Bill English's 'thinking out loud' on the affordable housing problem suggests the Government's planning some serious action

Bill English's 'thinking out loud' on the affordable housing problem suggests the Government's planning some serious action

By David Hargreaves

Beware of senior cabinet ministers giving speeches that have no apparent purpose and contain no new initiatives. It could be the vacuum that comes before a gale of new rules and regulations.

I confess to having been rather perplexed when a copy of Bill English's latest musings on affordable housing clunked into my inbox on Tuesday evening. I was further perplexed and intrigued when hearing that the speech, which wasn't pre-publicised by the Government's PR machine, had in fact been given last week. What that says is that the musings were intended for a select, businessy-type, audience and then the minister decided they should be shared more widely.

Why was I perplexed? Well in essence the speech doesn't really say anything. But having said that, I do recommend readers have a look at the whole thing. Because it's the many things the speech doesn't say that appear to be the key here. What we appear to have is a very senior and influential member of the Government (arguably THE most, certainly after the Prime Minister) thinking out loud. And that's why for all that the speech contained no new information and no fresh initiatives it may in time be seen as a significant signpost along this adminstration's journey.

English is one person in this Government who does appear to think and plan ahead. While John Key is often immersed and swept up in essential issues of the day such as flags, ponytails and pandas, English is this Government's 'big picture' guy.

I remember attending a business-type function Bill English spoke at in Auckland in early 2013. At the time the Government's planned partial privatisation of the state power companies was the hot ticket. English referred to that, but he also strongly indicated that he was chomping at the bit to do something with NZ's social housing. Two years on we can see those plans unfolding (or is that perhaps unravelling).

The point is, there's clearly something the Minister has in mind when it comes to urban/housing planning and my guess is it's probably a biggie.

The Productivity Commission's due to come back with the final version of its Using Land for Housing report next month. I liked the draft report, but also said at the time that English's response to it appeared perhaps a bit tepid. At the time I was inclined to think maybe English thought some of the recommendations went a bit far. Now I'm wondering if in fact he thought they didn't go far enough. English's subsequent, post-speech comments that he's getting ready to request another Productivity Commission inquiry, and that this one will focus on planning, is perhaps the key missing piece to this little jigsaw.

The latest building consents figures from Statistics New Zealand show that in the 12 months to August there were 8600 new dwellings approved for Auckland. That's the highest number since 2005 and represents a big step up from a trough of 3100 approvals in 2009. But my goodness, it is taking time to wind the rubber band up. Official forecasts are for activity to peak at around 14,000 approvals in the 2017-18 period, which will be the most by around 2000 a year seen in Auckland - certainly since regionalised figures have been collated by Stats NZ.

But assuming all goes to plan, this means that from the trough of 2009 to the new peak will have taken eight or nine years. That's way too long. Effectively Auckland will have building activity in 2018 based on what the requirement for houses was nine years before. Now if the demand has by 2018, for whatever reason, fallen off a cliff you get the crash scenario that English cautions about.

As a city that aspires to be truly international, Auckland would appear to have a bright future that sees its population continue to grow strongly and therefore over time, as with other major world cities, land and property values should just naturally appreciate. But within that long term anticipated trend, there is definitely scope for short term 'bust' situations where there's a sharp correction in prices and first home buyers and the like are left swimming uneasily in negative equity possibly for some years. So, I don't know that you can say with absolute confidence right now that building 14,000 houses in 2017-18 will necessarily be a great idea.

But the flip side is true. We might get to 2018 and find that even those levels of construction are just not enough and that disused urinals in 'K' Road are now selling for 10 million apiece.

It's probable that English's intention in belatedly releasing this speech was to provoke a new round of public discussion - maybe to even give him some ideas on the way forward. But I suspect he has a few ideas anyway.

I hope I'm wrong but I still have suspicions the Government might yet want to centralise urban/housing planning. I instinctively think that would be a mistake.

But by the same token, local authorities have been given ample opportunity to show that they can do this stuff well and generally haven't.

Creation of new designated regional urban planning bodies, free of the natural conflicts of interest often present in local councils, might on the one hand be seen as yet another nasty layer of bureaucracy. But on the other, it might be the only way to go ultimately. What do you think?

The situation we need to get to is that building activity in any particular area - and Auckland as much the biggest city is clearly the biggest problem - can be ramped up and down very quickly in order to react to changing circumstances.

We are certainly a long way away from being in that situation at the moment. It needs fixing. If English has the solution, come on Bill, bring it on.

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

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So in other words the most senior long term thinker in the government has no idea how to solve the housing availability problem after how may years is it now? You would think that stopping unprecedented level of immigration would be a good place to start, at least until he has solved the problem and bought the market back to equilibrium. They appear to be trapped in their own corrupt complicity in the manipulation of this and other markets and the whole thing is blowing up in their face. When you are wrong it is best to admit it and the sooner the better.

Politicians admitting they are wrong? Simply unheard of.

Deny 'til you die. I think that's their motto...

and I thought that was the motto of commenters on this website ...

I don't think they will centralise, I think they will instead control how many restrictions the council can place. Rules like a certain % has to allow a certain density, the urban boundary must be at minimum 150% of the size of the current city, etc.

Now if the demand has by 2018, for whatever reason, fallen off a cliff you get the crash scenario that English cautions about.

Yes... If approvals/ new supply peaks at 14,000 in 2017-2018..... AND... Housing credit starts to grow at double digit rates ....THEN.... I can see a crash scenario as a possibility...

AND... if you step back and think about it.... it would be a reflection of the lack of visionary leadership at both Council and Govt level.... ie.. responding to issues way too late.... just reacting to events..

The slowness in response ....lines up all the ducks.....
Extreme high prices and Heaps of new supply...and a decline in demand ( maybe immigration policy changes..?? )

That seems a more likely scenario than a crash in prices now..???

A crash is inevitable and will be triggered by an external event. In my travels around the world, virtually every city I have visited has had major house price inflation.
No one can tell me there is suddenly a shortage of houses in all these cities at the same time!

If Bill English thinks the housing market in Auckland is going to crash within the next 8 years, then if he was a responsible minister he would be putting the brakes on the housing market now.
He is all talk and no action, he prefers letting the free market sort it out, which up to now has failed dismally.
We all know the market is being driven to dizzy limits, not by genuine home buyers, but investors and speculators, both here and overseas.
There are many things he could do but won't. Interest on investment properties should not be tax deductible as this is the main driving force for investors. This is just one of many things he should be doing.

As a city that aspires to be truly international, Auckland would appear to have a bright future that sees its population continue to grow strongly and therefore over time, as with other major world cities, land and property values should just naturally appreciate.
....
Who is Auckland?

The point is that when the supply of housing is relatively fixed, shocks to demand – like migration flows increasing sharply as they have recently – are absorbed through higher prices rather than the supply of more houses.
This has been borne out by extensive studies in the United States following the Global Financial Crisis.

What they’ve found is that, across different markets subject to rules which vary by state, more-intense regulation of urban development is associated with higher house price volatility.

That is, the steepest price increases and the sharpest falls are in areas where regulation is strongest.

The effects of planning rules can extend to the macro-economy.

Cities are one of the extraordinary inventions of the human race.

Studies have shown that cities are an engine room of growth. Incomes in cities are higher than elsewhere. That is one explanation for high rates of urbanisation.

Research indicates that when planning rules prevent workers shifting to higher-productivity locations, then there is a cost in terms of foregone GDP.

It’s only relatively recently that economists and politicians have understood the scale of those effects.

He refers to research he favours and ignores that which he doesn't eg Australian Productivity Commision on immigration, the savings Working Group, Treasury paper 14-10, and Albert Saiz paper on geography and house prices. What's more he is claiming large positive benefits from population increase when after twenty years of high population growth they they haven't shown up.

English is famous for crowing about needed skills and over on the National party blog

To provide you with some facts, Wiseowl, there are two major sources of immigration. The first are work visas (35,900 to August 2015), of whom the biggest source is the UK – these are highly skilled migrants or in occupations where there is a serious skills shortage such as IT, medical occupations, highly skilled manufacturing, construction, etc. The second are NZ and Australian citizens (35,200) who arrive here as of right.

Perhaps you may want to specify which skilled occupational groups should be cut from the immigration quota?

No one seems to have the facts. By numbers the top four are:
1. Chef
2. Registered nurse aged care
3. Retail manager
4. Cafe or Restuarant manager

http://croakingcassandra.com/2015/09/03/occupations-of-residence-approva...

National got very worried about Labour's letting the cat out of the bag on the high percentage of buyers with Chinese sounding names. Commenters flooded in to Kiwiblog. The government is acutely aware of what the public think and so they aim to maintain certain ideas such as New Zealand needs a larger population. Alluding to studies is a good trick as long a no one actually checks the larger picture. National gets away with it thanks to the open border progressives in the media, universities, Labour and Green Parties.

Its official its a "Housing CRISES". Great to see self promoter DonKEY at the UN solving the worlds problems. Why do National drag their heels on this huge issue of indebtedness and en-equality?