HOT TOPICS:   House prices  |  KiwiSaver   | LVRs                                                RESOURCES:    Economic calendar   |   Cashback incentives

The comment stream

Recent comments

Reader poll

Will the price of unleaded 91 petrol fall below $2 at the pump?

Choices

Labour promises to build 100,000 homes in ten years at NZ$300,000 each; Will work with private sector, community agencies, local govt

Posted in Property Updated

By Alex Tarrant

Labour will tap the government's cheap borrowing costs to launch a ten-year programme to build 100,000 homes at less than NZ$300,000 each if it gets into power in 2014, leader David Shearer announced over the weekend.

Shearer said around two-thirds of the houses built over the first five years of the programme would likely be in Auckland.

Other developments would be built around New Zealand in places of high housing costs, such as Christchurch, Tauranga and the Western Bay of Plenty, Nelson, Wellington and Queenstown Lakes District.

KiwiBuild

Dubbing the plan KiwiBuild, Shearer said houses would be sold as they were built, "so over the full course of the programme there will be no cost to the Crown."

"Once the build is underway the programme becomes self-sustaining within the first term as the sale of one batch of houses finances the development of the next," Shearer said at the Labour Party conference on Sunday.

"To kick-start the programme, there will be a one-off NZ$1.5 billion investment. This represents a fraction of the NZ$41 billion National has borrowed over 4 years, and is substantially less than the NZ$12 billion National has committed to the Roads of National Significance. Because this is capital investment, it will not affect our path back to surplus," Shearer said.

The programme would be overseen by Housing New Zealand Corporation (HNZC), but the construction would carried out by private-sector construction firms, with some social housing agencies also participating.

'Won't drive prices up'

The government would sell 'Housing Affordability Bonds' "to give institutional investors and ordinary New Zealanders the opportunity to invest in the future of their communities."

"The offering to ordinary New Zealanders will be made through the KiwiBonds channel and will give New Zealanders a sustainable investment opportunity. Unlike the current speculative property investment, this vehicle will not drive prices up," Shearer said.

First home buyers

Houses would be restricted to first home buyers, and buyers would need to live in the house for a period of time to be determined based on advice from officials.

There would be a penalty applied if the house was sold within in this time frame. If the property was sold, prospective buyers would also have to show they saved their deposit themselves, including through KiwiSaver.

Luck of the draw

Where there was more demand in a locality than there are homes available, eligible candidates would go into a draw and the buyer will be selected by ballot.

"No household type will receive preference over any other household type. Nor will there be any income restrictions. On the whole, people will ‘self-select’, with those who can afford to move up the property ladder excluding themselves," Labour said.

Won't be sold at a loss

The price of the homes would be set at a rate sufficient to fully cover the Crown’s costs, including land, construction and finance costs.

"They won’t be sold at a loss. But nor will the government seek to charge a ‘developer’s margin’. A small 1% margin on top of the Crown’s cost of borrowing is sufficient to ensure the programme is self-funding over the long term, while still keeping the homes as affordable as possible," Shearer said.

Market intervention

Speaking on TVONE's Breakfast programme on Monday morning, Shearer houses built would be smaller to be more affordable.

"The fact that we’ve got a lot of them means that we can make savings through bulk buying," Shearer said.

“It’s not going to be just suburbs. It’ll be apartments, and terraced houses, new subdivisions perhaps. There’s a whole range of things we can do with it," he said.

“You’ve got to be able to have an intervention in the market. Because at the moment the market is not meeting the needs of those [needing] affordable homes. They’re going to the very expensive homes that nobody can get to and buy.”

See the release from the Labour Party below:

KIWIBUILD: 100,000 MODERN AFFORDABLE HOMES –

FACTSHEET

HIGHLIGHTS

Labour will:

• Help Kiwis into their first home by building 100,000 modern affordable homes.

• Create a significant number of skilled jobs by launching the largest public building programme in over 50 years.

• Provide 2,000 apprenticeship opportunities for young New Zealanders through Labour’s ‘one in a million’ target.

• Generate $2 billion a year in economic growth through extra jobs and spending on construction materials.

REALISING THE KIWI DREAM – MODERN AFFORDABLE HOMES

Labour will ensure New Zealand is once again a place where Kiwis can realise their dream of owning a home. Currently a record 1,000 New Zealanders are leaving for Australia every week for better pay and more opportunities.

Through smart investments in our future we can create a reason for New Zealanders to stay. The housing market is failing thousands of Kiwis. The biggest barrier to home ownership is the difficulty of getting on the first rungs of the housing ladder. One of the main reasons housing is unaffordable is the lack of new entry-level houses. In the 1960s and 1970s, when homeownership was on the rise, 30-35% of the new houses built were entry-level homes. Today, that proportion has fallen to just 5%.

The Crown is the only player large enough to make a real difference to the home affordability crisis. That’s why Labour will take a bold hands-on approach to fix this hole in New Zealand’s housing market.

For New Zealanders looking to get into their first home, the choice is clear: no change under National or real change with Labour. National is offering 5 more years of inaction, leaving it to the market and providing no hope that anything will change. Labour is offering a serious solution to one of our enduring issues, which will directly benefit thousands of New Zealand families.

LABOUR’S SOLUTION - KIWIBUILD

Labour will oversee and invest in a large-scale 10 year programme of home building focussed on modest entry-level houses for sale to first home buyers. We will partner with the private sector, community agencies and local government to build these houses. Our target is to ramp up to building 10,000 houses a year by the end of our first term (or as swiftly as the availability of skilled labour allows), and to continue at this level for around ten years.

Around two-thirds of the houses built over the first five years are likely to be in Auckland. Other developments will be built around New Zealand in places of high housing costs, such as Christchurch, Tauranga and the Western Bay of Plenty, Nelson, Wellington and Queenstown Lakes District.

BENEFITS

The benefits of KiwiBuild will be substantial. This solution offers a bold and comprehensive answer to one of New Zealand’s long-standing problems. KiwiBuild will be the largest public building programme in over 50 years. It will increase the number of houses being built over time by up to 50%. Based on Productivity Commission data, it is estimated that building 100,000 homes will substantially reverse the last decade’s worth of increase in the number of working households who cannot afford to buy their own home.

Estimates of the cost of a modest entry-level home suggest they can be built for less than $300,000, especially when building is undertaken on a large scale (which can bring the cost of materials down). It will also have substantial economic benefits. These include:

• Creating a significant number of new jobs in the New Zealand construction industry;

• Providing 2,000 apprenticeship opportunities for young New Zealanders through Labour’s ‘one in a million’ target which requires companies with significant contracts to take on an apprentice for every $1 million of investment they receive;

• Generating $2 billion a year in economic growth through extra jobs and spending on construction materials. More growth will be generated when this money flows through the economy as families spend their income and businesses reinvest profits;

• Increasing tax revenue to the Crown through additional economic and jobs growth, supporting the health of the Crown accounts;

• Helping halt the ever-increasing costs of the Accommodation Supplement, which has grown by over 75%, or more than half a billion dollars, over the last decade, and is projected to keep growing strongly.

COST

Labour will use the Crown’s low cost of borrowing and the economies of scale from building in bulk to bring down the cost of building these houses.

KiwiBuild houses will be sold as they are built, so over the full course of the programme there will be no cost to the Crown. Once the build is underway the programme becomes self-sustaining within the first term as the sale of one batch of houses finances the development of the next.

To kick-start the programme, there will be a one-off $1.5 billion investment. This represents a fraction of the $41 billion National has borrowed over 4 years, and is substantially less than the $12 billion National has committed to the Roads of National Significance. Because this is capital investment, it will not affect our path back to surplus.

We will sell Housing Affordability Bonds to give institutional investors and ordinary New Zealanders the opportunity to invest in the future of their communities. The offering to ordinary New Zealanders will be made through the KiwiBonds channel and will give New Zealanders a sustainable investment opportunity. Unlike the current speculative property investment, this vehicle will not drive prices up.

DETAILS: QUESTION AND ANSWERS

Who will build the houses?

The programme will be overseen by Housing New Zealand Corporation (HNZC), but the construction will carried out by private-sector construction firms, with some social housing agencies also participating.

Where will the houses be built?

Much of the land will come from HNZC buying new land or building on existing developments. Labour will also use public land and look at reconfiguring and subdividing some existing state house land as opportunities arise.

What will the houses look like?

The modest entry-level homes will be designed to get first home buyers onto the property ladder. They will be modern, healthy and energy efficient. They will be range of sizes to accommodate the wide range of people looking for an affordable option, and will likely be on smaller land lots. Some will be stand alone and others in apartment blocks.

Who will be able to buy the houses?

Eligibility to buy a KiwiBuild home will be kept as simple as possible to cut down on administration costs. As with the current KiwiSaver homeownership features, the houses will be restricted to first home buyers. Buyers will need to live in the house for a period of time to be determined based on advice from officials. There will be a penalty applied if the house is sold within in this time frame. If the property was sold prospective buyers will also have to show they saved their deposit themselves (including through KiwiSaver).

Where there is more demand in a locality than there are homes available, eligible candidates will go into a draw and the buyer will be selected by ballot. No household type will receive preference over any other household type. Nor will there be any income restrictions. On the whole, people will ‘self-select’, with those who can afford to move up the property ladder excluding themselves.

How will the prices be set?

The price of the homes will be set at a rate sufficient to fully cover the Crown’s costs, including land, construction and finance costs. They won’t be sold at a loss. But nor will the government seek to charges a ‘developer’s margin’. A small 1% margin on top of the Crown’s cost of borrowing is sufficient to ensure the programme is self-funding over the long term, while still keeping the homes as affordable as possible.

Can we build that many houses?

Building 10,000 modest affordable homes a year is an ambitious but achievable target so long as it is well-planned and private-sector construction firms are given long-term certainty about the scale of the project. KiwiBuild will take us back to the higher rates of homebuilding seen in the 1950’s, 1960’s and 1970’s. We know from past experience that this is possible. From 2002 to 2004 consents increased by 10,000, so a significant ramp-up in building activity is certainly achievable. Also between 1972 and 1974, the number of residential buildings completed per year increased by 10,000, largely in response to the housing policies of Norman Kirk’s Labour government.

Further, building levels in Christchurch alone are expected to rise by 3,000 just in the next year. In fact the bulk of the 20,000 new residential building in the Christchurch rebuild are predicted to be completed by the time the KiwiBuild project gets underway. KiwiBuild will provide further opportunities for the skills and workforce built up by the Christchurch rebuild.

Currently we have some scope to grow. Building levels are at an all-time low, with 17,000 fewer residential building consents than the recent peak of 32,000 consents in 2004.

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

We welcome your comments below. If you are not already registered, please register to comment in the box on the right or click on the "'Register" link at the bottom of the comments.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current Comment policy is here.

157 Comments

"Only people against this

"Only people against this will be the SPECULATORS" - I think this known as an ad hominem type of logical fallacy? Rather than presenting a compelling arguement you are just saying that anyone that disagrees with you is bad (assuming you mean speculators in a bad sense?).
 
http://yourlogicalfallacyis.com/ad-hominem

I am against this kind of tax

I am against this kind of tax payer subsidies.
1. The building cost will be sky rocket since tax payer will pay for it.
2. People will reply on this subsidie for ever and no goverment can stop it any more. 
3. Labor is creating poor areas again.
4. HNZC will ask more and more money from central goverment.
5. Increase employment based on TAX payers money is a feak.

Mr Gloom, "Labour creating

Mr Gloom,
"Labour creating poor areas again" - I think you'll find the division between the have's and have nots has widened considerably in the past 4-5 years.
As for those "People" you talk about, they're people in a similar position to me 25-35, professional, 50-75k, growing families and contributing positively to society. We're not after hand-outs just someone who is prepared to buck the trend of inflated house prices.
As for increasing employment based on "our taxes" that's a no-brainer! I'm sure you've worked out many PAYE middle income earners pay their fair share of taxes.
We need young Kiwi families staying in NZ to rebuild this country and contributing to our GDP, not being forced into ridiculous debt to keep their heads above water. Perhaps if housing afordability was maintained New Zealanders would see the benefit of being employed, owning their own home and not relying on benefits and high levels of credit.
Otherwise we get: "The man with the most toys wins"
 

Snippy, there is nothing in

Snippy, there is nothing in the Labour proposals that says they will be forcing land bankers to sell them the land at a fair price. This will be the undoing of the whole scheme. Labour in the UK has never ever bitten the bullet and forced the sellers of land to keep their prices down to rural land prices, even public housing schemes still pay the land bankers the inflated price that zoned, planned land fetches on the market.
Good luck to Labour dealing with the land bankers who love Len Brown (and vice versa?)

It is a historical fact that

It is a historical fact that land adjacent to rail stops gets land banked and capital gains scored on it, while the very much vaster amounts of land accessible by car are what breaks the land bankers monopoly. I have been trying to get this point across on this forum for years.

Snippy - This proposal in

Snippy - This proposal in it's current format doesn't identify whether potential purchasers have to be resident in NZ for a certain time-frame before taking up the housing opportunity.
Given that the NZ population is set to expand significantly it would appear new migrants could be the greatest benefactors of such a system.
 
This proposal by Labour is cluthing at straws and will do nothing to lower home prices. 

  • The $300k price tag Labour is talking cannot be guaranteed.
  • Bureaucrats will not be able to deliver the projects cheaper than small to medium sized builders.
  • Sends a strong signal to the market that Govt is going to meddle in housing which will actually encourage more speculators in certain areas.

Some quality questions need to be asked about who the speculators are - (as some people dump developers in with speculators). Are the speculators paying their taxes?
Do Real Estate agents speculate in property? It appears many of them have.
There are anecdotal stories of public servants speculating in property. Are these PS speculating from information gleaned from within the organisation they work for and have these PS paid taxes on any speculating they have undertaken?
 
I have absolutely no issue with someone trading property for profit.  However it appears that some of these people trading may not have declared their profits and paid the appropriate taxes. I also question whether it is appropriate for public servants who are privy to certain information to have the ability to speculate as this should be a conflict of interest.
Councils not releasing land should also be seen as a conflict of interest as they all own property and are part of the problem of increasing land values. The RMA process is hideous, convoluted and extremely expensive, Councils place enormous charges on applicants to the RMA process and can protect the councils business interests as there is no independence or competition.
Labour needs to address the real problems so the property market can sort itself out and not keep interferring as this creates distortions.
 
 
 

this would be pretty good.

this would be pretty good. Help resolve the housing crisis, and lower unemployment

Politicians all over the

Politicians all over the world are long on promises and short on delivery. Why didn't Labour do this in the mid 2000's when the property market went berserk. If it is so easy to do why isn't National doing it now. Politicians are only in the game for themselves. Look at how many of them have rental properties and more than one. Do you really think they are going to implement such a scheme that will potentially devalue their portfolio?

Too true. The media beats up

Too true. The media beats up a few Tranz Rail shares in an MP's portfolio, but turns a blind eye to property investments and vested interests in housing policy.

Good point. However, Labour

Good point. However, Labour will recognise this initiative as being an election winner if they deliver their promise. The Nats simply don't care if middle income New Zealander's cannot afford their own homes. There was an article written a few months back stating the number of properties owned by all MP's. National MP's made up the top 8 from memory.. why would they consider this as an option.

That's not the right approach

That's not the right approach Labour!
 
In Auckland, why not build new state houses and sell the existing ones into the market for renovation or redevelopment?  The old state houses in the Central suburbs are more likely to be in places where people want to live than new houses on the fringe would be.  Those old state houses are impossible to effectively or cheaply renovate for the state, whereas private owners could buy and add value through their own sweat equity.  Providing first time buyers "perfect" brand new houses only encourages laziness and bum-sitting!

Agree (except for the last

Agree (except for the last sentence). Large conglomerations of HCNZ in central areas are not a good idea. They work much better sprinkled  - like each HCNZ house should be sepearated from the next by at leat 15 private houses.

Chris J ...you will pardon my

Chris J ...you will pardon my cynicism, but would not ,what you propose be mainly in your best interest...? While I'm no fan of the pepperpot myself I hardly see making a killing ground for further speculation in the best interest of the economy let alone first home buyers.

Yet again the productive and

Yet again the productive and exporting South Island is subsidising the ever consumptive Auckland.  Two thirds of these houses are to be built in Auckland.  That sends the wrong signal.  If people want to live there why do we subsidise them when they find they can't afford to do so.  There are more correct economic signals to send.

Spot on KH, Not only do the

Spot on KH, Not only do the Jafas want us to give them cheap houses, they want us to pay for their transport as well.
Poll results from the Herald: "A majority of Aucklanders want the Government to make a significant contribution to the $2.86 billion city rail link, a poll has found."
http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10848414
Has any one bothered to ask the 3 million that don't live in Auckland?
 
 

Funny, I don't remember the

Funny, I don't remember the 1.5 million Aucklanders being asked if they wanted their tax money to support the Christchurch rebuild. Not that they would have said no, but it would have been interesting if the shoe were on the other foot and the earthquake was in Auckland instead.
The reality is that Auckland needs spending on housing and roads because it is growing at a much faster pace than the rest of the country. Get over it

Funny, I don't remember

Funny, I don't remember Auckland having a natural disaster 2 years ago that now requires a rail line. Are u comparing an expected engineered housing crisis with an unexpected natural disaster as being on equal footing?

Have you bothered to think

Have you bothered to think where NZ would be without Auckland?  so yeah great we'd be exporting some wool and some lamb....takes us back to the 19th century why dont you.
ie NZ's economy is now way more complex and inter-dependant...yet more factions is one sure way to set us back a long way IMHO.
regards

If Auckland is so

If Auckland is so ecconomically wonderful why doesn't it susceed from the rest of NZ.  Do the Singapore thing.  Ecconomic powerhouse and all that.
The rest of New Zealand would be overjoyed to be rid it.
Go and find some other sucker to interdepend on.

Because you still have the

Because you still have the switch Chris M and without that and Hobbiton were just another pile of cement destined to force feed immigrants into ever diminishing hovels.

Would be worth it just to

Would be worth it just to stop the whinging and jealousy
 

If Auckland is so

If Auckland is so ecconomically wonderful why doesn't it susceed from the rest of NZ

Do you mean secede?

Yes he did Stanley, and you

Yes he did Stanley, and you know it, don't be a snob, it's not that important....or is it.

well you know Christov, my

well you know Christov, my understanding is that spelling is just as important in academia today as it was all those years ago when we were at school. No-one takes your dissertation seriously if you can't grasp the fundamental piller of written communication - spelling.

So as much as I get chastised for being pendantic about the spelling in posts, I maintain that if you want to be taken seriously online you should at least get your spelling correct, and ideally your grammar also.

And there can be no exception made for English not being your first language - a cursory check on Google or even pasting your entire comment into MS Word and letting spellchecker work its magic is all that is required. While the odd misspelling or incorrectly placed apostrophe is excusable, getting the one word that is the crux of your entire post incorrect (in this case secede) makes it difficult to take the rest of the comment seriously.

Nothing snobbish about it all.

:-)

wtf is a piller?

wtf is a piller?

Beats me. I couldn't find it

Beats me. I couldn't find it in the Concise OED.  Perhaps spellcheck failed in this case?

Ah you found the deliberate

Ah you found the deliberate spelling mistake. Excellent.

;-)

Yep Steve (@11.53).  Thought

Yep Steve (@11.53).  Thought about it a lot.
a.    Draw a line west/east across New Zealand with half the population north of that and half south of it.  Line will be somewhere in the middle of the north island.  Draw same line for exports.  Harder to be sure.  Could be about Cook Straight.  I have seen assertions its just North of Chrischurch.    So where would Auckland be without the south.  Nowhere much economically at all. 
b.  Wool and lamb.  Not forgetting Dairy.   So whats so great about IT and financial services etc.   Lots of promises.  Nothing great produced for our country yet.   Quite puny by comparison in fact.  I don't work in those industries but I recognise what they do for our country.  Cool guys with takeaway coffee in hand peering at laptops, don't make an economic powerhouse. (yes that is a wisecrack, but so was yours about the 19th century) 
c.  Factions.  Fair point.  I don't advocate separatism and didn't mean to imply it.  Not the way to go.
d.  Future of Auckland.  Needs to become a producer to survive.  It's future is in fact tenuous.  The  regional towns (eg Dunedin eg Napier) experienced the withdrawal of ticket clipping activity some 20 or 30 years ago.  (Warehousing, distribution, administration, banking etc)   They have adapted and are now thriving. 
Auckland is just starting into that whirlpool.  It's activities are disappearing to Sydney and Singapore amongst other places.  Example.  A friend tells me he could once do business in Auckland with the Advertising Agencies.   Now to do any business of substance he has to go to Sydney.  What happened in the regions 20 years ago is just starting to get into gear for Auckland.  It won't be pretty for a while.
d.   Just want to reiterate my original point .  To subsidise housing with Auckland the major beneficiery, creates an economic distortion.  If the real costs were faced, then people might make different decisions about where to live, for the benefit of the nation.

I'm not sure how a country

I'm not sure how a country that only exports aggriculture would survive a big fall in commodity prices, etc. Has any country become rich from aggriculture?
 
And what happens when Wellington becomes 1.5 million people, needs some new roads and houses, and the south island begins hating them - another split?
 
On point d, isn't subsidising the christchuirch rebuild creating an economic distortion? If the real costs were faced, then people might make different decisions about where to live, like not on a fault line?  The same could be said about a lot of the roads in the south island that carry a handful of cars a day and can't make financial sense - shouldn't we close them all to avoid distortions?

What happens when Wellington

What happens when Wellington becomes 1.5 million?  A great question and one that deserves it's own debate.  Welly is about 400k so will need to quadruple in size and NZ would be about 18 million.
Given our internal birth rate this is going to be about 200 years into the future unless.  Unless we simply open the gates (really open the gates). 
We have 50,000 kiwis giving up on NZ each year right now (half of wellington since JK took power).  What would the demographic of the country be like, does it matter? 
This is great debate that we as a country should be having.  So far this stream has covered the pros cons of extra Govt housing in Auckland - this is a simple by product of increased numbers of immigrants into nz.  The bubble in property can be looked at in this light.
I'd love to have leadership of this country that wanted to look into this. 
 

What happens when Wellington

What happens when Wellington becomes 1.5 million?

Yeah like 1.5 million people would ever want to live in Wellington! It's incomprehensible that 400,000 people actually live there already. One can only assume they have never been anywhere else.

Jimbo.  You obviously don't

Jimbo.  You obviously don't like working with cows.  Frankly neither do I and I don't.  But without agriculture New Zealand would be like somewhere else.  Papua New Guinea comes to mind.
As for financial security of our nation and the link to agriculture..  Think of the Protein shortage.  Think that we are 7 billion people now and climbing.  By comparison Apple computers are riding high ( well they were in 2010) but are on the downward slope.
If I had to bet which entity would be the most likely to be around in 10 years.  Given the choice between Apple and NZ Agriculture Inc.    I would bet NZ Agriculture.

Here are some numbers that I

Here are some numbers that I crunched based on statistics NZ web site.  They pretty much speak for themselves. 
Auckland Port
Export $/head 5,000  Import $/head 10,700  Net contribution -$5700/head
Tauranga
Export $/h 16,700, Import $/h 10,000 Net $6,700
Napier Net $8100
New Plymouth Net $6,500
Wellington Net -$2,700
Nelson/Marlbough Net $6,900
Christchurch/Timaru Net $1,300
Otago Net $20,600
Southland Net $7,700
Auckland is a very expensive overhead because we have about 1,400,000 people not pulling their weight.
As an interesting aside the 4 Aussie banks profits add to about 4 billion from our population of about 4 million.  That is $1,000 per head compare that to the figures above.

Your numbers tell me that

Your numbers tell me that most imports come through Auckland's port before they are redistributed throughout the country, not sure how that implies Auckland doesn't pull it's weight.
Not all exports need to go though a port - in fact a lot of the most profitable ones don't.
 
According to this site http://monitorauckland.arc.govt.nz/MonitorAuckland/index.cfm?242A576B-12...  Auckland makes 37% of NZ's GDP which is higher than its population. Auckland has about 7% unemployment which is about the same as the country as a whole. Auckland wages are about 10% higher than the national average which implies we pay a higher percentage of the total tax. Just because we don't grow apples or herd sheep...

GDP largely just tells us

GDP largely just tells us what people are paid.  It doesn't tell if they are doing anything useful for their pay, such as producing exports or replacing imports.  Wellington is full of highly paid government servants; so presumably a high GDP; do they produce anything useful that puts "bread and butter" on or national table?  NO.
Re much of the imports comming through Auckland.  Yes, but wouldn't it make more sense if the inflows and outflows through each port was more balanced.  My point is that the south island would get along better without Auckland as they are net income earners and could just as easily import their Chineese junk through Christchurch, Dunedin or Invercargil (infact at less cost without the internal freight).  If Auckland did not have the South island would the reverse hold - clearly not.

But you are assuming that all

But you are assuming that all that Auckland does is import stuff. There is a lot of manufacturing and professional services like IT and accounting in Auckland. Without Auckland there would be very little in NZ except farming. 

The largest professional

The largest professional services firm exporting services in NZ is not based in Auckland..those pretenders in Auckland are just taking their cut from the wealth generators...

The largest professional

The largest professional services firm exporting services in NZ is not based in Auckland..those pretenders in Auckland are just taking their cut from the wealth generators...

Farming is what puts the

Farming is what puts the money in your pocket Jimbo.  Do the math and see the result.  And I don't work in that industry.

Not my pocket, but yes it is

Not my pocket, but yes it is the main driver of our economy by a long way. But it would be silly to base your economy only on farming there could be some pretty major recessions if there was a drought or dairy demand dropped off.
if the South Island was its own country it would still need most of the services that come out of Auckland. So it would either need its own major city requiring more roads and housing, or outsource them to the country of Auckland. 

LOL what services in

LOL what services in particular... please provide some examples....

Today you have probably used

Today you have probably used some web sites developed in Auckland, eaten some food manufactured in Auckland, used an appliance made in Auckland, drunk a beer that was cheaper to produce in Auckland, used some petrol refined north of Auckland, watched some tv produced in Auckland. 

Illustrative numbers - well

Illustrative numbers - well worth repeating.  They say it all.
Auckland Port
Export $/head 5,000  Import $/head 10,700  Net contribution -$5700/head
Tauranga
Export $/h 16,700, Import $/h 10,000 Net $6,700
Napier Net $8100
New Plymouth Net $6,500
Wellington Net -$2,700
Nelson/Marlbough Net $6,900
Christchurch/Timaru Net $1,300
Otago Net $20,600
Southland Net $7,700
My comments well above are not anti Auckland.  And as a country I believe we do need to stick together.   But Auckland is now well down a slippery slope that is going to get steeper.  One the smaller cities to the south have dealt with 20 years ago.  What is Auckland going to do to become productive.
Returning to the original story about Labours housing plan.  Why should we selectively subside people who choose to live in Auckland and can't afford to.  A better signal about actual housing costs and where to live is needed.

I thought labour were

I thought labour were building some houses and selling them on for a small profit - hardly a subsidy. I bet most areas in nz are subsidised in some way, whether it is broadband and mobile in remote places where it isn't profitable or irrigation subsidies or tax breaks for movies. It is just that aucklanders don't whinge as much about others subsidies we accept it is for the better good.

Like your post and the

Like your post and the ressons you give are also the drivers why the population projections for Auckland will not happen. Serious business often is now conducted off shore...you advertising scenario is one of many that come to mind. Auckland is going regional.

Im not sure its that

Im not sure its that straightforward, however Auckalnd as a bastion of the property bubble, yeah sure...
Auckland as a producer? well depends on what it produces....it maybe for instance that it actually supports production else where....
Real costs of where to live. Well I live in Wellington because frankly there simply isnt anywhere on SI that Ive seen in a decade that I could get a job with/for....its simply too small.  That of course guts my wife as much as me as she's SI born and bred...Wellington is our compromise....
regards

Obviously there is a need for

Obviously there is a need for what is done in Auckland or there would be no jobs and companies in Auckland. Unlike Wellington, Auckland isn't propped up by the government.
 
The money being spent on Auckland roads and rail is just the fair share of the fuel tax paid, and this housing subsidy is not meant to cost the taxpayer anything.  Aucklanders pay an awful lot of tax so why shouldn't we get our fair share of government spending. 

Please explain Steven...your

Please explain Steven...your comment again does not explain itself...lets take a guess...import and export distribution points could be any number of places...or all innovation comes from Auckland? Good grief :-)

I guess it was a simple reply

I guess it was a simple reply to a simple position someone put forward that the SI could survive well by itself.   Or that Auckland is just a consumption point....I would suggest its a lot more complex....
So some factors that make Auckland/Wellington critical are,
1) Its population and that density.  So to get say imports to work economically it takes numbers and a collection of numbers....without that SI might find its imports are way more expensive....
2) There is more to NZ's exports than agriculture....IT, software jumps to mind, ie high tech and that usually takes "silo's" of ppl, Wellington film for instance.......but Chch I think used to be a bit of a software powerhouse? (is it still?)
3) Geofrey Ward (TED?) I think it was said cities super-scale on so many things.....0.75....
Im sure there are lots more pros and cons.
 regards
 
 

There is simply no

There is simply no justification for taxpayers around an entire nation paying for a commuter rail project in one particular city. It is hard to imagine anything for which the benefits are more focused on specific locations, than a commuter rail system. If it doesn't stack up in terms of the local people who benefit, actually funding it, then it should not get built.
The whole thing is a rotten fraud, check out Tony Randle's audit of the Auckland Rail Loop Business Case.
 
http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10762195
 
Download Randle's actual audit HERE:
 
http://www.kiwiblog.co.nz/2011/10/the_case_for_buses_not_rail_for_auckla...

I agree, you are probably

I agree, you are probably right in the rail commuter project.....Ithink the cost Ive seen quoted was $4500 per metre and thats the minimum cost, so $4.5milion per km....hard to see that as justifiable.
"obtaining  the cost calculation information used to support the CBD Rail Link was refused byAuckland Transport. The information was only provided after several months delayfollowing the intervention of the Office of the Ombudsman"
This really hacks me off, this information should be freely available for inspection, checking and challenge.....spending large ammounts of tax payer money has to be robust.
regards
 
 

I can't see how spending on

I can't see how spending on rail is any different to spending on roads - they are both localised to the region the money is being spent in. Are you saying we should stop building or maintaining roads because one region might get a bit more spending than another?
If you use business cases for road maintenence spending, a huge number of roads in NZ would not be worth maintaining. Resealing a long country road that services a small town might work out at tens of thousands of dollars per user. But you don't hear me complaining.

You do have roads. If a small

You do have roads. If a small town is asking for its own rail network out of tax $ then i would be complaining about that too.

Generally yes except roads

Generally yes except roads are more flexible.  Where rail wins is hvy and frequent transport, not something thats generally applicable in much of NZ. So electrifying the main line Dunedin to Auckland, OK, new commuter, when a road has to be put in anyway, not really.
I fully expect btw that small roads servicing small towns wont be maintained as is past say 2020, certianly 2030...
regards
 
 
 

Steven, for once I think you

Steven, for once I think you and I are in agreement. I have been trying for years, to point out on this forum and others, that the "value" of rail "investments" is very much localised to the small amount of land close to stops, especially in the inner city. But roads disperse value and reduce the "monopoly rent" component of urban land prices. Robert Murray Haig's theory of urban land rents and transportation, published 1928, was once common knowledge among economists. Henry Ford understood this stuff well, so did many politicians and social reformers as well as economists.
One of the biggest wastes of infrastructure in NZ, is the millions of kilometers of rural roads. This, and much of the rail infrastructure, and other rural infrastructure, actually means that some proportion of our much vaunted rural export sector is still a net burden to the economy even after Rogernomics and the abolition of direct cash subsidies to the sector.
While urban roads carrying 30,000 vehicles per day are deprived of four-laning, the nation is covered in millions of kms of roads that take less than 10 vehicles per day. How stupid is this? All the growth in the world economy for the last 60 years has been in urban economies, the rise in global rural produce has been accompanied by a fall in real commodity prices, so that reliance on exporting rural commodities has contributed to our nations slide down the international wealth rankings. If we served our urban economies with infrastructure as well as we served our rural ones, it would make a lot more sense.
I suggest that in many parts of the country, the roads and drainage and water supply and so on is already there for the rural sector, and simply throwing the region open to low density urban development would be virtually costless as regards infrastructure.
The primary reason that local governments hate Greenfields development, is that they like to "double dip" on the costs of infrastructure. The advocates of growth containment assure us that money can be saved by "utilising existing infrastructure in the cities" with intensification. This is utmost bad faith, seeing that developers of "intensification" projects without exception get socked with maximum possible development contributions allegedly for the "necessary expansion of infrastructure capacity".
This is absolutely false and the LGA 2002 should be getting re-legislated so that developers have a fast-track and cheap objection process. The truth is that the councils have failed to provide for maintenance and renewal, and they are using the developers of "intensification" projects as milch cows to fund this, lying that the charges are for "capacity expansion". This is the second lie on top of the original one, that growth containment "makes sense because there is spare infrastructure capacity in the existing built areas".
So much for the "public watchdog" aspect of our supine politically correct ideologically captured "mainstream" media.
With greenfields development, the situation is clear: new infrastructure has to be provided, and the developer pays for it. The Council cannot make this developer a milch cow for unfunded maintenance and renewal of existing systems. This is why they hate greenfields development, all the other reasons are advanced in utmost bad faith.

While I agree on the commuter

While I agree on the commuter rail being unwise at a high level...ie context and detail might be important I think we strongly disagree on much else.
When you describe "urban as the growth" you miss several things, you look back and you do so through the glasses of  fossil fuel. That is a paradym  that has passed.   Its also of questionable good....ie not productive but consumptive....
I agree, "necessary expansion of infrastructure capacity", yes this is actually a good way to get existing worn out infrastructure replaced when you cant afford to purely from the existing rates, and that should be telling you why urbanisiing everywhere simply wont work.
OMG we agree twice...
Where we disagree is the costs of repair isnt meetable (probably bad english) by rates ie councls have failed, its simply because it cannot succeed.  This effect is shown magnified in the USA, the place is falling apart.
What you are advocating is more of that failure...just we can kick it for a bit longer.
What we do have to do is move on...more of the same simply isnt going to work....not for future generations.
regards
 

JimboJones - the long country

JimboJones - the long country road servicing a small town will have people who produce an exportable product surrounding that small town. Maybe you should work your figures differently. Instead of the thousands of dollars per user scenario you use - try using exported products per user.

One third of the entire

One third of the entire globes dairy production is derived from New Zealand Dairy Farms

Really ? Dont tell the FAO

Really ? Dont tell the FAO

"One third of the entire

"One third of the entire globes dairy production is derived from New Zealand Dairy Farms" Impossible. Maybe it is one third of the dairy production actually exported. The vast majority of world dairy production is "local", for local consumption. NZ is almost unique in having land to burn; or to "dairy farm" as the case may be. Europe has several hundred million people and most of their dairy consumption is locally produced. Same with the USA. Heavily populated parts of the world with low dairy production, tend to not consume much of it either. There are parts of the world grossly under-utilised for farming production today, and as they ramp up production, prices will be depressed still further; they have already fallen around 4-fold in real terms in 6 decades. Eg parts of South America and Africa.

I think you mean its the NET

I think you mean its the NET left for export after internal consumption? or whats available on the global market?
Similar problem and a similar often repeated mistake for oil....its not what is produced but what is left for sale.
regards
 

I'd dispute those figures

I'd dispute those figures KiwiD, sounds like a put up to me, now if you've ever been stuck in a jam at bottleneck junction (Mt Eden Shopping Center) you'd prolly vote in favour, but then why not widen the bloodly road,,,? because that is a jaffa late' hub and we can't be upseting them now can we.
Three K of ringarosy from an outfit that can't get it trains out of Britomart on time....yes 67% of us want that...I don't think so, crikey half the North shore alone don't even know where Mt.Eden is.let alone care.

While I don't want to stand

While I don't want to stand in the way of national pass time of abusing Aucklanders, it is worth pointing out that Auckland pays more tax per head than anywhere else and it pays more petrol tax than anywhere else.  Auckland is subsidising your roads your schooling and every other service you receive from the government.  The annoying interlude to your fun is over, you can resume the Jafa calling again...

South island has had and

South island has had and conitinues to get a great deal of help. NZ is a democracy ruled by th majority, who happen to live in North Island and in particulalr Auckland.

The South Island needs to do

The South Island needs to do the same as Scotland and get a referendum on susceeding from NZ.  Auckland believes that they are the power house of NZ so they would not resist until it was too late.

There is a south island

There is a south island independance party you could vote for. 
It would be interesting to see what percentage of government spending was in the south island compared to the tax intake of the south island. My guess is the government spends more on the south island than it should - considering the number of roads in the south island which probably have 3 cars a day drive on them and landslides every second week, the number of small towns in the south island that proably have quite high unemployment, etc. Also considering that wages are lower in the south island, I would assume the tax intake is lower per capita.
Yes Auckland does get a lot of money spent on it, but it does have a big proportion of the population, it does make a big proportion of NZ's GDP, and it does pay a big proportion of the governement's tax intake.

JJ - you highlight a great

JJ - you highlight a great problem with use of GDP.  If people simply circulate money internally this all counts towards GDP but doesn't help the overall wealth of NZ.  Extreme example is if I clean your car you pay me $20 and you clean my car and I pay you $20 - GDP up $40.  Worst case senario we pay $40 for a tourist to come and clean our cars and they depart with $40nzdollars.  Best case senario we go to Aussie clean a bunch of cars and return with lots of $aussie dollars.
The reality is that we are an export primary producing country.  The areas that produce the most exports are outside Auckland. 
If we put 100% of our public funding into Auckland roading and 0% into rural then this country would grind to a halt. 

Would that include the

Would that include the Europeans or would it just be just the Maori?

The plan seems clearly not to

The plan seems clearly not to be a subsidy; but fully self financing. And as it is on a pay/ earn  as you go basis, that can be put to the test for each batch of houses. Especially as the houses are, rightly in my view, to be sold and not kept as Housing NZ stock. Their point that the accommodation supplement needs would diminish, also seem valid, as do tax and employment expectations. So no subsidy at all. In fact income generating.
It will be interesting in time to see where the land is to be found.
For all the Jafa bashers, it would be interesting to at some stage see where the net spending/ net earning of the country was split. I suspect that Auckland more than holds its own in terms of income/ tax paid vs expenditure/ benefits paid out. Most government departments seem determined to keep any such analysis secret.

if this is a joke it's a good

if this is a joke
it's a good one

To be fair , I think it a

To be fair , I think it a little outrageous for Shearer to be promising to deliver on low cost housing before he has his own house in order.....a bit like promising Christmas with trimmings while unemployed.
The return of Cunnie the Running Kun...? he has the dog they need to take the Nats on, but , the party , the caucus, fear the dog unleashed....the question, should he roll Shearer, is, can he temper his spite in the interests of pragmatism..? If Parker is even a little sycophantic , he's convertable and useful, if not, it's all uphill.
Right now the first battle for Shearer is just to win back support lost to the Green partry, even Norman has a higher public profile than Shearer..............
 What does that say about the issues Labour have to consider at short notice..
 Invisibilty is not considered an attribute in Politics,covert or not.

So........how will they deal

So........how will they deal with land price speculation IF this legislation/idea was even passed?
How will they deal/control local councils to stop them raping and taking advantage of these new home buyers via ever increasing rates and levies?
Which elected bank will control the loan? or which department?
I still see many unanswered FUNDAMENTAL questions. 

The government needs to

The government needs to signal strongly to the market that the excess bubble prices are not going to be tolerated...
1.  There will be no bail outs of those that lose out.
2. Walk away mortgages legislation could be brought in.
3.  Signal the 'luxurious' public funding of accomodation supplement and wwf will be first to be cut when GFC#2 hits.
4.  Signal that minimum levels of deposits will need to reinstated.
5.  Remove kiwisaver 'cash for house clause'.
6.  Capital Gains Tax
 
These are just a few examples of how the authorities could pour cold water on the price speculators. 

Not a bank slave - the

Not a bank slave - the Government has to maintain economic stability as the priority. If they make too many changes that stability will be threatened. While the housing affordability issue is frustrating for many economic instability is a far more serious issue for the country.
 
National inherited a plethora of issues from the Labour led coalition at a time of global economic instability. If the NZ house market had crashed as happened in many other countries NZ would be in a seriously unstable position right now. 
 
National can only unwind the system slowly as to do otherwise will place the country in jeopardy. If our banks failed all those people saving for a house deposit would lose their money under your scenario. Not to mention anyone else with savings. 
 
Walk away mortgages model - where's the responsibility in that? No one forces people to take out a mortgage. It's a two way contract and people should respect that repsonsibility and do their homework. 
 
WFF has to go - i assume this is part of the balancing act that if done to soon could cause mayhem. The ideal situation would have been to not introduce it in the first place. But I didn't hear many people complaining about the implementation when Labour introduced this subsidy. In fact most people thought fantastic I getting something for free from the Govt and that is the problem. No one actually thought about the long term implications. 
 
CGT - you have to be joking - it will solve absolutely nothing. Private enterprise is already over-funding Govt expenditure and if more taxes have to be contributed to a flawed system them you will be allowing further incompetence and inefficiency. Government and council expenditure is why house prices are so high yet you want them to have more money to spend from people who are already struggling. 
 
It is Policitians who created the bubble prices !!!!! It is policy, legislation and interferring in the market that is the problem. 
 
 

Absolutely agree,

Absolutely agree, Justice.

".....So........how will they deal with land price speculation IF this legislation/idea was even passed?...."

As I say in response to another comment near the top of the thread:

"......there is nothing in the Labour proposals that says they will be forcing land bankers to sell them the land at a fair price. This will be the undoing of the whole scheme. Labour in the UK has never ever bitten the bullet and forced the sellers of land to keep their prices down to rural land prices, even public housing schemes still pay the land bankers the inflated price that zoned, planned land fetches on the market.
Good luck to Labour dealing with the land bankers who love Len Brown (and vice versa?)"

Getting the SUPPLY side fixed

Getting the SUPPLY side fixed is most of the equation except in Auckland.
The DEMAND side needs action on both immigration pressures and on the ability to curtail external investor/speculator pressures.
Plenty of time to address this later though it would be good to telegraph future policy to stop current enthusiasm from these sources.

Yep neither Labour or

Yep neither Labour or National want to address demand because neither want existing house prices to go down. John Key has been quite open about the need to support the property market.
 
The effects of the govt announcing restrictions/moratorium on immigration and property ownership by non residents would be almost instant as would restrictions on credit. In the current environment even big wage rises would just fuel even more borrowing and exacerbate affordability rather than fix it

Nail, head, bang.

Nail, head, bang.

agree

agree

the thing with the politics

the thing with the politics wtf is it will turn over time. At the moment less than 60% of Aucklanders own a home now...a declining % each year. Who wins Aukcland wins the country in elections. When this number gets to 50% home ownership national will be out, for a long time. People won't forget national forcing them to become rent serfs.
Then all parties will be falling over themselves to appease the majority. The demand side of housing will come into play...they'll all suddenly see it like magic. Politics unfortuantley is not a game for the best interests of NZ or its economy long term. It is to get voted back in, in 3 years time. Politicians haven't wanted to solve the real housing affordability issues because the majority, homeowners, would see a wealth decrease and they'd risk being voted out 

This is a generational

This is a generational thing.  As the younger generation is less active in the political process the pollies will look to who votes.  How much those voters will care about property - e.g. accomodation supplement far more important to left wing than right.

There are some questions to

There are some questions to be answered, but at least someone is coming up with a "big idea" in reponse to the crisis. As a first home buyer, this definitely interests me.

This is a good policy...I've

This is a good policy...I've spoken with several National voters and this policy might sway them to Labour...housing affordability is a big issue and National is misreading the electorate, there is clearly market failure and Govt intervention is required....National's seems to think the Council's will sort the issue out at some stage - not good enough.

Election promises with

Election promises with borrowed money seems to be the vote winning strategy.
 
If it succeeds shame on politicians but bigger shame on the voters who quick to blame others for the choices they make.

Mr Shearer will get bit of a

Mr Shearer will get bit of a shock when he actually tries to build his houses that can sell for $300K - fully covering the Crown’s costs, including land, construction and finance costs. (and GST, development taxes, consent processing fees, consultants etc.).
 
"houses built would be smaller to be more affordable." is a good idea - but generally not allowed by the district plans.
 
The private construction firms aren't going to do it for a loss and having a government department organising it costs a lot more than any private developer would ever dream of for a margin.
 
We've seen this so many times before. All the project management and design fees will need to be advertised on GETS and given to whatever consultants are willing to do it for the cheapest fee. Every dollar saved on design on big projects will cost $10 extra on site - and so Mr Shearers $300K houses will end up being either very very small or more expensive than the private developers houses next door.
 
 

Don't kid yourself, the

Don't kid yourself, the Government has the soverign power to step right on in there and change the playing field. They did this after the end of WW2 in a short space of time but there millions of homeless people. One must bear in mind shelter is a necessity and needs to be treated differently than the speculation market.
People entering the house market are being burdened with massive debt consumming 90% of weekly income and the threat of loosing al due to health, relationship or employment changes. This also has veryu negative affects on families and in turn society
NZ needs people to live, work and own a stake hold in NZ.
Curently the property system is geared/driven by speculation - real estate agents, banks, media, foreigners  and baby boomers who paid significantly less proir to the 1990 bank deregualtion and have more than one property.
National party appear to be protecting this wealthy unproductive sector of society, particularly the huge amount of money we borrow and interest paid overseas, sucking NZ dry.
Cheers 
 

You're right about all the

You're right about all the debt and shelter etc. etc - but I seriously doubt government can produce masses of $300K houses in Auckland. Government simply cannot build cheap. they never have and never will - there's all sorts of checks and balances and accountability (rightly so) that the private sector isn't lumbered with.
 

Really hard to see it any

Really hard to see it any other way. 

I think they will build a lot

I think they will build a lot of teraced houses which are a lot cheaper to build and require a lot less land. Also they effectively get a 15% discount because they pay all of the GST to themselves (and then 33% of whatever profit any subby makes as well).

Oh so they don't charge GST

Oh so they don't charge GST then - here's the first of may taxpayer subsidies that would need to occur.

So very true Bob, plus the

So very true Bob, plus the RMA objections will clog up Councils and then the Courts.

"houses built would be

"houses built would be smaller to be more affordable." is a good idea - but generally not allowed by the district plans.
Can you give any example of a district plan that has a minimum house size rule that would prevent a 100 to 140 square metre house being built?
Also the Department of Building and Housing is sitting on plans for 3 bedroom houses that (three years ago) cost $100,000 to build.  Which suggests your concern about cost of building is as correct as the drivel about district plans preventing smaller houses.

We already know that 100,

We already know that 100, 140, 200, 300, 800sqm houses are fine under district plans - BUT we are talking about affordable housing. There is never a problem building exensive houses - they are encouraged. Auckland City Res 6 rules, PM 196, Central area PM2 all have miniumum sizes bigger than affordable.
 
Say hypothetically you have taken a group of senior council planners and urban designers through a 62sqm dwelling and they have agreed that there is nothing wrong with people being allowed to live there, and yet the minimum is now 70sqm. You are looking at a $56K difference in price (NOTE: you don't have to live in it - you are always allowed to chose a more expensive unit if you want the extra space)
 
It is the easiest cost component to change (just change the rule) and one of the biggest. If you knock 20% off the construction price of that 70sqm unit you may save $28K - that's hard. If you halve development tax you might save 20K. If you halve land cost you may save $25k. Why not just take the easy $56k saving?
 
"the Department of Building and Housing is sitting on plans for 3 bedroom houses that (three years ago) cost $100,000 to build." any evidence of this claim? You're talking about 100-140sqm houses at $100,000? you believe in $700-$1000 per sqm builds (including foundations, landscaping, service connections etc etc) by a conservative risk adverse bureaucracy?
 
Affordable can be done, but not by government.
 
 

Hi Bob - well said

Hi Bob - well said

Is your mysterious $100,00 3

Is your mysterious $100,00 3 bed DBH house actually the $168,000 120sqm DBH 3 bed starter home?

Read 7.8.1.16.MINIMUM SIZE OF

Read 7.8.1.16.MINIMUM SIZE OF RESIDENTIAL UNITS IN THE RESIDENTIAL 6 & 7 ZONE in District plan
 
Go to Keith Hay website. The cheapest 5 houses in the "first choice" range are illegal in Auckland City under this rule. How does that help affordability?
 

This a good idea? you are

This a good idea? you are deluded, firstly the giovernment will be strangled by the populist politics of trying to provide what the "consumers" want i.e. a 3 bedder on a little plot of land inside a 20minute commute and what the physics dictate, they will soon find they don't have enough land without knocking down existing housing and raising the ire of every leftie and HNZ resident (remember this is the labour party that campaigned by distributing leaflets to HNZ renters saythe the nats wanted to sell "THEIR" house) or building in ticky tacky subdivisions in the wops, In Auckland City Council the mandarins will be rubbing their hands in glee at the fees they can collect and the empires they can build.
This is not a solution but populist bullshit rhetoric and if anything shows Shearer up as patronising beauracratic left wing central state controllist without the deviousness and cunning that Clark had.
 
 

Why, Neven911 (if that's yer

Why, Neven911 (if that's yer real name...) surely you aren't suggesting that inventive and determined use of the RMA, local Council Consultations and other Democratic Precautionary Principles, could be employed to NIMBY this Brilliant Idea out of existence?

I am also trying to point out

I am also trying to point out that the price per acre that the land bankers at the locations where Len Brown will allow development, is like a kind of "expansionary variable" that will swallow simply as much funding as it can - or possibly refuse to sell the land to the government, period. What then? I say a government trying to fix "housing affordability" this way has to have the leftist cojones to nationalise land, or at least pay an arbitrarily low value for it.
A lot of activists love Curitiba, Brazil and its rapid busways surrounded by high density development, but none of them acknowledge the fact that the whole thing was financially very viable because the land for it was nationalised. Everywhere that land owners can "hold out" for top dollar, the viability of the whole project is destroyed right from the start.
Len Brown's plans for trains and high density absolutely require nationalisation of land or "eminent domain" if it is to actually work at all. The cost of apartments in Akl CBD is already obscene; similar to CBD's around the world where incomes are 2 to 3 times as high. Planning even more rigidly around constraint and trains will only make this worse, not better. Len Brown and his cronies need to be investigated for their links to the owners of land that their grand "plans" favour.

Not often that i agree with

Not often that i agree with you Phil (and never with waymad, is that a "real" name?) but there are for me two issues, The capital cost, i.e the your stance on the landbankers on the fringe, but also the operating costs, namely the fuel cost which did in the inland empire in the US.
As far as I can see nieither the Nat, Green nor Labour have addressed this problem, The Nats will let the "market decide" (and the market is clearly rorting the situation, from builder, banks insurers and COUNCILS) and the greens and lefties propose a utopia based on state control and shared tranport assets, which is a "we can carry on just as we are as long as you rich pricks give up your BMW's" philosophy..also flawed.
The solution for Auckland lies in a systematic redensification, not platitudinous "smart growth" or endless sprawl

Neven, the famous "Costs of

Neven, the famous "Costs of Sprawl 2000" paper pointed out that the higher the median price of houses, the further it was worthwhile driving daily to save money on the price of the house. The Real Estate industry calls this "drive to qualify" i.e. for a mortgage.
This is why the "inland empire" in California happened. Houses far too expensive in the growth-constrained existing areas.
Of course when you have non-recourse mortgage laws, the people living in the inland empire just walk out of their homes when the prices crash.
I challenge you to name one single city in the world where they do "systematic redensification", where housing is affordable and commuting times have reduced.
In fact in every such city, housing is grossly unaffordable and commuting times are longer, not shorter, firstly because people are "driving to qualify" and secondly, because of congestion on a neglected road network.
This is "unintended consequences" exactly as always happens when economically ignorant people like Bolsheviks or urban planners run things.

Phil This is where you go off

Phil
This is where you go off on your retrospective tangent,  "Costs of Sprawl 2000" was written in the period from the mid-80s to 2003 where oil was $25 a barrel and all was well with the world (or the US anyway) it will never be like that again, Housing will become more expensive because it is energy intensive (in capital works and operating expenses) and the "market" will not defeat the physics, if you build big houses or commute a long distance you will require more energy. The latest farce is the MSM saying that the US will outproduce KSA in a few years

I have commented extensively

I have commented extensively at http://www.facebook.com/CantabriansUnite
 
The unfortunate reality is that the Labour proposal is failing to deal with the key issues of land supply and infrastructure financing appropriately.
 
It seems very likely the production and pricing levels suggested are unachievable – and with this approach will most likely be highly inflationary. Simply because the two critical core problems noted above are not being dealt with.

IT IS VERY IMPORTANT when analysising Labour starter build proposals to focus on the ALL UP development costs per square metre and relate this to the price bands they are aiming for. It will soon become apparent that the proposals are not achievable - other than Brirtish style "ratholes". The AVERAGE size of a new build in Britain now is just 76 square metres and falling. Its build rates are appalling at 1.8 / 1000 pop per annum - about 117,000 units for a population of about 63 million...wellbelow where normal replacement should be.
 
With this massive demand boost Labour is suggesting WITHOUT dealing with the supplu / inflation vent of fringe land and proper infrastructure financing (along the lines of the Texas style Municipal Utility District infrastructure bomnd financing model) the inflationary riskes are enormous.
 
Again.....researchers, economists and others need to focus very much on ALL UP build costs per square metre and how they are likely to track under Labours proposals ...bearing in mind starter stick is going in on the fringes of the affordable US markets for about $US600 through $US700 per sq metre ALL UP.
 
It is for this reason - and others besides - why Labours affordable housing proposals wont work.
 
Hugh Pavletich

Hi Snippy – I have done

Hi Snippy – I have done analysis on a new subdivision in CHCH .  The value of a section based on the present development regime is $198,000. However after running it through a Texas MUD (I have lived and developed MUDs in Texas) regime brings the price down to $61,000. The savings are made in a number of areas. The first is removing waste cost (note waste cost is seen as revenue by others).  Land is purchased at rural land value, minimum developers levy, infrastructure separately financed, consented, developed and sold within 12 months. One of the biggest savings you make is on the % multiplier costs, namely GST, sales commission, contingency and developers margin eg sales commission is a lot less on selling a $61,000 (but easier to earn)  than a $198,000. There are a number of hybrid versions of this possible based on how different councils operate etc, giving of course different section values. But there is no reason to ever, ever, ever pay what we are presently paying.  Snippy you also asked for an example based on a 2500 unit development. Economies of scale are misleading, as it is a U shaped curve, ie savings are made up to a certain number, but after that, the costs will go up again. For house building in one subdivision 50 plus house being built at one time by one developer tends to result in savings of about 25% and then it starts to flat line after that and then go up. It’s more about a certain number being built consistently over time that is more important than just the number by its self.
For any Govt. to think they can overcome systematic failures in the present system by managing it themselves and building quicker (ie doing the wrong thing faster) is seriously deluded, and sadly doomed to fail if they get the chance.
 

Surely the biggest saving is

Surely the biggest saving is that you have simply included land at rural value?
As this also excludes infrastructure who pays for it? Who pays to maintain it? Hopefully it's not through selling bonds and simply transferring debt to future generations to make it seem cheaper now?

Hi Bob Biggest savings per

Hi Bob
Biggest savings per section are: GST from $25,826 to $7,956, Sale commission from $5,940 to $1,830, Land Cost from $22,555 to $2,500, Development Levy $28,000 to $5,000, Interest on Outlay $15,740 to $3,331 and Developers Return on Outlay $33,094 to $10,068. Yes Infrastructure is funded separately and is owned and maintained by the owners within the development, much like the common property in a BC is. This funding can be via the owner’s house hold mortgage or through lower interest bonds with the security being the ability to rate the owners within the development for payment. This localised bonding is not available in NZ at the moment, but is no different to how local councils borrow money ie based on their assets (which is also infrastructure that has been vested to council by section owners via the developer under the present development regime) and to also rate owners to pay for the cost of those borrowings. In MUDs the infrastructure still belongs to the people that have paid for it, or are paying it off, namely the section owners. To see more detail on this I have posted two articles on http://www.performanceurbanplanning.org/  go to bottom left corner.
Bob this is not aimed at you - but people seem unbelieving that sections could be developed for these prices when there is ample evidence in other countries, and I have been involved in one in NZ that was a hybrid, resulting in lower prices. Naturally I would not want anyone to pay such a low price if they were not comfortable with that. So just let me know how much they would like to add for the sake of it, to feel comfortable, and I will be happy to oblige. We have become so used to paying more that we now insist on it.

Not quite what you're after

Not quite what you're after but interesting...
 
http://www.chranz.co.nz/pdfs/branz-residential-construction-and-costs.pdf
 
Page 3 shows land and development tax at 43% of house cost for a big house. There's stuff missing here like financing costs and doesn't seem to address infrastructure.  As the density increases the land component drops. In CBD apartments the land component might be 5% and the development tax 5-10%. Developers margin could not be 5% or no bank would touch them.

Yes as density increases the

Yes as density increases the land component drops, but the m2 rate goes up.

Exactly, Dale, the evidence

Exactly, Dale, the evidence is that every city in the world that constrains urban growth, cannot downsize its average section size faster than the land price per sq meter rises.
This leads to the glaring irony that half acre lots in the affordable cities cost half what one tenth of an acre costs in the unaffordable cities; and the glaring irony that all the affordable cities are low density cities and all the unaffordable cities are high density.
Nor are the commute times in the low density affordable cities, higher than the high density unaffordable cities. In fact the low density affordable cities win on every measure of efficiency that you could name. Actual resource consumption is not a measure of efficiency, but a measure of household discretionary income. The high density cities have lower resource consumption because the unaffordable housing is like an extra "tax" robbing households of discretionary income. Spending on entertainment, health, education, and what have you will be lower too. Marriage and birthrates are also lower thanks to the "housing tax" effect too.

Yah, great sound bites, but

Yah, great sound bites, but the devil's in the details.
 
Borrowing from the ever-ready Surplus Nations o' the World,  to pay the GST (that's 3/23 of the gross, don't ferget) on the materials, fees, levies, development contributions, and other essential elements of any Gumnut-funded plan does rather sound like a Magic Money Tree solution.
 
And if'n I wuz one of the (count 'em!) Two Firms supplying them materials (known ortherwise as a Duopoly - see the Productivity Commish), why, I'd be Delighted to Help Out!  Must have a Cartel Cawfee with the other Terrible Twin, real soon now.
 
And if I wuz a Local Council, looking forward to all that moola from  fees, levies, development contributions, and other essential elements of any Gumnut-funded plan, why I'd be Planning furoiusly as ter How to Spend It All, right now, just in time for the next 10-year Long Term Plan consultaterationising round.
 
And if I wuz an Architect, a Housing GreenWash Applicator, or a Smart Growther, why, I'd be honing the website, inventing some more Credentials and Reference Sites, and looking forward to my 10%, too.
 
And if I wuz an ordinary Joe or Jane Voter, I'd be thinking - Yup, they've certainly Bought my Vote with this!
Sigh....
 

Sigh.....indeed.....you're

Sigh.....indeed.....you're right, dammit.....!

Note to self: return to NZ

Note to self: return to NZ and set up housing construction company to take advantage of government subsidies and make a quick fortune a la The Great Home Insulation Government Windfall, The Great Solar Panel Government Windfall (Oz) etc...

Quality not assured.

Spot on, Stan. That, too, is

Spot on, Stan.

That, too, is a problem, along with the cost of the land at the locations where the gummint wants to build.

Let's not forget  the offer

Let's not forget  the offer includes a CGT clause, and rest assured with that door kicked open, the Nats will make fearmongering , top of the agenda.

Labour, on top of Parnell

Labour, on top of Parnell Rise n the RHS, there are 3 big blocks of state house.. how about selling them for a princely sum and build newer, nicer state homes somewhere else..  Almost all of the tenant there are beneficiaries, they don't really care if they are 10 mins walk or 1 hr drive to the CBD..

My thoughts exactly. Some of

My thoughts exactly. Some of those state homes around Bastion Point have epic harbour views and would fetch massive sums, especially if permission was granted for low-to-medium rise apartment blocks to be built in their place.

kill 3 birds with one stone - get a big chunk of change towards affordable housing elsewhere, provide a lot more accomodation in the area, and dramatically lower crime in the neighbourhood at the same time!

The overriding challenge to

The overriding challenge to housing affordability in Auckland continues to be the lack of supply.  Auckland's population continues to grow, and its housing supply must grow with its population in order to increase affordability.

The need to increase the supply of housing and tackle affordability issues is a key housing policy issue. Yet despite the critical social and economic role that housing plays, it has tended not to have the same political profile as, say, health and education.

 

So far it has always been a case of "passing the buck" with the usual "more investigations are needed" " will set up another commission to look at reasons for high cost" and so on. Atleast now there is a concrete plan to tackle this issue.

 

The first important step toward a "large scale increase" in housing supply has been taken by Labour in proposing the KiwiBuild initiative. 

 

 

Sounds good Labour - I will

Sounds good Labour - I will buy one each for each of my kids, none of them will have any income; one for Jack, one for Jill and one for the Castro our family dog.  After all under Labour's motto, everyone have equalled rights - men, women, gay, dog, cat, gold fish etc..

I think it is obvious that

I think it is obvious that something like this needs to be done, and the government should be able to build affordable houses without making a loss on them (although I don't think committing to 300k is a good idea - they should sell them at cost price).  National won't do it because it is outside their ideals that the market will take care of everything - which as usual doesn't seem to be happening.

What Labour is being

What Labour is being completely naive about, is the power of the owners of land at the chosen locations, to "hold out" for whatever price the market will stand. Are they ready to take the land off its owners and be accused of being Communists? Otherwise the prices of the housing at the end of the day, cannot possibly be "affordable".

Of course the devil is in the

Of course the devil is in the detail, but I think this is a very promising initiative by Labour. Well done.
Now just sort out the limitations on private development and we'll really be talking.

Peter Cresswell has a pithy

Peter Cresswell has a pithy take on this pipe-dream: 
 
"it amounts to a plan to get existing home-owners and taxpayers to pay for the slums of tomorrow"

Peter Cresswell hits the nail

Peter Cresswell hits the nail smack on the head:
"..........The nice Mr Shearer isn’t stupid, however. He reckons he has an answer to some of these obvious problems.  He has spoken to Auckland Mayor Len Brown already, he says, to take up his offer of a partnership with Auckland council to make land available.
But if Len Brown’s planners can magically make 66,666 cheap sections available to help Labour’s election chances, then why couldn’t it make cheap sections available for you and I to build our own affordable homes?
And if Mr Shearer thinks it’s appropriate to allow his 100,000 houses to be “fast-tracked” through the regulatory process, then why can’t houses and projects built by you and I?
In short and in summary, if cheap sections and “fast-tracking” were already available to everyone, then the problem of affordable housing would not be with us......."

Labour’s proposal does not

Labour’s proposal does not address why land is so expensive, why it takes so long to get consent, why we have such high developer fees etc.  They are not addressing the underlining problem.  Making housing smaller in size may make it more affordable but will also make it poor value for money. There is no way they can make these houses more affordable on comparing apples with apples basis without heavy subsidization.  It’s embarrassing as a Kiwi to hear this type of children’s thinking coming from adults. It’s Gallipoli all over again.
 

The term "market failure" is

The term "market failure" is grossly inaccurate in this case.  This is a political failure and the market is responding exactly as an economics 101 textbook says it would: restricting supply increases prices.
 
The market isn't "failing" to produce affordable housing; it's simply not allowed to, by the land limits and building regulations that make it practically impossible to put a new house and land package on the market for under $400,000. 
 
Instead of using taxpayer money to subsidise housing projects, why doesn't Shearer look at dealing with the issues that are causing housing to be unaffordable in the first place?

Far too rational, logical and

Far too rational, logical and commonsensical for a decadent, post-enlightenment nation like NZ......!!!!!!!

Well, I've come to the view

Well, I've come to the view that the market won't be able to fully address the problem in Auckland, no matter how much planning liberalisation there is (I'm not arguing against liberalisation, only arguing it can achieve so much). Scale is a big problem. ie. the lack of scale and economies of scale in building. This will always be a problem. This is where I disagree with Hugh that Houston approaches will solve Auckland's problem. Houston has and will always have much more economies of scale (5 million population plus versus Auckland 1.5 million). This is not to say NZ can't improve - it's just it won't be able to improve construction economies THAT MUCH
Talk of future slums is quite silly. These will mainly be homes for middle income earners. Yes there is a risk that poor design could create poor environments, but so long as that is properly addressed.....
 
  

Matt, when the cost of land

Matt, when the cost of land swallows 50% plus of the total development costs, when it should be 15%, it is inevitable that the buildings that will get built, will be of low quality as well as too small. It is a flat lie that increasing density makes housing affordable when supply of land is strangled; what city in the world is an example of this idea working? Every affordable city in the Demographia Reports actually has very large sections on average; in these undistorted markets, a whole quarter acre section costs less than half what one tenth of an acre is now up to here or in the UK, or in an Australian city, or in Vancouver.
I repeat, it is a lie that affordability can be restored by reducing space under the conditions of the urban planning racket. The cost of land becomes an expansionary variable; no matter how much less of it is consumed per household, the proportion of the household's income required to pay for it rises. Besides this, it has been obvious in the UK as far back as Peter Hall et al's voluminous report in 1973, that people get "priced out" of efficient locations and end up commuting far further than they might have otherwise. Are you aware of the boom in Thames and towns in Coromandel, with young Aucklanders moving in and commuting from there daily? Way to go with the unintended consequences, Hayek must be looking down and having a good laugh.

"It is a flat lie that

"It is a flat lie that increasing density makes housing affordable when supply of land is strangled"
 
If one doubles the density then the land cost per unit halves. Halving the land cost makes it cheaper. 
 
"what city in the world is an example of this idea working?"
 
Try Auckland for starters.
 

BZZZZZZZZTT!!!!!!!!!!!! Auckl

BZZZZZZZZTT!!!!!!!!!!!!
Auckland median multiple: 6.5
Affordable cities of which there are several dozen in the USA: 3
Average section size: about 4 times bigger in the affordable cities.
Worst of all, even the highest density living of all in Akl, "apartments" of 20 -30 square meters, are about the same cost as apartments twice the size in Manhattan where incomes are twice as high.
Get a conscience and start admitting the facts.
I say the stink of corruption between Len Brown and the owners of properties in Akl CBD area stinks to high heaven and it is high time Kiwis stopped acting like long time residents of Rotorua who do not notice the smell.

I would hate to see these

I would hate to see these cheaps houses purchased and sold at the same overpriced values as other houses. Even if the owner has to hold on to the house for years. Its not fair. The houses given out under this scheme, should also have their re-sale value controlled. This way others can get that first cheap step in the property market, not just those few that are lucky enough to get a government hand out. As a side effect; A few houses in a street with a controlled re-sale value could influence the value of many surrounding houses..... maybe????

I don't see why politicians

I don't see why politicians are wringing their hands over all this when the problem could be solved LITERALLY overnight by banning foreign ownership of residential property in NZ and forcing existing foreign landlords to sell within a certain time period or have their holdings liquidated by the state. This requires little more than a few strokes of a pen and would work EXACTLY how it's needed. It would affect property values in the big centres (mainly Auckland) while leaving property values in the provinces untouched.
 
It would ensure that future controls on things like LVRs, interest rates etc actually work. At the moment, anything the powers that be do to try to reign in the property market by de-incentivising lending simply tilts the market MORE towards foreign ownership and investment.
 
The fact that no politician is talking about this, goes to show that none of them are serious about deflating the housing bubble and merely want to pay the matter lip-service to be seen to be doing something about it to keep as many voters as possible.
 
Makes me sick.

I've worked in a number of

I've worked in a number of countries with restrictive ownership regulations favouring local ownership; they don't work. The basic reason is that all you need is a local to front for the foreigner's ownership, on record.  

Nope  

Nope
 

Sorry that was supposed to be

Sorry that was supposed to be posted as a reply further up ..

From the Auckland City

From the Auckland City Council Website …..The Auckland Region Housing Market Assessment Report also concluded that even households earning the median household income are being effectively locked out of home ownership.11 This indicates that households which fall within the band of 80% to 120% of the median household income (approx..$72,000), are likely to need some sort of subsidised home ownership (my emphasis).
As the Aussies would say to labour about non subsidised housing around $300,000  – mate your dreaming.
 

For some reason the majority

For some reason the majority of the posts above have degenerated into comparisons between Auckland and anything south. Good to see we are focussed on the issue – not.
This housing statement by Labour is a typical opposition party announcement and has nothing to do with affordable housing. For any opposition party the ends justifies the means, especially by being in opposition they are prevented from the means, so their end is to only to get elected, Thereafter, if they did get elected, they can do what any sitting party does on affordable housing – nothing.
The only good that may come out of this statement is National will now get of its backside and do something real this side of the election.
 

Yes, they have (apart from

Yes, they have (apart from the ancient bash-a-Commie ranter).
 
But it's still a case of most of them missing to point.
 
This is about the inability to underwrite 'wealth', long-term. Wealth is essentially 'the ability to buy bits of the planet', and storing it ahead of purchase in proxy terms, has always been the game.
 
It worked on the way up, but doesn't on the way down, in terms of physical underwrite.
 
So we see the twin drivers - need to bubble-up existing assets, and the need to borrow against a future which increasingly won't be capable of the underwrite. It manufactures the need to deny reality, en route. Be it Climate Change, the Limits to Growth, the impacts of sprawl, land-use competition, degradation, there has to be built-in denial.
 
Which puts Shearer in exactly the same boat as Cunliffe, English, and Turei. Neither Chicago ideology nor socialism outrank physics.
 
Can we do cheap housing? Yes, well under 100k. I've done it.
Can we do the land? Yes, but it will involve the dismantling of BigAg, which will follow the collapse of growth economics, which of course means that all bets will be off at that point......

Not often that i agree with

Not often that i agree with you Phil (and never with waymad, is that a "real" name?) but there are for me two issues, The capital cost, i.e the your stance on the landbankers on the fringe, but also the operating costs, namely the fuel cost which did in the inland empire in the US.
As far as I can see nieither the Nat, Green nor Labour have addressed this problem, The Nats will let the "market decide" (and the market is clearly rorting the situation, from builder, banks insurers and COUNCILS) and the greens and lefties propose a utopia based on state control and shared tranport assets, which is a "we can carry on just as we are as long as you rich pricks give up your BMW's" philosophy..also flawed.
The solution for Auckland lies in a systematic redensification, not platitudinous "smart growth" or endless sprawl

Neven911 - The solution for

Neven911 - The solution for Auckland lies in a systematic densification, not platitudinous "smart growth" or endless sprawl.
Well summarised – I see the issue as removing waste cost from the system, as opposed to value cost. Where the conflict comes in is one person’s waste cost is another person’s revenue eg development levies and land value multipliers caused by restrictive zoning policies. There is a direct correlation between fringe land prices and inner city prices. This correlation applies irrespective of whether a city grows by ‘smart’ growth or less restrictive growth policies. In short, reduce the price of fringe land by having less restrictive zoning and you will also reduce the price of land going back into the inner city. If prices where cheaper in the city then it would be easier for people to choose to live there, they wouldn’t have to drive as far (if at all) to afford to rent or own the house of their choice.
 

Dale Smith - the problem with

Dale Smith - the problem with that is the whole fiscal house-of-cards rests on the 'equity' currently held in the stuff that will reduce in 'value'.
 
Banks need that 'value' to stay, mortgage-payers need to think they're 'winning', a lot of it is collateral, either real or potential.
 
Neven has raised the real question: should 'the market' be left to decide what happens, or should we make some sensible decisions, based on what current knowledge tells us must be ahead, or should we rely forever on finding'something-not-yet-found to keep the system going?
 
The last is mathematically 100% guaranteed to fail at some, never-bigger stage.
 
The first is a bunch of short-sighted lemmings.
 
The real issue is the current cost of servicing, the future ability to continue servicing, and the future ability to repay debt (a social, not physical ramification, that). One of the 'services' is the continued supply of food at current cost, to those in your new stock of housing. Gotta think 100 years......

Powerdownkiwi, Yes this

Powerdownkiwi, Yes this bubble equity is the elephant in the room, and why people can agree that someone, but them, has to change. But we can either chose to let external forces push prices up and down, boom or bust or we could have more individual, local and country determination. To be involved in behaviour that continually creates waste as revenue and value and hence higher house prices is not the way to promote sustainability living and affordable housing.

Sorry but this looks like an

Sorry but this looks like an oxymoron...."we could have more individual, local and country determination"  ie if we do this we wont have "boom or bust"  which simply makes no sense. If nothng else a big part of what has caused the preent "boom and bust" is just that ie "individual"  "involved in behaviour"
"To be involved in behaviour that continually creates waste as revenue and value and hence higher house prices is not the way to promote sustainability living and affordable housing." yes indeed except that the very things you and Hugh are trying to promote are more of the very same.
regards
 

That's right Steven, it’s our

That's right Steven, it’s our present behaviour or lack of that has created this rise in unaffordable housing. Even when prices do bust in NZ, they are still at unaffordable levels. Keep doing the same thing, and as they say, you will continue to get the same results. I'm saying we need to change.
What I am suggesting is to do something that is not being done in NZ, so I cannot see how I can be accused of promoting more of the same.

Neven, the famous "Costs of

Neven, the famous "Costs of Sprawl 2000" paper pointed out that the higher the median price of houses, the further it was worthwhile driving daily to save money on the price of the house. The Real Estate industry calls this "drive to qualify" i.e. for a mortgage.
This is why the "inland empire" in California happened. Houses far too expensive in the growth-constrained existing areas.
Of course when you have non-recourse mortgage laws, the people living in the inland empire just walk out of their homes when the prices crash.
I challenge you to name one single city in the world where they do "systematic redensification", where housing is affordable and commuting times have reduced.
In fact in every such city, housing is grossly unaffordable and commuting times are longer, not shorter, firstly because people are "driving to qualify" and secondly, because of congestion on a neglected road network.
This is "unintended consequences" exactly as always happens when economically ignorant people like Bolsheviks or urban planners run things.

Hey Stan Good Vibes, this

Hey Stan Good Vibes, this site is full of 'obvius spelin misteaks', but you, being the 'piller' of proper grammar over everything, fail to realise that it is the message being transmitted by those participating that counts - if you weren't so 'pendantic' you might realise that being up yourself is not an obvious mistake...it's a character flaw!

A submission to the CCC Draft

A submission to the CCC Draft Annual Plan this year sets out the sequence which Councils so signally fail to understand.
My submission, in summary, is this:
The Council has caused, continues to perpetuate, and remains oblivious to the social, cultural and economic effects of, a new-housing affordability crisis in Christchurch.
What do I wish as an outcome in the DAP?

  1. Full disclosure to new-housing buyers of the total Council impost in their section+house price, including imputed interest at IRD rates from the date of every such impost:  an Itemised Bill;
  2. Disclosure in the DAP of the average totals for DC, Consent fee, and Sundry Levy, by class of section (Residential/Industrial/Commercial/Other)

My submission is best understood if ‘housing affordability’ is decomposed into its several drivers: 

  1. Council housing imposts are funded by householders, and via debt.
  2. Household incomes are low in Christchurch
  3. Section prices in Christchurch are excessive
  4. There are productivity and material-pricing aspects which are NZ-wide

1 - Council housing imposts are funded by householders, and via debt
Council revenues -  ‘contributions’, ‘fees’, and ‘levies’, all of which appear as current revenue streams in the DAP  - in respect of new housing input costs (section, facilities, housing itself), are eventually incurred by the end payer:  a household, and the payment is via debt.
The Revenue which the DAP so blithely contemplates, is Debt for the household concerned.
Debt compounds.
Whenever cost is added in a development cycle, it causes interest to accrue immediately (whether for a credit line, or the opportunity-cost of foregone interest).  The earlier the impost, the greater this compounding.
For the householder who eventually pays for the section and the house, there is already a significant Council component in this sum.  Mike Greer is on record[1] as quoting $75K/section.  But the pain does not end there.  It does not matter whether this $75K is 100% debt-funded by way of mortgage, or paid in cash, because either the interest is paid outright, or in the case of cash funding, an interest income stream is foregone because the bank balance is permanently lower.
Over the life of the mortgage (say, 25-30 years) about as much can be expected to be paid in interest as is repaid in principal.
That $75K Council impost has resulted in a $150K cost to that household.
The Council sees (and plans to Spend) Revenue in its DAP, annual financial performance reports.  But in respect of housing, this long-spent Revenue lives on in the household, for decades, as part of the mortgage or foregone interest income.
I do not believe that the Council recognises this simple, universal equation.

[1] “its development levies - the cost of consents, new roads, sewerage and other services - are still going to be about $75,000 of the cost of a section” – URL:  http://www.stuff.co.nz/the-press/news/christchurch-earthquake-2011/68650...

 
Here endeth the rant - but note that the $75K/section Council impost, comes from a large local housebuilder firm.
 
As HP would say, get the land price wrong, and everything else is wrong.
 
So, just where are the 66,667 sections at $50K each over 10 years gonna come from, for Auckland, again????
 
Because that's what Labour's Grand Ten-Year Plan is gunner need.....

Waymad, something that needs

Waymad, something that needs to be pointed out repeatedly until it sinks in, is that these imposts and supply-constraint premiums that are lumped into the price of new homes, affect the price of the entire real estate market.
So these imposts and supply-constraint premiums also end up the cause of a wealth increase for all existing property owners, at the expense of every first home buyer, who is paying the "premium" regardless of whether they buy a new house or not.
It was always far more moral to just have all ratepayers paying in, in their turn, for infrastructure growth from which the following generation benefited. This moral principle has been flipped on its head - the following generation is paying into a wealth transfer to the preceding one, as well as not getting infrastructure paid for by everybody, as the previous generation did.

Totally agree, PB.    And

Totally agree, PB. 
 
And some of the SFB common taters still haven't twigged to the basic accounting principle of harmonising the life of the debt with the life of the asset when it comes to infrastructure and the financing thereof. 
 
Ya hear rants about 'loading the future generations with the debt of today', but very little about 'why chaps and chapesses, that there sewerage is flowing down pipes laid in by the Drainage Board circa 1902.'
 
Sigh.

It has been described as what

It has been described as what would happen to the second hand car market if petrol tax was instead a one off tax on new cars.
 
Councils should be able to incur debt to fund new infrastructure and then repay that debt over the infrastructures useful life by imposing a property or other type of tax. There is many ways to do this but the Texas Municipal Utility Districts is perhaps the most elegant.
 
All housing consent fees should prohibited. They are a highly ineffiicient form of tax. They completely distort the housing market.  Not only by the huge cost, but the delays in gaining a consent give the property developer monopoly pricing power because they know any competing developers will be so far behind them in offering alternative properties. The Labour parties 10,000 cheap houses a year provided by government does not change this situation.

What a wonderful idea Labour

What a wonderful idea Labour have come up with. Give away a ton of equity to first home buyers at the expense of existing home owners and create another housing bubble when that equity is used to get more debt.
Why KiwiBuild will create more housing problems than it will solve.