By Bernard Hickey
New Zealand faces two crises and one big opportunity that governments in Wellington and Auckland seem either ignorant of or unwilling to address.
The first crisis is of housing supply in two specific parts of the country.
Auckland and Christchurch now have massive shortages of waterproof and undamaged homes that regular families can afford to own.
The problem is set to get much, much worse in the years to come given the lack of new building happening right now and the population increase projected for New Zealand, and for Auckland in particular.
The Department of Building and Housing forecast this month that New Zealand needs to build around 20,000 to 23,000 housing units a year over the next five years to keep pace with population growth. Meanwhile New Zealand has been building at a rate below 15,000 a year for the last three years.
It could be argued this also ignores the destruction or degradation of large swathes of housing stock in Auckland and Christchurch because of the leaky building disaster and the earthquakes of 2011 respectively.
Auckland itself needs at least 10,000 new homes built each year, yet less than half of these are being built.
The crisis has intensified since 1999 with the introduction of the Metropolitan Urban Limit and the revelations that an entire generation of homes is leaky and will have to be either reclad or rebuilt.
Yet the lack of intensity and debate within New Zealand's political leadership is astonishing.
John Key has focused the government this year on selling up to half of the shares in the state-owned power generators to avoid borrowing more money. The government has virtually ignored the strong analysis and recommendations late last year from its own Productivity Commission on New Zealand's housing affordability problems, which are mostly about a lack of new house building. The Department of Building and Housing's advice to the incoming minister made no public impact. See Alex Tarrant's article here.
Even Auckland Mayor Len Brown seems to be focused on other things, in particular a rail loop. He seems more interested in the underlying infrastructure for the very, very long term than the immediate crisis of a lack of housing.
This crisis is playing out in a variety of ways.
There is, of course, a rise in homeless numbers. But the more obvious increase is simply in the price of homes and rents. Both are rising quicker than the wider inflation rate and price rises outside of Auckland and Christchurch. There is an inevitable reaction to this, which is for young Auckland and Christchurch workers and families, those who are not property owners, to simply give up.
They are leaving the country. Last year there was a record exodus of young New Zealanders to Australia, where at least there are much higher paying jobs with many more choices for home ownership, even if affordability in the likes of central Sydney and Melbourne is also impossible for those on anything like median incomes.
The second crisis is youth unemployment.
Statistics out this month show New Zealand has 83,000 15-24 year olds who are not working or are not in education. The youth unemployment rates for Maori and Pacific Island youth, mostly in Auckland, is simply scandalous at 30.4% and 29.8% respectively. These are Greek and Spanish-type levels. Yet, again, we hear nothing from likes of Key or Brown. There seems little sense of urgency or leadership.
Leaders are supposed to identify and articulate the problems before calling for solutions. We have yet to hear our leaders even acknowledge the problem.
That brings us to a massive opportunity. Why can't New Zealand as a nation take a strategic decision to solve these two crises by training these 83,000 young people as plumbers, chippies, electricians, roofers and the like in preparation for a national scale building programme?
Why can't our governments, both central and local, provide some leadership to fix these problems?
It would be tough.
Government-owned land would need to be opened up and town planners over-ruled. Taxpayer money would need to be invested and lots of it. All these kids would need to be trained.
But is anyone even talking about it, let along doing it?
The problem cannot simply be ignored. Expressed another way that property-owning politicians might identify more with, here's an example of what's wrong with these property markets.
A basic three bedroom 1980s-style family house on flat land was sold in the Grammar zone in Epsom this week after a bidding frenzy of over 400 bids by 90 people. It had a government valuation of NZ$770,000 and was expected to sell for around NZ$900,000.
Instead it sold for NZ$1.339 million or 34 times the median salary for workers in Auckland.
195 Comments
Upcoming events on the world stage forces New Zealand to make massive changes in a number of sectors. Foremost the government should stop megalomaniac economic ambitions in favour of foreign, mostly greedy investors.
The government should aim for full employment in a much more diverse and flexible economy. Especially infrastructure orders should be allocated to NZcompanies and not to foreign workforces.
Government and the NZpublic have to live within the means, without losing sovereignty, security, assets, our environment – our land.
Hang on Bernard...34 times the median salary for a worker in Auckland is pocketchange to the SOE bosses and salary bloated local govt blobs....you seem to think govt is about the people....wake up Bernard....new reality....the people are the pawns on the media board for the 1% to play with....
No worries if the peasants are forced to rent...there is the landlord supplement to take care of them and fatten the landlords and banks....heck that's three sets of votes for one subsidy benefit..
As for building new houses....Bill took care of that with his 15% gst grab...knocked the crap out of the regions....try phoning around to find out the impact....it's been a hammer blow...
I'm not sure what the relevance was for the last paragraph. If buying in that zone for 'free' state schooling, the profile is likely to be mid 40's professionals (children born when their mother was early 30's) buying their second or third house.
I'd wager a good double income and possibly an OE nest egg in there as well. Factor in the alternative cost of private school to interest cost (if you can get a place at a private school) and you have the recipe for spirited bidding. None of the above has much to do with the body of the article. This is likely an isolated incident not an example of the wider market, which by the way has never been broadly affordable in my adult life.
Asia Expat
Many thanks. I agree this is an extreme example, but it is the tip of the iceberg and when that iceberg moves the tip moves most.
Even with say NZ$200,000 of combined after tax earnings that house price represents more than 6 times earnings. There would have to have been major capital gains elsewhere for the finances to stack. That may be the case, which suggests the movement of the iceberg.
I've seen the house. It is far from anything special and even with the grammar zone distortion this was extreme.
cheers
Bernard
Bernard,
Only the buyers could give us a definitive response, however I imagine it's not as leveraged as we expect. There is money in NZ (logically every piece of freehold property has an owner and it's not all mortgaged), it's just not always obvious.
FWIW: I work in Indonesia and the TOTAL country mortgage outstandings here are less than NZD 22 billion, which is 12% of NZ's total. Most purchases are settled with cash. The concept of house price levels relative to incomes is irrelevant here. If many of these buyers chose to buy in Auckland they would find prices very reasonable. It's all relative.
In terms of the main article point, I don't see obvious solutions. Some have commented that even free land may not make development profitable. Maybe existing houses are a relative bargain and we are destined to pass our residual mortgage debt to our children, as they do in Hawaii?
As for youth unemployment, I employ reliable tradespeople at $70 per hour for minor building work and $57 per hour for gardening. Even the latter appears to have no competition from young people and it's not a high skill role. Maybe general entrepreneurship training is needed as much as trade training.
Cheers
From experience some leadership, mentoring and funding achieves a great deal. Set up a couple of builders in North Canterbury over the past 6-9 months. They are doing well and even their mates from aussie want to come back and join them. Yes property development may leave most people here cold.. but the houses are going up and they are growing as young people. Making good coin on development down here for now, they have their heads on straight and will have more options because of it.
The potential in people is there you just have to harness it. Met a lovely girl who has been taken on by a client through a WINZ program and she is flying. Naturally employers don't want to invest and take a risk but the potential abounds everywhere. People have lost the art of taking a calculated risk.
The media are so out of touch with what is going on. Most of the people here on this forum tend to claim to have substantial wealth and experience so then go out and do the right thing and invest...in people.
There are contrasting fortunes in canterbury however the opportunity has never been greater for the young.
Auckland is simply no different apart from the cost of living. Have a client setting up there in a main stream aspect of a profession which is simply not serviced at all in Auckland how weird is that!
Another has open up after the two main competitors, one in Christchurch and the other in Auckland were killed off last year. The Christchurch company won the price war however did not last last the June EQ. Been waiting for the right people to bump into for six months to fill an obvious void. Why did no else do it!!
The spirit of enterprise need s to be rediscovered. Go on take a calculated risk....
"Why can't New Zealand as a nation take a strategic decision to solve these two crises by training these 83,000 young people as plumbers, chippies, electricians, roofers and the like" Nice idea I suppose, but it assumes that the individuals concerned actually want to be trained in these particular fields (or trained at all).
That's not NZ's biggest problem in the building industry Elley. It's the fact that a great deal of the building work just goes to Fletchers, they refuse to pay a builders and contractors decent salaries which is why most have gone to Aussie instead of CHCH. The government/Fletchers are now looking abroad for trades people hoping that they will except NZ sunshine wages based on some perception that they will see NZ like a tropical island oasis!. Won't take them long to find out the real cost of living in NZ though will it and where all there hard earned wages will go
In stead of building more roads in the billions the government should spend money on people - the intellectual capital.
Worldwide events will dictate the lives of many- unemployment and disorientation, youngsters in particular.
The government with the private sector together should train NZ youngsters in 12 weeks - life skill, team- and community work. To be prepared for the challenges in life/ jobs, basic training of the wider population is essential for societies.
Here an example: http://cheaphealthygood.blogspot.co.nz/2008/08/life-skills-101-curricul…
Why would you need a rent subsidy? Go "self-employed" get $30 odd an hour cash and dodge the tax man.....seems to be fairly common, bugger off to OZ if he gets close....and yes I would think from the "builders" ive met Friday and Sat nights state wouldnt be an issue.....almost normal.
regards
Good on you Bernard. Keep up pounding away and something will happen.
The house I am in is on a worthless piece of land on a hillside. Previously it was used for gorse production, a well known non economic activity. Once blessed with the title of "house section" it becomes worth $250 000 ($350 000 three years ago). This is clearly stupid. There are costs in turning worthless land into a building site; sewerage, electricity and roading and so forth, but surely $30 000 plus fees of $20000 would cover it (it is on an estate in Nelson).
Where is the political will to sort this out? Why are National wasting their poltical capital on projects that will give us a Green/Mana Party dominated government at the next election (and the economic stagnation and decline that will follow)? What happened to their political nous to pursue policies that will stick, to make progress at a rate the bulk of New Zealanders can go along with? Have they lost the plot? Has success addled their brains?
Bernard believes he can persuade Bill and John to give Bob the builder some work...fat chance Bernard...chch is stuffed and the capital flight is well underway...the rotting rubbish rots and who gives a rats...tax take heading down deficit heading up...no worries just borrow more of Bernanke's toilet paper or even Mervs.
Bernard, best you watch what happens in Greece cos that's gunna be us pretty soon.
Word is out the ratings liars are set to crush the banks every which way leading to rising rates...guess what that'll mean for the Kiwi serfs.
Have the nats lost the plot?
What was the plot in the first place?
When I voted them in for their first term, I thought they had promise. They seemed to talk to the middle class. They talked big about turning around the exodus to Aus, and sorting out the socially and economically draining housing cost issue.
Well over three years later, and they have not acheived any meaningful policy gains. Their returns on RMA / planning reform have been meagre and ridiculously slow. The productivity commission inquiry into housing affordability was another joke, given how much evidence exists to develop new policy.
The harsh reality is, doing things like freeing up planning conrols will help, but will only partly solve the issues.
The costs of development are so high now, that regulatory reform will only make small differences round the edges. In most parts of Auckland, medium density is not feasible due to building / development costs. I've worked on numerous housing development schemes in the past 2 years, and none of them stacked up, because the units (typically 3 bedroom terrace houses circa 120 square metres) would usually need to sell for circa 25% more than standalone houses on full sections in the same neighourbood, once you've accounted for all the building and devleopment costs, plus 15% GST, plus profit margins etc. Doesn't take a rocket scientist to conclude that the demand for compact 3 bedroom terrace houses will be crap when you can buy a detached 3 bedroom house on a full section in the same neighbourhood for 25% less.
Developers are often heard saying now that even if they got land for free they would find it hard to get development to stack up.
So unless the govt is prepared to do something radical like cancelling GST (and they won't do that) on all new housing development, then there is no show for any meaningful private sector delivery of housing in Auckland. And even if a development stacks up as feasible, there is still the issue of obtaining finance.
As Bernard alludes to, and as I've stated here recently several times, the govt is going to have to start delivering housing again, because the private sector is going to deliver only a fraction of the housing needed. And the govt needs to give more funding to developers like the NZ Housing Foundation doing shared equity development.
Doing this would relieve the housing issues, and would create jobs in the housing sector.
It would probably need a rise in income tax.
I'm sure some here would object to that. If so, my question would be what would you do? And don't tell me that changing the planning rules is the silver bullet because it isn't. As I stated above, it would help as one of a number of new approaches.
And what, may I ask, are Ministers Heatley and Smith doing for their pay?
(Edited for language -- the sh.. word / bernard)
This was discussed on a previous thread and you never gave a reason why the government (who operate in the same building industry as the private sector and who are notorious for making buildings expensive) would suddenly be able to provide cheaper housing than the private sector - something they have never done before.
You also gave example of 'affordable' new tract houses in Adelaide to demonstrate how much cheaper houses were to build there than here, although they were were actually more expensive per metre than the Auckland equivilent?
"http://www.devine.com.au/house-and-land-packages/south-australia.aspx has an 'Orlando 179' and land package for A$403,900.
A similar group build 30-45 mins from Auckland...
http://www.trademe.co.nz/property/residential/for-sale/auction-434299079.htm is NZ$600,000
The NZ one is 20% more house and 35% more land. So the Australian one at same size would be A$484,000 (based on 20% more house) or A$545,00 (based on 35% more land). In NZ$ that would be $624,000 to $703,000.
So actually the Australian house has more expensive metre rates than the Auckland house.
In total terms it's cheaper because it's allowed to be smaller - so obviously the cost is in the planning requiring big house/land not the building costs which from your example are higher."
Bob
Firstly, I never said that the govt would necessarily deliver houses more cheaply.
But I was focussing on govt rental housing rather than "to buy". Having said that, partnerships with shared equity providers can help with ownership.
Also, govt does not face the same funding barriers of the private sector - provided they get their finances in order, and reprioritise
Re: the Adelaide exmaples, you need to look more carefully, there are house and land packages through that company for circa 300K. Also, its a mistake to convert the Aus build cost to NZ dollars. What matters is what the houses are costing relative to local incomes. The Aus dollar might be near one NZ dollar in a year or two anyway, like it was few years ago - the currency is volatile
But I think we are in agreement that Auckland needs to loosen up its planning controls to Adelaide standard. If you allow 250 sq. m sites in Auckland with 50% site coverage then you can start to see 120 sq. m homes sold in even good areas for say $420 - 450K. At the moment when you need 400-500 sq m minimum in most areas then with the larger sites that 420-450K price is more like 550-600K in good areas
But this is only really applies to small incremental infill that is not going to dleiver that much housing.
You argue that Plan Change 2 killed apartments in Auckland. I think thats only one part of the jigsaw. I think the provision of small apartments in the central area reached oversupply anyway, so regardless of PC2 I don't think many more would have been built. You also have to remember the apartment slowdown coincided with the GFC and the death of developer funding
So you've changed your assertation that "The govt should be building more social and affordable housing" to something like the government should provide more housing even though it won't neccessarily be cheaper?
If I look at cheaper house land packages the metre rates are even higher. You are claiming that these buildings are cheaper in Australia than NZ but they aren't. It's got nothing to do with affordability relative to income. Your claim was that building in NZ is more expensive than Australia. But in your example it isn't. It is the townplanning that makes our houses bigger and therefore more expensive.
Yes I agree that higher densities would mean cheaper housing.
Bob
We'll have to agree to disagree on the building rates.
What we share though is a view that more flexible planning controls, especially around minimum allotment sizes, will help housing affordability in Auckland, as in Adelaide.
A strong reason that the "Aspen 131" house on the Adelaide website can sell for 288k, is that the planning regs allow a site of 233 sq m to be created, and allow a house to be built on that small allotment as single storey.
To be honest though, I don't think the developers would have done this of their own free will. I suspect the creation of smaller allotments to allow for more affordable housing was driven by Council, who must mandate that larger developments provide 15% of units as "Affordable". I bet if they weren't mandated to do this they would have just create the standard 350 - 400 sq. m allotments with houses selling for 400K plus. I think Auckland / NZ needs a similar policy around mandating affordable housing. Although, one would think that there is a big demand for affordable housing so the market would provide it. But they don't seem to, I suspect they can make more profit by building bigger and more expensive houses, so they do so. So its not just planning rules that drive that sort of behaviour, its also profit motive
Although the Demographia survey shows Adelaide is almost on the same plane as Auckland, with median multiples of 6 +, the examples referred to show that new housing can be bought in the Adelaide market significantly lower than the median house price in Adelaide (with the median house price in Adelaide being around 350K I think).
Where in Auckland can one buy a new detached 3 bedroom+ house (on even a small section) for significantly less than the median house price of around 450K, within 30 minutes of the CBD?
Anyone?
Can't find the Aspen 131 package but assume that means 131sqm costing A$288K therefore A$2200/sqm dividing package house size versus the Auckland example of NZ$2800/sqm (A$2150/sqm). We'll have to disagree that it's lots cheaper to build in Australia.
Developers make more smaller the building gets so generally will build as small as allowed (smaller = cheaper = bigger market & smaller land cost per unit). That's why there's small apartments built in the CBD. Can change in expensive areas where there's a big premium payed, but this discussion is about affordable.
You are probably aware that I have been researching this issue for years.
My challenge is, can anyone show me any city in the world that has strict fringe growth boundaries, where the BASE land cost inflation throughout the entire city has not been so high that it is absolutely impossible to restore "affordability" by trading off size.
If you investigate cities in the "Demographia" survey, you will find that EVERY city with stable, affordable "housing prices" ALSO has very LARGE average section sizes in new developments. But every city with an affordability problem, has very SMALL sections in new developments, that are several times the price of the large sections in the affordable cities.
If you "net out" the costs of development and even the fees and levies, the inescapable conclusion is that the BASE land cost is inflated by dozens or even hundreds of times.
In affordable cities (mostly in the USA, and indeed most cities IN the USA), a half acre section might be $35,000 and a 1 acre section might be $40,000. The extra half acre adds just $5,000. The contribution of BASE land cost, is about $10,000 per ACRE.
But in unaffordable cities, whether in California or Vancouver or the UK or Australia or NZ, one eigth of an acre might be $250,000 and one quarter of an acre might be $350,000. Half an acre might be
So the "costs of development", fees and levies, etc, is around $100,000 AND the cost of LAND is about $800,000 per acre.
So sure, the fees and levies add something, but it is not honest to the home buyer to make claims like "the fees and levies are what makes your section in Auckland $250,000 compared to the $40,000 section in any US city that is not growth constrained".
The fees and levies might have added $70,000. But the inflation in the BASE cost of LAND means that the same SIZE section would be $900,000 in Auckl instead of $40,000 (or $110,000 if the latter had $70,000 of fees, levies, compliance costs, etc).
The NZ's home buyers have got the cost DOWN to $250,000 by "trading off" a whopping 7/8 of the section SIZE relative to the affordable-market city. And it is STILL more than DOUBLE or TRIPLE or even more, the price of the ONE ACRE section in the affordable city.
The planners tell us that they are planning affordability into the system by reducing "excessive" land consumption.
They are either lying or terminally incompetent and should be sacked now before they do any MORE damage. Kiwis are being SCREWED and are taking it lying down. Perhaps the fact that the sizeable constituency of already-home-owners think they DESERVE the "wealth" that their 100%-inflation-in-10-years property has "earned" them, especally if they have used it as an ATM for cruises and cars and wide screen TV's.
And screw the young, they moan too much and want everything for nothing.
I THOUGHT Kiwis prided themselves on "fairness" and also their "common sense" relative to "stupid Yanks" etc. SORR - REEEEEEE, Kiwis. WAAAAAAKEY, WAAAAAAAKEY........
But the economic value of that land for agriculture is probably $50 a year per hectare if it is dry gravel (that is a guess, but it's easy for a valuer to work out). So where does $200 000 come from? That is the real question that Phil Best is trying to get you to ask. It seems important to me.
I lived in Texas for a while and a basic house that's a bit rough in a nice little town with the equivalent of a Polytechnic costs US $25 000 to US $35 000. In Nelson, a nice little town with a Polytechnic, an equivalent house costs NZ $250 000 to $ 300 000. This is complete madness to me.
Well, I suggest you move back to Texas then Roger because how do expect houses to ever cost that price in NZ unless they fall into a state of dereliction (as was/is the case in Southland, Invercargill, Wanganui, Dunedin etc etc).
You can still buy in Bluff or South Invercargill under $50k occasionly. You can buy in NIghtcaps, Kaitangata etc for $30k any day of the week.
Prices are only at those levels due to decay, obsolescence and general lack of anyone wanting to live there.
You are in cloud cuckoo land if you think Canterbury land is bare gravel worth $50 per year per hectare (ie a market value of maybe $500-1000). For starters if it was bare gravel it would probably be worth 100 times that as a quarry, secondly 99.9% of Canterbury's plains is highly productive land worth $10-40,000 per hectare depending on various factors (intensity, irrigation etc).
Land on the city boundary within development outlines at $200,000 per hectare is cheap considering prices which are paid for lifestyle blocks much further out of town (generally $50-100,000 per hectare).
Philbest needs to get realistic. It's not Texas, farmland is worth much more in NZ than he thinks it is and prices aren't going to fall much because of a huge surplus if sections - take a look at oversupplied areas like Central Otago/Lakes.
Prices only fall due to dereliction ie Texas, Rust Belt, Inland Empire etc etc.
"Dereliction" he says, like in Texas, he says.
Texas has the only cities in the 1st world that are growing as fast as the top 30 cities in the 3rd world. Yep, sounds like dereliction is responsible for low prices, like in Detroit.
Detroit has houses half or a third the price of Texas.
British cities with decades of high unemployment, worse than Detroit, still have seriously unaffordable housing - thanks to strict urban planning and massive rackets in "planning gain".
The price of farmland all over the world does not vary by so much that it renders it impossible to get housing median multiples down to below 3. We are talking about farmland ranging from $20,000 per acre at the absolute max, down to almost nothing. This does NOT explain why sections raw land price component can cost well into six figures per acre more in some markets.
"Urban echo values" or "option values" force the prices of farmland up when nearby cities have strict planning that hands semi monopoly powers to land owners with a stroke of a pen. All the land owners need to do is wait for the growth boundary to reach them, and their gain over the price of farmland is hundreds or thousands of percent.
It IS possible to eliminate "planning gain" altogether - if anyone can buy a farm anywhere and build houses on it, there is not going to be any "planning gains" for anyone.
The loudest complainers about my arguments, I suspect to be land owners shunting in their rompers about the possibility that the regulations will be eased, because they KNOW what it will do to the value of their speculations. They are NOT as stupid as their own arguments.
I guess problem I have with you and Hughs arguement is that it goes:
1. cheapest housing is best/most affordable
2. the cheapest housing is in Texas
3. the urban form of Texas is unregulated low density sprawl
4. therefore low density urban sprawl provides the cheapest housing
5. therefore we should regulate for low density urban sprawl to get the cheapest housing
Firstly I disagree that the cheapest is neccessarily always best. In economics cheapest price is information - the product is in oversupply. More expensive pricing informs that that product is undersupplied/ more desirable. Cheapest takes no account of externalities. Cheapest capital cost is usually related to higher running costs. Cheapest can be a disaster - cheapest cladding design/systems weren't the best in the leaky building crisis - they were the least affordable/most expensive. Cheapest is not neccessarily best or even most affordable.
Secondly saying Texas housing is cheapest is arbitary. The cheapest housing in Auckland is CBD apartments. Therefore closest to home it's the highest density that is the cheapest. You say, but you don't like them - however your arguement is that cheapest is best, do you really mean that the cheapest housing typology that you are personaly comfortable with is best? There is expensive or cheap high density (Manhattan versus Auckland CBD). There is expensive or cheap low density (Hamptons versus Texas). Your claim of a simplistic link between density and affordability is dubious.
Actually my argument is that there is a massive mis-allocation of capital in NZ.
We have riduculously overpriced housing. I sold my house and now rent (which costs half as much).
I'm not an economist, I'm an entrepreneur. I live on my ability to allocate capital effectively.
The ONLY arguments against Texas' urban form are post-rational enviro-religious arguments. There is EVERY justification for New Zealanders of all people in the world, to have a sub-$50,000 acre each if they want it.
"The enlightement" meant we were quit of the medieval papal theocracy. Now, we have an enviro Taleban theocracy that is far MORE anti-rational.
As for "CBD apartments" being cheaper, have you seen pictures of the "holes in the wall" accomodation that some Japanese cities have? Why don't you suggest young couples lower their sights even further re housing? Who are you to dictate what is and isn't adequate and equitable?
Well done - when logic doesn't work calling the opposition post-rational-enviro-religious-eco-taliban is really convincing.
Why don't you add in satanist, nazi commie and an extra enviro as well? Your theories would be much more convincing if you labeled anyone who disagreed as a "post-rational-enviro-religious-eco-taliban-satanist-nazi-enviro-commie"
so, above I told you what SHOULD be done
Now I'll tell you what WILL be done.
The Nats will make some fairly trivial RMA changes.
That's it!!!!
So, in Auckland at least, we'll see construction struggle for years, and rents will keep edging upwards. This will drain household's disposable incomes, so we'll contnue to see retail and hospitality struggle.
Auckland's GDP growth will be anemic, and the city will struggle to attract teachers, nurses etc. These professionals will be increasingly drawn to the regions, or to Australia.
Matt
And on the first of March new building regs come in so that all consented works will require a "Licensed Building Practitioner", how will that improve the situation? all in order to "protect" the "consumer". Reminds me of James Kunstler saying if you do one thing do not let your government call you a "consumer".
This also stresses the concept of public/private partnerships because "planning" has always been a part of a public/private partnership, and if the public part gets it wrong then we are all left dealing with the consequences, i.e. leaky buildings, the public regulators let loose the ability for private developers to build perfectly regulated failures.
So what is the solution? I'd zone sections of Auckland for development with guidelines for density and rebates for delivery, i.e. your council fees depend on the delivered purchase price and density, with criminal charges bought for any fiddles (proxy selling etc)
This way planners can encourage development rather than restrict and rely soley on the taxed profit motive to get the desired outcome.
Neven
If you go to a surgeon you want someone who's reasonably competent and qualified doing the job.
When you buy a car you're willing to pay a premium for something that's been properly designed, reliable and is safe to operate.
When you're getting a house designed you want the cheapest twit who's willing to do the worst job?
Surgeons, well my friends all had to pass exams where 99 or 100% was needed....ie do you really want someone opening you up that only knows where 52% of the bits are?
I'd suggest not.
Car's well just about any car sold in the 1st world these days is pretty much "properly designed, reliable and is safe to operate." its amazing really.
House design, no I will design my own thanks...Im free cant get cheaper than that....I know what I want in layout etc...do you really want to employ someone who charges 4% fee so adds as much in as they can to get more $?
I'd suggest not....
regards
...and that's why we have a leaky building crisis and so much substandard housing.
How come you want experts to do your surgery and design your cars but go DIY with your house which is a much bigger investment?
Why don't you also design your own cars and do your own surgury? Those surgeons add in all sorts of unneccessary costs you could save heaps. If medicine was deregulated doctors would have to charge less as they would be competing with anyone who wanted to have a go - like vets and nurses and the guy running the dairy. The 'market' would control quality because people would learn to go to people who had a good reputation.
Bigger investment? Like what planet do you live on? If a surgeon screws up Im dead...if the house has a mistake Im still alive but a bit poorer...there is no comparison.
I go DIY because Im one of the so called [ex-]professionals, except Im old fashioned in my designs, and works, the new regs sucked. I dont have fancy features which shove up the cost just so it looks "nice" Im a purely functional type.
Surgeons are in effect a one off function. but you can get public health surgery, in effect thats the closest you can get to commodity pricing.
Cars are a commodity.......the design spead over many units is a commodity price..
Housing can be a commodity design.......in fact I think builders generally re-use a design they have....so its pretty close to commodity in design aspects, it certainly can be.
Plus there is a difference between DIY and building a house......the former pretty much works within the original design....the latter is a new design....
The market cant control anything, you assume that everyone has perfect knowledge, that simply isnt the case.
regards
When did "quality standards for cars" actually drive the rate of improvement in cars? Did a govt safety committee somewhere invent the airbag? Did a govt energy committee somewhere design the first over-50-mpg car?
By regulating housing so heavily, and especially by driving up the base price of land so much (one eigth of an acre costs $250,000, of which $150,000 PLUS is "base land cost" compared to a base land cost in non-regulated cities being close to the farmland value of under $10,000 PER ACRE) all innovation in housing construction is being stifled.
There is simply no room for experimentation when the SECTION is going to cost you quite BIT more than a much bigger section AND HOUSE costs in a fair price city and SHOULD have cost YOU - if it wasn't for the eco-Taleban in planning departments.
You're confused. This discussion is not about the Resource Management Act, town planning or affordable housing. It's about the Building Act 2004 requiring from the 1 March 2012 that people who design the structure and waterproofing envelope of houses and small apartment buildings are qualified to do so. You may not have noticed but there is a leaky home disaster/crisis.
Allowing cladding systems to be selected and designed purely based on the lowest initial cost has proven to be an utter failure - not cheapest in long run.
Bob
I'd suggest you do more reseach on the "leaky housing crisis". It was a combination of three things
1. Fletchers & Carters gang tackling the government so they could seel kiln dried timber and therefore bypass the timber treatment industry that they didn't control
2. Bill Porteous's grand building design code
3. A love for the monolithic look combined with Hardies changing to a wood fibre based board
Cheap had nothing to do with it as you could now build a very expensive disaster, unless you mean by cheap the ability of the giants of the construction materials industry Carters/Fletchers & Hardies to make for money
Poor old Bill, I knew him from his time at Victoria University.
Unfortunately he was very defensive on any criticism of building construction methods. A lesson for everyone - never argue something is successful when it isn't - also never deny there is a problem when something fails.
Why?
1. untreated timber was introduced because it was 'cheap'. Cheaper than cleaning up the timber treatment plants which was the alternative
2. NZBC was introduced because it was going to make buildings cheaper - performance based building code rather than a prescriptive was going to give us all sorts of innovation and new cheaper construction methods.
3. 4mm 'hardibaker wood based FC sheets was a 'cheap' replacement to absbestos FC.
Most causes of 90's leaky building crisis stuff leads back to trying to make buildings cheap. A house that's expensive just because it's big is still cheap.
Bob
Strangely price is the main determiner is a market economy, Yes they bought in all these things to benefit the 'consumer' but they didn't did they? Are the material companies being held liable for their inferior products? not i said the fly, I think your focus on cheap misses the point, we have standards for performance and a legal system that allows for recourse, so what happened? They ran!, they hid! and even the government that is supposed to act on behalf of of its citizens set the legal dogs on us, so your taxes paid lawyers to defend an action against the BIA so that the liability was not pursued.
So by bleating cheap repeatedly you are in my opinion trivialising a systemic failure which has and continues to have only consequences and no solution.
I completely don't get what you're trying to say. There seems to be no logical relationship between your post and mine? Hardies have expensive lawyers, govt dodged their responsibility etc. - that's what's happened since - not the cause? What are you actually saying?
Oh come ON, regulations re building has forced the price of raw land in sections up by well into six figures per acre?
The Commission into Housing Affordability disaggregated all this stuff.
You are just thrashing around showing either your ignorance or your vested interests.
Please explain your theory on how regulations requiring use of treated timber "forced the price of raw land in sections up by well into six figures per acre".
I'd like to know exactly how allowing untreated timber in house construction would reduce the price of the land the house is on? You are correct in that land with a rotten leaky house requiring demolition is worth less than empty land, however arguing that all houses should be leaky and rotten to reduce the price of the sections they sit on seems a bit silly.
If you have bought a house built to the standards the Govn sets, designed by profesionals to those specs, built to those specs by qualified builders and inspected by council employees to make sure it conforms....just why isnt there a liability?
Of course as you say at the other end is "me" who will end up paying even though I am not responsible for those awful standards...and awful they were/are...
It comes down to professionals pushing the Govn to relax standards as they knew best, they however have not been left holding much of the costs...I think they should be myself.
regards
If you had sure, but don't forget...
NZ buildings are not designed by professionals, not neccessarily built to spec and are not inspected by professionals.
A professional is someone who is does a job that no one else is allowed to do unless they are qualified to do it properly. This enables the professional to charge enough money to do the job to the appropriate standard (and take the blame if they don't). 1 March 2012 will be the first time ever there will some semblance of professionalism in the NZ building industry. Up until now anyone that could wield a pencil could design, lodge for a building consent and build. Council Employees are still responsible for inspecting. They don't charge enough to do it properly and undercut anyone who would do it properly.
In other countries you need a professional to sign off drawings and inspections - councils don't inspect. The designer/inspector can then charge enough to do it properly and take liability.
In NZ you don't pay designers to inspect your project because the law requires you to pay council to do it - why pay twice? and if you had a choice you'd choose council because they'd be much cheaper.
Im not sure where you get this from, last time I did major DIY work I had to get a structural engineer to do one bit....then the Council insisted the engineers were responsible and demanded completion certs for the entire job, naturally the engineers wanted triple the original agreed price....my $400 fee went to $1100. This was even though the council had signed off on the consent and drawings before hand as Ok...so in the end I had to pay both fees as the council insisted they also turn up but would only sign off once the professional had...so inspections turned into $185+ an hour events...like no way do I do any more such work....its insane.
regards
Council only approved and signed off building consent based on the structural engineer designing, checking and taking liability for the structural engineering part. Council did not inspect the structural engineering part - they just made sure the structural engineer had.
Structural engineering is a profession - you are not allowed to do it without being qualified and registered. The structural engineer takes liability and charges fee accordingly.
Designing a watertight envelope is going to become the same.
Would you prefer that anyone could do structural engineering? You could have then got someone to do it for $10/hr. Then when it failed you'd get all upset and say it was the governments fault.
It is stupid to have regulations and inspections provided by one institution that does not want anything to do with "liability", and insurance provided by another institution altogether.
I am frankly surprised that the insurance industry hasn't been clamouring to do the lot all along - can any experts on here come up with any reason why? After all, the buck will stop with them in most cases.
The latest iteration of "NZ Building Code E2 - External Moisture" is currently 194 pages long. Prior to the Building Act of 1991 when (a much shorter) E2 first appeared the equivilent document was ??? According to your theory there were more standards prior to 1991 so perhaps you could enlighten us as to what this presumably much heftier and more restrictive document was?
Steven
Before the current 'standards' there was a venerable document called NZS 3604, about 100 pages long and you could build a damn fine house from it., get a copy
And yes there were a lot of great stucco buildings in NZ, a lot in Napier where 'spanish mission' was one of the styles adopted with Art deco after the 31 earthquake, a lot of fibre cement houses were also built in the 1940's after the war when they were cheaper than a WB house due to lack of Timber in pre pinus radiata days and these still exist.
Myself i was bought up in a stucco'd cottage in HB and we never had an issue (stucco is a decorative finish),
So i disagree its not the 'type' of building is a major issue though in auckland where it is temperate the rainfall is higher, I can see major downside in not having eaves, Though this can be blamed on planning restrictions (lightlines) and the foolishness of the purchasers,
The current crop of regulations will do nothing to impoved the situation IMHO, in fact regulating the young homeowner out of construction is a major retrograde step, the power is now squarely with the construction corporates you have no interest in making housing affordable.
Neven
The building code and NZS 3604 are two independent documents covering essentially different areas. (Of course building must comply with NZBC B1 but this is not the type of document 3604 is).
From memory NZS 3604 was undated in 1991,1998, 2004 and 2011, but the fundamentals are virtually the same in all documents.
The big change was in the NZBC E2/AS1 in 2004 and the code for timber treatment.
Lack of eaves is a non issue, it is the separation of permeable claddings and dry interiors and framing that is important. A 2 storey house with eaves only on the first floor has more exposure to rain (on the walls) than a single level property without eaves, yet we don't see much failure on timber weatherboard homes over 100 years old built in this style. The choice of cladding material and installation are more important issues than eaves.
Chris
I agree to a point but the main function of eaves is not weatherproofing, but solar design. though I do think in a lot of single level houses they do mean the waterproofing at the top of the windows doesn't get stressed. I've seen quite a few building where the wood joinery would leak (an do when the gutters overflow) but don't because of eaves, its amazing what a strip of galv or a groove can achieve, it seems to me that mocern building is based on a lego & silicon mentality
I also find the current obsession with a watertight envelope a concern, since claddings need to provide egress as well. AFAIF we allways had separation between permeable claddings, brick ties, the problem was we were not expecting some claddings to be as permeable as they were and they took away the building paper, but i'll defer to you on this
Neven
We still have NZS 3604 and it is still used daily as an acceptable solution for NZBC B1 and B2 - however it is no longer the 100 page booklet that it was in 1991 - NZS 3604:2011 comes in a hefty ringbinder and is 100's of pages.
I was trying to remember what the equivilent of E2 was before 1991? There mightn't have been anything - no rules at all?
I'm in that boat. Returned from the UK with good skills and experience, most the jobs are in Auckland, but I can get a similar job in a provincial city for maybe 10k pa less. Looking at the Auckland housing market, rent, congestion etc my partner and I are going to just move to a provincial city where our earnings are going to go that much further. Its an oxymorn, earn less to have more, but sadly in the case of Auckland, somewhat true. And with a percentage of my income coming from offshore, it makes little sense to be based in Auckland and incur greater overheads.
A very good video Iain. Well worth watching. If if the ideas in it were implemented what effect do you think that would that have on the price of houses? If Banks were not allowed to print money at will then I would think the prices would go down. I think there are too many people with a vested interest in the status quo for it to happen.
Printing has nothing to do with our present housing bubble...take away the Alan Greenspan "put" of extremly low interest rates and put in a CGT all 20 years ago and the bubble would have been way smaller....
So you dont need to change the monetary system....just stop its political abuse.
regards
Like hell I will.....I paid as much down as I could 18 months ago.....more debt is plain nuts....
Im perfectly happy to sit here and watch the likes of big daddy think they will make a pile....pity when it goes wrong he cant be held truely liable, a debtors prison is necessary IMHO, and those will come back I suspect....
regards
But but if we don't borrow billions from the nice friendly banks and compete to buy the boxes of shite...why the whole economy will collapse steven...it would ....and all because of you....you rotten sod....we suffer because you won't do something that's plain nuts....!
I for one don't believe for a moment that a gold standard and no monetary expansion at all, prevents price hikes in anything in which the supply is being racketeered.
The money merely has to come out of other things rather than be newly created, that is all. The "tulip bubble" and many of the famous historical bubbles happened before the era of faiat money.
Run a racket in land and housing supply, prices will inflate, wealth will be transferred, and people ripped off. End of story.
Even with no credit at all, prices will go up faster than first home buyers can save money. This is just basic econ 101. I don't know how so many people get away with putting 100% of the blame on "other causes" rather than "urban plan" racketeering. This is like another Prohibition era, only with housing supply rather than booze. It is crooks who make big money, while honest distillers and property developers are shut down, and decent people just wanting a drink or a house have to pay through the nose.
I'd just like to mention these "training programs" wouldn't necessarily need to be long - if at all - in most cases.
Much of the skills needed for construction can be learnt on site. Of course, electricians and plumbers ect might require more training, but we don't really want to put 80,000 kids into a profession NZ only needs 5,000 of, for example.
At least half of the 80,000 kids could just start doing building labour. They'd quite quickly learn the basics and by the end of a year or two, should have gradually progressed and learnt a lot of new skills.
Building foundations isn't rocket science, nor is shifting dirt, erecting frames, and so on.
There would have to be a near calamity in this country for houses to drop by that much goNZ. We went to some open homes today and the agents talked things up a storm. Buyers are utterly unwilling to sell for less than they bought for and it will take a whole lot of job losses and mortgagee sales to shift prices south.
The near calamity will be a calamity but it will come from abroad and that will be job losses and banks calling in the PI loans as they panic. Sellers (I think you mean), yes thats true and the few I know who want to sell their $500k house are now renting it because the best offer was $360k.....minus real estate agents fees of course...and as long as interest rates are really low, that makes some sense....if you think this is a short term event....
If like me you think its a 20+ year event and prices will never get back to 2007, well then selling would be sensible..but then greed and belief in voodoo economics trumps fundimentals...
good luck ppl...
regards
I do not believe that any country right now where median multiples house prices are over 5.5, (with some regional markets being well above) will NOT have a reversion to under 4.0 some time in the next 20 years.
Japan took 20 years. Ireland took 2.
I believe that it is impossible for a nation to sustain levels well above historical average, because it is a COST to the productive economy. It is only a "boost", TEMPORARILY, to the consumption economy; then it is all downhill from there, with household discretionary income gutted to the extent that GDP is materially lower.
The quicker prices get back to sane levels, the sooner household discretionary income can be restored, and our whole economic future with it.
Take a look at the graph on page 5 of THIS:
And look at THIS:
http://www.macrobusiness.com.au/wp-content/uploads/2011/09/ScreenHunter…
This is the sort of analysis that SHOULD be common, but it is rare. Note that the cities in the USA with LOW “discretionary spending” are the ones with high property prices?
What do you think this does to the various cities economies in the next few DECADES? It’s the OPPOSITE of the “boom” phase where people are spending like drunken sailors using their houses as ATM’s.
And there is little “respite” from this, regardless of low interest rates, because the size of the loan makes the biggest difference, not the interest rate. In contrast, when interest rates were high and house prices were low, every interest rate fall seriously stimulated the economy because of the effect on mortgage “re-financers” discretionary spending.
yep, things have certainly stabilised / strengthened for house prices.
I think Bernard is still seeing a 15% drop - although is not specific on timing
I think some regional areas might fall a bit more, but Auckland? It will edge upwards nominally,staying flattish in real terms, even with continued economic weakness, by virtue of abysmal supply response and ongoing govt inaction.
The only chance the Auckland market will crash is if Europe really disintegrates and China and Aus slump big time. Not likely, but certainly possible, maybe a 20-25% chance?
John Key and his property loving mates in high prices will be delighted, of course. The wider economy remains sickly but who cares when the elite are doing very nicely thank you. Its all very feudal. Of course most of the public don't see through Key, although maybe the tide is starting to turn.
99+% chance all the above will slump....the only Q is when....its managed to last 12 odd months past where I saw it....maybe 12 more? 24more? but its a when not an if.
15% drop....way worse IMHO, 10%+ for 5 or 6 years when the 2nd Great Depression starts, so min loss of 50%....and Im thinking 75% is probable or my best guess....
regards
Firstly, Bernard should declare a 'vested interest' in more folk being interested in interest on interest.co.
Big picture, it's a good debate to have. Len Brown would be a good interview subject, Bernard. If he's playing the long game, I'll bet he knows what's coming (growth-forever ldeologues don't think in terms of rail).
Firstly, housing has to be payable-for. That, looking forward, says it won't be conventional construction. I suggest we'll see standardisation, and things like bathroom modules which arrive on a truck, just with water-in/waste out fittings, and probably all kitchens will be back-to-back with them, meaning kitchen water/waste would feed in/out of the bathroom module. It doesn't need massive training to do that kind of production-line work. I also expect panel construction, it's lighter, less material and quicker. These will have service cavities at standard heights (above-skirting and above-bench probably). Again, production-line stuff. Our 135 sqm house panels took 42 person-hours to erect, and that was an amateur, first-effort/steep learning-curve effort. Again, not much training needed.
About land, yes, but Bernard is as wrong as HughP et al, in ascertaining what land. Here there are two valid approaches, the 'Keep cities tight/more rate-take per service-metre' approach, and the 'sustainable long-term' one.
Only the latter is worth appraising/adopting. Track housing is out, in that one. So too are apartments. So too, is population increase and immigration. A good book is Tim Flannery's 1994 tome "The Future Eaters". (Some of us have been thinking about this for some time....)
So the land being made available should be the BigAg stuff currently covered with cows. Cut it into sustainable-area lots, and cluster them round village hubs. The area (section size) will no doubt be site-specific, but will be dependent on food-growing ability, and on effluent-disposal capability. My guess is between 1 and 5 acres.
I don't have much problem with that helpful comment, apart from the underlying Malthusian premise. Hopefully your idea includes not letting the planners and their fellow racketeers in land banking, keep the BASE LAND price per acre up at $800,000 rather than down at $10,000 where it should be?
"Get" that last point like your fellow doomsayer Steven finally did after years of my repeated patient explanations, and we can definitely work together, even if I don't believe in Malthusianism, period.
".....Bernard is as wrong as HughP et al, in ascertaining what land....."
You are wrong in assuming that the free market wouldn't simply create the outcomes you think need to be "planned". It is "planning" and the kind of people running it, that is actually leading us into disaster. You are quite right about apartment living. The "planners" are actually the worst enemy of your quite helpful suggestion above. Try your luck with them.
Try Bob Parker in ChCh, see whether he's prepared to permit development like your suggestion even with people in his city effectively homeless. As for Len Brown - is your suggestion for an interview of him, to seek pearls of wisdom, or to give him the roasting he deserves?
Until the 'free market' is decoupled from fiat finance, you have to restrict by planning.
That's because at every given moment. what is owed in the fiat system is more than has ever been owed, repaid or earned. That is what distorts things, as it demands growth. That's a more controlling force than any planning Dept.
None of these players - your type, the banker types, the planners, the economists, nor the caring folk - are looking at what is coming. We'd be overrun here at our place with young folk wanting to stay and learn about sustainability, if we took them all. The understanding is obviously coming from the bottom up, and from the intelligent down. Not surprising, really. Only the dinosaurs will be left, at some point.
Don't make the mistake of using a name-call to eliminate something you don't like from your psyche. It still takes energy to do work, the laws of thermodynamics don't alter, and this is a finite planet. Name-calling won't change that, any more than blind belief in a cobbled-together book can change the fact of evolution.
You're right - prices will reduce, relative to incomes. Can't not. That won't particularly help your narrow-focus putch, though.
Smart man. Understood energy, his passive solar stuff was way ahead of time. The Jacobs house was WW2 era , and Ithink he did them a second one - seem to remember '49 but maybe wrong. Partial curve, stone wall thermal mass, it was all there. He wouldn't have designed it, if he thought it wasn't needed - which makes him very smart indeed. That's contemporary with Hubbert, and there weren't many Hubberts!
Why do you find it so difficult to grasp that 1-acre ideals are rendered IMPOSSIBLE by the planning rackets that I describe, and you inexplicably keep defending based on total irrelevencies like "laws of thermodynamics"? You would defend a regime that racketeered BREAD and drove the price up, on the pretext that "world wheat supplies are going to run out ONE DAY".
Over-charging your citizens NOW does not improve the resilience of your own economy, to the future shocks you say are coming.
The only mindset that I can imagine drives this, is one that LIKES the idea of his own civilisation being the first to collapse - a kind of compulsory "Captain Oates" order to your fellow citizens.
interesting people talk about shortages of houses. i live in Takapuna / Belmont area where there is a huge amount of navy properties in the area. you can go for a walk anytime during a month and you will find at least 40-60% of these houses empty. they are also on sections big enough to put another house on so now that the local maori tribe has aquired a lot of this housing thru the treaty they could look and maybe helping the housing crisis and do a bit of building.
"you can go for a walk anytime during a month and you will find at least 40-60% of these houses empty"
I've been here 26 years and never seen even 10% vacancy. Most of them have been tarted up in the last 5 years or so, new woodburners, fences, landscaping, re -decorated. Canvassed the whole lot 2 years ago and can't remember even one being vacant. Sometimes quite a few are away at sea but the houses aren't vacant. You're right about the sections. Some of them are big enough for 3 or 4 dwellings. Nice views too.
Well "the government should" But me. I don't think so
Bernard. what makes you think the government can afford this, when individuals who are the ultimate payers of goverment costs, can't afford it.
It's that economic fraud and the hiding of true costs that has made Greece the economic powerhouse it is today.
Rather than another 'borrow and hope' project, with lage amounts of cash going out, which just transfers the costs to our grandchildren. Why not shrink government's role to that which enables the people to get on with these essential tasks.
As citizens we can find the energy and resouces within us to get on with these essential tasks, if only we had the drag of goverment weight off our backs.
Auckland is a totally different market to the rest of NZ. Many families are obsessed with schools in Auckland and being in the right zone. This distorts those suburbs' property markets. There are great schools all round the country and most kids in regions are able to access many more sports and activities because of the time wasted travelling in Auckland. I realise the job market is much bigger but even so, I don't know how families afford to live there. The huge mortgages issued for average houses there are scary.
Wise parents rent in a good zone (rents are nowhere near as inflated as house prices, this is classic bubble symptom stuff) OR they buy (or rent) in a bad zone and send their kids to a private school.
Much cheaper than trying to outbid everyone to own property in the good zone.
Well there are two ways ive seen parents get up to to get the school they want "cheaply". Rent as you say in the best zone for 1 year, once the kid(s) are in school you just move to a cheaper but close by area the school wont usually insist you move and even younger sibblings are allowed in so as to follow the older ones....and the other is register the kids with thier grandparents who often take the kids back and forth anyway.....and then "move" a year or so later...if teh school finds out all you say is oops I forgot....
The thing about outbidding is yes you pay a lot but some years later the price should stay up...of course you have to afford that...
regards
I agree with Bernard.
There is a problem with home construction which is leading to an increase in house prices. In the end the value of an existing house does relate to the cost of building a new one.
There is a problem with youth unemployment in particular and a skills shortage .
This is an issue that the maori party in particular should be using their poliitical leverage over and offering to marshall Iwi land resources . That would give them more credibilty than playing wedge politics over mixed ownership of SOEs.
There are existing Housing NZ homes which could be sold to free up cash to fund some building.
The state is not normally very good at building anything but we do have a situation where the market is distorted by the hangover from the finance company collapses , building regs tightened to buggery because of leaky houses and artificially constrained land supply. There does seem to be a role for the Government to knock some heads together and break this particular circuit.
I'm not sure government housing would lower any prices, since those houses would likely not be desirable to the middle class. The government would inevitably let in a high proportion of beneficiaries in that new housing leading to a less desirable neighborhood. The middle class would still fight over the housing shortage in good neighborhoods, as they do now.
Also, I think we can lay to rest the idea of cheap labour in NZ, no matter how young they are. Maori and Pacific youth are unemployed now because they don't want low wage jobs picking fruit, which we import people to do. They will complete training only if the training and jobs pay well.
It doesn't make sense to have an army of builders crawling over each site anymore. If we want economies of scale pushing down prices and bringing up quality, like they do in other markets, we need to build our housing in factories and ship it in pieces to the site. Train factory workers to use high tech machines, not builders to use a hammer.
Then we'll need technology, to build those factories and houses, and thats something we can export to the rest of the world.
Bernard – if you are going to get all Keynesian on us why not direct the workers towards Energy Independence for New Zealand… Sure some more cheap apartments / terrace houses / units in Auckland are needed but what would be really inspirational and would make people want to stay in New Zealand is if we could build a 100% renewable electricity system. This would serve as a base towards total energy independence in the future – yes the oil will run out one day people. If New Zealand can’t do this, then no one can - freenrg4nz.wordpress.com
Actually Keynes work on the zero bound trap is probably the most relevent and accurate piece of work for the situation we now face....that or Minsky...
Oil run out, there are two errors in this, this isnt about oil running out...this is about not being able to get any more and hence price will limit the demand...
and more importantly this is a transportation fuels issue and a food issue......100% electric is a must but thats really a side issue....
regards
Definitely a side issue to the housing issue – but not in general. The thing is, we should be burning our gas at 95% efficiency for direct use applications (heating water etc) rather than using it to make electricity at 50% efficiency. Or we could be using it for gas to liquid-fuels conversion to reduce reliance on imported crude oil. Either way, 100% renewable electricity for NZ is the first step towards reduced effects of the massive price / supply chain disruptions that are coming (as you point out) when the oil production and demand relationship goes nuts.
What qualifies you to diss the median multiple 3 you eco Taleban a-----hole?
What do you care for fiscal child abuse, and mortgage slavery to banks, eh? Nothing, nada, zilch.
If you cannot "get" this, piss off from the serious finance and economics blog and go waste everyone's time on some eco Taleban echo chamber blog.
Bernard Hickey, do we have to put up with this incessant drivelling time waster forever?
PeeBee: Occasionally you impart some very good stuff. More often than not you do yourself a dis-favour by, being long-winded, beating around the bush, departing from your central point and referring to concepts the average person has no familiarity with. Which is a pity. You need to revise your approach. And keep it short. When you do one of your periodic re-appearances, you post (paste) far too much in too short a time for it to be original and germane to the topic on hand. You must have a magazine full of ammo busting to go.
If you go back and refer to a final comment on the January Earthquake article you will find some stats that between yourself and Hugh you overwhelmed it by producing over 40% of the in excess of 1mb of postings space. You 2 were talking to yourselves.
Thanks for the friendly tone of your suggestions, Iconoclast.
What I say about the volume of postings I sometimes make when my blood is up, is that I am having to address endless recycled BS from trolls who I suspect are being paid by land bankers and other vested interests to bury proper argument in BS.
Most of the time, I simply do not have time. It has been 3 days since I looked in here. Those perpetual trolls will always have the last word. They will have had the last word on the ChCh earthquake thread you refer to. Hugh and I were not talking to each other, we were addressing endless recycled BS, myths, irrelevancies, subject-changing, and outright lies.
If Kiwis won't wake up to the great rip-off and economic suicide they are being subjected to, that is their funeral. I just hope when the NZ food riots come, I will be watching them on Fox News somewhere in the USA.
I recently tried buying a section on the north Shore of Auckland, so that I could build an affordable house on it, such as a Keith Hay type home. These houses and others similar are relatively inexpensive and proven design that wont leak and many actually look reasonably stylish, not just boxes. The new house would cost about $170,000.
Had to give up on that idea, as all the subdivisions had covenants that required large houses to be built that would cost twice as much - completely unaffordable for myself and my family.
The reason for the covenants apparently being that they did not want any neigbour hoods to look "cheap", and had to make sure the houses would not be devalued by a "cheaper looking" neigbouring house.
I do not regard a $250,000 section + a $170,000 house, as cheap!!.
I was advised not possible to build for under $450,000 (house + land) on the north shore due to covenants, and compliance costs.
So in end bought an old "cheap" dunger 1970's house for about 400,000, and did some renovations myself. At least it doesn't leak like many of the $650,000 neigbouring houses.
It would be great if this sense of excess grandeur could be removed from covenants on sudivisions to allow more afforbable housing.
Optimist - there are good and bad aspects to the do-up-an-oldie approach.
One 'good' is that the build energy is already done, and the existing services in place.
One 'bad' is that pretty much what you have is what you're stuck with, or you lose your 'investment. That means you have to choose carefully; solar orientation and lack of shading being more important the further south you go. Ability to be insulated also figures - I've a mate with an uninsuladed brick house, horse-hair generation plaster-board within. He can't insulate the wall cavity.
Building really cheap, new, is still absolutely possible, particularly if small is your thing. We have some subdivisions hereabouts (N of Dunedin) which have the same size threshold you complain of - presumably to safeguard neighbour's 'values'. Me, I wouldn't live with that kind of neighbour.
Fortunately although it is "old", it is on a large 1,000sqm north facing section, is well insulated, timber clad, no rot, is warm and dry, with all day sun, and good sized eaves to keep the rain off and excess sun out.
Even some basic houses built back in the 1970's were suprisingly eco-friendly.
$20,000 spent on renovations +"free labour" - my own, and it is now a very satisfactory house. I consider myself rather fortunate!
I totally agree. Left to myself I'd rather build small and high quality, but councils are fixated on this idiot idea that value is predicated on size rather than materials, workmanship and finish. A cheap tatty shack is a cheap tatty shack, no matter how bloated in size the thing is. If they're worried about comparative prices, then just express it as $$/m2 for chrissakes. Wonder how it is that they reconcile this nonsense with the high value and desirability of 19th century suburbs, where tiny cottages are cheek-by-jowl with 3-story mansions?
In most cases I've seen, it is not the council's that decide and apply the covenants, but rather the sub-dividers/developers. They want McMansions because they think that will keep their land prices high.
I have always viewed such covenants as discriminatory - the first time I encountered one such sub-division proposal - I submitted opposition to the council in relation to the developer's application for consent to subdivide, and if I recall correctly, the response I got was that such 'rules' written by the landowners were not within the council's remit to consider!?
That's a shame about the covenant. Ours also specifies a min size, 220m2 I think, but also other things that I am actually quite happy about (eg, no dangerous dogs, activities like wrecking of motor vehicles not allowed).
We looked at a section once where it stated that men were prohibited from mowing the lawn shirtless and that the grass should never be more than 60mm high (or something like that). I felt it was way worse than having a minimum house size, not to say completely ridiculous.
Houston has numerous areas covered by covenants, which are a free market means of addressing the lack of zoning.
But Houston's lack of zoning also means that the free market does meet the "bottom" of the market as well as the top.
Every few years Houston has a referendum on zoning, and votes to do without it. This pattern is consistent across all income levels. The low income people in Houston must be some of the smartest low income people in the world, if they have worked out that "protection" from developers etc, merely makes housing unaffordable to them.
Low income Kiwis, on the other hand, are true masochists, generally supporting the politics that actually hurt them the most.
There are many builders and kitset home companies that can supply fully insulated, double glazed new homes for around $1000-1200 sq m complete, including appliances and fittings. And that's without economies of scale. Will middle class kiwis bought up on a diet of house porn on TV and magazines want them though? Does it make sense when land is so expensive to put inexpensive houses on it? There are massive opportunities for the building industry to get together with Iwi who have the land to offer healthy new homes for their people but do Iwi heirachy actually want to do this? (Cue Willie Jackson and John Tamihere)Do elders really want younger people moving back from the cities?
New, healthy homes in village clusters on cheap/free semi rural iwi/local govt land might rejuvenate some of the provinces. Would young people accept more limited job opportunities in return for vastly more affordable housing?
http://www.lockwood.co.nz/Default.aspx?pageID=2145893513
http://www.latitudehomes.co.nz/site/transportable-and-budget.asp
WTF - my pick is that the move, when it comes, will parallel a crash in dairy prices, a cascading default on mortgages for same, and an inability to 'earn' in the cities, all happening concurrently.
I suspect a blind eye will be turned to regulations, because they will be impossible to comply with at that point. Expect clusters of housing, probably round intersection arterial roads, or where good water flows. Expect existing villages to be re-occupied, those with more cohesive barter, trade and co-operation will be more desirable places to live.
"more desirable places to live" I suspect you are right....tried to pursued my wife to take a job in such a spot I know of last month.....she doesnt want to know, I could even telecommute until that doesnt matter any more. Instead she seems to think her middle class, capital based, cosmopolitan way of life will continue for decades....most ppl around me think the same way........dont want to discuss any such luxury ending....go with the flow I guess....move when able....
regards
Steven - yes, most folk don't get it, and if they do, the chances are that their spouse/partner won't. More female don't get it/don't want to get it than male, in my experience, but that may be a biased sample....
It's Jared Diamond 101 - most people most of the time, think that what they are currently experiencing is a permanent arrangement. It raises serious questions as to why the trait survived this long - maybe the instinctive nest-builder mates with one who is unimaginative enough to stay around?
What gets me, is the number of folk who won't get to pay off their mortgages, even when the rates approach zero. I suspect we'll see more land-sharing arrangements. and more inter-generational sharing arrangements between the older owners of too-big houses, and can't-afford but able youngsters.
Hughey's right in that prices are too high in comparison to incomes, but he needs to understand where incomes are headed. Bagrie was worth listening to this morning.
EASY TO CREATE THOUSANDS OF UNSKILLED JOBS IMMEDIATELY:
Christchurch has at least 10,000 houses that need demolished and are not worth relocating. At the moment these are being crushed by diggers and moved to what will ultimately be landfill.
BUT one house could be constructed with about 8 weeks of labour (1 person) all the material sorted and recycled. The cost of that unskilled labour at $15/hr is $4800. The average demolition cost is $15,000. The value of salvaged material would easily cover an extra labour cost.
That means about 1000 extra jobs full time for 2 years.
Relocating good houses at a cost of $50-100,000 each (largely labour costs) would create immediate housing that was affordable and of excellent quality (many suitable homes are under 20 years old). Houses could be up and running for as little as $200-250,000 plus the cost of acquiring the dwelling from the Government.
Why is no action being taken to make anything sensible happen?
Where is the leadership?
FYI from a reader via email
Bernard
Your informative articles are always of interest.
There seems a hint in yours about NZ Housing Shortage that the Leaky Homes problem is proportionally worse in Auckland.
Is there available any data to confirm or deny this?
It would be interesting to know whether builders and architects in different areas of the country were more careful about what they designed and built.
Regards
Hi
Many thanks. This Department of Building and Housing Report http://www.interest.co.nz/sites/default/files/D%20of%20B%20&%20H%20on%2…
says 75% of the leaky building claims under the Weathertight Homes Resolution Service have come from Auckland.
cheers
Bernard
The fact that there are more leaky homes in Auckland doesn't mean the designers / architects were necessarily more careless than elsewhere. Its the product of many factors:
- more medium density development was/is built in Auckland
- style conscious Jaffas wanting that Tuscan look, darling, with no eaves pleaaaaase
- developers probably in general terms try to cut more corners in Akld, because everything is closer to the edge cost wise
- Auckland's damp and humid climate
FYI a comment by a reader via email:
Hello Bernard This was my last effort to get some traction on their thinking for this year’s budget. Didn’t even get an acknowledgement. Same with all of my other letters – all in the too hard basket. Sincerely Peter Dear Mr Key Congratulations on being able to form a government and best wishes for a successful and healthy year for you and your family. The holiday period has not been a lot of fun for many, many businesses. Trading is tough and retail in particular is just plain hard work with not a lot of reward left when their efforts are tallied up. I have discussed the following proposals with most of the clients we serve (400 businesses and nearly 1,000 income tax returns) and there is a pragmatic consensus that we, the Government, are for all practical purposes broke. Indeed, as a wry observer noted, if we weren’t we wouldn’t be borrowing $300,000,000 per week to live beyond our means. These are the proposals that have general acceptance for a better tomorrow:- Compulsory superannuation at an initial rate of 5% (of the salary/wage) rising by 1% pa until we get to parity with Australia;
- SMSF for the self employed;
- Salary sacrifice would be available for both to the equal extent of the contribution (if you want Kiwi’s to save then you will have to offer them a tax incentive; may not be fantastic fiscally however that is how they think and the savings would outweigh the cost);
- Increase GST to 20% and exempt fresh fruit and vegetables, milk too;
- Introduce a CTT (Canterbury Transaction Tax) in reality a Financial Transaction Tax at 2% with effect from 1 April 2012; (this has widespread support throughout the community);
- Introduce CGT (Capital Gains Tax) at a rate of 10% with effect from 1 April 2012; base value being the most recent GV;
- Introduce an investment allowance for new machinery and equipment at a one off depreciation rate of 25% of CP;
- Introduce a 150% income tax allowance for approved research and development;
- Increase the age of eligibility for Government Superannuation progressively so that a 60 year old would receive it when they turn 70; 61/69 and so on; ensure there’s a safety net for those who are vulnerable in the short term;
FYI from a reader via email:
Bernard
I wanted to congratulate you on your excellent article this morning on addressing both the housing supply and youth unemployment in Auckland and Christchurch. These are important issues that the Government should be doing more about. Since you asked whether anyone was talking about these issues I thought I would point out that Megan Woods the new MP for Wigram raised pretty much exactly this combination of issues in context of Christchurch in her maiden speech. These are the relevant parasWe have the opportunity to train a generation of young people with the necessary skills to be active participants in this work. Currently we have 83,000 young people aged 15 to 24 who are not in any form of work, training, or education. This is up 4,000 from last quarter. We cannot sit idly by and watch this figure continue to climb. I finished high school in 1991, when youth unemployment was at 20 percent, so I know firsthand the fear of leaving school and there being no jobs. We had two choices then: further study or go on the dole. I made a decision to go to university—I was the first in my family to go straight from school—but the hopelessness felt by my friends who were looking for work is something I will never forget.
There is an alternative. By 2013, 36,000 additional workers will be required in Christchurch. Bringing in skilled trades professionals from overseas simply cannot be our solution. We need to invest in our young people and let them lead the way. Such a commitment is not a leap into the unknown; we have done this before on the scale that is necessary now. Following World War II, New Zealand faced both a critical housing shortage and the underemployment of young Māori. Labour Prime Minister Peter Fraser showed the necessary vision to resource trade training schemes for young Māori workers. This scheme was the subject of my PhD thesis and I saw both the positive opportunities this scheme provided individuals and the benefit the nation received in having a generation of skilled tradespeople—not to mention a stock of well-built houses.
Very interesting.
I hadn't seen that from Megan Woods. Snap.
I too was one of that generation of 1991 who hasn't forgotten how many of my friends couldn't get jobs.
It hurt many of them for years. The research shows many never recover their lifetime earnings to 'normal' levels.
cheers
Bernard
FYI a comment from a reader via email:
Good morning Bernard Great article! I have tried and tried to get some Government interest in trade training for our area, all to no avail. The Government Ministers are simply not interested in actually thinking about the problem of youth unemployment and lack of skills in the broader area of building construction – it is just too hard for them. Northland has a desperate need for employment and housing needs – Mr Carter showed some interest (for a while) however it became too hard for him and then he retired from Parliament. Wish I knew how to help you get the message through. I never seen a Government so immune to new ideas – unless it is for their own, forget it. Please keep trying to get the message through on behalf of all right thinking and concerned New Zealanders. Sincerely PeterFYI a comment from reader via email:
Overruling planners and opening up greenfield developers will create unintended consequences. Creating another Otara on the edge of an urban area is 20th century thinking - 19th in other parts of the world. I agree that more dwellings are urgently needed. But they need to be in communities, with schools, affordable transport and health and social services. Overriding planners will be a shortcut to social deprivation, infrastructure issues and other unintended consequences. The better answer is to give local planners more power and resources by devolving the responsibility and assets for social housing to local government. Housing NZ and its paternalistic centrist approach could be wound up and local communities then could be empowered to find local solutions. Tax resources would be shifted to the local level. You journalists really do need to get out more. Go and look at social housing in Sweden for example, which faced a housing crisis several decades ago.
I agree with training a lot more trades but dumbing down the professions won't catch us up to Sweden. Maybe under your scenario Auckland may look more like Bangkok.
Shaun
FYI from a reader via email:
Hi Bernard,
Well said.
It's been my view that we have out priced our market due to overt planning regulation and other blunt instruments.
The banks and the councils are also to blame. Bloody banks lending frivolously and allowing the market to ramp up whilst councils trying to squeeze us all into some utopian apartment dream they have.
Personally I think the road is going to get harder. The costs of producing houses are so high we have no margin or a limited market at a higher price. Nobody can afford anything despite the lowest interest rates of all time. Says a lot.
FYI from a reader via email:
I absolutely agree with your column 100%, you've said it all. My wife and i are young professionals and are not even considering buying, you are far better off saving your money in tax efficient investments. We also cannot as a nation continue with youth unemployment the way it is.
I really thoght John Key would bring a down to earth style of leadership to parliament and stop the silly point scoring that occurs, but he is as bad as any ive seen. He never seriously answers questjons during question time, just has a silly grin on his face.
I voted twice now for him, not again though! Where is the leadership he promised, the only winners under his policies are his banker mates.
FYI from a reader via email:
I'm a builder of at least 40 years. I've built homes for the best architects as well as restoring villas - the whole range.We've spent six years - so far - trying to meet / complete the conditions of our Resource Consent to split our property into not one, but three titles.
As far as I can see, the RC process is one of the major obstacles with new land being made available for housing. Interesting, our land is fairly hilly & hard to make any money from agriculture - but we can't sub-divide it easily..... Yet land in south Auckland that is prime agricultural land is just wasted with bloody housing - that's short-sited. In fact, that's what we've noticed in NZ - Kiwis are really short-sighted. We're struggling with a mortgage after trying to appease the conditions of our RC which included fencing for kms, concreting driveways & surveyors, planners, etc Every obstacle they can throw in front of you - feels like 'tall poppy' chopping at this end. Still haven't completed it...we need to borrow the an $30k to pay for power/phone connections to each title PLUS the Council fee - (Parks & Reserves Fee).Bernard, did you see Daisy Foldesi and her mum on Campbell Live tonight with the ridiculous CCC requirements for setting up a temporary office in Lyttleton?
Something needs to be done. Rodney Hide promised to fix things - he did nothing. National has done nothing - we need a complete overhaul asap.
The anger in ChCh and Lyttleton is a must watch Bernard.
Daisy and Marie are nice normal Canterbury buisness folk, unfortunately at boiling point over bureaucracy and inaction.
Watch from 4mins 20sec in for the best part:
http://www.3news.co.nz/Lyttelton-business-community-recovers/tabid/367/…
FYI from a reader via email:
Typically, I concur with your sensible economic comment to a large degree - yet reading your recent article, I can't help but feeling your thinking around opening up the town belt is severely flawed.
The one thing that loosening the town belts does, is benefiting the speculators - it's not bringing down house prices sustainably. There's ample evidence for this (e.g. Queenstown tried this - with no effect on affordability). Plus, there is no real gain from pushing lower income families ever further away from their workplaces - an inevitable effect of urban sprawl.
There's ample opportunity for densification within the MUL. As an example: Paris is by all accounts a very liveable city - and it does not have high rise apartments (apart from very few in troubled satellite suburbs). Paris density: 20,980/km2, Auckland (metro) density: 2,654/km2. Of course, we cannot increase density 10fold over night - but we are by no means at any rational limit, yet. And despite the popular myth: high rise apartments are not required for vastly higher density - just smarter use of land.You rightly demand government to become an active player in the housing market by opening up government owned land, and I agree with this. If government would furthermore invest the 1.2 billion we spend on the Accommodation Supplement annually (basically a subsidy for landlords) to buy strategic pieces of land within the MUL (the Lion Brewery in Newmarket, or Vinegar Factory in Ponsonby come to mind), and making them available to the right people, this could have a real impact over time.
Strengthening of the third sector, e.g. enabling housing co-operatives, would be another good idea. Overseas, special legislation for housing co-operatives is making it easy to set them up and operate. Here, housing co-operatives are viewed as for-profit companies, and fall under the Securities Act with all the implications for cost and compliance associated with this.
Anything that inoculates the basic need of housing from the imponderabilities of markets is good - housing co-operatives have been very successful in this regard overseas, e.g. more than four million units are owned by co-operatives in Germany, well contributing to the very affordable housing situation there - despite it being absolutely impossible to build anything at all outside of tightly defined urban limits.I applaud the initiative to take the housing crisis seriously - but please do not become a mouth piece for the vested interests demanding more of the same: more sprawl, more motorways, more profit.
Urban planners in Auckland got it wrong for the longest time - they are just beginning to see the light, and getting flak purely because they throw a spanner in the works of a well loved money making machine.Kind regards
Many thanks for your considered thoughts.
I'm no fan of sprawl and I made a point of saying we needed brownfield and medium density housing too.
But many, many New Zealanders want to live in 'traditional' suburbs.
My main complaint to those who refuse to relax the MUL is they often themselves are priveleged to live in stand alone houses and (often) simply don't want the value of their land to fall when more supply is added.
I take your point though about motorways. However the profits from land banking and drip feeding with in a MUL are just as obnoxious.
A good debate to have.
I enjoyed your comments about German housing cooperatives. Do you have any more information I could look at in English?
cheers
Bernard
Some excellent comments here Bernard, thanks for sharing.
I'm with you, we need a mix of medium density, brownfield redevelopment and peri-urban suburbia. However, the big issue is not so much where development will go, but how we are going to get development at all.
That is, the issue isn't really a spatial one, its more of an economic one, with the key issues being:
- Funding for developers is difficult to get, with no end in sight (it might even get harder)
- Medium density development in many locations,especially lower to mid value locations, is often impossible to get to stack up in terms of feasibility
- Medium density gets closer to work in higher value, higher amenity locations, but there are often heritage issues in these localities, and / or well-moneyed opposition
Some of the comments make good points about looking at development co-opeatives and not for profit providers. Shared equity development has been quite successful in the UK, and the NZ Housing Foundation have been doing some schemes for a few years.
With regard to "sprawl", its going to be a necessary part of Auckland's response, and I hear that the Council will probably pull back its expectations of 75% of all new housing occuring within the MUL, to maybe 65%. All the expert advice from property and development specialists is telling the planners that achieving 65% would be very very hard. let alone 75%
So the key is not whether sprawl should happen, but how it can be properly planned so that we get "good" sprawl rather than "bad" sprawl. I think if we can get comprehensively planned peri-urban communities adhering to exemplary environmental requirements, then we can get quite good results out of peri-urban development.
Personally, I also think a condition of all new peri-urban delveopment should be the provision of small lots (say 20% of the total number of sites) within a subdivision so that affordable options are available. Otherwise, we'll just get the usual 500 sq. m cookie cutter subvisions with 200 square metre plus houses, or vacant sites with covenants requiring big houses. And these sites and houses will be delivered for $500,000 plus. If we can get some small lots / skinny lots into the mix, then we can see peri-urban subdivisions offering affordable land and house packages for circa $300,000 to $350,000. Not only does provision of small lots within a subdivision aid affordability, it also helps to make for more interesting and diverse urban design.
Having said all this, funding and feasibility is still going to be challenging for private development. That's why I do think that government involvement in housing delivery is essential. I have come to this position very reluctantly and with no lack of thought. But the private sector is simply not going to be able to deliver on its own.
Clearly, Labour are thinking about these issues, based on the comments above. Maybe emails I wrote to them before the election are getting through (I never had any response). They have an opportunity to really forge some strong policy with a clear point of difference from "do nothing" National
" Paris is by all accounts a very liveable city" Oh really?! I'd be curious to know if that poster has actually lived there. I mean, I suppose it is very liveable if you enjoy living with 20,980 grumpy people/km2 and using the *cough cough* "great underground" mentioned above(which comes with its share of very dodgy people, including stalkers etc; can't say I miss it at all, and I was only there for 8 months thank goodness)... Each to their own!
Elley - I'm not going to totally dismiss that reader, because they raised good ideas about co-operative housing
but...... they are clearly of the "new urbanist" dreamer kind. Probably they are an English urban designer who gets off on Parisian urban design
I lived in Paris for 3 months 10 years ago, I would say its a great city to visit and great if you are rich, but I think if you are middle income or lower life is one big grind.
I would not call it "liveable" in the truly democratic sense of the word, being a city that is liveable for a large proportion of its residents
They also make the fatal error of suggesting Paris is a model for Auckland, when they are so extremely different places, historically, economically, culturally, environmentally
FYI from a reader via email:
Bernard,
The MUL in AUckland has been in place for decades (30 or more years at least. It was first put in place to protect the Auckland airports operation as I understand it from an old planning colleague of mine) - not since 1999 as you suggested in your article.
Otherwise though, I generally agree with your view of the housing crises these two cities are facing. I would also add dealing with earthquake prone buildings to the crises - this will particularly affect Wellington, but other areas too. Of course, if the Royal commission in Christchurch proposes to increase the EQP code level from 33% to say 70%, the number of earthquake prone buildings will go up overnight, so the construction and property sectors will face an even more interesting challenge at that point - how to pay for all of these problems! A national scale building programme must be funded from somewhere - not a great time to be funding that with more borrowing!
Which government owned land would you open up? Why should taxpayers subsidise the provision of housing?
Thanks
Many thanks.
You're right the general idea of the MUL has been around for a while, but it was formally adopted in late 1998.
Here's more info on that:
http://www.interest.co.nz/news/40977/motus-grimes-says-auckland-urban-limits-driving-land-prices-stifling-development
cheers
Bernard
Why should taxpayers subsidise the provision of housing?
Because the costs of not doing so outweigh the benefits of not doing so.
That is, because the private sector will deliver insufficient housing to meet demand in Auckland, house prices and rent escalation will lead to worsening productivity, and further delines in a range of sectors in the economy ie. everyone (or most) will lose unless something is done.
Contrary to popular media opinion, cities and society do not benefit overall (in net terms) from high and rising housing prices and rents. They are a massive drag on economic growth and productivity. Also, if housing gets too expensive then cities start to lose the ability to attract key workers, in education, health etc, ie. critical social infrastructure
Houston has shown how a city with affordable housing can thrive, even in lean economic times. Now, I don't think Houston's approach and success can realistically be replicated in Auckland, for a whole host of reasons. Rather my point is Auckland is going to stagnate economically if it doesn't do something to at least limit gains in house prices and rents, through getting more housing happening .
And in my opinion, the best way we can address this issue is through a range of non-partisan policy measures that look to the free market approaches of places like Houston, as well as some of the European planned approaches with social and affordable housing. And closer to home, the successful apporaches of cities like Adelaide. Because the reality is that strong market AND government driven approaches will be required in Auckland.
My great fear is that politics will prevent the necessary rounded solution. National will focus almost exclusively on market approaches. And if Labour govern again, they will focus almost exclusively on governmental approaches
BERNARD - it would be awesome if you could somehow distill all the good ideas in this debate and get a searching interview with Phil Heatley or someone (maybe even someone from Labour, if the Nats seem disinterested?). Really test them on these issues. Because they are sitting on their laurels when urgent action is demanded
FYI from a reader via email:
Hi Bernard
In your Herald article, you assume that the 83,000 youth who are unemployed are all employable. The sad fact is that most of these young people represent the 'fat tail' of our education system. Most of these young people have left school without even the most basic formal qualification, more than you would like to think cannot read at a functional level. Worse, large numbers lack the most basic life skills that require them to get up in the morning, and then work while at their place of employment. Did I mention problems with mental health, drug and alcohol abuse?
When you have 25% of our nations children, (220,000) growing up in benefit dependent homes, most of these the DPB, where there is no father in sight, abuse and neglect is all too common, then perhaps we should not be surprised.
If we want better outcomes for our young people, then we need to stop State funding for teenage mothers, who make up presently 1/3 of those entering the DPB for the first time. 22% of which go on to have a subsequent child while on the benefit.
More than 50% of those on the DPB are Maori or Pacific Islanders.
More than 50% of Maori women between the age of 20 and 30 years are on a benefit.
I see no prospect for meaningful change while we continue to fund this stupidity.
This is the real issue affecting the future of New Zealand that no one is talking about.
Kind regards
Brendan
"Solve the social problems" this is a very good Q. From my perspective I wonder just how good the welfare state has worked out...I guess I have no real understanding of what was before it, compared to now we have it....it doesnt strike me as doing very well, but maybe the problems are so great that its done as well as can be expected.
regards
I don't understand why asking the question, is there a problem with social welfare, even makes sense. The plain fact is that the market mechanisms, around which most of the NZ and international economy are structured, have massively re-structured (and this started in America) and created significant extra burden on the social welfare systems in Western countries.
The apparant conclusion which we are suppost to draw from this appears completely irrational on the surface. By comparison, if you were an aviation inspector and you are doing triage on a plane which went down with engine trouble, you would never conclude that the main cause of the accident was the insufficient aeroplane seat belts, because it would be crazy to think so!
I can't understand why the nutters are still running the frickin mad house, especially since they are quite plainly doing it while wearing their favourite brand straight jackets.
Two parts to that - in the near future, there will be work a'plenty. It won't be construction, though. It'll be food. We've got 7 billion people, maybe 2 billion of them hungry already, and that's with us using fossil fuels in agriculture as they've never been used before, depleting aquifers as they've never been before, and degrading soils as they've never been before.
If you want to train kids for the future, Bernard - train them to grow food.
http://physics.ucsd.edu/do-the-math/2011/10/sustainable-means-bunkty-to-me/
Once upon a time we used to have the Ministry of Works, Railways etc to soak up marginal workers, the unskilled, health/mental problems. Yes they stood around a lot but they weren't languishing on benefits and some of them actually got good skills like welding, driving machinery etc. The social compact was accepting the inefficiency of these organisations in return for providing minimum wage employment and keeping crime low. They built some good infrastructure too even if it took a while sometimes.
Now we have stripped down Railways, no MOW but very lucrative contracts for Fletchers et al, generations of beneficiaries and high crime.
What's better? Face it there are many people who can only "work" in government supported organisations. They are unemployable in the private sector and have been thrown to the wolves
Why do you even post this drivel Bernard? There is absolutely no evidence presented to support the wild allegations, the author just chooses to pluck figures from the air and you can of course support any argument you like with that kind of reasoning. In fact, contrary to popular myth, if a line of reasoning seems suspicious thats because it probably is. We all have a natural instinct for why political point scoring on poor sectors of society is dis-tastefull, and it is so because its mostly un-deserved and entirely un-constructive.
Of course the follow up argument is falatious. Cutting benefits to most of these groups is going to make the problem worse, primarily it will reduce educational outcomes (because there is an obvious and clear link between poverty and poor educational outcomes) making the situation the author describes worse not better. In fact it seems very apparant that the author of this has had a poor educational outcome in their past.
Actually, the one-kid family is doing the planet a bigger favour than the McMansion isn't.
You need to do some homework.
Dr MacMillan and Co, were entirely appropriate in 1935. Not now. I assume you're a part of the Labour effort - time they had a serious talk about the future. They're a wasted space until they do. Tell them if they want my lecture, they can have it free. They won't though. Easier to choose ignorance.
962 Houses under $250k on Trademe in Hawkes Bay. Can't get cheaper than that. Plenty of jobs here for skilled workers. Solution to housing problem: Buy yourself a cheap house, use this period of cheap interest rates to pay it off fast. 5.5% on 220k = cheaper than rent.
Why risk the loss MB...better to buy an old Bedford and bash it into a mobile house..young sprogs will get to see the country...you and the other half can pick fruit and do cash work...spend winter up north...heaps of great places to stop...http://www.google.co.nz/search?q=converted+bus+houses+pictures&hl=en&prmd=imvns&tbm=isch&tbo=u&source=univ&sa=X&ei=6H9CT-kTgZSJB6nt2OQE&sqi=2&ved=0CCEQsAQ&biw=1024&bih=626
Powerupkiwi I have never heard so much rubbish spew forth from anyone untill
I read your blogs who the hell do you think you are , telling everyone to stop using
energy oil gas etc ,not to have kids ooooh the worlds overpopulated etc etc grow food we are all going to die most of what you say is just at best half truths get a life son and grow up
Baz
I never took my eye off the ball.
Never stopped reading.
Or thinking.
Nor did I let emotion cloud that thinking.
Nor was I stupid enough to think that because something 'hasn't happened yet', that it wouldn't. You guys will both be dead one day - the fact that it hasn't happened doesn't make it any less true.
http://physics.ucsd.edu/do-the-math/2011/09/discovering-limits-to-growth/
But the discussion is a bit off-thread - best you address your issues Baz. I've already built one of the most energy-efficient houses in the country, for the least money and time invested, and there are more days where we have folk here learning about it, than there aren't. They're mostly in their mid-20's, and all on the high side IQ-wise. The last two were big-company American architects.....
Just 2 things
1) were the buyers of the place in Epsom kiwis? I'm guessing Asian.
2) Akld Grammar is a crap school - they poof on about their "winning" mentality - from what i can see given they have nearly 2000 boys, their sporting record relative to other colleges is shite (and thats despite the large amount of poaching they do).
Yes it's a queer thing when you consider that the text books and the curriculum say exactly the same thing, whether you're in Auckland Boy's Grammar or Freyberg High School in Palmerston North! The benefit from being at Grammar may well come from the parents themselves, (and the fact that it’s largely an all boys school) which is all the more bizarre as if so, the parents are paying more for their housing costs because they are buying the house.
There seem to be several reasons for the high percentage of leaky homes in Auckland and most have been identified in previous posts.
But my experience has been that Auckland has been most agressively promoting a high density compact city and enforcing high site coverage.
For example a landowner approached a colleague of mine (an architect of the old prudent school) to design a medium density housing cluster.
He did and the owner applied for the consent. He was told it was not dense enough and to have it redesigned to so as to increase site coverage. Their solution was to remove all the eaves and get closer to the boundaries.
My colleague refused because of the risk associated with monoclad low cost construction.
So the landowner went to someone else who was prepared to lop off the eaves.
End result?
Leaky building.
The appearance of a lack of eaves on Auckland city houses in the 1990s and 2000s where the annual rainfall is greater than 1 metre per year (more than Londons) has always struck me as another example of a gobsmacking New Zealand stupidity. In fact it’s so bad it’s the kind of dumb that I naturally associate with the special-kind-of-stupid Greens. In fact it wouldn’t surprise me if they had a hand in some of these decisions that gave us leaky homes when you consider what the rationale behind some of them was. For example, stopping the use of treated timbers in homes was a sop to the ecomentalist on their religious 'environmental' grounds as a way to stop polluting the environment with heavy metals and building our homes with ‘poisonous timbers’. And high density housing has always been a Green imperative. A case of connecting the dots.........?
Owen McS - many councils don't count eaves as site coverage. That said, it is perfectly possible to construct leakproof-ly without, as both my non-gable-end flashings prove. Monolithic cladding is also leakproof-able, down/out/down flashings are hardly new.
Rates will outpace incomes from now on, and the infrastructure costs which drive that will accentuate the push to consolidate. Don't for a minute blame that, for what is really arrogance, ignorance and greed across the board. It was just a symptom of a society going through the ' bread and circuses' stage. Get you fiddle out.
Notice that the moves ever since, at all levels, have been ass-covering. Govt changes Dept name. Firms vanish. Councils duck for cover. Collective blame-shift decides that a single wall surface (adequate for centuries) must suddenly be inadequate (it couldn't have been us, we're sooooooo smart). Oregon and Macro get outed because they can't be treated, then get reinstated. Cavity walls get wind and vermin (surprise, surprise) so we legislate to block the bottom, not to remove the nonsense.
I saw it all, and designed a house with no need for a cavity wall, as the framing is all inboard (think portal-frame gymnasium) of the inner lining. Not that it was needed - the place won't leak anyway - I just wanted to show the nonsense for what it is, and to make people think.
Correct PDK. The first metre of eaves in Auckland city does not count as site coverage so the suggestion that someone would increase site coverage by removing eaves is incorrect (however they might remove eaves to avoid HIRTB indicators).
The suggestion that anyone would apply for a consent and be told "...it was not dense enough..." is absurd. The client may say that, but Auckland Council NEVER would. The rules are about maximum density not minimum and Council always fight to reduce density.
This must have happened in Manukau City or somewhere else?
Sadly Owen's not now around to discuss any more.
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