Written By: - Date published: 11:15 am, December 1st, 2008 - 54 comments
Categories: health, housing, national/act government -
Tags:
Good housing is a foundation of a healthy society, and it is something that New Zealand has long lacked. Despite leading the world with our state housing in the 1930s, we have fallen behind. Housing in most other first world countries is much warmer and drier than here.
That has important consequences; a study by the NZ Business Council for Sustainable Development shows our one million under-insulated homes (two-thirds of the housing stock) leads to 50 admissions a day for respiratory illnesses, costing $54 million a year, 180,000 work days lost to sickness a year, and an annual national power bill half a billion dollars more than it needs to be. Poor housing leads to diseases of poverty, like glue-ear; to save on construction costs, we have paid an insidious, often invisible price in quality of life.
So, what’s to be done about it?
Labour made a good, if typically timid, start by insulating State houses and improved insulation standards for new buildings that are now coming into force. The Greens-Labour deal for a billion dollar insulation package would address under-insulation in older, non-State houses but it seems National is intent on scrapping that package for no apparent reason.
The NZBCSD points to the successful use of a mandatory house rating system in Seattle as another option. Home buyers don’t value insulation at present because they are often unaware of the insulation a particular house has or lacks, and they aren’t aware of the costs of under-insulation, both in health and money. A housing rating system informs buyers – increasing prices for better-insulated homes relative to under-insulated ones – and that encourages people to invest in insulation.
I think that’s a good idea but it’s never going to make a difference for the people who face the worse effects of bad housing – poor families renting from private landlords. Out to squeeze what money they can from the country’s worst and cheapest housing, the last thing on these landlords’ minds is investing in insulation from which they stand to see no direct monetary return.
So, a housing rating system is not solution in itself. To build a healthier housing stock, we need more government investment – more State housing, more subsidisation of insulation in private homes – and higher standards for existing as well as new buildings.
National/ACT has talked a big game about more efficient, productive government spending. Well, housing is a perfect area to walk the talk. Every dollar spent on insulation in under-insulated homes (according to a government study in the 1990s) saves two dollars in health costs alone. Add to that, lower power costs, higher productivity, more employment (perfect for a recession) and better education outcomes for healthier kids, and we’re talking great value for the taxpayer’s dollar.
So, will we see a bold series of housing initiatives from the new government? Now, that really would be a brighter future.
Facebook
Twitter
Scoopit!
SP said:
No apparent reason? How about $30 billion of deficits projected, over the next ten years? That sounds like a pretty compelling reason to trim back unaffordable expenditure and ensure that the economy is as strong as possible to pull us through the economic crisis. It’s nice to have big pipe-dreams–six hundred million to MFAT, a billion for insulating private homes (and therefore adding to the values of those privately-owned homes and the private investors), etc etc.
Nice ideas, but just not affordable, and I don’t think should be the biggest priority.
Actually this so called study shows nothing of the sort (in terms of lost sick days etc). It recycles data from other sources then combines it with an opinion survey that it conducts regularly – ie the monthly Shape survey and tries to build a case for policy change. If you don’t know what shape is, it’s a self selecting email survey which asks a number of often highly unbalanced questions (IMO) and allows you to invite a friend to take part.
I don;t know a lot about survey methodology but that to me is highly dubious and I am suspicious of the validity of the results, especially when in one section it states
“These metrics have been assessed using key research
conducted by the University of Otago Medical School, Wellington.
They are indicative only recognising the difficulty in extrapolating to
a bigger community level of predicted benefits. We are supportive
of further studies in this area with a larger population base to
improve the data available for this form of assessment.”
That tells me they don’t even trust their own numbers.
It also seems to extrapolate that ‘x’ people said their house caused them to be sick into ‘y hundred thousand NZers are being made sick by their homes’, yet there is no evidential basis for it, just the opinion of the people being asked. A lot of people believe in astrology but does that make it true?
I was also concerned by the lack of references to where the figures come from in the first place – none are actually sourced via footnotes though there is a list of references at the back. Why not say where the info comes from directly?
The report itself is a big plea for taxpayers to subsidise the upgrading of other people’s homes and mandate the installation of some high cost but low performance systems favoured mostly by those who won’t be paying for them. For instance, it says that in a test home solar heating saved $275 a year. Sounds a lot until you realise that solar systems cost $5k to $10k to install. Not a great return on investment.
Umm, Tim, didn’t Steve outline why the insulation would be a good thing to spend a billion dollars on?
- Every dollar spent saves $2 on healthcare later down the track
- Less days off sick = greater productivity
- Installing the insulation = work for the building sector = people in jobs, paying tax
Did I miss something? I know I’d be a lot happier with a billion dollars being spent on insulation instead of, for example, new roads. Or tax cuts.
Tim. The deficit might be grounds to drop tax cuts for the already wealthy but cutting a program with myraid economic benefits? Weird economics there.
And it’s a billion over 15 years, that’s pocket change in terms of the deficit and total government spending.
If poor housing insulation is really a major problem, then I don’t see why the Government doesn’t just mandate housing insulation standards. Why spend a billion dollars of taxpayers’ money improving private housing stock?
Gee Tim, more regulation? I can really see Rodney going for that one.
Nanny State anyone?
Kevin, I don’t really care what Rodney goes for. I’ve never voted for him and don’t expect I ever will.
Like I said, if dampness and cold houses really are an issue, creating a public health issue, then the government should regulate to ensure that all houses are fit for human purposes. I’d expect that study to be done on a scientific basis with a clear cost benefit study. You can call it what you like, but enforcing housing standards doesn’t seem like nanny state to me (not that I’ve ever used that expression).
I very much doubt that there are many people who can afford to buy a house, who can’t afford to have it properly insulated. I’d much rather regulation being used as the tool to improve housing quality rather than taxpayer subsidy of private investments.
This thread is a good illustration of the difference in approach between the left and right.
If the left wish to ban uninsulated homes due to health effects then surely they should also ban cars from able to exceed 100kph (limiters) and ban cigarettes fullstop.
Do you think individual people could possibly work this out for themselves and make their own minds up whether they would rather spend more on more insulation or spend that same money on something else like mayeb their kids education, or a big vegie patch? After all, there is only so much money. I would rather work it out myself than have Fitzsimmons do it for me. I mean – is she really that much smarter than everyone else?
It is really is a classic case of the different approaches, which of course the public has just decided on.
Tim,
“I very much doubt that there are many people who can afford to buy a house, who can’t afford to have it properly insulated.”
How much do you think it would cost? Do you really think that there are only a few people out there that couldn’t afford to throw that cost on the mortgage at present?
Given that it’s really about priorities, do you think this spending would really be less beneficial than Key’s broadband gimmick?
This spending is in an area that the private sector isn’t doing anything, yet would benefit the economy as a whole, at a time when builders could use the work.
What about the people who rent and who’s landlords are under no obligation to upgrade their properties.But I suppose those renters can “go down the road” after all “it’s a market”
PB, I haven’t seen any studies, but I suspect that if there are public health issues in uninsulated housing, they are more likely to be lower-income housing, and probably rental housing at that. I think it should be a landlord’s responsibility to provide safe, healthy homes. I’ve been to places where there is atrocious rising damp–rental properties that really should just be condemned. I don’t know how people get away with tenanting those properties. I certainly don’t see a need for the taxpayer to subsidise an upgrade.
As for the cost, I don’t know. 3-4 grand maybe. About one percent of the property value in the city, and slightly more in other areas.
Tim, perhaps they get away with it because people are desperate for housing – after all the alternative is worse.
But I suppose those renters can “go down the road’ after all “it’s a market’
Yes, that’s exactly what they should do – it’s exactly what I’ve done with my landlord.
We have a huge problem with dampness/mould/mildew, and taking five minutes of my day to contact the landlord, explain the situation, and point out that it’s his house losing value if he doesn’t do anything about it, was enough to get a DVS system installed.
There is a huge oversupply of rental accomodation in NZ (we can argue the root causes some other time
) and now is the perfect time for tennants to be using their superior bargaining position.
Vanilla
One of the reasons this stuff is controversial is because the benefits are not always as clear cut as some would make out. In a Dunedin study- one of the Chapman ones – they spent $1800 improving insulation and it only saved 350kwh (about $70) of energy and had a very small improvement in room temperatures. I suspect that lack of clarity on benefits is the reason lobbyists try and push the taxpayer to spend the money.
Tim, vto. It’s not about people who own their own homes, and Phil it’s not about people like you in a powerful market position (good income, oversuply of rentals in your market). Our concern should be targeted at families renting on lower incomes, who have to take the cheapest housing and whose lanlords don’t give a crap about things like insulation.Now, you righties are all about the handup not the handout. Surely you can see that insulation, a one-off cost that has longterm benefits to people’s lives is exactly that kind of handup. (maybe you’re not for hand ups either, maybe you’re just not for helping out those at the bottom of the pyrimad).Tim, there are mandatory insulation standards but they don’t apply to buildings in existance before the standards came into force.. I reckon they should be applied to rental properties even if they are pre-1979.
SP, I understand your point and it makes sense. But only to a point. And that is the point – where is that point? My point was that this issue is a good illustration of the difference in approach between the two main factions of NZ politics. One that prefers to make decisions for people and one that prefers to trust in people to make their own decisions.
Rather than forcing my neighbour to insulate their old home I would rather trust in my neighbour to make the right decision for themselves. Who am I to tell my neighbour what to do with their house? In fact, as I type I look at my neighbours mostly old places and think of the reception I would get if I went and knocked on their door and told them they had to what I told them with their house.
It’s just that age old conundrum.
Of course houses would be better if they were warmer. So would people if cigarettes were banned.
And when it comes to where the point of that conundrum sits the people of NZ have just sent a very very clear message to Wgtn.. Ignore at your peril. Or perhaps a better way of describing that message is, in the words of Cullen, “we won you lost eat that”. (hee hee, that one had to come back didn’t it)
“Rather than forcing my neighbour to insulate their old home I would rather trust in my neighbour to make the right decision for themselves. ”
I support low/zero interest loans, offered to everybody. They’ve recently introduced this in California, after seeing much success at the local level. It is a pity that the last Government was reluctant to push this policy, and we saw only limited access to this instrument available, in favour of low income home owners (almost an oxymoron). A universal coverage would not be all that costly, but is likely to be much more successful in terms of both outcomes and popularity.
Of course, these loans should also be offered to landlords (carrot) with a mandatory requirement after a certain period of time (stick). Many landlords will take the offer if given voluntarily, but some will so no commercial advantage and choose not to if given the choice.
“Rather than forcing my neighbour to insulate their old home I would rather trust in my neighbour to make the right decision for themselves”
what concerns me is not so much when they’re not making the decision for themselves, it’s they’re making the choice for their tenants.
We’re going to end up like the Bedouin who live in tents with a Rolls Royce outside. Except we will live in poor housing with gold-plated broadband infrastructure. And it won’t be paid for by oil, but by debt.
Mary on Checkpoint is trying to hold Phil Heatley to account on the new policy of capping state house numbers, quoting his words from September back to him which never mentioned a cap and instead talked about increasing the stock in the medium term. But of course they now mean something else – and he deals with this by just talking over her. This is what happens when election policies were mere bullet points – they can mean something quite different once in power.
How often will we see this tactic?
“How often will we see this tactic?”
As often as we see it needed. Expect it as the default setting from NACT.
“No apparent reason? How about $30 billion of deficits projected, over the next ten years? That sounds like a pretty compelling reason to trim back unaffordable expenditure and ensure that the economy is as strong as possible to pull us through the economic crisis. It’s nice to have big pipe-dreamssix hundred million to MFAT, a billion for insulating private homes (and therefore adding to the values of those privately-owned homes and the private investors), etc etc.”
Unless Key wants to “invest” in “infrastructure” – then it’s all good Tim?
Are you going to come out and say his broadband plan and other expenditure is a crock of proverbial, or are you just playing this along party lines?
What about the people who rent and who’s landlords are under no obligation to upgrade their properties
Bill hits on a very good point. Around 40% of us live in rental accomodation, and this number is growing at around 0.5% pa. And I would hazard a guess that a dominant portion of the very bad houses are in this category.
The big problem from the landlords point of view is that there is absolutely zero incentive to do anything about it. In the current market rental returns are pretty much fixed by location and number of bedrooms. Age and condition of the property perhaps affects the occupancy rate somewhat, rather more than the actual $ per week value. Energy costs are fully paid by the tenant, so any investment by the owner shows zero return.
Until recently tenants have placed absolutely zero value on things like warmth, efficiency or ventilation. Many of them have no idea how to maintain a house, they’ll close all the windows, pull all the curtains, run an unflued gas heater and then wonder why the windows have puddles streaming onto the floor. In this kind of scenario the landlord has very little motivation to be doing much to improve the property. All up it is not a pretty picture and there are whole swathes of the rental sector that are very sick indeed.
Having said all that, the recent “Toxic Homes” TV series seems to have made a real impact. All of a sudden new tenants are asking questions about the health of the home, if it is insulated or not, and what the power bills are. Some are checking to see if the property was used as a P-lab and are looking more closely in bathrooms and toilets for signs of dampness and black mould. Overall my impression is that this program has reached a lot of people and opened their eyes to this very major issue.
Right now I’m looking at a quote of around $9000 to fully insulate three 100m2 houses using Greenstuff (R3.3) in the ceilings, Airfoam (R2.8) in the walls and either recycled polystyrene (R2.8) or a foil (R2.5) under the floors. All three will get a 6kw heat pump and some form of ventilation system. (One good trick is to vent the warm air into the bathroom, this pushes any moist air quickly out of the house and definitely eliminates the usual tendency for this room to grow mould.)
The problem is that all up this represents about a $20k plus investment, that on paper, the only way I can justify is that it will likely improve the occupancy rate and marginally improve the rental. I don’t even want to calculate the ROI. Any sane man would tell me that I’m just soft in the head.
I have to conclude that the only way forward for the rental sector is a combination of education (like Toxic Homes), rating systems and a gradual introduction over time of improved mandatory standards.
As landlord renting to the bottom end of the market I cannot see the point of spending big $$ on insulating a dunger only to up the rent in order to pay for it.
Forget about the grant – they estimate 22K to do a thorough job and how do you properly insulate a 1914 lath & plaster villa without relining the whole thing
Someone has to offer cheap housing and that’s certainly not the govt.
But seriously why don’t you landlords here stop trying to get rich off the housing needs of others? Why do you think state houses originated? To get slumlords off the backs of the workers. Why is Heatley putting a cap on state houses? Because the real National policy is to sell the prime sites to their developer mates and infill the gullies with matchboxes.
A capital gains tax would sort you lot out, drive down the cost of housing and then no interest loans would give home owners some incentive to put sweat equity into their homes including basic retro insulation.
It doesnt take much to reline a home if you live in a real community and have plenty of voluntary help.
In fact housing needs can be met by collective labour. I have seen slum developments in Sao Paulo where the community gets a land grant from the local body and builds everything from roads, drainage up. The thing is that the land is community owned an nobody is trying to get rich from rack renting their brothers and sisters.
rave,
Up until about `15 years ago, the traditional rental return was around 10%, ie if the house was worth $100k, then the rent was about $200 pw or $10k pa. This formula had been pretty much the norm for many, many decades.
In recent times as values rose dramatically, rents did not and returns have dropped to around 3-6%. Very few landlords see anything like the old 10% return. In fact the average tenant is paying about 40% of the cash to live in a house, than if they had purchased that home themselves with a 20% deposit mortgage.
Rentals have never been cheaper. I think your ‘rack renting’ rhetoric can be safely put to bed.
In fact many, if not most tenants are actually not yet in a position to own a home. Either they do not have the equity, or they are not at a stage of life when they either need or should own a home. Their lives are generally still rather transient. The median tenancy only lasts about 12 months, and then they move on, usually for very good reasons like new jobs, new relationships, or suprisingly often, they have purchased their own home.
What landlords do is leverage their own equity to enable people who have none to access a home to live in. It is not money for jam. There is a considerable amount of work in it if you do it right, and there are not inconsiderable risks. The number of bastard tenants out there considerably outnumbers the bastard landlords.
The notion of collective housing is a good one. I’m all for it, but very very kiwis have the balls to give it a go. I’m also quite active with Habitat for Humanity, another very interesting organisation with another very successful communal model.
RedLogic
I used to work in Tenants Protection so I know a bit about landlords.
I have also had to look after family property that was rented out though I was personally opposed to acting as a landlord.
Landords rent out to cover their mortgage costs and then make a capital gain when they sell because they can and that’s the way many people have increased their assets in NZ. Once you jump on that gravy train its easy to see tenants as bastards.
I see private tenants as pretty powerless people who have little control over their lives and who do not respect property because it means nothing to them. Where local body or state housing exists in large blocks the situation is different.
It is unfortunate that NZ did not stick with land taxes that punished land speculation. Of course it didnt because of the pork barrel driven politics of land farming. Once this system was established then land values soon got out of reach of the working class. That’s why state housing is absolutely necessary and the more of it the better.
I was talking about how things can be different if land is nationalised or owned collectively so the incentive to gain from the ‘unearned increment’ does not exist. Collective housing on privately owned land is probably a nightmare. The example I cited in Sao Paulo allows families to sell the houses back to the collective for the value of their own sweat equity. This is fair and it develops values where the individual and collective coexists productively. The individual works for him or herself and for the collective and everybody wins.
Even a capital gains tax wouldn’t change things. You may get the smaller guys stop buying housing but for most people its very long term. Most people don’t expect to get rich from the actual rent coming in. That rent typically doesn’t even cover mortgage. Most people will buy a rental for that long-term capital gains and if they had to pay 33% they would still likely get a good profit. It may slow house prices rising but I don’t believe it’d do that much damage.
If you really wanted to hurt landlords and people investing in housing your best way. Then remove the ability to do this:
Negative gearing. The IRD also allows losses in investment properties to be claimed as deductions against income earned from an employer. This is termed “negative gearing”, the effect of which can turn what would normally be a pittance of a tax return into a substantial refund. Seek the advice of your accountant when determining what can and can’t be geared against your income.
via stuff.co.nz
—–
Personally I think National was premature to get rid of the house efficiency policy and I believe while that may have been ideologically opposed to it that it was something people liked.
In regards to rental housing. If you really want to push those to be properly insulted etc etc the smartest thing would be make it attractive via tax returns. So if you insulate your rental and/or make it more energy efficient you can get substantial tax returns. Its the smartest way to do it and will see far more results than grants or anything else.
nobody seems to have got that the title of this is a reference to Engel’s work of the same name. boo?
Capital gain taxes usually do not have the desired effect. In fact land speculation and a monstrous property bubble has just happened over the last decade in every developed nation in the world, despite a huge range of various tax measures these nations have in place.
Unrealised CGT’s are a nightmare. NZ I think had one in place sometime during the Muldoon era, but it only lasted a few years… the effects were so pernicous on all sorts of commercial operations. They positively invite avoidance and the administration gets hugely complex. Very few countries have ever persisted with this form of CGT for long.
Realised CGT’s (ie tax paid on sale) are quite common, but the usual long-run effect of these is the exact opposite of what you intend… the land owners NEVER sell, rather the property is held onto for generation after generation. Over time more and more land is held by fewer and fewer people.
I think the best method for preventing land speculation would be to eliminate freehold title and make all land leasehold. Rates would become land rents. Most importantly the banks would not be allowed to securitise the land portion of a property’s value, and that simple condition alone would almost completely eliminate the speculative mechanism drives land price bubbles.
Incidentally property investors are NOT the ones who drive prices up. Most investors look to buy property that is undervalued for some reason, and seek to add some form of value to it. Over the last 3-4 years, until the bubble burst late last year, most investors had their cheque-books firmly shut, yet the bubble merrily continued inflating all the same.
We know there’s horrible landlords but there are also a number of tenants who are also horrible.
My partner has two rentals. One was damaged by PI users. The other was abused by people that lack obvious common sense. These were people earning good incomes yet they still left windows closed, the curtains constantly closed and it caused damage. Another lot didn’t pay their rent for a month but my partner who is far too generous allowed them to get away with it. He is a good landlord who is always working to help the tenants in his property. He’s been generous in setting the bond, he has been generous in the damage caused by his tenants and he has been easy-going when people have not paid their rents.
Most tenants are excellent, likewise the majority of landlords too are excellent. Its the few that tend to be assholes and they let both landlords and tenants down. But please do not make some poor/rich analogy that excuses tenancy behaviour.
GC,
All that the removal of negative gearing would do is drive up rents, and in the long run achieve little else.
If the rental company is loosing money (and most are at present), then if the loss is ‘ring-fenced’ into that company then it stays there. In the short term this forces the owner to put in shareholders funds (already tax paid from employment income) to cover the loss, OR to raise rents to cover the short fall.
If the owner props up the company with his own funds, then when the business eventually turns a profit (and eventually after 10-20 years most do) all the losses are then unwound. All that has happened in effect is that you have created a monstrous cash flow problem without changing anything in the long run.
Or more likely the vast majority of owners will not be able to cover the losses. Their uniform response will be to raise rents…all at once all across the country, by about 50-100%. Sure some landlords will not, but the tenants in their houses will stay put, (and you can only rent one house once)… the rest either pay or sleep in the streets.
Then you can get to moan about rack renting.
And the idea that landlords might be en mass forced to dump huge numbers of properties onto an already depressed market is a nightmare scenario that the other 60% of NZ’ers who are already worried about the declining value of the homes might also not appreciate.
He was like one of Goons or sumfink, yeah? You should have called it ‘The International Christmas Pudding!’ everyone knows that one. Or perhaps you could of gone with one of the Marx brothers flicks, “A day at the races’ or ‘Duck soup’. But they wouldn’t have fitted the post I suppose. Oh well, serves you right for having a pack of heathens for readers I reckon.
GC,
You make some excellent points.
So if you insulate your rental and/or make it more energy efficient you can get substantial tax returns.
At present insulating a house is counted as a capital improvement, so the cost is not even tax deductable. If you borrow to pay for it the interest portion of the loan is deductable, but the principle is not.
Most tenants are excellent, likewise the majority of landlords too are excellent. Its the few that tend to be assholes and they let both landlords and tenants down. But please do not make some poor/rich analogy that excuses tenancy behaviour.
Absolutely agree. Most in fact have looked after their homes better than we look after our own… it’s almost embarrassing. So far we’ve been very fortunate, but you can never quite put aside that niggling worry that one day, one of them is going to let you down big time, and when it happens there is not very you can do about effective redress. Frankly I would regard the Tenancy Tribunal as a forlorn last hope; I would do everything both proactive and possible, before I went down that path.
I don’t advocate doing so RedLogix just that if you want less people investing in property that is the way to do it. I think the current way works rather well. I don’t actually believe making money off housing hurts people. I do believe current prices are too high and the market knows that thus why we’re likely to see a long period where house prices either fall or stabilise without any rise in house prices. Most tenants do rather well in that even for those on lower incomes they can potentially rent in areas they could never afford to buy a house.
There is an issue in that home ownership is falling. But I don’t believe you hurt those already invested in property. Its not just that house prices outweigh incomes or that we live in a more user-pays systems. The attitude in New Zealand too has changed and you really do need to make sacrifices to buy property. Most just aren’t willing to do so.
And another point. Most people investing in property are pretty normal people and many of them are hurting just as much as other people. Many aren’t actually on super high incomes. Many investors in property make sacrifices to own second homes etc. Yes they can offshoot losses through tax returns on personal income. Yes eventually it should pay in that over the long-term they will make money. But many are really hurting now.