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David Hargreaves ponders why a housing obsessed nation like New Zealand keeps electing governments that don't know how to handle housing issues

David Hargreaves ponders why a housing obsessed nation like New Zealand keeps electing governments that don't know how to handle housing issues

By David Hargreaves

So, what is it with housing?

New Zealanders like to own it. And they like to talk about it - a lot.

A fair few New Zealanders seem to know quite a lot about housing and what the various issues and complexities are.

And yet we keep ending up with governments that make a pig's ear of this subject, a subject that so many kiwis hold so dear.You would think we would do better, wouldn't you?

The previous National-led Government spent nine years flipping and flopping housing policies, alternating between trying to pretend we didn't have shortages of houses and then trying to do something about it.

Finally in the closing stages of that government they produced something that was either a master stroke or a declaration of their own impotence - they got rid of the Housing Minister title!

Remember that? A Government that was presiding over what a lot of people were calling a housing crisis without anybody officially designated with the job of handling said crisis!

Imagine if we went into a huge recession and decided we weren't going to have a Finance Minister any more? Well, you wouldn't would you. Although perhaps that could be the next masterstroke for the next recession!

So, anyway, National exits, stage right, in 2017 - and enter the Labour-led Government, with, aha, not just a Housing Minister, but a Housing and Urban Development Minister, Phil, suited and booted, 'we can fix this'...'KiwiBuild needed now' Twyford.

There's been plenty said about the Great Reset this week, so, I'll keep my comments brief on it.

I will just pose the question of whether any policy has ever crashed and burned as badly as this one. I still don't think it was given a fair enough chance. But you have got to say that the ineptitude with which the policy appears to have been driven would get a 10 out of 10 on the ineptitude scale. Rather than fix the ineptitude and have another go the Government has bailed.

And secondly, to those who have suggested that in terms of the housing portfolio, KiwiBuild was just an unwelcome distraction, well, yeah, I know what they mean in the sense it was just one part of a policy mix.

A distraction that helped form a government

But it was an 'unwelcome distraction' that for sure helped Labour get into government. It was overhyped in the election build up and at least some people must have voted for Labour on the strength of it. And I think we the people are entitled to slap any government around a little if they totally mess up and backtrack on a policy that was a flagship for them - however badly such a policy might have unravelled for them.

And governments do have a duty - I think - to give policies on which they were elected a fair crack. Don't just toss them in the bin and move on and pretend you never had the policy. It's treating the voters with contempt, I think.

As an example, I gather there was some chap with weird hair who had a go at making himself American President based around some fruitloop idea of building a big wall. Ha! Word is the guy's still talking about getting it done, because even he it seems realises it's important to try to at least been seen as doing what you said you would. However nutty it might be.

So, Labour should not easily be forgiven for giving up on KiwiBuild before it had been given a proper chance and for now quietly dropping the KiwiBuild name in favour of the rather clinical sounding Government Build Programme. (Yes, granted they haven't officially dropped the KiwiBuild name, but don't worry - they will. Just as soon as they think we are not watching any more.)

A rush job

It was clear to me from reading the package of materials for the Great Reset that the plan we were presented with, and which we have waited nine months for, has clearly not been put together across a nine month period. 

It is clear enough because the package we've been presented with looks like something that's been put together in a huge rush and has ideas that have not even been properly formed.

This suggests there's been a pretty fair degree of disagreement within the Government as to what to do. 

So, I come back to my earlier point: Why do NZ governments seemingly find housing so difficult to tackle as an issue when its something that just about all Kiwis know something about.

Is that one of the problems?

Are there too many conflicting views brought to bear?

We deserve better

Because everybody thinks they know a bit about housing, do we end up with governments that in this specific area don't draw enough on the industry expertise that is available?

It really is time we had a government in this country with a coherent and logical housing strategy. And we should be capable of producing such a government.

This Government has one chance to mildly redeem itself in the housing area. If it can genuinely make some progress on things such as reviewing the dreaded Resource Management Act, freeing up some planning constraints, finding convincing ways of handling who pays for infrastructure in new developments, ways of making building materials more affordable and other such inhibitions then it will not have been a complete dead loss.

But, you know, the election is now just around the corner. And it's looking like the Government will have been able to make very little headway with those bigger structural issues just mentioned.

Meanwhile the house building programme, the Government Build Programme (for goodness sake don't mention KiwiBuild), looks set to descend into the kind of ad hocery the previous National Government specialised in.

Low scores all round

Right now I would actually give this lot a worse score for how they've handled housing than I gave National - and believe me, I thought they were rubbish at it.

This Government's gone in the opposite direction to National in how it is handling housing. National lost the Housing Minister altogether. This Government now appears to have a plethora of ministers in this area.

I suspect the net impact of many ministers (too many cooks spoil the broth, anybody?) might be roughly the same as having no minister at all.

I for one will be looking with great interest at what housing policies are offered up by the various political parties in the run up to the election next year.

I'm not looking for whizzbang schemes with fancy names. Just some coherent strategies. That would be nice. 

A nation of house lovers with a government that knows how to handle housing. That would be wonderful.

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155 Comments

The RMA / planning constraints , billing for the infrastructure , the cost of building materials , the complexity of the building act ....

.. David , neither Taxcinda nor the Gnats have gone anywhere near any of the real issues ... Labour have blocked foreign investment in residential property ... but either the horse had bolted on that one , or it wasn't an effect anyway ... and they promised to step hard on immigration , but have failed there too , the flood is easing , but we're still allowing way too many people in each year , and seemingly not the high skilled and tech experts we actually need ...

... and as for a simple land tax to nip some profits from land bankers... both Labour and the Gnats are going nowhere near that one . . All the talk was the idiotic CGT or nothing ... we got nothing ..

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"" seemingly not the high skilled"" - well everyone meets low wage immigrants and most of us know of high skilled immigrants (eg the Surgeon who operated on my eye). The word 'seemingly' could be removed from the immigration debate if NZ stats published figures summarising IRD returns for immigrants. My guess 1/3 over NZ median income and 2/3 low paid and for those paid hourly working longer hours than average.
Putting our immigration per capita as per average OECD countries would be the fastest response to housing issues in Auckland.

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Most of the low skilled are those here on student visas, who barely speak English, but somehow manage to enrol into, and pass their third rate private vocational college course. Banning foreign students from working while "studying", and making sure they return home after their course has finished, would be the simplest way of stemming the influx of cheap workers who deprive low income New Zealanders of getting jobs, pay rises, and training, thus trapping them in a cycle of poverty.

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GB. The country is so far out of whack after 30 years of asset sales to foreign owned companies.

$20 Billion a year, going offshore, tab 7, current account and investment account stats, that our supply chain for the cost of houses including banks loan interest , nails, wood, roofing, plumbing, ie Fletchers, is now infected by Foreign owned company super profits.

NZ doesn’t make super profits, eg Fonterra largest exporter, $500 million profit if its lucky.

So how can we have an internal market faced with $20 Billion profit for the foreigners each year to extract from.

This is a bankruptcy model, and Foreign Banks are leading the way.

Weird, banks know limits for you and I, but not for themselves.

I hope someone has the fortitude to take on overseas investment interests and tell them to go away. We’re losing $2 for every $1 we get given.

What a great trade that is.

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I agree but if anyone in gets anything like this going that will cut their profits they are but down by the press. If they still manage to gain traction it would be terminal.
Basically the only way out is a massive crash and jail in mass. Some say that Trump is trying to get this over the line at present but us plebs dont get that memo.

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yes, terminal is an understatement. But you have to try and save the sinking ship for the good souls on board.

Of which we have many.

Removing Foreign Investment is the answer, which has a cost higher than borrowing as they demand 10 = 15% returns while International Debt is 3%.

Foreign Investment is therefore terminal. It doesn't help the economy.

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Landlords versus renters...
In the landlords corner... the banks, immigration, homeowners and the economy.
In the renters corner...…………… no-one
There is no political will to see housing values diminish either by building or devaluing.

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I'd perhaps put the principles of behavioural finance to be on the side of renters....a force more powerful than any other! When this greed turns to fear, which is always the case, watch people jump ship (and the captain of the rock star aka John Key, the king of the markets jumped a long while back!)

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"A nation of house lovers "...

That's the problem, too much vested interest...

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A nation in which % home ownership has been falling for over 20 years. I predict under 50% in census for Auckland

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The saying 'People get the Government they deserve' says it all, right ?
And we got only two main parties, both to blame for the ongoing immigration debacle which together with the one story wonder (housing) has screwed the New Zealand since the year 2000.
No relief in sight, sadly.

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The unmet need is for cheap housing. The young sharing a rental or living with their parents need something cheap so they can settle down and if they choose to start a family. Cheap meaning 3 to 5 times household income; just like it was 50 years ago. So the target ought to be $200,000 - and that would mean plenty of factory built, identical, small boxes.
Why are we not building them? Because the decision makers and I suspect most of the readers of this site are upper middle class and sneer at cheap housing.

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We are not building cheap houses Lapun, because it currently cannot be done for that cost. Things have moved on and wages simply have not kept up with house pricing for 95% of the population.$200K will get you a house in some parts of the country but probably not the land to put it on. Starting a family these days is not viable for so many reasons, smart people will not be having kids anyway.

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Too many people in the chain with their hands out. Get rid of the middle men. The Gov't and large developers. Impower the people. The owner, the bank and the builder = less friction on the money along the way, cheaper houses.

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Kezza, refer my comment above.

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$200,000? Are you talking that for the box that goes on the land? Land in Auckland is going for $1k to $2k/m2.. Or if you want to add a carpark to any of the kiwibuild apartments, they are asking $35k to $50k.. for about 10m2?

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Yeah, if we get $200k houses, there will be thousands of people who owe twice the amount than the house is worth. Thatvis a total collapse of the NZ economy.

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It won't happen, not in a hurry, a long slow slide is about the best that going to happen (unless the global economy has another meltdown.. which is increasingly likely), whatever we do in NZ it'll take time to happen so if they aren't stupidly over leveraged or on interest only mortgages they'll be fine. And if a few thousand property speculators get burnt, thats a good bloody idea.

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I'm seing a fast slide in conjuction with a global situation. A lot of people out there doing hard times, businesses only holding on due to low interest and high product demand. Noticed lately items on TM selling for less than they would have a couple of years ago. Car imports down a hell of a lot, a few export earners not doing flash, tourism has got to take a biit of a knock this season.
This stuff and other global issues haven't hit yet. How it all effects the high debt laden masses who were already under preasure is yet to play out.
Have been told by a couple of property investors that they have been given the heads up from their bank managers, the money tightens up from early next year.

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Yes talking of the box on the land - and $200,000 is about right for a large row of say 45sm 1-bed boxes using factory methods. And at least one car park but in North Shore some of our new apartments just leave it to the owner to find space on the road (dumb short sighted planning.
So the issue is as you say the land - firstly the cost and secondly the wastage since they have to have access and also leave sunlight to hit the neighbours.
Land prices could be solved; for myself I hope they won't because 80% of my homes CV is land but on the other hand my four adult children cannot remotely afford to buy.

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No, the no carpark thing is so you can be green.. nevermind that we don't have teh transport infrastructure nor will we for the next ten years at least to make that practical for most people

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The car park thing is just reality. A very few extreme greens do not have a car and I deliberately choose not to have a car because my health needs me to walk and I've weak self-control and couldn't walk past my own car. We are the rare minority.
The reality is if you can afford a house or even an Auckland rent then you can afford a car and will buy a car even if you do use public transport for work. The fact is if a modern townhouse is selling for over $650k then more likely than not it will be occupied by two adults each with a car or at least dreams of a car.

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Aucklanders own 700 odd cars per thousand people. In Christchurch it is over 900. In Auckland vehicle travel kilometers per capita is declining. In Christchurch it is increasing.

The reason for the difference is Auckland spends 6 times the amount of capital expenditure on building public transport in comparison to Christchurch.

Regarding transport citizens get what they pay for...

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Brendon - thank you for the facts. I'm surprised by those figures - surely you cannot be counting children and babies?

Those capital expenditure figures - are they per capita?

As a sometimes bus user - during the day they are frequently empty or just a few pensioners and during the rush hour(s) virtually full. The economics of running buses must be heavily skewed towards places with high population density.

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Have you been on a bus in Christchurch? Middle of winter, no heating. Middle of summer, no air conditioning. Unless you like getting to your destination in a hyperthermic or feverish state, buses are not a viable option, which is why nobody uses them.

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Something needs to be done and right now!

First home buyers can fund new builds themselves (within the price range), no deposit but able to fund the build. At present they can only enter a contract but can only pay for it on compleation.
Open up new sections, infill housing. If there is demand out there the people will fill it themselves.
No chance of over supply which could drive prices down.
No chance of houses being built where they are not wanted.
No cost to the tax payer.
Saves the tax payer money.
Impowering the people not wrapping them in cotton wool.
Ten's of thousands of people pushing this not just a select few building developers.

Why this will not happen.. The Gov't dosen't get the 30% on the profits kick back.
Whatever is going on at present isn't working and creating a lack of faith that this coalation will be able to dampen the blow of the coming recession.

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Gov't punching the ticket then selling it to us that they are doing it for our benifit needs to stop.
We had the Gov't funding part of tbe house insulation thing a few years back.
My quotes with the Gov't backed companies.
$3500 to $4500. Non Govt backed company $3000 for the same job.

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Headline from our " Northern Outlook " (6/9/19) : "
KiwiBuild homes unwanted " ...

.... of 51 KB homes completed in the Waimakariri just 8 have been sold ... they're around $ 395 th in Kaiapoi , $ 445 th in Rangiora , $ 472 th in Woodend , and up to $ 499 th in Pegasus ...

The problem is , we have a plentiful supply of houses in Canterbury ... not necessarily affordable , but the market is full ... but Labour went ahead with KB here regardless ... twats !

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The Kiwibuild houses in Greater Christchurch were in the wrong place.

They all required expensive long car commutes to access the bulk of the Christchurch employment market.

If those Kiwi Build houses had been that price but more centrally located and part of a proper rapid transit system I believe they would have sold like hotcakes.

The problem is so far KiwiBuild has not joined the dots. There is no common sense integrated housing and transport planning.

This latest announcement from Megan Woods does not give me any hope that lesson has been learnt.

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Allow the home buyer to decide and cut the ticket punchers out.
Homes sde built where they are needed and how the owner wants them.
The owner, bank and builder is all you need. No large builing company adding over inflated costs, no 30% tax on the profit.
No deposit but by compleation they have 20% LVR due to the money saved.
$200k section, $200l build, worth $500k

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Or you could buy any one of the 545 homes currently listed in Christchurch City for under $400k.

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"No chance of over supply which could drive prices down."

Err, prices need to come down, and interest rates go up.

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Colalation adding houses into a market where house prices are dropping... Oversupply house price drop. Interest rate rise, lots of people go broke, house prices drop.
You want a house, you fund it. That way we do not end up working on a guess of how many houses are needed.

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House prices don't drop, you get taxed out the wazoo to pay for the increasing number of people in motels funded by the govt at $1500/week and the accommodation supplement at $1.5billion a year and risng.. your choice..

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We are going into a recession and it is going to be a large one. Put the interest rates up and sink the ship so we can start again.

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Just gimme a couple weeks to get my cash out of the bank and the sharemarket and into gold and physical currency in a safety deposit box and go for it.

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Rodger that!

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Just don't expect any young New Zealanders with families to stick around after you do. Why bother? Many are somewhat unimpressed with being handed the bill for every ill the previous lot have foisted upon us. Expecting young home owners to just cop negative equity because other idiots left the pantry bare and got away with it sends a powerful message to anyone trying to get ahead here.

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It's a global thing, no where to hide. You cant stop it, you jusat havdvto protect yourself.

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Yeah.
The reality is most governments don't really give a s#$t about the majority of citizens.

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No, as always they only care about getting re elected. Even the great Jacinda, saviour of the poor....

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Of course those of us who are engaged in productive enterprise are hit the hardest for all costs in this country. Because those who make the free money off windfall gains are precious snowflakes and are not allowed to be taxed.

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Jail a few ex politicians, that have dubious Sir or Dames status.

And stop pampering to overseas interests. Governments are elected to represent all citizens of the nation, and their wellbeing, rather than overseas interests hidden by blind trusts and nominee companies.

A good start would be:
1. Reducing our dependence of oil, with electrified public transport investment.
2. Restricting controlling stakes in essential concentrated industry to NZ domiciled people.
3. Elect representatives that take ownership of problems. Actions speak louder than words.

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Yeah but National were happy to sell our houses to foreigners because it was making their voters rich! They weren’t pampering to overseas interests - they were pampering to their greedy self interested voters! Who cares about the next generation!

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Tab 7 :Investment income from foreign investment in New Zealand

Not sure how this will look. $ are in Millions, therefore quarterly is $4 - $5 Billion

Jun 2017 Sep 2017 Dec 2017 Mar 2018 Jun 2018 Sep 2018 Dec 2018 Mar 2019
4,542 4,705 5,069 4,408 4,885 4,911 4,800 R 4,675

The only solution to NZ housing problems is removing Foreign Banks from the equation, removing $5 Billion profit going offshore.

Then work on the rest.

Then reverse Keys 49% Electricity Co sales to Foreigners, as once you own your home, you'll know be paying through your nose for their power so they can make more super profits.And then there's petrol, renovations etc etc.

Just no end to this rort.

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Come on peeps. Vaible solutions please...

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Let’s have a massive recession, reset asset prices and interest rates and start over - as opposed to kicking the can down the road by continuing to drop interest rates and increase debt. This is a viable solution - but everyone is afraid to go into recession post-GFC - like it would be the end of the world or something.

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Whether people like it or not, it's a matter of time

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Agree. Lets get it over and done with. Increase interest rates, sink the ship so we can rebuild.
This coalation is doing a good job of that.

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... HNZ to become mobile ... scrap KB , and pour the $ billions into assisting needy families into RVs ...

Boot out the freeloading freedom camping tourists , they're adding nothing to our economy ..

... grab those RVs , mostly around one tenth the cost of a KiwiBuild house .. . house families that need it desperately , on wheels ...

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Where would these Great RV camps go?

Canterbury for example is building about 5000 houses a year. So if we replaced this permanent settlement pattern with a migratory one what would that look like?

Maybe a modern version of medieval Mongolia?

Maybe that would work? Definitely outside the box thinking Gummy...

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Fully self contained RVs can camp anywhere ... folks can follow the jobs , camp on apple orchards in Hawkes Bay when its picking season ... a home for the fraction of the price of a house ... but hey , if they're not needed in Canterbury dont buy them or drive them there ... wow ... how easy was that !

... a temporary solution until GFC 2 hits hard .. and crushes houses back to 2 - 3 times household annual gross incomes , as they should be ... as they were until this aberrant property bubble started inflating 20 years ago ...

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No Kazxa..world economy is sinking under a mountain of debt...stop pushing your small world agenda bias.

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Yep Kiwibuild is helping that along nicely. 5% deposit isvsetting a lot of people up to fail and it'll end up costing the tax payer. May as well get it over and done with before many more go into debt.
There are times when you see the writing on the wall so you push the reset button.

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That article is spot on.

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He reckons the day of reckoning will come. Me too. Probably in the next 5 years.

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Don't we all

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For all the drivel about affordability and first home buyers lining up to enter the market, the actual data of home ownership rates which have been in decline for 30 years is a simple story of overpriced compressed wood chip. Since 1991 , New Zealand has increased the stock of home "owners" by 176,000 about 6000 a year. Since 2007 the stock of home owners has increased by just 54000, around 4000 additional owners a year. However, since 1991 those living in rented accommodation ( excluding free) has increased by 312,000 around 11,000 additional renters per year, almost double the rate of those owning a home. Since 2007, the stock of those renting/home owners 140000/54000 is now approaching three times the rate . Without contemplating the myriad of factors, in a period of rapidly declining mortgage rates home ownership rates are continuing to decline, at a faster rate.

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You don't think the tax free capital gains and negative gearing (thankfully now gone) had a large part to play in it?

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From yesterday's interview with megan wood, their focus is on the entire market's delivery of affordable homes, as is evident in the recent numbers of new homes being built in the lower range..

But I still think that if KB doesn't deliver 3000 houses (even if they are under construction) before the next election, labour is going to have a tough job convincing the public

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Obsession with housing? If wanting/needing somewhere safe and secure to live is an obsession then I am prepared to wager every single person on the planet is obsessed with housing.
Of course ownership is something we would all like, without it, we are left with absolutely crappy tenancy laws that leaves more and more people at the whim of landlords who do not have to provide long term tenancies (and by that I mean one hell of a lot longer than 1 year).
If we are to accept that more and more people will never own their own home, and thus have security and a stake in their community, then tenancy laws must change to reflect that. It can be additional to what we already have, so that there is an option for people who wish to, can lease, maybe even for life, as per much of Europe.
You cannot leave people insecure and fleeced to the skin, paying other people's mortgages, people who can at any time give notice and sell the place out from under its occupiers. That all has to be over.
Our current tenancy laws came out of a time when we went "flatting" when we started work the married, often young, and went on to owning our own homes, there was little or no need for long term tenancies, most rentals were just blocks of flats. That has changed, the rules must change.
Much of society, those tenants everyone decries, have basically opted out of society as society has not exactly benefited them, they move constantly, their kids change schools regularly, they cannot actually afford to house themselves. We must embark on a massive social housing build and get some security into these people's lives in the hope they can come back from the brink.
Houses must cease to be seen as a never losing casino game.

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I have had a single rental property for 15 years. Managed by a decent property company. My tenants stayed for years and I was happy. Then one tenancy caused problems - nice people when sober but from payday and into the weekend loud parties lasting most of the night. A neighbour told me they had complained about the noise (drum kit taken onto the deck and played at 2am) but also had cancelled visits from family because of the bad language. So I contacted the noise control dept and they would not reveal who had complained but told me they had had 4 different complainers. I told the property agents and the tenants left without any eviction. Without that 90 day period I and all the neigbours would still be suffering.
A sane landlord doesn't want tenancy changes - if for no other reason than they cost money. Surely we could balance landlord and tenants rights - maybe when asking tenants to leave the landlord pays the tenant? or when selling gives them a small percentage of the profit? Remove landlord rights and you get my experience in London 50 years ago - most empty houses in Europe, preference for foreign students over locals because they would eventually leave.

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I do not mean for all tenancies to be forced to be long term, you could carry on the same way, what I see would probably need to be purpose built and offered as an option, they would be different from social housing and would be almost a blend of ownership and renting, they would appeal to a different sort of person than the second ones you speak about. They would likely not be owned by individuals but probably co-operatives, and people leasing could possibly even own shares in them. It is another option I seek here, there are far too many landlords not doing what you have. The other thing is, it has got to be affordable, it is not at the moment.

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Sounds good. The vast majority of both landlords and tenants are good; passing laws to protect us from the bad ones [tenants & landlords] are frequently counter productive. I like the idea of a range of different types of tenancy.
Affordable tenancies: main factor is house prices but there are other factors - eg 8.24% of rent going to property agents and as the owner of a single rental a property agent is needed.
Why not build more cheaper homes and reduce the rapidity of population growth?

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Yes. There needs to some long term institutional investors in rental housing. Who target the building of affordable, modest yet warm, dry long term rentals.

A partnership between non-profit Community Housing Providers and institutional investors, such as ACC and the Superfund would be perfect.

The government could have facillated this. A $250m/year pot for instance would give 5000 capital grants to the value of $50,000 each for the building of Community Rental Provider housing.

That is essentially what Phil Twyford asked for a year ago when he requested Kiwibuild expand into the rental market. But Cabinet rejected the funding request.

Kiwibuild has since flopped and no one is convinced that Megan Woods has revived it.

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David have you any updates on how the HLC is doing?

"HLC chief executive, Chris Aiken, said that HLC was committed to the delivery or enablement of more than 50,000 houses over the next 10-15 years through the sale of more than 1,200 clean, clear, serviced super lots."

https://hlc.co.nz/news/hlc-invites-builders-developers-and-housing-prov…

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Now if some of those HLC developments, which btw is coming under the auspices of the new Housing and Urban Development Authority Kainga Ora, were well funded institutional rental housing discussed elsewhere in the above thread then this would meet a wider segment of housing demand. So would speed up the delivery of the 50,000 houses.

If those houses were medium to high density built within walking distance of an expanding rapid transit network, then that would deliver more customers to the transit network making it more financially viable.

Is anyone in the government joining the dots. Or do they all have narrow silo'ed thinking?

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A couple of commenters have nailed it. Too many ticket-clippers and too many backside-coverers.

I built 135 sq m for 50k, 15 years ago. Couldn't do it now and the only reason is legislative changes. That said, a mate just built same sq area, using the same panels and complying with today's requirements, in a fairly up-there suburb. $130k walk-in (ex land price). It can be done, you just have to think out of the box

But we don't have a housing crisis - we have a population crisis. That's what housing houses; population. We have to address that FIRST, or all bets are not so much off, as doubled next time around.

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One of the reasons is staring you right in the face David. They, like you, don't know how to measure things correctly.

The price of housing by itself is irrelevant, what is relevant is the price of housing as to how we can afford to pay for it which is directly linked to how much we earn.

And the best measure of this is the median house price to income ratio, which plenty of evidence shows should be around 3x income. Anything higher than this is highlighting a dysfunctional market. And the biggest dysfunction it highlights is how restrictive the land policies are, ie more restrictive, higher house prices.

Treasury is spot on by saying that it the supply side that needs sorting out, ie less restrictive land policies. It is not the only thing that needs sorting but until it is done, everything else is wasted effort, as the evidence shows.

The latest reset by Labour is to restrict land even further as they say they want the focus to be on density, then there is the protection of the 'sensitive soils' which is going to allow council to stop further development on the basis of all land is sensitive, now the water quality issue.

More restrictions and increased costs. It's not that there isn't soils that need protecting or water quality that needs improved but it is now being hijacked by the Greens high density ideology to stop all development that does not fit this 'four legs is bad, two legs is worse' ideology.

Labours only solution is to subsidise affordability, keeping the price high at the front end but lowering it at the back end, typical smoke and mirrors that allows private profits to be partially paid by the public purse. But this only raises prices as it increases demand, but not supply, and the bureaucratic cost of further Govt. input negates most of the subsidy anyway.

The solution is easy enough, ie restore the house price to income ratio, either by raising income or lower house prices.

To lower houses prices the first step is to open up supply so it can be developed in developer real time at demand, which also means reducing other consenting constraints. This is easy enough as it is mainly a legislative exercise.

The reasons they don't want to do it are obvious, as in the short term some people would be disadvantaged, but this number is less than those that are disadvantaged now if you don't do it.

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40 years ago my parents built a large house, my dad drew up a floor plan on the kitchen table one morning, went to council got a consent for $50k through to consent and $10's of k more for other council costs during build. A relative who is a builder used to do a house every 3 months prior to ~2008, but in last decade has increased to 6-9months due to time wasting regulatory impediments - build costs massively increased but houses no better. And then there are massive costs of reserve contributions and utility connections, over-the-top health and safety, sediment and dirt controls, detentions tanks to save council money on their infrastructure. Branz created/enforced materials cartels, massively uneconomic overspeccing of foundations etc by scared engineers. These costs are all created by local and central govt. Only they can fix it, but the culture of government - serving special interests and squeaky wheel 'what about the children' issues is such that they are probably unable to.

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Exactly. NZ, up until late 80's, early nineties median multiple was historically 3x income and it was possible to built as you say.

It can be argued that improvements in housing methodology would incur some price increases, bit these increases would be minor overall, and the reality is that our housing quality has not overall improved.

We increased insulation and weather 'tightness' which initially helped but because it was done incorrectly we ended up with leaky homes.

And it is not improving, last year MOE had to put aside $1.4 billion for school remedials, mainly due to leaking issues in new schools.

Labours issue was they thought that because National did nothing, the solution was to do something, and do it bigger and quicker, but when the something is the wrong thing, doing it bigger and quicker only magnifies the problem.

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Foyle. The extra regulations and massive council development fees you cite are having a negative effect. On the plus side an owner can self-build and not need to comply with h&s, can prepare own compliant plans and save the now ballooning LBP builder charges etc. It was discussed by Peter wolfcamp on zb this morning. I was already aware of the exemption, still it was interesting to hear about actual cases.

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Problem is the councils have also been incentivised to attempt to regulate such that it is impossible for NZ's building sector to build a leaky house within regulations.

This is a nigh on impossible task. The construction sector will find a way to build crap, and as long as it's the councils' problem to pick up the tab for such crap then regulation will try to increase to avoid that liability.

What's a different approach? The sector takes responsibility for the quality of products they sell to Kiwis? Compulsory industry insurance?

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I did exactly the same in 1976. One plan, four elevations (one per side) self-drawn on two sheets of A3 tracing paper. Local builder with a good reputation built it. Perfectly impossible now.

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... the " nimby " effect is also restricting land supply . .. those wealthy folk in Orc Lands leafy green suburbs will not allow valuable land to be utilized more efficiently ..

My solution would be the land tax .. a 0.5 % L/T would raise $ 5000 annually for each million dollar section ... that'd shift a few nimbys ... or it'd raise alotta moola for the government ..

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Just 0.1% would change the housing market drastically.

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Auckland already has 0.2-0.3% in rates. would probably need to increase to ~1% to have desired impact on efficient utilisation of land, and cut value of undeveloped land around cities.

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I think theory might differ from reality. Give the bureaucrats more money and you will get more bureaucrats, able to write more and more regulations and carry out more and more inspections.

This is seen as progress to the Bureaucrat Hive Mind:
As of October 1, 2009, the EU Acquis has reached up to 14,607 legislations. Similar to the domestic legislation of any country, the EU Acquis is dynamic in nature and it is subject to change. It is estimated that the acquis grows by approximately 5,000 pages every year, and that the existing EU Acquis is composed of 110,000 pages.
https://www.ab.gov.tr/faq-for-negotiation-process_44460_en.html

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Not saying give local govt more money, Land Tax should be instituted in a revenue neutral way - reduce income tax or GST to compensate.

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Absolutely.

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Wikipedia: during the peasants revolt of 1381 "A wide spectrum of rural society, including many local artisans and village officials, rose up in protest, burning court records" and "set fire to law books and buildings in the Temple, and killed anyone associated with the royal government" and "entered the Tower of London, killing the Lord Chancellor and the Lord High Treasurer".
Just waiting for home ownership to drop below 50%.

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There are two types of Nimbyism.
1) By deliberately stopping any changes (changes that you were allowed), it creates a shortage of what you already own and therefore increases the value of your property. It is self serving and selfish, closing the door on others once you have got what you wanted.
2) Opposing something that you were sold on the basis that you were mislead, eg buy into a neighbourhood where the rules said you cannot build above a certain height etc., then at a whim, your neighbour, council, the Govt. change the rules.

We need less of number 1 and leave alone those in number 2 neighbourhoods to live how they agreed.

The ideology that promotes less restrictive land zoning encourages this.

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Ashley church is coming out with some research to prove there is no so called housing shortage.. which is what I have always said.. just need more affordable homes

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We have a plentiful supply of houses in the Waimakariri , but prices have not fallen appreciably ...

... thanks in no small part to cheap credit , mortgage rates at hysterically low levels... cheers Adrian Orr .. yay for the NZ Reverse Bank .. thanks for keeping the punchbowl full , party on guys !

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Ey? I thought he's been one of the key proponents of the housing shortage myth

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How many rentals does Ashley Church own?

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Thx, I will have a listen tonight.

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More affordable rents (i.e., putting in rental price and tenancy controls) would lead to more affordable homes as well as improvements in existing housing stock.

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You and I understand that, why do politicians struggle to get it? They are scared to upset those heavily vested in housing

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To a certain extent our political system is corrupt - even though we don't want to admit it. As I've mentioned before, we're going to have to wait until the baby boomers are all dribbling into their pajamas at the Summerset Village before sound policy can be set - in the interim, its about continuing to allow the self licking ice cream cone to lick itself stupid (boomers/home owners/investors and their portfolios aligned with politics/mileu).

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The boomers have left us a lot of shit to clean up.
I crack up when I see all these 4-5 storey retirement apartment complexes rising up in Auckland. The same people who complained about these types of developments in ths past are very happy to move into these places now....
So many double standards, so much self interest.

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.. go easy on the generalizations please . . I'm a " boomer " and I abhor the current situation as much as you do ...

GFC 2 : the Great Re-Set is coming ... buckle up , it'll be ugly and painful for awhile ...

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Fritz. It sure is hilarious seeing you blame the boomers for sh#ting on you. You are close to that age group (if not actually a boomer) yourself so anyone younger would probably call you a hypocrite.

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They are scared to implement price controls anywhere in this "free market economy". Neoliberalism hangover. We've got it far worse than our overseas counterparts.

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Rent control policies are a terrible idea. They typically produce tremendous corruption and abuse and large scale systemic cheating when implemented in other countries as they introduce so many opportunities for under-the-table arbitrage and require new armies of bureaucrats with great power to upset peoples lives (and so very corruptable power) to administer. If you are going to do subsidies then do it transparently by subsidising the person paying the rent and avoid the potential for corruption.

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If rent controls are bad, then so to is subsidizing the private rental market

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As I've said in other threads - if we really believe in free markets, then lets stop all accommodation supplements/welfare and see how long our investors think housing is a great place to be! The poor would struggle, but it would eventually provide clarity as $$ would stop flowing into the hands of the darklords (landlords), house prices would reset.

Combining a welfare state with free markets (when it comes to a basic necessity like housing) is just seeing one part of society exploiting the other. Its BS and the rules need to change.

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As I have said in other threads, the accommodation supplement is NOT paid to landlords. There is nothing independent about your observations Independent Observer, they are laced with self interest and envy

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The accommodation subsidy is indirectly paid to landlords. It would be far better to introduce a voucher system that was paid directly to landlords, but to qualify for receipt of such a voucher - there would be certain regulatory controls that one would have to agree to as a landlord.

It really is quite simple - and its done in many other countries. Where NO such price and other regulatory controls exist in order for a taxpayer subsidy to be paid to a landlord, is absolute MADNESS - but that's what we have in NZ.

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Houseworks - could it be that your own confirmation bias prevents you from seeing that my views are independent? Look at your username! My views are utilitarian focused, for the benefit of our future, and not contaminated by some short term get rich at the expense of others standpoint. If in your opinion that isn't an independent view, that isn't my problem, that is yours.

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You have indeed said it in other threads. You were as incorrect there as you are in this thread.

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Again agree with Kate. Accommodation supplement is just a way of channeling tax payers funds straight to foreign banks profit margins.

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Agree. If it were me, I'd be regulating to remove Accommodation supplements over time (say over a two year period with the schedule of decreases set in law from the outset). But first, you have to implement a 'no upward' rent freeze as well as change some tenancy laws in order to give existing tenants more protection/security (i.e., no rent reviews up and ongoing tenancy assured unless a property is sold under a standard sales transaction type).

NZ needs a bold government to get us out of this ever increasing taxpayer housing supplement - simply not affordable.

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If owner occupiers (new buyers) weren't competing with investors the perceived shortage might disappear overnight! One family, one home....Not one home being chased by one family and 5 investors. This has created artificial demand and pushed prices much higher than they should be....I personally hope the housing bubble crashes and burns - we shouldn't reward stupidity should we?

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The only clear solution would be a land tax.

In my view we should kick off with something negligible like 0.1% per annum and have a plan to increase by the same amount each year over a decade to conclude at 1%. Given long term rates are under 2% this would reduce land values by about 50%.

Obviously then the tax would have large discounts for home owner occupiers so make life affordable. Investors and land bankers pay the full amount.

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The easiest way to implement land value tax would be the government legislating that at every local government election ratepayers are asked via a local referendum what sort of rating system they want. Land value only rates or land + capital value rates.

There could be all sorts of in between options. For instance in Christchurch there would be a huge benefit if central city commercial ratepayers paid land value only rates. That way the landowner who has taken a risk and built on their land something of commercial value is charged the same as a neighbour who decided to do nothing and land bank instead.

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The last time I checked I read that almost every single council does NOT use land value ratings. They are not as smart as you are Brendon.

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For almost everybody there is no appreciable difference between the two systems. They mostly apply to the general rate which has been steadily declining as a percentage of the total rate take. Uniform Annual General Charges and targeted rates can be applied on a per property basis (sewer can be "per pan").

Two groups in particular are disadvantaged by land-value rating: farmers and the elderly (shorthand for those who have lived for yonks in a now modest dwelling on very expensive land). And guess who vote and make fusses at Annual Plan time?

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Good response.

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Said it before but what is needed is regulation of the rental market.

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But it' a free market Kate! (half sarcasm, half not...)

I personally think we should cut all welfare payments/supplements for a year. It will hurt the needy in the short term, but will destroy the greedy in the longer term.

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See my proposal above. Schedule cuts over a two year period.

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The most terrifying words in the English language are: "I'm from the government and I'm here to help"
The urge to regulate solutions to problems you see needs to be tempered severely by the appreciation that new laws and regulations generally come with a pile of unforeseen and nigh on impossible to predict negative consequences (social and economic). It's incredibly hard to improve the status quo through additional regulation, particularly in areas like this.

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Gotta laugh. It was massive deregulation (the state retreating from this core responsibility) that got the world to the mess it is in today.

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Kate is right. Govt tried to promote private landlords so taxpayers could avoid building state housing. Throw in ten plus years plus RE seminars focused on shifting developer apartments on the back of reducing personal tax (Blue Chip for example), then add in super cheap money and a deluge of foreign immigration with their printed money (much being printed overseas) and you have today's mess.

Off all the ideas promoted here the only one that will likely work is a land tax (double rated for foreign owners) on all land, with the corresponding reduction in income tax. If Farmers and PIs are making no profit then they will need to restructure their affairs to ensure that they operate profitably up to their land tax threshold. Yes in all likelihood an almighty debt reset, but its either than or all retirement savings will be trampled to dust by property/debt/rent inflation impacting everything as we are starting to see now.

Pick you option. I would like to not require a wheelbarrow of cash to buy milk and bread like is required north east of South Africa.

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Kate: I follow your comments with interest since you are clearly one of the brightest and most ethical (kind-hearted) commentators but believe you may be wrong this time.
To start with there are existing rules that cover deposits held in escrow, notice periods, access for landlords agents, insulation standards, periods between rent increases. So we have rules and if you just want to tighten them or adjust them a little that is OK. What you must avoid is the situation I experienced in London in the 1970's where well-meaning Labour governments had produced a nightmare for honest landlords and honest tenants.
Please keep it simple. Someone else has suggested a range of different tenancies and that might work - some trade offs between rent and termination periods (both for landlord and tenant).

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Thanks, yes, I did expand a bit above on that thinking. But we do need to appreciate that the over burden / over reach of regulation in most Western countries of the 1970s was decimated in the 1980s and 90s. Deregulation, particularly of the FIRE sector allowed for exploitation of the masses - and hence the widening inequality we see today. We can no longer rely on institutions and professions, such as auditors and accountants, to act honestly and professionally. The FIRE sector must be reigned in and it is only good governance that can do that.

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For example, how many RE transactions over the past decade do you think were knowingly transacted with individuals and entities with dubious means (i.e., suspected 'dodgies' but then no one asked/cared because we had no serious/real anti-money laundering regulation) ? Our very own PM sold two properties and look what muck has come out on those.

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You get the feeling we're only just starting to scratch the surface - more details to come...

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And while we impotently go round in circles, the government continues to pour an outrageous number immigrants and work permit people into the country. As Treasury pointed out the house waiting list continues to grow. We continue to fall further behind the demand. The logic is inescapable extra immigrants must either displace locals or be unhoused themselves. Thank you Labour for crapping on your core supporters.
Come election time, National are going to have a field day sadly.

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Watching this Gov't fail was like watching Obama fail to deliver. Lots of hype and good intentions that went no where.
The only chance of Labour not being a onevterm wonder is calling an election now and that would still be a big maybe.

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.... alotta voters supported Labour because of the Kiwi Build policy ... gullible buggers actually thought it would work ... they believed in the lunacy of Phil Twyford ....

Who do those voters turn to in 2020 . . Labours flagship policy is a shambles , an utter failure ... " re-set " anyone . . harrrrr de flippin haaaa ..

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Good question.. who? Definitely not National, the speculators will be back in force

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McGillicuddy ! ... where are you , when your nation needs true leadership , hast thou forsaken us ...

.. or , are you down a bar somewhere sampling the local craft beers ?

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There are 4 things to consider, %, demand, supply, tax.

1) Price of money - we have low worldwide interest rates which drive up asset prices - nothing can be done about this

2) Demand - the excess demand is coming from an immigration rate that is too high for the demand response to stay up with. NZ has run a high immigration rate for a long time as a % of population. But, in absolute numbers that x% kept going up & most immigrants stayed in Auckland driving house prices upwards.

A high immigration rate drives up gdp (but with dis-economies of scale which have to be addressed but later down the track.) Cynically its a very easy way to prop up the economy.

The immigration rate is slowly falling under Labour, but we need a proper population policy of managing the immigration rate around maximising gdp/capita growth & socioeconomic benefits.

3) Supply. - The RMA was meant to be effects based legislation, but was hijacked & old style town & country planning act zoning was implemented which is rigid & inelastic. Every individual rule in the RMA certainly did not go through individual regulatory impact assessment. If they had most rules wouldnt exist.

The RMA needs revamping - All existing rules and covenants should be sunsetted with a 10 year horizon and a single effects based national level urban plan developed by all councils jointly guided by an appropriate National Policy Statement. (we dont need district plans stacked as high as the skytower for a population of 5m)

Developer contributions - these should be ditched. They simply push up the capital cost of housing. Its not the developer that creates the demand but the user. Targeted rates should be implemented.

Building supplies oligopoly - the ComCom needs more powers to ensure competition. The ComCom should have to give much more weight to the HHI index when making decisions.

4) Land tax - we need a land tax to drive the efficient use of land, offset by reducing other taxes

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KO, best comment on this thread, you should return to NZ and run for PM cause it won't happen with either of the 2 main parties here….

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Agree great post. Great to see Yvil agreeing to no 4. RMA is now the bane of any property project.

We also need a limitation of liability for Councils with respect to building defect to stop rate payers being the patsy. Developers, builders, and material suppliers need legislation that transcends liability avoidance via limited liability company liquidation, family trusts, and overseas ownership.

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We deserve better in all aspects of our country. We have to face facts and acknowledge the economy has been utterly reshaped since the 1980s to focus on land based capital gains. Wasn't that the whole idea of neoliberalism in the beginning? To disinvest from troublesome regulated industries like automaking and steel works with their encumbant employees and set up infinitely more profitable financial industries instead? Of course the best way to get rich isn't to own a factory anymore, its far simpler to grab an asset, any asset and inflate its worth and your wealth at the same time. Trouble is housing is a multidimensional asset and people live in them unless they've been evicted for a vacant possession sale in which case they now live in a car...and unless you got money you don't get no assets or inflation based wealth creation. You have not, you are poor. Bad system, it must change.

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I don’t thinks it worse than national’s position. For starters they acknowledge it’s a problem and are prepared to use government muscle to solve it. The fact that they seem to have bungled using that muscle is a seperate issue.

The Stephen Barclay issue - whatever was at the core of that - clearly cost them.

For me the big sins are pacing and mixed objectives. As I’ve said, focus on making houses systemically cheaper and forget about getting FHBs into affordable houses.

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True, but if they fail to deliver on housing (at least 3000 including under construction by next election) they might as well hold a gun to their head, they won't need National to do that ...

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They won’t get to 1000 by next election.

There are electoral consequences and policy consequences. Granted they need to show more progress from an electoral stand point but slow and stead wins the race from a policy standpoint.

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250 completed, 550 currently under construction, 1900 contacted to build.. so that's 2700 already.. even if there is a drop out by 700, leaves them to get another 1000 under way in the next year..

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Selling them is the still the issue... then there is how much they costed to compleat... If the selling or the cost don't work out, Labour is gone in tbe next election and it will be unlikely Kiwibuild proceed anywhere from there.

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Increasing supply enough is the main issue. If they have to drop the price on them to move them it suggests that the increase in supply is working. The idea is to make home ownership more affordable, so falling prices would be an indicator of that.

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I think the Barclay issue was most likely a result of the problem not computing and he got spat out as a consequence. Regardless, its small fry compared to Nick Smith V Bronwyn Pullar when he was ACC minister...I have no issue returning the current coalition to power next term and I would happily see them carry on beyond that too. National have become horribly warped and have taken the neolib, book balancing at all costs obsession, far too far at enormous cost to the country. They exist in their own cloister refusing to exchsnge fresh ideas with anyone and in typical cultlike fashion have driven themselves to greater and greater extremes and convince themselves they are right each time because no one challenges their warped policy views. My acronym going ahead is NVNA...never voting national again.

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NZ is no different to overseas countries in regards to housing being unaffordable for many!
Currently in Germany, and I can tell you that there are far more people sleeping in the streets than NZ and many have said how good the renting situation is in Germany.
People in the streets on the grog and certainly aren’t able to rent anything!
Jacinda should be over here having a look as to how others are living.
Just been on TV headline “Housing Prices Soaring In Europe”. Didn’t understand what was said as I don’t understand German!!
Megan’s Woods, Twyford and Davidson need to keep away from housing in NZ as they have no idea whatsoever

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Germany also imported an extra 1.5 million folk through lack of sound forethought on Angela Merkel's part.

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Ron Hoy Fong is a classic example of the greed of property investors, he owns 30 residential properties (if that's not enough), supported and loved by the banks, feeding of hard working Kiwi families who'll never be able to save for their retirement that the tax payer will have to pay in the end.
And its not enough hes been fixing prices through illegal bidding and his cohorts use immoral tactics to rip Kiwis off.
This is just one example of many, the Government need to crack down on these residential investors and free supply up for people / families who really need them for their future independence is security.
I'm sick to death of this inept weak Government who's said they'd make the tough decisions but have proven they've no back bone to make the changes the NZ society needs.

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Rubbish, investors don’t force prices of houses up at all!
Owner occupiers have more affect on prices going up!
I can assure you that the investors with larger holdings always buy under market value!

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The Man, you should just get on and enjoy your travel, for your benefit and ours!!!!

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Fritz, we are enjoying our holiday so far.
Just need to educate the many uneducated on Interest.co
Reality is that it is not an ideological world, never has been and never will be!

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Hi man. I for one appreciate the info and your perspective. These others making cheap snipey remarks show their small minded bias and envy..in my opinion.

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The 'CONFLICT OF INTEREST' is no surprise between the real estate agents & residential property investors buying up stock, I bet there a shady deals going on and back handers - just like Fong. Thanks for confirming the huge problem.

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No back bone at all.
The only significant calls they make are ones that don't affect almost anyone in the electorate. Like the FBB.
Ardern is a phoney

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Sounds like a parasite.

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Failure to do the right thing is the Political Problem of this century,
This is not about housing, the Pollies all own one....or more.
This is about funny munny, which is not even a joke.
Debt drives, nobody steers. Nuffin new in the past few months, just more and more stupidity....about Housey Howsy. Used to play that when I was a kid...now we pay Pollies to make new rules....with Bwankers.
No brainers is allowing people with no brains into power to solve issues, that a simple reset would have done.
Allowing Bankers to set the pace, is a one horse race.....Orr am I mistaken.
Trying to inflate their egos as well as their investents is par for the course... As is their demand for more people, to fund their constant "Stupidity"....over building more and more houses to accommodate their needs. More voters, less interest, more debt, before dis-honour. I could explain in greater detail, but I could not resist a return to modern Capitalism, Kiwi Style...here in the land of nod...and the big dark cloud.
Tis why I leave...periodically. Not sure why I return....But Hi guys....anyone wanna buy an investment...cannot lose with Kiwi Built Houses. And to section a plot. (Google that last phrase). The plot thickens.

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Housing NZ seems to be moving in the right direction. Take a look at the website. They must have a design bank now. The Government could override the Local Government meddlers and pass track anything built to these (and other approved) designs anywhere in the country. https://www.hnzc.co.nz/housing-developments-and-programmes/bealey-avenu… https://www.hnzc.co.nz/housing-developments-and-programmes/auckland-hou…

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Yes, HNZ is doing impressive work - finally!

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Because neither focus on the first order:
jobs, and rising job incomes.

That's jobs for the people and rising job income for the people,
Rather than the mirror gaze the polllies display.

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This Labour Party idea was nice, pity that Labour all are total liars.

https://www.labour.org.nz/government_should_abolish_auckland_urban_grow…

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Good article. I too think National did a lot of damage to housing that caused the shortage of rentals. The main cause was stopping the depreciation. That took one billion dollars a year out of the industry by way of extra tax.
It would be nice to know what they spent that money on.
This article overlooks the other damage that Phil the wrecker has caused. Give us a bit more time and we will see how much damage has been done. I am talking about the various changes to the Residential Tenancies Act that have been pushed down our throat. Justice has been done away with. Being bad as a tenant is now going to be OK. Too bad if the neighbours or the poor innocent ones looking for a new property to rent are hurt.

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Ha ha. Anyone who was listening carefully during the 2017 election heard Labour categorically promise not to fix the housing market.

Echoing John Key's words almost to the letter Phil Twyford promised not to cause house prices to drop. National and Labour's plan is to hold prices at the same nominal level and let household incomes rise to make the housing market more affordable. By my calculations that should take between 50 and 70 years.

That leaves Labour with only the "ad-hocery" options (is that even a word, David?) to try to alleviate the pain. Building more social housing is a good option and may actually be working. But everything is else is more or less doomed to failure.

Both Labour and National know exactly what is wrong with the housing amrket and what the effective solutions are. They also know that implementing those solutions would be political suicide.

So I am not holding my breath.

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