The real cause of New Zealand’s failing housing system

Written By: - Date published: 3:16 pm, February 23rd, 2020 - 139 comments
Categories: housing, labour, Social issues, Steven Joyce, uncategorized - Tags:

Remember the 1960s and 1970s?  For those of us around at that time it was a time of pretty well full employment and a time when homelessness was rare and easily fixed.

My own personal experience is that my dad, who was a boilermaker and my mum who had to cope with five of us, but we had a modest but reasonable home to live in, plenty to eat.  I grew up in a real working class area, where families of all socio-economic statuses could set up a home for their kids.  Our education did not suffer from the effects of overcrowding or temporary residences.  And the cost of putting a roof over everyone’s head was not a major draw on incomes that increased every year.

Fast forward to today.  We now have a crisis, one that has been brewing for decades.  In the past decade we have seen the number of homeless people begging on our streets explode.  And we have had the emergence of families whose parents have jobs sleeping in cars with their kids because they cannot afford to buy or rent.

This recent article by Simon Wilson in the Herald dug into the reasons.  It is behind the paywall which is unfortunate because it needs to be read as widely as possible.

The answer to what caused the housing crisis is contained in this graph:

See what happened?  The state used to provide significant support to first home buyers and young families and used to pour capital into the construction of lower value housing. 

My family was one of those helped by a 3% loan and capitalisation of Child Support.  It had a profound beneficial effect on my life and that of my sisters.

It used to be part of the political consensus.  The Nash Labour Government instituted the scheme, the Holyoake National Government kept it going and the Kirk Labour Government put it on steroids.  Even the Muldoon National Government kept it going.

Please remember there is a lag of a couple of years between funding and expenditure given the delay in obtaining titles and construction.  

Under Rogernomics the scheme was cut to the bone.  There was no alternative they said.  Then Ruthenasia killed it off.

There was a small increase under the Clark Labour Government, mainly I presume through the shared equity scheme.  But then National cut even that provision.

You can see by the way the trends in the lower quartile construction lags the expenditure by a couple of years how profound the relationship between the two is.

It is clear that the market of itself will deliver us more of the same.  Which is why Kiwibuild and also the Government’s construction of more social housing is so important.  The former is going more slowly than we would like, the latter is going really well.

So are there any other reckons we should add to this most important of subjects?

How about former Minister of everything Steven Joyce whose fiscal analysis skills led him to believe there was an $11.5 billion hole in Labour’s draft budget figures, one that has not materalised.

He has the cheek to ask us not to get partisan on it.  If “partisan” means “thinking anything but a pure market solution to the problem” then he may be right otherwise he is being facetious.

He asks us to look at policy changes over the past decade when it is clear we have to look at the past 40 years.

He says that the problem was not enough houses being built from 2000 to 2010.  Reality would suggest he is out by a decade in his apportionment of blame.

He basically blames “red tape” and Auckland Council for trying to have a compact urban form for the problems.  He then claims that passing of the Unitary Plan in 2016 has led to a surge in construction occurring.  The figures would not bear that out.

He claims that the Global Financial Crisis contributed because it dried up the supply of available money.  It is good to see that he no longer blames Labour for the GFC inspired “decade of deficits”. 

His third proposition is weird.  He says:

The third, and arguably biggest lesson from the last decade is the now obvious role low interest rates play in driving high house prices, and indeed all asset prices. Every time interest rates have got ridiculously low, house prices have shot through the roof as people bid up prices to the limits of the mortgage they can now afford. This price inflation seems fine if you already own a house, but it perpetuates the wealth gap between those that own houses and those that don’t.

This ignores the fact that interest rates are currently at historically low levels yet through a number of Government initiatives, some started by National, house inflation is lower than wage inflation.

His conclusion suggests he may occupy an alternative reality to the rest of us.  He says:

There are lessons out of the rental housing and social housing markets. It is crazy to persist with a single monopoly state housing provider when it has never in its history managed to successfully meet the demand for social housing. It’s also not sensible to let one person have the same state house for life irrespective of changes in their family and personal circumstances. The rapidly growing social housing waiting lists compared to two years ago provide the evidence there.

Can I ask Steven to check out what happened in the 1960s, the 1970s and the early 1980s?  He is my age.  I presume he was aware of what was happening around him.

This is an important debate.  The future of hundreds of thousands of kiwis depend on getting it right.  I just hope that the debate occurs with an understanding of what has happened in the past and what has worked.  And that it is motivated by achieving what is best for our communities, not what will drive the biggest profits for land developers and land owners.

 

139 comments on “The real cause of New Zealand’s failing housing system ”

  1. RedLogix 1

    Good post Mickey. I'd tick pretty much all the same boxes; with perhaps two more I would add.

    One is the legislation introduced by National in the early 90's that prevented Local Councils from 'cross-subsidising' their commercial activities. It looked an innocuous thing at the time, but I recall immediately understanding what it was about.

    If you look at closely at the history many the older 'established' suburbs they were essentially developed as council projects, funded on the back of the future rates income they generated. Council staff typically planned and supervised contracts for much of the ground work, but critically retained financial control. They could borrow at low rates and extend the terms over decades.

    What National did was treat this as a 'cross-subsidisation' and instantly put all Councils out of the development game, handing it entirely over to their private developer mates. Now developing is a risky game and they have huge costs to manage, but crucially they have to load all of these costs and risks onto the first buyer of a section. This dramatically pushed up the price of developed sections. It's now common for the section to cost more than the house, a situation our grandparents would have thought ludicrous.

    The one thing that would really pull home prices back into line with incomes would be for Councils to get back into the development game and hold sections long-term, with leasehold title to the home owners. That was the cost of the section would be amortized over many generations and crucially the banks could not use the land as security … and this would immediately shut down speculators (as distinct from investors) gambling on land value capital gains.

    • mickysavage 1.1

      Thanks RL. You and Ad both make the same point and I agree that Councils should be allowed to be more proactive and they have been significant house creators in the past, particularly with older adult housing.

      • RedLogix 1.1.1

        I'm agnostic about whether Councils should be providing homes … HNZ does seem to be well set up to do that and I can't see why their function needs to be duplicated. But providing developed land is a whole other story.

        PS … what appalling grammar in my comment above. The folly of commenting before first morning coffee!

    • Gosman 1.2

      The reason behind land costing more than the actual house being built is indicative of a shortage of land being made available for building on rather than the costs involved in preparing it to be ready to build on (although that does play a part it is true).

      • RedLogix 1.2.1

        A very old and close friend of mine is very familiar with the land development game and I've looked at his numbers. Trust me the development costs are staggering and dominate. In his case the raw land was essentially free (having been in the family for generations) … but his breakeven price was barely different to anyone else's.

        But in another sense you are right, NZ does have limited land and unconstrained urban sprawl is undesirable anyway. The underlying problem is that we are not using what we do have to the best collective effect. In particular we need to get a lot better at high density housing that people want to live in.

        • Gosman 1.2.1.1

          I have no problem with higher density housing in NZ cities. However planning laws in this area are as restrictive, if not more so, to releasing new land for residential builds as it is a massive NIMBY issue. Again if you remove the ability of people to slow or stop intensification developments then you will resolve the biggest roadblock to affordable housing.

          • RedLogix 1.2.1.1.1

            True, I largely agree with you on the NIMBY issue. At least part of this issue is that intensification often results in a genuine loss of amenity for it's immediate neighbours. If we could develop reasonable ways to compensate or mitigate for this impact then a lot of the heat would be taken out.

            Just for example … if we wanted to intensify say the whole of Dominion Rd in Auckland, the Council offers compulsory acquisition and proper compensation to all the reasonably affected residents (say 300m either side of the road), and then long-term lease the land to private developers to build high rises on. The existing residents get the opportunity to move on with their lives, the Council gets a long term income from the land rental, and the developer's planning risk is hugely reduced.

            • Gosman 1.2.1.1.1.1

              All of that seems both expensive and time consuming. Sometimes people should accept the fact that living in a city means that things will change rapidly and they can't expect to live on a quarter acre in a 3 bedroom bungalow in a Central suburb in Auckland without being surrounded by 3 or 4 story townhouses.

              • RedLogix

                Sometimes people should accept the fact that living in a city means that things will change rapidly

                That's easy to say when it doesn't affect you. And if you stay in one place long enough it almost certainly will.

                • Gosman

                  Of course I am affected by this sort of stuff. I live by a main communter rail line which is being upgraded. This entails significant work overnight which is loud and disruptive. I am fine with this as I know it is the price I pay for living in a city.

                  • mpledger

                    But you get the benefit of the line when it's finished – even if it's just other commuters switching from car to train. Building a 4 story apartment block over the fence hugely diminishes people's privacy and sun light, making houses cold and dark.

                    • Gosman

                      Yeah, you should move to the suburbs if you want sun light and land. Stopping others from encroaching on your inner city property because you want both the convenience of inner city life AND the benefit of large land protected from being overlooked/shaded is greedy to the extreme. Perhaps you should get a degree of compensation for some loss but then again your land value has increased so much that you will be well rewarded if you sell (hence why people are building more intensively).

          • woodart 1.2.1.1.2

            so, gosman, take away landowners rights?to have there say over developments that might very well downgrade others property values and living standards? dance on the pin head al you want but that is basically what you want…

            • Gosman 1.2.1.1.2.1

              Your property rights should not dictate what others can do with their property. Sure you should have recompense if people cause damage to your property but as I argued above increasing intensification means your property value is rising not falling so you are already being compensated to a degree if you sell.

              • woodart

                you have missed most of my point(no surprises there). doubling the population of any area does not increase estate values. many times it decreases values, and most often decreases living standards with traffic, noise, etc. but if you advocate taking land owners rights away, then say so.

                • Gosman

                  No, the land value increases with intensification as a small bit of land can be used to build more on. What does suffer is the capital value of property that is not being intensified. Hence a three bedroom bungalow will lose value if it is surrounded by 4 or 5 story apartment blocks. However the land itself has not reduced in value.

            • mikesh 1.2.1.1.2.2

              Closeness to public transport, good roading, and other amenities is what pushes up property prices. Intensification is therefor desirable because it means that more people can benefit from those amenities.

        • Molly 1.2.1.2

          " In particular we need to get a lot better at high density housing that people want to live in. "

          I agree with you on this point. I'd also add that we need to include the provision for well designed additional community spaces for gathering, activities and socialising that support those higher density development dwellers, else we are just solving one problem and creating others.

          • Gosman 1.2.1.2.1

            The link you have provided in the past to housing solutions in the Netherlands actually highlights a more laissez faire approach to house building. The people building houses have far more flexibility in deciding what they want to build and how they build it.

            • Molly 1.2.1.2.1.1

              But the local authority also including planning provisions for schools, retail and community spaces.

              … still waiting for your contributions Gosman…

              • Gosman

                Yes that is what I would expect ANY local authority to do. The key though is the people BUILDING the houses are not constrained much in what they choose to build and how they build it.

                • Molly

                  And the reason this was done in this case, was because of the social investment that the owner/builders were making in the resulting community. That investment was indicative of build quality and care.

                  That assurance cannot be assumed from builders who are solely interested in financial returns, and who will not be residents in the community.

  2. Ad 2

    Fair enough to get annoyed at Stephen Joyce.

    But.

    It's pretty hard to see a fresh government doing a different version of Kiwibuild. It's cost one senior cabinet minister his reputation, so it's pretty unlikely another one is going to have a go at it.

    This government's efforts are towards strengthening the rights of those in rental housing, putting a lot more money into emergency accommodation. Also the've revived Housing New Zealand and let it loose to develop whole neighborhoods.

    They have worked with the third sector to get new multi-unit developments up around Auckland pretty well.

    Councils long sold off most of their pensioner and other flats following government pressure. Government could allow Councils to have subsidized accommodation like they used to, but as it is there's no encouragement for Councils to get back in to build themselves at scale.

    Even the Urban Development Agency requiring authority powers that are going through parliament at the moment may probably stall until after the election.

    It would also help if NZTA actively worked more with HNZ to find new parcels of land through their own acquisition processes. And of course rail projects as well.

    The entire intervention machinery is dead in places, weak in others, and just getting back on its feet in others. That's after 3 years of trying, and bright spots like Point England and Cannon's Creek and Northcote now emerging.

    If all metro councils, and HNZ, and new entities like HNZ were all given strong reasons to cohere, maybe there would be a proper cohesiveness to public sector intervention in housing.

    But that's for another government.

    This one has gone as far as it's going to.

    • Antonina 2.1

      An accurate description Ad. Sad that this Government cannot have a better view

    • Gosman 2.2

      The State is on a hiding to nothing if it attempts to solve the housing supply issue on it's own. There is simply not enough funds to increase housing stock to the levels that would have an impact on supply without further driving up the cost of the land available for housing. The best you can hope for is replacing the private sector demand factor in the growth in the costs of housing with a state sector demand factor. The worst is you add to the private sector demand thus increasing house price growth even more.

      • mickysavage 2.2.1

        Why is that Gossie? The Crown can borrow at 1.5% or so right now. That can fund a whole lot of construction.

        • Herodotus 2.2.1.1

          The industry is currently near capacity. As you are someone who knows the system, it takes time for consenting, upsizing infrastructure (stormwater, utilities, water, gas), physical development etc. Funding is the least of the issues.

          We had a year ago Twyford informing us the Unitec was to take 10 YEARS to complete 3000 houses (even though the PR spin was for a greater amount ) and how is this development progressing ???

          https://www.beehive.govt.nz/release/unitec-deal-marks-major-kiwibuild-milestone

        • Gosman 2.2.1.2

          Except if the government attempted to increase it's borrowing to actually make a significant dent in the housing supply soon it will be paying a lot more than 1.5%. There would be a massive increase in risk to the government accounts.

          Imagine spending billions of dollars buying land and then the price of land drops by 10 or 20 %. You would have the State on the hock for 100's of millions if not billions of dollars in losses.

      • mikesh 2.2.2

        As the social Creditors used to say: If something is physically possible then it should be financially possible.

  3. Muttonbird 3

    Simon Wilson's article was one I really wanted to read but couldn't because of user pays.

    The guts of it is that Government assistance in house building was abolished by Douglas and buried without trace by Richardson.

    I did read Steven Joyce's article which, despite asking for a bi-partisan approach, proceeded to run like a political advert for the National Party.

    It was a re-hash of the same tropes we have heard from National and Seymour for some years now. That being if you just open up wherever to build houses then competition among developers will reduce the cost.

    He cites Christchurch as an example for Auckland. But Christchurch is a near infinite flat plain with zero obstacles to transport infrastructure. One of the only obstacles to suburban growth there is water security.

    But Auckland is an isthmus, and the isthmus is full. It is a place where transport infrastructure has been neglected for decades and the catch up is painful.

    I'm going from Glen Eden to Eden Terrace the other day at 9:30am and four lanes are jammed/stopped leading up to the newly completed Waterview interchange. This is brand new and it's already full. It doesn't get better than this, probably ever, and Steven Joyce just wants to throw open the urban border for more and more people to inhabit more and more remote areas. How are you going to get them to work?

    Why can't those tasked with running the country see that in a space constrained by geography and historically poor planning, demand is the major problem.

    Slow down!

    • In Vino 3.1

      Muttonbird: NEVER pay to read the trashy Herald. Do what I do – go to a café with good coffee and a cheap, healthy breakfast on offer, and read their copy of the Herald while enjoying good coffee. You may need to be retired, of course…

      • Anne 3.1.1

        Or go to a cafe (please how do you get the little thingimy above the 'e'? – pad and pen ready) and have a not so healthy lunch and wonder why the grams(?) keep piling on. One of the joys of retirement.

    • Sacha 3.2

      Joyce, Brownlee and chums are planning for the past. Cities need sustainable shared transport as part of their planning and building – not single storey sprawl just because that's what builders and subdivision-mongers are used to getting away with, palming off the transport costs to buyers in long commutes and traffic jams or the public purse in ever-widening roads that can never solve the problem. Yesterday's men, even before climate change is taken into account.

      • Molly 3.2.1

        Cities need sustainable shared transport as part of their planning and building

        Agree entirely.

        And TBH, although the post makes a couple of relevant points, there are several contributors to the housing crisis and all should be recognised if any effective solution is going to be designed.

        On top of taxation and regulatory policies that allow and encourage overseas investment in residential housing that results in rental and sale profits going overseas, and also encourage NZers to use housing speculation for financial security. There has been the erosion of state housing, wage stagnation, landbanking, ghost houses, and the effects of increased need with immigration policies that have not addressed the added pressure on supply. Most importantly now, an ever increasing cohort of well-housed and financially rewarded voters across the great divide have found that they have benefitted quite considerably from the rise in housing costs over the last couple of decades and any mention of putting the brakes on – or god forbid – reducing the value, of their financial windfall is treated as blasphemy.

        • mikesh 3.2.1.1

          One wonders whether the boomer generation reaching adulthood, from the seventies on, and needing housing of their own, may also have been a factor which would have increased demand.

          • Molly 3.2.1.1.1

            With a growing population, there will also be increased demand, but the spike in demand that we cannot fulfil is unlikely to be due solely to that natural increase in NZ's population. I have no issue with immigration – many NZers at some point in their lives enjoy the benefit of moving and working overseas, and that access should be offered as well as we take advantage of it.

            However, immigration policies that only look at the benefits of immigration, and don't have in place robust systems that provide appropriate infrastructure, housing, employment and worker protection, education and healthcare fail both established and recent New Zealanders.

            • Rae 3.2.1.1.1.1

              Immigration of itself is not an issue, however the rate of it is very much so. It is far too high for us to cope with. We are now living in a world that requires us to do something about our overpopulation of it, or we are going to end up with just about zero wild places, forests and clean oceans left. Those things are essential for the planet, the planet is essential for us.

              I make no apologies, I believe population reduction via a lower birth rate, via women having control of their own lives, finances and reproduction, is something the left very much stands for, and almost automatically leads to lower birth rates.

              • Molly

                Agree, on both topics. Immigration limitations, and infrastructure and social support needs to be a considered national discussion, which will make it less susceptible to dog-whistle politics and racism.

                Also, there are many studies to support your premise, regarding women and fertility choices.

                • Rae

                  You only have to look at Japan, and just about any advanced society where women do have such controls, birth rates are well down.

              • Gosman

                NZ does not have an overpopulation problem and our birthrate is around replacement level (or even below). In short you are worried about a problem that we don't really have.

                • Rae

                  That's funny, I could have sworn New Zealand was part of the world. Gee, you learn something every day, don't you?

    • Gosman 3.3

      This government assistance in house building wasn't actually in building houses. It was in purchasing houses.That is a HUGE difference.

    • mickysavage 3.4

      Thanks Muttonbird. This clip neatly summarises the problem with building motorways, aka induced demand.

      https://twitter.com/brenttoderian/status/1192568535009988608

      I avoid driving to town unless there is no alternative. The train from Glen Eden is about as fast, much more relaxing and there are no parking hassles.

  4. greywarshark 4

    <i>This ignores the fact that interest rates are currently at historically low levels yet through a number of Government initiatives, some started by National, house inflation is lower than wage inflation.</i>

    I don't get this. Could you expand?

    • In Vino 4.1

      Agree, Hamilton house prices just went up by 8%, but my semi-retired wages somehow failed to do anything like that.

    • mickysavage 4.2

      From October last year (https://www.beehive.govt.nz/release/rising-wages-and-low-inflation-supporting-kiwis)

      • greywarshark 4.2.1

        How well is the data gathered for these percentages that make them relate to ordinary people's experience?

        Something from the ODT on how our CPI inflation level is measured.

        https://www.odt.co.nz/lifestyle/magazine/real-cost (Thanks savenz on TDB)

        • Phil 4.2.1.1

          There is an awful lot wrong with that article. Once Munro starts adding in 'the Austrians' his misunderstanding and conflating of a few different things makes the entire thrust of the article meaningless.

      • Ross 4.2.2

        Average house prices increased by nearly 12% in the last 12 months. I doubt wages have increased at that rate!

        https://www.newshub.co.nz/home/money/2020/02/reinz-reports-multiple-regions-with-median-house-price-over-600-000.html

        • McFlock 4.2.2.1

          Gotta love the fact that the new houses are more affordable then, eh.

          • Rae 4.2.2.1.1

            When you have to sidle with your stomach well drawn in, along the space between house and boundary as the section is so miniscule then you understand why. Goodbye the home vege garden, goodbye the home fruit trees, goodbye backyard cricket.

            • McFlock 4.2.2.1.1.1

              Yeah, and the lifestyle block I grew up on is now worth in excess of a million, when it was an affordable build for an electrician 40 years ago.

              That was then, this is now. I'd rather live in a hovel I owned rather than the hovel I rent.

            • Molly 4.2.2.1.1.2

              Single, story house builds on sections are a nostalgic view on what housing can be.

              While housing remains firstly a financial vehicle and investment, our view of acceptable or quality housing design is limited to what provides good returns. There are instances in housing discussions, where neighbours with limited land have provided their families with a privately-shared larger common area by knocking down fences between properties and utilising the benefit of all the space.

              In the climate of financial perspective of housing this solution to smaller lots would be unthinkable.

              We do have to mature in terms of how we build houses and communities in New Zealand, and part of that conversation involves ensuring that all demographics have access to well-designed common spaces.

              • Gosman

                What people get in return from investing in housing is what other people are willing to pay and therefore reflects their desires. If there is a strong desire for 5 bedroom, 2 car garage single story houses then people will pay a premium for them. What you need to do is convince people they should live in a much smaller property closer to others. Then there will be a greater demand for those houses creating a premium for them and encouraging more development of that style.

                • Molly

                  … oh, if housing was only about financial returns…

                • Blazer

                  your first sentence is complete nonsense.

                  If it was valid there would be no need for the Govt to shell out over $2.5 billion in supplements to landlords.

      • Herodotus 4.2.3

        MS perhaps taking a more extended look at data, paints a different picture to your. See how housing and income diverged under the Helen Clark years, and has maintained this gap between capital grown and income growth. No wonder we cannot move to correct this when it was always "when the other party was in power". Admit it, both Labour and National have and are still %$#^ing this up.

        https://www.thehousesite.com/thehomesite-master/the-state-of-nz-housing

  5. Blazer 5

    The GFC is the core reason for rampant property inflation around the world.

    The huge increase in 'money' supply, instigated to bail out the financial failures that were Wall St and The 'City'…i.e Q.E lead to a race to invest' a huge portion of this free money in …land…'they aren't making anymore of it'!

    To maintain this charade ,interest rates had to be dialled…down.

    Marry this up with some western countries promoting an 'open' economy and foreign money arrived in billions to park up in …property.

    We were told by the Natz that foreign buyers were a mere 3%,that they didn't have the data,and now Bridges wants to reverse the FB ban!!

    The FIRE economy has captured the gutless politicians as the tradeable sector shrinks and inequality grows at a great rate of knots.

    A shortage of supply!No an abundance of cheap opportunistic capital.

    The Kiwi Dream has been destroyed.

  6. barry 6

    The other factor was market rentals and landlord subsidies, which have pushed up rents and consequently made affordable housing unaffordable to anybody but "mum and dad" investors.

    • Craig H 6.1

      Good point – building more state houses maintains supply and depresses rents a lot better than market rentals + accommodation supplement.

      • Gosman 6.1.1

        If there is not enough land supply available to build on (or alternatively to intensify building on) then it doesn't matter who owns the houses that are being let out.

        • Rae 6.1.1.1

          It matters greatly who the houses are owned by. If the public purse is having to top up rents for landlords then it is far, far preferable that such housing be owned by the public in the first place.

        • Craig H 6.1.1.2

          With 5 million people in 268000 square km, there is no shortage of land other than possibly in central Auckland and Wellington.

  7. Observer Tokoroa 7

    The Banishment of Common Sense

    It is rather sad visiting Mickey Savages' account of the excellent post WWII Housing success, initiated and carried out by the sensible men and thinkers of the times.

    The existence of some of that housing is still there to be seen – and in use.

    The sadness was, that much of the valuable Housing was to be sold off complete with its Section. Sold off by National politicians. And the Wealthy became Wealthier.

    The era of the Landlord was marched in – is still being marched in. Money bags almost too heavy to be lifted. Excruciating Poverty is his deal. The only Deal. National is proud of it.

    In my opinion, it can be fixed. At some expense to the Wealthy who caused it. Ayn Rand, Margaret Thatcher; Greenfield; Ronald Reagan. Sir Roger Douglas. Mr screwy.

    It turns out Mickey, that "Aggressive Wealthiness" can be worse than any Communism.

    We rightly got rid of Communism. Lets be sensible and get rid of obsessive Wealthiness.

    • Gosman 7.1

      Private landlords have ALWAYS been the main provider of rental stock in NZ. The State sector was only ever a support for those who struggled to get private accommodation.

      • Rae 7.1.1

        There was a time we had little need for many landlords. We need to aspire to that again

        • Gosman 7.1.1.1

          Except from a rental perspective the private sector has been essential in NZ for most of it's history since 1840.

          • McFlock 7.1.1.1.1

            Not really.

            It's just how we rolled.

            State houses can replace the entire private sector at any time. The private sector cannot replace all of state housing because without it the less profitable tenants go homeless.

  8. Policy Parrot 8

    In actuality, the problem boils down to one unavoidable truth, and can be unwound with one unavoidable measure:

    Residential Housing in the 50s, 60s, 70s and 80s was generally not a widespread vehicle for private investment. A few law changes and a general attitudinal change that rental income comes from magical fairy land; rather than from other, perhaps less well off/younger members of the same community, started the ball rolling on a hydra that no government is willing to tackle for fear of antagonising recent homeowners who have no to do with this problem except are paying through the teeth for their property.

    The solution: Limit residential real estate ownership to one property per person. Have a time allowance of one year from the realisation of estate to sell. Such a measure should be grandfathered in to lessen the impact, and to prevent a massive dumping of property onto the market all at the same time. Note: I said 1 person, this still allows for the typical fiddling, i.e. one for the wife, one for the three year old etc. But it will stop the 30 to 100 properties going to the guy so he can play World of Warcraft/Minecraft all day.

    Property prices and rentals will fall, the cost to the government of accommodation supplements will fall, and government can spend that money instead on expanding the state housing stock.

    • Sacha 8.1

      a widespread vehicle for private investment.

      Striking how many of the people we see opining about housing do not mention that reason at all, when some at least are smart enough to know about it.

    • Gosman 8.2

      What evidence do you have for your claim that "Residential Housing in the 50s, 60s, 70s and 80s was generally not a widespread vehicle for private investment"?

      • Policy Parrot 8.2.1

        A correction. Outside your own dwelling/property, investing in real estate was uncommon. 85 to 90 pc of houses were owner occupied. This number is now trending under 60 pc.

        Hell, the government would be still better off if it offered disaffected former housing market investors access to a new investment fund withdrawable at any time at a guaranteed 7pc return run by along the lines of the NZ Super Fund.

        • Rae 8.2.1.1

          And what was owned as investment property usually consisted of a block of flats, suitable for people after they left home and before they got married, and that was about it, really.

      • mickysavage 8.2.2

        Well home ownership rates were way higher than they are now.

        • Gosman 8.2.2.1

          So? That does not mean lots of people did not invest in housing prior to the 1990's.

          • mickysavage 8.2.2.1.1

            It does mean fewer families had to pay out of control rents to landlords to survive. And it also means that market forces driving up rental levels were much weaker.

            • Gosman 8.2.2.1.1.1

              There is a reason for that. Prior to the 1990's land was much easier to build houses on and our house build rates were higher per head of population. Do you know what happened to land use regulations during the 1990's?

              • Molly

                Enlighten us, Gosman.

                I think your answer will be a good topic for those interested in the long-term effects of inefficient planning, and I suspect your answer will give us much to chew on.

                  • Molly

                    I'm not going anywhere.

                    Why don't you explain how you think this has impacted on housing?

                    • Gosman

                      I already have. Look at the graph supplied by MS in the OP. Note that after 1991 New builds collapse after 1991

                    • Molly

                      Why do you think that is directly related to the RMA? and why that impact has been sustained for almost 30 years?

                    • Gosman

                      Because the RMA made getting approval to use land for new (or for intensifying existing ) housing much, much more difficult. The reason it has persisted for 30 years is because the RMA has largely stayed the same over this time in this particular area.

                    • Molly

                      The RMA has not stayed roughly the same over this time. In fact, even as it was established the change of government diluted the "resource management" aspect of it before it was passed.

                      As you can see from this lecture by Sir Geoffrey Palmer, the initial Act of 382 pages has inflated to over 796 by 2018. Despite this, and other environmentally titled Acts our "resource management" practice since then has degraded our natural resources, and socialised those externalities to the point we are unable to rectify them in the current political climate.

                      As well as being incorrect about the "largely the same" you still haven't defined why this sole factor is responsible for the housing crisis.

                      Particularly, why you ignore any other factors, such as decreased state housing, limited access to social housing, increasing building and labour costs, immigration pressures, substandard housing leading to health issues, communities divided and left less resilient by roading, stagnating wages, rising fundamental costs not reflected by CPI figures, short-term planning for both communities and transport that delay good solutions.

                      Quite importantly, and often missed in housing discussions, is the ongoing costs and quality of life experience by residents once they move into those homes. Whether the planning has provided a place for individuals and communities to thrive and develop, or whether those that are unlucky enough to occupy them find they have to spend large amounts of money and time commuting to services, facilities and shops.

                    • Gosman

                      LOL! What you are trying to state here is that the RMA has become even more onerous since it's inception (you may well be correct) BUT you actually want it to become even MORE restrictive! That is fine if you are willing to accept by doing so you will make it even more likely house prices will be unaffordable and housing costs will remain high. Accept the responsibility for what you want.

                    • Molly

                      " LOL! What you are trying to state here is that the RMA has become even more onerous since it's inception (you may well be correct) BUT you actually want it to become even MORE restrictive! "

                      No. What I am saying is that the RMA is not "largely the same", and despite its name, the Act itself, amendments and other Acts have been ineffective at protecting our resources.

                      I don't really know what you are saying other than – LOL.

                      Because of our relatively low population density, and fairly recent city building that has happened alongside the acquisition of private vehicles for most, historical planning and building in New Zealand has occurred without regard to the value of considered land-use, and long-term planning for transport and communities.

                      It is the effects of these historical planning (or non-existent) designs that have exacerbated the effects of the housing crisis on our communities.

                      If your solution, is to treat land availability as the only factor in the housing crisis, then your research into the topic is fairly shallow, and your solution will be ineffective.

                    • Gosman

                      I'm not treating it as the ONLY factor. I'm stating it is the MAIN factor in the housing affordability stakes. None of the points you raise will help much at all in reducing housing costs and in some cases will actually lead to increased costs. You want to increase resource protections and involve much more detailed planning provisions. These will increase both time and costs involved in developments and reduce the land available for housing.

                    • Molly

                      I disagree that your drumbeat on land availability is the main factor.

                      " None of the points you raise will help much at all in reducing housing costs and in some cases will actually lead to increased costs."

                      Not true, and since you can't be bothered explaining your cavalier dismissal…

                      " You want to increase resource protections and involve much more detailed planning provisions. These will increase both time and costs involved in developments and reduce the land available for housing. "

                      Actually, you are incorrect. I would want an effective way of protecting our resources. You make the assumption that that means more red tape. I would prefer a simpler system that does not morph into a series of amendments, and exceptions that is not consistently applied throughout the country. (And let's be clear, those burdensome changes and rewrites have come about through advocates for exploitation not protection of natural resources.)

                      Simpler elegant protections consistently applied may, of course, reduce profits for those so inclined, but they may also be easier to design for and improve them.

                      What effective management of resources will do is: healthily house our people without impacting adversely on the environment, and provide them with housing that promotes social wellbeing and community health as well.

                      (Let's not forget that we need to build so as to transition people into lower energy lifestyles, and considered planning for both buildings and transport have a big role to play in the success of that transition.)

                    • Gosman

                      " I would want an effective way of protecting our resources. You make the assumption that that means more red tape. I would prefer a simpler system that does not morph into a series of amendments, and exceptions that is not consistently applied throughout the country. "

                      Of course I make the assumption this is more red tape. That is what we have come to expect in NZ every time we set up a system to try and "protect" resources.

                      Can you give me an example of how your new system can lead to increased intensification of housing AND/or new land being made available for housing to be built upon without this red tape? None of this wishy washy, airy fairy stuff you are writing about. Actual hard policies. Give me an example.

                    • Molly

                      " Can you give me an example of how your new system can lead to increased intensification of housing AND/or new land being made available for housing to be built upon? None of this wishy washy, airy fairy stuff you are writing about. Actual hard policies. "

                      Well, Gosman. As usual, you show yourself to be a taker – not a giver.

                      I have in the past provided you with many examples of alternative housing approaches, and yet you continue to provide…. none to back up your bombastic assertions.

                      Go back through our histories of conversations and you will see real-world examples – that do not involve further disregard for the environment or welfare of people – of solutions to housing.

                      I will spend my time more productively on the treadmill walking nowhere.

                    • Molly

                      Following that destination-free walk, I'm feeling more magnanimous… I'll pass you the conversation ball one last time, and we'll see how you do.

                      LAND AVAILABILITY

                      Effective resource use – including land – is required when making land available for housing, as we can see from the results building on the Eastern suburbs in Christchurch that overlooked historic restrictions on that same area because of land unsuitability, or on much of the Auckland residential area of Flatbush that allowed homes to be built on toxic landfill. I'm sure many other contributors to TS will be able to think of other examples. The current implementation of the existing RMA was not suitable to prevent these occurrences – and others. Even you should be able to see that some form of resource management is required before allowing development of land.

                      1. Housing is not just a development of buildings. It requires physical infrastructure such as roading, utility networks, waste disposal systems and ongoing support for all these from local government. While local government budgets are constrained, it makes better fiscal sense to build higher density housing where these budget items can be reduced in both capital and ongoing expenditure. This also means that population figures for providing community facilities and parks are met in smaller areas, giving local government a better ongoing return for investment in those areas. This requires good planning and regulatory control, not an absence of it.

                      2. Housing is not just about the provision of a building to live in. When discussing housing, we need to look at the ongoing elevated costs of living in areas without suitable support systems.

                      With that in mind, can you provide researched projections of the following?

                      The increased amount spent on transport for households in subdivisions built on land available that contributes to Auckland's sprawl – including not just the financial cost, but the social and health costs of being in a vehicle for an extended length of time to get to work, social engagements, services or activities.

                      How that reduced time for community and neighbourhood promotes the health of neighbourhood relationships, support systems and community resilience?

                      How increasing rises in combustion engines fuel, in areas that are poorly or not serviced by accessible or affordable public transport options are going to fare as effective climate change solutions are enacted?

                      I look forward to your detailed response.

                    • Gosman

                      I'm all for intensification of inner city residential Molly. If you want to tear up the unitary play and allow people to build 3 or 4 story buildings in Grey Lynn and tower blocks in Ponsonby then go for it. Just be open that is what you are proposing and none of this wishy washy ideas that don't actually have anything meaningful behind them.

                    • Molly

                      No consideration of the points made then.

                      Once again, only taking from conversations and not contributing, apart from…

                      "…none of this wishy washy ideas that don't actually have anything meaningful behind them…"

                      Every suggestion I have made in the past with you, have concrete, real-world examples to refer to. But I understand that you have difficulty conceiving of housing being regarded as a place that supports other aspects of well-being separate to financial benefits enjoyed by a few.

                      “…If you want to tear up the unitary play and allow people to build 3 or 4 story buildings in Grey Lynn and tower blocks in Ponsonby then go for it… “
                      Oh. That’s what tearing up the Unitary Plan would allow, would it? Stop using emotive and irrelevant examples to make your point, unless you actually don’t have a point to make.

                    • Gosman

                      Molly, I'm trying to get you to commit to something actually tangible. If you want greater intensification of our urban environments that is great. But you should acknowledge that likely means lots of 4 or 5 story apartment buildings being built in inner city suburbs.

                    • Molly

                      OK, Mr Intangibility…

                      " If you want greater intensification of our urban environments that is great. But you should acknowledge that likely means lots of 4 or 5 story apartment buildings being built in inner city suburbs. "

                      I was involved with many workshops and submitted on Auckland's Unitary Plan, and never was so simplistic as to suggest an intensification definition was such as you have written.

                      I support well-designed higher density communities around well-designed accessible public transport links, with associated community spaces and facilities, whether they are urban Auckland or in the well established or new communities that have resulted from our historical sprawl.

                      What exactly do you support other than financial exploitation of the un or precariously housed?

  9. Blazer 9

    The shortage of housing in Auckland is estimated at around 40,000 dwellings.

    The number of unoccupied residencies in Auckland is estimated at around….40,000!

    • Gosman 9.1

      Your point?

    • BR 9.2

      Government policy has made renting out property almost untenable. For example, there are houses in Auckland worth about a mill that attract a rental return of about $650 pw. 650×52 = 33800pa. That represents 3.38% ROI. It barely compares with a long term savings account, and that doesn't count expenses like rates, property maintenance etc. This also assumes that there are ideal tenants occupying the property. One bad tenant can queer the deal very badly. The current tenancy laws (all allegedly contrived to "help out the little guy") make it very difficult to evict bad tenants. That is why many property owners would prefer to leave their properties empty than to risk taking a substantial financial hit for mere chump change.

      Successive governments and councils are 100% to blame for high priced housing in NZ. What has happened as a result of their incompetence and villainy was entirely predictable. They have done three things to create the housing shortage. Firstly, the odious RMA has led to the establishment of a large, powerful and profligate bureaucracy that must be paid for using expensive permit and consent fees as well as high rates, driving up the cost of building a house or extending an existing one (In places like India, if you want anything done you have to bribe an official. In NZ if you want anything done you have to bribe an official, the only difference is that it is illegal in India, in NZ it is required). Secondly the council refuses to release land for subdivision further restricting supply, and thirdly they are importing large numbers of people into the country, all with the approval of Mr anti-immigration himself, the right "honourable" Winston Peters.

      Bill.

      • Blazer 9.2.1

        wrong angle old chap…..CAPITAL GAIN is the name of the game in RE at that level….yield is chump change and too much work.

        • BR 9.2.1.1

          "wrong angle old chap…..CAPITAL GAIN is the name of the game in RE at that level….yield is chump change and too much work."

          Ca you translate that for me?

          Bill.

  10. Gosman 10

    The major cost in housing is the value of the land. Land value rising faster than the capital value of the buildings is indicative that not enough land is being released for housing supply growth. The supply of land for housing is largely artificially controlled by regulations.

    https://www.rbnz.govt.nz/-/media/ReserveBank/Files/Publications/Analytical%20notes/2013/an2013-11.pdf

    “In its Inquiry into Housing Affordability, the Productivity Commission (2012) identified
    land scarcity, restrictive urban planning, and the time and costs associated with land
    development and construction as factors constraining the supply of new housing in
    New Zealand. Grimes & Aitken (2006) found that housing supply tends to be slow to
    respond to changes in demand, but particularly in Auckland. The same study found
    that housing supply responsiveness tends to be hampered by both land scarcity and
    increases in construction costs – and that land availability has been the more
    important of these factors since the 1990s. If land is scarce, due to either geographic
    or regulatory barriers, this can increase the cost of new building and significantly
    inhibit the responsiveness of new housing supply to future increases in demand.”

    • Blazer 10.1

      Plenty of land available in NZ.

      5 Million population,same land mass(apx)as Gt Britain=65million pop.

      • Gosman 10.1.1

        Except I stated land available for housing. There IS lots of land in NZ. Much of it isn't being designated for residential housing.

    • Sacha 10.2

      Economists maintain a touching faith in yesterday's supply-side ideologies.

      • Gosman 10.2.1

        That's your answer is it??? No refutation of any actual point just an ideologically based rant about how you personally disagree with supply side economists.

        • Sacha 10.2.1.1

          Reality disagrees with the great neoliberal experiment. We know what it produces.

          • Gosman 10.2.1.1.1

            Do you mean the greatest increase in human wealth and technology and decrease in global poverty the World has ever seen?

            • Sacha 10.2.1.1.1.1

              Tell it to the people struggling to feed their children in this supposedly first-world country.

              • Gosman

                Mainly because of excessive land use regulation making housing costs much higher than they should be.

    • SPC 10.3

      If it was only a shortage of land why are share values going up as fast as land values?

      Joyce got it right – cheap debt rising asset values.

      • lprent 10.3.1

        Which happens until enough boomers start running down their assets after they retire.

        I was figuring my way through this the other day because I was born in 1959, am 60 now, and I’m ‘saving’ about (all up) about 30% of my in-the-hand income into assets after you take out the mortgage interest and taxes.

        In about 10 years, I figure I’ll have to retire to start working at a less stressed pace (assuming I last that long). In which case we’ll probably cash up. My needs are few apart from the ever cheaper network access and the odd bit of hardware to support what I’d anticipate will be a lucrative open source ‘hobby’.

        But as I’m towards the end of the boomer age group (typically those born between 1946 and 1964), I’ll be doing this as the era of saved cheap capital starts diminishing. Implications are interesting strategically. I suspect that it means I’ll be looking at cashing up in a period where capital gets more expensive.

        • SPC 10.3.1.1

          Sure, there is that second factor of boomer saving (more oldies owning a rental and also having money in shares via Kiwi Saver) also increasing asset values.

          No mortgage and DINK saving for retirement – those born 1955-1964 working to around 70 would indicate this phase will continue towards 2030.

          Which might mean we face a centennial reality check around then (presuming the pandemic does not expose any banking sector fragility before then).

          PS It's possible that cheap debt is the systems way of protecting the BB into safe retirement (too many people to afford in old age poverty if their savings collapsed).

  11. Jimmy 11

    Economist Cameron Bagrie has since changed his mind and stated that Steven Joyce was actually correct about the $11.8bn hole.

  12. Incognito 12

    Out of 63 comments, 20 are from Gosman and 12 are replies to Gosman. Just saying …

    • Gosman 12.1

      Do you have a specific problem with the discussions I am involved in? If so then point them out.

    • McFlock 12.2

      Shows mickey must be onto something then. A tory only gets their knickers really twisted over something if it has a good chance of making life better for poor people.

      • Gosman 12.2.1

        Yeah, ditching the RMA (or at least gutting it's more restrictive elements that affect housing developments) would indeed have an excellent chance of making life better for the poorer sections of society as housing would become much more affordable.

        • McFlock 12.2.1.1

          thanks for your concern.

        • woodart 12.2.1.2

          ditching housing laws is what got us the leaky homes. who cant remember prebble on parliament steps burning housing rules for a photo op?

        • Blazer 12.2.1.3

          is that what motivated the Key Govt in 2008 when they had the numbers to reform the RMA as promised…but couldn't be…arsed.

          • BR 12.2.1.3.1

            They didn't have the numbers. Peter Dunne, who has never achieved anything in his political life except to create another useless, wasteful and expensive government department, brought the hammer down on National's RMA reforms.

            Bill.

            • Blazer 12.2.1.3.1.1

              In 2008 they had the numbers…just had other priorities…like beringing back knighthoods and the high country pastoral lease legislation to enrich a handful.

    • tc 12.3

      Today's rostered on neo liberal apologist.
      Good post Mickey…Roger and Ruth led the dance nobody since has changed the tune just speed up the tempo.

  13. woodart 13

    two points that seemingly have been ignored are the latest court decision over tiny homes, and the large amount of beach houses that sit unused for 45 weeks a year but the owners refuse to rent out.

    • Gosman 13.1

      Would you want to live in a beach house where the owner can kick you out for 2 to 7 weeks every year some time over summer?

      • woodart 13.1.1

        yes. I live at a beach and there are many older folk here who would jump at the chance of renting a beach house for 40 or so weeks a year, then go cruising during the summer. there are a large number of older motorhome owners who want somewhere to winter over.

  14. Craig H 14

    With 5 million people in 268000 square km, there is no shortage of land other than possibly in central Auckland and Wellington.

  15. millsy 15

    I didn't know that councils owned all the land in outlying urban areas. Which is good because that means we don't have to find some way of forcing those who own that land to build cheap houses for everyone.

  16. pat 16

    Surprisingly land values (sections) have increased below CPI since 1975…if you wish to find the cause of property inflation above CPI you need look no further than the Banks and their deregulation…increased book equals increased profit

  17. SPC 17

    Joyce was right on one thing – low interest rates result in a bidding up of land values (whether for existing houses or for land for new builds). All asset values go up when debt is cheap.

    It results in the barrier to owning being lack of equity/deposit – basically those not owning finding it hard to get onto the property market ladder.

    Thus government assistance to buy (deposit) is more important to first home buyers than KiwiBuild (which should be an option for those already on the market instead – those couples in single bedroom flats and apartments seeking their first family home or retirees/soon to retire downsizing from housing on sections).

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