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Opinion: Houston, we have a (housing affordability) problem

Posted in News

By Hugh Pavletich

The Christchurch New Zealand based architect Peter Beaven (now nearing a surprisingly sprightly 85 years), is a South Island identity, who over many decades has been a regular commentator on urban issues and an enthusiastic promoter of inner city living. John McCrone in a recent The Press article “The Inner City Conundrum” airs Mr Beaven’s views on inner city living and the leaky homes issue. His views (with other “inner city” enthusiasts) have had considerable influence on the local scene.

Mr Beaven (a “social engineer” at heart, a common and often amusing affliction of the profession of architecture) is very keen on the idea, that people lives would be happier, if they could “connect” by living in dense inner city developments, rather than living in the suburbs.

That reputable international research (and here)  proves otherwise, is beside the point.

Unfortunately, it has not occurred to Mr Beaven and importantly The Press writer Mr McCrone, that the leaky home problem is a systemic one and a regulatory failure at both the national and local levels in particular. The Court of Appeal made this  clear with its recent North Shore Council decision (New Zealand Herald - Anne Gibson report).

Mr McCrone and his fellow journalists throughout New Zealand, would be well advised to research and report on how the Building Industry Authority (BIA) and the individuals involved in particular got it so wrong and why, and how they succumbed to the commercial pressures to allow these obviously shoddy building methods and behavior in to the system. And further to this, ascertain the responses at the time of local authorities, via their lobby group Local Government New Zealand (LGNZ) and of course the Institute of Architects (NZIA) and Institution of Professional Engineers (IPENZ) through this process.

Those with experience in the industry are acutely aware of the nonsense that went on.

After all, Canada had already been through the “leaky home” experience. The Auckland architect Kevin Clarke in a recent New Zealand Herald article “ Govt can't escape leaky homes blame” summed it up when he stated –

“The leaky building epidemic did not happen by accident. It was primarily caused by government mismanagement over more than a decade”.

Within The Press article, Mr  Beaven provides his perspective on how the leaky homes problems came about and follows up with vague ideas on what he sees as the solutions required.

Mr Beaven has had much experience now of leaky homes, as he has been the designer of many inner city dense ones in Christchurch. As he states, he is now a poor man because of these failures and is not prepared to have any further involvement in their design. He is understandably, particularly sensitive on the issue of “site inspections”.

As is the case with most architects, Mr Beaven’s understanding of urban and development / construction economics is not impressive. Little wonder his suggested policy prescriptions are all over the place.

The Annual Demographia International Housing Affordability Surveys have repeatedly illustrated for the past six years, the core problems of our major urban markets in New Zealand. This year’s 6th Edition, covering 272 urban markets of the Anglo world, shows that Christchurch, with a gross annual median household Income of $52,100 and a median house price of $319,200 (September Quarter 2009 data) had a Median Multiple (median house price divided by annual income) of 6.1.

This 6.1 Median Multiple is rated “severely unaffordable” and well outside the performance of a normal market, where housing should not exceed 3.0 times annual income.

It is clear that too many other architects and the staff of The Press and the Christchurch City Council, do not understand the significance and importantly, the consequences of this. On the Welcome Page of my website Performance Urban Planning, I clearly define the characteristics of a normal and affordable urban market -

“For metropolitan areas to rate as ‘affordable’ and ensure that housing bubbles are not triggered, housing prices should not exceed three times gross annual household incomes. To allow this to occur, new starter housing of an acceptable quality to the purchasers, with associated commercial and industrial development, must be allowed to be provided on the urban fringes at 2.5 times the gross annual median household income of that urban market. The fringe is the only supply and inflation vent for an urban market. The critically important Development Ratio’s for this new fringe starter housing should be 17 to 23% serviced lot / section cost – the balance the actual housing construction. Ideally through a normal building cycle, the Median Multiple should move from a Floor Multiple of 2.3 through a Swing Multiple of 2.5 to a Ceiling Multiple of 2.7 – to ensure maximum stability and optimal medium and long term performance of the residential construction sector.”

Very basic stuff indeed for most people – and I make no apology for the repetition. This “repetition” unfortunately appears necessary, as it is clear  Mr Beaven and The Press writer Mr McCrone have yet to appreciate the significance of these basic structural realities.

Affordable solutions

The well known property industry economist Rodney Dickens recently reviewed this year’s Demographia Survey and the solutions proposed to restore housing affordability, within “Is a solution in the wings?”. He provided links to fringe new starter housing in affordable North American markets.

Christchurch with a median household income of $52,100, house price median should not be exceeding $156,300 (not the astronomical September Qtr ’09 figure of $319,200) and new starter house and land packages on the urban fringe, should be going in at a Median Multiple of 2.5 or around $130,250. Christchurch fringe sections / lots (if one can find them) cost near double this. Simply because the Christchurch City Council artificially strangles the normal supply of them.

The Christchurch City Council is simply in a pickle with its infrastructure financing and management. Financing unnecessary bureaucratic growth has been the real game – thanks in large measure to docile governance and a lack of real media interest. To hide these failures, it employs the Orwellian term “smart growth” (which in reality is “no growth”) or forced urban consolidation, to mislead the media and public, that starving fringe land supply and artificially creating housing bubbles is a good idea. The reality is of course that New Zealand has oodles of land supply for normal urban growth requirments.

New Zealand has had near 30 years of this “playtime planning” nonsense, while the United Kingdom has experienced 60 years of it. Little wonder the New Zealand residential construction performance has been degraded, to the extent we are currently paying double what we should be per square metre. The British are paying some four times as much. I covered this issue within an article two years ago “How Urban Planning Degrades Housing Productivity.

Increase prices?

Running true to form as an architect, Mr Beaven within The Press article has obviously convinced himself that the “core problem” is that inner city apartments do not cost enough. In essence he states that they are “too cheap” at $250,000 to $300,000 and that if they were cranked up by another $150,000 to something north of $400,000, well……. somehow this would solve the problem.

He is to be commended for being “straight up” with his perspective of the numbers.

Assuming that these “shoebox” inner city apartments are 100 square metres – Mr Beaven is obviously of the view that all up development costs per square metre of $2,500 to $3,000 per square metre are not adequate and that they really need to be at $4,000 per square metre. Or possibly he has the “British shoeboxes” of which he is so fond of in mind.

If this is the case, he must be of the view that $5,260 per square metre  is required to solve the problem.

The average size now of a new residential build in Britain is 76 square metres (and falling) and the average age of a first home buyer is 38 years (according to UK Shelter). Britain’s annual build rate per thousand population at 1.6 (California an appalling  1 / 1000 during 2009) is a shocker and well below normal replacement. If New Zealand was building at the current British rate, just 6,800 new residential builds would be put in place on an annual basis.

Not enough new building

According to Statistics New Zealand information, the annual volume of residential consents is currently running at around a paltry 15,000 units and with its population of about 4.360 million, this represents an annual new residential consenting rate of about 3.44 per 1000 population – way below where it should be. This is simply because local authorities, such as the Christchurch City Council, currently do not allow affordable  housing of an acceptable quality to be built.

To allow for normal (a) replacement (b) population growth (c) reducing household sizes with increasing affluence (where second homes are required as well) between 25,000 to 35,000 new units should be consented annually. Local authority mismanagement is currently suppressing the residential construction sector production to about half speed.

Houston we have a problem

Rather surprisingly, The Press writer  did not draw the veteran architect’s  attention to the latest Houston Association of Realtors Monthly Report, where in the month of February the median family home sales price was $US147,000, with the median price for a townhouse / condominium being $US128,000.

Condominium / townhouses in Houston are of course substantially larger than their British and New Zealand counterparts. It seems likely the total development costs of these are well below $US1,000 a metre – possibly in the order of $US700 per square metre all up (land and building).

I was in Houston a couple of years back as part of a housing study tour. At that stage, 235 square metre new fringe starter housing on 700 square metre lots, was being put in place for $US140,000. These comprised a double garage, 4 bedroom, master with ensuite, separate dining room and ducted air conditioning. The serviced lot cost was $US30,000 and the actual housing construction cost $US110,000. The construction cost for the 235 square metre house worked out at $US468 per square metre – all up development costs (land and building) for the 235 square metre house with 700 square metre lot - $US595.

Manufactured housing of 160 square metres on large lots was being put in place for $US73,000 - $53,000 for the manufactured house and around $US20,000 for the serviced lot. $US331 per square metre manufactured unit construction - $US456 per square metre all up (land and manufactured house).

And they don’t leak Mr Beaven. This crystal clear evidence is staring us in the face.

No wonder young Texas families with their mortgages of around $US130,000 (and likely often much less) filled the cruise ships leaving Galveston through the Caribbean. I was pleasantly surprised just how relaxed and tolerant people are in Houston, a dynamic city of 5.8 million where near 90 languages are spoken. Their counterparts of the tiny 360,000 population rural service city Christchurch, New Zealand (6.2 percent the Houston population), with their grossly excessive mortgages and generally poor quality housing, would be lucky to see the beach at Sumner – if they could afford the bus fare or gas to get there.

On the “tolerance front” and to digress for a moment, I will never forget the experience of an Albanian taxi driver in Houston, who’s English was poor and knowledge of Houston’s streets was pretty much on a par with the writers Albanian language skills! The hotel clerk went out of her way to run a Google map off the computer and patiently went through it with the taxi driver, so he  would more likely get us to the destination. He did. How Houstonians responded to the New Orleans Hurricane Katrina disaster, was another humbling and instructive experience in human decency and generosity.

It is disappointing both Mr McCrone and Mr Beaven didn’t check out the residential development performance of the affordable North American urban markets, identified within the Annual Demographia Survey’s, prior to rushing in to print.

There are 103 affordable North American markets identified within this year’s Demographia Survey – 98 in the United States and 5 in Canada. Atlanta, Dallas – Fort Worth, Kansas City, Memphis, Minneapolis – St Paul, Tulsa, Corpus Christi, St Louis – just to name a few.

Both these individuals should have also checked out the respective building industry performances of California and Texas on the United States National Association of Home Builders website. It would no doubt come as quite a shock to them that Texas (population 25 million) gets way more dense type (multi unit) development in than California (population 37 million), the “basket case” of the United States and epicenter of the Global Financial Crisis.

Artificial strangulation

All forms of development (whether they be inner city or suburban)  benefit in soundly governed and regulated markets, where land is at its true market value. Artificially strangling the fringe land supply and blowing land values through the roof, is massively destructive – in economic, social and environmental terms.

People with an ounce of market sense (something too many economists and architects are unfortunately devoid of) would know now, that if we are to solve our systemic residential development industry problems, the political cowboy culture nonsense, with its foundation of infuriating “"sun rises in the west" research, must stop. A disciplined commercial culture must be allowed to re-emerge, with a solid foundation of sound governance and regulatory administration.

We use to build affordable housing of an acceptable quality – it’s a matter of relearning how. And learning from the affordable North American markets, particularly with respect to the financing of infrastructure (Municipal Utility Districts) and zoning mechanisms. Houston is the only major city in North America with just a sprinkling of zoning but mainly deed restrictions instead. These other affordable North American markets are “zoned”.

A “disciplined commercial culture” is one where a business operators major asset is its reputation. It is not a government employee or consultants scrap of compliance paper or written contract signifying nothing – as leaky home victims are currently learning the hard way.

If you can’t deal with people on the strength of a handshake, they should not be dealt with. Only if they can pass that simple test, should a written contract be even considered.

'Wipe out the shysters'

In an open and competitive market, where consumers are respected and provided with adequate choice and sound information, the shysters soon get wiped out. Competition is the best way – indeed the only practical way - of stimulating honest and fair dealing. This is far better than attempting the “bottom of the cliff” approach, untangling messes through the Courts, with messy Government intervention later – as the unfolding leaky homes saga is illustrating.

New Zealand’s major metro housing is sitting up at a severely unaffordable  5.7 times annual household incomes overall, with near 90,000 leaky homes and a finance sector where over the past few years, 48 firms with around $6.1 billion impaired, involving 187,000 deposits, have gone to the wall as I explained recently.

Within days of the release of this years Demographia Survey, the New Zealand Government announced it is starting on this path (my comments) of addressing these problems, with the Environment Minister Nick Smith’s Urban Technical Advisory Group Report due for completion March 31st. Provided this report is sufficiently robust, it should provide the foundation, for New Zealanders to work together in getting sound solutions in place. The National Government has been constantly reminded of its political management failures in getting the Resource Management Act properly bedded in during the early 1990’s.

Constructive evolutionary improvements (it’s at least a 10 year process to sort this huge mess out), can only happen in an environment where people are adequately informed of the issues to be dealt with and are allowed and encouraged to participate in working through solutions.

It is to be hoped that following the release of the Environment Minister Nick Smith’s Urban Technical Advisory Group Report shortly, The Press and other media, will play their important role in encouraging community discussion in exploring workable solutions. The Press’s Fairfax colleagues in Australia are doing a good job as illustrated by this recent article by Adele Horin in the Sydney Morning Herald, in discussing some aspects of this broad issue -  "Mums and Dads adding to great Australian nightmare".

Hugh Pavletich runs Performance Urban Planning

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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173 Comments

Keep grinding away, Hugh. Well

Keep grinding away, Hugh. Well done.

And may I remind all youse intelligent types out there, that this is Local Authority Draft Annual report season.

This is Your opportunity to comment publicly on the shenanigans that your local Taxation Grabber gets up to. I, f'rinstance, am going to ask my local Clueless Christchurch Council two pointed leetle questions:

1. Why are you increasing a balance sheet provision by $16m (7% of rates...) with zero public explanation by way of Notes to the financials? Provisions are only permitted where the probablity of paying is almost certain. So, details please.

2. I have a table of development Contributions, noting the estimated revenue in the various functional areas from this source, and also noting the estimated expenditures in the Added Demand area - which is what DC's are supposed to be funding.

2.a. How do you account for the functional areas such as 'Cultural and Learning services', where the DC income is $746K, yet the Increased Demand is but $273K?

2.b. Please provide a breakdown of total DC income (which I note to be $26m, or 10% of rates), by Residential, Commercial and Other. Please, additionally, tabulate the number of residential sections which produce this income, and provide the arithmetical average DC per such section.

I hope, by this means, to highlight several aspects of this tangled mess.

- the accounting subterfuge which goes on: the $16m provision is certainly 'material' in Audit terms, yet is tucked away in the full-length document, totally omitted in the public summary, and amounts to 7% of total rates. No ordinary ratepayer would have the first clue that this was happening.

- the reliance on DC's as a revenue source, which certainly adds a considerable impost per residential section, and goes some way towards accounting for the severe unaffordability of first homes in Christchurch that Hugh notes in his article. 10% of rates is a big chunk of dosh, and the question really is - if you didn't have that revenue line, and had to rate for it, would you be quite so keen to load the entire rating base with the expenditure it's used for?

- the per-section impost of DC's locally - some real data.

I shall be asking for speaking rights, and hope that others will do the same sort of exercise for their own Taxation Grabbing Authority.

The price of Liberty is Eternal Vigilance....

> "On the “tolerance front”

> "On the “tolerance front” and to digress for a moment, I will never forget the experience of an Albanian taxi driver in Houston, who’s English was poor and knowledge of Houston’s streets was pretty much on a par with the writers Albanian language skills!"

The writer's English language skills could maybe use a little work as well. "Who's" should be "whose" and "writers" should be "writer's". Also you need another "whose" between "and" and "knowledge". Sorry to be pedantic, but the sentence seems a bit ironic.

<i>Christchurch with a median household

Christchurch with a median household income of $52,100, house price median should not be exceeding $156,300 (not the astronomical September Qtr ’09 figure of $319,200) and new starter house and land packages on the urban fringe, should be going in at a Median Multiple of 2.5 or around $130,250.

Hugh - what is your 'best bet' of the current costs of the new starter house and land packages on the urban fringe .

Is there any way you can show how this can be achieved in NZ?

The proof is required, otherwise your message gets lost in a swathe of 'can't build a house for that/land too expensive' arguments.

Is it possible to itemise the costs and potential savings areas?

Manufactured housing of 160 square metres on large lots was being put in place for $US73,000 – $53,000 for the manufactured house and around $US20,000 for the serviced lot. $US331 per square metre manufactured unit construction – $US456 per square metre all up (land and manufactured house).

This is achievable in NZ, if so, HOW? I suspect that you are much better connected and able to 'prove' this than most. There will also be knowledgeable builders who might want to try creating a budget.

Otherwise it all gets put in the 'too hard' basket (bit like 'financial regulation').

KWJ - I did mine

KWJ - I did mine 5 years ago, 135 sq/m fr $50,000 ex labour. I reckon I could still pull off the same sq/m including labour for under 100,000.

land, of course, is another issue. As Mark Twain noted, they're not making any more of it.

Great article Hugh. I like

Great article Hugh.

I like your analogy of Americans going on cruises while Christchurch families struggle to make it to the beach. Yet it is so true, that if you spend all your income on your home / you have nothing left over for yourself.

The problem now, as I see it, is that for the market to de-leverage the current home owners and more importantly banks would be out of pocket. I have no sympathy for either of them, but they make up a powerful group to lobby the Government.

So why would anybody even think of building a house for a better price?

So it's the councils fault

So it's the councils fault restricting land supply so they can get more money for it and no doubt lining their pockets in legal ways of course.Also leaky houses allowing developers to build houses with the cheapest crap they can find to maximise profits.So come the revolution atleast we know who to shoot.

So do you want to

So do you want to try PDK?
I'm sure Hugh would listen.
Imagine your knowledge/interests put to use housing people!
12v lighting - grey water recycling, solar, thermal efficiency etc.
What a great service.......

So - short of land in NZ?

Yield a bit - lets try and grow a tiny bit more - but in a slightly better way than we seem to have done so far.

Funny how 100 year old

Funny how 100 year old Rimu and Matai boxes on piles with aussie grade iron roofs and verandahs all round...are still standing...but the garbage designed by architects and approved by govt clowns in the 90s are in a rotting pile of mold and soggy Rubarb.

Unfortunately most councils are not

Unfortunately most councils are not making it easy to build medium density inner city housing either.

Houston is completely different from NZ. Maybe if we lived in a big flat desert attached to a developing country we could meet those buid prices. Some of the other 100 affordable markets may be more applicable.

PDK numbers are correct. 100k house build, 100k land, 50k infrastructure (roads pipes cables), 40k council, 20k interest. Sell for 350k leaves 40k for developer as a best case scenario.

Indeed Wally. I see from:

Indeed Wally.

I see from:

http://www.dbh.govt.nz/building-construction-costs-indices

...that NZ contruction costs are estimated at NZ$1300-1400 psm which is 2x the amount being spent in Houston (in NZ$). Now I realise the specification matters (as do a number of other factors), but by a factor of 2x? (note, I have no idea what's included in the DBH numbers).

1. Blame the RMA... 2.

1. Blame the RMA...

2. Economy of scale. A quick visit to Bunnings store in Oz, you will notice that most consumable items they have there are 20% cheaper than NZ (even with exchange rate). Also a family member in Brisbane recently built their house, $258K was total cost for a 280 sq m house and that with 30 sq m pool (excl. land)

There is a massive expanse

There is a massive expanse of land available for development in CHCH - just drive up to the top of the port hills and have a look. What you will see is a small city with water on one side and the Canterbury plains (flat) on the other, stretching as far as the eye can see. Drive for 10 minutes out of Cathedral Square and you will be surrounded by endless flat fields where the only residents are grass munching cows and sheep. Yes it is true that they are not making any more land, but we have a long way to go before using up a fraction of what we have.

It's all locked up by

It's all locked up by the Airways Corporation flight paths, Sam! We can't have new development under those nasty noise corridors, can we.

I think that where the

I think that where the skin heads are not Airways Corporation flight paths

Great article Hugh. However until

Great article Hugh. However until the entire membership of CCC are replaced, especially the Mayor, ChCh housing will remain severely unaffordable for a long time. I would especially like to point out that the ChCh Airport, 75% owned by the CCC, are one of the main objectors to housing development, not only in ChCh but also in Waimakariri and Selwyn. They use all their financial clout to hire very expensive legal people to challenge any development within 30 kms of the airport, thereby sterilising a lot of good housing land. Unfortunately most developers can't afford to take the Airport company on at their legal game because of the costs and time required.

Excellent Hugh, I take my

Excellent Hugh, I take my hat off to you.

For the record - as

For the record - as the John McCrone who wrote the article - I am well aware of the SmartGrowth vs sprawl debate, having written about it frequently (including quoting Hugh). And also the wider reasons for leaky homes.

As a journalist, I was reporting on one person's opinions (made topical because the previous week I had pointed out that this famous architect had designed some complexes with problems).

Personally I think the house price issue is complex. It is not just an artificial restriction on land availability but also the fact that artificially cheap money from the banking system got pumped into the only commodity ordinary people felt they could trust.

From firsthand experience: 'manufactured housing'

From firsthand experience: 'manufactured housing' is the pc marketing term for what most New Zealanders will know as trailers (as in 'trailer parks'). They are pretty lightweight constructions, which can look nice enough when new - but need a significant commitment to maintenance from an early stage.
Construction in Texas is also an industry densely populated by cheap Hispanic labour, many of whom are paid minimally with no benefits like health cover.

Hugh once again great stuff

Hugh once again great stuff as for the Christchurch City Council social engineers the only solution here is for the city to elect a Mayor and councilors with a some sound commercial background and to sack all of the indoctrinated planning staff and start from scratch. It’s an embarrassing mess a disgrace with the poorest being screwed by the system. The planning bureaucrats carry on as if Christchurch is a huge city set in the middle of a land scarce part of Europe rather than being equal to a couple of suburbs of Sydney set in one of the most sparsely populated parts of the developed world

The current Mayor and councilors are commercially naïve visionless yes men to ideological bureaucrats who are hell bent on empire building.

The Christchurch City Council is one of the largest entities in the Sth Island its very poor planning choices around housing represents a major economic impediment to the regions growth.

I hereby publically nominate Hugh Pavletich as a mayoral candidate for the forth coming local body elections.

Andy, Nicholas and Sam: There's

Andy, Nicholas and Sam:

There's plenty of land on non-productive soils well away from flight paths near Chch.

Consider Prestons (CCC Plan Change 30, just notified).

The beautiful thing about Prestons is that it's exposed the CCC's cherished 'Urban Development Boundary' as little more than a red squiggle on a map, possibly drawn up after a planners' well-catered luncheon. The Sec 32 assessment, in particular, makes delicious reading, as the Reluctant Plannerista are forced to concede that in most major assessment areas, Prestons makes perfect sense And complies with the intent of the RMA.

That Urban Boundary can be seen as being a bit like the Sykes-Picot line which, drawn up on a napkin over a boozy lunch in the middle of WWI, divvied up the ME, and has been a pain in the proverbial for - oh - about a century or so.

But I digress.

Prestons will succeed: especially when you consider that the promoters (and sole landholders) are a JV of Foodstuffs and Ngai Tahu....and guess who's building the CCC's nice new HQ? But hey, just business, no politics, eh?

Y'all could do worse than read the planning docs, make a positive submission and say 'Right on, Chaps. Let the Land Supply Burgeon!'.

And John (welcome, and are

And John (welcome, and are you the JMC who wrote 'The Ape that Spoke'?).

I'll recycle for the umpteenth time some old Lord's view about the 'complexity' for your edification.

Elle Don't worry you wont

Elle

Don't worry you wont be the first to realise that Hugh has a history of not letting the facts get in the way of his point of view

N

What a ridiculous suggestion from

What a ridiculous suggestion from Elle, Neven911 doesn't make himself look at all credible by seconding it.

As I have said before in arguments with lefties like the Pommie Communist Ian Abley, their one biggest fear is functioning free markets that clearly benefit everyone, even the worst off. There's nothing like unholy alliances of big business and corrupt bureaucrats and politicians to ensure plenty of oppression, exploitation, ripping off, and increasing inequality and disadvantage. But it ain't the free market, and don't blame the free market.

John McCrone of The Press

John McCrone of The Press - Many thanks for your comments.

The Demographia Surveys however prove that open housing markets, where fringe land supply is not artificially restricted, do not inflate. Instead they ramp up supply to keep housing affordable. With respect - may I suggest you study closely the comparative performances of Texas and California.

Then ask yourself the question - why did Texas housing stay at 2.5 times household income through the era of easy money?

I really do hope you guys at The Press start winding things up in this sleepy old town.

It sorely needs it.

When I was President of the South Island Division back in the early 1990's, we had an enormous amount of fun, with The Press reporters taking a strong interest in local politics. The grumpy old super sleuth Greg Jackson ofThe Press staff did an enormous amount of truly great work at the time (he later sold his soul out to then Mayor Gazza... he.... he). Former Councillors Derek Anderson and David Close tell me now how much fun it all was.

The good people associated with the Council actually appreciate this interest being taken.

i have every confidence these problems can be sorted out. But its going to take the full on participation of you guys in the media for this to happen.

Thx, waymad. We've been away

Thx, waymad. We've been away from Chch for a wee while, so have missed the 'up to date' on Prestons. Last we saw it was in conflict with Bob Robertson's Pegasus Bay, and looked like it would be stalled till' that one' was out of the way. But all good news! It's the obvious 'hole in the map' that you describe and a re-routing of the highway through the old Belfast freezing works makes sense now.

Hugh Pavletich is a good

Hugh Pavletich is a good man. This is how "Civil society" functions. Honest concerned citizens devoting time and money to keeping the politicians and bureaucrats honest. Ask yourself, where would it end if there wasn't people like this?

Waymad, identifying 7% of ratepayers money buried in local body accounts. Another good example to us all. My pick is that it is related to some debacle in transport or urban planning, which are politically correct sacred cows and not to be impugned.

"why did Texas housing stay

"why did Texas housing stay at 2.5 times household income through the era of easy money?" because no one wants to live in Texas.

Another tip to John McCrone

Another tip to John McCrone of the Press; take a look at the adjacent threads and see how some Aussie journos are starting to apply the heat on this issue.

Bernard Hickey himself is obviously starting to "get it".

http://www.interest.co.nz/ratesblog/index.php/2010/03/30/top-10-at-10-ir...

shorts Says: March 30th, 2010

shorts Says:

March 30th, 2010 at 1:21 pm
“why did Texas housing stay at 2.5 times household income through the era of easy money?” because no one wants to live in Texas......"

DUH.

Show your ignorance, pal. If you actually followed Hugh's arguments like some of us have for years, you would know that Texas is the USA's "growth State". Fact.

Wow - I was only

Wow - I was only joking. Show your lack of humour, pal. But obviously I must have been close to the mark to get a response like that.

I refuse to worship at the alter of Hugh, nor believe anything just because he decrees it.

Wow - I was only

Wow - I was only joking. Show your lack of humour, pal. But obviously I must have been close to the mark to get a response like that.

I refuse to worship at the alter of Hugh, nor believe anything just because he decrees it.

powerdownkiwi Says: March 30th, 2010

powerdownkiwi Says:

March 30th, 2010 at 9:53 am
"KWJ – I did mine 5 years ago, 135 sq/m fr $50,000 ex labour. I reckon I could still pull off the same sq/m including labour for under 100,000.

land, of course, is another issue. As Mark Twain noted, they’re not making any more of it."

Full marks for the first part of your comment, PDK.

But URBAN land? Come ON. The only lack is induced via urban limits.

Robert Shiller did a good analysis of this a couple of years ago, I keep posting links to it when this argument comes up. Farmland around the world is all worth, per hectare, amounts within a range which is far, far below the values of land within Western cities urban limits. The exceptions are the cities without urban limits, or without limits tight enough for supply to be "cornered".

NZ is about 1.6% urbanised. Had we had no limits, we might have "sprawled" another 0.05%, but we would have no housing bubble, we would have $30,000 sections and we would have nationwide house price median multiples of around 3.0. This would have lost us around 0.001% of our farmland.

The argument about cities needing to be surrounded by flat land before Texas results can be achieved, is nonsense in this light.

I apologise, Shorts. I wish

I apologise, Shorts. I wish I had picked that that was humour. I "get" what you mean. But it comes up as a sincere argument so often, how was I to know?

It has been said that Texas' huge inbound migration for the last 20 years, means that Texas is no longer "full of Texans" like it used to be. So it is growth with a kind of a self-sustaining momentum, eh.

Hugh, I think you missed

Hugh, I think you missed the point of Peter Beaven's article.

He was criticising the quality and design of many inner suburban/ central city infill developments and lamenting over how it cost a lot more to build a quality inner city townhouse/flat than it was actually worth. Hence the conundrum of the low quality buildings being built right now.

This seems to be a point you've missed. There is no feasible way whatsoever that you could produce new housing of the size and type you're suggesting (even if you were given a greenfields site for free) develop roads, services, fees and fully finished 120m2 (say) 3 bed houses plus a separate garage and landscaping for much less than $200,000 (finished house only say $130,000). Throw in developers risk, margin, holding cost and selling fees and you'll need to add another 20%. Then add the undeveloped value of the land. Good luck producing this for under $300,000.

Income multiples might be a nice theory, but if you can't possibly produce new houses at those levels you'll never have existing prices adjust to get back into line with your "theory".

You quote Christchurch median income as $52,000. Stats NZ give the income for a Canterbury male as $47,500 (full-time equivalent $52,600) and a female as $31,000 (full-time equivalent of $40,700).

So an average couple in Christchurch both in full time work gets $93,300PA, that's an income multiplier of 3.37 (based on the last 3 months REINZ median of $315,000). Is that unaffordable?

Remember in ChCh an average $315,000 will buy you a very good property. For that money you can get a good sized character house on a full section in good (maybe renovated) condition in a reasonably good central suburb (the sort of thing you'd pay $700,000 for in Auckland, or $A1.2m in Melbourne).

Peter Beaven is right, if you can't produce a quality house for less than what a similar existing house sells for then prices will have to go up. This is especially true when demographic demand for housing is increasing while net supply is low.

My wife and I are

My wife and I are typical young(ish) professionals for our area. Our household income is $170K. We bought a well built, modern 3 bedroom 2 bathroom 180m2 home on 700m2 in the Eastern Beaches for $470K in December 2008. We could have paid $800K to buy something half as nice in Remuera, but didn't see the point.

"Oodles of land supply in

"Oodles of land supply in Christchurch"? Have we learnt nothing from other civilisations that built cities on their best arable land? Oh, sorry, I forgot - we're that polluting country that sells ourself as 100% Pure.

@Chris - I didn't have

@Chris - I didn't have room to fit it in the article, but Beaven did say that of course high CBD land prices were all part of the story of why it cost a lot more than $300k.

He is not ignorant of the issues, just highlighting yet another not really told part of the story.

@Hugh - The UDS and densification seem to get overwhelming popular support in public surveys. Agreed, the public maybe being asked stacked questions and not understanding the wider arguments.

And indeed, why aren't these things mayoral election issues? I am planning some articles on what should be hot election topics like this, but the media can only push issues uphill so far if the voters aren't really that bothered.

@ Waymad, I did write The Ape That Spoke and a few more. That Rees Mogg link was broke though - what was it about?

Some good comments over here

Some good comments over here about the same issues

http://www.interest.co.nz/ratesblog/index.php/2010/03/30/top-10-at-10-ir...

cheers
Bernard

(1) Chris - allow me

(1) Chris - allow me to touch on some of the points you raise.

Firstly, the 3.0 Median Multiple is well recognised as the ceiling for an affordable market - and it really is just a matter of working back from there, in assessing how individual markets are performing. This is why too, I have gone on like a scratched record with the "affordable market" definition.

The numbers simply speak for themselves. These are not theory, or hugh Pavletich views, but are "reality". This use to happen in NZ and is currently happening in North America.

These developers / builders will amaze you if they are allowed the right conditions to put in place affordable housing. Competition will see to that.

(2) John McCrone - good point about "local views" but I have seen more than my share of local sauthority sham consultation over the years.

The reality is too that local government / planning issues bore most people to tears, which tends to allow the zealots free rein. There are real issues regarding the quality of information the public gets on the performance of local authorities as we know. Hide the LG Minister for one is acutely aware of this, as are many others.

Much of this debate on these issues these past five years has been happening on the internet. I think it would be fair to say that the MSM has not been as active to date - with some notable exceptions. Hopefully however this is changing.

(3) Bernard - many thanks for directing us to the other thread where Philbest makes some most iinteresting comments. PhilBests research capacity is simply remarkable.

Best regards to all,
Hugh Pavletich

two things overlooked here -

two things overlooked here -
1) architects design less than 5% of housing and
2) cheap land on the perifery is cheap partly because of the high transport costs and secondly the lack of facilities.
no-one is ever going to force land costs down.
a decade or so ago, the formula was to build a house worth 3 times the cost of land, this sure doesn't apply now.
and (good grief) it is IMPOSSIBLE to build cheap housing with the current (and rising) compliance cost!

I am an Architect -

I am an Architect - and reject your assertions that Architects are ignorant of the economics driving house prices. Individual Architects, as with any professional group, will have different political outlooks and priorities.

It has long been recognized that constraining urban sprawl pushes up land values.

Whatever my own viewpoint, the argument goes that this is quite appropriate - the extra cost is simply the monetization of the costs to society & the environment of urban sprawl that can not otherwise be recognized by the market.

Markets can only ever optimise supply and demand for individual participants, and are very inefficient at addressing wider democratic or strategic long term concerns. This is precisely why we keep retaining & electing systems of central government.

Where land use is unconstrained and prices are low, sprawl happens - therefore , outside places like Houston , society (via the ballot box) has presumably decided the social & environmental costs of urban sprawl have not been sufficiently factored in - i.e. the individual are getting affordable land, but at the expense of wider/strategic community & environmental concerns.

A bit like the trade off between allowing the market to determine the level of access to crack cocaine vs. imposing artificial constraints on supply - yes the price rises when constrained, in the hope that consumption drops.

That said, I would prefer to see the social objectives of urban intensification being pursued via elimination of compliance costs for the supply of high quality high density environments - perhaps eliminating rates and consent fees for such developments. Given that social objectives are a reflection of the will of the entire community, it is appropriate the the entire community pays for them, not just the poor suckers who happen to be building at the time.

Cheers

Paul King
Architect

PhilBest et al - maybe

PhilBest et al - maybe I should clarify the 100k you all agree with. That $50,000 was everything. Services, permit, sitescaping, the lot. You should have seen the discussion with the Council re permit fees - but when I itemised it, they were good.

About land, Urban Village is right - the other kind of right from the one I suspect you are!

Exponential expansion in 2D from a hub is a frightening phenomenon. You are witnessing the last great heaves the globe can manage in that regard.

Sorry, limits to growth and all that. Every thing we do and make takes energy, as too does maintenance. There is now exponentially more built infrastructure (much of it nearing replacement - think sewers under 100 year old skyscrapers) than ever, at the very time we've hit the peak of energy supply.

No simplistic two-worder (like 'free markets') will change that little piece of physics.

Which is why I went on down the track - in a little fit of positivity - to see how much could be done on/with how little.

But land - no, it's finite, and has other demands on it, one being to feed the folk you ostensibly want to site - ad infinitum - on the paddocks. That ends in the last doubling-time. Which is now, or nowabouts.

I've just been giving a lecture to a polytech architects/management course, and touched on 'embedded energy". You shoulda' been there.

:)

2nd attempt! - website timed

2nd attempt! - website timed out while trying to edit first one...

I am an Architect - and can very easily reject your assertions that Architects are ignorant of the economics driving house prices. Individual Architects, as with any professional group, will have different political outlooks and priorities.

It has long been recognized that constraining urban sprawl pushes up land values.

Whatever my own viewpoint, the argument goes that this is quite appropriate - the extra cost is simply the monetization of the costs to society and the environment of urban sprawl that are not otherwise recognized by the market.

Markets can only ever optimise supply and demand for individual participants, and are very inefficient at addressing wider democratic or strategic long term concerns. This is precisely why we keep electing systems of central government to address these things. At any time, society is free to change it's mind if a good enough case for change is made.

Urban sprawl has long been identified as a bad thing - particularly when landscapes are dominated for miles by low cost low quality low density urban environments. Readers need only travel through the suburban hinterlands of Sydney or New York to see this for themselves.

Good design can make any housing type or density more acceptable, however very few New Zealanders are trained to distinguish the implications of good vs bad (at least not before it is too late), and are seldom interested enough to engage others who can do so on their behalf - yet as a nation we tend to resent and complain about the depredations and impact on us of others who also fail to use good design - thus we vote to at least constrain the sprawl of bad design across our landscapes. A crude approach certainly, but as yet nobody seems to be proposing a sufficiently compelling alternative approach that will meet the same objectives

Where land use is unconstrained and prices are low, sprawl of low visual and urban quality builders box environments undeniably happens - therefore, outside places like Houston, society (via the ballot box) has presumably decided the social and environmental costs of urban sprawl have not been sufficiently factored in - i.e. the individuals are getting affordable land, but at the expense of wider/strategic community and environmental concerns.

A bit like the trade off between allowing the market to determine the level of access to crack cocaine vs. imposing artificial constraints on supply - yes the price rises when supply is constrained, reflecting an acceptable consequence where the objective is for consumption to drop.

That said, I would prefer to see the social objectives of urban intensification being pursued via elimination of compliance costs for the supply of high quality high density environments - perhaps eliminating rates and consent fees for such developments. Given that social objectives are a reflection of the will of the entire community, it is appropriate the entire community pays for them, not just the poor suckers who happen to be building at the time.

Cheers

Paul King
Architect

If only Mr Pavletich's article

If only Mr Pavletich's article had fewer grammatical errors. How is it that a man so sharp with his observations can be so "blunt" with his writing? One example among quite a number: " . . . Albanian taxi driver in Houston, who’s English was poor . . . ". Or was there no money left for an editor? I know it is pedantic, even unnecessary, but it annoys me.

Just a couple of points...

Just a couple of points...

1. By fringe land you mean the productive land that borders urban areas... the stuff that is still farmed, forested or otherwise put to agricultural use? Doesn't it make sense for councils to manage urban expansion in these areas? Doesn't it make sense to weigh the economic and environmental value of other land uses against the need for every kiwi to have access to cheap land? You sound like an advocate for LA type sprawl! Lets hope that in the long run you are proven wrong, and we can all enjoy the Canterbury Plains region as it is now - NOT chockablock with urban congestion, badly designed suburbs, poverty pockets and other "wish we hadn't done" thats.

2. New Zealand realestate is part of a global market and I wager that a lot of New Zealand, including parts of Christchurch are considered a lot more attractive for living then a lot of the fringe areas of Houston or other parts of the US. Just ask one of the Americans that have recently moved to New Zealand or spend every summer here.

I'm a kiwi living abroad. If I were to compare what I could by in NZ for the median Christchurch house price with what I could by here - well. Value-wise, Christchurch would win by a landslide. The point I wish to make is that there are a lot of overseas kiwi and foreignors who feel exactly the same. Godzone mate... you can't expect a piece of paradise for nothing.

If you mean, by buying

If you mean, by buying at the median Christchucrh price as noted by Chris-J as $315k, JB, I think you'd be quite dissapointed at what that buys you, whether it be Christchurch or wider metroplitan New Zealand. An 'investment property' for someone else to pay off for you to be sure, but not one that I fancy you would want to live in; and this in no way indicates that I think people have unrealistic expectations of their first, or even their sucessive houses. But rather what that $315k will actually will buy you at todays price/quality ratio.

Urban Village Says: March 30th,

Urban Village Says:

March 30th, 2010 at 2:03 pm
“Oodles of land supply in Christchurch”? Have we learnt nothing from other civilisations that built cities on their best arable land? Oh, sorry, I forgot – we’re that polluting country that sells ourself as 100% Pure."

And which is the most polluting activity for land? Suburbs or farming? Why do you think NZ has the first world's most polluted rivers?

Dave Launder, Paul King, JB.

Dave Launder, Paul King, JB. You all miss the point that land prices "step" up by a factor of 10, 20, 30 or more from outside the urban limits to inside the urban limits. Without urban limits, there is no "step", and the RAW land is worth about $1000 per section size.

But once there has been a bidding war between developers and speculators for the available land; and a bubble mentality has set in, and you have land being held (and paid interest on) you start with raw land at a whole lot higher price before you turn the first sod.

Yes, fees and development contributions contribute too.

All sorts of effects flow on when fringe land is several times too expensive. The section is now half the price of the total package of fringe new houses, instead of 10 to 20%. The small spec builder is pushed out by the burden of financing the land while he builds the house. That leaves the big boys freer to monopolise.

Land values tend to rise gradually from the fringe to the center, to be about ten times more expensive. We used to have $30,000 sections on the fringe and $300,000 sections in inner areas. Now the fringe sections are $300,000, what has happened to the inner area land values?

We used to have old rundown houses that were worth next to nothing as a house, and were still the cheapest option for buyers because the land was worth $100,000, or $150,000, or $200,000. (with rising convenience of location). Now, there is NO "cheap option". All those rundown old houses are sitting on sections "worth" half a mil and going up from there.

It is low income earners and first home buyers who have been hurt the most.

The inner area land values being higher, results in redevelopment to more efficient uses, like higher density living. But what happens when all values are pushed up to the extent they are by urban limits, is that redevelopment actually is slowed from what it should have been, because the resulting redevelopment even at higher densities, is affordable to far fewer people than it would have been before.

World Bank Economist Alain Bertaud is the leading author of studies on all this.

PowerdownKiwi, ".....Exponential expansion in 2D

PowerdownKiwi,

".....Exponential expansion in 2D from a hub is a frightening phenomenon. You are witnessing the last great heaves the globe can manage in that regard....."

I agree, but this sort of expansion is because of urban planning. A free market would result in a lot more employment located at the fringes, and lower average travel distances. Most of the planners "solutions" are actually solutions to problems they have created in the first place, and planners solutions to planners solutions only make things worse.

A free market would actually have efficient public transport operating without public subsidy. The subsidised monopoly model is nonsense if you really are about "efficiency".

You say: "There is now exponentially more built infrastructure (much of it nearing replacement – think sewers under 100 year old skyscrapers) than ever, at the very time we’ve hit the peak of energy supply....."

That is why densification in urban centers actually does not have a cost advantage over greenfields development. It is a lot more expensive to get at sewers under skyscrapers.

Paul King; "......Where land use

Paul King;

"......Where land use is unconstrained and prices are low, sprawl happens – therefore , outside places like Houston , society (via the ballot box) has presumably decided the social & environmental costs of urban sprawl have not been sufficiently factored in – i.e. the individual are getting affordable land, but at the expense of wider/strategic community & environmental concerns....."

Have you seen any study that says just how much land and house price increases are justified to factor in the "costs" of sprawl?

But this monocentric thinking is the main problem. A bit less zoning restriction, and decentralised employment, and the problem is solved. It never should have happened in the first place, only the social consensus back in those days was that separation of employment zones and living zones was a good thing. People WANT their quarter acre sections with trees and gardens.

Houston and places where land is cheap, actually have a lot greener suburbs and more green open spaces. It is simply what people want. It is all wrong to force them into high density living at high cost, and to assume that their loss of trees and gardens will be compensated by your nice planned parks and reserves. Your expensive "urban limited" land makes the parks and open spaces expensive too.

One of the commonest but

One of the commonest but least understood contradictions of Green advocacy, is this. In the advent of depleted resources and scarce, expensive energy, most inner city jobs will simply cease to exist. We might condemn the extravagance of the advanced US economy, yet we completely fail to recognise that millions of bureaucratic and paper-shuffling jobs simply cannot be supported by a leaner, simpler, "Green" economy. All those workers have to be fed, clothed and housed; and these things have to be provided by millions of other humans for whom inner city living is impossible.

Not to mention the sheer unaffordability of Manhattan for the most people. Not only do the inhabitants of Manhattan have jobs that would not exist without the extravagant, complex US economy, they earn the highest incomes in that economy. Manhattan actually represents the same sort of elitism as the ancient castle in which the nobility lived, surrounded by peasants who did the dirty work necessary to sustain the inhabitants of the castle in their utopian existence. When the peasants were forced by enemy action, to abandon their low-density living, the castle could not survive for long.

Furthermore, inner city living itself will become impossible in the brave new world of scarce resources. The same factors that will make free use of private vehicles less feasible will also apply to public transport. If we really do have to confront such a crisis, we will be forced to resort to freely mixed uses of land. The transport necessary for the support of modern living, particularly for the supply of food and necessities, will no longer exist; neither will the supplies of affordable electricity.

In the brave new world of depleted resources, what makes sense? Living in a wholly separate house with its own plot of surrounding land, where you can burn biomass to heat your home, cook on a barbecue, hang washing on a line, grow your own vegetables and fruit trees, collect rainwater, compost your own waste and recycle "grey water", keep fowls or even a sheep or two, and have solar panels all over your roof and a wind turbine in the back yard; and buy produce from nearby small farms, vineyards and cottage industries? Where does living in high density inner city blocks of flats fit in to this picture?

3YEARS ago I spoke to

3YEARS ago I spoke to a builder who had just finished a 136sq metre brick house,his cost 120K ON A FLAT SITE,excluding labour. It was then sold for 475K.The land cost was not more than 100K fee simple title.In that total it included all Landscaping ,carpets,fences .Of course the price of the building is paramount to the debate.

PhilBest - welcome to Cuba.

PhilBest - welcome to Cuba. :)

Folk like me have been pointing out for some time, that if you want to see where we are headed (note clearly, not where folk like me want us to head, but where folk like me see we ARE headed) study Cuba.

It's 50 or 20 years (depending on whether you count from US withdrawal or from USSR) that she is down the track.

Biggest moves we can make re housing at this juncture, is to acknowledge that the vast majority of our existing housing stock will be around when TSHTF.

Then we address energy and water and insulation of same. All energy is sun-derived (oil, hydro, wind, coal) and all transmission is a loss.

On-site capture, then, and of water too. Both should be legal requirements. Then you just gotta get the food distributed. Easy in comparison.

Hard to address such while folk are selfish/small-minded enough to vote for tax-cuts, and to think that growth is a desirable goal. We've got a lot of maturing to do as a society, and not a lot of time. Make that, no time!

Caveay emptor in spades.....

PDK, another broken record: there's

PDK, another broken record: there's 300+ years of transport fuels tucked away under Southland. Peak energy is a local, not a global, phenomenon. If you want authentic Doomsterism, try ol' Jim Kunstler over at CFN. He's got the real moves. And check out this for a real, shall we say - frisson. And remember, nuclear power is advocated by Stewart Brand - the original Whole Earth Catalog guy.

John McC - the Rees-Mogg article is about the four conditions for a housing bubble: I've quoted the salient bit below (another broken record).

1. license housebuilding, so that no one could build a new house without a licence, or even rebuild an old house or a redundant barn.
2. encourage developers to maintain large land banks in order to benefit from rising prices.
3. leak out new permissions only after long periods of delay.
4. combine this with an unlimited flow of mortgage credit and relatively low rates of interest.

If you restrict supply below the market clearing level and increase funding, you will inevitably create a bubble and you will lock people out of the market.

Also, it's worth checking out Peter Cresswell for his Libertarian take in 'why do we need housing inspections at all?'.

While those views are at one end of a wide spectrum, I note that as recently as 2002, it was possible to buy run-down beach shacks in New Brighton under $50K. What happened? A 'free credit' debacle inspired by an economically clueless Gummint. Rock up to WINZ, claim poverty, get handed $100K with few strings attached. Instant market reaction: add $100K to all prices throughout NZ. Instant wealth transfer to existing home sellers, funded by every first home buyer, and a new, much higher floor slipped under all house prices. And prices are notoriously sticky on the way down. Poor first-home buyers helped by this here Policy? Less than 2,000. Cost of Policy for the rest of us? Guess in the billions.

Paul King - Architect It

Paul King - Architect

It is most interesting having an architects perspective on this thread. But with all due respects i think you have a very poor understanding of urban economics. This is a major weakness of the profession of architects.

Artificially ramping up raw fringe land costs from say $20,000 per hectare to a million through two million and beyond (when the inappropriate levies and development charges are added in as well) cannot be justified in any way at all.

Just loook at the bubble carnage in the stangled markets of the United States - California in particular. there are other bubbles to pop as well globally of course.

As you are possibly aware, i have been a commercial property developer for some 30 years. Within the industry, architects have become increasingly marginalized and have allowed the engineering profession to dominate. This has happened because arhitects do not appear to have the skills to design cost effective structures. They have become pretty much "decoration sub consultants" reporting to the lead engineering consultant

As architects roles have deminished, they have become increasingly politically active. In other words - since they are failing to get market support, they have instead sought political support to impose their views on the community.

May I suggest you discuss this serious issue with your fellow architects.

Besr regards
Hugh Pavletich

We don't need more sprawling

We don't need more sprawling suburbs in New Zealand. They only serve to increase our dependance on dwindling foreign oil supplies (to power the cars commuting from the satelite townships to the cities) and they take up productive farm lands.

The only exception to this would be the introduction of sustainable towns which were planned with sustainability in mind along with the concept of peak oil (which even the oil companies agree is going to change the way we use energy). Check out the book 'The Last Hours of Ancient Sunlight' if you need more convincing.

So, I guess your saying

So, I guess your saying "take the city ( and it's businesses) to the suburbs", Carlin, which appears to fit in with what Hugh is advocating. Take 'the work' to the fringes, and commuting diminishes? LA is a good example. There is no 'city centre' it's all about individual transport and suburban life + work.

Oh, Carlin, give me strength.

Oh, Carlin, give me strength.

Just had a converstaion with my neighbour, who has had, shall we say, a Situation with his latest (in a long string of) Building Inspectors.

Neighbour is adding a lean-to bedroom on the back of the house. Three sides, one along the side of an existing garage, one back wall, one other side wall, and an internal non-structural wall for a WIR.

Side wall along the garage is tacked onto an existing lined (inside and out) and braced wall. It's solid: 140x47's, dwangs everywhere, starts at a house corner (itself the strongest and best braced part of any wall). I know - I did it.

Inspector #1 looks at this wall, where neighbour proposes ordinary 10mm Gib lining. 'Oh no, must be braced! Braceline please'. 'But it's attached solidly to a lined, braced wall. Where's it going to go? And Braceline's far more costly'. 'Do you want your sign-off?'. ''Oh, OK'.

Inspector #2 checks this wall, notices the shower wall is unbraced (far corner of said side wall). Cannot use Braceline here. Wet area. Still needs to be braced. Get cute and expensive little metal bracket thingos as advised. Put them in. Tick.

Inspector #3 checks the WIR wall (last bit). This Must Be Braced! But mate, it's not structural. We know best, sonny - use 12mm ply, please. OK (mutter). Uses the shuttering from the concrete and quickly cover That with Gib. Tick.

# of inspections for this one side wall: 3 @$150. Extra costs with each inspection over that originally estimated as per approved plans: several hundred each vist.

Value of added bracing? Nil. Wall was structurally sound before any bracing at all, because of its linkage to the freaking original wall which has withstood wind, sun, rain and repeated impacts from small children.

Cost:benefit ratio - infinite, because benefit is zero.

Neighbour's core temperature: close to meltdown. I've talked him down (have to, because he has my Bostitch Big Bertha 100mm nail gun and I don't want blood on it from the next Inspector.)

That, folks, is yer building issue in a nutshell. All cost. Zero benefit.

Remind me again: (carefully avoiding Godwin), why do we need these hapless clowns?

And Carlin, Prestons is going to be on sand, presently growing thistles, broom and ponies. Productive, eh?

i recently renovated a house

i recently renovated a house in new york.here are a few costs to show the sort of prices you can buy prodcts for in america [in us dollars 6 months ago]double glazed french doors $225 new stove 230 airless spraygun 299 doble glazed double hung windows including arcitrave 79 new kitchen in white oak with laminate bench 1495 coke 16c a can .goood quality paint 25 for 4 litres .new gas central heating instaled 1000.strangest thing is the rents are the same as ours 200-300 a week

Guess who's back...back again...shady's back...tell

Guess who's back...back again...shady's back...tell a friend........

http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10635364

See if you can get an interview with him now Bernard or a bottle of wine or two??

Waymad - who's the broken

Waymad - who's the broken record?

I told you to find out about EROEI.

Please do so.

Then decide whether your sulphur-laden brown coal - one stage up from peat - is to be for 300 years of fertiliser (which is what it sounds like!), or for transport.

Surprisingly, it cannot be both.

And I've asked you before - 300 years at what rate of consumption?

Uninformed comments don't become real through repetition.

28 year old - in

28 year old - in my view, pathetic

Good to see Hugh is still championing the cause.
Good on him, but measures on both the supply and demand side will be needed

DEMAND SIDE
Restrict foreign investment on residential property
Toughen lending criteria
Restrict immigration to key skill shortage areas

SUPPLY SIDE
Allow for some limited expansion of urban limits
Allow for easier intensification
Change development contribution approaches, provide discounts / waivers for higher density development or peri urban devleopment that provides sustainable on-site treatment of stormwater, wastewater etc.

Bruce Greig and Waymad Firstly

Bruce Greig and Waymad

Firstly Waymad - the focus must be on making things as simple as can be for the Local government folks. Real real simple. Unless Im missing something - people do not go in to the local government sector because of their genius

Bruce Grieg - It would have been very much appreciarted if the architecture, engineering and quantity surveying professions could have followed up with the detailed pricing in the United States. After all - we have all been discussing these issues for over 5 blasted years now. Talk about a lack of initiative!!!

@Matt, totally agree on the

@Matt, totally agree on the toughening of lending criteria. Allowing people who were never going to be able to pay a loan back to take huge mortgages was rather criminal.

As for us, we have just built...45mn out of Chch. Why? Because after looking for a reasonably nice, large(ish) section for about 3 years we were sick of not finding anything at all and certainly were NOT going to pay a ridiculous price for it. Result: moved last month in a large, new (hopefully not-leaky) house on 4ha of land which (the land) cost us around 5$/m2. Sure, that was more than what we had in mind but hey, at least we've got something to show for it that has potential. We just got chooks for Easter to get our own eggs (the kids will love that + it'll save money and be free-range), a family milking cow and a few lambs are part of the plan, and we will be planting an orchard and firewood this winter to become self-sufficient in some areas (not to mention the food will taste better). We were initially driven out of Chch because of plain silly prices but have absolutely no regret now (and have a million-dollar view too). Plus it's changed since we first arrived in NZ 8 years ago.

Downside - Hubby has to commute to work for now. We're working on it so that he can work from home asap (our field is perfect for that and I am sorted in that respect already). So my 2 cents worth is...move out of the big cities to cheaper, within- commuting-distance smaller towns. If enough young-ish people "revolt" in that manner maybe whoever is driving the prices up will get the message???

Btw, we are foreigners although not investors (at least not in property). I am not sure that I can agree that immigration is bad regarding housing, although haven't researched actual figures.

Hugh Pavletich: My grasp of

Hugh Pavletich:

My grasp of economics is pretty reasonable, and as I have said, the profession cannot be stereotyped in the way you seem to want to - different architects think different things, just as different doctors think different things.

If you read my post carefully, you will see that at no point did I advocate constraining land supply. I simply explained the economics underpinning that approach.

I agree, the "bubble" is not justified in any free market sense - but as I carefully pointed out, it is being imposed on the assumption that the free market has got it wrong, because the free market cannot price in all the long term consequences of sprawl.

I happen to agree that prices are too high - A 10-fold increase in land values without a 10 fold increase in population represents a substantial opportunity cost and transfer of wealth out of productive activity into passive non productive assets, as well as impacting seriously on affordability.

While high quality high density environments can be fantastic places to live in, low quality environments are made even more miserable with high density.
Quality is, sadly , to a large extent a function of cheapness (or "cost-effectiveness" as developers like to call it) - cost effective developments are almost always the slums & suburban wastelands of tomorrow - a cursory look around Christchurch will demonstrate this.

Cheapness is a phenomenon that applies at all levels - but the largest negative impact is when developers try to save on design costs - design is the one intangible thing that can turn a sows ear into a silk purse - if the developer has a little vision & is smart enough to think outside the cheapest=best mindset

I would like to see other methods used to achieve higher quality of design in all our environments.

That certainly won't happen while developers fail to comprehend what good design is, and think of Architects as decoration sub consultants!
It also won't happen while too much of the value of any building is in the land.

Cheers
Paul King

Well, PDK, Fonterra's currently running

Well, PDK, Fonterra's currently running the Edendale plant (ED4 driers) partly on Mataura lignite. Works for them.

And funnily enough, just as Hugh notes about LG staff, resorting to hectoring is - well - a resort.

I don't recall urging 300+ years of what Jim Kunstler calls 'Happy Motoring'. But 30-50 years of SASOL would certainly provide the transition fuels we need to keep our happy little food-surplus-based economy humming along.

But as Ben Franklin said - 'if you can keep it'.

And, hey, PK - great advert.

Paul King, Thank you for

Paul King,

Thank you for your comments.

In my view the forced urban consolidation (sld as "smart growth") hs been caused in the main by local authorities not being able to cope with growth.

Im not sure you have grasped the significance of my definition of an affordable market and the importance of getting new stock on the fringes at around the 2.5 Multiple. As we both know, the stuff has been cranked up to 6, 8, 10 multiple, thanks to raw land prices on the fringe being hoisted 50 and 100 times their true value (not 10 times)East UK to digress for a moment, the raw fringe values have been cranked up a whopping 500 times.

As we become more affluent, urban densities should decline. You might like to read about that within Prof Solly Angels Intro to the 5th 2009 Demographia Survey. Indeed there is merit in taking the load off existing infrastructure as it ages. Its hugely more costly to overload existing infrastructure and shortening its useful life.

The quality of the housing stock in the affordable US markets is way above what we have here in New Zealand. The quality of my so called executive home here in Christchurch is not up to the standard of the $US140,000 starter stock on the fringe of Houston!

I hoe I made it clear within the article that ALL forms of development are helped if land is at its true market level and the critically important Development Ratios are respected. Then we will start seeing quality, as the market pressures will force this to happen.

With the greatest of respect, I do think that architects come across as "eletist'constantly prsing for better quality, without considering carefully why the system is simply not allowing this to happen. I do hope you encourage discussion of these important issues within the profesion.

I see no reason why we cant all work together here in New Zealand to see that this becomes a reality. Indeed it was thanks to the Planning Institute supporting the Demographia Survey back in 2007, that really got things rolling in this country. I will be eternally grateful to the planners for that.

Best regards,
Hugh Pabvletich

Loved the article Hugh and

Loved the article Hugh and a number of your points were also brought up by an economist in a very good BBC interview I saw about 1 year ago.

Well with the farms (dairy/vineyards) prices dropping by 40%, the fringe land will be cheaper, but the building costs are way to high that’s to the minimal number of manufactures (Fletchers). It would be good to see a few more and more supplies from overseas.

Although the building prices are coming down by the large companies..now $1100sqm for brick outside and tile inside. While Jo Builder is still asking $1600

On another note got a call from my mum in Aussie. Brought an apartment with the Rud government help and positive spin about Aussie was recession proof and now are struggling with higher interest rates, didn’t have the heart to tell he they are likely to go up further. Only moved in 8 months ago. Thanks Rud

Still looking for a lifestyle property and I’m seeing more and more listing in my bracket. Thanks to Hughs article I will wait a while longer.

rev,s-- kevie,s multiskilled---here,s an existing

rev,s-- kevie,s multiskilled---here,s an existing industry that they managed to wipe out in 12 months. i deal with these older company,s + they,re buggered--they,ve all been tarred by the same brush
http://www.couriermail.com.au/news/insulation-repairs-could-blow-out-800...

Rev;s - thanks for your

Rev;s - thanks for your kind comments - and the others too. Bear in mind, its a long haul exercise digging ourselves out of this mess. I have every confidence Kiwis are clever enough to do it though.

If its any consolation - New Zealand, of the 6 countries covered by the Annual Demographia Surveys, is way ahead of the others in getting on to these issues.

Dont get me going on those Australians pwilkie - it only brings the worst out in me!

Hugh Pavletich We architects may

Hugh Pavletich

We architects may come across as "elitist" to those who prefer second best - but to anyone familiar with the enormous difference decent design makes at any budget level, & what is so eminently achievable when clients engage genuine fully trained and Registered Architects (rather than "Architectural Designers" - which anyone can call themselves!), and then let them do their job! ... Rather than pulling in a tame "yes man" designer once all the strategic decisions have already been made, and the mistakes are already locked in.

We are painfully aware that building has become much more expensive as restrictions and compliance costs have increased.- remember every extra dollar spent buying land is a dollar the client can't spend on decent design - it hits us worst of all!

However may of us are still idealistic (especially the older ones, not so driven by economic efficiency), and accept our reduced incomes as the price of limiting degradation caused by developer quality sprawl. I am not one of them.

To be fair, I have passed through many suburbs in the US - and usually the result of sprawl there , as everywhere , is endless, banal and and bleak rows of tract housing where nobody walks any more - even "executive quality" tract housing is still tract housing, and still usually looks dreadful and run down 40 years later as those with money & inclination to do maintenance move ever further out of town...

Compare that with the superb urban environments and buzzing social interaction created in old or new world high density environments - Mediterranean hill towns, inner city apartment living in Barcelona or New York or Sydney , and you get a sense of why Urban Planners and many Architects, and indeed many ordinary well travelled & well educated people (is that elitist?) favour artificial constraints on the land supply
(Strangely, with even greater constraint, New York in my experience can actually be cheaper to live in than Christchurch!)

Excellent Hugh; a good look

Excellent Hugh; a good look at one aspect. In the end it is "too much money, chasing too few goods". Overseas lenders flood the market with cash and it's a bit like vomit in an eel pool: The big yellow-bellies go for the big chunks first.

Here in the Far North we have a perfect case study: We have a mayor whose primary occupation is building lots of pretty boxes for human warehousing. He buys up large chunks of space as front man for a syndicate of wealthy interests, then decides he wants to be a public servant. He campaigns on a "Great Society" theme generously funded by Real Estate agents and Property Lawyers.

Once elected, he uses public monies to create a fine urban plan, complete with state-of-the-art infrastructure to service the aforementioned purchased land. To pay for the new roads and service arteries he changes the rates valuations from land based to a capital based scheme that targets commercial ratepayers. Employers howl but existing homeowners are happy it's not them. New communities spring up and their denizens demand libraries, playing fields, schools, fire and police stations, etc. Property rates skyrocket and the Mayor is voted out. He returns to private life to find business has been very tidy in his absence. After all, he still has some directorships to occupy his free time.

Waymad - as I recall,

Waymad - as I recall, you're the one chucking the rhetoric around. The only thing Kunstler has ever done in my book, (he's just a rhetoric-chucker too) is to coin the phrase

"The long emergency".

Which is as apt as I've heard. When folk throw around labels like 'greenie, communist, doomer or redneck, I switch off.

Physics is the only thing. Have you got your head round Energy return on Energy Investment yet? :)

Thanks for the comments guys.

Thanks for the comments guys. keep them coming. I will respond this evening.

New Geography has just posted

New Geography has just posted an excellent article by Joel Kotkin that appeared in Forbes as well - "Dont mess with Texas". Its well worth a read. The comments make interesting reading as well.

pdk Have you looked into

pdk

Have you looked into the EROEI of the "300 years of lignite" claim?

N

300 years of lignite? What

300 years of lignite? What about peak coal then? (world production peak forecast for 2030).

http://www.tsl.uu.se/uhdsg/Publications/Coalarticle.pdf

http://www.abc.net.au/science/articl...13/2569143.htm

This would be off-topic, except for the fact that the base issue here is our capacity to correctly plan for future eventualities.

The problem with "market forces" as the universal solution provider is that they seem to operate with the short-term view. So they may create the right near-term responses, but not the mid-term, or the long-term, which may be different again.

We can see this in this thread.

There is a house price bubble and development constraints (plus free money) are the immediate issue.

There is the longer-term goal of densification as it is more eco sustainable.

Then there is the even broader view that it is all about to turn to custard because of peak oil and in that scenario, yet another ideal housing story seems correct - perhaps low-density sprawl again with everyone having space to grow food, etc.

Or then again not. This week, as it happens, I've been writing about the Transition Town movement, meeting the good folk down in Oamaru. A certain level of urban density seems needed to foster all the artisan skills required in a post-oil, post-growth, era.

http://transitionculture.org/2009/01/22/the-200-artisan-skills-required-...

Pick your event horizon and respond accordingly.

You guys going on about

You guys going on about running out of fossil fuels are such a bunch of technology pessimists. The world would have run out of wood and whale oil if we hadn't worked out how to use coal, and later, oil, and later still, gas.

We wouldn't have reached a stage of economic development at which we could set up the infrastructure for fossil fuels, if we'd put "sustainability" restrictions on wood use back in the year 1200. You guys are the greatest threat to progress in human history. In fact, there were restrictions on wood use pre christianity, not cutting trees down was a pagan religious faith requirement.

Malthus was wrong. Ehrlich was wrong. Julian Simon was right. People are "The Ultimate Resource"

http://en.wikipedia.org/wiki/The_Ultimate_Resource

Paul King and others who

Paul King and others who are getting an intelligent grasp of this issue:

As long as you abolished urban limits and kept land cheap, many of your other objectives would actually become easier to attain. Land has been driven up so much in price that it is now actually an obstacle to redevelopment of land to more efficient uses rather than an incentive. This is possibly the most important point the planning profession needs to grasp.

"Artificially ramping up raw fringe land costs from say $20,000 per hectare to a million through two million and beyond (when the inappropriate levies and development charges are added in as well)" as Hugh puts it, results in land closer to the center going from $200,000 per hectare to what? Ten million per hectare? You tell me. It sure cannot be anything other than quite a lot higher than the fringe prices.

There is a lot of difference between doing high density redevelopment on inner suburb land at $200,000 per hectare and ten million per hectare. You might argue that there is even more incentive at the higher price, to redevelop the land to more efficient uses. But this ignores the realities of the total amount of REAL INCOME in any economy. In practice, the enormously inflated land value is a more effective aid to incumbency than any NIMBY restrictions on redevelopment and "save our suburbs" movements.

What Alain Bertaud's studies identify, is the pent up demand for affordability results in higher density development, infill and cross leasing and so on, occurring at the fringes where land is "cheapest" (at, say, "only" a million dollars per hectare....!). The practical consequence of this, is a whole lot more people living a lot further out and commuting a lot further to their centralised jobs, than if they had been able to afford the more conveniently located homes of the past.

Hugh Firstly as a developer,

Hugh

Firstly as a developer, I agree that there are too many unnecessary costs and restrictions put on development.

But in saying that I can't agree with some of the arguments you present about "multipliers".

Obviously if you believe "multipliers" of 3 represent an affordable housing level then do interest rates have no impact on affordability? Surely the increase in "multipliers" in NZ from 1980s to 2010 has a lot to do with a shift in interest rates from average rates of close to 20% to below 8%?

But more importantly I have to question the data you use.

You didn't address my concern that according to Stats NZ two average FTE workers in ChCh would have a household income from wages only of $93,000 would is a huge difference to your $52,000 median, which is only about the same as the average income for a full time employed male in Christchurch. Intuitively the $52k seems too low if it includes all household income, who calculates this number? I can't find a data series for this on either infoshare (Stats NZ) or RBNZ.

The only regional numbers I could find are from the (StatsNZ) Household Economic Survey, which gives the average household income in Canterbury (from all sources) as $77,348 (June 2009 year). This gives a multiplier for Christchurch of 4.1.

[As an aside, Stats NZ give the estimate of 1,624,000 households and 3,378,000 working age persons, that’s 2.08 working age persons per household. In Canterbury, Stats NZ state that there are 334,200 employed persons out of 507,000 working age persons, which implies that there is 1.37 working age persons per household (an average of 0.73 of an “employed male” and 0.64 of an “employed female”).
As a very crude measure of median income take the average household multiplied by the median wage in Canterbury of $47,500PA for a male and $31,000 for a female which is about $54,500 for the median household and that is roughly inline with your number. However this is only the median income from wages, what about other income? Superannuation, investment income, government benefits etc (remember the way I calculated this assumes only the 334,200 employed persons in Canterbury get any income). Stats NZ give the figure for the figure for NZ in 2009 (HES) as about 71% of household income derived from wages. Hence extrapolate to the estimate of wages calculated above and we get an estimate of total household income in Canterbury at $76,700PA which is inline with the average household income given in the HES. This number seems entirely realistic and plausible whereas the number quoted in demographia seems far too low].

Anyway, is it relevant that household incomes for retirees, students, the unemployed etc (who either already own a house, purchased when they were working, but who now would never be able to obtain a mortgage) are used to justify that house prices are unaffordable?

So this has got me wondering about the accuracy of the other demographia numbers.

Let's look at Houston, we could have a problem:

Bernard, Hugh et al check this out:

http://realestate.aol.com/neighborhoods-Houston-TX/Houston/id-4835000

Houston, Texas median household income: $41,034
Houston, Texas median house price: $192,477
Houston, Texas home ownership 40%
Houston, Texas house vacancy rate 11%

Demographia 2009 survey gives Houston's multiplier a 2.9.

The above numbers give a multiplier of 4.7! Maybe that's why their home ownership rate is so low (40% compared with 70odd% in NZ). Also with an 11% vacancy rate the housing market bears no resemblance to Chch or NZ/Aussie markets which are much nearer full capacity.

So let's look at a few other randomly selected centres:

Los Angeles county:
Median house $606,375
Median household income $42,529
Multiplier 14.3!! Compared to 7.2 in demographia

Honolulu
Median house $1,048,626
Median income $51,395
Multiplier: 20.4!! Compared to 9.1 in demographia

Indianapolis
Median House $122,090
Median Income $45,866
Multiplier 2.66 This compares to 2.2 in demographia

Santa Cruz
Median House $740,664
Median Income $60,705
Multiplier 12.2 This compares to 6.9 in demographia

Detroit
Median House $26,300
Median Income $32,426 This compares to demographia at $53,600
Multiplier 0.78 (Remember Detroit's population has halved since 1950 and it continues to decline)

Obviously there are big discrepancies between demographia and what AOL.Realestate report. AOL seem to have very detailed and accurate numbers. I know that some of the data may be for slightly different areas (say LA county rather than the whole metro area) but can you explain the big differences in multipliers Hugh.

It appears that demographia has overestimated a lot of US income data which makes the multipliers look very low. While they have underestimated NZ income, making our multipliers look high. Is this the case?

Indeed looking at the sample of cities above the only thing that is clear from the total lack of consistency between multipliers is that affordability DOES NOT dictate multipliers - desirability, demand and supply does. Maybe a multiplier under 3 represents an undesirable city with a slow exodus of population and complete over supply of housing more than anything else? (Sound familiar Invercargill and Wanganui?)

House prices are clearly governed by forces other than just incomes and affordability. The single biggest of these forces are construction costs and new home prices.

It's all very easy for people to say you can build a house for X amount of dollars, and that efficiencies will reduce costs further. But of course the reality is that it costs a certain amount to build a house and if it was that easy to reduce the cost I think that I and a lot of other developer/builders would not hesitate to make those savings.

So here's a challenge for Hugh and anyone else that thinks they can build houses at super low prices:

I've got a number of vacant flat sections in Christchurch, if anyone can build me a fully finished quality 120m2 plus garage all done, all costs included, house for the $100,000 or even $120,000 that many of you suggest, then feel free to get in contact and sign a fixed price agreement. (This is to be for the house only on a fully serviced section, as I've already spent about $40,000plus per title just to subdivide excluding underlying land cost).

Continuing my comment for Paul

Continuing my comment for Paul King and Urban Planners:

You could have incentives for high density redevelopment, and as many pockets of reserve land as you like. As long as you had no urban limits and land remains cheap, you will be able to achieve a lot more in the parts of the city where it matters most.

The US cities with low land values actually have far more "green" everywhere for this reason. Compare the opportunity cost, or even the outright purchase cost, for Councils; between $200,000 per hectare land and $10,000,000 per hectare land.

Also, did you notice the comment from "Elle" above? Lifestyle blocks are, seriously, the new option for people who would have chosen to live on the "sprawling" fringe in the past.

For a few years, country towns were an option, but planners have now succeeded in getting collusion from the relevant jurisdictions to force up the prices there too. As some guy said above, you could buy a house at New Brighton for $50,000 a few years ago. He asks "what has happened"? What has happened is that even every little Hicksville in NZ now has development restrictions and limits, and the low cost farmland with which they are surrounded is now off the options list.

I think I'll pass on

I think I'll pass on those sections, Chris_J. Doesn't the District Plan come up for revision in 2011? I seem to recall that was the teaser for all those 10 acre life sentence blocks in all directions. Hold 'em till '11, then chop 'em up and reap the rewards. Maybe that's when the Great Land Bank will be unlocked, if so.

Paul King, I realise the

Paul King, I realise the big difference between architectural designers and architects. When we first started on our home building project 15 months ago we went to see four different architects. However we were told in every case that their fee was 10-12% of building cost.

The trouble is, we didn't have that sort of money to spend on top of land + services + building cost (so built with a building company whose architectural designer drew our plans as part of the fixed-price contract). The truth is, not many Gen X-Y people have that much money to spend on top of the other unavoidable costs to get better drawn plans (potentially, seeing how many "architecturally designed" houses have actually failed and leaked in the recent past).

It also doesn't sound quite right that since the house prices doubled, % fees are apparently the same as what they used to be. Surely, it doesn't take more effort now to draw the exact same house than it did before the property bubble? Why then not adjust fees accordingly (in other words, drop them to 5-6% of house cost and still make the same money for the same service provided)? Maybe then people like us who would have liked to get architect drawings could actually afford them (and you'd get more business)?

bernard hickey isn't the only

bernard hickey isn't the only one picking up on the selfish baby boomer theme...

relevant to this and to the intergenerational threads...

http://news.bbc.co.uk/2/hi/uk_news/magazine/8593210.stm

"..Surely, it doesn’t take more

"..Surely, it doesn’t take more effort now to draw the exact same house..." haaaaahahaha, oh well asked Elley...you can buy a good CAD programme off the shelf and with some effort draw your own plans up. Costs should have dropped massively. Just a big rort. That's why the house building firm was able to get the plans adjusted for no extra charge.

@Elley: 10 years ago we

@Elley: 10 years ago we moved to Christchurch. Bought a wonderful house off a developer who was upside down and enjoyed it for 4 years. We wanted to build on a life sentence block, and asked the architect of our current house to give us an estimate for something similar. We got quoted 20% of finished cost ( so your quote was good at 10-12%), but that would include his project management to 'save us the stress'. I did the project management myself and got a local draftsman to do the drawing, which included all the council rigmarole, and his fee..$1500. When I asked the architect,"Why so much?" He responded with "Well you'll be able to get so much more when you sell it because its an (architects name, here) house". I can't say it made an iota of difference upon sale.

@Wally, I am an engineer

@Wally, I am an engineer (albeit in a totally different field) and I love design so I did draw the floor plans myself (and only the floor plans!). The house that was built is pretty much exactly what I had on paper. Unfortunately I am not exactly handy with a hammer and I sure don't (or didn't until 15 months ago) know a lot about building, materials, roof plans etc. I wouldn't be too confident of the waterproof-quality of the house if I had drawn the house, even with a good CAD program but will keep the advice in mind if we ever build again!

@Nicholas, interesting to see that the %fee was in fact good. Still, it was a heck of a lot of money that we just didn't want to spend for maybe better drawings. I am hoping the quality of the house hasn't been affected and we do love the design (I drew plans for about 4 years before coming up with the ones we did use so a lot of thought was put into it).

Good for you, Elley. One

Good for you, Elley. One tip. Get a 3 D drawing/CG done ( maybe that's what you do!). I look at many houses that probably 'looked good on paper' that look a shade odd in real life. Maybe that's what the 20% avoids! Good luck.

@Nicholas, yes, we did request

@Nicholas, yes, we did request 3D drawings from the building company that allowed us to make appropriate changes along the way so that it wouldn't just be functional and suitable for our family from the inside, but also nice enough to look at from the outside. We have moved in now, and are very glad the building process is over (although it was probably as smooth as we could hope because of the huge amount of preparation we put into it and of the quality of the building company we picked, it was still stressful at times).

Our hope now is for house prices to halve so that our kids get a chance to have their own house too at some point (in the meantime we'll be saving hard so that we can help them getting it in case prices remain that unaffordable, which would be a real shame if you ask me).

Golly! Time for a G&amp;T,

Golly! Time for a G&T, after a comment like that Elley! Not only will halving help the children, but you as well, when you add to the brood and need to upgrade. It's surprising how few people 'get it' that house price rises only benefit speculators and down-graders. Now where's that Bombay Sapphire.....

Nicholas, we have 4 young

Nicholas, we have 4 young children so are not planning to add to the brood. Our disposable income has dropped enough as it is!! This is our 2nd (and last) house. We bought a "standard" 3-bed/1bath house shortly after arriving in NZ and didn't expect our family to go from 2 to 6 people in 4 years, hence the new one.

I figure that although our kids would get less money from selling it once we are gone if prices did halve, it'd mean they'd have paid much less for their own house so all-in-all, it can only be positive (less interest money going to bankers!!). I just don't think a situation where young people/families have no hope of ever owning a house (unless they get a mortgage so big it won't ever be paid off and they also end up paying many times the actual cost) is any good. Having huge mortgages seems to have become the norm here. Surely thinking it's OK to be in a lot of debt isn't in fact OK?

And finally I can't see how anyone can argue that houses are in fact quite affordable in NZ (if this is what Chris_J above was trying to demonstrate about Chch). They are just not, even for many well-paid professionals, let alone for "average wage" workers. I realise a big drop in prices would hurt some current owners who have little equity (and developers maybe but they shouldn't expect my sympathy) but in the long term surely it'd be positive to most people (although probably not much comfort for the said highly-mortaged home-owners)? Not that I know a lot about all these issues - I am an engineer not an economist - but it saddens me to think my (and other's) kids could be permanently locked out of home ownership unless we can help them financially (which we will make sure we can).

PhilBest - calling others pessimists,

PhilBest - calling others pessimists, then calling folk who think (?) like you intelligent, is interesting, but won't change reality.

If you don't understand that your kind of expansion is exponential, I can't help you. I would have thought the accelerating rate at which Chch is gobbling up the Plains was pretty obvious, as was the world-wide demand for commodities. What the heck - maybe it looks like an infinite flat planet to a Canty observer, (it's the only geometric form giving unlimited possibilities) but I assure you the rest of us think it's a finite sphere.

Waymad - great advert for what, exactly? If you think I do what I do for money, you misunderstand me bigtime, and you'd be wrong. Again.

Neven911 - yes, I did

Neven911 - yes, I did have a look at the EROEI of lignite a while back:

http://powerdownkiwi.wordpress.com/2009/10/19/gerry-brownlee-lignite-car...

enjoy :)

Chris J - May I

Chris J - May I suggest you communicate directly by email with Wendell Cox (refer email address at end of Demographia Survey) to discuss the Median Multiple methodology and the official sources, as Wendell is the demographer. Where you are with respect wide of the mark, is that you are not including the total consolidated metro areas or quoting from official statistics (e.g. US Census). I note the Houston example you provide covers essentially the core 2 million people, while the total metro area is around the 5.8 nillion mark..

Paul King - I too

Paul King - I too am an architect, we need to be careful that we aren't too defensive, as we like many other professions and sectors are partly responsible for all the problems we are debating here.

Perhaps a condition of abolishing urban limits could be that any development beyond the current urban fence must be designed by a registered architect. Now, of course not all architect's work is good, but in general I would say the standard is much higher than the crap that gets churned out on a regular basis by "architectural designers" (ADs). The ADs are fine for small jobs, its when they do bigger scale stuff that they frequently go wrong.

I am not opposed to some urban expansion, in fact I think there is no realistic alternative (higher density housing is necessary but will only go part of the way to meeting future housing demands). The important question to me is more how its done. I very much agree that I don't want to see vast tracts of crap identikit housing stretching forever. There need to be strong conditions around this urban expansion, aesthetic and environmental checks and balances.

Only philistines would want to see our cities spread in the typical ugly American manner.

Chris J - dealing with

Chris J - dealing with housing affordability measures

I am not at all sure you have read the extensive material on my website and that of Wendell Cox Demographia.

The major reason we got the Median Multiple based Demographia Surveys underway was to stress the importance of the relationship between household incomes and house prices. You would no doubt be aware of the technically unsound "Housing Affordability Index's" that had been floating around for years, that threw mortgages in to the mix, just to confuse people.

There is a world of difference between housing affordability (house prices and household incomes) and secondly, mortgage affordability. The two should never be mixed, for what are surely obvious reasons.

One of the "obvious reasons" of course is that the terms, structures and interest rates on mortgages can be manipulated and indeed have been over many years, as most industry people know.

Their only real purpose has been as a marketing tool for organisations.

Far better just to keep it simple with the Median Multiples and the incomes and house prices clearly shown. The Median Multiples clearly illustrate the health or otherwiise of an urban market.

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Elley: put wide eaves on

Elley: put wide eaves on yer house, and get a traditional builder to put it up. No probs with leakiness with a decent, simple roof (the more changes of slope, returns, valleys, projections through the roof surface and - quelle horreur - internal gutters, the more ways for water to wreak havoc).

A really good sourcebook for this design philosophy is Stewart Brand: "How Buildings Learn". Brand is the original Whole Earth Catalog guy, well worth a look.

MattinAuck and Paul King MattinAuck

MattinAuck and Paul King

MattinAuck I am concerned that you see some need for it to be mandatory that new fringe housing must be required to have an architect involved.

Why is it you think architects cannot compete out in the market place, but instead need political protection to survive? A welfare scheme for architects if you like.

We exist as businesses - whether we are developers, builders, engineers, architects, whatever - to meet our customers needs. It would appear to me the architecture profession is not going to get the support until it is seen as "customer focused".

Elly's and Waymads discussion above illustrates this very well I think. Elly was obviously let down by an architect.

Hugh - are you a

Hugh - are you a philistine or not?

If you are not then I would respectfully suggest that you would like to see well planned and designed communities on the the urban edge, rather than the usual market driven, poorly designed, mcmansion oversized tasteless dross. Unfortunately looking at the images of the houses on the Demographia website I suspect you favour this tasteless garbage

This has nothing to do with professional protection and everything to do with quality of environment

I could think of nothing more shameful than more Botany Downs style tack stretching out from our urban edges

but if it was nicely designed, well planned and laid out, and environmentally responsive, then maybe yes...

You frequently quote Joel Kotkin. What you fail to mention is that although he is supportive of urban edge development he also favours a strongly designed approach to this form of development, frequently referencing wonderful 1950s developments where nature and development were wonderfully intertwined

you need to realise that there are no black and whites in this world. For you to get what you want (abolition of urban limits) maybe you need to be humble for a change and realise that maybe a balance to that is greater control on design and environmental matters

Look at central Auckland apartments for what happens when the market is let to run with very minimal interference = 98% garbage, 2 percent quite good

MattinAuck I am working on

MattinAuck

I am working on the "humility problem" but like all the architects I know, it is an extrtemely difficult one for us all to master!

Indeed - in my last comment I attempted to be "humble" in suggesting that we need to put our customers needs first. And thats the way it should be.

Its a very dangerous game indeed if any of us set ourselves up as the arbiters of good taste. To me at leasdt, it is particularly odious if we seek political support to impose our aesthetic views on others.

I really do think architects let themselves down when they attempt to impose their aesthetic views on the community.

Both you fellows are way too hard on the quality of a lot of the residential development in North America. Much of it within the affordable and more affluent areas is by far the best in the world. Just compare it to the rathole garbage in the United Kingdom.

Its always worth bearing in mind that anyone in this country can set up as a developer. If both Paul King and yourself think the current bunch of developers are making a mess of things, why not get out there competing with them? The buying public will then tell you whether or not you are better meeting their needs.

Hugh My point on multipliers

Hugh

My point on multipliers in the US is simply that there is no consistency across cities. The fact that the US has a lot of sub 3 multipliers is simply because those are the cities that have large tracts of dilapidated or abandoned housing worth virtually nothing. This is indicative of either population exodus (Detroit and much of the mid west cities) or oversupply of cheap new housing (Houston etc). Creating large tracts of urban wasteland is hardly a good (or possible) strategy for NZ.

You still haven't addressed my point on NZ median incomes. Where do you get those numbers from?

You quote Stats NZ as your source on the survey. However Stat NZ give Canterbury's average household income as $77k not the $52k you quote.

You may wish to investigate this yourself as it goes to the credibility of the entire report and your arguments.

I'm not sure that it is possible to discount the relationship between house prices and interest rates. Interest rates and housing affordability are intricately linked and it is illogical to suggest otherwise.

It is simply not possible to produce housing at the prices you suggest, which makes yours (and others) argument for price falls illogical. Even the most efficient and streamlined construction process utilizing the cheapest imported Chinese products could not produce new housing at the prices you suggest.

The decline in affordability over the past 10 years follows a significant improvement in affordability during the 90s once interest rates were brought under control. I've outlined in other posts on this site that house prices in 2001 were the most affordable at any time over the past nearly 40 years. The reality is that with median multipliers of 4.1 in Christchurch and 5 in Auckland (based on Stats NZ actual household incomes), that NZ is far from the levels of unaffordability seen in many other centres.

Lifting planning restrictions and cutting council charges are good ideas, but it won't solve the problem. Right now, large numbers of sections sit idle in Christchurch because demand from home builders and developers is still muted. Even with many sections being sold below the developers original cost, there is still no demand because the price of existing houses are often too low to justify building new.

The target should be high council charges and levies which can add up to 15% to the cost of a brand new starter home in Christchurch. Even if these costs were cut to say 5% plus more land freed up for development, the savings on the cost of a new build would not be enough to effect any reduction in the cost of existing housing.

Chris J Thank you for

Chris J

Thank you for your comments. In response -

(1) The Demographia figures are from Stats NZ. I have asked Wendell Cox to respond to the points you have made regarding North American urban markets and Demographias Median Multiple methodology. You should have a response within 24 hours. I note that you have with respect to Christchurch household income levels quoted averages ($77k) while the median ($52k) is of course employed as a component of the Median Multiple.

(2) It needs to be noted that Demographia Surveys rate cities as (a) affordable (b) moderately unaffordable (c) seriously unaffordable and (d) severely unaffordable - as we recognise that no statistics are "exact". The reality is that New Zealand housing is considered highly stressed with the Demographia approach and others - such as current lending multiples.

(3) Large open growing urban markets in North America are affordable. Just three examples of many - Atlanta, Dallas Fort Worth, Houston. the "wasteland" comments you make are with respect nonsense, unless one is talking of basket cases, such as Detroit or the Inland Empire in California.

(4) When discussing the structural health of urban housing markets, it is indeed critically important to keep interest rates out of it. The Median Multiple (house price / income relationship) is a "clean measure" - because the figures are clearly shown. I have already made it clear that measures bringing interest rates / mortgages in to the "Index" have historically been manipulated and are technically unsound.

I will respond to the other points in a further post.

Hugh Pavletich

Continuing............ (5) You make the

Continuing............

(5) You make the point "It is simply not possible to produce houses at the price you suggest........". The reality is that due to decades of poor quality planning, our housing construction sector has been seriously degraded. By my estimates we are currently paying around double what we should be. It is clear to me you do not at this stage appreciate the significance of this. May I suggest you contribute constructively to this discussion by sourcing from the Texas market a breakdown of the elemental costs of say the $US140,000 fringe starter housing. I would have thought by now that following 6 Annual Demographia Survey other's in the industry would have shown some initiative and followed up getting this information. The Quantity Surveyors in particular have shown no initiative and have not contributed at all to date. It's long overdue they did.

(6) Interest rates and housing affordability have very little relationship. Why did California exceed an 8 Multiple, while Texas stayed at 2.5. Same interest rates in both States. The reputable international research is clear on this. I have provided hyperlinks to it within the article.

(7) You should know the significance of Development Ratio's (you are a Christchurch subdivider - am I correct?) and that these are currently seriously out of whack in New Zealand. Can you enlighten us on the vast amount of sections available in Christchurch and their pricing levels please? To me at least the market is starved of affordable ones. Where are the $30 - $50,000 ones on the fringes of Christchurch? I am amused to learn that the prices of the existing homes in Christchurch are too low!

(8) Housing Stock Value to Gross Domestic / State / Area Product is also another good "check measure" in assessing if housing is affordable or not. May I suggest you compare Houston and New Zealand? I think you will find that we are way out of whack.

I trust the above comments aare helpful

Best regards,
Hugh Pavletich

Chris J - Hugh is

Chris J - Hugh is deluded
I absolutely agree with you (and Hugh for that matter) that freeing up more land and reducing development contributions costs is a good thing, and will help housing affordability to some extent.
But like you I think Hugh is in absolute la-la land if he thinks it is realistic to get the multiplier down to 3:1

And he looks at things very simplistically. Urban fringe housing may get the raw cost of housing down, but if the owners are commuting over an hour each day when petrol is say over $2.50 a litre in 3 years then the benefits of that lower cost housing are eroded in terms of the household's net financial position

MattinAuck Refer Schedule 2 of

MattinAuck

Refer Schedule 2 of this years Demographia Survey - Houston Median house price for Sept Qtr taken from National Association of Realtor data $US160,000 - Median household income from US Census $US56,300 - Median Multiple 2.9. You will note that prices have eased somewhat in latest Houston Association of Realtors report. i provide hyperlink within article.

Acceptable new starter stock is going in on the fringes at around the $US140,000 or a Multiple of 2.48.

I would suggest Chris J and yourself also go to my website www.PerformanceUrbanPlanning.org down the left column to the Harvard University Joint Centre of Housing Research Median Multiple Tables for major US metros since 1980 - and you will note that most metros since that time sat in the 2 MM range.

The reaction to this overwheling evidence (and this is only part of it) should be - what can we learn from this, to get our markets here to affordable levels over a realistic and reasonable time frame?

it needs to be borne in mind too, that if it wasnt for the Annual Demographia Surveys, people in this part of the world would still be clueless about the degree of unaffordability in this part of the world currently. Most from the property and finance sector have been in no hurry whatsoever to point this out to the wider public. Just keep pumping the prices and mortgage loads is the name of the game. And of course we had the economists peddling "inflation" as "growth".

What I would suggest you guys do (again) is get the professional organisations to show some initiative for a change and get a breakdown of the new build numbers in the affordable US markets .

This "dumb denial" of course was how the leaky homes situation came about. Putting it rather crudely - just because you are Kiwis doesnt mean you have to think like sheep. It is not against the law to use your initiative. Ms Clark is now in New York and there is no need to be afraid any more!

MattinAuck There is an assumption

MattinAuck

There is an assumption that everyone works in the CBD and has to commute. A lot of people tele-commute these days or work in fringe industrial and commercial areas.

cheers
Bernard

Bernard I think you will

Bernard

I think you will find that your assumption is an exaggerated one. There is merit in what you say, but I know plenty of people who live in outer suburban areas who still commute to the CBD or live on the North Shore and commute to say Manukau. And from my experience the whole tele-commuting thing is overated - many people have tried it, but find that the old face to face thing is by far the most effective way of communicating and working
I would still guess-estimate that significantly more than half of the people who live in outer suburban areas still make a long commute. But this is just my own anecdotal observations

MattinAuck - Bernard is correct

MattinAuck - Bernard is correct - and there is a wealth of research literature out there to support this. May I suggest you go to the Demographia website and start digging on this issue. Core employment is generally only about 10 - 15% and generally declining.

Urban areas are not monocentric. You really need to think of cities as a collection of villages ( I better be careful - Im starting to think like an architect), that over time develop spontaniously their own character. The diversity and potential diversity of them I find rather fascinating.

I have just read a

I have just read a couple of fascinating articles - one by Michael J Totten "Twenty years after the fall of the tyrant" on Caeusescu and Romania, which has a link as well through to another excellent article by Theodore Dalrymple (Dr Tony Daniels - who I have met incidentally) in City Journal "The Architect as Totalitarian" where he discusses Le Corbusier.

Lets just say in all humility (we developers and architects are working on this) that both these articles are excellent reminders of the dangers of imposing our aesthetic views on others - and rigging the political processes to make it happen.

Some reader might like to provide hyperlinks to these articles. My humble architect friends comments on these articles would be most welcome of course.

I understand that Ms Clarke while she was a lecturer at the Political Science School at Auckland University, did a study tour of Romania back in the 60's or 70's and came back positively enthusiastic about the place. Possibly some enterprising journalist might like to do some digging on this.

Hugh -yes I very much

Hugh -yes I very much undertand that cities are not monocentric, but the CBD still employs a very significant number of people
Also, multiple centre urban form does not imply that people live right next to the centre they work in. Mulitple centres often means that someone might live in waitakere but work in manukau
this still has significant commuting implications

Bernard Nobody commutes in auckland

Bernard

Nobody commutes in auckland thats why the motorways are so empty isn't it, Maybe we should suggest the authors of these studies blindfold themselves and walk across one

On a totally unrelated note could you enlighted us to why the New Plymouth district council is the largest dairy farm operator in Tasmania?

Neven

MattinAuck - you are correct

MattinAuck - you are correct to a degree but generally people gravitate to live near employment and services etc. The lower the density, the less the congestion as well.

Hugh "Gravitate to live near

Hugh

"Gravitate to live near employment and services"

Hard to do at 19 persons per hectare (Aucklands unchaned denasity sincve 1900)

"The lower the density, the less the congestion as well."

WTF? Is this on the basis that the denisity should be lowered by more roads?

Neven

Neven - yes. There is

Neven - yes. There is oodles of land - flick through to the hyperlink within my article above.

I will be "off air" until this evening - but keep the comments rolling in.

Michael Totten: "Twenty Years After

Michael Totten: "Twenty Years After The Fall of the Tyrant"

http://www.michaeltotten.com/2010/03/twenty-years-after-the-fall-of-the-...

There is a surprising lot of observation and comment in there about Bucharest's urban planners, including photographs.

And here is the estimable Theodore Dalrymple's recent column "The Architect as Totalitarian"

http://www.city-journal.org/2009/19_4_otbie-le-corbusier.html

Enjoy.

Paul King: ".....Compare that with

Paul King:

".....Compare that with the superb urban environments and buzzing social interaction created in old or new world high density environments – Mediterranean hill towns, inner city apartment living in Barcelona or New York or Sydney , and you get a sense of why Urban Planners and many Architects, and indeed many ordinary well travelled & well educated people (is that elitist?) favour artificial constraints on the land supply...."

GREAT, for those who can afford it.

Economist Randal Pozdena of Portland wrote a paper entitled "the New Segregation", on this subject. He was far too polite. It is the New Eugenics.

It baffles me that elitists can sneer at the aesthetic of suburban housing, yet they are unable to offer the 90% of the population who cannot afford their ideal, anything better. Don't kid me that your "affordable" "high density" planned urbs are better, aesthetically, health-wise, psychologically, or socially. I said "affordable" high density, notice. Because the urban limited metros happen to have "unaffordable high density", for the simple reasons of land economics that I explained earlier (whih argument you seem to be ignoring in the hope that it wil go away).

PowerdownKiwi; You haven't taken any

PowerdownKiwi;

You haven't taken any notice of the percentages I have told you, of NZ's land uses.

Robert Shiller did a good analysis of this a couple of years ago, I keep posting links to it when this argument comes up. Farmland around the world is all worth, per hectare, amounts within a range which is far, far below the values of land within Western cities urban limits. The exceptions are the cities without urban limits, or without limits tight enough for supply to be “cornered”.

NZ is about 1.6% urbanised. Had we had no limits, we might have “sprawled” another 0.05%, but we would have no housing bubble, we would have $30,000 sections and we would have nationwide house price median multiples of around 3.0. This would have lost us around 0.001% of our farmland.

At the international level, pressures on food production would have to push the cost of farmland up to equal or exceed the average value of urban land, before it could fairly be said that there was an imbalance of urban land against farmland. The evidence is the exact opposite. Farmland is worth only a small fraction of urban land. There is so much LESS urban land than farmland, that even the biggest conceivable increases in "sprawl" would erode the available amount of farmland by low single figure percentages.

Have you noticed, too, that the UN keeps having to revise population growth estimates DOWN, as birthrates fall in tandem with populations becoming modernised, secularised, and urbanised?

As an exercise in understanding motives, (this was on the BBC recently) a speaker at some environmental symposium posed the following question. If we discovered some magical source of energy that we could go on consuming with no harmful effects at all, would that be a good thing? 90% of the audience said "no", that would not be a good thing.

Hmmmmmmm.........

Paul King: "...(Strangely, with even

Paul King:

"...(Strangely, with even greater constraint, New York in my experience can actually be cheaper to live in than Christchurch!)"

Do you know what the urban density of New York is, overall, once the suburbs have dragged the average down from Manhattan's 30,000 plus per sq km?

Lots of interesting info on this HERE:

http://demographia.com/db-worldua.pdf

Auckland: 2200 ppl per sq km
Christchurch: 1900

New York: 1800

waymad Says: March 31st, 2010

waymad Says:

March 31st, 2010 at 8:51 pm
"Elley: put wide eaves on yer house, and get a traditional builder to put it up. No probs with leakiness with a decent, simple roof (the more changes of slope, returns, valleys, projections through the roof surface and – quelle horreur – internal gutters, the more ways for water to wreak havoc)."

And you know what led to the demise of eaves?

Expensive land, and regulations with plan-view-based ratios of structure to site.

Clap clap clap clap clap, give the regulators and planners another big hand, folks.

Matt in Auck Says: March

Matt in Auck Says:

March 31st, 2010 at 10:13 pm
"Hugh – are you a philistine or not?

If you are not then I would respectfully suggest that you would like to see well planned and designed communities on the the urban edge, rather than the usual market driven, poorly designed, mcmansion oversized tasteless dross. Unfortunately looking at the images of the houses on the Demographia website I suspect you favour this tasteless garbage...."

Matt, apart from the elitism and taste arbitration issues, most suburbs develop an appearance over time, with trees, shrubs, gardens, lawns, alterations, painting and so on. Most suburbs after 30 years are a beautiful sight. Sprawling cities like Houston are a beautiful sight. It is the planned concrete ones that are most truly repulsive.

In fact, urban limits and high land prices result in far LESS "green" than the alternative. Th next most repulsive sight after the concrete tombstones of the USSR, is the rows and rows of unrelieved houses, absent lawns and gardens and trees, of most English towns consequent on their 1947 Twon and Country Planning Act.

Matt in Auckland: "....Look at

Matt in Auckland:

"....Look at central Auckland apartments for what happens when the market is let to run with very minimal interference = 98% garbage, 2 percent quite good..."

NO, Matt, that is the result of the land being 50 times more expensive than it needs to be.

It was actually some temporary residents from Texas who ended up on Mark Sainsbury's show recently complaining about the poky, expensive inner city accomodation in Auckland.

....and there are of course

....and there are of course no leaky homes on South Islands West Coast.. No artificial land shortages with decent size lots / sections (no recession plane problems) and reasonable land prices.

I doubt there are many of them in the south of the South Island either.

PhilBest - many thanks for popping up the Dalrymple and Totten article links for readers and as always you extremely well researched comments. these are "must reads".

As more PhilBests emerge - Pavletich can be put out to pasture. 5 and a half years of this is (putting it diplomatically) - "adequate".

Matt in Auck Says: April

Matt in Auck Says:

April 1st, 2010 at 10:44 am
"Bernard

I think you will find that your assumption is an exaggerated one. There is merit in what you say, but I know plenty of people who live in outer suburban areas who still commute to the CBD or live on the North Shore and commute to say Manukau...."

And the main reason stopping employment devolving to the outer areas is?

Planning and zoning restrictions, , by any chance?

Chris_J Says: March 31st, 2010

Chris_J Says:

March 31st, 2010 at 10:58 pm

"......My point on multipliers in the US is simply that there is no consistency across cities. The fact that the US has a lot of sub 3 multipliers is simply because those are the cities that have large tracts of dilapidated or abandoned housing worth virtually nothing. This is indicative of either population exodus (Detroit and much of the mid west cities) or oversupply of cheap new housing (Houston etc). Creating large tracts of urban wasteland is hardly a good (or possible) strategy for NZ....."

What do you say about Northern England areas where industry collapsed just as bad as Detroit, 30 years ago, they still have 30% unemployment, they have third-generation welfare dependency; AND they have a housing shortage and seriously unaffordable housing?

How long do tracts of abandoned housing last, when prices are allowed to fall and redevelopment and economic rejuvenation is not obstructed by regulations, militant unions, or corrupt administrations? Detroit's cheap housing is great for the autoworkers who still HAVE their jobs at $40 per hour plus perks and super worth another $30 per hour. This is how golden-egg-laying geese get killed.

Hugh, How can you deny

Hugh,

How can you deny that Houston, Atlanta etc have huge urban wastelands, much in the same way that Detroit has it's "urban prairies". Take a look at the greater fifth ward in the central city of Houston if you want an example. City blocks of 12 x 800m2 sections are often occupied by as little as 2 or 3 scruffy houses on broken up unkerbed streets, the rest of the land is often just scrub or wilderness (remember this is flat land).

Take a look at Atlanta. The metro area is 21,000 sq km that's 8% of NZ's total land area or double the size of Fiordland National Park or more than the entire Canterbury Plains. Atlanta's metropolitan area has just 1 occupied household per hectare. Auckland has 5.2 households per hectare which when you exclude public areas, roads and commercial property probably equates to something like an average 700m2 per houshold. Atlanta probably equates to something like an acre per household.

Back to my main point about Stat NZ incomes. What survey or dataset from Stats NZ have you used because I can't find one that says the median household income in Canterbury is $52,000. I can believe that the median household income from wages only is $52,000, but not the total income when Stats NZ produce a figure for the average household income at $77,000.

Given that the minimum household income is probably $18k say (single pensioner or a couple on benefits) [excluding those business people who made big losses last year!] Say this is 10% of households. Then consider those families on benefits or couples on Super or flats with 3 students on student allowance, they may get $28k average say. Say this is a further 10%. We also know that only 9% earn more than $70k. So households above $140k aren't likely to total more than about 9% say. We also know very few households earn over say 300k as those that do are likely to have earnings in different structures and not pay personal income tax on those structures. So doing a back of the envelope calculation to work out a rough income distribution we might have something like the following:

Proportion Annual
of Households Income
10%_________$18,000.00
10%_________$28,000.00
10%_________$40,000.00
10%_________$55,000.00
12%_________$70,000.00
13%_________$85,000.00
14%_________$100,000.00
12%_________$120,000.00
7%__________$150,000.00
1%__________$200,000.00
1%__________$300,000.00
Weighted Average
100%________$77,450

Juggle the percentages however you can, but with the constraint on lower income and the constraint on number of workers in upper income levels known, there are little other possibilities for the distribution.

Looking at my guesstimated distribution, clearly the median is somewhere around the $75 to $77,000 level.

To get an average of $77k and a median of $52k with the upper constraint only we would need 20% of households to have zero income, 15% averaging $18k and 15% averaging $28k - highly improbable.

Don't get me wrong, I support the idea of cutting development costs, but if you numbers aren't bullet proof then nobody is going to listen to the arguments.

On the idea of cutting construction costs, I'd love to be able to build houses for 50% less or even 25% less, so if you do have specific strategies to do this, I'd love to hear them and would of course be interested in taking any feasible ideas on board.

Philbest said: "And the main

Philbest said:

"And the main reason stopping employment devolving to the outer areas is?

Planning and zoning restrictions, by any chance?"

Although true to an extent, that claim is greatly exaggerated. There would be a whole raft of factors influencing where employment locates. One reason many businesses like a CBD location is that it is generally a location that is most central to all employees and customers on an averaged basis. Another reason is the concentration of business in a CBD - a book store in the CBD has a much greater potential catchment of customers than a bookstore in a small shopping strip on the edge of town.
The very essence of cities is that they are a network of idea and business transfers and exchanges, historically the most efficient way for those functions to be maximised is in denser envrionments with higher population and employment densities. Technology has to some extent reduced that need, but it is still a strong one.

but if you believe fervently and unrelentingly in the religion / dogma of libertarianism then sure blame urban planning....

If the average is $77k,

If the average is $77k, the median is probably in the low 60s (you can infer this from the stats.govt.nz HES table of deciles of national household income).

The (non) relevance of interest rates is a fairly interesting observation (certainly its been my observation as well - if history says anything you'd expect rising interest rates to match rising prices... for a variety of unusual reasons).

Chris_J: If you want an

Chris_J:

If you want an assessment on Atlanta, you can't beat "Clearing The Air In Atlanta" by World Bank Economist Alain Bertaud.

http://alain-bertaud.com/images/AB_Clearing_The_Air_in%20Atlanta_1.pdf

Summary:
The Atlanta Regional Commission’s Regional Transportation Plan addresses the problems of pollution and congestion in Atlanta by proposing to expand the existing transit network and to reform land use to promote a more intensive use of the existing built-up area. This paper argues that neither of these proposals is feasible: the current spatial structure of Atlanta is incompatible with a sizable transit market share; and Atlanta’s spatial structure cannot be changed significantly in the next 20 years, even if draconian land use regulations were adopted. As a result, in Atlanta technology and congestion pricing are the only way to solve the problems of congestion and pollution. The paper concludes that as long as voters believe that federally-subsidized transit and smart growth will solve the congestion and pollution problems they are unlikely to support solutions which address the problems.

Bertaud points out that Atlanta

Bertaud points out that Atlanta has done a lot of things right, providing jobs, rising incomes, and affordable homes, while attracting record migration. It also has an extreme dispersion of job locations - only 2% are in the "CBD".

He argues that "the Transit Conceit" has actually obstructed the RIGHT solutions from being enacted. There is no way that "Transit" can be workable in Atlanta, or its density increased to levels that would make it transit-friendly. This would require 20 years of destruction of 80% of the existing housing and infrastructure capital.

The only solutions are technology and congestion pricing.

Colin Clark, in "Regional and

Colin Clark, in "Regional and Urban Location", pointed out that if a subsidy is being paid to a monopoly "Transit" system; abolishing the monopoly and paying the same subsidy to ANY "transit" provider would result in enormous efficiency gains.

How many people might be pleased to fill empty seats in their cars commuting in to work, if the local government paid them $5 per passenger per trip to do so?

Why can't we look at simple realities like this?

Matt in Auckland at 2.35PM

Matt in Auckland at 2.35PM

I agree with most of what you say, it is just how and where you are trying to apply it, that I disagree with.

It is simply not viable to recreate New York in Auckland, with only 1 million people. The same reasons that make Auckland lag behind in "decentralisation" compared to New York, also mean that planned densification and rail transit will not be viable in Auckland either.

When Auckland has a CBD like Manhattan, rail transit will be viable; and so will satellite cities and bookstores. But you under-rate the wholly natural trend in this direction, which is being resisted by planning and regulatory processes. It is not just "the plan" and zoning that stand in the way of this happening, it is the delays and costs imposed by the regulators.

I have also been meaning

I have also been meaning to point out that in cities with flexible land uses and dispersed employment, retail, and amenities; the average trip length is much lower. But the reason that people in such jurisdictions often end up driving just as much or more, is that the convenience of location leads to MORE trips being made - even home from work at lunchtime, for example.

It is an ugly reality of urban planners intentions, that they mean to impose inconvenience and loss of disposable time, on householders. Loss of time spent with their children and spouses, loss of time for recreation, loss of time for social activity.

Chris_J It is obvious that

Chris_J

It is obvious that there are different sources of statistics and different parameters for inclusion in studies of the kind that Demographia carry out.

But it is clear to me from your calculations, that it would have been possible for Demographia to obtain even worse figures for certain regions if they wanted to cherry pick to prove their point. I am inclined to give them the benefit of the doubt, and trust the consistency of their methodology from one region and period to the next. In that light, there has been a shift in affordability, for the worse. It would be interesting to see what multipliers your method would come up with for earlier periods when land was much lower in price by anyone's measure.

It has also been pointed out that the Demographia "household income" basis actually masks the sizes of swings against INDIVIDUAL income, as household sizes and numbers of earners fluctuate in RESPONSE to house prices.

If we were to compare past decades where a single income earner could support a family and pay off a mortgage in 15 years, with today, the difference would be very much worse. The wonderful "liberation" of women out of housekeeping roles and into the workforce, has been completely nullified by the rising house prices, so that now both partners work and take even longer to pay off the mortgage - and have less kids and spend a whole lot less time with them and providing for them.

Matt in Auck's comment above

Matt in Auck's comment above is a good example of how statists make an argument then use a leap of logic to advocate government intervention.He says, "The very essence of cities is that they are a network of idea and business transfers and exchanges, historically the most efficient way for those functions to be maximised is in denser envrionments with higher population and employment densities."

Right, so assuming that is actually the case (I personally disagree but that's beside the point) then presumably cities will become denser over time due to market forces. So why do we need government violations of private property rights (zoning rules) to force people to live in this "efficient" manner? Maybe it's because either the benefits are over-stated or people simply don't want to be forced to live like sardines when there's plenty of room around them for cows, sheep and giant snails.

Kleefer you obviously haven't read

Kleefer
you obviously haven't read many of my postings on this wesbite over the past year.
I am far from statist. In fact I advocate much greater relaxation of planning regulation, and relaxation of the urban limits.
But I also advocate balance. Despite what you say about govenrments "forcing" people to live in higher density environemnts, I actually think many people value living close to the CBD, the arts and culture, the shops and restaurants, and not having to spend more than one hour in their car each day.
I live in a villa on 300 square metres in an inner Auckland suburb. I choose to live there not because some bureaucrat has dictated that I do, but because it has great schools, I only spend 10 minutes on the bus to get to work (which means we only need one car which is great from a financial perspective), its near all the services and entertainment of Newmarket etc etc.
Similarly my parents live in an inner city townhouse in Wellington for much the same reasons.

You have also somewhat taken my point “The very essence of cities is that they are a network of idea and business transfers and exchanges, historically the most efficient way for those functions to be maximised is in denser envrionments with higher population and employment densities.” OUT OF CONTEXT. I wasn't advocating this fact as a case for forced intensifcaiotn, I was just pointing out that this is a strong factor why many businesses want to locate in dense urban areas, and that businesses locate in such areas not just because planning controls stop them from locating on the urban fringes.

I said earlier: "To get

I said earlier:

"To get an average of $77k and a median of $52k with the upper constraint only we would need 20% of households to have zero income, 15% averaging $18k and 15% averaging $28k – highly improbable."

You can ignore that comment, because I did make an error in that calculation (reducing the average to 52k under the aforementioned constraint - must of been the hot weather today!).

But looking at table 7 of the HES (thanks IanC) it clearly shows that the national median household income is $64,000, which is below the average but would indicate that the median household income in Christchurch is about the same (around early mid $60s). This would give a multiplier of 5 in Christchurch right now, not the 6.1 or so of demographia.

Interestingly if you do a rough calculation using the HES deciles, you can see that the national median income of households who either have mortgages or rent (ie excluding mortgage free households) is more like $70,000. Which makes the affordability issue look even more overstated.

Matt in Auckland; So in

Matt in Auckland;

So in which jurisdiction are more people able to exercise your choice of living closer to the city center; an urban limited one where your townhouse is worth $150,000 as a structure and the land it is sitting on is "worth" $1,500,000; (assuming fringe sections at $250,000 and a "location" advantage factor for you of 6x)

OR an unlimited jurisdiction where the townhouse is worth $150,000 as a structure and is sitting on land worth $300,000 (assuming fringe sections at $30,000 and a "location" advantage of 10x)?

OR where there are old houses worth $40,000 as a structure on the $300,000 section?

This is why Houston's inner city actually has students and artists but LA's is full of upper class prats living in condos. Your urban limited utopia is nothing more than a massive gated community for rich elites.

No-one on any blog has yet provided a satisfactory answer to this simple econ 101 illustration.

I still score Kleefer 10

I still score Kleefer 10 and Matt 2.

Kleefer is exactly right, densification occurs naturally as a region grows.

The defining ingredients for density at the center?

1) The provision of roads
2) The growth of the whole metro.

Manhattan would never have been so dense if it was not for having plenty of roads provided by its original planners; no city centre has ever densified because of a good rail transit network; inadequate roading is the number one obstacle to densification.

Manhattan would also not exist without millions of people living at low densities for hundreds of square kilometers around it.

Reading tip:

"Population Growth and Land Use" by Colin Clark
"Regional and Urban Location" by Colin Clark

Colin Clark lived and worked in an era when truth actually mattered, not articles of post-christian watermelon religious faith.

PhilBest The theory of what

PhilBest
The theory of what you say is appealing - cheap urban fringe land cheapens inner urban living.
but I would like some evidence please.
Can you provide evidence that inner city living is as accessible as you argue in Houston? Do you have some stats or links to a real estate website showing 3 bedroom townhouses selling for less than circa 250-300K in the inner suburbs of Houston?

PhilBest thanks for being kind

PhilBest
thanks for being kind and giving me a 2, I thought you were going to give me a 1.
I guess you will reserve that for the most strident Smart Growth Proponents!!!!

PhilBest / Hugh Please confirm

PhilBest / Hugh

Please confirm or deny the following.

A guy from houston once told me that Houston's house prices are deceptive because they have some property taxation that is much steeper than the rates we have here.

As you both know much about Houston I'm sure you can clarify this matter.

Chris J It unfortunatrly appears

Chris J

It unfortunatrly appears you are simply throwing numbers around with prolific abandon, as you are teaching yourself demographics on this thread, For example to suggest the land area of Atlanta is somewhere north of 20,000 sq kilometres is wasting our time. Its around a fifth of that. Please go to the Demographia website for the March 2010 World Urban areas data.

Be that as it may - we will respond to your points tomorrow.

MattinAuck Regarding your point about

MattinAuck

Regarding your point about local government taxation - yes as a % of the property value in Texas, the property taxes can be quite high I understand. 2.5 - 3.5% is not uncommon. In California they are capped at around the 1%. But bear in mind that California property prices are generally much higher. Because of this, often the Californian household is paying more local government tax.

There are a multitude of other taxes too, something States such as California really rock in. US taxation could be turned in to a lifetime study with its differences and sheer complexity.

Texas has no State Income Tax.

All in all though, Texas is considered a low tax State.

US local governments have far wider roles than ours here in New Zealand - such as police, fire and a multitude of other services. I am not in favour of the US local government structures and the services they provide, based on a property tax. Im a great fan of property rates being earmarked for property services ONLY - and other activities financed by user charges, income and consumption taxes. There is quite a lot that needs to be tidied up in New Zealand on that front in my view.

As a % of incomes Americans pay far less tax than what we do here in New Zealand.

It needs to be noted as well the mortgage interest tax deductibility that they have in the United States, something we dont have here of course.

Thank you Hugh I look

Thank you Hugh
I look forward to either yourself or Philbest providing evidence of city fringe properties in Houston being affordable, so that you can demonstrate to me your theory that cheap urban edge land makes all land (even the land near the centres) cheaper

Chris_J, regardless of the argument

Chris_J, regardless of the argument on correct MM number, do you not agree that house prices have become unaffordable to most average kiwis over the past few years?

To illustrate, we bought our first home after settling in Chch late 2002 (standard 3bed-1bath-750m2 section) at the then-median-price (or thereabouts) of 175K. We re-sold 6 years later at 350K. Sure, we made some renovations along the way but still, that is a big increase in price! In comparison, I accepted a job at 60K late 2002 (down from 95K in the UK, ouch) and 6 years later also this had hardly gone up to 70K. So in other words I went from being able to buy a home that was about 3x my annual salary late 2002, to potentially having had to buy the same home for 5 x my annual salary late 2008 if I had not entered the property market before the boom. Surely nobody argues that the average increase in house prices over the last few years has been way out of line with the average increase in wages?

@Matt, good on you for enjoying your life in a high-density area but living in the CBD is not everybody's cup of tea!

Elley - please read my

Elley - please read my comments carefully. I don't live in the CBD, I live in an inner suburban area (low-medium density) with mostly villas and the occasional townhouse or unit - big difference

@Matt - point taken. However

@Matt - point taken. However from reading the discussion above (very quickly I have to admit) you seem to advocate packing up more people in the CBD. Is this what you believe people want? I know I don't, and apparently you don't want this for yourself either.

Or maybe I just completely misunderstood your points above but I did read "Allow for easier intensification" in one of your earlier posts. Anyway, my point was more that whichever way one "plays" with the figures, it seems rather undeniable that house prices in NZ have become a lot more unaffordable than they used to be in the space of a very short time and I feel sorry for people trying to get into the market at the current prices.

Elley - I advocate more

Elley - I advocate more intensification within the existing urban area. This would mostly occur in suburbs via more townhouses, low rise multi-units, via apartments around town centres, and mixed use development on ex-business land
but I am not so one eyed like the Smart Growth brigade that I cannot see the need for some urban sprawl - it is inevitable
I'm sure that if we have a bit of both - a bit of intensification and a bit of sprawl - then we can meet people's choices
good night and I look forward to Hugh's evidence that Houston's lack of urban limits creates more affordable inner suburban housing

Matt - i would suggest

Matt - i would suggest you comb your way through the Houston Association of Realtores website www.har.com and for good measure go to the Real Estate Section of the Houston Chronicle. Many months ago when I checked the Chronicle website out, there was a wealth of very useful information there.

The major reason why I use Houston as an example, is because of the superb information available on the HAR and Chronicle websites. I would rate the HAR by far the best Real Estate industry website in the world.

Within my articles as well, I make a point of providing extensive hyperlinks, so that readers have the opportunity to easily access further information. And of course, there is an enormous amount of information on the Demographia www.demographia.com and the Performance Urban Planning www.PerformanceUrbanPlanning.org websites.

Elly - you are right. Another useful "check measure" besides the Median Multiple is the total value of the real estate stock in relation to Gross Domestic / State / Area Product. It shouldnt exceed 1.5 times - New Zealand is sitting north of 3.0 times. Further to this - how large the new mortgages are in relation to annual household earnings, which should not exceed 2.5 times. 4, 5 and 6 times in New Zealand and through to 7 times in Australia is where we are at the moment.

As Philbest outlined in a post above, after the 2nd World War right through to the 1970's the household income more likely comprised just one, the male. It may sound quaint and corny today, but a guy who couldnt financially support his family through that era was considered a loser! And it was frowned on if the mother was forced out to work because the male couldnt financially support the household.

Women were then "liberated" - but the unfortunate thing is that too many of them now are in reality "mortgage slaves"! Fine if woman want work outside the home - but I do think it is a huge social injustice when they are forced to get work outside the home just to fund grossly excessive mortgages.

So the household income measures actually understate the serverity of the problem

Hugh Obviously I'm not embarking

Hugh

Obviously I'm not embarking on the "how to win friends and influence people" tact with my comments, however I'm simply highlighting other publicly available information that contradicts some of your claims.

My academic background is in theoretical physics and mathematics, so I believe that any formally published claims must imbue a high degree of rigor and consistency.

About Atlanta, Wikipedia quotes the following:
______Population_________Size
City____538,000_________341km2
Urban_3,500,000________5,083km2
Metro_ 5,475,000_______21,693km2

Apparently tour guides in Atlanta claim the metropolitan area is the largest of any city in the world (they are obviously proud that their city is 150km across).

Matt in Auck,

Like most US cities you can buy houses for virtually nothing in the absolute centre. Here's a two storey renovator about 1500m from downtown Houston for $14,000:

http://www.realtor.com/realestateandhomes-detail/1703-Worms-St_Houston_T...

There's no question some US cities have affordable housing, but where this has been achieved it is at the expense of the quality and desirability of both the urban environment and the housing stock.

Elley

It appears you are one of the culprits for our recent boom!

What you probably don't realise is that the house you purchased in 2002 was probably worth around $175,000 in 1995 and may have been worth just over $200,000 in 1997. (I'm just guesstimating here because it would depend on the type of property and suburb). This does put price doubling in the 5 years from 2003 to 2007 into perspective and demonstrates that you were particularly lucky with the timing of your purchase (must be Irish or something eh?).

The type of property you purchased in 2002 sounds like it's possible a 60s/70s in perhaps the northwest (although it could be a better house in a cheaper area or maybe a character in a reasonable inner area, but let's just assume it's a late 60/early 70s in the north west).

When the house was built it was probably worth say $15,000 (say 1970) which is $250,000 in today's wage adjusted dollars. After rampant inflation of the 70s and 80s it would have been worth $110,000 by 1987 [also about $250,000 in today's wage adjusted dollars ], btw 1987 was when I started following the ChCh market closely and interest rates were 20%. By 1991 it would've been about $140,000 still about $250k in today's dollars. In 1995 it would be $175,000 ($280k in today's dollars), in 1997 $200k ($300k in today' dollars), in 2002 $175,000 ($225,000 in toaday's dollars), in 2008 $350,000 ($370,000 in today's dollars) and today (assuming you sold early 08) it's probably worth $330,000.

So the unaffordability is over sold, and much of the overpricing is already corrected, another 2 or 3 years of flat prices will see the market back roughly inline with where it should be.

@chris j you will never

@chris j

you will never get layed :)

Chris_J: <i>Interestingly if you do

Chris_J: Interestingly if you do a rough calculation using the HES deciles, you can see that the national median income of households who either have mortgages or rent (ie excluding mortgage free households) is more like $70,000. Which makes the affordability issue look even more overstated.

Chris - respectfully I think you're missing the point. Every city in the Demographia study will potentially have a difference (perhaps a similar difference) between the income levels of those with/without mortgage. It would be nice for them to have a perfect data set and be able to work it out to the n'th degree, but they can't...

I know you focus on:-

- number of incomes
- to get household income; then
- size of mortgage and
- current interest rate.

And you've shown that its not far above "normal" at the moment. However, one should expect interest rates to rise by approximately 2% to match the economic recovery (assuming we'll have one), as the RBNZ is now saying 4.5% is a "neutral" OCR given banks increased funding costs. This means 8% mortgage rates - a 1/3 increase - and would move the affordability (by your measure) back to approximately as bad as its ever been (or require a 1/3 drop in the mortgage size, which is I dunno - a 25% drop in the house price, can't be bothered calculating).

It seems to me that you're not interpreting this as unaffordable as interest rates haven't done that yet. I think you need to reconsider.

@Matt - OK, balance is

@Matt - OK, balance is the key I suppose. I have to say that one thing we commented on when we arrived in NZ cities was the fact there were so few appt buildings in comparison with European cities. Every family seemed to have their own little house & backyard and it seemed better to us in terms of quality of life than cramming lots of families in tiny appts in crowded complexes (not to mention the effect on landscape, the less concrete the better in my view).

@Hugh – Didn’t someone recently write a book called “A man is not a financial plan”? Trouble is these days as a woman, you get frowned upon if you don’t work (mostly stay-at-home mums, usually assumed to be "bludgers” for trying to raise their kids well), and you also get frowned upon if you are a working mum. So in other words if you happen to be a woman, once you have kids (which most women do at some point in their life because their guy can’t do it for them and are still the ones expected to look after said kids), you are doomed  Can’t win really!

I am not a mortgage slave, thank goodness, and I do feel kind of liberated despite going from a good-paying job to mum of four preschoolers (might have something to do with creating opportunities for myself and a new “from-home” career). But I am not a feminist.

@Chris - I’m French. Our timing was pure luck. We arrived in NZ late 2002 and since we were planning to settle here and felt that we’d been renting for long enough, we bought our first home asap. We were 27, professional couple with 2 good jobs. I am not sure you can argue that people who entered the market at the “expected” time for their generation for sole purpose to have a primary home (ie not investors) contributed to inflate the market? Surely that is just part of the (life/housing) cycle? However if we did, I suppose I should profusely apologize! For the record, it was an early 70s house that was indeed first purchased for 16K. What I do know is that we got it for less than the previous owner did a couple of years earlier.

Matt In Auckland It would

Matt In Auckland

It would be a long process to describe to you how I know what I know. It is not through doing my own research of facts on the ground all over the world; it is through digesting the research of others like Wendell Cox (Demographia), Alain Bertaud, Oliver Hartwich, Edward Glaeser, Colin Clark, Julian Simon - to name but a few.

I would recommend starting with Colin Clark's 2 vital books "Population Growth and Land Use" and "Regional and Urban Location"; then go on to Alain Bertaud's studies, starting with "The Costs of Utopia". A grounding in the history of cities and the studies into growth and the various correlations, leaves one well equipped to see the perfect logic in the arguments of people like Hugh who are coming at the subject from "the other end" - housing affordability.

The fact that land prices escalate from the fringe to the center, is long established, and the 10x rule of thumb is also long established. That is, from the fringe to inner SUBURBS; prices generally go up ANOTHER 10x to the very center of the CBD. Population densities are naturally higher closer to the centers. There are exceptions, and it is handy to understand the reasons for these.

There seems to be a stage that a metro "matures" to if it is allowed to, where inner areas begin to "empty out" in favour of newer "nodes" further out. This is probably a natural consequence of land prices in the center finally outstripping the region's incomes and abilities to meet the costs. Then there is a kind of "competition" between the nodes that actually keeps all land prices lower than in less mature, less populated jurisdictions or jurisdictions that have interfered in the natural growth process. Furthermore, the process of reversal of growth in the center becomes self-sustaining, because of "blight". This is why you get things like the $14,000 house near the center of Houston, mentioned above.

Past racially-based ghettoes also influence this process, preventing the land values from having escalated much in the first place in that area. However, ask yourself just how costly "renewal" of such areas will be, with conveniently placed land being so low in price. If the jurisdiction wishes to buy up the land for a new park, for example?

I have found all this a most fascinating area of study, and I recommend it. I am also extremely surprised at the total lack of grasp of these historical realities on the part of people who have apparently been "educated" as planners.

Coming back to Auckland; Auckland is nowhere NEAR achieving the "maturity" under which population density is high enough in its center, to sustain public transport as a main means of transport. Not in the context of the history of the world's cities. I doubt any NZ City ever will be unless we get a few tens of millions of immigrants or invaders. Even if Auckland was "mature" in the sense of the myriad cities of 3 to 6 million population, it would still be doubtful. Such cities, all over the world, still are heavily burdened by public transport subsidies even to move 10% of their commuters.

These 3 to 6 million population cities are actually ruining their own chances of achieving mature, efficient densities at the center, by the very regulatory effects I have been describing. Just because "everybody does it" doesn't mean it is right. I believe the property bubbles all over the world are the consequence of this "everybody does it" syndrome. There is nothing else that correlates. Interest rates, tax laws, you name it; there are disproofs all over the place. Australia and NZ had interest rates 2 to 3 times as high as the USA yet developed even worse housing bubbles. A majority of housing bubble jurisdictions around the world has CGT's; these had no effect on constraining the bubbles, they just earnt their governments windfall revenue.

Thanks Philbest, I will try

Thanks Philbest, I will try and track down those texts

Hugh said: "So the household

Hugh said:

"So the household income measures actually understate the serverity of the problem"

Thats a good point.
The cost of nannying / daycare for families where the wife goes back to work quickly are actually quite significant. So if the hosuehold income is say 70K, hubby is earning 40K, and mum is earning 30K, a good 10-15K could go on childcare, plus if both are working with kids there is a strong chance they will need two cars (more cost), there will be more fuel costs, takeaways are likely to be eaten more etc etc.
So this, in net terms, essentaily reduces the gross houshold income from 70K to 50-55K, therefore the affordability problem is even worse

well at least until the children get to an age of reasonable independance

Hugh / PhilBest Would you

Hugh / PhilBest

Would you be so kind as to review my following summary:

Contrary to the fears of the proponents of "Smart Growth", abolishing metropolitan urban limits will not lead to unlimited urban sprawl and very limited urban intensification.

Rather, abolishing urban limits will reduce urban land costs, thereby improving the economic feasibility of urban intensification. Although some peri-urban development / sprawl will occur, this would occur inevitably under existing smart growth conditions as the often marginal feasibility of urban intensification inevitably forces some shifting of the MUL over time

Im particularly impressed with the

Im particularly impressed with the quality of the discussion on this thread by all participating.

Chris J - I had hoped to get back to you on a few points, but am currently waiting to hear back from Wendell Cox of Demographia. He has a massive workload and readers may be interested in knowing that all the research on the Demographia website is generated by Wendell himself, without even a secretary!

Its important to recognise that there are no "perfect measures" and this is why as I mentioned in an earlier post, it is always a good idea to have "check measures" as well - being importantly (a) GDP to total housing stock value and (b) mortgage lending in relation to annual household income. The Median Multiple is by far the best though

We have been through all this quibbling over statistics years ago - and readers who are interested may like to read the Welcome Page on my website, where I refer to these issues.

Its important to realize too that I am by no means popular in some quaters of the property and construction industries, as most are not keen to see increased competition and their currently protected situations threatened by new stock coming on the market. An investors greatest enemy is a developer. They will do whatever it takes by misusing the political progress to shut them down.

Indeed I got turfed out finally as President of the Property Council in the South Island in the mid 1990's after being in the job near 4 years, because I pressed hard at the time to get land supply openned up. I still pressed for it and the then Environment Chairman of the Christchurch Council Cr Charles Manning came on board and land supply was openned up in Christchurch and other major metros at the time. I hold Charles Manning in the highest regard.

So there is a very long history to all this. What is actually happening now with the Environment Minister Dr Nick Smiths Urban TAG Report due for release, is really what should have happened back in the early 1990/s when the Resource Management Act was supposed to be bedded in. The then Environment Minister, Simon Upton, who considered himself an intellectual, duffed it big time. The bureaucratts walked all over the guy. He simply didnt have the political smarts to head these clowns off.

There is an enormous amount of work to do in this country "de clowning" the public services at all levels, so that they are taught once and for all, that their role is to serve the public.

In essense, these housing affordability problems are by no means complex. The more things can be simplified, the better. "Simplicity" is of course, something bureacrats detest, for obvious reasons.

Best regards,
Hugh Pavletich

Matt in Auckland: Thank you

Matt in Auckland:

Thank you for that summary and the opportunity to comment on it.

"Contrary to the fears of the proponents of “Smart Growth”, abolishing metropolitan urban limits will not lead to unlimited urban sprawl and very limited urban intensification......."

Instead of "and very limited urban intensification", I would say "and reduce urban intensification".

"......Rather, abolishing urban limits will reduce urban land costs, thereby improving the economic feasibility of urban intensification......"

I would add to that, "AND increase the effectiveness of every other tool used to encourage urban intensification; AND lower the cost of inner area "green space", public land, and amenities, AND reduce pressures on metro areas designated "heritage".

"...... Although some peri-urban development / sprawl will occur, this would occur inevitably under existing smart growth conditions as the often marginal feasibility of urban intensification inevitably forces some shifting of the MUL over time....."

I would add that: 'This peri-urban development takes place at such low densities, the number of people involved remains low compared to the unnaturally dense development that otherwise takes place close to the MUL as households seek their "most affordable option". Older houses closer to the urban center cease to provide this option because of land value appreciation.

Some reference to the "land value slope" might be helpful by way of further enlightenment to readers of your summary.

Agree with Hugh, this discussion

Agree with Hugh, this discussion has been considerate and fruitful.

Actually, I see it as

Actually, I see it as somewhat nuts. Cranially constrained, indeed, and I think the crux of my criticism would be this:

Most of you are thinking linear, but are urging the exponential.

"opening up land" is a classic example.

Finite resource, buddy, and in competition with food.

Then there is the wee problem of energy - which is needed for everything we do. None of the above addressed that - apart from a glib cornicopian aside, or two. No mention of embedded energy, for instance.

So my take is that it has been a look - regardless of depth- at a particular deckchair. Perhaps built of untreated timber, out on the top deck, but nonetheless a deckchair.

Appraisals from a still-floating ship (eg value appraisals) are future-irrelevant. For instance, Matt buys a house in Auckland, because he can earn more there. He is a little into his mortgage, when declining energy flows hit global fiscal systems - as we probably - effectively - have already. The questions are whether his income-stream will continue, whether exponentially-expanding interest-charging will continue to demand of him, or whether it collapses. What will the bank do, what will Matt do, and what will happen to values?

Until you address the sinking ship, the deckchair debate has only accidental relevance.

Think global, act local, PDK.

Think global, act local, PDK. I'd be more worried about keeping the envious eyes of well-armed Others at bay - the Resource Wars scenario.

But realistically, aren't you worried about Peak Gentle Annie's? I don't believe F&P make them anymore....

Me, I'm waiting for Nanosolar to licence their solar PV to Monier, and retrofit my Centurion tiled roof.

That's Real technology for you. Building-Integrated Power Systems (BIPS) are the next Big Thang.

Matt In Auck, I apologise

Matt In Auck, I apologise if I've incorrectly labelled you a statist, I don't read this site often and don't know everyone's political views (Libertarianz member Mark Hubbard being the exception). However your comment was a perfect example of the argument statists often use to justify a range of market interventions- "This is the way things ought to be so therefore the government should do this to make it so."

As the great economist Ludwig von Mises pointed out, most of the problems that governments try to solve through intervention have actually been created by government intervention in the first place. Housing is a great example- government-imposed artificial limits on development combined with inflationary monetary policy make housing unaffordable for many people so the government decides to give taxpayer-funded loans to a (not so) lucky few, thus keeping prices astronomically high.

Henry Hazlitt's book "Economics in one lesson", which I have just had the pleasure of reading, blames bad government policy on people's inability to look past the immediate consequences for one group of people and look at the long-term consequences for everyone in society (referencing Frederic Bastiat's writings about what is "seen" and what is "unseen").

I'm now going to deal with another argument I've seen for urban planning and "smart growth": cities use up productive land that could be used for farming and growing crops. This is a fair point on the surface- cities tend to be on the most fertile soil. However, it ignores the concept of marginal utility, which is the measurement of how much value people place on one unit of something (land, water, cheeseburgers, t-shirts etc).

The best and indeed only accurate measure of marginal utility is price. Now say there was an 80 hectare block of land on the edge of the city. Under normal market conditions (no urban limits) the price would be determined by who valued the land the most. If the land was fertile and a farmer was prepared to pay, say, $50,000 a hectare, the townies would have to value the location, lifestyle etc enough to be prepared to pay $51,000 a hectare for it.

This example shows how people can find different forms of utility for the same item. The townies don't get any extra utility from better soil. What they value is the location. If they lived further out they would have a bigger commute to work. However, the farmer sees much greater utility in higher-quality soil. The question is whether this is greater than the extra utility the townies get from living closer to the city and not having to drive/bus/train as far.

Now let's say there was some empty land just down the road with bad soil and farmers were only prepared to pay $25,000 a hectare. Why would the townies pay twice as much for land in a very similar location when they derive no real benefit from the soil (except nice gardens perhaps)? If they were stupid enough to do that then good luck to them.

The problem is it doesn't work like that any more and politicians are to blame. Because of urban planning these low-value areas that could be used as cheap land for residential housing are off-limits because they fall outside the planners' magically-derived boundaries. To make matters worse, inside the boundary, land that could be used for farming is instead converted into residential developments because the price of this land is inflated well beyond the returns it could get from agriculture.

Affordable housing has been a

Affordable housing has been a problem for I don't know how long and I don't know if anyone can solve this, I guess affordable houses are not really affordable at all...

Chris J My apologies for

Chris J

My apologies for the delay in responding - but when Easter arrived i had had about enough of housing / local government and needed a break.

I note you academic qualifications and am surprised you then use tourism websites and Wikipedia as authorititive sources. With respect to urban areas - please refer to the Urban Areas Research on the Demograhia website www.demographia.com .

With regard to Christchurch Household Income statyisics, may I suggest you refer to the NZ Statistics 2006 Census information which states that the Gross Annual Median Household Income then was $48,400. For more updated information, refer to the October 2009 Statistics NZ Household Income data. You will note that overall during the 2008 / 9 year, household incomes were pretty much static. So any income growth occurred in the preceeding 2 years.

In assessing the income growth over this period, the Demographia Survey has allowed for around 7 to 10% income growth over the 3 year period of the metro areas conered by the Survey.

Christchurch as therefore moved in 2006 from $48,400 to $52,100 - a 7.6% increas.

You are correct in that the Gross Annual Median Household Income across New Zealand is about $1,200 a week or about $62,400 annually. Christchurch is way below this - which comes as quite a shock to people living in the city.

Indeed - it is a civic disgrace. and people sich as Mayor Parker, Chamber CEO Townsend and The Press Editor Holden, should be drawing this to the publics attention.

Best regards,
Hugh Pavletich

Kleffer Excellent points you raise

Kleffer

Excellent points you raise about land. I trust you and other readers have used the hyperlink within the above article, regarding "oodles of land supply".

Normal urban expansion should not be considered "spraw". What is sprawl is when planners artificially strangle fringe land supply and crank its value up by 50 to 100 times. This in turn forces people out to lifestyle / life sentence block and outlying towns. The unnecessary lifestyle blocks chew up an enormous amount of agricultural land. Most are completely unproductive.

In any event - I cover most of these points in the hyperlinked article.

Many planning commentators have suggested

Many planning commentators have suggested that Texas' relatively lax land-use planning system has protected the state from the foreclosure epidemic.

But another cause may be Texas' strict banking regulation: Texas restricts home equity loans to a greater extent than most states. In Texas, "the total amount of debt on a home cannot exceed 80 percent of its appraised value, and any proceeds cannot be used to pay off other debts."

http://www.thebigmoney.com/articles/judgments/2010/03/30/lone-star-secre...

Paling Fence - funny, I

Paling Fence - funny, I just found that article and was going to post it here
I always thought that there was something else beyond Hugh's mantra that limited planning regulation = Houston's more affordable housing
Clearly it is probably an equal contribution of looser planning regulation and tighter bank lending crtieria, not to mention Texas's high property taxation

Paling Fence and Matt, Thanks

Paling Fence and Matt,

Thanks for bringing up the issue of the more stringent mortgage lending regulations of Texas (ones I support) than those in the State of Geogia, where Atlanta is the major urban market.

For some reason Paling Fence, your hyperlink through to the Big Money article does not work for me. Be that as it may, I would suggest you and other readers access the recent New York Times article by Professor Paul Krugman "Georgia on my mind".

Within this article, Krugman states clearly that land use regulations are the major problem, but that in the case of Georgia with its more lax mortgage lending regulations, it has experienced high numbers of Bankl failures and foreclosures.

Both Texas and Georgia are affordable markets. Atlanta experienced gross overbuilding and this explains why its Median Multiple hit a low 2.2 in the last Demographia Survey. My view is that normal growing markets should move from a Floor Multiple of 2.3 through a Swing Multiple of 2.5 to a Ceiling Multiple of 2.7 through the normal building cycle. Going below the 2.3 suggests overbuilding, low population growth or decline or some other abnormality.

What Krugman failed to point out though was the quantum of losses experienced in different type markets. Pre Lehman losses in total dollar terms have been 45% California; Florida Phoenix Las Vegas 17%; other prescriptive markets 31% and the responsive markets (which include Texas and Georgia) just 7%.

In other words - it is clearly the prescriptive markets that caused the massive losses and the Global Financial Crisis.

You might also like to read on the Demographia website "The housing downturn in the United States - 2009 1st Quarter Update".

The land use regulatory governance issue is the primary reason and lax mortgage regulations is the secondary one. Both however need to be dealt with.

Hugh Pavletich
www.PerformanceUrbanPlanning.org

[...] means complex. I trust

[...] means complex. I trust you find a recent article of mine (with important hyperlinkls incorporated) Houston, we have a (housing affordability) problem of [...]

Nice post, keep up the

Nice post, keep up the excellent work