach, Kapiti Coast, or the Coromandel isn't likely to be useful for a family that needs to access schools and work daily, find a job, access public transport etc. To misquote Star Wars, that's not the housing stock you're looking for.

    I'm not sure it's as complicated system to have an impact upon as you think Ben. If there's 20,000 rental properties available in any one month, and 50,000 families/groups of people looking for rental accommodation, then demand is 2.5 times supply.

    If you can add 10,000 houses to that equation, all of a sudden demand is 1.66 times supply. But given that you're only actually looking at some regions, and withing those regions you're really only looking at the bottom end of the market, your situation is probably much better. Maybe there's 10,000 houses turning over/month and 30,000 families. Add 10,000 houses and your ratio has halved to 1.5.

    Which isn't easy to say that building 10,000 houses is easy, but we're not looking for the government to change the market for $2 million residentials in Epsom. We're looking for them to affect the situation of overcrowding and families sleeping in garages and sleepouts who need to get in at the bottom end of the market.

    The way for the government to do that isn't to suck all the private demand to build new houses out of the market by selling its housing stock to community organisations or businesses. We need private money and public money to be going into building new housing, not private money to be tied up buying existing housing stock that is already available. That's stupid.

    Since Nov 2006 • 6243 posts Report Reply

  • BenWilson, in reply to Kyle Matthews,

    If there’s 20,000 rental properties available in any one month, and 50,000 families/groups of people looking for rental accommodation, then demand is 2.5 times supply.

    You need to say the price you're talking about to make that comparison. Supply and demand are both functions of price. You are also equating the rentals in that formula, like they're a widget you can buy off a shelf, each the same as the next one. But property is inherently not like that, because their location is fixed, and the willingness of people to move into them is a function of their preferred location too. Basically, you can't talk about them in that way at all. It's not a helpful analysis. It quite literally does not mean that the rentals don't exist, that there isn't enough housing stock anywhere. It means there's not enough at the right prices in the right places.

    Trying to sum that all up with a single number isn't going to work. A person does not have a single number that they are prepared to pay for a single property, as the totality of their demand. They have a desire to take a particular property that is a function of the price (usually monotonically decreasing), and they have another one for every other property they could buy, and it could be a very different curve. And every person has a different collection of these curves.

    I know what I'm saying is hard to understand, I'm struggling myself. It's basically that the lack of housing is not simply a function of the amount of housing. It goes to the way that the housing that exists is distributed too. It's quite possible for people to be homeless when there are plenty of houses empty.

    We’re looking for them to affect the situation of overcrowding and families sleeping in garages and sleepouts who need to get in at the bottom end of the market.

    For sure, and I think state housing is a good way to help with that. So is giving the poorer families more money so that they could afford to move into houses that are actually available. There also might be a lot more incentive to rent places out if a lot more people have a lot more money to pay for them. What I don't think is a good idea is building state housing in the hope that it will drive prices down. It won't work.

    We need private money and public money to be going into building new housing, not private money to be tied up buying existing housing stock that is already available.

    Yes, new houses should continue to be built. But that's not going to alleviate poverty. That's what I'm saying. Only a policy of actually housing those in need will house those in need. Hoping that increasing supply will drive prices below demand (without even understanding what those ideas mean) will not help at all.

    Auckland • Since Nov 2006 • 10657 posts Report Reply

  • Kyle Matthews,

    You need to say the price you’re talking about to make that comparison. Supply and demand are both functions of price.

    No I don't. I'm saying there's 3 times as many people needing to buy or rent those properties, than there are properties available for rent. That will push the price up, as taught to me in 3rd form economics. If the number of houses available suddenly jumps so that for every house available only 1.5 people needing to buy or rent it, there will be much less pressure on the price. People will be able to get those properties cheaper.

    Yes it's a function of price, but if supply increases and demand remains the same, price falls, so relatively the people buying/renting are better off.

    I know what I’m saying is hard to understand, I’m struggling myself. It’s basically that the lack of housing is not simply a function of the amount of housing. It goes to the way that the housing that exists is distributed too.

    I'm not having any problem understanding it. Indeed it's what I said. There are plenty of areas where we don't need more houses, the work needs to focus on the places and parts of the market that demand seriously outstrips supply.

    So is giving the poorer families more money so that they could afford to move into houses that are actually available.

    As Russell pointed out, throwing more money into the fire isn't going to help. If there's 30,000 families or individuals at the bottom of the housing market who are seriously underhoused or living in seriously unsuitable housing, giving them each $100 extra/week only helps the overall situation if there's 30,000 suitable properties for them to move into. We know that there aren't:

    By best estimates the city is about 10,000 houses shy of what it needs and it's only likely to worsen. According to the Salvation Army, under current trends over the next 20 years Auckland will be short of 90,000 houses - more houses than were destroyed in the Christchurch earthquake.

    So while that might help some individual families, it's just going to move underprivileged families around the bottom end. Some will end up better off, but they'll likely take the place of other people who will slip down into something worse. And the major benefactor will be the people owning those rental properties because the people renting them suddenly have a bunch more money and they can increase rents and still fill their properties.

    But that’s not going to alleviate poverty.

    Poverty is definitely about more than your income. It's about your income relative to your expenses, and it's definitely about your housing, education, ethnicity etc. People living in substandard housing aren't just doing so because they don't have enough income. Substandard housing creates its own costs - financial, health etc.

    Since Nov 2006 • 6243 posts Report Reply

  • Ian Dalziel,

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    Christchurch • Since Dec 2006 • 7950 posts Report Reply

  • BenWilson,

    No I don’t. I’m saying there’s 3 times as many people needing to buy or rent those properties, than there are properties available for rent.

    It's not really true, though, or should I say it's not very precise. You mean there are 3 times more people inadequately housed than there is housing currently offered for rental. I don't dispute that. But you don't seem to get that the pool of demand for housing is quite literally everyone, not just unhoused people, and that housing offered for rental is not the only housing that could be offered for rental, it's just the only housing that the owners want to rent out at the current likely prices. If rentals are much higher, then more houses and rooms will quite likely be made available, as the income from rentals looks more attractive. If you can only charge someone $100 a month for your house you might consider it not worth the trouble to even have them in there. If they have a lot more money, then rentals can be higher. Also, they can probably afford to commute further, so property further from their place of work becomes viable.

    Yes it’s a function of price, but if supply increases and demand remains the same, price falls, so relatively the people buying/renting are better off.

    There are two main points to make there:
    1. Demand is a function of price. If price falls, you're talking about a different demand point along the curve. It will usually be higher, the lower price gets. So if price falls, demand will probably not remain the same.
    2. Quibble 1 falls into insignificance in light of the point that the supply of houses here is 1.5 million, and the demand is the entire population of people who could viably buy a house here, including people not even in the country. Can you quantify at all what the effect of adding x houses to the housing supply will do to the price? Beyond identifying that there are some forces at work, can you put any kind of figure on how hard those forces push? After all, I can exert a force with my hand on a 10,000kg truck coming at me at 100km/h. It's almost certainly true that I'll slow it down. But will it be even noticeable, apart from the bang?

    So while that might help some individual families, it’s just going to move underprivileged families around the bottom end.

    That entirely depends on how much money we are talking about, and who it is given to. If it's amounts anywhere near the order of the cost of building tens of thousands of houses, it would go a heck of a long way to rentals. It could be extremely stimulatory to private house building to the extent that thousands of houses get built privately anyway, not to mention that places currently unoccupied might become viable to rent out, or the commute from them might not be financially crippling.

    Which, again, should not be taken to mean that I don't think we should build houses. I'm just disputing that we'll get prices under control that way. Or even, for that matter, have a measurable impact on them. And without directly subsidizing people into houses (by, perhaps, offering them at a considerable discount to market rates), building them might not help the poorest people at all.

    People living in substandard housing aren’t just doing so because they don’t have enough income.

    No, but it's the single most important factor, by a long way.

    Auckland • Since Nov 2006 • 10657 posts Report Reply

  • Kyle Matthews,

    It’s not really true, though, or should I say it’s not very precise. You mean there are 3 times more people inadequately housed than there is housing currently offered for rental. I don’t dispute that. But you don’t seem to get that the pool of demand for housing is quite literally everyone, not just unhoused people, and that housing offered for rental is not the only housing that could be offered for rental, it’s just the only housing that the owners want to rent out at the current likely prices. If rentals are much higher, then more houses and rooms will quite likely be made available, as the income from rentals looks more attractive. If you can only charge someone $100 a month for your house you might consider it not worth the trouble to even have them in there. If they have a lot more money, then rentals can be higher. Also, they can probably afford to commute further, so property further from their place of work becomes viable.

    As Russell pointed out, throwing more money at landlords is not a good choice. Secondly, we all know that we are short of housing, quite a lot at a entry level price for buying and renting in certain areas. Everyone having $50 extra a week won't change that data.

    1. Demand is a function of price. If price falls, you’re talking about a different demand point along the curve. It will usually be higher, the lower price gets. So if price falls, demand will probably not remain the same.

    That doesn't change the fact that increasing supply leads to price falling.

    2. Quibble 1 falls into insignificance in light of the point that the supply of houses here is 1.5 million, and the demand is the entire population of people who could viably buy a house here, including people not even in the country

    I don't believe that's correct. If we're talking about the government building state houses - basic solid houses in unspectacular areas. Given that they won't be sold, the demand for them is only people who need housing. They'll clean out a lot of the demand for that lower end of the market - the entry level - and help keep prices lower than they would be otherwise.

    The housing price truck that you're trying to stop includes all the mid and high level houses - $800K, $1.5 million, $3 million. Which the government won't try and influence through state housing so aren't really relevant.

    If the government doesn't get some investment and building in the game, they're going to be subsidising housing that is getting increasingly expensive. That means that their subsidy is going to need to continue to rise. It's in the government's interests to keep rental prices at the bottom end of the market low, as that's the part of the market that they're paying a significant amount of.

    Since Nov 2006 • 6243 posts Report Reply

  • BenWilson, in reply to Kyle Matthews,

    That doesn’t change the fact that increasing supply leads to price falling.

    That's not a fact, it's a theory with a whole lot of caveats and disclaimers about the conditions under which it holds. Even the claim you made has the wildly unrealistic caveat of "holding demand constant". It's also a theory that makes no attempt to quantify how much pressure that it puts on prices. In fact, the concept of the quantity of this pressure doesn't even seem to have a unit at all, although please correct me if I'm wrong about that. It's not even possible to quantify it, from what I can tell.

    If we’re talking about the government building state houses – basic solid houses in unspectacular areas. Given that they won’t be sold, the demand for them is only people who need housing

    Everyone needs housing.

    They’ll clean out a lot of the demand for that lower end of the market – the entry level – and help keep prices lower than they would be otherwise.

    How much demand is that? How many people rent a house a the lower end of the market? How many people are you talking about? How much will it keep prices lower by? How much are they going up by anyway? How much will they cost? How many are being built anyway? How will it affect the quantity of the ones that are being built? How many people will the population be by the time they're finished being built? How much effect does building of new houses actually have on population?

    The housing price truck that you’re trying to stop includes all the mid and high level houses – $800K, $1.5 million, $3 million. Which the government won’t try and influence through state housing so aren’t really relevant.

    I'm lost. You want to talk only about the effect of building state housing on the price of the 750,000 houses that are valued below the median? All right, then, what effect do you think adding 10,000 houses to that stock would have? I'm not asking whether there's a vague downwards pressure here, I'm asking whether you sincerely think that could do a damned thing to drive down the prices of property that is rising by 5% per annum already anyway? In particularly, I'm not asking about a hypothetical situation in which a number of economic factors get magically held in balance. I'm talking about the real property and rental market that real people have to really rent a property tin.

    Auckland • Since Nov 2006 • 10657 posts Report Reply

  • Kyle Matthews,

    Tonight I was directed to an interesting publication by Auckland City Mission describing people's experiences and difficulties living in poverty.

    Since Nov 2006 • 6243 posts Report Reply

  • Kyle Matthews,

    That’s not a fact, it’s a theory with a whole lot of caveats and disclaimers about the conditions under which it holds.

    It's a very well held theory with lots of real world evidence. It's as fact as you can get in large complex macroeconomic systems. It's not straight maths that you can predict, but demand for housing is moderately predictable at the lower end. It tends not to be the thing that people on lower incomes skip paying - they'll skip paying food and electricity, health care costs etc first, as the above shows. At the lower end of the private market, people won't tend to downgrade into damp, cold houses if they can afford something better, just because it's cheaper.

    I’m lost. You want to talk only about the effect of building state housing on the price of the 750,000 houses that are valued below the median?

    No, I said lower end of the market. State housing competes with the bottom 10-20% of income levels - single income minimum wage earners, underemployed people, beneficiaries. It doesn't compete with the median income which isn't the bottom end of the market.

    But anyway clearly no agreement here.

    Since Nov 2006 • 6243 posts Report Reply

  • Kyle Matthews,

    How much demand is that? How many people rent a house a the lower end of the market? How many people are you talking about? How much will it keep prices lower by? How much are they going up by anyway? How much will they cost? How many are being built anyway? How will it affect the quantity of the ones that are being built? How many people will the population be by the time they’re finished being built? How much effect does building of new houses actually have on population?

    I’ll get my research team right on that.

    Since Nov 2006 • 6243 posts Report Reply

  • BenWilson, in reply to Kyle Matthews,

    It’s a very well held theory with lots of real world evidence.

    And a whole lot of counterexamples. It's so useless for any practical purpose that it's only used in theoretical arguments.

    but demand for housing is moderately predictable at the lower end.

    Then predict away.

    State housing competes with the bottom 10-20% of income levels

    Because only poor people ever buy cheap houses? It's like landlords never even existed.

    I’ll get my research team right on that.

    So actually it's rather a complicated thing then? But surely there's "lots of real world evidence". Surely making predictions about how much prices will be affected is child's play? Tell me, even in the broadest sweeping strokes, how you would go about putting a number on it?

    Auckland • Since Nov 2006 • 10657 posts Report Reply

  • Suzannah Paul,

    As a community worker of may years I offer just this, believe nothing of what your hear, and half of what you see! Via our news reporting system we see only what representations the media want the General Public to see. In truth, the gaps in socio-economic boundaries are far wider and impacting than we are ever told. One question that needs answering is: what is happening to all the $$$ being gradually, (and not so gradually) from the public sector? The public fund for supporting Community Groups who use volunteers to assist those who are in need and at risk is, and has been a sinking lid policy for many years. It is about to get much worse! Volunteers form a huge part of a work force that is not actually taken into account as far as income saved is concerned. At one time, some years ago, the amount of man hours if calculated as paid time, for one sector was $10,000,000.00 per year. That figure was not definite, as many hours are not recorded in a manner for such a calculation. Government needs to recognise that Volunteers are an very important part of the community bindings, and advocate for more use of volunteers, as they make friends, network, and learn work skills. New Zealanders with English as a second language also make a difference here.
    So, back to my question: where is all the money being withdrawn from services going? We are all spending more under the user pays system, costs for services, power, telephone, etc are increasing, as is food, clothing, and transport, so it isnt going there. Importers, traders, businesses that manufacture goods to sell, and export, all have to pay to do this, and much of the cost is in duty, customs etc that goes into the government revenue coffers. Salaries and wages are not keeping up with increasing inflation, Beneficiaries, (those awful people who bludge!) are not receiving enough to keep body and soul together, never mind support a family, particularly when there are children or others who have serious health issues.

    If anyone chose to look back over the last few years, and research how much we have lost in $$$$ from the services, it would be realised that much of that money would have made a difference to the housing situation in this country. There have been over the last 20/30 years several practical building methods that cut the time, and cost of constructing a house for example. Modulok/kitset style is one. Habitat for Humanity, I understand, uses group work, (like barn raising?). Some of these ideas are worth implementing today when the need for fast, cost effective, sound construction is the requirement. Sweat Equity, where the future home owners put in time and energy, is another way of building equity.
    Which ever way we look at it, unless the current system is restructured, New Zealand will end up with overwhelming poverty, illness and crime.

    Auckland • Since Dec 2014 • 1 posts Report Reply

  • Kumara Republic, in reply to ,

    Newshub, nice to see some healthy anger. “All those wankers you see in the paper that are 32 years old and ‘I bought my first house at 22 and now I own 12 houses’ have just been lucky enough to be in this 10-year period where [house prices have soared] and they just keep re-leveraging. Well, those guys will be fucked, which is good…

    I agree, owning more than one home is greedy. It’s okay to be angry about that sort of thing.

    Mark Todd is rightly our local version of Nick Hanauer, who's also posted on Newsroom:

    https://www.newsroom.co.nz/a-stake-through-the-heart-of-neoliberalism

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

  • linger,

    It is the same thing, if you consider establishing a working public healthcare system as infrastructure parallel to (and – in the sense that NOT doing it incurs even more expense – with a stronger case than) building your bridge.
    In the healthcare system, paying a wage sufficient to retain staff is part of the expenditure necessary for maintaining the level of service the public relies on.
    Do you really advocate building your bridge and then not budgetting anything for maintenance, so that it falls apart after people have started using it?
    The borrowing vs. not borrowing distinction is specious because it's entirely determined by what and who the government has decided not to tax.

    Tokyo • Since Apr 2007 • 1942 posts Report Reply

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