NZ Initiative's Jason Krupp says there is clear hypocrisy when someone who resists urban change in their suburb bemoans the fact that their children cannot get on the property ladder

NZ Initiative's Jason Krupp says there is clear hypocrisy when someone who resists urban change in their suburb bemoans the fact that their children cannot get on the property ladder

By Jason Krupp*

Do older Australians hate younger Australians?

This is a question that some were left pondering after attending a recent presentation by John Daley of the Grattan Institute on the urbanisation challenge facing Australian cities. Even more concerning, given the similarities between Australia and New Zealand, is whether younger Kiwi generations are also despised by their seniors.

This was of course not the explicit message that Daley conveyed to the audience attending the NZIER’s annual meeting, but it is hard not to reach this conclusion when looking at the research he presented. At the core of Daley’s argument is the fact that developed world economies are increasingly being dominated by the service sector as manufacturing moves offshore.

Even in Australia, where mining makes up a significant chunk of the country’s exports, the services employ about 70% of the workforce.

These services cluster in big cities where the rewards from proximity to other firms is greatest, particularly around the CBD. Grattan research showed that between 2006 and 2011, close to 60% of new job creation in Australia’s five biggest cities took place within 10km of the city centre. Those Australians living close to the CBD were rewarded with the greatest access to jobs, and were more likely to be better educated and receive a higher salary.

The problem in Australia, according to Daley, is that most young people looking for work in the CBD-concentrated service sector cannot afford to live there as there is simply not enough housing, particularly of the medium density sort. High prices force many younger people to look to the urban fringe for more housing affordable housing, but this has put them further away from the job market.

Grattan data shows that more than half of net population growth in the Australia’s five biggest cities between 2006 and 2011 happened over 20km from the CDB, even though only 25% of job creation took place there over the same period. Those who lived in these areas were faced with a long commute into the CBD, which had a material impact on their cost of living, increased pressure on family life and lowered their well-being.

Daley shared the anecdote of a medical technician quitting her job because the difficulties of meeting family obligations where she lived and holding down a job in the inner city were too great.

But if younger generations are the losers, then Australia’s older generations, who saw their net wealth increase substantially in the eight years ending 2012 as a result of investments in property and savings, are the winners. Not only that, but populist policies have resulted in the net cost of older households (65+) to government increasing substantially in recent years, which has to be paid for by the young through higher taxes.

This amounts to a massive wealth transfer from the young to the old, such that a younger generation is now emerging in Australia that will have less wealth than their parents, even though they save close to 10% of their income. Daley laid the blame for this wealth divide not at the feet of planners, who he said were well aware of the problem, but with the people who were benefitting from these wealth transfers: the older generations.

Constructing medium density housing in the inner city may be good for young Australians, but not so for the person who perceives that the development will have a negative impact on the value of their standalone house. This under-recognised negative externality, Daley said, is what fuels Nimby-ism (Not in My Back Yard), and drags on urban development in a millstone- like fashion.

The presentation was fascinating, but unfortunately Daley was not in New Zealand to pose solutions, but rather to invite suggestions how to fix the slow motion car crash playing out in Australia’s biggest cities. It is a problem many New Zealanders have a stake in, as it is not hard to see the same trend playing out here, particularly in Auckland. These policy solutions have yet to emerge, although work is being done on it by many of the country’s leading economic research institutes, including The New Zealand Initiative.

Nevertheless, the broad direction of the fix is evident. Firstly, mechanisms to pay off the losers from inner city development are needed. This cannot be done where legislation like the Resource Management Act allows anyone to object to a development, even when they are not directly impacted by it.

The government also needs to develop urban policies that recognise that cities are not museums but concrete organisms meant to flex and change over time. Laws that protect amenities like the green leafy character of inner city suburbs will only make the affordability problem worse, not better. Equally, as economist Edward Glaeser has shown, policies that ring fence cities from growing out in the hopes that this will fix the problem are likely to have the same effect.

Finally, and most importantly, it is the people who live in these cities that need to take responsibility for the problem. There is clear hypocrisy when someone who resists urban change in their suburb bemoans the fact that their children cannot get on the property ladder, and this needs to be exposed.

It is overstating the case that older generations in Australia (and New Zealand) do not hate the young. Everyone is someone else’s son or daughter. But if the wealth transfers from young to old that leave younger generations worse off are not addressed, it is likely that the resentment may begin to flow the other way. 

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*Jason Krupp is a Research Fellow at The New Zealand Initiative, which provides a weekly column for interest.co.nz.

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"NZ Institute's Jason Krupp says there is clear hypocrisy when someone who resists urban change in their suburb bemoans the fact that their children cannot get on the property ladder"
You don't suppose they are totally different people, do you?

In my experience, very often they are the same!

Yes David, but affordability and sensible development (ie protecting character and amenity) are not mutually exclusive.

Only in a society where there is rapid population growth without any growth in real incomes is this a problem, as it inflates house prices while not giving the employment and income opportunities for the next generation to be able to purchase homes.

So instead of being hypocrites, these "moaners" are actually luminaries - showing us that our current growth mantra (by all means including airline arrivals) is not only unsustainable but detrimental to the well being of our future generations.

I have to ask DC, has such rampant growth in house value made you significantly wealthier?? (I mean you own your own home and the value of that is largely irrelevant to your actual wealth, but has high prices actually made your day to day income higher?)

For me, high prices have made me wealthy on paper, but in reality on the properties I hold, the high value does not boost the income, so it is of little benefit to me, unless I cashed in, which I could, and move to Bermuda (which I think DC would like?).

Rising Auckland property values despite being only "paper gains" allow you to leverage your Auckland property to purchase positively geared Hamilton / Tauranga properties that add to your disposable income.
The cumulative rise in values from all those properties plus the extra disposable income lets you buy more Auckland property ( Negatively geared ).
Eventually you sell some keep the rest and have a nice, reasonably constant income stream while you pursue your passions.

Emphasis on the word "rising". Of course you can guarantee that to always happen. There is evidence foreign buyers are not so evident in the Auckland market these days. The fact that they have to register with the IRD might have a lot to do with it. Let's see what happens in the next few months.

Its not going to be a ladder for much longer.
So it may be a good thing that the young can't afford property at the moment.
Some parents "help out" by lending/ gifting some money but this just makes it worse..

The same hypocrisy is used by the over 65's working and then complaining their grandchildren can't get jobs.Go figure.

You are tarring-and-feathering all 65's throughout New Zealand when most people in areas outside of Auckland can rightly complain but haven't enjoyed the same munificence

Firstly, mechanisms to pay off the losers from inner city development are needed. This cannot be done where legislation like the Resource Management Act allows anyone to object to a development, even when they are not directly impacted by it.

In case Jason is reading this: I wonder who he proposes would pay "losers" the compensation. This kind of "takings" regime is fraught with difficulty - so very interested in your further ideas.

And the second sentence is a bit misleading. It is important to note that many developments are processed under limited notification whereby only those directly affected can participate (submit) in respect of the decision-making process. Any development which is publicly notified (submission open to all) will have one or more aspects of it which are non-complying under planning rules - and one would hope that planners/plans use non-complying sparingly and for good reason.

careful

In response to a successful claim in the high court opposing a new mine development

The Australian Govt is introducing legislation to prevent anyone from opposing any development where they don't have standing - a direct interest - labelling them vigilantes and saboteurs and terrorists
http://www.theguardian.com/environment/2015/aug/18/coalition-to-remove-g...

The government has labelled such challenges as "legal sabotage" and "lawfare".
http://www.theaustralian.com.au/news/latest-news/environmental-law-shake...

While you were not looking

"The NZ Initiative must be new owners of interest.co.nz"

We are getting more and more of their propoganda - has to be a reason for their dominance

It changed when the very neutral BH (though the Rabid Right may disagree) was replaced by the right leaning DC (no friend of the Loonie Left) who all too often participates in the discussion despite pretending to be the editor.

While I agree somewhat on the swing to the right, good debate is good debate and DC's comments tests and adds more to the discussion than many IMHO.

Yes a bit of a concern, if I wanted far right wing drivel, well I'd go read NBR, or whaleoil

XD

Laws that protect amenities like the green leafy character of inner city suburbs will only make the affordability problem worse, not better.

Tell that to the inhabitants of Milan who always extolled the virtues of London's numerous green open spaces during my business trips to Italy.

and most importantly, it is the people who live in these cities that need to take responsibility for the problem.

http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11392187

As Len says Auckland's been under investing in transport since the days of Robbie.
and Aucklanders are quite use to half baked infrastructure projects (pointing to the bridge prior to the clip-on, he does).

so its all business as usual....

Auckland works on a just-in-time principle - as in just-in-time to meet yesterday's need - the harbour-bridge being a classic example - they built it and within 4 years found it inadequate - resulting in the clip-ons - compare that to the Sydney Harbour bridge built in 1932 took 50 years to reach capacity and planning for the under-harbour tunnel began - now built

This doesn't seem specific to Auckland. This is part of kiwi culture, "she'll be right", everything done on the cheap.

Spaces that were under stress 20 years ago when I lived there, and one of the reasons I came here. I may not earn as much but I have free time and a quality of life.

The same people who bitch & moan about a couple hundred bucks in rate rises when their property increased in value by $100k in the last year.

These people are increasingly out-of-touch with their kid's generation. It's almost beyond a joke.

Baby boomers, for the most part, live in a completely different universe.

Colbert said it best.

If anything, the most hypocritical are the ones who whine about the RMA obstructing progress... only to use it when it suits them. It's the housing equivalent of Foodstuffs and Progressive Enterprises obstructing each other's developments for financial gain.

Rinse and repeat with wind farms etc etc. everybody wants everything as long as the problems of providing such are else where out of sight.

Liked this article encapsulating the hypocrisy. She made $175,000 + in three years tax free but complains about the other buyers/sellers affecting the FHB.
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=1150...

While I can agree with the jobs/economic statements there is such a thing as quality of life. The problem is the inner space is finite so sure lets build on every bit of green today but at some stage there is no more and you have created a rat hole. So the Q is not how to intensify ppl but how to disperse the jobs IMHO.

Or better yet, how to live, thrive and enjoy a life without thinking you have to keep cramming more and more people in. All more people mean is more and more restrictions on your life, try to turn that into a positive as I see none

Well watching ppl split their section build and second house and then sell both it seems to be a case of crap in one spot and move to another "better" one.

I agree, I think economists and pollies have the wrong metric is isnt GDP that is important but GDP per capita. More ppl might improve GDP but when you have finite resources, no you just consume them faster and there is less to go around. The problem is one of vested interest, for the ppl making a % per transaction, in their case the more ppl the more transactions the more profit for them, in a way parasitic.

Good article Jason : )