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Opinion: National’s focus on housing affordability in RMA reforms is welcome
February 3rd, 2010
By Hugh Pavletich
The 2010 6th Edition Demographia International Housing Affordability Survey was released January 25, 2010, generating significant international media coverage, including a report on the Demographia Survey by the highly regarded Mish’s Global Economic Trend Analysis.
This Annual Demographia Survey covers the 272 major urban markets of the United Kingdom (33 urban markets), United States (175), Canada (28), Australia (23), the Republic of Ireland (5) and New Zealand (8).
For urban markets to rate as affordable, housing should not cost any more than 3 times annual household income.
On a country basis of the major urban markets surveyed, the United States was the most affordable with a Median Multiple of 2.9, Canada and Ireland both 3.7, United Kingdom 5.1, New Zealand 5.7 and Australia experiencing the most intense housing stress at 6.8 times annual household earnings.
With respect to the 8 New Zealand major urban areas surveyed, Palmerston North at 4.6 with Napier – Hastings and Hamilton at 5.0 times annual household earnings were the least stressed markets. Dunedin and Wellington followed with 5.6 and 5.8 respectively. The most stressed markets were Christchurch at 6.1, Auckland at 6.7 and Tauranga 6.8 times annual household earnings.
New Zealand has much work to do in progressively restoring housing affordability to historic levels, where households do not have to spend any more than 3 times their annual household income to house themselves. And importantly – not load themselves up with in excess of around 2.5 times their annual income with mortgage debt.
In broad terms, the suggestions on what is required are covered within this year’s Annual Demographia Survey refer “Restoring Housing Affordability) and on the writer’s website.
The New Zealand National led Coalition Government is well aware of this. The focus must be on much improved performance within the local government sector.
Since assuming office November 2008, there have been a series of announcements (for access to major Ministerial Statements go to Performance Urban Planning) by the key Ministers involved, being Housing Minister Phil Heatley; Infrastructure Minister Bill English with Associate Steven Joyce and Environment Minister Dr Nick Smith.
Building And Construction Minister Maurice Williamson is playing a major role as well, in endeavouring to improve performance within the building sector and streamlining the regulatory processes. Local Government Minister Rodney Hide has been preoccupied through 2009 with Auckland issues. This year however, it is anticipated his focus will be on working with Local Government to significantly lift performance.
Three days after the release of the Demographia Survey, the Minister for the Environment Dr Nick Smith issued a statement - New work underway on Phase II of RMA reforms – stating –
“There are major question marks over the way the Resource Management Act is working in urban areas,” Dr Smith said. “I don’t think we have the incentives right for developers to do the best urban design in our largest cities. There are also questions about the policy of metropolitan urban limits, the effect they have on section prices and the negative flow on effects to the broader economy. Nor do we have a good track record of having the right infrastructure in place at the right time for supporting urban development.”
In seeking outside advice on these issues, the Minister has set up two Technical Advisory Groups (TAG’s), with the Urban Group chaired by Alan Dormer to report back by 31 March and the Infrastructure Group chaired by Mike Foster to report back by 30 June. See the interest.co.nz report on this from January 28.
The core issues within the Terms of Reference for the Urban TAG are –
The scope of the review will look (at) the merits of tools currently available for implementing urban planning and design including:
(1) housing affordability / section (lot) pricing mechanisms
(2) urban design panels
(3) metropolitan urban limits
(4) financing and funding mechanisms for infrastructure
(5) spatial and structure plans
The ‘lead in” to these points is rather unfortunate, as it is old style Town and Country Planning Act language, and clearly does not reflect the enabling and environmental effects based intent of the 19 year old Resource Management Act. Further to this, including Town and Country Planning style “urban design panels” and “spatial and structure plans” in to the TOR mix is an unnecessary and damaging distraction. Remarkable too – when one considers that the reporting date for this Group is 31 March.
Dr Smith is to be commended for including within the TOR (1) housing affordability (3) metropolitan urban limits and (4) financing mechanisms for infrastructure. This is a big ask of a group of professionals with no practical development experience, without imposing on them “aesthetic issues”, where they may or may not have any expertise.
The Government must be clear that the days of old style “playtime planning” (The Crisis of Academic Urban Planning | Newgeography.com) are over and that the name of the game now is “performance planning”. Indeed, they should have been “over” back in 1991 when the RMA came in to force. Good planning essentially is a task carried out by those with the appropriate technical skills, that is forward looking, with the capacity to focus on the timely provision of infrastructure.
If I haven’t made myself clear – we need engineers, not evangelists.
We must not revert back to the failed old style Town and Country Planning approach and have to endure any more of the “sun rises in the west” research underpinning this nonsense.
There is nothing more irritating to a property owner or development practitioner, than having to endure the aesthetic musings of a council employee or a politically favoured architect, with the power to withhold consents, unless their (often costly,undesirable and silly) “whims” are incorporated within development’s.
With the “leaky homes” fiasco to deal with, the public is in no mood for urban design advice.
While Local Government appears very keen to spend ratepayers’ money on “design advice” (another aspect of “playtime planning” to expand the bureaucracies), it seems this sector have no funds available to meet their civic obligations to leaky home owners. The Minister of Building and Construction issued a release just prior to Christmas - Government Assistance for Leaky Home Owners stating –
“I had hoped the package would include a contribution from the territorial local authorities, but they have advised me today that this is not possible. While this is disappointing, the government believes that local authorities have a key role to play, and that the door remains open for them to be part of the solution.”
“Our priority is to bring together a package that helps people fix their homes, the government understands the frustration of leaky home owners who have waited ten years or more for assistance – the majority of those affected have found it impossible to access finance to make repairs.”
At the same time, the Minister released a statement, Review reinforces Government action on weathertightness, with the PriceWaterhouseCoopers report attached, stating that between 22,000 to 89,000 homes are affected. The Government also accepted PWC’s consensus figure of 42,000 homes affected and that the costs are likely to be around $11.3 billion in 2008 dollars.
Indeed, it would appear the Government already recognizes the significance of the need for clarity with respect to regulatory responsibilities, with the recent announcement by the Minister for Arts, Culture and Heritage Christopher Finlayson, Historic Places Trust review announced, where he states –
“Separating the local advocacy interests of branch committees from the regulatory functions of the Trust along the lines of the British model means better outcomes for both,” Mr Finlayson said “For example, local activists will not be constrained by having to work within the priority setting framework of a Crown entity.”
During the previous term of the National Government, the writer had dealings with Nick Smith when he was Minister of Conservation and responsible for Heritage as well. There was a clear need at that stage for a “culture change” within the Historic Places Trust, to restore sound and sensible regulatory administrative disciplines. It was an impressive performance in political management.
These same political management skills will be required of Ministers Smith, English, Heatley, Hide, and Williamson working as a cohesive team, with local government and the wider community. As citizens, we have a responsibility to play our part too.
The country cannot afford to be put through a replay of the political management failures of the previous National Government, following the enactment of the Resource Management Act back in 1991.
* Hugh Pavletich runs Performance Urban Planning
Tags: Hugh Pavletich, National, Nick Smith, Resource Management Act, RMA, Urban limits
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February 3rd, 2010 at 10:13 am
Indeed the RMA does need reforming… It is not onerous enough on urban sprawl development!
Housing affordability would be more effectively addressed, by addressing the issues of Population growth and Credit growth.
If it’s too expensive for ya in Auckland… Move to Mataura… and make your own Lattés.
February 3rd, 2010 at 10:25 am
An excellent contribution Hugh keep up the good work.
February 3rd, 2010 at 10:29 am
@Hugh – “There is nothing more irritating to a property owner or development practitioner, than having to endure the aesthetic musings of a council employee or a politically favoured architect, with the power to withhold consents, unless their (often costly,undesirable and silly) “whims” are incorporated within development’s.”
Actually there is nothing more irritating than watch some piece of Architectural Shite that’s totally out of step with the Democratically arrived at Community Plan get built next door…
Councils serve their Ratepayers… Developers serve themselves.
February 3rd, 2010 at 10:37 am
One thing is for sure! Councils need to be reigned in on their application and compliance costs which are well into 5 figure sums for most new builds. Just crazy. They are just like greedy little monopoly corporations now.
February 3rd, 2010 at 11:02 am
I love it how it has nothing to do with the Environment….heavens forbid that planning has anything to do with that. Good to see that they left that off the list for the TAG as I would hate to see them have to consider the Environment.
Tower buildings in estate complexes…..that worked overseas…..lets do it!!!
I must say that I do find this a bit hard to stomach.
Once again, it must be about growth….why must we grow? Sure improve the lot of the current population but why add to the population when you can not look after the current lot? If there is no more demand for new lots, then the cost of the existing will be sorted. Problem is business need more cheap slave labour to make them lots of money, so they have to import them.
RMA needs to change, but I my opinion not in the way that people believe.
February 3rd, 2010 at 11:13 am
The council want to charge me $1200 fee for moving my kitchen sink from one side to the other side of the wall. yep 1200 of my hard eraned cash! I asked if they can break the cost down – their anwer “Sorry we can’t”. Go figure why our houses are so expensive.
February 3rd, 2010 at 11:20 am
“why must we grow? Sure improve the lot of the current population but why add to the population when you can not look after the current lot? ”
Review how a ponzi scheme works and you’l have your answer….
February 3rd, 2010 at 11:39 am
# gingerbreadman Says:
February 3rd, 2010 at 11:13 am
The council want to charge me $1200 fee for moving my kitchen sink from one side to the other side of the wall. yep 1200 of my hard eraned cash! I asked if they can break the cost down – their anwer “Sorry we can’t”. Go figure why our houses are so expensive.
I’m hearing you! bloody ridiculous! you buy the property and THEY tell you what you can do with it, all of it. Why did kiwis let this happen?
February 3rd, 2010 at 11:43 am
Sarah Says:
February 3rd, 2010 at 11:20 am
“why must we grow?
Ponzi scheme is right, Because we borrow and borrow we must then increase the taxpayer base ie( our children & grandchildren) to pay for it. They won’t have a chance in hell! It’s come to a head though Sarah. The funds are running out and the ‘create money from nothing’ plan is fast losing credibility.
February 3rd, 2010 at 11:45 am
I guess becuse we were stupid enough to elect the buggers… As for my kitchen, I found out that council has no plans on our house in their filing system!
February 3rd, 2010 at 11:50 am
@ gingerbreadman / Justice
“$1200 fee for moving my kitchen sink”
Are they doing the job for you then?
Digging a drain?
February 3rd, 2010 at 11:54 am
Fat chance. $1200 just to shuff bit of papers around.. And if anything goes wrong I suppose the response would be “it’s not our fault!”
February 3rd, 2010 at 12:00 pm
@gingerbreadman
Is this a ‘minimum charge’ for any ‘permitted’ alteration?
Sounds ludicrous.
I’d have just moved the thing without thinking about it!
February 3rd, 2010 at 12:13 pm
KW John: I guess so, the figure they gave me was at the bottom row on their charge schedules. Naturally, as soon as I found out that council has no plans on our house………happily ever after
February 3rd, 2010 at 12:22 pm
@gingerbreadman
Had similar situation re: plans/ permits not existing.
Its worth finding out when purchasing.
Curious/sad how the absence of permits/ plans can be beneficial.
Hopefully I can be happy too!
February 3rd, 2010 at 12:29 pm
GBMan, as I noted back in the day, a whole lotta construction can be classed as Repairs and Maintenance, especially when as-built plans are not available to the Regulatory Drones. Cash is king, and under-the counter rules. Really, this is just the normal human response to stoopid planners or Gummints – buy ‘em off or just ignore them on the grounds that ‘the hills are high and the Emperor is far away’. Take care to ensure that the sink looks as though it’s been there for about the age of the house or the most recent reno, tho’.
And Hugh, good article. The negative value-add of the RMA, regulation in general (fencing of sites, scaffolding, certification of electrical tools, the list is endless) and assorted planning/funding shenanigans is by my reckoning around 10-15% of total costs. Hasn’t saved one life, or improved urban streetscapes one iota, either.
And fer the rest of the Greenish types, try reading Stewart Brand’s latest epistle (y’know, the Whole earth catalog bloke). Might stem the tide of those lazy cliches like ‘urban sprawl’…..
February 3rd, 2010 at 12:42 pm
Justice/Sarah – that is the point……why to we allow this form of buying things on credit and trying to find a way of paying for it later. Therefore why do we allow growth? Why do we not address the problem, not just find a sticking plaster to make it go away for a few years? Why must we live beyond our means? Oh that’s right, the BB’s will want their pensions and their healthcare……..and their houses, or atleast the right to subdivide their property so they can make more money to keep them in the manner to which they have become acustomed.
As for the $1200 – Sounds like the Council needs to ensure that you get a consent as once upon a time someone complained to the council/government/ombudsman that their house was rotting/leaking/dangerous/unhealthy and that why isn’t the Council doing something about it. Then…..once enough people were upset about some dodgey workmenship they wrote a law saying exactly how something it to be done as the worker could not be trusted and that they needed a regulator to check on them. Unfortunately the cost of the regulator was $1200, then people complained that the regulator was too expensive and that we should trust the builder/plumber…….then they were upset that they were not regulated….so they complained so they wrote another rule and that does 1500 to implement….etc etc…get the drift?
February 3rd, 2010 at 12:47 pm
Interesting blog Waymad.
I’m still learning how it all hangs together.
An analogy:
A plumber friend once installed a heating boiler for me – questioning why, as he went, the designers of this otherwise superb piece of engineering hadn’t, in final testing, invited a dozen installers along to do actual installations.
A lot of time/ money/stress could have been avoided.
February 3rd, 2010 at 1:15 pm
Hugh has taken another red pill…
February 3rd, 2010 at 2:04 pm
Mouse:
“…..Democratically arrived at Community Plan…..”
Yeah, Right. A few bureaucrats who have been granted totalitarian powers by stupid politicians, indulging ideological whims on the pretext of ideologically predetermined “research”, backed up by vested interests that are nothing to do with the ideology but who are quite happy with the “unholy alliance” that results.
February 3rd, 2010 at 2:08 pm
Hayek in “The Road to Serfdom”, has a chapter on “Planning and Democracy”, in which he points out that “Planners” who have been granted wide powers in a Democracy due to ignorance, apathy, and the multitude of issues that voters need to consider when electing politicians; frequently end up imposing less democratic decisions on the people than what might occur under a straight-out dictatorship.
February 3rd, 2010 at 2:25 pm
Come on gingerbreadman, tell us all which thieving council wants $1200 to let you shift your kitchen sink. We all enjoy a good laugh.
February 3rd, 2010 at 2:37 pm
@ Phil Best – a Fantastic description of the Act/National Auckland Super City debacle…
Well done!… infact
IMO describes Hugh’s Crusade here rather aptly.
February 3rd, 2010 at 2:56 pm
Auckland City – you guessed it!
February 3rd, 2010 at 3:08 pm
And you know what – I found out much later that under the schdule 1 of the new 2008 Building Acts. I didn’t need to get permit to do this type of work and the lad at council still advised me to get one !!! And we are trying to clamp down on gangs
February 3rd, 2010 at 3:38 pm
Only kiwis could look at their beautiful country and say “this is overpriced”. Frankly, when I go overseas I can’t wait to get home.
Property value = real value in my opinion.
Tell me where else NZ$400,000 can get me this lifestyle in the world. The market determines value; not the government.
And don’t blame the banks – I’m not talking about bank notes. I’m talking VALUE, which yes, must often be expressed in notes.
February 3rd, 2010 at 3:51 pm
Well that was a load of drivel….what else have you in store for us John S?
February 3rd, 2010 at 4:14 pm
Tell me where else NZ$400,000 can get me this lifestyle in the world. The market determines value; not the government.
Only kiwis could look at their beautiful country and say “this is overpriced”.
$NZ 400k sounds cheap, but then look at the average kiwi wage. Abysmal. That is why it is overpriced.
Ok if you got in when it was 200k though.
February 3rd, 2010 at 4:48 pm
Andy M….
“$NZ 400k sounds cheap, but then look at the average kiwi wage. Abysmal. That is why it is overpriced.”
Personally I think we may actually be, for once, slightly ahead of the pack with our ‘low wages’ i.e they may actually be a good idea. Bit controversial maybe.
Where low wages fail, is if everything else is priced too highly.
We can’t do much about things we have/want to import, but we can/should be able to sort our own domestic market out.
Guess what comes next….
February 3rd, 2010 at 6:28 pm
“There is nothing more irritating to a property owner or development practitioner, than having to endure the aesthetic musings of a council employee or a politically favoured architect, with the power to withhold consents, unless their (often costly,undesirable and silly) “whims” are incorporated within development’s.”
I agree to a point, hoiwever I also disagree.
I agree in that as an architect I do often find some of Council’s requests are based on personal whims, and are not cognisant of economic and functional realities.
However I think we unfortunately need to tolerate such experiences because quite clearly a laissez faire apporach to urban planning has failed our cities.
Hugh, have you actually walked down Nelson Street in Auckland City? and been bombarded with block after block of dire stalinesque apartment blocks?
These are the product of an era in Auckland urban planning where no authorisation was given to address building aesthetics.
February 3rd, 2010 at 8:00 pm
“$NZ 400k sounds cheap, but then look at the average kiwi wage. Abysmal. That is why it is overpriced.”
BINGO! KW
February 3rd, 2010 at 8:08 pm
Paul, I don’t know why other than everyone has an expectation of ‘progress’ and what that is. Councils and so forth love spending other peoples money but how much spending you think they would do if the costs were tied to their wages? ie. the more of the public/ratepayers money they spend, the LESS wages they then get. This should be implemented.
Work out the annual ratepayer contribution and equal that amount (in percentage terms) to their council wages. If say 25% of the ratepayer contribution is left at the end of the budgetted year they get a 25% bonus, BUT if they spend 25% more than the annual ratepayer intake they get a 50% reduction in wages!
Like that?
February 3rd, 2010 at 8:56 pm
Johns S
You wrote “…Tell me where else NZ$400,000 can get me this lifestyle in the world. The market determines value; not the government….”
Give me a break. Did you forget about the wage levels in different countries when you mentioned about lifestyle in the world? Give me a break.
February 3rd, 2010 at 9:27 pm
Matt in Auck – you bring up a very important point regarding aesthetics and design standards.
Within the article – I touched on the serious leaky homes issue. Clearly – this was a massive regulatory failure, where in essense the guys at Local Government level couldnt get the basics right. Worse still, they are not prepared to meet their financial obligations to the victims, but, surprise, surprise, seem to have the financial capacity to engage in “design advice”.
The callousness of this simply astounds me. Peoples lives have been wrecked and their financial security wiped, simply because they trusted the Compliance Certificates issued by Local Authorities.
May I suggest with respect you think therough this very carefully.
All the public wants from the Land Use Regulatory Authorities are reasoned and reasonable environmental and building standards to work to. Once you bring “subjectivity” in to it, where civil servants are allowed discretions, the whole process becomes corrupted.
These “servants of the public” can get very swollen heads if they are given “subjective discretions”. i remember a guy at the Christchurch City Council telling me one time, just how easy it was and how much fun he was having pushing people around. We sort of laughed about it (he knew NOT to do this to me) – but we were just talking about some of the bubble bunny developers and their consultants.
This problem then degrades the whole culture and performance of the development / construction industry, where the good people get out. This is the major reason why so many developers have gone to the wall these past few years – putting most of the finance companies under as well.
So if people havent got smacked with a leaky home – they have probably lost their life savings with the finance companies going down. indeed there are good numbers who have got whacked with both.
We need a solid and sound regulatory environment to allow far better development and construction performance. There is nothing better than good solid competition to keep everyone honest in my view. If we dont get the first right – the second cant happen.
Best regards,
Hugh Pavletich
February 3rd, 2010 at 9:49 pm
John S : The team appear not to like positivism around here . It is Ground-Hog day , and the gang are seeing shadows every-which-way . But your point is well made , that after a sojourn abroad , it is grand to get back home .
The thread is that currently , Kiwi houses are at a rich multiple , compared to average incomes . We are second or third most overvalued for houses , in the known world . And for those who prefer to sleep without the rain wetting them through , that expensiveness seems to be an issue .
February 3rd, 2010 at 10:01 pm
@Hugh, and everyone else of course.
“Kainga Whenua under which Kiwibank will lend up to 100% of the costs to build or relocate a house”
http://www.scoop.co.nz/stories/BU1002/S00080.htm
I have already professed my ignorance on all matters, so don’t murder me if I still misunderstand…..
Does this effectively mean that the land costs are low/non-existent.
If so, I seriously ask you to consider whether or not the idea of state rented land – at a nominal and properly regulated (I always assume this) rate, could be made available for home building.
One good dismissal will shut me up on this……go on. I prepare to yield!!!!
February 3rd, 2010 at 10:13 pm
No banks will offer loans on construction of houses , on these multiple owner pieces of land . The Gov’t initiative allows development to proceed . Rather than a hand-out , it is assistance to by-pass commercial bankers rules .
February 3rd, 2010 at 11:07 pm
Justice…….lol….. I do not think I would like to see the Council workers here getting paid bonuses……it will end you like other “incentive based” industries, look at finance…..well the guy made millions on his well thought out [lucky] trades and therefore should be paid millions. It seems hard enough to get anyone of any real substance to work in local government at a political level let alone as paid staff. They just leave in their droves once they have experience to rape the system from the outside. Even noticed how many ads there are out there for local government work? Why are people not wanting to take the “cushy” option these days with security and all these perks? I fear it is because that have to deal with @#$%%^er’s like us and there is only so much that a person can take.
So then to say that if they spend less, yet their phone rings and they read their local paper with people saying that they are not spending enough to give them all the things that they are “entitled” to because they pay their rates etc etc blah blah, is not going to increase the stress and make those staff want to stick around? Sorry but I just can not see it working.
February 3rd, 2010 at 11:17 pm
Thanks RT,
At the risk of digging myself in deeper…..
I was trying to suggest that there is no land cost associated with this housing. It is already owned…. Again I wobble in ignorance.
I was trying (poorly or wrongly) to extend this to the idea of the taxpayer/govt leasing land for home building and removing the initial land cost
Its the idea of the “taxpayer/govt leasing land for home building and removing the initial land cost” that I was considering.
Thanks, I should have said:
“Is it a completely ridiculous to propose that the taxpayer/govt could lease rather than sell land for the purposes of residental home building”
Oh sod – that looks even worse, help me, I’m drowning…..
February 4th, 2010 at 8:42 am
KW John : Clearly you were not Council trained . Their shovels come with an instruction book . Somewhere on page 13 it says , to stop hole getting bigger , tell the junior to cease using the shovel . Then the other 6 of you ( supervisors ) can go home . …….
….. . Drowning is mentioned further on , when the junior breaks through the town’s water-supply pipe-line ( which the 6 supervisors were supposed to prevent ) , quickly reclaim shovel , then flee ………….
February 4th, 2010 at 10:17 am
@RT
They told me to take a ’sicky’ today. Something about digging too fast in the sun.
They knew best, though I sort of hoped they like how much dirt I moved.
Turns out the hole was in the wrong place anyway…
Good thing happened though. They thought I might one day make supervisor, just got to slow down and understand the way things work.
I’ve also been working on a secret design – a shovel with two heads…….