Productivity Commission wants more land for home building, puts tax changes in 'too hard' basket in draft report on housing affordability

By Alex Tarrant

Tight land supply leading to rising prices, a slow consenting process, and poor productivity in the construction sector have been flagged by the Productivity Commission as contributing to unaffordable housing much more than New Zealand's tax structure.

There was an urgent need for more land to be opened up for housing in urban areas, particularly Auckland, to try and tackle the problem of housing affordability in New Zealand, the government-appointed Productivity Commission said in its draft report to the government on the issue.

The Commission recommended the Auckland Super City Council reconsider its draft spatial plan, as the city faced "significant housing affordability challenges". The Commission said it found the council's current plan, with a target of accommodating 75% of new housing withing existing urban boundaries, would be difficult to reconcile with affordable housing.

Meanwhile, it poured cold water on calls for the introduction of a capital gains tax, saying claimed tax advantages for housing over other asset clases were "much smaller" than often suggested.

Other recommendations included improvements to building consent processes to speed up the service and reduce costs, improving how local council development charges for infrastructure were calculated and applied, and measures to improve productivity in the construction sector.

Read the full 260-page draft report here.

The Productivity Commission was set up by the government through a confidence and supply agreement with the ACT Party following the 2008 general election, with one of its first tasks to look at housing affordability. The Commission is calling for submissions to be made on today's draft report before it releases its final report and recommendations to the government in March.

It's a land thing

There was an urgent need to release additional land for residential development, particularly in Auckland, the Commission said. Section prices in Auckland now accounted for around 60% of the cost of a new dwelling, compared to 40% in the rest of New Zealand. Section prices had grown more quickly than house prices over the last 20 years, indicating that appreciating land prices had been a key driver of house price inflation.

There were immediate issues of affordability closely related to a "chronic and potentially prolonged shortage of new (both greenfield and brownfield) dwellings particularly in Auckland," the Commission said.

"The Draft Auckland Plan for example acknowledges a shortfall of 10,000 homes currently and possible annual demand of 11,000 new homes a year over the thirty years to 2040. This compares with an average of 7,500 new dwellings actually consented in Auckland annually over the ten years to June 2011; and just 4,700 annually over the past five years," it says in the report.

In fixing the problem, the views on whether intensification or greenfields development was more cost effective appeared evenly split, the Commission said.

"While in theory brownfields should cost less than greenfields to develop, the fact that existing services may be close to capacity in older areas and require significant investment in expansion and upgrading reduces their apparent advantage. In any case, even if start-up costs are higher in greenfields, the advantage may not be enough to compensate for their lower land costs," it says in the report.

Do it now

"The Commission believes that an immediate increase in land for development would help address affordability by redressing the current housing shortage. This could be achieved by a combination of bringing significant tracts of greenfield and brownfield land to the market in Auckland and Christchurch (where it is underway as part of the response to the earthquakes) and exploring the options for doing so in other high growth centres (for example, Tauranga and Hamilton)," it says in the report.

"Any such release should, of course, be contingent on meeting requisite geophysical and environmental standards, it should favour land that can be readily connected to existing urban areas and amenities and that can cater locally for employment needs, and that provides for a variety of housing markets (defined in terms of different demand segments or submarkets). The aim would be to identify, assemble, and develop substantial parcels of land for housing and associated uses of such a scale that it leads to a rapid easing of current supply constraints and consequently a reduction in price pressures," it says.

Such a move was likely to require a significant institutional response, and may require collaboration between central and local government, private sector and third sector.

"In the case of Auckland, the task is to identify land that could be immediately released, then identify significant tracts of land with the potential for (say) 50 years development, with at least 20 years’ worth under preparation for development. This should cover brownfield and greenfield sites in and around different sectors of Auckland to provide diversity, to ensure competition, and spread risk," it says in the report.

Small-scale investors crowding out larger ones

The Commission made the observation that most investors in the New Zealand rental market were small scale, and large-scale landlords had a very limited presence in the market.

These small-scale landlords were prepared to accept low yields in part because of expected capital gains in the future. The net cash yield on investment properties was estimated to be well below 4% during the house price boom over the 2000s, but capital gains had been relatively strong until recently.

"Outside of student accommodation and retirement villages, large-scale landlords have a very limited presence in the New Zealand market. A low cash yield is likely to be one important reason why institutions have been reluctant to enter the rental property market. In effect, they have been crowded out by small scale private investors," the Productivity Commission said.

"The large scale of investment required to assemble a suitably diverse portfolio of rental properties in different locations with different demographic exposures is also often cited as a barrier to institutional investment in the sector. Challenges around capturing any construction scale economies in the sector may also be inhibiting large-scale involvements," it said.

"Reflecting these barriers, the share of people living in rental properties owned by private businesses, trusts or other organisations has remained low at under 5%, indicative of a very low level of institutional involvement in the sector."

Tax in the 'too hard' basket

The Commission poured cold water on calls to change the tax system, saying it did not favour housing as much as it was believed. Changes to the tax system were effectively put in the 'too complicated' basket in the report.

"The Commission is not persuaded that taxation issues were a principal driver of the recent surge in house prices. The present tax position is long-standing and any tax benefit can be expected to have been capitalised into house prices long ago. Absent change to the tax regime, a tax bias that has already been factored in should not cause movement in prices," it says in the report.

"There is a tilt in favour of owner-occupied housing, but only to the extent that owner-occupied houses are financed by owner-equity. Even there, property taxes (rates) levied by territorial government, and GST, act to level up the playing field," it says.

"Also, to the extent that housing – owner-occupied as well as rental housing – is financed by debt, that debt is taxed quite heavily. This arises since tax is applied to the full amount of nominal, not just real, interest."

However, on the other hand, capital gains on housing were generally outside the tax net.

"Clearly, those gains were substantial during the price boom. However, there are questions about how ‘real’, and/or permanent, those gains really are, and thus questions about the nature and extent of any tilting of the tax system in favour of housing that stems from their exclusion from tax assessable income," the Commission says.

"In the case of rental housing, the high rate of house price inflation and leveraging up of rental  investments during the 2000s created opportunities for rental investors to achieve positive economic returns, including capital gains, whilst reporting tax losses. However, investors appear to have traded away some portion of those gains by accepting lower rents," it says.

"It is possible that over the longer term the capital gains and ‘tax breaks’ may come in below what was being anticipated (particularly now that depreciation deductions have been eliminated). If that proves to be the case, the economics of the rental market could look different in the decade ahead, with less investment and higher rents than in the last decade."

'It's not ideal, but changes would be complicated'

Against this backdrop, the Commission said it did not see a pressing need for changes to the taxation of housing. The current taxation of housing was not ideal, but addressing particular anomalies would further complicate the system and could have unintended effects.

"In these regards, the Commission notes that the two most recent major tax reviews to report, the McLeod Committee in 2001 and the Tax Working Group (TWG) in 2010, ventured beyond looking at how to ‘adapt’ the measurement of income to better cope with asset price inflation. They recognised that adjustments required to achieve that within the existing income tax framework are unavoidably complex, and saw merit in moving to taxing housing capital more directly, and more simply, in particular by applying a ‘risk-free rate of return’ to the assessed value of the housing investment," the Commission says.

"The 2010 TWG report additionally explored the application of a ‘capital charge’ and of a land tax. These approaches would all involve a shift toward taxing property, including but not limited to housing, in a manner more similar to how local government rates are struck," it says.

"Potential advantages of these kinds of approach, over applying further patches to address anomalies and inconsistencies in the existing tax system, would appear to be their comparative simplicity, certainty, stability and neutrality in the face of inflation, whether in asset prices or more generally. But they also involve much broader issues, including the appropriate balance overall amongst taxes on income, consumption (GST), and property, and as such, are beyond the scope of the Commission’s current Inquiry."

From the report

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218 Comments

Finally some sense.  More taxes will not make houses cheaper.  More houses will.

Someone has figured out that $50,000 of council 'development' tax on a small inner city apartment makes it... more expensive.

so while Rome starts to burn, the new Labour leader doesn't address the serious housing crisis facing middle and and lower income Kiwis, he sees a bloody All Black flag as being the way forward for NZ... it beggars belief... where are all the leaders? What the hell is happening in this country? HELP!!!!!!!

Shearer wants fern on flag

http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10773745

Well well what a revelation - The solution “It’s the market stupid”

In the US currently the housing stock equals about 110% of GDP historically its about 82% and in New Zealand its what 300% of GDP little wonder we have a poverty and debt problem 

re the pouring cold water on a CGT

The Productivity Commission is totally an Act / Business Roundtable poodle, so of course is going be opposed to anything that would tax the rich.

Cheers

No they are offering practical workable solutions the market.

'The Productivity Commission is totally an Act / Business Roundtable poodle "

Really?  Classic example for sour grape 

At least they knocked some common sense approach rather than manby pansy CGT without any indepth analysis of the real impacts.

 

Moa:  You want "indepth analysis"?

How about "Let's dispel the myths and close tax loophole", highly researched and authoritative. 

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=1073...

Much more so than ideological burblings courtesy of Act & BRT.

 

The NZ Herald is "highly researched and authoritative"?\

Do they know that CGT's did NOTHING to keep property prices from bubbling, ANYWHERE, at ANY TIME?

By all means advocate CGT's to broaden the tax base. But it is long since known to be nonsense to expect them to provide housing affordability.

not by itself, but reducing the incentive to speculate surely puts downward pressure on bubbles? If you expect to make 7% a year (double every 10 years), it doesnt look so good when its only 4.5% after tax, especially when you are making a cash loss due to low yields. But remove the CGT, and provide rebates for the loss? might not look so bad then. And if you use the broadened tax base to lower marginal rates, then saving and working for an income (as opposed to buying land and siting it out) becomes a better option. As i outlined yesterday, NZ/AUS have exceptional bubbles, NZ has no proper CGT, AUS has a reduced form. Perhaps partly explains why it still holds such an attraction whilst the rest of the world has crashed (mostly from lesser bubbles than us).

I don't think anyone has seriously trotted out a CGT as a way of preventing property bubbles - they clearly didn't in any country (eg Oz, US, UK). 

From observation, the argument is purely a straw man put up by the anti-CGT brigade, so they can then knock it down & say "well, demolished that idea!"

CGT is actually about spreading taxes around the different income classes fairly, & evening up the revenue to govt from the various possible sources.  Sure, the failure to have one causes distortions in the economy, but that isn't the key reason to have one.

agree re teh fair distribution of a CGT. But as i outlined above, who still has a property bubble?? Aus and NZ. NZ has no CGT. Aus has a reduced form of CGT. In other countries, once the speculative mania subsided it was clear there were no advantages to owning property. Not so in NZ and Aus, where neg gearing and lax CGT combine to make a loss making low capital gains asset not such a bad store of value in some people's minds (especially when int rates are low, making taxed savings worse than ever after inflation).

I'm not saying tax is the only factor, but it is a big factor that most certainly exacerbates and prolongs bubbles. But most  importantly it is the EASIEST one to fix, we can change it in the stroke of a pen. Tax incentives add to demand, and thats the last thing we need. Just as cheap debt adds to demand, and too much immigration, and govt bailing out banks, and artificially low rates, and ........ land supply - fantastic land supply is being recognised, but how long to wait before action??

A CGT would have earned the government a bit of revenue in the years roughly following 2002, but plenty of countries had CGT's and they did not stop a bubble. Japan hiked its CGT rate up and up and up in the 1980's, and even at 70%, it showed no signs of slowing their bubble down. When the problem is distortions in the supply/demand balance, a CGT just gets "costed in" to speculators business models.

PhilBest: "CGT just gets "costed in" to speculators business models"

So therefore the CGT is actually goosing along the bubble! 

Wow, that's a new one!

Is it responsible for kiwifruit PSA too?

Cheers

I owe that insight to World Bank economist Alain Bertaud. I'll see if I can find the paper he said this in.

Its good news if its true

It will mean that those with rabid opposition to a CGT (including various posting on this site) can relax - they can just build the CGT into their costings. 

So we can all relax & join the rest of the world with an equitable and non-distortionary tax system

Nice!

But the rabid opponents of a CGT on the grounds you are considering, will be equally (or more so) rabid opponents of liberalised land supply regimes. The latter will mean much less opportunity for capital gains to pay tax on, in the first place. At least in the "boom" phase.......

Notice that the international property magnate George Soros is a major backer of "Green" and left wing political groups. These groups kid themselves Soros actually cares about the same things they do, rather than the capital gains their policies are bringing him........You can bet that there is a lot of this "Baptists and Bootleggers" type political alliances going on.

that would have to be one of the more ridiculous theories I have heard - it implies buyers are prepared to pay more to help the sellers net gain. It also implies those countries with CGTs should have had bigger bubbles, which for the most part (maybe Japan excepted) was not the case. If you saw any property spruiker seminars you would know that tax advantages was always one of the main selling points - naive people buy the sales pitch, and naive people create demand.

You misunderstand the way markets function when supply is constrained.

From the point of view of the investor, the absence of a tax was a "plus". But "what buyers are prepared to pay" for what is after all a necessity, is nothing to do with whether the seller is having to pay a CGT or not.

It is the same with anything that is being quota'ed or racketeered.

Even without rationing, taxes do not lower the price of anything. Sellers always pass the costs of these on. But with rationing, the position of the seller is strengthened.

The only difference the CGT might make, is in the level of total capital gain, from a seller's point of view, when the market finally tops out. But the price to the buyer will be no different - it will merely have a "CGT cost to the seller" component. Up till then, it is unlikely the CGT will have made much difference to what the speculators realise.

 

 

what the buyer is prepared to pay isnot affected by whether the sellers has to pay a CGT -  agree. But what the buyer is prepared to pay IS affected by whether the buyer foresees whether they will have to pay a CGT down the track. You said it yourself, no tax is a "plus". That provides more incentive, more incentive means moreare likely to want to buy, that creates demand, that pushed up prices. From personal experience, i have put money into the sharemarket very recently BECAUSE i get better tax treatment there. I can see tax and inlfation are chewing up my savings so I amlooking at other ways to avoid the tax man. That has added demand (althouhg not to the ppty market whch i wont touch).

Wise man.

If everyone was wise instead of followers of manias, we wouldn't be in the trouble we are.

Now that I have actually read the report, I personally found the Commission's lengthy analysis of taxation factors entirely convincing, and an education in its own right.

Politicians and advocates who look at the potential tax revenue a CGT would have reaped 2001 to 2007, are completely missing the point - the whole point is to prevent episodes of price volatility this severe; a CGT would not do this, and would incentivise politicians not to. Successful and equitable housing policy that provides stability and affordability, would minimise the potential revenue to government from a CGT, especially if it was net of CPI inflation.

One of the worst distortions in the whole system, is the fact that tax on interest is not net of inflation. This applies to interest on mortgage debt just as much as it applies to interest on savings. Any capital gains tax that was not net of inflation would likewise be inequitable and distortionary. If a CGT was net of inflation, it would reap very little revenue. 

The Commission also estimates that local body rates on average are equivalent to a 20% tax on imputed income from home ownership. Speculators chasing capital gains rather than rental income, do pay rates and often fail to recoup them from renters. The fact that rents remained low while house prices increased, shows that this was common. This is a classic symptom of a bubble.

The Labour and Green MP's who support a CGT, really need a good grilling on mainstream TV from someone who knows their stuff (which excludes all NZ's current show hosts, sadly). In fact Greenies generally are getting a free ride from the media on almost all points regardless of how absurd their position is.

Ever thought about some precious metals? Contact Peter Shiff's company 

I dont agree, well sort of not...it might work provided the council outsources the services cost so its efficiently done (Councils efficent? what an oxymoron). .  Really though its way too messy, its just not that simple IMHO.  Also to get costs down you need to guarantee a large number of sections on sale so there is competition. 

I suspect the Govn needs to buy large setions at the agricultural price and teh slice them up.

Otherwise the council should keep out of this, and certainly should not be providing serviced sections paid for via bond issues thats one huge nightmare, as this loads costs onto existing ratepayers which isnt fair or efficient.  So want a new house pay for the connections, but if the cost of the section includes the servicing costs, well OK. 

Did you know that 40% of the section cost is developer profit? so that needs to be eliminated, selling to individuals directly sort of does that, but that raises huge issues. Trouble is the vast majority of ordainary ppl cant build a house, or oversee its construction it so at some stage you will need a bodgy builder....and have an overseer company....hello fat margins...

Building a basic house and extending it is a receipe for a mess...

I dont see why that restriction on selling is needed....supply enough sections and that will hold the price down which is the key really.

regards

"Did you know that 40% of the section cost is developer profit?"

No - do you have the slightest bit of evidence to back up that claim?

Hmm....need to find the URL....think I read it on here...

Nope stuff, google is my friend,

http://www.stuff.co.nz/the-press/news/christchurch-earthquake-2011/60846...

"A new trust set up to develop low-cost sections for red-zone evacuees believes it could sell them for up to $80,000 below market value."

regards

Can someone help with data? Cost of NZ agricultural land is what? $12000 per acre?  say 500m2 sections = 80 sections.

Allow say 20 sections "wasted on roading etc, so net 60 sections.

12000/60= $2100 per 500m2

But buildable sections are $200,000 if you have permission...strikes me as a huge profit...if those numbers are right and Hugh says the councils are a rip off....I can so believe if we relax planning permission that cheap sections will appear.

regards

Once you got the land there's also $100k per section you need to add in for Council standard roading, kerbing, berm, streetlighting, footpath, data, power, sewage system, water reticulation, stormwater, landscaping, bulk earthworks, consultants (don't want it to slip down the hill or flood or anything).

Then you need money to buy all the stuff above (that you presumably want) so you'll need to either be rich (so be wanting a return for taking a big risk) or borrow (in which case you'll need to prove a minimum 20% profit - ie 80% LVR) and pay them interest for the years it takes to do it.  Funding costs are a suprisingly big percentage.

Then if you're selling you got agent fees.  Also there's from 20K Council tax to go in there before the margin.

 

Hugh is correct in that there is finacial gain in zoning, however there's also huge environmental and social costs in car dependant sprawl suburbs.  Cheapest isn't always the best (putting melamine in milk makes it cheaper) and just because people want freestanding sprawl houses doesn't mean they should have them, unless perhaps they pay for all costs.  People might want to barbeque kiwi's over large bonfires of burning tyres while discharging raw sewage - but that doesn't make it a good idea.  

"huge social costs" ??  What are the huge social costs of giving families affordable homes?

There are 2 ways to increase land supply to provide more affordable homes.  Adding sites to fringe (sprawl) and adding sites within existing urban limits (intensification).  Both are recommended in the report.

Hugh etc. ONLY want sprawl (with intensification only allowed where NIMBYS approve - which means nowhere).

 

Sprawl costs include pollution and environmental degredation - Hugh's own statistics show that people living in sprawl pollute hugely more than those in more intensive development - and then goes on to say that's a good thing for the environment...?

Sprawl developmment relies on cars so everyone without access to a car (the young and old) is isolated and trapped.  Everyone else has high transport costs and time wasted commuting.  If you belive in peak oil then sprawl is a disaster.

Maintence of roads and services infrastrucre is barely affordable to society as it is.  Sprawl requires vastly more infrastructure to both instal and maintain than intensification.  Sprawl development triples, quadrouples or more the required roading and services required (let alone stormwater runoff polluting creeks and sea).

 

 

 

 

Intensification doesn't just mean apartment buildings.  It's absurd to claim that high rise apartment buildings are the next step in intensification from suburban sprawl.

Most of Auckland is Res 6 so a site less than 750sqm is deemed too small to subdivide.  A 750sqm site will take a 262.5 single level house or a 525sqm two storey house and only 1 family is allowed to live in it.  

Adding suburbs does require more infrastructure, but its still cheaper than letting house prices spiral out of control by creating an artificial shortage of land.

It seems to me that New Zealand has opted into the UK model of housing and land development rather than the American model.  I'd personally rather live in a nice leafy suburb than row houses, but I accept not everyone would agree with me.

I understand too much sprawl causes its own social problems (like urban decay) which is why it needs to be balanced with the considerations you've outlined.

And believeing in peak oil hasn't much to dio with anything, electric cars are already here and will likely just get better and cheaper.  You can also build trains from the new suburbs into the heart of the city, fast trains.

 

Get a maths lesson Steven!  (Try 6 sections per acre)...

Prime Dairy land peaked at 50k/ha, Vineyards 300k/ha.  Im not sure who is buying agricultural land at 120k/acre.

Stuff living in the middle of town, for the same price as an inner city section, you could buy an economic farm.  And still build a house on it.  With all of the peace, serenity, privacy benefits. 

In places yes skudiv that is true but not everywhere....and the pros have to outweigh the cons...and the balance changes greatly as you age skudiv....ie try farming in the outer Marl Sounds...figure the prospects of a two hour trip just to get to Picton..another half hour to a hospital...Or maybe a small holding in the North Island takes your fancy, where in many areas you can expect your few livestock to go poof in the night...or to have a shotgun poked in your face by the local drug growers.

I recall back in the 80s in the Gisborne region one farmer having to use his tractor to block in the thieving locals who decided his crop of Watermelons was ripe for them to pick...or a teaching couple in Gisborne who got home to their rural retreat to find the locals had stripped it bare..wedding gifts and all...

Locally we are able to detect who enters the area because there is only one road...but it still demands vigilance and takes any gloss off the idea that rural living is somehow 'better' .

Oh and I left out any mention of the money grab by Council...an ongoing concern for rural folk who are seen by the pointy head Council splurgers as fair game....

Sad but true Wolly.

Someone saying on Stuff that "...developer's margin and sales and marketing costs, which could account for up to 40 per cent of a section's value" is not quite the same as claiming developers make 40% profit on land sales.  That article is just about people/trust doing the work of a developer so taking the risks and rewards of developer (in fact being developers).

In some cases, where property is rapidly appreciating, people have made 40% or more margins developing property, but majority have made much less or nothing or mostly lost money.  In current environment I doubt anyone would get a return at all from land subdivision.  Repairing leakers on the other hand could return 40% or more, but you need to be expert.

See my above comment on sub-dividing....

I dont have a solid cost for agricultural land, best thing I could find is $9kUSD per NZ acre....from a work on looking at international dairry land prices and where was cheap to go diarying, argentina for instance was $2300 per acre v NZ's price which is described as OTT.

So there are 4000m2 in an acre, say 500m2 per section....which makes sections worth peanuts, hence Im querying my maths.

regards

Having dealt with developers for 20+ years I assure you that some do very very well, lots spend like they are doing well and lots just lose money.

How does this fit into your maths Steven?

A 4.2694 hectare section with the most recent valuation being $1,775,000. 

A road, albeit unsealed already serves this property and utilities effectively at the gate as there is an existing property.  All properties in the area use septic tanks and there is no talk as far as I'm aware of changing this anytime soon.

Property is situated on north side of Westgate (West Auckland) along with numerous properties of this size.  The MUL effectively encircles the area.

 

Steven is FINALLY starting to SEE THE LIGHT.

But it is NOT "developers making too much profit", it is the ORIGINAL seller of the land TO THE DEVELOPER.

NO farmer inside an urban growth boundary is going to sell his farm for typical "farmland" values.......!!!!!!!!!

The other commenters here are right, the developer is the meat in the sandwich in the planning racket, half of them end up going bust.

The guy who suggested that councils should give young people a share of fringe land, is thinking along sensible lines, although this would not be necessary if there was no planning racket.

Steven, did you know (I have probably said so on here) that the Netherlands, which has 14 million people in a country the size of Canterbury, uses "Compulsory Aquisition" to keep the price of land fair, in spite of ACTUALLY being short of it? (UNLIKE NZ).

I have also said on here again and again, that the fact that "land conservation" advocates of all kinds DO NOT advocate "compulsory acquisition", leaves them wide open to the charge that they have vested interests or are in the pocket of those with vested interests in land value uplift.

Steven, few developers make any profit with prices where they are today, certainly not 40% of the sale price!

Classic!

this will help, but so will tax changes.

Yip tax the crxp out of everyone will help (for a very short time). 

The idea of  communism, the State owns everything and provide something will also work !

A measured & rational response indeed from Moa

Darn Bernard, when's that sarcasm font coming??

silly comments Moa, easy to trot out the communist call. What we are asking for is a FAIR DISTRIBUTION of tax. It is ludicrous for home owners and investors in capital to pay no tax when their asset grows in value, but for income earners and savers to pay full tax. The current system is a) unfair as it favours owners of capital (generally the wealthy) and b) distortionary, as it encourages people to chase stores of wealth that receive lesser tax. Add a CGT, we can reduce marginal tax rate but it apply it evenly across the board - scrap neg gearing and we can reduce even further. Makes sense to me. And the lesser the marginal tax rate, the less communist we are.

The biggest problem is "planning gain".

Address THIS, if you want social justice and intergenerational equity.

CGT's just get "costed in" and the young still pay through the nose.

In Singapore the state owns all the land and we don't think of them as communist- just saying

In the Netherlands, the government has powers of "compulsory acquisition" that they use if there is any sign of capital gains in land starting to get out of hand. The threat of this is sufficient most of the time, to make the Dutch forget about trying to make too much money out of capital gains on land.

And they are not Communists either.

But both Singapore and the Netherlands are free-enterprise, efficient, intelligent peoples who have worked out what inflated land prices would do to their economies if they let it. They have also literally "run out of land" if you take "food security" into account. The Netherlands is the size of Canterbury, with 14 million people.

I think it is morally inverted to regard "planning gain" as a "property right" and the taking away of it, as a "regulatory taking". Rubbish. Planning gain is a regulatory "GIVING", if there is such a term. If there is not, there should be. Perhaps "corruption" covers it. Eliminating planning gain is simply eliminating corruption.

Finally , someone has stated the bloody obviuos .

The local authority rort of taxing subdivisions through levies , fees and plain gouging is the place that John Key should start . These fat-cat bureaucratsin the city councils  need to be cut down to size.

The longer it goes on the worse it will become 

and the profits of selling agricultural land as building land once you have permission?

a way bigger rort.

regards

Steven, North Korea is your ideal country.. it has vast amount of agricultural land , very few build up areas - only small and very small group of well-to-do people and no private property developers.  99.999% of the people live in equality.  And one very kind leader. 

Sound too true - it is...

Ah, Steven, Steven, Steven.

Keep this up, man. Why has it taken so long for you to get it? What was wrong with my explanations all this time?

This is just the point being made in the Macrobusiness blog post I referred to above:

"Each time an area is rezoned to increase the potential development density, by relaxing height and density restrictions for example, the landowner is gifted a new property right that greatly increases the value of their land.  They pay nothing for the privilege – it is a pure economic rent.

So why do landowners receive new development rights created by town planning changes for free?

Miners pay royalties as a fee to the State for their rights to minerals.  Farmers now need to buy rights to water from rivers and groundwater systems if they want to expand their irrigation.  Even greenhouse gas emitters will soon need to pay for the newly created rights to pollute. But when rights are created under planning schemes, they are simply given away. And all we hear is silence.

There is a better way that simply borrows the principles applied elsewhere.  When the government (in this case, usually the Council) creates a new property right, it sells it, rather than giving it away for free."

Yes, but that does nothing for housing affordability.

Britain has got so hardened to "planning gain", that years are now spent before any permission is granted for anything, negotiating "shares of planning gain" between the incumbent land owner, the council, other layers of government, local interest groups, the developer, consultants, etc etc etc. Nobody seems to give a stuff for the first home buyer.

It IS possible to MINIMISE "planning gain" rather than try and negotiate endlessly over the "best" way to USE it.

Wrong again Steven, rezoning makes capital gains taxable.

Under current tax laws, any increase in value acheived when a property is rezoned is taxable even if the property was not purchased for the purposes of development (unless you've owned it for more than 10 years):

http://legislation.govt.nz/act/public/2007/0097/latest/DLM1512437.html?s...

An amount that a person derives from disposing of land is income of the person if—

  • (b) the person disposed of the land within 10 years of acquiring it; and

  • (c) the total amount that they derive from its disposal is more than the cost of the land; and

  • (d) at least 20% of the excess arises from a factor, or more than 1 factor, that—

    • (i) relates to the land; and

    • (ii) is described in subsection (2); and

    • (iii) occurs after the person acquired the land, for the factors described in subsection (2)(c), (e), (g), and (i).

Factors for purposes of subsection (1)(d)

(2) The factors referred to in subsection (1)(d) are—

  • (b) the likelihood of the imposition of rules:

  • (c) a change to the rules:

  • (d) the likelihood of a change to the rules:

  • (f) the likelihood of a consent being granted:

  • (h) the likelihood of a decision being made:

  • (i) the removal of a condition, covenant, designation, heritage order, obligation, prohibition, or restriction under the Resource Management Act 1991:

  • (j) the likelihood of the removal of a condition, covenant, designation, heritage order, obligation, prohibition, or restriction:

  • (k) an occurrence of a similar nature to any of the occurrences described in any of paragraphs (a) to (j):

  • (l) the likelihood of an occurrence of a similar nature to any of the occurrences described in any of paragraphs (a) to (j).

"In the case of rental housing, the high rate of house price inflation and leveraging up of rental investments during the 2000s created opportunities for rental investors to achieve positive economic returns, including capital gains, whilst reporting tax losses 

It was partly a tax issue.  Rental investment ramped up when the 39% tax rate was introduced.

These small-scale landlords were prepared to accept low yields in part because of expected capital gains in the future. The net cash yield on investment properties was estimated to be well below 4% during the house price boom over the 2000s, but capital gains had been relatively strong until recently 

Another tax issue.  There was never any intention to make a profit from the "rental" business.  Our inefficient tax laws including the rule of intent should've still captured the majority of these and either disallowed the loss offsets or taxed every one sold during the decade as well.

One of the elephants in the room regarding incentives for "what" people invest in, is that it has got more and more hassle and less and less worthwhile investing in a business that actually produces anything and employs people.

This is perhaps the biggest hidden "unintended consequence" of laws and regulations that "protect" the worker and the environment, and that suck profits out of the company before they are even taken as income by a shareholder, thus robbing the growing new business of its fairest source of capital for growth. I refer to the Company Tax. People wonder why the finance sector has steadily gained at the expense of the productive sector - that is one answer. The amount of company tax sucked out of every growing business, is funds that the business has to get from the finance sector instead of from its own profits, to pay for its larger stock, debtors, equipment, premises, new employees, etc.

Every activity under the RMA is either Permitted, Controlled, Restricted Discretionary, Non-Complying or Prohibited.

Any development that is catorgarized as Permitted or Controlled can be budgeted and one can proceed with certainty.  This equals cheaper, faster and easier.

Any development that is catorgarized as Discretionary or Non-Complying is dangerous.  Costs, timing and outcomes are completely unknown, unending and random.  One is completely at the mercy of unpredictable bureauocrats.  These activities are expensive, involving numerous consultants reports and give zero certainty on outcome.

As District Plans (enacted by RMA) evolve more and more potential development becomes catorgarized as Discretionary (Council has all power in consenting) and less and less is left as Permitted or Controlled (Council are limited in their power).  Nothing Discretionary ever becomes Controlled or Permitted as that would involve less bureaucracy.

Therefore everything gets more expensive.

The new Auckland plan will probably be sold as incresing densities and adding greenfield sites BUT unless these activities are Permitted or Controlled it will be a waste of time.  What will happen is you will be allowed to increase density as a Discretionary activity which means  you'll need to be a very rich gambler with a lot of spare time to attempt it.

Look at Res 8 zoning that was supposed to address some of these issues.  It's Discretionary so no one has been stupid enough to try it. 

An even bigger problem with this sort of "planning", is that when the shift of urban gravity is towards the fringes, the price of land tends to be getting diluted in a downwards direction. Try and reverse that, and what happens? It doesn't matter whether the demand is "natural" or coerced, there will be a far stronger effect on price increases (capital gains for central property owners) than there ever will be in terms of increases in numbers of people. Only a small number of people actually re-locate before the rising prices lock out everyone else.

Either Len Brown and Co are economically illiterate (likely) or they are in bed with the property owners who stand to gain from this.

Patrick Troy wrote the following in his 1996 book, "The Perils of Urban Consolidation", which book SHOULD have been the last word in this debate:

"....At its heart the effect of the policy of consolidation is to defend and further entrench central city interests. It fails to recognise the multi-centred functioning of the existing cities. The policy relies on the alleged benefits of a highly centralised fixed rail public transport system without acknowledging to whom the benefits accrue at whose cost......"

CGTin the to hard basket .What a load of crap.

Sounds like he comes from a farming family in Te Awamutu.

Hugh

 

Will this change anything?. I have a useless 2.4 ha block on the boudary of a city. Could never be amalgamated, locked by 10 odd houses, river etc Only good for houses. National promised cahnges years ago but nothing. Is there anything to suggest this isnt simply another paper stating the obvious, which is duely ignored?

Spirk

 

great comments from Ling at Fletchers:

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10773493

He's absolutely right, we need more land opened up on the fringes AS WELL AS more intensification done well

Right too about the need for more mass fabrication and economies of scale 

 

Some truth, some crap, some glaring ommisions. 

I do not see any trades staff or their bosses making much more than a low to modest income, so I dont see how you can squeeze much more out of them.  Trying to hang on to them and prevent them heading to Australia where trades wages are twice ours puts this in perspective.

High construction costs have got more to do with high materials costs from near monopolies.  Two cement manufacturers who buy from each other in different parts of the country.  One wall board manufacturer who twists the governments arm to protect it when the imported competition threatens it.  One concrete block manufacturer in Auckland..... the list is extensive.  NZ manufacturesrs are largely sole producers who's only competition is imported with significant freight costs.  Profit margins production inneficiencies are protected.  These timid bureaucrats dont seem to want to raise their heads above the parapet and challange the industrial establishment.

So borrowing money at 6% and letting inflation pay it off tax free, rather than engaging in productive enterprise creating exports and employment, and being taxed at 33% is not a problem.  Utter crap.  Sounds more like they found what Key and his mob wanted them to find.

Dead right on land prices and availability.  Similarly Council charges.  Councils need to be directed to limit their focus to the basics required, not the flowery, expensive crap that they want to push onto home builders and land developers.. 

 

good point about the construction costs, and in reality there is only so much that can be done to bring them down. NZ is a very small country with a very small market, it will always struggle to get anywhere near the economies of scale of Australia. Thats why section prices are where realistically the most gains can be made.

Did they mention reducing GST in the report as a way of reducing costs?

Reducing GSt from say 15% to say 5% would mean that in a typical middle value Auckland suburb a new detached house on a circa 400 sq m section could sell for early $600,000s rather than late $600,000s   

I tried Matt...honest I did...I screamed into the chasm between Bill's earholes and all I got was an echo ..echo.... echo....

Yes a gst drop to 5% on a new housebuild would boost activity and lower unemployment and be an all round positive move...but making the cut would amount to the govt of fools looking like...well fools.!

New housebuilds require councils consent plus fees and charges with gst theft on top, so there exists a piece of legal paperwork that could be used by the homeowner to lodge a claim via the IRD and the IRD would have access to pretty accurate data to determine the real build costs involved...and the right to claim could could go hand in glove with severe penalties for trying to scam or rort the system.

10% on a cost base of $250,000...pretty normal sort of house....would be $25000 the homeowner would not have to face...or borrow!....

Academic my dear Matt because of the echo... echo...... echo....

You forgot the price of Timber, big part of a wooden house, aparently international timber prices have been poor, Fletcher Forests & Placemakers and Carters and their forests have maintained good profits from vertical integration.

Funny how we always have to pay international prices when they are high and Cost plus when they are low.

They just let them grow John...nothing's cut unless it's sold...fair enough...and if Who flung dung is paying $3 a metre for 4x2 then so too can Kiwi Keith...

The answer is to use something else..try Hebel block or straw bale matt. You might even have a bash at using tires and rammed earth...so long as you can get an engineer to sign off on it the councils have to take a running jump.

No GST on dirt eh Wolly.

The problem for our extensive plantations of pine for timber is that all it will be good for soon is dunny paper. Pinus Radiata was selected for its rapid growth and sponge like ability to absorb preservatives, which it needs to have any sort of durability. Trouble is with CCA treatment is that there is only 16 years of chromium left. 

 

Chromium?

According to John Elmesly's book  " Chromium "  ( 2001 ) there are massive untapped deposits of chromium in southern Africa and in Kasakhstan . He postulates that chromium is the 21'st most abundant element on the planet , with the entire earth containing an average of 100 parts-per-million of the element .

........ shortage ? ...... I think not !

Probably not the best example Gummy, but there is a difference in terminology that is important. Known resources are different to reserves and to turn one into the other isn't always straight forward. EROI is paramount, but available technology to process and geopolitics also come into it. Energy to process and transport is part of EROI and will be questionable as we run out of the exhaust that which the earth has stored for us.

Yes there is lots of chromium, but can we get it is the question. A bit like alumium resources in the USA, they have plenty but there is no known process for refining it.

But better examples I have posted in the past are I think Nickle, Zinc and Lead for which there is only 20 years at current production and limited other resources.

Not worried about running out of lead for you batteries as we can just use Cadmium or Lithium instead, ahh nope you won't be because they run out shortly after.

One of the ironies with plantation timber growing, is that it is a VERY low value use of land.

It would be far cheaper for the first home buyer, to let him buy the land and put a house on it, without incurring "planning gain" costs, and just import the timber instead of growing it on that land......

ENOUGH TALK - TIME FOR ACTION

 

Sort of like a game show. National gets the votes and now it spends (as it really wants to)!

 

Time for citizens to Question growth?

This is pure Koch Bros stuff.

Box 1 Specific issues for investigation
 Factors influencing the supply of land and basic infrastructure for residential construction
 Factors influencing the cost of residential construction, including the effect of standards,
specifications, approval and title requirements on the cost of new housing construction;
 The level and growth of productivity in the land development and residential construction
industries, and the effect of government regulations on productivity in these industries;
 The efficiency of taxes, levies and charges imposed at all stages of the housing supply chain
 The efficiency of the tax treatment of owner-occupied and rental housing
 The influence of changing consumer housing preferences, willingness to pay, and financing costs
on housing affordability
 The operation of the overall housing market, with specific reference to the availability of a range of
public and private housing types, the demand for housing, and the efficiency of use of the existing
residential housing stock.

 

--------------------------

No mention of immigration?

"Immigration and tax breaks for investment in residential property are being cited as the underlying causes of steep increases in the cost of housing over the past decade.

New Zealand now boasts one of the highest rates of home unaffordability in the world as a result of prices rising far faster than incomes, and the government's Savings Working Group blames that squarely on the policies of successive governments.

Although "the favourable tax treatment of property investment" accounted for about 50% of house price increases between 2001 and 2007, the working group said, there was also strong evidence that rapid swings in immigration brought about price-rise "shocks".

There was a sharp spike in immigration in 2001, 2002 and 2003 and, said working group committee member Dr Andrew Coleman, it appeared that property prices did not fall anywhere near as greatly when immigration fell again.

The report added that there was little evidence that immigration boosted local incomes. In fact, the need to build roads and schools meant that net migration contributed to the national deficit."

http://www.stuff.co.nz/business/4622459/Government-policies-blamed-for-h...

Immigration is a separate debate.

IF we decide to "let them in", we need to "supply houses".

It is not suitable for a housing affordability crisis to be the basis to exclude immigrants.

yes it is, if we dont have enough houses for them and they have the resources to outbid local, of course we should exclude immigrants while we get our own house in order.

Good luck with that.

Hopefully "while we get our own house in order" won't be as long as it would take to have a political argument about immigration as specifically related to housing affordability. Immigration is a big subject in its own right with all the lines pretty well drawn long since.

It's no wonder Farrar was trying to knock out Winston!

"Matt in Auck | 16 Dec 11, 2:20pm
ENOUGH TALK - TIME FOR ACTION"

Here's a thought, a family member just completed a brand new 4br home, 15km out of Brisbane city.  The 550m2 section was $215,000, the 215m2 house was built by David Reid (a NZ comp) for just under $190,000, fully landscaped.  And for another 12K they could have a swiming pool.  Try to do the same in Auckland, you'd lucky to get a 2br 90m2

And $215,000 is still too expensive. You want to do some comparisons with those markets in the USA, not just Texas, where "planning gain" is minimal.

RAW land absent "planning gain" is less than $10,000 an acre. Most of the cost of a section is the cost of development.

This is why the difference between a quarter acre and a whole acre in a city with minimal planning gain, might be $10,000 ($40,000 versus $30,000) - but in any Aussie or NZ city, every extra 1/4 acre in your section costs you well into six figures - because that is what the raw land cost has been inflated to.

Best way to reduce prices in Auckland is to remove density rule from the Plan & limit the amount of city that has Discretionary uses.

Let Council have discretion over sacrificial parts of the city like Res1 which can then become super expensive to develop in - "you want to change your front door handle? you'll need Archeology and Heritage expert reports, permission of everyone who lives within a 2km radius, a public hearing, colour consultant reports, fauna expert reports (what if a native beetle lands on the handle and the paint is toxic?), environmental vision statement, specialist report on disposal of the old handle, including environmental impact statement if going to landfill and a deposit cheque for $8000.  Then in about a years time we'll either say yes or no - and there's no way we can give you an indication of which until we have processed the application and you've payed the balance of the bill."

 

 

Gosh Bob, you know jolly well the Councils exist to ensure they have to exist...we can't have the potential for 'make work BS' to be missed....think of the Council staff that wouldn't be needed...and the much lower 'fees and charges' grab....removing the red tape and bloat might lead to an increase in activity....that sort of crap just cannot be allowed to happen.

They are the experts.

There an affordable housing development proposed in Auckland that has been designed, costed and sold off plans.  So people want to build it, people want to buy it and people want to live in it.  It complies with everything except density therefore it becomes Discretionary.  As a Discretionary activity Council have declined the consent as they don't consider the complying parking and complying outdoor space is enough (even though the people that want to live there do).   

This is absurd & typical.  Instead of of millions of dollars being spent in the local economy and jobs etc. being created there is nothing happening because some pointy head wants to control other peoples private lives.

Bob old bean...iffin anyone wants a Council to rise off its money bloated bum..all they gotta do is be a pain in that bum...phone phone and phone again and again and email storm the place 24/7....fill the foyer with potential residents and don't leave...slip past the net and fill the offices...

Pretty soon the consents turn up....works a treat...target the pointyheads who are being a pain. If at first you don't succeed...hit the home phone line as well....

That's what I'd do - those guys are off to the environment court (with QC costs no doubt added to price of each house)

Too many people live in Auckland for the size of our country .

Its not good for a country to have half its population squashed up one end - inefficient

So let it stay horribly expensive and congested as a market signal and stuff the income multiplier theeories

Good god, I actually agree with you...

Is it true, that Auckland rate payers have to apply to Council for a resource consent and pay fees, if they wish to grow their own toms and runner beans?

No - but the food safety amendment bill is coming that will make growing your own food a crime (if you haven't purchased your food from a multinational it might not be safe).

However the consent mentioned above (houses on residentially zoned farmland) apparently required a "lizard management report" from a lizard specialist which involved a survey of lizard population and a lizard rehousing strategy...  although many $1000's later turned out there was none.   Still all that pointless cost can just get added to the house cost can't it. 

"food safety amendment bill"

This is just some ultra-right wing libertarian fundamentalist tax- and government-hating claptrap, circulating among conservative Kiwis.  If you received & believe it, it says something about your belief system and credulity.

http://www.snopes.com/politics/business/organic.asp

Cheers

 

Creedence is given to this ridiculous assertion about home grown produce because the relevant minister is the wholly useless Kate Wilkinson ( recently voted MP for the Waimakariri by the obviously blind & brain-dead voters in that electorate ) .......

..... and it galls Gummy , having recently escaped from the Kaikoura electorate , where the laziest MP of all time Colin King reigns supreme , to fall into the realm of another stupid National party yokel ......

Both electorates amply prove that a majority of people are so bereft of commonsense that they oughtn't be allowed to vote .

......... but Gummy ought ot be allowed to horse-whip Wilkinson & King to within an inch of their sorry incompetent fat lazy lives ...

Gummy:  You don't think you're moving slightly off topic?

However, obviously strong passions have been stirred in your breast.  So let it all out big fella!

I live in the Whanganui electorate, where the voters insisted in voting in the totally useless Jill Pettis (Lab) time after time, even with the obvious evidence that apart from a bit of febrile late-feminist ranting, she never achieved a single thing even when part of a party which was in power for nine continuous years of that time. 

"Braindead" about sums it up.

Cheers

 

... and I'm not being anti-Labour.  Sure, the present incumbent (Chester Borrows) is a much better use of space.  However I vote for Hamish McDouall (Lab, ex-Master Mind & Sale of the Century winner), who is a Labour centrist & I think a real one for the future.

My point is, I always pick out who I think is the best calibre candidate, & don't cast my electorate vote for the party.  I use my Party vote for that.  But I think I am an exception in doing it that way.

Cheers

 

So you don't believe in existence of Food Bill 160-2 (2010)?

Parliment seems to 'cos they are debating it and saying things like they didn't mean for the act to prevent  the sale or exchange of seeds for propagation by non-corporates etc. 

 

It figures - the urban growth containment racket has already had the effect of eliminating the backyard gardens in which people MIGHT have grown their own food........

is this just another way of the govt saying "its not our problem, its local councils"?

I agree with wolly - Councils exist to ensure they have to exist... and they need to ensure that they are also revenue generating entities now - easiest way to do this is through rates, and development fees!!

!

 

The costs of land development in Auckland is to high, costs which all end up in local govt wallets, you spend up to $90k before you even start to build on the Shore ($40k development contributions + subdivision/survey fees of $50k). This is why land values in Auckland are 60% when compared to the rest of NZ at 40%. The cost of subdividing large sections in Auckland is a huge contributor to the cost of land and makes it unaffordable to subdivide, buy land, or build. I know of large subdividable sections in Nrth Sh, Akld, prime for development, but if developed the Government will take $90k per section before a house is even built, this is what is a huge contributor to the increased cost of sections in NZ.

 

I can see a solution to NZ's flagging productivity.  We should act as consultants to the countries that are famous strugglers, and show them how they can unleash their productivity!  There is a fortune to be made for the country in consultancy fees!

Yes, the Productivity Commission can be contracted to Germany, Singapore, Hong Kong, etc.  They can show how their daft urban limits are holding back their productivity! 

All they have to do is do away with their absurd zoning limits, and allow unlimited urban sprawl!  And do away with those stupid CGTs that all those countries have!  Just imagine how their economies would go into orbit!

They will be astounded at the vision and solutions of the Rodney Hide- and Don Brash inspired Productivity Commission of NZ!  Their cheeks will be wet with tears at our wisdom!

Sorry about all the explanation marks, but its all just  so exciting, isn't it!

Cheers

 

 

Germany does not have an inflated urban land prices problem because there is a kind of "right to develop" for property owners in their constitution.

Hong Kong and Singapore have literally "run out of land" long since.

Notice that they are not competitive manufacturing bases any more? The price of land has forced out everything but low-land-intensive "industry", but especially "financial services". And what sort of accomodation do low income earners get - a hole in a wall somewhere.......

Good luck to NZ trying to turn its economy into one of the same kind, just so we can "contain urban sprawl".

Using regulations to make our urban land just as expensive as Hong Kong or Japan or Singapore, is like fighting a war against a far more numerous enemy who does have a major disadvantage - let's say they are all lame - and us "playing fair" by laming ourselves too. Never mind about "plenty of land" (and potentially lower land COSTS) being an advantage that MIGHT make up some of our serious economic disadvantage of extemely small population numbers.........

 

 

"Right to develop" in Germany.  Somehow I can't believe that.  When I was in Germany last, I noticed that towns stopped at the vineyards etc as if cut off with a knife.  My hosts said that was due to strict zoning & regulation.  & they seem to still have a manufacturing industry!

As for Singapore, I think still the largest manufacturer of offshore oilfield equipment.  Plus big in electronics & biotech. 

Try telling them that manufacturing is dead there!

On Germany's planning system, read "Bigger Better Faster More: Why Some Countries Plan Better Than Others", by Alan W Evans and Oliver M Hartwich. They do have low cost, stable urban land prices. I know several young people who have emigrated there from NZ; it is literally cheaper as well as being a high efficiency exporting powerhouse.

Singapore does have heavy government involvement in land, to keep prices lower than they otherwise would be. Perhaps Singapore was not the best example, but my point is that "land intensive" industries cannot compete internationally when they are based in economies with inflated land prices. The industries you name are not exactly the most land intensive, and do not disprove my point at all. No-one looking for somewhere to build a production line for any products with high bulk-to-value relationship today, would choose any economy where the land is several times more expensive. This would be a major factor in Boeing choosing North Carolina rather than extending its facilities in Seattle, for example. And this would apply even more for a factory for a lower value-to-bulk product like foodstuffs or furniture, for example.

In some countries, developers are required to build a certain ration of low-cost housing that is reserved for the low-income.  That helps lower income folks own homes.

So if the developers have to sell some houses below cost how do they recoup that loss (which they must do to make project feasible and get it funded)?  - perhaps the other dwellings all increase in cost?

Exactly, this is a waste of time.

The selection of the people for the "low price housing" is a lottery at best and a racket in its own right at worst. And as you say, the average price stays the same - of course the developer has to recoup the sales below cost.

Tight land supply leading to rising prices, a slow consenting process, and poor productivity in the construction sector have been flagged by the Productivity Commissionas contributing to unaffordable housing much more than New Zealand's tax structure.

But how can this possibly be???? Impossible!!!!!!!!!!!! When told that a CGT had failed to stop property bubbles from forming in every single tax jurisdiction where they apply, we were shouted down as selfish greedy imbeciles by people wearing lettuces on their heads and those carrying chips on their shoulders. Why we were even told by New Zealand’s last great hope for wealth and prosperity, the beatified and pure New Zealand Labour Party, and its most high poope, Phillus Goofus, and it has to be said, their courtly fools, the Greens, that it is New Zealand’s lack of a CGT that is to blame. Why even St. Bernard of Gloom said as much! So what can all this possibly mean?

Great discussion guys. Excellent debate.

We've done something useful on this site.

cheers

Bernard

This report is encouraging...but the issues have been known for many years...why the endless series of reports, parliamentary enquiries, commissions & working groups ??? 

How about some action...it all comes down to demand and supply right??

Odd how it's much harder to leverage a profitable business to buy a house.  The irony of this whole sorry saga is the banks attitude towards housing.  For my business I can get between 50%-65% loans, on profitable income producing assets, that don't even need capital gains or loses.  For a house I can get 95%.

Not "odd" skudiv...it's the system...it's what makes the nz economy a turd...Bollard loves it and English too...the banks are creaming it....party political donations are assured skudiv and lotsa directorships on offer at the banks for retiring pollies...Noddyland nodding away on the property play.

One of the elephants in the room regarding incentives for "what" people invest in, is that it has got more and more hassle and less and less worthwhile investing in a business that actually produces anything and employs people.

This is perhaps the biggest hidden "unintended consequence" of laws and regulations that "protect" the worker and the environment, and that suck profits out of the company before they are even taken as income by a shareholder, thus robbing the growing new business of its fairest source of capital for growth. I refer to the Company Tax. People wonder why the finance sector has steadily gained at the expense of the productive sector - that is one answer. The amount of company tax sucked out of every growing business, is funds that the business has to get from the finance sector instead of from its own profits, to pay for its larger stock, debtors, equipment, premises, new employees, etc.

But the banks themselves are just following the money. Why should they invest in economic analysis that shows that they need to self-regulate to restrain credit to prevent a housing bubble? They wouldn't be allowed to self-regulate anyway - if they all did this, they would be prosecuted for collusion. If one of them did it, they would go out of business.

Chart 5.8 shows Asian population in Auckland rose from 10% (1996) to 18% (2006)

I suggest it could be 23% by 2011. Add in the number of those who have made multiple purchases (for renting because it easier to park their cash rather than buying or setting up a business which requires some language fluency) and it is pushing the demand out of all proportion to the number.

We also have in excess of 100,000 overseas students who because of lax immigration rules are able to apply for residence without having to return to their homeland.

This alone gives cause for alarm for those NZers who are trying to get on the bottom rung of the property ladder.

We need to bring in Chinese to Act as bus drivers for the burgeoning tourist trade from China. Check out the bus parks by Real Journeys in Queenstown. This is the future, today.

These immigrants could have been causing NZ to boom in a genuine productive sense, if our policy settings were like Texas. Several Texas cities are the only cities in the 1st world that match the top cities in the developing world for growth rates, and they do so without house prices rising at all, while the building of them and all the spin-off from this, provides real jobs.

That's o.k if the geography is a flat canvas and there are large growing industries to support the growth. What industries are growing to justify the same thing happening in NZ? An economist noted that 60% of job growth (NZ) was due to the property boom. Our migrants tend to have dual citizenship and are coming for lifestyle and a pension for their Mum and Dad.

You ask "What industries"?

Have you watched or read anything from Sir Paul Callaghan?

What is actually already causing any growth in the NZ economy, is manufacturing, by a few tens of companies that almost no-one has heard of. AND these industries are far more environmentally friendly than farming, which produces only thousandths of times as much value per sq km.

Callaghan points out that another 100 like our current "top 40", would put NZ into the top of the OECD.

http://sciblogs.co.nz/a-measure-of-science/2011/04/20/sir-paul-callaghan...

Our top 40 have got where they are in spite of NZ's perverse policy settings and public attitudes.

Here are the answers to how to boost the right sectors of the economy:

http://www.policom.com/PDFs/FLOW%20OF%20MONEY.pdf

Here is an open letter from a frustrated Silicon Valley entrepreneur, on "why the silicon is being driven out of Silicon Valley":

http://www.fcpp. org/images/ publications/ Cyprus%20letter. pdf

I quote, from the second to last paragraph:

".....our days of investing in California were over. We would never subject ourselves or our shareholders again to public insults by an anti-business politician over a destructive tax that never should have been passed. We have invested nothing more in our San Jose fab and will soon sell it, to complete the move of the very last of our manufacturing facilities out of the state of California. With only a few exceptions, the silicon has indeed been forced out of Silicon Valley....."

Do read the whole thing.

Surveys in th US show a high resistance to developments. Something like 60% of people have opposed something... I can't find the study just now but it is an eye opener.

One of the ironies in all this, is that the denser "development" gets, thanks to the grossly inflated price of land, the greater the resistance to all development gets.

The lowest resistance to new development to be found anywhere, is generally the resistance of the residents of low density cities, to new similarly low density development.

The highest resistance to development, is usually found in "save our suburbs" movements resisting infill. Strangely, this resistance has been ineffective in most parts of NZ and Australia, where miles and miles of suburbia have had new buildings plonked onto every "once was a backyard". It has a lot to do with the inflated prices of urban land. When your 1/2 acre backyard in an established area is worth well perhaps $40,000 (as in low density, non-restricted US cities) there is not the same urge to cash it in as there is when your 1/8 acre backyard in an established area is "worth" $200,000.

Low density US suburbs are actually beautiful. It is hard to pick out the rooftops among the trees. Birds and squirrels are everywhere. Parks and streams are usually just over every back fence.

It is our "dense sprawl" (this term is getting increasingly used overseas, especially about LA, the only US city that has it) that is ugly and objectionable.

Agee Philbest  -  recently we stayed with friends in Dallas/Fort Worth - in their suburban house, no side fences, no front fences, lawn & large trees everywhere  -   the cul-de-sac looked like one big park with natural/traditional looking houses.  Green belt pathways etc ... Must need some good planning to achieve .... no piecemeal devts here   .... and quite reasonable prices.     Only trouble is you can't really potter about outside in privacy  - 

However, driving the 16 lane Dallas motorways in a rental is scary  -  esp with exits on both sides and the GPS advising on lane adjustments continually. Even the airport drive-in resembles a mssive multilane motorway.  So there's a motoring cost for the big greenfields devts....

There are secondary routes with fewer lanes if this scares anyone.

In "Planning for cars in cities: Planners, Engineers, and Freeways in the 20th century" by Jeffrey Brown, Eric Morris, and Brian Taylor; the most dramatic point to my mind, is that the planners and engineers in most US cities following WW2, actually intended to expedite decentralisation with extensive inter-suburban arterial networks; the Federal Govt's insistence on massive many-lane highways which focused on CBD's wherever they interacted with cities, was actually resisted initially, but of course the fact that the Federal Govt was offering the funding made it happen. In spite of this, decentralisation has proceeded apace, driven by market responses to congestion and elevated city centre land rents. Imagine how much more efficient this decentralisation might have been had the planners of the 1950's not been over-ruled by events driven by the Federal Govt.

 

16 lane Dallas motorways is scary massive – I reckon that’s wider then most rivers here in beautiful New Zealand. 

16 lane motorways - how can people do that to each other - how cruel ?

Wow , 16 lanes , how cool is that ! ...... is that 16 lanes each way , Walter , or a total of 16 lanes both ways ?

... we could do that , easy peasy . We just gotta concrete over those stoopid rivers ( the Waikato & the Waimakariri ) and we could have two 16 lane expressways here in NZ ...

.. .. all that water is wasted anyway  , going  to the sea , .. it should be piped off to the dairy farms where it belongs  ........

16 lanes : Awesome !

Who is this Hugh Pavletich who is all over this website?

His techno-babble is incomprehensible, his arguments self serving, his manner hysterical and his posts patently advertisements for his business,

BH should be charging per word and maybe then he will give us all a break.  . 

Hit a nerve did he ? ...... nice work Hugh !

The funniest article from the Demographica people is...

http://www.newgeography.com/content/002462-smart-growth-livability-air-p...

...which explains that sprawl is better for the environment than density because although pollution per person is much less in denser areas there is more localized pollution.  If we all lived in sprawl there would be heaps more pollution per person and heaps more total pollution, but it would be spread out more - therefore sprawl is good for the environment and density is bad.

 

Australian Professor Patrick Troy, in his 1996 book "The Perils of Urban Consolidation", goes into great detail regarding the potential for new approaches to water runoff, harvesting, supply, use and recycling, waste disposal, composting and mulching, and "at source" waste separation and resource recovery; in new low density development. Potential benefits and cost savings of this nature are never included in comparisons between urban form alternatives. He also points out:

".........Modern cities are inherently ecologically unsustainable because they need to import food, energy and raw materials and they produce more waste than they can cope with within their boundaries and because they radically change the ecology of their sites. Moreover, the larger the concentration of population, the more unsustainable the city is. Even if we extend the boundary of the city to include its hinterland we cannot usefully describe it as potentially ecologically sustainable. The more the city becomes part of the international economic order, the less it can be seen as ecologically sustainable in any operational sense. To hold out such a beguiling but unattainable prospect ultimately diminishes legitimate concerns for the environment......

 

"........The only urban strategy which seems to be environmentally sensible is one which has as its goal the minimisation of environmental stress within and outside the city......."

Troy discusses how increased density and the more intensive coverage of land with tarmac, has already led to drainage and flooding issues; and that higher density results in increased local air pollution.

 

He also discusses the relationship between energy use in the home and dwelling type, household size and type, and income; and concludes that it is far from clear that dwelling type is significant. He points out that separate houses have much greater potential for the use of energy other than electricity eg passive solar, solar panels, biomass, air flow for cooling, shade trees, etc.

Troy discusses the use of energy for transport, pointing out that transport only consumes a portion of total energy used, the transport of goods consumes a portion, and private vehicle travel for non-work purposes consumes more than commuting travel. The policy focus on commuting travel is somewhat misguided. Troy estimates that "journeys to work" are responsible for approximately 3.4% of total Australian CO2 emissions.

"....Propinquity or location is only one element in the generation of travel. Enhanced mobility gives people greater access to a wider range of interests and activities and allows them a higher degree of engagement with other like-minded members of the communities to which they belong, thus enriching their lives and contributing to social and economic vitality. The notion that people will be prepared to accept a circumscribed rage of interests by confining their travel to public transport or only to those activities within easy reach of their homes is a fundamental misunderstanding of their desires and their willingness to bear the cost of those desires......."
 

Troy provides a similar insight to that commonly associated with Peter Gordon et al:

"......evidence available indicates that on average, the journey to work is remarkably stable in terms of the time taken. Those who work in the CBD appear to have experienced a slight increase in the length of their journeys (a high proportion of them already travel by public transport); this has been offset to some degree by a fall in the length of work journeys of those who work locally or who travel to non-central locations. The 48% of the workforce working in locations distributed throughout the metropolitan area have work journeys which are highly circumferential. Neither the fixed-track highly centralised public transport system nor the radial road system facilitate these journeys. Brotchie et al (1995) conclude that the most effective way of meeting the demand for circumferential travel would be to build circumferential freeways.....

".......we cannot expect a great reduation of work trips without a massive change in the distribution of jobs. There is no indication that we can expect such a rearrangment of employment, nor, given the benefit from separation of industrial and commercial activity from residential areas, should policy be directed to achieve it. Changing urban form by increasing density is unlikely to affect the employment distribution or the propensity of people to travel to work by public transport.

In the major cities we have seen a reduction in the proportion of the workforce engaged in the functions discharged in their central areas. In some cases we have seen a reduction in the absolute numbers employed in the central areas. These absolute and relative reductions have occurred as a result of a variety of economic and social processes and there is no reason to believe that these processes will be reversed, so we cannot expect the great refocusing of jobs in the central areas which would be necessary for an increase in public transport patronage.......

"......Much of the congestion arises because the highly centralised road system funnels traffic that has other destinations through the city centre. The fact that much of the peak traffic is not work related is also overlooked....."

Troy also points out that air pollution indicators have been steadily improving in most areas as they decentralised, due partly to the decentralisation itself and partly to technology improvements.

Troy makes an argument that is not often made, that the decentralisation of businesses should be better planned for, so that better-supported suburban nodes are the result instead of more scattered development.

Wendell Cox debunked

http://www.cp-dr.com/node/2810

William Fulton is a fiscal child abuse denier.

The people who refuse to see the connection between urban growth constraint and inflated land and housing prices, are terminally ignorant utopian thugs akin to the Bolsheviks. While they do not cause as much human suffering, their mind set is the same.

Plenty of cheap houses in NZ for 1st home buyers  -  Trademe has dozens of Provincial City, 3 bed, slightly lower socio-economic area, liveable - for around $250k.  Can't get much cheaper than that.   $12,500 deposit  - repayments cheaper than rent.

Maybe more people are now unwilling to humble themselves & live in a simple, lowerclass area?   

You can't go much lower than $200k for any kind of liveable property -   that's not going to go any lower in the forseeable future.

Other problem = most new section developments have building ties/covenants by developer that the new house must be a minimum size - which means a build cost of at least 300k+.  plus section. So it's hard to build a small, inexpensive house in a desirable area.

 

Problem is, in provincial towns where housing is more affordable, there are no jobs to be found.  That's the reason property is  cheap.

Plenty of jobs in Tauranga, Hamilton, Hawkes Bay, Palmerston etc .... in fact there's a shortage of skilled well-qualified applicants everytime we advertise .... 

You miss the point Mortgagebelt...gaining a qualification rewards you with not only a debt stone round your neck...it means winz won't see you as a long term client that needs to be looked after...

I see too many intelligent hard-working people in their 30's & 40's with no qualifications or any sense of skills/knowledge progression - then they have to play 'catch-up'.  Think many NZ-ers think they can snap their fingers and somehow magically in their 20's they can have a nice house, good income and all rosy. 

Worse than any 'House Price too high' problem - NZ has an under-skilled, under-qualified, un-ambitious, lower than necessary income problem.  Not just the bottom 30% no-skilled.  Also the mid-bracket who could/should be pushing their incomes up from a mediocre $40k up to $60-100+ with a degree, and/or postgrad plus skilled experience, plus application of business nous. 

Nup  -  just sit & moan  - that;s the way .... it's the fat cats & banks  - that's the problem ... oh yeah it's the govts fault also for giving full access to education with a small loan ....

That's BS MB....you need to open the other eye...yes a skill in serious demand and a qual to match, like structural engineering and specialist surgical work can lead to salaries in the hundreds of thousands...heck you might even reach the same level as the bloated senior state sector fatcats....but for most an effort to get there comes at the cost of years without wages and that stone of debt.... while leading nowhere...years down the hole.

As for your parting swipe...only fools fail to accept the banking rort remains the leading cause of the debt crisis....show me a poor banker....doh.

MortgageBelt,

When urban land supply is constrained, rising incomes capitalise into the prices of housing.

The Productivity Commission Report points this out.

The best author on this, is Paul Cheshire - the PC references him.

Check out everything by Cheshire listed here:

http://www.performanceurbanplanning.org/academics.html

 

Now here's a good house  -  premier Beach property  -  only $150k or offers!   Yes it is a house.

http://www.trademe.co.nz/property/residential/for-sale/auction-432279810...

It has a roof (shelter),  land  &  excellent for toughing out coming economic conditions.  Renters can't say they're locked out of the market with this.

$7500 deposit  (stick it on your credit card).  Interest only mortgage at $166 a week.

Noone can say they're "locked out" with dirt (pun intended) - or is that sand - cheap properties like this around ....

Here's a better one...

http://www.trademe.co.nz/property/residential/for-sale/auction-412821761...

Quarter acre & 3 bedroom house for $20,000.  On interest only that's $19 a week!

At 20k Might buy it for a holiday house ....

Brother-in-law has bought several sections in his rural village for a few hundred dollars each. And his rates bill is the same - unified across his house + sections down the road. Ironic as he is now probably more asset rich as an alternative lifestyler than us 'aspirationals".  OK - you may have a 2 hour commute to PN or HB but hey that's not much different to Auckland or Sydney - & its rural roads. 

If the "planners" get their way, it would be worth buying these as investments. The planners want to shut down the cheap "rural" option because their policies forcing up the price of urban land leads to people doing leapfrog commutes from far beyond the urban fringe.

Hence the planners start to seek "regional" planning powers.

In cities without regulations driving up the prices, this means not just perfectly acceptable new McMansions for $140,000 and townhouses for $90,000; it means that scummy old houses in scummy areas are $40,000 and even less. OK, that's US dollars, but get the point.

$300,000 for scummy houses in scummy areas is still a rip-off, especially of the people that can't afford anything better. What's the HOUSE i.e. the structure, worth? Anything? Only rationing of land keeps the price of even the worst "dirt" propped up like this.

When bread is rationed in poor societies, it tends to cause the price of alternatives like cow pats to rise too.

You are focussing on shabby suburbs in your examples.

Have some balls and try:

1. Herne Bay

2. St Marys Bay

3. Parnell

4. Stanley Point

5. Takapuna

6. Epsom

7. Remuera

8. Mission Bay

9. Devonport

10. Ponsonby

Note 1: The average house value for the top 8 is over $1M with the last 2 just short of $1M.

Note 2: Popular suburbs like Mt Eden, Westmere, St Heliers, Grey Lynn and Freemans Bay haven't even made it to the top 10, but their average house value are all around 900k.

Because we only live once - Right here, right now, do it or lose it.

Hugh, the right to be heard does not mean the right to be taken seriously...that's abit mean isn't it from BigDaddy.  Your "do it and lose it" theory doesn't really apply to those with a lot of cash and can afford multiple homes with relatively little mortgage.  I live in one of the top 10 suburbs above and have 2 other properties in the top 10, but only have a mortgage less than 100k.  We are both earning good money and I don't think we are feeding the banks at all.  Each to their own so to speak.

If you really think it is okay to use fraudulent money to get there then go right ahead. Not all have the same absence of morality.

Fraudulent??  pfffft!!!

Did you borrow money doublegz? Where exactly did that money originate?

There goes Hugh again filling up space and advertising his wares. He should remember that the right to be heard does not mean the right to be taken seriously. 

The problem with affordable housing is that todays first home buyers want to buy at the level their parents left off, rather than start more humbly.

Putting up lists of expensive areas doesn't move their cause forward at all.

Another major stumbling block is the provision of infra structure. Releasing more land sounds warm and fuzzy and appeals to the narrow mind of the likes of Hugh and other fuzzy logic no-hopers.  

What is forgotten that new land requires roads, footpaths, drainage, power, transport, schools, shops, council consents and a host of other services.

The cost to provide these is the same for affordable houses as it is for multi million dollar subdivisions. 

That's why builders and councils cannot create cheap homes because the start up costs are un-payable. Even  if Council fees were cut in half the other costs remain sky high.

Then there is the question of GST which casts a pall of 15% extra on everything the moment the shovel turns the first clod of earth. 

The bottom line is that first home buyers with limited funds should either start off with  more humbler existing homes ( of which there are plenty) and over time move up- or accept that they will be renters for ever.      

Yep totally agreed!  Nothing wrong with Avondale, New Lynn, Kelston, Ranui, Massey, Manurewa, Panmure, Papatoetoe, Otahuhu, Mangere and Otara.  People should realise that these suburbs are close to town too and are quite leafy and much more affordable.

Exactly,  buy your first house in Ranui not Remuera  -    work hard on the garden, paint the interior, pay down extra on the mortgage, ignore your friends scoffing, then in 7 years sell it   -  you'll be surprised at the equity you've built up.  then you might move into a higher socio-eco 'hood.

But, oh no - let's have a moan about the 2.5 million villas in Remuera .....

Hey, let,s built identical houses in identical steeets , put everyone on identical salaries, give them Ladas, identical home loans, ..... uhm... think there's a name for that.

It is completely unnecessary to build "affordable housing" in undistorted markets, because "trickle down" actually works like this:

In cities without regulations driving up the prices, this means not just perfectly acceptable new McMansions for $140,000 and townhouses for $90,000; it means that scummy old houses in scummy areas are $40,000 and even less. OK, that's US dollars, but get the point.

$300,000 plus for scummy houses in scummy areas is still a rip-off, especially of the people that can't afford anything better. What's the HOUSE i.e. the structure, worth? Anything? Only rationing of land keeps the price of even the worst "dirt" propped up like this. When bread is rationed in poor societies, it tends to cause the price of alternatives like cow pats to rise too.

What you are saying, ".....buy your first house in Ranui not Remuera  -    work hard on the garden, paint the interior, pay down extra on the mortgage, ignore your friends scoffing, then in 7 years sell it   -  you'll be surprised at the equity you've built up...." would be fair enough if the prices were as I suggest - under $100,000, not over $300,000. Your suggestion re building up equity in houses like these now, is utter garbage and fiscal child abuse of anyone that takes your advice. More like, they will lose their shirts as the prices continue to resume some sort of reality of relationship with incomes and the entire "rest of the economy".

If you'd talked like that in California or Nevada or Florida or Spain or Ireland a few years ago, they'd be trying to lynch you now.

A rather one eyed view. You guys talk about affordable suburbs without acknowledging that those area are usually crime ridden, with poor housing stock and poor schooling. The middle class of the past did not have to stoop so low, and neither should it now.

So your membership of the 'Middle-class' automatically gives you the right to purchase a cheap house - a nice house - in a nice suburb with Decile 9 schools!   I don't think so  -   maybe in Utopia

  Ha - get into the real-world:   your skills & knowledge which you might have aimed at from an early age may give you the earning capacity to purchase a property somewhere  -  but that's dependant on the life decisions you made from an early age in terms of studying, gaining qualifications, work experience, saving determination, investment nous, dedication to work,  risk taken in a business, building a network of relationships  etc etc .... 

I think if you've studied hard, achieved a university degree, worked and saved hard, and earn a middle or upper middle income you should expect to be able to live in an environment that provides more than crappy shack houses, and sub standard schooling.

My parents were both teachers - totally middle income, straight down the middle, - yet they could aspire to own a house in a good suburb (I'm not talking Remuera here, I' talking Howick, Browns Bay etc) with good schooling. Today such a couple would be struggling to buy a house in some of the crappier suburbs of Auckland dominated by state housing.

you obviously don't think so, but I think hard working middle class citizens should be entitled to decent housing, in decent suburbs, with decent schooling.    

Hi Matt

I live in an "affordable suburb", yes admittedly only a decile 4-5 primary school and a few uncut lawns from the nearby renters but friendly neighbours and good young kids playing at the local swings together. Life is what you make it, not the postage code you live in.

Australia also has it's own problems

http://www.courts.govt.nz/publications/publications-archived/2000/international-comparisons-of-recorded-violent-crime-rates-for-2000/new-zealand-compared-to-australia-violent-crime

And before Hugh jumps in and says that Houston is utopia the murder rate there is 3-4 x higher than NZ....God Bless America!

Good one ya for going to Adelaide, because if you stayed around in Auckland you would of ended up like this gentleman

http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10773838

The middle class of the past wouldn't have touched most of those suburbs (Ponsonby, Grey Lynn, Mt Eden, parts of Parnell, Freemans Bay, Eden Tce, etc) with a 10 foot barge pole! Many of them were low class inner-city slums with the highest crime rates in Auckland! They are grossly overpriced now only because they have become gentrified (by gay men oddly because they were dirt cheap for them to buy and they have the innate talent to tart them up) and they are now fashionable to a certain type of buyer (fashion victim?). But when the fashion changes as it inevitably will............look out! Owners will get a short sharp reminder of what it is they actually own. A drafty and cold working class house that is 100 years old, and that doesn’t have adequate off street parking.

There are many nice suburbs in Auckland which are far more sensibly priced and that offer a quality lifestyle (internal parking and pool e.g) and good schools than those found in the innercity west and south.

John Banks "Great Oppurtunity" (Auckland Population increase)

A great majority of Americans — in fact, the highest level in six years of Saint Index surveys — oppose new development in their own community. 79 percent said their hometown is fine the way it is or already over-developed. Some 86 percent of suburban Americans do not want new development in their community. Asked, “What type of new development would you most like to see in your community?” the most common answer was “none.”

http://saintindex.info/general-attitudes#nimbyattitudes

"In your community".

The operative phrase.

That is, infill.

Low density development beyond the fringes, or "new cities" over the horizon....? No problem.

Cynicism about government and the role money [the Property Council] plays in our political system extends into perceptions about local development and planning. 64 percent of Americans said the relationship between local officials and developers makes the approval process unfair.

http://saintindex.info/general-attitudes#nimbyattitudes

Huston, we have a problem:

"Meet the Rick Perry Donor Who Runs Texas DOT

by

Last week Streetsblog looked into the suburban real estate moguls who used their public offices to advance the country’s largest sprawl project – Houston’s third outerbelt, also known as the Grand Parkway. But even with all the cronyism and self-deal propelling this project forward, just a few months ago it looked like the Grand Parkway had been stopped in its tracks. The money had run out. The public was balking [PDF].

Then a man named Ned Holmes came to the rescue. A real estate developer, Texas DOT commissioner and prominent businessman, Holmes “found” the $350 million in unbudgeted money needed to move the project forward another 15 miles in its relentless, multi-decade march into the Houston region’s last natural grasslands."

http://dc.streetsblog.org/2011/11/10/meet-the-rick-perry-donor-who-runs-...

"last natural grasslands."

Sorry Phil Best this is why NZ as things like the RMA and street marches over mining etc...many if not most NZers value quality of their surroundings as part of their quality of life over absolute material / $ wealth....

by all means if there are a vast majority wanting mining and uncontroled building, get a street protest up...and prove those numbers and wishes.

regards

Pshaw. Enviro-looney hysteria.

"Houston's last natural grasslands"...........

Look on Google Earth, and laugh these enviro Taleban off the planet.

Thanks to LOW DENSITY, and extremely low opportunity cost of land, half of Houston IS "natural grasslands" or natural "something".

Having come back from a perspective-gaining time away, I must say it's sad to see the same narrow-minded, self-serving bleatings hereabouts.

How about we have a real debate with the 'Productivity Commission', starting with their name and objectives.

It would be akin to asking the deckchair commission whether they're factoring in the imminent sinking - and being ignored, or ridiculed for raising the question.

 

Why don't you stick to walking the streets of the city dressed in robes, wearing sandwich boards proclaiming the end of the world? This is a serious finance and economics blog, and rational views of the world are taken as a "given" on such forums.

Hang on people, don’t go phallistic.

We have had a worldwide credit/debt bubble, not a housing bubble as such. A housing bubble would have left us with a lot of empty houses.

The guy sounds good. I was taken in at first. I have had a quick look at it and it looks very well researched and reasoned...but I don't see the primary cause mentioned.

Hopefully it will get better as I grind my way through the verbiage these things seem to delight in. So far most of what I have read should be in the appendices not the main body of the report.

He clearly does not understand the role of Ponzi financing in NZ housing.

There needs to be a clear difference understood, between a supply-constraint "house PRICE bubble" and a house construction boom. The latter is the subject of a lot of misplaced hysteria, seeing that a few too many new houses represents only about 1% of the "malinvestment" that occurs when the price of every bit of dirt that every property in the country is sitting on, inflates in value by 6 figures.

It only takes a minimal shift in numbers of people per house, or a few in-migrants, to fill up a house quantity overhang. How long did the "fallout" of the famous 1990's Texas "housing bubble" (actually a construction boom) last? Construction numbers have been healthy and steady for probably 28 out of the last 30 years.

Sack the bloody Productivity Commissioners I say. Put Hugh and Phil in charge.

 "...an average of 7,500 new dwellings actually consented in Auckland annually over the ten years to June 2011; and just 4,700 annually over the past five years,"

But we are told Auckland is on a roll...OllyN screams buy....so what's with the demand for consents falling so far...the way I read it the demand has crashed not just dipped....

Hey Bill....have you figured it out yet...?

I don't think he's listening................I'll try yelling....."HEY BILL>>>>HAVE YOU FIGURED IT OUT YET?"........"OUT YET?".........."OUT YET?"....

Bleeding echo

So while Rome starts to burn, the new Labour leader doesn't address the serious housing crisis facing middle and and lower income Kiwis, he sees a bloody All Black flag as being the way forward for NZ... it beggars belief... where are all the leaders? What the hell is happening in this country? HELP!!!!!!!

Shearer wants fern on flag

http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10773745

 

The two self declared anti-sprawlers (i.e. anti housing on the periphery of the urban area), namely Mike Lee and Gary Taylor, live on Waiheke Island and at Muriwhai Beach respectively and in single family houses at that.

 

So their policies apply to the plebs but not the elite. So it has been since Roman Times when the nobility who lived in their expansive villas in the countryside insisted the Plebs remained penned up like factory chickens behind the city walls.

 

Whenever some one holds out against low cost housing for the plebs of Auckland always check where they live themselves.

 

 

So by the same token we should ignore your views on urban planning issues since you live in on a lifestyle block in the back of beyond.

You are inverting Owen's point. At least he is consistent with what he preaches.

 Australaian banks have got a week to do a stress test for the coming European meltdown, it will be interesting on how they stack up for an expected 12% unemployment 30% drop in house prices..apparently this is not a drill.The downturn in China might be the catalyst for a mass of returning kiwis 

If China sneezes and Oz catches a cold, do we think the fleeing Kiwis will come back flush with money and adding fuel to the property fire, or will they mostly be poor and incapable of house purchase? It is more likely the latter, because even if they have a reasonable amount of savings, there won't be a huge number of jobs available here. Chch rebuild may have some impact I suppose.

Cheers

hane,

I live where I chose to live (moved here fifteen years ago) and do not try to force people to live where I think they should live. If you cannot see the difference bewteen the designer facsists and my position then there is no room for discussion.

Are you aware the planning school at Auckland University is part of the Faculty of Creative Arts and Industries and site alongsid the Department of Dance.

Do you not think that "planners" (who should be a threatended species by now) should focus on how cities work rather than on how they should look.

Resource Management has nothing to do with the creative arts unless you accept the fascist principles of urban design as an aesthetic theory rather than being about urban economics and cost and benefit.

 

Not that Owen and I agree on everything - but thats neither here nor there. Young people in particular, need to read his articles and submissions.

...................................

How about AGW Hugh?

I'll mark that as Hugh Pavletich believes AGW is "an extinct religion". Might such environmental judgements on human activity and problem solving ability be eventually realised as market failures?

It's not extinct yet, unfortunately.

The ideas of Productivity Commission, as well as those of McShane, PhilBest, Pavletich et al that dominate the housing threads on this site studiously ignore the elephant in the room that it was the availability of credit that have caused the Western house prices to go insane. Lengthy screeds, great internet stamina, but hardly a word said about that at all.

 

 

Again you simply focus on the supply side but say nothing about demand. For instance the lack of credit bubble in Texas and Germany over the last 10 years has very little to do with nebulous ideas of cultural memory and very much a lot to do with government regulation of LTV ratios, 20% in the case of Texas and 40% in Germany, if I recall.

And how did South Korea have one of the world's biggest ever house price inflations from the late 1970's, with very little mortgage credit involved at all - young people saving towards a rising target, national savings, not debt, ballooned; while marriage and birth rates collapsed. This is what happens when land supply is rationed, even if you do not have expansion of credit.

Downturn puts 38,000 jobs at risk
By ESTHER HARWARD - Sunday Star Times | Sunday, 20 April 2008

Another 38,000 people could lose their jobs in the next couple of years as the economy slows, and people working in real estate, housing construction, retailing, manufacturing and business services are most at risk.

ANZ National Bank chief economist Cameron Bagrie said these sectors had grown off the property-market boom and accounted for 60% of new jobs over the past five years.

http://www.stuff.co.nz/sunday-star-times/latest-edition/376946/Downturn-puts-38-000-jobs-at-risk

That would explain why we are a "pro immigration country"*

*John Key on Hard Talk.

Downturn puts 38,000 jobs at risk
By ESTHER HARWARD - Sunday Star Times | Sunday, 20 April 2008

Another 38,000 people could lose their jobs in the next couple of years as the economy slows, and people working in real estate, housing construction, retailing, manufacturing and business services are most at risk.

ANZ National Bank chief economist Cameron Bagrie said these sectors had grown off the property-market boom and accounted for 60% of new jobs over the past five years.

http://www.stuff.co.nz/sunday-star-times/latest-edition/376946/Downturn-puts-38-000-jobs-at-risk

That would explain why we are a "pro immigration country"*

*John Key on Hard Talk.

HUGH PAVELVITCH STARTS EACH POST WITH A TITLE IN CAPS

and then moves to lower case to explain that towns in Texas have cheap housing therefore they are awesome - even though everybody knows that just because something is the cheapest doesn't mean it's the best - usually the opposite.

Hugh, you are getting rather strident, can't you see that most town planners and people don't actually accept your concept of urban sprawl that takes up good agriculturally productive land

Good productive agricultural land. This is lunacy. If that is what most people in NZ believe, then they deserve poverty.

What land is most productive per square kilometer? A city, or rural?

DUH.

HUGH'S CAPSLOCK KEY STILL BROKEN

and instead of addressing the issue resorts to personal attack.  Is everyone who disagrees with your vision of sprawl and no intensification a Bankers buddy? 

 

The report is quite simplistic and also biased in a number of ways. Owner occupied housing is seen as intrinsically a good idea, but reasons for and against this proposition are not dealt with in any meaningful way. Multi unit accomodation is also assumed to be undesirable, but this again is not dealt with in any meaningful way.

The report goes into some detail about the lack of economies of scale in the NZ residential construction industry but does not even acknowledge the idea that large scale high density accomodation would enjoy economies of scale.

Freeing up land supply at the fringe is certainly a way of increasing affordability, but my dog could have told you that. The nitty gritty of zoning and regulatory issues in the existing urban limits has not really been dealt with in any detail at all.

In a sense allowing increased density within the existing urban limits and allowing sprawl are the same thing: they both require upzoning. But the report only focuses on one of these two avenues. In fact at times the report seems to imply that the policy of restricting sprawl is synonymous with allowing increased density, whereas this is of course not the case in Auckland. Despite the RGS being in place for over a decade, stuff all upzoning has actually taken place, and it remains as difficult and risky as ever to try to develop medium to high density in Auckland.

But the cost of all land that anything in the urban area is sitting on, is determined by the cost of fringe land.

It is impossible to strangle fringe land supply and provide "affordability" in established areas (and hence the entire city) via infill and higher density, unless the properties involved are nationalised or compulsorily acquired for next to nothing, and developed and sold off at an artificially low cost.

Curitiba's famous Transit Oriented Design was only successful because of wholesale nationalisations of land for high density development adjacent to the public transport spokes.

Otherwise, the response to the "plans" will mostly be inflation in land price , and actual numbers of people "housed" will remain low. We are talking about very distorted supply curves, with prices high and "quantity" low.

More land may not necessarily lower prices of buildable sections (or not more than 10% or so)  -  developers & builders & financiers will still control the speed of bringing devt land to the market.

In the same way if a couple of large Japanese car importers brought in an additional 10,000 cars into the country - they are not going to immediately drop prices of $12,000 cars to $5000 overnight. They will use a variety of means: hold, pause, drip-feed, auction, sell in groups, etc to control any price slide.

That is exactly what did happen once when import license was quota'd and auctioned.

But if anyone can bring in as many cars as they want? Get real.

Hugh, I totally agree that getting rid of arbitrary restrictions on outward expansion is a good idea. But you can't pretend thatallowing outward expansion will improve the propects of upward expansion, if upward expansion remains illegal. I think the report has ignored the upward expansion issue.

People seem to think that councils in Auckland have encouraged intensification. They have done nothing of the sort. Density is banned across most of Auckland, or highly restricted where allowed to proceed. Let's fix both the outwards and the upwards.

+1 Hugh and his boomer mates purport to champion the cause of young people priced out of the market, but fail to understand younger generations are actually very open to medium density living close to town if such a thing were actually available to buy.

At the moment, it's just not because of density & minimum parking restrictions. http://transportblog.co.nz/2011/07/22/exploring-our-planning-problems/

Swan while going up is a good idea there is a limit. There is research to show that mental illness rates increase for people that live or work above four stories, you have to be able to perceive the ground and four is the limit for that.

Hane there are a couple of interesting points contained within that article. The issue of design is a good one and regardless of the rules a good architect (subjective)should be able to do better job than the aweful sausage flats. I am not sure what the rules were when those flats were built, but the 'stand alone' housing problem is a big one. A series of flats on a long thing section would be infinitely better to build without boundary or height restrictions. If the section was orientated the right way you could even get good thermal performance from such a design. The hardest part of a design of this type is to not have living areas adjacent, but I have done a design of this nature myself where the walls of one house formed a courtyard in the next.

Optimum density to maximise community is in the 30-60 people per acre range. We probably had that when birthrates were up.

Scarfie,

Why do you want to organise other peoples lives for them?  I am sure individuals are capable of weighing up the trade offs between being able to "perceive the ground" and the myriad other factors that they, and only they, face when deciding where to live or work.  If you are worried about people living on the fifth floor of a building, dont (unless someone else has forced them to live there).

I understand there are externalities associated with development.  But there is a huge difference between say, shading a neighbours property, and people in the general area "not liking the idea" of a particular development.

You make a very good point, but the opposite is that they have their lives controlled by those that control the property chain. When the choice is between bad and very bad then it isn't much of a choise. This is pretty much the case with New Zealand.

While I don't like the idea of American urban sprawl from a community and resource perspective, I fully sympathise with the opinions of Hugh and PB. Tell the planners to go to hell and let people get on with it. People may build crappy urban sprawl, but at least they had the choice to do so.

There is a principle laid down of Christopher Alexander in "A Timless Way of Building" that the more you lock up information within a profession, the worse the outcomes. This is exactly what is happening in most of the West and certainly in this country. I would like to see Archecture, Law, Medicine etc dismantled as 'registered' professions. It has bred such arrogance.

When people are informed in their decisions, and given the freedom to make them, well that would have to be the best outcome.

Architecture is already a totaly deregulated profession.  You have to be registered to be called an "Architect" but if you can wield a pencil you can design and lodge buildings for consents.  One of the reasons we got a leaky building crisis.

 

The cost of all land that anything in the urban area is sitting on, is determined by the cost of fringe land.

It is impossible to strangle fringe land supply and provide "affordability" in established areas (and hence the entire city) via infill and higher density, unless the properties involved are nationalised or compulsorily acquired for next to nothing, and developed and sold off at an artificially low cost.

Curitiba's famous Transit Oriented Design was only successful because of wholesale nationalisations of land for high density development adjacent to the public transport spokes.

Otherwise, the response to the "plans" will mostly be inflation in land price , and actual numbers of people "housed" will remain low. We are talking about very distorted supply curves, with prices high and "quantity" low.

What is most disturbing is that those who are most opposed to a lightly regulated urban economy show  their profound ignorance of how cities work as they enthuse over their notions of how cities should look.  "The Vision Thing."

EG They talk about productive land needing to be protected from urban sprawl. There is no such thing. Only people make land productive. (And dont divert into the ecological role of different land – it has nothing to do with "productivity" in this sense.

Then they confuse fertile land with productive land. The most productive land is probably growing truffles as we speak (last year fetched US$13,000 a kilo) You can grow a useful crop of truffles in your back yard but you will just about the least fertile land you can find. Grape growers and olive tree growers do NOT look for highly fertile land. Actually only 3% of our most fertile lands are used for horticulture so it is hardly in short supply. 

I wrote a paper for the Auckland City Council in 1965 called Residential Density and Development costs.  Medium density two storey housing proved a highly "efficient" use of land and made it easy to provide for owner occupied housing at reasonably high density.

Hence we enabled "town housing".  

The reason for the high density multi storey apartment boom in Auckland was the usual stuff up. Council had made it illegal to live overnight in the central area unless it was in a hotel etc. While I tried hard to remove that law it stayed in place even during my two years at Berkely. Then there was the office block boom in the eighties and then that bubble burst and the city anti residential rule was dropped so that the half built offices could be converted into high density apartments. They were but with dreadful acoustics etc... NEVER buy an inner city apartment without spending the weekend in to test for the noise of toilet flushings charging down behind your head board.

If you want to know the origings of most modern planning theory go here:

http://rmastudies.org.nz/documents/UrbanRomanticsUS.pdf

Enjoy.

 "I am suggesting that we cannot win" Vote with your feet, as you have obviously done. 

One of the best recommendations I know of in relation to the built environment, is that assessments should be done by how a space 'feels' not how it 'looks'. Even better if it is comparitive.

Hello

NZ has plenty of housing,just look in the poor run down areas.Auckland is full of these getto type areas.Nobody working an all the problems that nobody wants to talk about.

The old houses should be used for statehouses,why would you build loads of new houses for people who will never work.

There are people in my street that have been in there statehouses for 45 years.Give the working family people these houses so they can buy them.

Look NZ needs to start looking after people who give a shit,pandering to the bottom feeders who take everything , do nothing has not worked.

A good farmer picks the best breeding stock,NZ needs to do the same.

Build houses for people who can afford to buy them.

We need working people who have money.

Pick the best for NZ

 

The Government tells the SWG what to consider/ not consider. That is corruption.

======================================================================

 

The exclusion of a capital gains or land tax from consideration has prevented an accurate assessment of measures needed to promote savings by the Savings Working Group (SWG) say the New Zealand Manufacturers and Exporters Association (NZMEA). The SWG detailed the tax differences between assets and other forms of investment but was prevented from drawing the logical conclusion. There is little point tinkering with savings vehicles while large tax harbours still exist.

The SWG estimated that the tax system bias in favour of housing caused about half of the increase in house prices over the past ten years, and that this distortion encouraged “investment in housing rather than investment in more productive assets that would have lifted productivity and potentially lifted exports.”

NZMEA Chief Executive John Walley says, “The major reason we see a low savings rate at the moment is that borrowing on a property is the most tax advantaged way of building wealth. Unfortunately this method of growing wealth also increases our foreign borrowing (as the banking sector chases the lowest cost of funds, and in the process overvalues our currency) and starves our productive economy of capital and margin which would otherwise be available.”

“There is little point in the Government commissioning working groups to investigate these problems if they are going to restrict their findings. Just about a year ago we heard from the Tax Working Group that a capital gains or land tax is needed; burying our heads in the sand is not going to fix our problems.”
 http://www.realeconomy.co.nz/148-terms_of_reference_blight_swg_.aspx

Net migration set to stay positive
Dec 19, 2011
                                    
Meanwhile Key said he expected net migration to New Zealand - a factor in house price pressures - would stay positive.
                                    
"One of the issues in Auckland is we're the home of most internal and external migration. We're on a pathway to a couple of million people. That puts pressure on the system," he said.
                                    
"The balancing act here is that the councils generally don't want to release land, because they say that forces them to build infrastructure further and further out - roading, sewerage, all those things - whereas intensification, they like that."
                                    
The government would look to continue the trend of net positive migration to New Zealand, Key said.
                                    
"Yes we lose people to Australia, but we still have a lot of migrants come and I think overall they add a lot of value," he said.
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=1077...

All the Government Money Can Buy!

FYI I have removed a thread that included a bunch of name calling and silliness.

Let's keep the tone high people.

cheers

Bernard

Parliament will be sitting , soon .....

.... let's leave the name calling & silliness to them , that are practiced in the art .....

The argument becomes a bit of a flailing giant squid.

I find it frustrating that we sweep immigration under the mat assuming questions relating to population size are settled and obvious.

http://www.clevelandfed.org/research/commentary/2011/2011-27.cfm

"In recent decades, some cities have seen their urban centers lose population density, as residents spread farther out to suburbs and exurbs. Others have kept populous downtowns even as their environs have grown. Population density in general has economic advantages, so one might wonder whether a loss of density, which may be a symptom of negative economic shocks, could amplify those shocks. We look at four decades of census data and show that growing cities have maintained dense urban centers, while shrinking cities have not. There are reasons to think that loss of population density at the core of the city could be particularly damaging to productivity. If this is the case, there could be productivity gains from policies aimed at reversing that trend."

So are we drilling down as to whether our urban centres are growing or contracting.  I would have thought Christchurch even before the quakes had a hollowed out centre. 

Certainly much of small town NZ which is definitely not growing meets this description.  Everyone who can afford it is on a non-productive lifestyle block on the periphery, with neighbours who want the land to stay in a non-productive state because production is messy, noisy and irritating.  The town is left to the old and the poor who get slammed with high rates to support the periphery. 

Just putting that out there as an alternative scenario.

 

 

 

 

That assessment by the Cleveland Fed shows just how out of touch one bunch of economic specialists can be, with another specialist branch of economics.

Prof Patrick Troy (Australia) calls this sort of analysis "Physical Determinism", because it places urban form at the beginning of the process of urban economic and socio-economic evolution instead of at the end of it. Anyone who wants to seriously study this point, needs to read Troy's book "The Perils of Urban Consolidation".

Another quicker and easier read that will provide the necessary epiphany, is "The Flow of Money and Its Impact on Local Economies" by William Fruth - downloadable online as a PDF.

Ask yourself this simple question - is Manhattan Manhattan because it has skyscrapers, or because it became one of the world's 4 main centres of international finance about 120 years ago? Can any city in the world "become Manhattan" simply by building tall buildings, and expecting the sources of employment that the city has depended on up till now, to occupy those buildings instead of the kind of premises they currently prefer, in the locations they currently prefer? Warehouses, factories, retail malls, car dealers, etc etc etc?