David Hargreaves says the Government should broaden its line of attack in the fight against the country's housing problems

David Hargreaves says the Government should broaden its line of attack in the fight against the country's housing problems

By David Hargreaves

What do you reckon the most difficult job to do in New Zealand would be?

Hugely subjective of course.

I’ve always thought All Blacks coach would be the toughest gig.

And if you’ve just immediately scoffed: “All Blacks coach the toughest? Why, I could do that!” then you’ve just walked into my cunningly laid trap.

The reason I would pinpoint All Blacks coach as such a difficult job is because the All Blacks MATTER to New Zealanders. Everybody in New Zealand knows something about the All Blacks. Most have an opinion. Most have some sense of ‘ownership’, of feeling involved, and dare I say, a sense of some type of entitlement. New Zealand should ALWAYS have the best rugby team in the world.

When you are coaching the All Blacks you are doing so on behalf of the entire New Zealand public. If you win the World Cup, well, that’s about what you should do. If you LOSE it…what one earth were you playing at?!

I’m not sure whether Phil Twyford ever envisaged himself as an All Black coach. And I’m not sure he envisaged when he took on the Housing role that he was in fact getting himself into a very similar type of job. But he was.

In terms of things that matter in New Zealand, housing is right up with the All Blacks. So, if you set yourself up as being the coach of New Zealand’s housing team with a ‘World Cup’ to be won (in this instance by building 100,000 KiwiBuild houses – that’s Twyford’s ‘World Cup’) then your business is suddenly everybody else’s business.

Because yep, that’s right, it seems most people have some sort of an answer to New Zealand’s housing problems. 

It has been, for example, a great revelation to me over recent weeks that apparently the National Party (to be henceforth known as The Party With Sausage) had housing under control when it was in Government. This from housing spokesperson Judith Collins: “National had a comprehensive housing programme underway when we left office. We were on track to build nearly 100,000 homes over the next three years, which is twice the number of houses currently in Dunedin.”

Crikey, if National had let us into the big secret that they had the housing problem sorted when they were still in Government, perhaps they still would be in Government now.

But I really don’t want to sound too flip on what is actually a serious problem. What’s becoming clearer by the day is that as a country we are nowhere near reaching some sort of consensus on what to do about building enough houses and also about replacing not-fit-for-purpose housing stock.

The current popular mantra is around ‘fixing’ the Resource Management Act. Well, so far as I’ve ever been able to gather, it’s been needing fixing for 28 years, which is how long the thing has been with us. We don’t seem to have been able to reach a political consensus on how best this thing can be fixed, or indeed what ‘fixing’ it really entails – IE what do we want it to do?

Making it 'sexy' for the public

The political spectrum, and I say this with a great sense of regret, is about appealing to the public with ‘sexy’ policies that people can understand and get behind.

If Twyford had got up before the last election and pledged a total overhaul of the RMA as a key plank for Labour then this would have carried all the excitement for the electorate of pouring cold tea down your trouser leg.

Ah, but: “We’ll build 100,000 houses!” Woah, sex on a stick. Let’s be having some of that then.

But now, rather than getting in behind the fact that someone has set out to do the 100,000 house thing though, it seems that the public’s taking an almost perverse pleasure now in knocking the whole thing down. As I said in a recent opine, some people have been awfully quick to call the whole thing a failure.

Again it probably comes back to this fact that virtually everybody in this country has an interest in housing and therefore an opinion. And an opinion on how things could be done better.

I would reiterate my view that KiwiBuild has not to this point been proven a failure. But against unrealistically high expectations naively set by Twyford it has unquestionably got off to a staggering start.

Tell us what the problems are

Personally, I would actually like the Government to come out and say just what the problems have been and where it faces issues. Really there has been little up-front discussion of this nature.

If the public at large – and big businesses that might be able to help – do know for sure what all the issues are then this could be of assistance surely?

The other point is, if we are clear that the issues are around RMA and such like, let’s know.

It wouldn’t do any harm at all right now surely if the Government said it was going to start a far-reaching review of the RMA.

What about the busting of Auckland's urban boundary as earlier talked about?

And what about the idea of rent-to-buy schemes, again as earlier talk about at the time of the formation of the Government.

Also while we are about it, what about a very thorough review of the building materials market with a view to putting a new broom through it?

Still aim for the 100,000

Don’t abandon the 100,000 houses, but broaden the attack. I think the Government would find the people of New Zealand most supportive of such a diversified plan of attack. Complex problems never have one solution, but rather require a combination of interventions.

I come back to the fact, the basic fact, that New Zealand has not built enough houses and too many of the ones we’ve got are not of a good enough standard.

So, come what may, we should be working on how to improve the situation.

I do suspect, however, that we may well see this Government very soon start to shy away from KiwiBuild and the building up of our housing stock.

Thursday’s release of The Tax Working Group’s report that will likely recommend a Capital Gains Tax in some form is likely to dominate the political agenda – and public comment – in the near future.

In such an environment it would be very tempting indeed to just let the housing problem child fade into the background – much as the previous National Government did.

If so, that would be disappointing and it means that’s yet another problem put in the ‘for later’ basket – such as superannuation. And don’t set me off on that one...

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?

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

67 Comments

Comment Filter

Highlight new comments in the last hr(s).

The Government can't come out and discuss the problems because they don't know what the problems are. The Ministers don't understand, any Department or Ministry involved doesn't understand (how would they when they have lawyers and policy analysts and no one who knows how to make things happen), and they aren't trying to understand.

You are supposed to set out to define the problem then be creative and come up with a solution. That's too much to ask for apparently.

They understand fully, just like they understand there isn't a "housing crisis" there's an "empty homes crisis". Unfortunately it's political suicide to actually do something about it. So both sides are going to beat around the issue without actually fixing it. All the while typical NZ families are suffering.

The biggest issue is the banking system and money creation that is focussed on purchasing and repurchasing financial assets at ever increasing prices rather than productive assets. I'll let Richard Werner explain.

https://www.youtube.com/watch?v=EC0G7pY4wRE

"The biggest issue is the banking system"
Not much more needs to be said after that.... ("Adrian? Hello, Adrian?...")

For 9 years the Nats said there was no problem,so did nothing.
For 9 years Lab said there is a problem and we know how to fix it.
Well it now appears that for 9 years both parties did nothing.

To be fair to both parties, they have both done some relatively meaningful things. The Nats pushed through the Unitary Plan, and Labour have brought in foreign buyer ban and Kiwibuild.
All of these were necessary, but are not enough.

The government should keep their hands to themselves and let the free market sort the problem out.

In the Auckland situation I think the unitary plan rules, for the most part, are quite development friendly. I think the problem is that almost any development over 3 dwellings needs resource consent and then almost anything under the sun can be raised.
If this requirement was changed it could make a huge difference to speeding up process.

Probably. But that would involve 'keeping their hands off monetary policy as well'? Are we ready for mortgage rates at 25% ( pick a number) because a free market in money will produce that in quick time....

Bitcoin. Just kidding.

Monetary policy is set by RBNZ (which controls the OCR independently) not the government of the day, but point taken. As long as we have government fiat currency there will need to be centrally controlled monetary policy, but in theory competition between banks should keep interest rates in-check to an extend anyway.

The government needs to take hold of the problem, and introduce large rent to buy / shared equity schemes.
There's one big caveat to this.
They haven't shown themselves to be competent at all with regard to housing. So I don't have much faith in their ability to deliver.

Hi Fritz

I'd have to disagree with you. You can't solve a debt problem by underpinning it with shared equity schemes and rent to buy initiatives. Markets need to do what markets do and they are now starting their correction. The Poms are still suffering the effects that these can kicking ideas had on the housing market and the Aussies are just experiencing (early days) the effects of their help to buy and 'first time buyer grant' interference from earlier in the decade .

Don't get me wrong, I think our bankers will bleat for these things, as will the leveraged and development sector and no doubt the government will go down that route... but it is the wrong route.

Nic I don't have as much faith as you in the market. I am not convinced there will be a substantial correction in NZ, and even if one started the govt would pull out all stops to arrest it.
Assuming such a correction doesn't occur, we will continue to be saddled with high land and building costs. The only way to get more people into ownership will be shared equity, leasehold etc. Having half a housing asset is better than having none.

High land and building costs come down first in a correction. We're already seeing massive discounts on the 'land flippers' land sites around Auckland. Land goes first, then labour gets cheaper as builders compete when there is less work building new houses, because thousands already sit empty..

Hi Nic,

Can you give an example of the "massive discounts" on land?

Have you spoken to the 'Revolution Director' at Remax?

https://www.facebook.com/donhainternational/photos/a.286088031822626/633...

I had not realised Remax was Don Ha.

My parents had bad experience when talking to Remax while they were considering options for their move a few years back. According to them, other companies' quoted prices (on ads) were generally accurate, whereas those of Remax generally ended up being quite a different ballpark to the actual realistic price once all the things that weren't included in the ad price were actually included. Their general advice to all comers was steer clear of Remax or assume their advertised price is way under the actual price.

Pretty gullible if you believe the real estate agent sales spin every time they pop “price reduced to sell”, “slashed”, “priced to sell” or “motivated vendor” in the title. You’ll find that type of title come rain or shine.

Yes, real estate agents undertake various marketing techniques.

Are there any land developers on here able to share their perspective on this? With respect to undeveloped land in Auckland, what are you seeing in terms of land prices on a per sq meter, per acre, per hectare basis?

Are there any builders offering land and house packages in Auckland on here? With respect to sections in Auckland, what are you seeing in terms of section prices on a per sq meter, per acre, per hectare basis?

CN are you really expecting an answer that fits your skewed view lol

Interested to see what people who specialise in this area are seeing and experiencing.

There are very few statistics available that I can find on raw farmland prices, raw land zoned with subdivision, and section prices.

I would also like to know some hard facts.

Have been fixated on land supply in Auckland for the last 3-5 years and have been doing a bit of long term tracking of section prices on trade me/realestate. My impression is they are falling faster than house prices, with the glut of land supply released in the past year or two.

But do not have hard data.

Minimum wage is soon to climb to $20/hr.
Land price is high because of limited supply in urban AKL.
Cost of construction is high.
Cost of compliance is high and waiting time is long.
Number of net migrants is high.
Housing shortage is high.

Why would ppl expect house price to go down?

I agree with many of your points. However, prices could still drop as any market is as much about confidence as anything else, and if confidence drops....

The confidence of ppl who have not had a house may be decreasing slightly.

But the confidence of property owners are holding very firm.

I guess it depends on how much pressure is exerted at home? I think the pressure is building and effecting the confidence of quite a few of those who leveraged up to play The International housing Casino. That's where the market is being set in Sydney, Toronto, San Francisco, Seattle, Melbourne... Have you ever heard of the empty house game?

See an empty house on the market - still there after deadline = 15% off. If it's still empty after 3 months + 30% off. You keep playing until you get an empty house that really needs to say yes...it's a great fun game, they played it in Ireland, Spain, Portugal and Greece..... I think it was called 'PIGS shafting' - 'Rockstars' could be even more fun!

Land price is high because a limited land supply did exist in greater Auckland from 2010-2017, but from 2017 onwards an excess of supply has been made available. (Land shortage still exists in urban Auckland, where costs are kept high, because Auckland Council loves sprawl.)

Housing shortage in Auckland has made Auckland an inelastic market with all the normal characteristics of one. The 2017 opening up of more land supply Auckland saw a flattening and slow decline of prices.

With inelastic markets what you need to watch is the demand side, because any drop in demand will have a big impact on price. Auckland market has been demand driven on the back of massive capital gains. But those gains have now stopped and the government is soon introducing a capital gains tax.

Why would people think house prices aren't about to fall?

The article is right, we care more about our houses than we do about relationships. At least, that's what it seems like to me. There is nothing better in life than a functioning partnership. It is the essence of life I would venture. A partnership or marriage or a functioning community or system is how everyone & everything gets through the good times & the bad. Having a roof over one's head is a key ingredient, granted, but the functioning partnership is the greater of the two in my mind/life.
Okay, so we have a nice house in a nice place, but we also have a great family & a great family business to go with it, which actually creates the wealth we need to buy a nice house. Great homes are fine, but great relationships are better.

David, Seriously, you say that to this point it hasn’t been proven that KiwiBuild has been a failure?????????
You have to be kidding????
It is the biggest miscalculation of anything ever said by any politician in history of any country!
100,000 over 10 years, and they have built absolutely ZERO houses that weren’t already in the pipeline, and you say it isn’t a FAILURE??????
Biggest failure of all time bar none and this COL is going to continue down the path of failure of all their promises!

?????????????????????

???!!????????!!!!?????!??!?!?!!!!!!!!!

They've been in government for 14 months. Do you know how long it takes to build a house? I've been told it could be as long as a year and we're on a section with all roads and services in place. I'm guessing it probably takes 12 months or more to get through the red tape on a new subdivision let alone start building actual houses.

He’s never built a house he just buys written off earthquake dumps and takes on all the skinheads that no other landlords will rent to.

I wager it takes less than the nine years they spent in opposition to come up with a plan that actually has a snowball's chance in hell of working, let alone being deliverable.

So less of a failure than the flag referendum?

Less of a failure than asset sales transforming our economy?

Less of a failure than the suspension of contributions to the NZ Super Fund?

Tip for new players: This article isn't about any of those things and they don't excuse campaigning on something there was no way they could deliver on.

Isn't the fallacy that "government intervention is best". I share the frustration with our daft housing situation. Labour promised to own the problem but therefore put themselves in the firing line when things go wrong. Would it not be better if the effort went into identifying and correcting the causes of the stupidity? At the moment all their effort is going into solving the effects, without actually knowing what the causes are. Fingers have been pointed at planning and banking, but without any real change.

Should our MPs not be focussed on making better laws rather than making houses? Isn't that their job?

Two of the biggest problems for housing in NZ are simply not fixable:
- our tiny population resulting in lack of competition and economies if scale
- the lack of readily developable land near our fastest growing cities

When houses and incomes were far more favourably related, our population was much, much tinier. Oh, oh there goes that argument.

When our population was much smaller we had much more easily developable land. We could also afford to build cheaper low density houses.
So you want to be really small - to your point - or much bigger.
Our problem was we were / are small and live in a country full of steep country and hazards, and with that context have had high population growth

Hi Fritz, I think us New Zealanders have been brainwashed to regurgitate the tiny population excuse a little too often in New Zealand - it's good for the old guard to perpetuate the myth and get away will both inefficiencies and high margins... but we're nearly 5 million people now. The age of tiny has passed.. all we need is a re-allocation of capital away from speculating on financial assets and into productive enterprise. There is enough of a market for new entrants who are agile to compete with the old guard... Just watch how Ikea will smash the Auckland home furnishing old guard when they arrive and you'll see what I mean. Our major problem is capital allocation not population size.

Aussie corporates realizing that nz population base is big enough to do business with have flooded over here. They are probably the main culprits for ripping us off and getting away with it. Plenty of examples

dp

Building houses isn't the problem at this point.

Having too many people to house is the problem. And it's exponential growth, which is why it will never be solved.

So many linear-thinkers......

So what's the solution to 'too many people'?

less, I would have thought.

How?
One child policies? (Draconian)
Education? (Can only achieve so much, a big chunk if society will always want to have a family, 2-3 kids if not 5 or 6)
Tax?

Replacement then snip

The alternative (and it's already too late globally, some billions too late) is much, much uglier. All we need is someone brave enough to discuss the problem.

Shut the immigration doors and let the high birth rate counties deal with their own problems.

Also stop paying people to breed. Working for families is a disgrace.

Fewer......

The stock reply: you first....

More space.

The All Black analogy is an interesting one.

Kiwi's pride themselves on not only their rugby psychical and mental toughness, and their mental nous, but also on the quality of our Rugby leaders ie managers and especially our coaches. Wrap that into our team cohesiveness and we are the best in the world.

You would like to think all that would somehow be reflective of how we are in business, like housing for example. But no, there seems to be no link which really highlights how housing costs and quality have completely dis engaged from pricing and what we hold dear to what makes us 'Kiwi.'

I did a quick comparison and if the All Blacks were to represent any jurisdiction as world beaters in housing then they should be representing Texas, and if any Rugby jurisdiction was to represent NZ in housing then the silver fern should be worn by India.

One of the main reasons we are good at rugby is that it is a global minority sport. It happens to be our national sport and quite large numbers play it here. It's as much a product of circumstance as organisational / managerial excellence.
Similarly Texas with housing. For sure some of it is down to policy. Much of it is down to circumstance - unlike Auckland and many cities in the USA, Houston is blessed with plentiful flat and accessible land around it.

Texas is - was - blessed with abundant cheap local energy. They builty a car-centric sprawl, no forethought in it, none at all.

How does that work in an energy-depleted future?

Badly, is how.

Texas cities haven't sprawled anymore than many American cities were housing is twice the price. And if density was a proxy for resource utilization then Hong Kong would be net zero.

If you think Texas has badly planned sprawl wait till you visit Auckland, which does use forethought. Phil Goff has decided to maximise sprawl, with rules making the relatively compact Texan variety illegal. Phil Goff uses a ban on development of 90% of the land directly adjacent to Auckland City, so that sprawl is forced to be more spread out. And Phil opens up a free for all on all land around every other town in the Auckland region*. And Phil subsidises infrastructure for the larger of the surrounding towns. Texas is nothing like Auckland in terms of sprawl per capita.

*Except Oneroa, because Waiheke took Auckland to court.

Houston was built on drained swamp land, like Christchurch but housing is half the price, Austin's rolling hill country is like Auckland's North Shore, with the clay as well, but housing is at least half the price.

And if flatness was a prerequisite for affordable housing, then housing should be free in many parts of Australia.

Our current housing stock requires impossibly large mortgages. For most average kiwis, they are impossible to buy. So who are we building for? Rich immigrants or buy-off-the-plans foreigners? Well, tell me what the purpose is in that! It's not doing anything for your kids. If anything, we need affordable houses of the same size and quality that require a mortgage that does not exceed 5 years of gross household income. A fantasy? So what has happened since houses were once affordable? This is the banker's game and they have the ball (world-wide). We have just been sucked into it. Housing is infrastructure. It's essential and fundamental to survival. You don't sell your infrastructure in bulk to other countries unless you just blinded by short-sighted greed. We don't need to build houses for other nations before we can house ourselves. That's my two cents!

Housing is infrastructure. It's essential and fundamental to survival. It needs to be affordable and dignified. You don't sell your infrastructure in bulk to other countries unless you're just blinded by short-sighted greed - and this is what the last government set us up to do. We don't need to build houses for other nations before we can house ourselves.

The All Blacks, who are they? I wouldn't want to be benchmarked against those muppets ever. Give me NZ Rowing any day of the week. Housing crisis in this country has been building for over 20-25 years, ever since housing became an assett class created by the preferential policy settings that were put in place by neoliberal governments of the 1990s as part of the new highly speculative post industrial FIRE economy, thats Finance, Insurance, Real Estate. Since then house prices have steadily inflated as one would expect of any asset class, especially one under pinned to such a degree by the banking system. Understandably everything associated with housing increased in price because, well, the bank behind the borrower would pay for it. As for the RMA, you don't seriously think it was intended to protect the environment do you? If you look it happened to be introduced at the same time as the FIRE economy was established. The effect of scarcity it created in land supply, it soon becomes obvious that its real intended effect was to lock in the fortunes of those who are wealthy enough to own or be able to own large tracts of land to develop while it effectively locks out anyone else who isn't rich enough and enslaves them to buying developed land and missing out on the vast wealth generated in the earlier phase. Target the banks, reign in the debt fuelled property inflation and replace the RMA, but with what?

What about the busting of Auckland's urban boundary as earlier talked about?

I believe it has probably been killed by the Greens. An incredibly cynical move by the Greens to facilitate the extended sprawl growth of Auckland, with all the associated pollution it causes. The Greens think more traffic and mess that occurs in Auckland the more people will want to vote for their supposedly "environmentally responsible" party. The Greens are in my opinion completely awful.

But quite astoundingly normal politics.

Indeed, doing away with the RUB, and the 10x multiplier it causes on raw land pricing, was certainly part of the rhetoric pre-election.

Plus we could recite the list of other impediments yet again. just for the (broken) record:

  • Do away with BRANZ. Use international certifications. If materials perform OK in Tokyo, Darwin, Cornwall, Juneau and Mumbai, let 'em in by the shipload. Enough of this 'We're Speshul' BS.
  • Give the Commerce Commission a rocket, a new set of actual Teeth, and turn 'em loose on the Materials Cartel. KPI: adjusted for FX rates, our materials should cost no more than those in WA.
  • Create a national Building Insurance entity, remove all liability for build cock-ups from TLA's (the poor dears can hardly cope with roads and 3 waters as it is now) and privatise inspections. Works for QLD. And institute mandatory maximum times for compliance certificate issuance, on pain of daily damages. Bit like demurrage for ships.
  • Create an appeals authority to work through build and compliance disputes. Bit like the Earthquake adjudication service in Christchurch. At the moment, there's no place to go except back to the hapless TLA whose staff foobarred the service in the first place.
  • Oh, and return the RMA to the effects-based deal it was set up to formalise, before the TLA zonerators perverted the entire thing into a mass of spatial plans. And as part of this, nullify all local Plans so we start with a clean effects-based slate.

I'm nothing if not the Revolutionary Kind (Gomez)

Meanwhile Core Logic have updated my estimated home value, rising from 95.22% of 2017 CV on 10/2/19 to 96.52% on 17/2/19.

As an aside, I have decided to extend my home rather than invest elsewhere (don't want to be subject to any CGT). The costs involved in building are eye watering and this doesn't involve subdivision etc. Quite how the COL could expect to build affordable housing with this cost structure is beyond me.

Anything that involves privatising or deregulating usually ends up a disaster in this country because we don't put enough regulation and accountability around the sector or processes being deregulated and it just encourages cowboys, you want that then go to a rodeo, plenty there. I fear that if branz would be replaced the industry would revert to that which delivered the leaky homes disaster, bringing in materials that don't suit our climate or shoddy building industry standards so don't do that either. Regulate it to the eyeballs and enforce it like Jerry Collins, its the only way to be sure.