PM Key likes affordability report, notes good points made on need to release more land, indicates not keen for more changes for rental investment

The Productivity Commission's housing affordability report made some good points about the need to release more land for housing development, as councils continue to favour intensification, Prime Minister John Key says.

Speaking on TV One's Breakfast programme, Key said central and local government needed to work together on the issue, as local councils were able to manage land supply, and the government was able to manage migration patterns into the country, and mostly to its biggest city, Auckland.

Meanwhile, Key indicated the government did not want to target the rental investment sector much more, saying if they went too far in changing the dynamics of the sector, rents would rise.

'It's not about tax'

Key noted comments in the report that perceived tax advantages for housing was not a driving factor in driving up house prices over the last decade. He pointed to other nations with capital gains taxes which all experienced house price bubbles - the UK, US and Australia.

“I think they’re right – it’s balancing the release of land, making sure that you’re intensifying the use of land in certain places, looking at the overall cost of building. One of the things they said was, in Australia they’ve got very large scale housing taking place that’s cheaper,” Key said on Breakfast.

“Their main point is if you choke off that supply of land then by definition land prices have to rise," Key said.

For home-owners, the biggest issue still was interest rates, he said.

'Don't want to hit rental investors too much'

Key indicated the government was wary about making further changes to the tax system that would hit rental property investors in the pocket, following the changes made to depreciation rules in Budget 2010, which he said took about a billion dollars a year out of the sector.

"There’ll always be a rental market. There’s no question we changed the dynamics around [the rental market] – it’s not as attractive as it was. The balance there is making sure we don’t do so much that people stop investing and then rental prices go up a lot," he said.

Net migration set to stay positive

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.

(Updates with quotes from Key)

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105 Comments

After reading that, I can't help but have the impression that he is happy with the way things are. Has he actually said he is going to do something?  Just a heap of mindless spin.

100% correct I've followed this issue for years. he made comemnts before about how he would do something.  All bullshit

If John Key really said "interest rates are the main issue for home owners", pity help us.

Does he think interest rates are currently "too high"? By what historical standards?

As long as land supply is constrained, lower interest rates will feed through to higher house prices, leaving current "mortgage affordability" neutral, but every fresh first home buyer with many more dollars of debt, many many more dollars paid to the banking system in his lifetime (does Mr Key have no problem with that?), and high vulnerability (potential bankruptcy, in fact)  from any increase in interest rates throughout the term of the mortgage. And that's a long time to be exposed to any increase in interest rates.......!

JK: "we still have a lot of migrants come and I think overall they add a lot of value,”

Some do, John, but overall?

The majority seem to be crowding into Auckland and invoved in the marginally productive or parasitic sevices sector but I don't know for sure either. 

How about some real research on this vital subject, has anything recent been done at all?

Among these migrants there are (mainly Asian) who are buying up MULTIPLE houses. These houses would not normally considered by other investors to have enough rental return to justify holding other than for personal occupancy.

The possible  reason is that these immigrants who remian overseas to work are seeking NZ residency by using the "economic/wealth" path and are unable or unwilling to put their money into NZ business investment. The easy way is to buy $600k houses on a 3% net rental yield  after using a local rental manager.

The result is that in some suburbs the cost to genuine home seekers is rising way beyond the real value of the properties.

Tell me I am WRONG.

The abundant data in the 250 page Housing Affordability report seems to not reveal a problem of this nature. Perhaps the evidence is anecdotal only?

Hugh there is an even bigger issue and that is getting wages up so there is money to buy.  And John Key is proud that he has lowered real wages since taking office. 

AS I already said to someone else somewhere else on this long thread, you might as well require employers to index their employees pay to returns on investments with Bernie Madoff.

No employer's turnover, profits, or productivity increases can possibly keep up with a Ponzi scheme somewhere else in the economy, and it is absurd, destructive employer-bashing to suggest that this is where the solution to housing Ponzi lies. 

By "real wages", do you include "what is left over after housing costs are deducted"?

I can assure you that there is not a lot else in the economy that would make the biggest practical difference, than restoring affordability to housing, meaning median multiples of around 3, and minimal "planning gain" associated with housing development.

Check out the graph on page 5 of this, and guess which cities have high housing costs and which have low housing costs:

http://www.houston.org/economic-development/joel-kotkin/pdf/KotkinAppend...

Also, guess which cities have a "future", and which are on a long term decline unless they sort their zero-sum wealth transfer property racket out.

 

STOP BEING STUPID AND GET REAL AS YOU ONLY LIVE ONCE

The fact is you need average of $1M to buy an average 3 beds 2 baths house with a section of around 450sqm in the following areas:

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, Kohi, Orakei, Glendowie, Pt Chev, Milford, Grey Lynn and Freemans Bay haven't even made it to the top 10, but their average house value are all around 900k.

Hugh -- yes I looked up Leavitt several months ago when you mentioned him before.

Isn't there a bit of a difference between the providing mass houses in the USA with its larger population base than NZ (compare Houston with 2.1 million in 1200 sq kms with 4 million odd over all of NZ) -- something basic about economies of scale.

I fail to see what is stupid about pointing out that the puyer needs a decent wage to be able to buy.  And bulk supply with nobody able to afford it because of low (and going lower) wages isn't  going to work.  

Your silver bullet solution is seriously incomplete. 

 

Hugh There are two sides to affordable housing.  The second side is the wage level.  What to do about that?  

I reckon affordable housing is a way more complicated problem that you portray.  Affordable housing is what is affordable accounting for the combination of capital costs of buildings (includes land) and the running costs of the building and the location, and relating those costs back to the wages.

 For example if a house is cheap but a long way from work, then it may not be that affordable.  I just see lots of rah rah about lowering the capital cost (by the miracle of increased supply of land), without considering whether a low capital cost comes with a higher running cost (e.g. paying for infrastruture on the drip feed v in a lump sum, higher transport costs to get to work, shops etc, potential social costs of being isolated from the city amenities), and without considering the piss poor level of wages we have.  

I know transport costs can take a decent swad of a wage.  I travel 1.25 hours each way to work.  I am paid well above the median and still pay some 6% on travel.

 

You can't try and force employers to index wages to bubble house prices any more than you can force them to index them to Bernie Madoff's investment scheme returns. Both are Ponzi schemes.

The same factors that are forcing house prices up are increasing employer's operating costs (especially premises costs), reducing productivity, and reducing household discretionary spending (and hence economic activity). It is absurd to suggest that the answer to the income-housing gap lies in something OTHER than reforming the regulations that inflate the costs of urban land.

Obviously then I must accept that I am absurd.

A bigger issue? If you put more money in people's pockets, across the board, then it will go straight back into the property market as inflation. This is what you get with a serious undersupply of what's essential. It's a competition amongst buyers, and more money further just fuels the "financial arms race".

And when you make land crazy expensive you give start-up's and [otherwsie] expanding businesses a very good reason to locate their enterprise/capital somewhere else. So you don't even get the capital investment which supports wage increases regardless.

Releasing land is absolutely fundamental.

John Key knows it, but he continues to only pretend to do something about it. He's a funny little creature. Still trying to work him out.

He's a funny little creature. Still trying to work him out.

 Andrew - I think the members and some voters of the National Party are currently working on that one too.

Andrew Atkin, it is a sincere pleasure to see you on this forum. You have impressed me long since with the extremely intelligent commentary you do on your own blog on this issue and a few others, even though you are not a specialist. The comment you just made is entirely typical of your ability to cut through the myth and hype and crap to the reality.

 

I hope we will see a lot more of you here.

PhilBest: Why thank you! Don't think I'm infallible though (smile!).

 "Key indicated the government did not want to target the rental investment sector much more, saying if they went too far in changing the dynamics of the sector, rents would rise."

The "dynamics" are currently a porridge of govt fiddling wrapped round a landlord subsidy costing well over $1billion a year.

The subsidy has driven rents higher...and property prices....ensuring a pool of tenants who cannot afford a home of their own...

The banks just love the game and have the RBNZ on hand to help out, while knowing they can count on Key leaving the game in play...

Wolly, you have this back to front.

Have you read the Report? (All 250 odd pages?)

The accomodation supplement cost has been increasing at 7% per annum, because of house prices being forced up by land supply restrictions, and tracking that, more people have been forced to become renters, and those rents have risen, although nowhere near as much as house prices (this being a classic evidence of a bubble).

The house price increases would have happened regardless of the existence of an accomodation supplement.

South Korea's house price bubble started in the late 1970's after they enacted Green Belt policies; tradition was that young people saved the price of a home, borrowing small top-ups from relatives. A mortgage credit market was almost non existent, and the same goes for "rentals". But house prices rose slightly faster than young people could save (which is to be expected, this is what happens when supply of something is restricted to even slightly less than demand), national savings boomed, and marriage and birth rates collapsed. This is the counter case to every argument for factors other than land supply.

It's interesting the the Productivity Commission has dismissed the tax structure..when clearly the landlord subsidies do increase demand...

A better approach could have been to have a weighting for each factor....for example, restrictive planning rules are the main driver so a 50% weighting....and it would be fair to say that the tax structure has maybe a 10% weighting....what do you guys think?

I personally found their lengthy analysis of taxation factors entirely convincing, and an education in its own right.

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 poor revenue. Furthermore, 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.

The Commission also estimates that local body rates on average are equivalent to a 20% tax on imputed income from home ownership.

AND I left out of that comment, the commission's discussion of the effect of GST - another tax that applies to housing.

The "tax advantages" of housing are over-rated.

Maybe we should focus on removing the tax and regulatory disadvantages of actually producing anything and employing people.

 

He wants more migrants to keep the house prices high. This is really really bad for our country. I agree that a certain percentage of the population should be migrants, but it should have a cap. We need to have much tighter migration laws.

REAL immigrants too.

NOT economic commuters looking for cheap education for their kids.

Also NZ citizenship should be able to be withdrawn within ten years of granting.

One disturbing thing I read in "Quadrant" Magazine a few years ago, was that international NGO's tasked with selecting refugees for admission nations like Australia and NZ and Britain, deliberately pass over English speakers, Christians (even if they are refugees because of their Christianity) and qualified people. They seem to regard it as part of their duty, to increase our level of  "multiculturalism", and part of our duty to permanently support useless people and cultural "stirrers", rather than integrate useful people into our society and our economy.

The USA apparently does not have this problem, because they are wise to it and do the selecting themselves. Australia has taken similar steps.

I did warn you this would be govt policy Muppet....immigration has always been the nz govt fallback policy...the spin machine sells it as great for growth...standard BS Muppet

If National don't play this game, Labour certainly will. So you have two options.....immigrants with capital, skills and enterprise...or immigrants without English, no capital and no skills...

Take your pick.

Immigration certainly is a separate issue, one on which opinions are well aired and electoral positions have long since been established.

If there was a hope of actually winding back immigration on any grounds, Winston Peters and his merry men would have achieved it long ago.

Ironically, the lower the overall level of immigration is, the lower the average quality of immigrants will be, because "humanitarian" admissions that we "can't say no to" will make up a larger % of the total. If we had a pragmatic "open door to anyone useful" policy, we would get on a lot better.

If there are not land supply constraints forcing house prices up, no amount of immigration would force them up - look at how many people the Texan cities can absorb without prices inflating. Actually building new homes rather than letting prices of the existing stock inflate, creates jobs ........ news flash for NZ........!!!!!!!!!

I estimate that for NZ to have "run out of land" and price inflation to be unavoidable as a result (assuming food security), we would need around 60 million population.

The Netherlands has 14 million people on about the amount of land Canterbury has; they are around 20% urbanised and a high proportion of the other 80% of their land is farmland, which is just sufficient for "food security" at low rations if they were cut off from import supplies in wartime. NZ with 60 million people, would be nowhere near this point - it would still have its National Parks. Japan has 120 million people with less land than we have and of course they are obliged to be large net food importers. So are Kiwis, with all their hysteria about "running out of land", sympathetic with any future Japanese desires to get themselves a bit more by armed conquest? Why not? If we can be as hysterical as we are about it, why wouldn't the Japanese people also be entitled to a bit of hysteria about space and food security?

Hugh says $50,000 for (fully serviced fully developed) section

Bob says $100,000 for the base costs of development per section

Bob | 16 Dec 11
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

That's a big disparity - Can we get a bit more information please? 

One significant difference, is the way infrastructure is paid for. 

Publicly funding infrastructure via finance over the long term is really the only equitable way to do it.

This is because when the charges are capitalised into the prices of every new house, the price of all houses is inflated by a similar margin. Therefore, the charges represent a wealth transfer from young first home buyers to established property owners regardless of where the young buy their first home.

It would actually be a lesser burden on the young, to just hit them with a levy to pay for all new infrastructure, after all, it was their fault for being born. The cost of all new infrastructure, spread out across all young people, would actually be a lot less than the extra that they are each forced to pay for a first home, and the levy would actually be paying for something, rather than just a zero sum transfer to older people and banks.

Or we could just stick to the way western civilisation did it for decades - perhaps our ancestors were wiser and more moral than we give them credit for?

Here's an example subdivision cost breakdown (last page)...

 http://www.boundary.co.nz/cms/uploads/images/10306_Subdn%20Feasibility%20Report.pdf

... which gets to $81,000+GST for one new site.  Keep in mind that this is for 3m wide domestic drive and domestic infrastructure only - a bigger subdivision with council standard 20m road reserves, bulk earthworks etc etc is way more expense both in consenting and construction, hence $100,000+ comment.

That is outrageous, and thanks for your time and effort in obtaining the info

Hugh and PB think that the large infrastructure costs of new subdivision should be disregarded as it can be borrowed (bonds) or the cost spread over everyone (higher taxes/rates).  With intensification no one pays 'cos it's already there.  They'll say that existing infrastructure needs to be upgraded so it's the same - no.  The only infrastructure that really gets major upgrade is drainage which needs upgrading due to age (and in Auckland sewage/stormwater splitting) anyway.  The big cost of roads exists and usually only needs upgrading due to higher traffic counts caused by .... sprawl.  NZ already has one of the highest per capita amount of road in the world.  A $23B asset which costs 5% of that to maintain each year (refer NZTA).

Finally, at long last, we get to the nitty-gritty of the issue. The difference is the front-loading of the entire infrastructure cost in the price at the time of development versus amortisation of the cost of infrastructure over the life of the asset (say 50 years). There is some validity to that proposition. But the capitalisation and carrying cost would have to be borne by government (local? central?) because private developers have to recover their costs immediately as they are not in the infrastructure business. The next question to resolve now is the what the heck do they do in Houston where you can buy a (developed?) section for under $30k. 

Huigh -- what is the cross subsidy and hidden costs in this $200,000 house price?  Things like public services like libraries, parks, public transport, ... the demand for which is created by these extra houses -- are they built into the cost of the house or paid for later or paid for by someone else.  Then there is extra costs of running a house on the outskirts of a city -- the cost of access to the city for work, shopping and recreation will be hgiher than people closer in.  And are these houses built using good levels of insulation and long life materials so running costs are low?  

Is the lifecycle cost of living in and maintaiinng a house on the outskirts low or is it a case low cost up front then higher running costs?

There are many new subdivisions currently in Hawkes Bay with many new sections  ie there is a plentiful supply in at least 6 areas in Hatings & Napier. 1 subdivision is owned/managed by the Napier council equidistant from a lower & higher priced suburb/s ie neither low or exclusive area.  Sections are still around the 200k mark. Houses in the low 400ks (& that's cheap compared to a more exclusive subdivision next door pricing package at around 550k)   So the plentiful supply of building sites has not really decreased prices - in fact they are at a premium over section values on existing houses. 

plus (c) to spend hours a day burning fuel driving around in F150 trucks (d) to receive gunshoot wounds (e) why tourists don't go there (f) how housing is cheap if you put in in unpleasant enough surrounds.

There is a correlation between the rate of sales of V8's and SUV's, and the "discretionary income" that citizens have once housing costs are paid for.

Any "beneficial outcomes" of "smart growth" work by depriving the population of discretionary income and reducing the consumption of virtually everything - not just petrol, but children's shoes.

The Commission correctly identifies at least 20 years supply, as necessary to preserve genuine competition between sellers of land, and they recommend infrastructure planning for 50 YEARS growth, to enable developers to follow this and still keep land prices competitive.

Alan W Evans discusses the Portland experience in his book "Economics and Land Use Planning". Portland drew an Urban Growth Boundary with "20 years supply" of land for urban growth within it. 4 years later, prices began to inflate.

Evans says this is because:

 - at any one time, approximately half of farmers will not want to sell their land, period.

- developments typically take about 4 years.

- developers like to have secured their next development site before they have completed their current development

- longer permission processes cause developers to act earlier to secure their next site

- farmers being approached all of a sudden by multiple interested buyers, "get wise".

That is not rocket science, yet planning advocates are in denial and most economists cannot see reality for all the fancy formulas they bury themselves in.

Developers, furthermore (Evans discusses this too) find they are now in a "high risk" profession, at the mercy of speculators and incumbent land owners with monopoly powers. The cost of RAW land that they must finance while doing the development, is now literally hundreds of times what it used to be. Property cycles are much more volatile and timing becomes much more important. The window of opportunity for money making is narrowed not just by the length of "boom" cycles, but by the length of permission processes.

Many developers end up going out of business, and the trade tends to concentrate more and more in fewer and fewer hands. The small "spec builder" is squeezed out altogether. The "supply" response during each "boom" of the property cycle, gets less and less and the PRICE response gets more and more volatile. This is literally the fact in Britain (where Evans comes from, and the main subject of his books). Actual shortage of housing gets greater and greater, and pressure on social housing and accomodation supplements increases.

The data provided by the NZ Commission shows we are heading in this direction in this country.

Andrew R,

Do you understand long term Investment? If the council lays a pipe, people will be using that pipe for 50 years or more. Why pay for it all at once? The new property owners will pay for it, in their rates, for the next fifty years. Do you understand?

When a power company signs up a new customer, they don't send them a bill for the cost of a new power station! Think about it.

Swan is onto it.

AND, publicly funding infrastructure via finance over the long term is really the only equitable way to do it.

This is because when the charges are capitalised into the prices of every new house, the price of all houses is inflated by a similar margin. Therefore, the charges represent a wealth transfer from young first home buyers to established property owners regardless of where the young buy their first home.

It would actually be a lesser burden on the young, to just hit them with a levy to pay for all new infrastructure, after all, it was their fault for being born. The cost of all new infrastructure, spread out across all young people, would actually be a lot less than the extra that they are each forced to pay for a first home, and the levy would actually be paying for something, rather than just a zero sum transfer to older people and banks.

Or we could just stick to the way western civilisation did it for decades - perhaps our ancestors were wiser and more moral than we give them credit for?

Yes ... Well ... But!

Were you too ( ... like moi) surprised by the response of the Productivity Council to the Housing Affordability issue?. There's was a  political response to what I, (silly me) thought might produce some answers that included some useful critial analysis. Nope ... fat chance as any meaningful! analysis was MIA.

This is NOT a simplistic problem deserving of simplistic ... so-called answers. 

Try for example the issues of Income, (the other component of the affordability ratio). Low incomes (DOH) equals High affordability, median property prices are often assumed to be the only bogie. Not so ... think about it.

Another one ... how can community infrastructure support a diverse non intensive land sprawl? DOH ... answer ... it can't ... unless of course we all want to use composting toilets off of unsealed roads (We don't).

Finally, our existing planning dynamic ... its ethos and structure, (particularly its Uni indoctrinated mind-set people) are congenitally wedded to the opposite of what the PC (and the PM?) think-want.

Go figure ... 

BLAB BLAB BALB    -  umm ,  arent a lot of immigrants coming to NZ to stay just for a few years so they qualify more easily for  bunking off to Oz ?

good luck to Prodcom on Non-Housafordabilitty but like most blabfests ANY REAL ACTION will be overwhelmed by future events  - in this case  likely to be a European financial meltdown,Chinese civil war / instability, and more Middle East mayhem coinciding with a weak US foreign policy. I mean look at the rush out of Iraq , the place will fall to bits shortly!

bring back Dubya

Larry Mitchell, have you actually bothered to read the report?

I am currently reading the book "The Politically Incorrect Guide to Socialism" by Kevin D. Williamson. He asks the question, what really does distinguish socialism? Of all the various political systems that are called "socialism", and some theorists say, no that is not really "socialism"; what feature can we say, identifies something beyond further argument, as "socialism"?

 Williamson's answer:

 "Government Planning". When anything at all is in conflict with "the plan", the true socialist will remain faithful to "the plan", rather than to equality, "rights", human well-being, economic growth, or whatever.

So when the Plan forces up the price of housing, beat up the employers for not keeping wages up to the same rate of inflation as housing. Never mind that the employers don't have the sales or profits to do so, or the increases in productivity to do so. You might as well benchmark wages against Bernie Madoff's investment payouts, it is about as meaningful as house prices when supply distortions are turning housing into Ponzi.

The Commission also discusses infrastructure costs in their excellent report. It is simply not true that costs will be lower if population densities are increased in existing built up areas. Capacity is mostly inadequate, and it is far costlier to disturb busy and built-out areas and replace existing infrastructure with larger capacity infrastructure than it is to just do it on greenfields.

You are right about the ideology of the planning classes. The best first step we could make is to sack the lot of them and turn the engineers loose again (just as they ran the show perfectly well for decades before the planning elites performed their coup-d-etat).

Hmmmm.  Sticking to 'the plan' regardless of evidence or consequences isn't a defining feature of socialism - it's a defining feature of strongly-held ideologies.  Political, religious, across the board.  Sounds like he's beginning from a questionable conclusion and distorting definitions in order to get there.

What other ideologies have "Government planning" at their core? Just curious. I thought his insight was a pretty good one.

One big impression I get from reading the Productivity Report is supply side ideology gone mad.  However it isn't government planning so isn't ideology and must be good?????

Huh? And real world experience? Counts for what?

What kind of housing plans and regulations deliver affordable housing market-wide? Where? Concrete examples, please. (Mandated percentages of "affordable" housing imposed on developers is a lottery for the lucky recipients of the affordable housing and does nothing for market-wide affordability).

What has the kind of planning you are an apologist for, done for Newcastle and Liverpool? Because that is where our cities are heading now. All this garbage about "vibrant" cities, means a de facto gated community for wealthy elites, with overpriced suburban slums for everyone else.

Of course the people who believe in grand plans will sacrifice their own political consituencies to the consequences of the plan - if their constituencies are living in rundown old accomodation, close to broke after paying the rent, kids getting respiratory diseases, etc etc, why of course that is the landlords fault, and greedy developers fault. Never mind that the same accomodation in a genuine free market (there are some holding out like little Gaulish villages) would be farily priced at $40,000 instead of $320,000. (Despised new McMansions being $140,000 instead of $500,000).

The non-linear relationship of these figures is due to the very different land price input factor, which is next to nothing in the free market, but in the distorted market, the fringe section is $300,000 of the $500,000, and the section in an older suburb is $300,000 of the $320,000 (the dilapidated house being $20,000).

Immigration may not drive up houses because of increased demand – any more than the increased demand for computers has driven prices up.

As long as supply can respond then increased demand can also increase the quality of the housing stock.

After all Houston was able to absorb 130,000 refugee households from New Orleans without any significant increase in price because their housing market is flexible and supplies affordable housing.

Indeed this is generally true throughout Texas which is why it one of the least affected by the recession and why Houston is now growing in population and employment faster than any other major city. Also Houston is top ranked for growth in manufacturing.

Sadly the PM endorses the idea that Local Councils have a duty to control land release. Tell me where the RMA says that. 

He also seems to accept the nonsensical argument that peripheral infrastructure is more explensive than upgrading inner city infrastructure. if you allow large scale developers to develop new towns or even new villages – rather than one house at a time – the development is self funding. Especially if we follow the Houston practise of providing MUD financing by long term debt.

Owen read the definition of sustainable management in the Resource Management Act: sustainable management means managing the use, development, and protection of natural and physical resources in a way, or at a rate, ...... 

You do not quote the whole of section 5. 

Typical.

Typical of what?  At least I shown that there is more to section 5 than the piece I quoted.

5.  

Purpose

  • (1) The purpose of this Act is to promote the sustainable management of natural and physical resources.

    (2) In this Act, sustainable management means managing the use, development, and protection of natural and physical resources in a way, or at a rate, which enables people and communities to provide for their social, economic, and cultural well-being and for their health and safety while—

    • (a) sustaining the potential of natural and physical resources (excluding minerals) to meet the reasonably foreseeable needs of future generations; and

    • (b) safeguarding the life-supporting capacity of air, water, soil, and ecosystems; and

    • (c) avoiding, remedying, or mitigating any adverse effects of activities on the environment.

     

     

     

    Where does say part of the purpose is to ration the supply of land itself.

    Indeed it at a rate which enables people and communities to provide for their social, economic and cultural well-being and for their heal and safety while [managing the adverse effect on the environment]

     

    Rationing the supply does not enable people to provide for their (own) social economic and cultural well-being,

     

     

McShane - that's  a disingenuous reply. The Nat Govt, inheriting the pending RMA from an outgoing Palmer, watered it down by inserting 'economic' in there, and by doing so they just threw 'sustainable' out the window.

How about some honesty?

You cannot have both; growth (of activity, area, population, consumption) is unsustainable. Calling it 'sustainable development' is a serious piece of horseshit, and 'sustainable management' is a disingenuous fudge.

The watering-down of the RMA created an oxymoron.

To quote that oxymoron without acknowledging its shortcomings, is spin.

Oh, of course, that's why you're here.

AndrewR - one presumes you're a Labout lackey?  They are as guilty here as anyone - presiding over the biggest exponential expansion we've ever seen. Shearer has to either lead a genuine change, or he's as wasted a space as Goff.

I suspect he'll prove to be a wasted space.

 

Yep, let's admit it, "sustainability" requires gas chambers.

See the quote immediately below from Patrick Troy: "The Perils of Urban Consolidation" published 1996; about "sustainability".
 

Hi powerdownkiwi.  No I am not a Labour lackey.  Crickey i can remember heckling Norm Kirk.

But you are free to presume what you like. :-)

Australian Professor Patrick Troy makes pointed observations about "sustainability" in "The Perils of Urban Consolidation" (1996):

".....Any term which can mean whatever the speaker/writer or listener/reader wants it to mean, provides little guidance or discipline in policy formulation or program administration...."

 

"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 discusses the "embodied" energy and emissions involved in higher density structures, which are usually very much higher than those of low density homes - also, that demolishing and replacing existing structures involves much greater additional embodied energy and emissions than continuing to use them.

Troy 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.

Iput 1 dollar in the bank and i pay tax on any interest.

Joe bloggs buys a house for a dollar sells it for 2 dollars and pays no tax.

Mr KEY ,This is not a percieved tax advantage,it's factual tax advantage.

Now that the Yanks have left Iraq maybe they can come to good old NZ and topple this Govt  who appear to be blind.

"I put 1 dollar in the bank and i pay tax on any interest. Joe bloggs buys a house for a dollar sells it for 2 dollars and pays no tax. ...This is not a percieved tax advantage,it's factual tax advantage".

And if the above is true, why are you not using your dollar to buy that house and get the advantage?

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.

Excellent point from Owen McShane below; the Commission's Report did say this too - in many States where there is a CGT, there is also tax deductibility of mortgage interest even for private home owners.

There is a fiction that there is no capital gains tax in NZ and especially none on property.

It's not true. If you are a trader then you pay capital gains tax.

If you are a land developer then you pay taxes on your profits and most of your profits come from capital gains.

It is actually a complex tax matter but developers pay their taxes, and farmers pay a land tax – called rates,.

Some American states have a state capital gains tax on top of the federal capital gains tax but then the interest on mortgages is tax deductible.

What stands out when comparing house and land prices across the US fifty States is that tax is not the main factor in bubbles and inflation. Its the regulation of the land supply that dominates everything. A bit like smoking and environmental cancers. While everyone smoked it was difficult track any other carcinogenic effects.

However, if States get too greedy, like california, then the population migrates to more friendly pastures. Hence the outmigration from California to Texas.

"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"

Don't councils charge developers for those things?

Yes they do - and the developers pass all that cost straight on (as they must to avoid going bankrupt) plus margins on it all to the purchaser.  Then rate payers pay to maintain it in perpuety. 

See...now you know why the days of the long drop and the rainwater tank were so good...still are in many parts...replaced these days with the compost dunny and a filtered rainwater tank...for which the Councils demand money and more money with gst on top...can't have peasants not using the pipes escaping the rates noose can we...

So the ultimate is to sit atop your compost bog reading up on how to grow the best fungi on your compost in the light from a solar powered Coke 'bottle' jammed through the roof...

while the water is heated via the wetback on the woodburner using the manuka from the bush...and the wife is in the creek with the net catching enough Whitebait for tea to go with the homebrew and wild pork. That old steam engine still runs and the genny pokes out enough to work the stove and the tv.

 

Wolly is there any reason you couldn't have a steam powered generator, in addittion to the wetback?

Perhaps the councils know that they will kill this goose, if they haven't already.

But publicly funding infrastructure via finance over the long term is the only equitable way to do it.

This is because when the charges are capitalised into the prices of every new house, the price of all houses is inflated by a similar margin. Therefore, the charges represent a wealth transfer from young first home buyers to established property owners regardless of where the young buy their first home.

It would actually be a lesser burden on the young, to just hit them with a levy to pay for all new infrastructure, after all, it was their fault for being born. The cost of all new infrastructure, spread out across all young people, would actually be a lot less than the extra that they are each forced to pay for a first home, and the levy would actually be paying for something, rather than just a zero sum transfer to older people and banks.

Or we could just stick to the way western civilisation did it for decades - perhaps our ancestors were wiser and more moral than we give them credit for?

Well you lot are a xenophobic lot!  Paranoia sets in - everybody is trying to steal our stuff - a bit like the old insurance ad.  When you are going on about all these economic migrants coming to NZ, just remember if you need a cancer expert or an xray or most types of consultants, that they are these economic migrants who fill the jobs.  The few NZers who can do these jobs have buggered off overseas in search of bigger pay packets.  Don't think that the medical staff or champions of industry come here purely for the money, because I can assure you, you will be totally wrong.

It seems to me that sometimes all people here do is slag off others who make a living in NZ, but forget that they make a living providing services that most NZers can't or won't provide.

We aren't as attractive as we used to be.  The NZ$ is ridiculously high, the cost of living is more than it's ever been and the pay is less than in most developed countries and all I hear about is the housing unaffordability in Auckland (1.1 mill here as opposed to 3.3 mil in the rest of NZ) and Johnny Foreigner coming over and buying up everything.

Prices will continue to rise until counclis release land, but those who already have houses (and those who rent them out) don't like the idea of new housing as it lowers prices/equity for homeowners. 

The old/middle class would lose out if the young/poor got their cheaper housing, and guess who controls the councils? Its not the non-voting young/poor.

I don't see this changing unless the government legislates changes here, and greatly angers the majority of voters in the process.

Agree. NZ badly needs another "Great Communicator" like David Lange - John Key very unfortunately is no such thing. All he can do is build goodwill by smiling and waving and not upsetting the natives and promising them that socialism really is painless, Helen and Mikhail were OK, Roger is Voldemort, etc etc etc.

The potential long term solution, is a long slow unwinding partly hidden by higher general inflation. This happened in the 1970's - there was a 2 year spike in house prices when the Kirk Govt made subsidised loans open slather, followed by several years of house prices flatlining while the CPI went up to around 20%.

Rodney Dickens calls this "washing away our housing bubble sins in a tide of inflation".

Then bed in the land supply changes to stop it ever happening again.

The irony is that the costs of infrastructure only become a burden when planning rules force land to be drip fed into the market. In a less regulated market most growth takes place is comprehensive development of some considerable scale and the developer funds the internal infrastructure. 

The ideal is for the developer to be able to fund this stage from access to long term lending (the MUD approach) and then hand the servicing of this debt over to the council when the development is complete and all the roading etc is vested in council.

Development contributions are a fine on development and hence development stops when there is no bubble to serve the speculative market.

What garbage.  Development contributions are part of internalising costs a.k.a. not bludging on everyon else.  

Thanks Hugh, I will read that.

Maybe if you could do even one post without sticking your damn advertisement at the bottom of it. Spammer.

Here's one for Hugh, not only looks like him but sounds like him also.

http://www.thedailymash.co.uk/opinion/columnists/power-thinking%2c-with-...

AndrewR, you keep saying THAT, I will keep saying THIS:

No answer, I notice.

Publicly funding infrastructure via finance over the long term is really the only equitable way to do it.

This is because when the charges are capitalised into the prices of every new house, the price of all houses is inflated by a similar margin. Therefore, the charges represent a wealth transfer from young first home buyers to established property owners regardless of where the young buy their first home.

It would actually be a lesser burden on the young, to just hit them with a levy to pay for all new infrastructure, after all, it was their fault for being born. The cost of all new infrastructure, spread out across all young people, would actually be a lot less than the extra that they are each forced to pay for a first home, and the levy would actually be paying for something, rather than just a zero sum transfer to older people and banks.

Or we could just stick to the way western civilisation did it for decades - perhaps our ancestors were wiser and more moral than we give them credit for?

No answer because I have other things to do as well as look at interest.co (like continuing to read the Productivity Commission's draft report).

Infrastructure, at least the capital costs of wastewater and water schemes, is typically funded by long term loans.  The debate is how the repayments of the capital costs are structured -- lump sum or annual payments in perptuity or some other variant.  Running costs are an annual cost addition.  Then there is the issue of some people being joined at time of initial construction while others join later -- what is the fair way of sharing the costs between these groups of people. 

If I understand you correctly you are arguing for an annual repayment in perpetuity, not a lump sum payment.  

 

Ohhhhh I see now, you are a DEVELOPER, and here I was, innocently looking at your ad below , you know, the one that says "URBAN PLANNING" and thinking what a wonderful thing it is this man volunteers his valuable time.   What a silly billy I am.

There are two types of "developer". One wants to make an honest profit building houses for people, at a fair price. The other wants to make bigger, riskier profits by land banking and selling it off bit by bit to people who have to crawl over broken glass to get it, including small builders and other competitors of his.

If Hugh is advocating for land supply reform, he is obviously type 1, not type 2. He deserves a knighthood, if not canonisation.

Hugh -- I am not saying anything about the complexity of infrastructure although having sat through lots of hearings and negotations about the standards to which waste water should be treated before it is dischagred to water leads me towards thinking there is complexity there.

The issue I am asking about is simply what is the fairest way to pay for this infrastrucutre, rememberiing that there are some people connected at the start, others joining later.

I like your concept of one city, many communities.  It is the sort of design we have to think about to cope with climate change, peak oil and limits to resources.  

AndrewR, what I am saying is that anything that capitalises into the price of ALL real estate, not just the new developments that are "levied", should be avoided like the plague. This includes "planning gain" per se, as well as levies.

It creates a wealth transfer from the first home buyer to the older generations (and to the banking system).

But it also creates cyclical volatility, reduced productivity, reduced discretionary income, reduced international competitiveness, increased inequality, reduced social mobility, and many other undesirable effects.

I have concluded after years of studying this, that low, stable urban land prices are like an economic (and socio-economic) secret weapon for cities that have them. This is a reason WHY the US economy is the world's most productive - it is not productive "in spite of" its low density suburbs at all. The alleged "benefits" of compact urban form are more than cancelled out by the "costs" of land price inflation (and the obstructive and strangulatory effects of "planning").

 

It seems to me that the logical conclusion of what you are saying is that we should all be renters.  That minimises the amount capitalised into real estate prices.  Garden city stuff.

more drivel from "No Action Key"

Blah Blah Blahd

If you ask the wrong questions, you get the wrong answers, and any commission which gets answers which Hughey and PB thing are 'good', has done just that.

http://transitionvoice.com/2011/12/a-course-to-keep-you-from-crashing/

The Productivity and Martenson can't both be right, and my money's on Martenson. At least, I spent my money doing much as he suggests, while it continued to be honoured.

Key has an IQ aroung 130, I seem to recall, so he has enough to know we are over the hill global-growth-wise. His problem, of course, is that the voters want to hear that you can 'supply land'. No ramifications, no infrastructure demand, no energy constraints, no triage required. Just like that. Imagine! Twain must have been wrong........not.

While they remain that ignorant, and we retain a democracy (don't get me wrong, I think it's the best system but it requires a populace capable of thought) he has no choice.

 

Powerdownkiwi's "right" questions of course, are the same ones that Thomas Malthus asked (and Tertullian centuries before him). They LOOK right according to mathematics and the status quo in science, but ignore "progress".

Their "solutions" would be worse than self-fulfilling prophecies, because progress requires continual accumulation of capital for R and D and exploration and commercialisation of technologies and so on. The consequences of wilful destruction of capital are worse than the alleged consequences of running out of resources.

Sadly, the huge 'progress' which you speak of has been largely achieved through the use of fossil fuels. I think PDK's point is that currently we are running our whole system on borrowed time - i.e. they day will come when we will deplete these and then what?  Currently there is no viable alternative energy sources that will be able to sustain our current way of life, or even the current level of human population for that matter.

You say that technology will deliver the answer, and I'll admit no-one knows for sure what may happen in the future. However, as much as I hope you optimistic people are right, as someone who has post-graduate qualifications in biochemistry/organic chemistry I cannot pretend that I'm not deeply concerned about the predicament we are in. 

Your economic growth etc.. is underpinned by man-made theories, thermodynamics is underpinned by the physical laws of the universe. Call me pessimistic but in the end I don't think the markets can cheat reality.

Some of the more unaffordable suburbs:

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, Kohi, Glendowie, Westmere, St Heliers, Orakei, Pt Chev, Grey Lynn and Freemans Bay haven't even made it to the top 10, but their average house value are all around 900k.

 

Encouraging to see the Prod Comm findings getting a bit of traction. The Draft Report has been picked up in Australia.

 

http://www.macrobusiness.com.au/2011/12/nzpc-hits-the-mark-on-housing-supply/

Any open minded 3rd form economics student would understand this.

 

HAHA. Business on RNZ this morning: Dr John Dymond, quoting an absolute - note that, you idiot growth-forever types - upper limit of arable area in NZ.

A finite area. Well I'll be buggered. You can't increase the supply of land exponentially forever?

Seems that the same comment has to apply to 'development' adjacent to cities.

Both 'sides' (agriculture and developers) will decry 'lifestyle blocks', but in % terms, they're being as myopic as many who comment above........

I note that Nat Radio failed to compare the Commission/Govt/Key attitide with Dymond's comments.

How about it Alex?  Rather that parrotting 'land supply' nonsense (there's been no change in what Cook drew on his first visit) how about doing some thinking. Rare in the media currently, I know, but maybe it's a niche waiting to be filled.

Compare exponential expansion of dairying with exponential expansion of urban development withing a finite area, all of it surveyed. It's simple compound math (sorry, couldn't resist). Then, when you've got that spread-sheet sorted, introduce peak oil (transport for both disciplines, fertiliser, alkathene etc).

You end up (I've been running that scenario since I served on a County Council which graded land - good quality no housing, low quality developable) needing to limit the number to be fed, limit the encroachment, and set up a food-supply system which is - wait for it - SUSTAINABLE.

 

What idiocy.

NZ "short of arable land".......????????

Why? For export?

That's the way to the third world, as we are finding out.

ALL the wealth created in the world economy for the last 60 years, has been created in URBAN economies. Read "The World is Spiky" by Richard Florida.

The only POINT of agriculture, is to feed URBAN workforces.

The only customers with the money to BUY our agricultural product, are in wealth creating urban economies. Busted arse countries like Bangladesh, lack wealth creating urban economies. There is NO nation in the WORLD that is "wealthy" because of agriculture.

So we sell our agricultural produce at near-break-even prices to Japanese who sell us back cars and electronic stuff. What a pack of losers we are.

Meanwhile, the "product" of 1 square km of any urban economy is hundreds of times that of one square km of any rural economy. But we "preserve" the latter and strangle the former...?????

NZ deserves an economic "Darwin award".

Stupid comment - but then, you think some omnipotent being created the planet within the last few thousand years, don't you?

Wealth isn't created. Money buys goods and/or services. Nobody yet has dissociated those from physical resources, and nobody has dissocoated the production of physical resources from energy use.

So 'wealth' is totally dependent on energy being available. Nothing whatever to do with where folk live, and I'll give you the tip; when push comes to shove, folk will value food more than suburbia. Clue - one you can live without.

Your second and third-last sentences beg the question: are you hoping some lesser beings will supply the food, while you mysteriously get 'rich' because you live urbanely at their expense?

Arrogant as well as ignorant, I'd call that. Along with unsustainable.

 

 

 

 "'wealth' is totally dependent on energy being available"....err well actually this is wrong.

First define wealth...it is not confined to stuff or things PDK.....a Bantu tribesman has a 'wealth' of bushcraft in his grey matter and unless your energy point includes the electrical function of the Human brain, then your point is wrong.

A culture can hold a wealth of behaviour...which sort of explains why some countries do better at functioning than others.

A person has a wealth of ability to learn...although most waste 99% of it.

 

 

powderdown kiwi

So called natural resources are infiinite because they are all human inventions. (with the exception of alluvial gold and meteoric iron.

The ability of the human brain is infinite – ie  there is no limit to human invention. Yes energy is vital but as long as the  sun shines energy is infinite too.

So relax.

Also I do have to wonder if Dr Dymond has ever put a spade in the ground. There is no such thing as productive land. Only people make land productive. I think he is confusing fertility with productivity. But fertility is not directly connected to productivity. Ask any truffle grower – like me. The effort goes into finding suitably infertile land. Same goes (albeit to a lesser extent) to grape growers and olive growers. And of course for hydroponic farmes there is no connection to soil at all.

Many of the lifestylers are the innovators of the rural sector. IT is a win win game. Farmers need cash to pay for milking sheds and to plant out or fence the streams. They sell a couple of acres and get the cash and the small farmers grow wasabe to export to Japan.

MAF has long established there is no connection between lot size and productivity. It's brain size that counts. How much land do you need to breed new hybrid roses? How much land do  you need to operate a hydroponic system exporting salad greens? How much do you need to grow a profitable truffle grove?

New Zealand is only 0.7% urbanised. Close to 40% is in "unproductive" DoC estate. Sadly DoC won't let us farm threatened species even though no farmed animal has ever gone extinct. Our plants are safe too because nurseries grow native plants and if one is declared close to extinction (like the Tecamanth) everyone rushes down to the nursery to demand they grow them. Wnat to buy the huge seed pod outside my window.

However, you are entitled to your animist religious beliefs and worship of the Earth Mother. Just don't impose it on me.

 

Emotionally I hate the idea of farmed kiwi; but economistically agree that if the objective is to avoid extinction of a species, then commercial farming will do that for you.

Trouble is, there is a reason why the original settlers brought their own farm animals with them instead of domesticating the wildlife they found here - it is quite hard to see the commercial viability of any of the latter.  They're no fun to hunt, they don't have particularly pretty feathers, they don't lay eggs quickly or in quantity, they don't look particularly tasty, their pet potential seems a bit limited - etc.

10 points to Owen.

 

Sigh.

Technology experts like Jesse Ausubel of the Rockefeller Institute have been pointing out for years that humanity's energy systems have been "decarbonising" all along, and on continued “market” trajectories, CO2 emissions will all but disappear within a century or so. This is because humanity has tended to both urbanise and become more mobile; hence energy requirements favour sources that are less bulky and more easily transported. This just happens to involve less carbon; carbon represents most of the "mass" in energy sources. We do not heat buildings in high urban density locations with log fires any more (the famous London smog used to kill thousands of people every winter), or run trains by shovelling bulky coal into their boilers while on the move.

Current energy systems compete with each other based on their own economic advantages and disadvantages. Electricity runs down wires; the ultimate thus far, in unobtrusive energy supply to multitudes of fixed locations. A tank of liquid fuel is sufficient for a vehicle to drive hundreds of kilometres. Batteries are not yet as efficient as tanks of liquid fuel. Liquid fuels are not suited to delivery to end users by pipe, but gas fuels are.

Natural gas is a lower-carbon source of energy than petrol by a factor of about 25%, and coal by a factor of about 50%. We have reached an economic tipping point with its use, where better methods have been devised to extract it, and investment in extraction and distribution are profitable. The international "Oil and Gas Journal" and "Oil and Gas International" often contains several announcements of the discovery or the commercialisation of new significant natural gas and/or oil "fields" in each of their weekly issues.
 

However, Ausubel predicts that oil will be supplanted as an energy source before humanity runs out of it, and coal is already in the process of being supplanted. Potential for total "de-carbonisation" of the energy system is offered by hydrogen fuel, which releases no carbon at all in combustion. Ausubel suggests that eventually, methane will be economically extracted from coal beds, leaving the coal behind; and hydrogen extracted from the methane. He suggests that most people do not sufficiently credit the energy industry with knowing what it is doing. Meanwhile, hysteria regarding scarcity of resources is a handy excuse for higher prices and profits for energy companies.

The economist George Reisman of Pepperdine University, California, in a 2001 article called "Environmentalism Refuted", discusses the misunderstandings that lead to the belief that the earth's resources are running out. Men have seen photographs of earth from outer space, and have forgotten how vast it is compared to us. We have actually barely begun to prospect the entire surface of the earth, and under the sea bed, for all known resources. Resource extraction industries tend to wait until a resource's known reserves are running out before looking for more. Hence, the economist Julian Simon was confident to bet against the doomsayer environmentalist Paul Ehrlich in 1980, that the price of five commodities chosen by them would be cheaper in 1990. Simon won the bet. Ehrlich declined any of the new bets further offered by Simon. Simon had spent much of his career tracking resource price trends for publishers of business forecasting information; a true expert who was appalled by the uncritical coverage given by the media to people like Ehrlich.

As mankind becomes more technically advanced, we discover uses, and substitutes, for more and more resources. Many of the resources we use most today were not discovered until the last century or two. Fossil fuels were unutilised in the 1700's, let alone nuclear energy. There is no reason to believe that we have come to an end of this process of technological advancement. 

The more “capital” accumulated by mankind, the more access we get to resources. We can drill deeper, extract elements more efficiently, access the resources under the sea bed, and so on. Furthermore, that accumulation of capital enables the discovery and "commercialisation" of new technologies. Non-capitalist economies never managed to get new technologies even as obvious as the automobile, into mass use by their citizens.

Apart from what has been fired into space, every molecule in every substance “used” by man, is “still here”. Every carbon molecule that has been “burnt” to extract energy, returns to the biosystem after a short period in the atmosphere, and will be able to be accessed again for the purpose of energy by our descendants at some time in the future, if the earth exists for long enough or if the process by which these molecules become energy again can be speeded up. Nature’s processes require a longer amount of time to produce a lower-carbon energy source from re-absorbed carbon – crude oil takes a lot longer to form than trees and plants. “Biofuel” is a short-cut that so far, unfortunately, requires more energy to produce than it provides on combustion.

It is actually more “moral” to continue to invent and innovate and adapt as rapidly as possible, and suffer possible “nature strikes back” consequences if and when they occur, than it is to “play god” and do actual harm to humanity immediately, and worst of all, to reduce our ability to accumulate capital, invent, innovate, commercialise, and adapt. In such cases, the “solution” is entirely likely, going by historical example, to be far worse than the "problem". Any breakdown of the monetary system, for whatever reason, would therefore have very serious consequences in any case.

 If humanity consisted entirely of pagan tree worshippers, certainly the earth might be wonderfully forested and lightly populated – by primitive people living primitive and short lives, having never discovered fossil fuels or any other “modern energy”. We could do something like this today, entrenching the status quo conditions of humanity, and never know what advances we didn't make. These are actually issues of religion and ethics, not science or economics at all.

There is an export market for kiwis but agree we would not need to farm many to save them.

 

However, there is definitely a market for wood pigeons – ask any restaurant.

Those that prove uneconomic to farm may then be left to DoC to manage.  

But they have an economic interest in keeping endangered species endangered. It's how they claim their funding.

 

McShane - I could almost feel sorry for you. Spinmeisters aren't needed when the truth is involved, so you're going to be starting from a back marker every time.

Folk like me only have to spot the flaw in your spin.

In this case, you think (?) resources are apparently 'human constructs' (I'd have suggested they were there long before we evolved, but there you go) and that there is no limit to what humans can do.

Then you attack the DoC estate.

Why?

You've already convinced yourself that there are unlimited possibilities, and given that the DoC estate is quantifiably finite, you'll do just fine operating elsewhere, which is presumably where the infinite possibilities must be.

Needing to encroach on a finite space, on the basis that your regime can grow forever, is bullshit.

But then, that's what supplies your funding, no?  Time spinmeisters were an endangered species, methinks.

My finding comes almost entirely from Superannuation, writing my columns in the NBR and royalties from five children's books published in America.

I am not sure how these sources affect my thinking. I have been fairly consistent in my core beliefs since my time in Auckland City Council in the early sixties.

Name me a valued resource that just lies around waiting to be picked up.

 

Where would you find useful amounts of alluminium prior to the invention of high powered electrolysis?

WE don't generate electricity from lightening. We have developed all manner of equipment to get it from some energy source and into our homes. 

Again name me a useful "natural resource" that exists without human intervention.

 

Even a tree needs a saw.

 

 

10 more points to Owen.

 

Apparently there has been serious progress with extraction-technology for titanium, which should make it as economical to produce as stainless steel.

 

Titanium is a durable material with wonderful useful properties. It's extremely abundant and can be easily recycled, though currently expensive to extract (otherwise everything would be largely made from it).

 

This could be an example of a coming resource revolution on its own. And like Owen McShane basically says, titanium is an invented resource in that we are now learning how to extract it efficiently. 

 

Minerals are no real concern and I doubt they ever will be. It's just too easy for us 'move' should a given mineral become scarse and expensive - the room for "re-engineering", and on so many levels, is vast. For a start, we can just stop deliberately making things that fall to pieces in only a couple of years! (why didn't Al Gore suggest that?)

 

In my view, the concern with resources boils down to a growing population and the limits of farmable land, though who knows what radical technologies might be achieved in agriculture, in the future. 

Andrew, ditto what I said to your earlier comment. It is encouraging to see you bringing your considerable common sense, insight and intuition to this forum. I have suggested before to some of the non-stop Malthusian trolls on here, that they could follow your blog and learn something.

"considerable common sense, insight and intuition" equals PhilBest agrees with you.  Whoopee.

Sorry Andrew, did you feel left out by that comment?

If you consider increased house prices, more pollution, worse traffic, more competition for jobs, then yes you could say that on the whole migrants to Auckland 'add value' </sarcasm>
Except nobody thought to ask existing Aucklanders if they want the city's population to keep increasing, because if they did, people would say no, we're happy with it as it is. Auckland is on the path to become yet another overcrowded, expensive, congested city. Why do we need to repeat the mistakes that everyone else has made?
The notion that 'growth is good' at the centre of modern economic theory is simply put, wrong.