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Unaffordable housing & the culture of greed

Written By: - Date published: 11:17 am, October 4th, 2014 - 42 comments
Categories: auckland supercity, capitalism, child welfare, cost of living, crime, democratic participation, equality, health, housing, same old national, wages - Tags:

The unaffordable housing crisis in Auckland (and elsewhere) continues, in spite of all the media coverage and government policies claiming to address the issue.  The problem is not “tinkering” by increasing the supply of dwellings.  that just plays into the agenda of the investors and speculators.  It is supported by a culture of greed, which encourages too many people see the buying of property as a way to their individual prosperity.

Housing crisis quake hit families

The catch is that getting wealthier on the backs of the poor, damages the society in which we all live: especially in terms of outcomes for things like health, education, crime, transport systems, etc.

There’s yet another article in today’s NZ Herald about the increasing problems for renters:

Families are being forced into desperate measures – paying more than half their income in rent and even living in cars – as Auckland’s rental housing crisis deepens.

South Auckland social service agencies say they are seeing more families with children living in cars, camping grounds and boarding houses in the past two or three months as private sector rents become unaffordable and state houses have become almost unavailable.

Housing stress is also spreading into middle-income families as the proportion of all renters paying more than 40 per cent of their income in rent has more than doubled in the past decade nationally, from 9.5 per cent to 23 per cent.

Last year 48 per cent of all renters who received an accommodation supplement, or 94,000 households, already paid more than half their income in rent.

The poor health outcomes will impact on all our services, and the combined impact of the failure to supply enough affordable housing and jobs with living wages mean that state funds are used to subsidise landlords and employers who pay low wages.

Most of government (and some opposition party) policies focus on building more houses.  But this even if this works in lowering the costs of rentals, it’s a long term solution, while peoples lives continue to be damaged.

Pattrick Smellie made it clear in an NBR article back in May of this year:

There is no housing shortage in Auckland, where prices continue to rise strongly thanks to investor activity, says the chief economist for the New Zealand Institute of Economic Research, Shamubeel Eaqub.

There was pretty good coverage of the housing issues on a Radio NZ Insight programme back in March.

Community Housing gives an explanation of the content of the programme:

Auckland’s Housing Crisis: the shortage and cost of housing in Auckland remains one of its biggest challenges – 30 March 2014

The Radio New Zealand Insight programme from 30 March 2014 includes comments from developers, bankers, local and central government agencies and Peter Jeffries, CEO, CORT Community Housing (Community of Refuge Trust).

You can access audio of the full programme here.

RNZ Insight

The first part of the programme covers problems  related to the alleged shortage of affordable housing for the buying of.  It focuses quite a bit on policies related largely to building new dwellings, and government and Auckland Council policies.

The most important bits come after about 21.30 minutes.

Greed a disease

The main government and council policies related to providing more affordable rental housing focuses on community housing and  charitable organisations.  The government and Auckland council want them to be bigger players, without providing them with adequate and stable funding, as explained by Peter Jeffries, chair of Community Housing provider, Network.

A bank economist reckons that rising interest rates will push prices down in the long term, and that building more houses won’t lower prices over short term.

At about 25.40 minutes, the Professor of Property at the University of Auckland business school, Larry Murphy, says the current housing market is complex.  The main problem for affordability is that housing is looked on as a way to greater wealth.  Murphy argues:

We have created this set of forces, socially, politically and culturally that are very hard to slow down.  And so at this stage, I think, most of the policies would be tinkering. It’s probably too harsh a word. But they are trying to modify the speed of growth in house prices.  But it’s very difficult. It’s a juggernaut that’s travelling along and there are lots of processes promoting it including population growth, income growth, people trading up in the markets; the whole set of processes. People’s expectations, drive their willingness to take on more debt, etc.

Murphy says that the moves to improve affordability by increasing the supply will be outweighed by more powerful financial and economic forces.

Meanwhile the housing bubble in Auckland remains large, with landlords just itching to raise rents to match some of the over-inflated prices people are paying for properties.  There’s been a few very uncritical artistes lately stating that landlords will soon be raising the price of rental accommodation. This NZ Herald article published last Monday is one example.

housing is a right

42 comments on “Unaffordable housing & the culture of greed”

  1. Weepus beard 1

    None of the affected people vote National, if they vote at all, so their concerns are of no importance to the current government.

    • Lanthanide 1.1

      Actually I think a lot of them were duped into voting National. That’s kinda the problem.

    • Chris 1.2

      People on benefits vote for National because they “like john keys”.

      • Weepus beard 1.2.1

        Heh. I wonder if people living in cars like john keys?

        • karol 1.2.1.1

          Probably just don’t vote – it’s necessary to have a fixed residential address – no wonder the numbers on the electoral roll are going down.

          • Weepus beard 1.2.1.1.1

            Undoubtedly they didn’t vote. How could you get yourself out of your car or tent after a cold and wet night and make your way with several children to make a special vote knowing that you’d be refused?

            We are returning slowly to serfdom. The difference with serfdom is that those peasants were housed.

        • sir pat 1.2.1.2

          probably would LIKe johns KEYS!!!

  2. Bill 2

    There was a link the other day, provided by DtB, where the argument made was for housing benefit to be slashed, thus forcing rental prices down and denying the tiny percentage of property owners who are landlords a certain cash cow.

    And a second argument that would see house prices drop by a couple of percent per annum, thus (among other things) taking some of the pressure off of unions in wage negotiations.

    Can’t quite remember the details and can’t find the comment with the link in it. Maybe if draco is around….

    found it /open-mike-02102014/#comment-902673 An RSA presentation.

    • weka 2.1

      If you slash accommodation supplement you have to increase base benefits, otherwise you cause further financial stress in the interim until rents readjust (how long would that take?). Problem is that AS is based on where you live and what the average rentals are in that area. This varies considerably (there is a $100 difference between the lowest area and the highest), so the State will always baulk at an across the board base benefit rise. In order to promote removing AS, there has to also be promotion of a solution to the problems that would cause.

      If you don’t raise base benefits, what happens to existing tenants when they lose their AS?

      If you do raise base benefits, what will stop landlords taking advantage of that?

      • adam 2.1.1

        But weka what happens when half the renters in auckland can’t pay their rent – landlords either need to be reasonable or mass evictions.

        Middle NZ are idiots, they are subsiding the rich, and blaming the poor for it.

        • weka 2.1.1.1

          If there’s a housing shortage I suspect landlords will choose evictions. Then there will be subsequent overcrowding.

          Don’t get me wrong, the way benefits are structured is both stupid and punitive. I just want to see the strategy for removing AS teased out a bit in terms of detail.

          “Middle NZ are idiots, they are subsiding the rich, and blaming the poor for it.”

          how so?

  3. Richard 3

    The only solution is to evict national from office by pitchfork seeing as they have sewn up the media and fair elections. Have pitchfork can travel..

    • music4menz 3.1

      Are you suggesting that the election was rigged? If so, could you provide some evidence for this? Are you suggesting that there should be a civil uprising involving violence to overturn the government?

      • Richard 3.1.1

        Interesting question?

        First question the answer is not sure on the election result. But i’ll say the votes counts were accurate the campaign was scuttled by the anti left brigade, being pro right media.

        Second answer for endorsing a takeover. No I was being sarcastic/It’s wishful thinking.

        I’d be more prepared to endorse taking all their money from them. Every cent and leave them in some low employment small town to taste the apples themselves.

        It would be kind of nice though to see the country actually head to parliament to make Key aware just how much his crap is affecting the average person. happen not a chance in hell. We have all been kept so poor we have not the time to take off work to even protest.

        However /sarc my pitchfork is sharpened and ready just incase.

  4. johnm 4

    100% right Karol
    As DTB said buying to rent and make Capital Gain is bludging, mainly of our fellow young just getting started kiwis wanting families.
    It’s kiwis favourite wealth creation activity, any wonder our wooden homes are so crazily overpriced? Aussie banks make a killing decade in decade out. Real Estate have a never ending party.
    And the losers? Our very own young just married couples diddled out of their birthright by kiwi greedies forced to be landlord bait for the rest of their lives.

    I know 7 persons doing this one had 8 houses at one point. And to add to the shame gutless NL governments won’t impose a CGT. Cunliffe proposed a slap on the wrist 15%. The greedies flocked to National the Hopeless didn’t vote at all, they know they’ll never have a stake in this country ( But will be slaves making another rich for sweet fa ), only hope? Australia.

    • karol 4.1

      Yeah. Although, One of the things I don’t think I mentioned in the post, is that part of the latest escalation is apparently because a lot of people are returning from Aussie.

      Also, while the majority of landlords are older, it’s not entirely just older people. I’m a boomer renter, and the last couple of my landlords have been well younger than me. They may be a smaller proportion, but nevertheless, the wealthiest younger people who can afford (maybe with parents help) are also doing the investor/speculator thing.

      Meanwhile, many elderly are also finding it difficult to make ends meet – many of all ages are also renters.

    • Draco T Bastard 4.2

      Cunliffe proposed a slap on the wrist 15%.

      Yep, that pissed me off as well. Especially when, a few months ago, I saw in the NZHerald a seller who was looking to realise at least $500,000 in realised profit from owning a house for 5 years – and that’s without counting the rental that they’d received from it. That sort of income needs to be taxed at the top rate and the top rate needs to be 60%+.

  5. Tracey 5

    thanks again for posting this stuff karol. much appreciated.

    i was in tauranga last week and noticed a wee explosion of community gardens of veggies and fruit trees. seemingly addressing a need for food not store bought and teaching people a new and needed skill.

    • Tracey 5.1

      never imagined a thriving nz would have to go back in time 50 years just to feed the family…

      • marty mars 5.1.1

        Community gardens and allotments are part of the answer I believe. I work with one and more and more we see people coming in and getting started in sharing or working together to grow food. Personally I believe in guerrilla gardening – just plant free food everywhere – food forests, veges, fruit, nuts, whatever – plant it and make it free for people.

        • Richard 5.1.1.1

          In Sunderland in the UK there are lots of allotments. They also get used and never have they been pushed to do it. I often used to take my Jack Russel down to their chicken coups to get rid of the rats. One of the best idea’s in the UK and frankly these days we may have to introduce something like it here.

          The NZ version I’ve seen is a pale imitation where they have say an acre of land grow on it and you can buy cheap vege’s

          Over in the UK you just apply to the council for an allotment and when space becomes available and your numbers up it will get allocated. It very small but enough for one household to grow all they want.

          Now as we home owners don’t have a tiny concrete back yard like they do and need dirt to grow on this should be open to tenants of housing blocks apartments in poorer area’s.

          It would not be on the scale of the UK, but each struggling family having the right to go to the council if they have no backyard to grow vege’s and be allocated a small section of land would be bloody marvellous I think.

  6. The NACTs were effective at shooting down the CGT because they realised that many workers are also landlords. Many would have started off by buying their state house. The Holland Government introduced the sale of state houses in the 1950s and from that point on drove the wedge of personal gain into the social solidarity of the working class.
    http://www.nzhistory.net.nz/culture/we-call-it-home/timeline

    A Workers Government would act to reverse this by building state rental houses and stopping their privatisation. A capital gains tax directed as landlords and speculators would see housing value fall to their true value – that of the labour required to build houses.

    To offset any losses to homeowners the state could buy private mortgages off the banks, with a one off capital gains tax equalling the increment due to speculation, and administer them through a single state bank at 0% interest. Owners could opt for social solidarity and convert their mortgage to rent.

    Of course the measures of state intervention in the economy to make this possible would have to extend well beyond a single state bank managing housing.
    The external debt owned to international banks and corporates would be repudiated. It is underwritten by the value produced by the next generations of workers who will become increasingly impoverished as a result.
    This debt is a tiny fraction of the expropriation of value pumped out of the country by finance capital over nearly two centuries.
    Privatised state assets would be bought back at a rate discounted by inflated ‘values’ or prices.
    Capital flight by banks and corporates would be compensated in part by seizure of their assets.
    New capital required to re-nationalise state assets and meet a boycott by international finance capital can be met by the state bank providing additional money capital backed by the total state assets and the value of commodities produced in the economy.
    Such a workers government would merely extend the heavily statised form of capitalism that was necessary to implant capitalism in NZ the 19th century, proving that the state under workers control that plans and finances the productive economy can retain socially produced value for the benefit of society and survival of nature.

    This is the alternative to the bankrupt capitalist world collapsing in a maelstrom of debt and climate chaos.

  7. coaster 7

    The average kiwi thats wants an investment chooses property because its easy to do, the asset can be maintained by most people, most couples doing this can still work and have a family whilst growing there asset for retirement.

    why would average kiwis wanting to get ahead borrow money to invest in the share market, or similar investment with the risks involed?.

    Buying a rental is safe, easy to do, easy to maintain and unlikely to be lost due to some idiot stuffing up your investment.

    when labour floated the idea of a cgt tax we scared alot of middle nz who look at buying a rental to help with there retirement, etc. Maybe starting with a cgt of 5% and slowly increasing it over time might have been better option.

    those people who buy lots of property are a totally different kettle of fish.

    • RedLogix 7.1

      I largely agree coaster.

      The vast majority of landlords are very ordinary working people doing it to provide some measure of income over an above our miserly superannuation.

      You can’t save for your retirement on our miserly wages.

      You don’t save for your retirement by gambling on our share market.

      And with many properties returning well under 5% – rentals are nothing like a ‘greedy’ get-rich-quick scheme.

      Whether you own or rent a house only makes a difference in the long-term. In the short-term both are debt-slaves to the banks.

      And finally – the difference between property investors and property speculators is that for investors capital gain is not an important factor at all. Simply because most investors have either purchased or built to hold the property for one or more decades.

      No sale, no realised gain.

      • karol 7.1.1

        The culture of greed is driven by the speculators and profiteering investors, and the banks. however, there’s also a culture enabling it that includes the idea that everyone needs to own their own house/dwelling. The latter breeds a culture of fear – if you’re not into the owning of your home, you future later life will be bleak,

        There are ways to encourage a different kind of culture, with a lot of it driven by government policy and local authority regulations.

        Actually, renting is fine if people have living wages, and there isn’t this culture of greed, home ownership-above-all-else- and fear.

        And of course, more money needs to be put into state and community housing, and the infrastructure like transport, services, etc.

        I’m currently wanting to move closer to Auckland CBD for various reasons. But these days, it looks harder than ever to rent nearer the CBD at a reasonable rate.

        And I just keep seeing endless articles saying the housing bubble in Auckland keeps increasing. This is madness.

        And I’m on a reasonable income. It must be sheer hell for many people on low incomes, in or out of work.

        I know landlords tend to be reasonable people. However, I’m losing patience with people continuing to buy into the culture that helps support massive housing inequalities.

        • greywarbler 7.1.1.1

          I am sure that others have seen articles in the glossy magazines, how-to books on how to buy rel estate and seminars with speakers with the name for being smart operators. I have seen many stories of how some young 22 year old has six houses already using leverage.

          One of the ways of breaking through this would be more state houses, and sweat equity projects for suitable people. Government providing loans for those with savings who are prospective home owners which shows responsibility with money and commitment.

          A government that wanted to see a country that was well balanced and self-supporting and able to develop innovative ways of solving any problems would find ways to deal with them. The laissez faire approach to any hard jobs is – get the bar stools and deck chairs out and wait for some business person to have a brain fart on how he/she can make money out of a deal. If you haven’t much money don’t bother to apply.

          Hone made a statement about state housing and got into trouble as a result. But the pollies didn’t want his sort staying on as an MP. He showed them up as seat warmers.
          edited

          • Murray Olsen 7.1.1.1.1

            I can’t see any way around the housing problems other than an extensive state house building program, allied to a ban on sales to foreigners. It’d also do heaps for employment and the resulting benefits would be huge. House prices and rents in Auckland and Christchurch would probably go down, so speculators wouldn’t be happy. Bugger them, they’ve been at the tit for long enough.

          • karol 7.1.1.1.2

            It is Green Party policy to build more state houses and provide the system where people can rent to buy state houses.

            It is a major part of the solution.

    • AB 7.2

      The average Kiwi most likely doesn’t have ANY investments. Apart from their Kiwisaver perhaps.
      The owners of ‘rentals’ are in most cases upper middle class, not average at all. In my technical-professional moderately high income National-voting (without exception) workplace, 4 out of 6 people have ‘rentals’ and 2 have six ‘rentals’ or more. It is done unashamedly for capital gain.
      These people have to take a bath financially before Auckland housing becomes affordable. To see any improvement in affordability these excess properties will need to be dumped back on the market because they make no sense as an investment.
      Ideally we’d also effect a cultural change where landlordism was despised as stealing the futures of the young and low-income. But I can’t see that happening after 30 years of ethical decay since the neoliberal revolution.

      • Weepus beard 7.2.1

        Nicely put.

        The cultural change you speak of happened in my household long ago.

      • CRobinson 7.2.2

        Yes it is all about the capital gain. As far as I can make out, actually managing the rentals is a lot of work, and if you care about the condition of the property and the welfare of your tenants (not all property investors are slum landlords, although some are) then the net return excluding capital gains is minimal.
        You are right to associate this activity with a socio-economic class – they have the spare cash (and borrowing capacity) and all of their friends (some of whom will be in the real estate business) are urging them to jump in to the market. There is a lot of pressure to conform.
        I like the placard, but it is the wrong way around – greed is not just a disease, it´s a sin. That is, it starts as something that you catch from others, and then you internalise the behaviour, become responsible for that behaviour and thereby yourself become a greedy person, ready to pass the disease on to others.

    • greywarbler 7.3

      @ coaster 7
      About people using houses as an investment and those who are more interested in becoming rental queens. When you buy and sell vehicles beyond a few then you are regarded as a dealer and your tax classification changes. It could be so for housing also.
      With the right approach it won’t be as satisfactory to make a living owning multiples of houses and squeezing people for rent. People who do own lots would be under close scrutiny as to maintenance, and for overcharging. When it wasn’t presented as so simple the market would start to deflate.

  8. greywarbler 8

    When you invest in a house, and make a loss, can that loss be subsidised by being debited against profits from other houses? I have the impression that that is so. It sounds like a rort to me.

    I looked up NZ Stats and it is plain from the graph on the link here how important this business sector is in the shrunken economy that we now have after Rogernomics and opening the gate wide for the benefit of the dairy farmers. There just is not the range of investment that there should be in a healthy economy. The real estate sector has the most businesses in NZ as at February 2013.

    Rental hiring and real estate services….100,000 businesses
    Agriculture forestry and fishing…………….70,000 businesses
    Professional scientific and technical
    services )………………both
    Construction )……….50,000 businesses

    (These numbers are indicative, not exact as I have taken
    them from a bar graph which can be viewed on the link provided.)
    NZ Business Stats 2013

  9. SeanExile 9

    Whats important to note here is that living in Auckland has become impossible for those on a very low income.
    They can live in Waikato etc but they struggle in Auckland.

    Why has this happened, mainly because our investment market ie the stockexchange isnt working and instead kiwi’s put their money were there is a return to be made. Had we instead had a functioning stockmarket it would have provided capital that would have allowed companies to expand overseas and creating large multinationals something NZ completely lacks. the only close thing we have is Fonterra. it would provide the so important risk capital that allow us to increase the amount of R&D spent within the country. At present our number is less than 5% of GDp while small countries who is doing well spend about 10%. 12% in the case of Scandinavia for example. In NZ growth doesnt come from corporations instead it comes from properties and services.
    But we arent alone most of Asia has done the same. Can we sustain it, yes, as long as immigration stays at present levels we can. if immigration stops we wouldnt be able to sustain it.

    The property sector is the only safe investment in NZ. Most I know own a rental or two. Over the last 4-5 years the capital gain has been spectacular. This has allowed almost everyone who owns a house to take a mortgage for a second, for a third etc. As long as the market keeps increasing with 10-12 % a year this will continue. What other market has seen these returns lately in NZ?
    When the interest rate goes up so does the rent. Now when people are starting tio see a small increase in interest rates rents will go up. Say 10% next year.

    if we want to stop our propert cycle we can simply legislate about a few things. Sharing of mortgage info among banks. So many have one mortgage with have major, all supporting their rental houses. And over the alst years the people have made great money from this and with the increase in prices banks have made a fortune to. Risk is so much smaller for them.

  10. coaster 10

    Property is a physical asset you can see, can improve, can insure, can borrow money you dont have to buy it, can make money from it via rent, once you have paid for it you own it and you cant normally loose it by an outside factor like the gec or bad fund management, can increase its worth slighly over time or at least hold its value.

    what other investments are like this that average kiwis can aspire to?.
    Noone would get a mortgage to get into the share market due to the perceived risk.

    • karol 10.1

      Why not aspire to livable communities for all, rather than focus so much on individual’/households trying to enrich themselves?

      • greywarbler 10.1.1

        karol 10.1 Why not aspire to livable communities for all,
        Good question. Intelligent responsible leaders, either/or politicians, church leaders, community minded visionaries, would have set these up by mid 20th century. That they haven’t is an example of our continual unwillingness to apply practical and timely solutions to recognisable problems. Fail NZ again.

  11. GRiM 11

    At present, we have the fractal reserve system as a mechanism for the expansion of money supply:

    gov creates money, then lends it to banks at OCR, banks then lend this out employing the fractal reserve system, for banks to make a profit and pay back government interest and capital, borrowers have to borrow:

    thus all new money entering into circulation does so via debt.

    This is fundamentally wrong.
    ——————————————————-

    increase in money supply should be directly based on increase of assets and work done, this is very easy to achieve.

    IRD already measure work done and asset creation.

    Remove all forms of tax, create new money supple based on present taxation models and introduce the supple via government expenditure.(gov not reliant on taxation, everyone and business are 20+% better off, )

    therefore as the economy increases, currency supply increases to match, infrastructure increase to support it and we actually capitalize on investments.

    Removal of taxation, but not regulations.

  12. greywarbler 13

    @ ropata
    Il thought this bit was likely to be contentious. But I think that Hazledine is right – as it seems that a Party in government can only concentrate on one idea at a time despite all the MPs and Cabinet members they have. Okay people and fair and respectful treatment are important but money is also, both need attention.

    And that’s what the cosy remuneration committees of company boards, and their sycophantic “executive remuneration consultants”, do. They put a respectable gloss on the inexorable pay increases by “benchmarking” with someone paid even more somewhere else – such as in Australia – whose next year’s salary will itself be benchmarked upwards and so on – an endless happy upward spiral.

    So who should care about this? You’d think those on the political left would care, and they do complain, but it was their preoccupation with identity politics and the beneficiary society that left the gates open and undefended when the warriors of privilege roared in and purloined the booty.

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