Bernard Hickey suggests 6 ways to improve housing affordability, particularly in central Auckland and Christchurch where prices are rising 10-20% to record highs

Bernard Hickey suggests 6 ways to improve housing affordability, particularly in central Auckland and Christchurch where prices are rising 10-20% to record highs

By Bernard Hickey

Last weekend I appeared in a discussion on TVNZ's Q&A programme about housing affordability with Productivity Commission Chairman Murray Sherwin.

The debate and Sherwin's fresh comments in favour of boosting housing supply helped spark a fresh flurry of political comments. Alex Tarrant reports here on the latest back and forth from Labour and ACT on the acommodation supplement, which Labour has lablled a subsidy for landlords.

Housing affordability is certainly a problem for home buyers on anything like median incomes in central Auckland, parts of Wellington and for undamaged homes in Christchurch. Find out more on home loan affordability in our Roost Home Loan Affordability reports, which show the percentages of after tax incomes required to buy homes in areas around New Zealand.

Sherwin and I had a good discussion about some of the issues around affordability, but didn't talk much about the possible solutions, apart from generally saying we needed to build more houses. Auckland is currently short of at least 10,000 to 15,000 houses, Sherwin says. Depending on which forecaster you believe, Christchurch needs 5,000 to 10,000 new homes.

Here's 6 ways I think affordability could be improved around New Zealand, and in Auckland and Christchurch in particular.

1. Build lots more houses - Somehow, someone needs to quickly build a shed-load more houses in Auckland and Christchurch. That's easier said than done, given current restrictive policies around land availability, the high cost of land and the high (and rising) cost of construction. The market is obviously not delivering the extra houses we need. The combined cost of sections and a new home is simply too high for most home buyers, relative to their incomes and their ability to service debt, assuming, of course, that interest rates don't stay ever lower forever. 

Somehow, section prices need to fall and the construction costs, including consents, need to fall, or at least stop rising. One way to reduce section prices to add a lot more supply, particularly in Auckland where the Metropolitan Urban Limit artificially inflates land prices, particularly near the fringe. See more here from Athur Grimes on Interest.co.nz

2. Open up more greenfields and brownfields land - The new 'Super' City of Auckland needs to open up a lot more land on the fringes and inside the city for residential development. The twin drivers of the status quo being maintained are the usual NIMBYism of existing property owners and the self reinforcing conservatism of land bankers able to drip-feed land out at ever rising prices to make (tax free) capital gains on the land.

Of  course it's not as simple as just plonking down more suburbs and in-fill housing. The infrastructure of schools, roads, motorways, railways, shops and playgrounds around these new houses needs to be planned and invested in and built. This isn't easy or cheap. For whatever reason it's not happening at the moment. It needs to, and pronto.

If the 'market' and the Auckland City Council is failing to deliver these houses and the associated infrastructure then central government needs to intervene. Auckland's housing market is the biggest in the country and sets the trends. The Reserve Bank missed the development of the last housing-led consumption boom that drove inflation higher and some fear it is about to do the same again, or it may react to a supply-driven housing boom that damages other parts of the economy. Either way, the nation's monetary policy and economic performance need an intervention.

3. Build state houses on government land - One form of intervention would be a massive state house building programme on government land in and around Auckland and Christchurch. The biggest need for new housing is at the bottom to middle ends of the market. Few affordable homes are being built because the incomes aren't there. Rents are rising fastest in Auckland because of a lack of new supply and continued migration (both from other parts of New Zealand and from overseas). Reducing demand for lower rental private housing would put a lid on rents and could be partly funded by a reduction in accomodation supplements to landlords.

The Productivity Commission rightly pointed out that just 5 companies in New Zealand produce more than 100 houses a year. Somehow, we need more companies building more uniform houses in a mass produced way that reduces building costs. That may mean more 'cookie cutter', smaller and more uniform homes, but it will at least mean they get built. One way to create such a firm is for the government to build one for a mass house building programme in Auckland.

4. Impose a land tax - This is one obvious way to reduce land prices across the board. The proposal to the Tax Working Group in 2009 by Arthur Grimes suggested a 0.5% land tax on land worth more than NZ$50,000 per hectare would reduce land prices by 15%. See more here from our 2009 report on that proposal.

5. Impose loan to value ratio limits and limits on loan servicing ratio limits - The Reserve Bank has said it is looking at ideas such as loan to value ratio (LVR) limits, but has done nothing yet. Late last month the Bank of Canada tightened its rules so the maximum LVR was cut to 80% from 85% and the maximum debt service ratio was set at 44% of income. The Canadian government also banned the use of government-backed mortgages for properties worth more than C$1 million.

So far both the Productivity Commission and the Reserve Bank have been reluctant to cite easy credit as a reason for the unaffordability of housing. They should, as the Bank of Canada, the Hong Kong Monetary Authority and the Monetary Authority of Singapore do.

6. Train the living daylights out of our jobless youth - A major reason why constructions are so high and New Zealand has been so inefficient at building new homes is apparent shortages of low cost (but skilled) labour. The complaint is that as soon as a brickie or a chippie or a sparkie or a plumber is trained they jump  on a plane to Australia for higher wages. That may be true, but one way to try to solve it is to train masses of young people in these jobs. The demand from Australia may be slackening off soon as the mining boom slows down and the housing market over the Tasman cools down.

In the meantime, let's train these kids up and put them to work. Again, that large national house building firm would be the place to do mass apprenticeships.

These are a few thoughts to help seed the debate.

I welcome your thoughts below.

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.

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Why should Auckland, and indeed the country, keep expanding.
To the detriment of the environment and living standards.
I would suggest limiting the population to current levels, by limiting immigration.
This would cap property prices by reducing demand.

Hickey is wrong on all counts.
 
Except the last.
 
And they need survival skills Building skills will be part of that.
 
What is the land doing now, Bernard? Food production? Export-earning?
 
What do we do when we've finished - do it again?
 
How are you going to maintain the infrastructure - the biggest number of balls society will have ever had in the air at one time, and all aging?
 
Delusional.

Problems is there is no alternative, or no acceptable alternative...
regards

Auckland has a problem with trafic already so adding more houses with even longer commutes is an exercise in diminishing returns. I believe that what Auckland needs more than simply more houses is transit orientated development (TOD) where housing is built out at a density and location which facilitates cycling, busing and train ridership. Why should people have to sit any longer than they already do in traffic with even more commuters on the motorways?
 

Richard
I agree we can't just plonk a bunch of suburbs on the fringes. That's why I'm keen on brownfields too and say we should be planning for the infrastructure as well as the houses. I'm a cyclist myself. It's amazing how quickly, cheaply, healthily and safely I can get around Auckland.we don't all have to be stuck in traffic.
cheers.

Bernard....good performance...however let's face it - in an MMP environment how will these hard decisions be made???....for example, if a policy is introduced that property owners / investors don't like (e.g. accomodation supplement, land tax etc...) then a minority party will jump in to fight their cause no matter how irrational the argument is....also, I thought you could have challenged Sherwin on how he didn't suggest LVR controls - however I do see you've included this in the above article...good job overall.

That's a good point about MMP. So far I've only been aware of the bad things it coughs up (such as teetering towards Maori ownership of the foreshore and seabed).

Nothing to do with MMP, you put up straw man examples and claim its wrong, ....If we had a FPP Govn that wanted to remain elected they also wouldnt have to take "hard decisions"...its the quality of the Pollies and us for being so shallow. 
regards
 

Once again you're suggesting increasing taxes on housing to make it more cheaper by making it more expensive.  Could you please explain the logic again? - if increasing taxes on stuff makes it cheaper why not also increase GST on food - then it will be cheaper and the tax take will increase, a win win.

Because HOMES should not be speculative commodities! THAT is why! We should be instead speculating on 'innovation'. Flipping houses back and forth to one another for more and more personal debt is less productive than flipping burgers even!
Tax can be used to discourage STUPID behaviour.
 

Yeah sure use tax to punish people for being bad or whatever - that's not what I'm asking. I'm asking how could it possibly make housing cheaper? Increases in the current land tax (Council rates) do not lead to lower house prices and certainly not lower rents.  Increasing landlords tax (removing depreciation) in a market with housing shortage didn't make rents or houses cheaper - it has had opposite effect.  Increasing GST hasn't made housing cheaper. 
 
How come increasing taxes on housing is always wheeled out as a way to reduce housing costs when it has opposite effect whenever it's tried (and is logically flawed)?

Land tax: options for reform By Iain McLean Professor of Politics, Oxford University
www.nuffield.ox.ac.uk%2Fpolitics%2Fpapers%2F2004%2FMcLean%2520Land%2520t...
This is a great article on why a Land tax is a better way to go.- If your going to tax anything- tax land and stop taxing people.
Currently we mostly tax people doing stuff like working and spending- then we wonder why both of those activities are offshored. We need people to work and spend here. Land Tax can actually mean that we pay less 'tax' to Australian banks through interest payments
 
three things need to happen
1. supply- explained  very well and in great detail by HP
2. money- loans based on rental return and minimum deposit rather than on ability of person to pay- make it on the ability of the property to pay otherwise we simply bid up the price of stuff we ( as a country) already have
3. Land Tax- start taxing land a bit and people a whole lot less- what is wrong with that?
 
 

Yes it might be a wonderful way to restructure tax system - it might be the best thing ever and we all love it - but it still doesn't explain how making housing more expensive makes them cheaper.
 
There is some suggegtion that it might do this by increasing housing costs making property investors have second thoughts about being property because it's too expensive - but how does that help?  Every other time property investors are faced with increased cost (depreciation, GST, rates) it just gets passed on.  It doesn't make houses cheaper - and if it did the property investors would surely jump straight back in.
 
 

Google Grimes and Coleman + Land Tax

like duh, and the rabid right claims the left has no business acumen. Because food is a retail item has no speculation content (at that level), now in terms of commodity futures etc, yes "tobin tax" those to take that gambling element  out.
regards
 

Food has no speculation content? - you should read the NI issue on that.  I just want to hear a rational explanation as to how making houses more expensive makes them cheaper.  It makes no sense and no one has ever explained it - I just get told about how it's fairer or better (which I have no problem with).  I can't get any explanation of how a land tax will make houses cheaper when every other additional tax/cost on houses makes them more expensive. 

Oh dear, you expect others to understand your blinkered views on economic "drivers", yet ignore teh real economic fundimentals that make your point of view obsolete.  You lack the ability to see or want to see root causes......until then you are advocating building on quick sand. 
regards
 

NB "normal growth" here is your biggest problem you believe in a flat earth, most other ppl with an education at least figured that was wrong in  the 14th century....
http://en.wikipedia.org/wiki/Myth_of_the_Flat_Earth
regards

I would agree with most of that except the idea of building on more city-edge land. Most of our cities (and Auckland in particular) already extend over an oversized footprint, with edge suburbs an increasingly difficult and unaffordable drive from workplaces. In Australia and the US, these "edge suburbs" have turned into "edge slums" with little employment. It would be better to follow the example of Europe and intensify development in urban areas.
(Not to mention that once the cost of services and highways are included, city-edge land isn't that much of a bargain).

I think I understand where you are coming from and why some people have a problem with it.
1. Open up any/all land for housing
2. this opening does not mean it will actually happen- but it stops some people artificially controlling land supply and therefore inflating the price of housing land.
3. So all land in New Zealand will not actually have houses built on it but we will stop the profit from the rezoning- too much money is tied up in this process
 
 

Hugh once again you ignore the infrastructure and living costs (additional transport cost, isolations and such like) of urban edge development.  Cheap up front and high running costs is as unaffordable as high upfront.  Maybe one day you will get that.
One thing that does puzzle me is why new houses should be for first home buyers.  If they were aimed at the market of houses for existing house owners to move to then that would free up existing stock for new home buyers, probabaly cheaper?
Or we could just do what the first labour govenrment did successfully and have a large state housing construction exercise.  Unfortunately not acceptable to the current ideologues in power.
Finally what should be done about the high cost of building materials and the implications of this on house prices?

A sacred cow needs to be put to death - the 'quarter acre cartel'. I do agree that NIMBYism has little to do with environmentalism, and much to do with protecting the property bubble at any cost. On the other hand, there's much to learn from the infamous shoeboxes that sprung up in central Auckland (and to a lesser degree Wellington).

And another elephant in the room is the fact that Auckland is bursting at the seams, while much of the rest of the country is running out of people (and industry). Maybe some form of regional development & infrastructure needs to be revisited, to encourage a more even population/immigration distribution round the country.

Landcare were - big picture - hamstrung by their pre-wished wish list. As is Hugh. As is Bernard Hickey, apparently.
 
The 'Big Ag' just-in-time food sytem breaks down from here on, it's a time-bomb of aquifer/water depletion, soil degradation (and the increasing inability to address same), transport (energy, in other words) problems, road-maintenance triage - that's happening now - and a fight for oil-based fertiliser, infrastructure etc.
 
That Big Ag is what feeds Hugheys sprawling suburbia. Vast tracts of ticky-tacky housing folk who have forgotten that food comes from anywhere but the supermarket shelves - and (think Wardells 1932 Dunedin) who will get a bit angsty when those shelves are empty.
 
http://www.endofsuburbia.com/
 
Small village/town clusters, and an acre or two per house, address the future. Endless sprawling 2-car-garage suburbia is a recipe for disaster. A restriction in population would be a proactive move too.

"A restriction in population would be a proactive move too" - essential.
regards

Solution for Auckland:
 
Government sell 1000 state houses in the inner suburbs every year for the next 10 years.
 
Gives $500m plus in revenue per annum which is enough to build 2000 new state houses each year instensifying and redeveloping existing state housing land and developing new mixed state/private suburbs on the fringes.
 
On the old state properties sold most will be redeveloped or renovated with an average spend of $200,000 say (including additional infill on sites sold), so total build spend is $200m by private owners and $500m on state housing - that's a total of $700m of spending - which would generate over $200m in tax revenue and overall cost the Govt absolutely nothing yet increase state housing revenue (on the capital in the properties being sold) by 100% and reduce maintenance costs significantly.
 
Solution for Christchurch:
 
Government could relocate up to 3000 ex red zone houses.  Cost including developing land could average $200,000-250,000.  75% could be sold.  25% retained to replace state houses that were lost.  A mix of existing Crown land and newly acquired land could be used.
 
There would be no net cost to the Government with sales exceeding expenses, and the Govt ending up with say 750 houses for free.
 

I'm no expert on Auckland's housing problems but your proposal to ease the housing shortage (actually, a shortage of AFFORDABLE housing) in Christchurch is bang on Chris. This has been blindingly obvious for nearly two years and why the Key government didn't include this option in their first round of red-zoning in June last year is a puzzle. Is it because they are (1) stupid, or (2) ideologically blinkered? Ignoring the fact that redzoning per se is a Government intervention in the land and housing markets. Key , Brownlee & co just couldn't bring themselves to use the Crown's powers to free up suitable land around Chch at a reasonable cost for this purpose. Their professed faith that "the market will sort it out" ignores the many structural impediments our citizenry here face in trying to move forward with their lives. It seems very likely the the "market solution" they prefer will amount  to nothing more than a continuing exodus from this city. This will probably do a little to exacerbate Auckland's problems.
Note there are plenty of state houses , some with minmal damage,in the red zone near where we live. I have not seen one lifted up and relocated. Beam me up Scotty.

Government sell 1000 state houses in the inner suburbs every year for the next 10 years.
 

Is there a publicly available list somewhere of all the state (that being central government owned) houses?   Just curious as to whether your 1000 a year from the inner suburbs of Auckland is a number based on fact - or just a best guess.  And by "inner suburbs" of Auckland, I assume you mean within the boundaries of the old Auckland City?
 
 
 

According to Terranet, Housing NZ own 53,900 land titles in NZ, 25,000 of which are in Auckland.
 
Why do they own a little house on 1199m2 in Long Drive St Heliers with a GV of $1,320,000 which they probably rent for $150pw??  Why do they own propoerty in Bedford St Parnell?  Why do they still own a large portion of what are now slum 60s housing at the bottom of Freemans Bay??
 
The vast majority of their holdings in Onehunga, Mt Roskill, Glen Innis and surrounds could be sold and redeveloped allowing more room for those prepared to pay big dollars to live closer to Auckland CBD.

I think the solution for Auckland is that the young ones should stop dreaming about owning their first homes in Westmere, Grey Lynn, Ponsonby and Herne Bay.  They should start with cheaper areas e.g. eastern suburbs, Papakura and Tuakau.  Learn to walk before you fly approach!
 

No one in their right mind would vote for an increase in Council Consenting fees. When it comes down to it not many would vote for policies that raised the cost of sections. Make the Council more democratic. Put the people in Charge. There are too many hidden agendas going on which if people knew about they would never vote for.

Do tell: how can councils be made more democratic, we already get to vote for them every three years.

The young adults (and young can mean up to age 40 in this context) need access to affordable homes. Whilst arguing the detail please keep in mind the big picture. 
For instance, keeping the productive population in NZ rather than watching them move to Oz, could be achieved with housing that is substantially cheaper.
Expensive housing is the biggest drain on personal incomes. GDP that increases as a result of house price rises caused by supply shortage is a false source of riches. Let's admit that restricted housing supply is a cost on society that only benefits a minority (unfortunately holding the reins of self-interested power). 
I favour focus on high density (high quality) housing in proximity to urban centers. This matches the desires, values and lifestyle of modern first homers, and has economic efficiency plus this new form of housing is not directly competing with suburban supply. Rather than bring prices down across the board, a new strata of pricing is created. Admittedly you won't see 10%pa rises any longer, but there won't be wholesale falls either. 
Good debate. When does the action start?

So the answer to a slowing economy is get property developers in power and get more development under way... and if there's a slow down get more property development underway untill everything is over developed.... then knock it down and start again?

Sounds a little like Queensland under Sir Joh.

Actually no, China and we can see thats a huge mess waiting to explode/implode.
Interestingly Hugh never comments on china and what it is doing to its environment...but then thats "free" so doesnt matter.
regards

Yep China syndrome, we can see how that is ending....funny thing is the right whingers complain that Govn is stopping a recession and a natural clearing out and here we see uh right whingers doing the same "stupid" thing but its lauded by the likes of Hugh P....
Great logic that.
regards

That should not come at cost of society and the environment. We need all four.”
 
Dreaming. You can't do the one without impacting the other. Cognitive dissonance, perhaps?
 
The reason the rules will be thrown out is that folk are going to choose immediate satisfaction over long-term viability. They can only excuse that, by ignoring facts, As some here do.

Im not so sure I'd use "satisfaction" I think when the voter has no job, or constrained income they want to correct that and the demi-gods who offer such solutions get into power.....it happened with hitler and its happening again....and we can see how well that ended....but history is always ignored.
regards

And for those who read Hughey's post, ask this:
 
What is the guarantee of the holy 'income level'?
 
Goods and services, being produced via work/energy, comprising bits of a finite planet.
 
Who has investigated that, and still ascertains that it is set in concrete?

So they'll hit the wall earlier.
 
But your two points make no sense, don't refer to any baseline in either case, and appear to be exponential, thus unsustainable.

Hugh, no disrespect but you've stood back from doing costings because your suggested costings are fantasy.
 
Excluding raw land cost, development contributions, council fees and charges, holding costs and builders margins, I believe a reasonable 120m2 3 bedroom house including the share of the cost of basic roads and services on a flat greenfields site would cost around $200k each.  Through in the exclusions (with raw land at say $20,000 per site) and you're somewhere around $300k.  Larger scales may reduce it slightly but only of the order of 10%.  However the cheapest that developers such as Horncastle are doing it for is mid $300s.
 

Tax land bankers.
Low or zero consent fee's for small house builds.
Government low interest loan to developers that can build small houses in bulk (economies of scale).
Slow immigration.
Free courses for learning skills in building trades.
Zero GST on building supplies
Release land around current rail corridors
 
 

So with no consent fees who pays for inspections?
This would be a cowboys wet dream.
regards

No development contributions would be even better ...YEE-HAW!

Government subsidies to pay for inspectors to stop cowboys. Stiff penalties if building codes not met. Any suggestions on how to provide more supply of houses?

Any suggestions on how to provide more supply of houses?

and when we build the houses get more migrants to buy the good ones in the good suburbs. Get poorer Kiwis ino smaller and smaller accomodation untill everyone has forgotten the lifestyle New Zealanders took for granted (normalise it). Meanwhile the savy property investors etc can enjoy their beautiful gardens.
80% of population growth is from offshore.
http://www.treasury.govt.nz/downloads/pdfs/mi-jarrett-comm.pdf

Singapore has an interesting land policy. The state is the biggest landlord and they have a two tier ownership model. After a time they will knock down and rebuild the accomodation and they do it well not like the apartments in Eastern Europe the late Owen McShane was fond of using as examples.

This whole situation is rediculous and occurs because a) a powerfull business sector directly benefit from population growth and b) "leftists of an internationalist tradition have always favoured globalization and getting rid of national borders and barriers to migration."
i.e. labour and the Greens.

Back in my parents time people built their own houses and people in a street cooperated, sharing a beer afterwards.

Another factor has been overlooked: average house sizes have been increasing from year to year, while average family sizes have been static or declining. Do we really need more McMansions, or is it yet another by-product of the housing bubble?

Here's another thought, Bernard.
 
Check out the prices of unit title and other options for housing in your typical retirement village, e.g.
http://www.rymanhealthcare.co.nz/living-and-care-options
 
I think you'll find that if our growing elderly had more affordable options to move to - they would sell their existing (and in many cases modest FHB-type homes) for a lot less. 
 
I think it could be that many older folks who are 'asset rich, income poor' are staying longer in the home they raised the kids in because they can't afford to move to these retirement villages - and even if they could afford them, there just aren't the places available.
 
So maybe if the state concentrates on design/build of these brownfield-type developments on the fringes - a great deal more inner suburb homes would come on the market at a more realistic price - or perhaps the state could even become involved as both buyer (of the inner city home for state housing) and seller of the retirement village unit title? 
 
It would likely also reduce health expenditure on home assistance, meals on wheels etc. and primary elder care would also be able to be concentrated and coordinated more effectively.
 
 
 
 
 

If we build in the future, it is more likely that we will infill existing towns. The surveying has long beed done, and they were at strategic sites, transport/servicing/water-wise.
 
They will be where the wave of folk exiting the cities -and displacing oil on the land - go first.
 
Cheap affordable houses are easy. You could produce a 100 sqm super-efficient house for $70.000 in todays dollars, and a granny-flat sixe for less than $50,000. There have to be thousands of vacant 1/4 acres in those hollowed-out rural towns.

I see Houston (the oil capital) is going green
 
STEVE KLINEBERG, a sociologist at Rice University, mentions a couple of events that made Houston’s leaders take notice of a looming problem. One was the day, in 1999, when their city overtook Los Angeles as America’s most polluted—evidence that the rise in asthma attacks among the city’s children, and the students passing out on football pitches, were no coincidence. Another was when Houston came up short in its bid to compete to host the 2012 Olympics. No one on the United States Olympics Committee voted for it, despite the fact that Houston had a brand-new stadium and had promised to turn an old sports field into the world’s largest air-conditioned track-and-field arena.
/ /
People’s views about houses have changed, too. In 2008 59% said they would prefer a big house with a big garden, even if that meant they had to use their car to go everywhere. Just 36% preferred a smaller house within walking distance of shops and workplaces. By 2012, preferences were running the other way: 51% liked the idea of a smaller house in a more interesting district, and only 47% said they wanted the lavish McMansion.
http://www.economist.com/node/21558632?frsc=dg|a

Isn't it against the rules of this website to criticise (in any way) Houston a.k.a nirvana?

Andrew R: Sadly there is no need to criticise Houston here on this web-site. There is any amount of adverse material available on the web about it. You have to look for it though. Probably the biggest would be the fact it is right slap in the path of Tornado Alley. Then second search the demographics population statistics. Look at the anglo population 20 years ago, and then again in 2010. It has dropped substantially. More than a lot. It's an exodus. Consider why they are leaving. Spend a little time doing your own independent research and you soon discover what the drawbacks are. Then ask yourself if you would like to live there. Won't find any of that in the advocacies here.

I think a land tax would see who was swimming in the nude (as the tide goes out) and the basis for an economic policy based on population growth:
 
The Property Council
“A land tax would be efficient and fair only if broadly and uniformly applied. New
Zealand has a long history of land taxes beginning in the late 1800s. Exemptions and
reductions have made land taxes politically unsustainable. They were finally repealed
in 1990. We see no reason why a land tax in the future should be any more politically
sustainable, particularly given the strong views of key stakeholder groups such as
farmers, retirees and Iwi.
 
[we are against strong effective measures]
 
A land tax would also impact on land prices. This would impact on banks – at least
2/3 of bank lending is to land based and housing segments. This could impact on the
cost and availability of capital – and consequently on economic growth – perhaps for
a protracted period.
 
[ a fall in land values will hurt our members who "climb the property ladder" on on earned capital gains]
 
Our initial analysis strongly suggests that far more detailed analysis and rigorous
debate is required before these ideas progress further. Otherwise potentially
damaging policy decisions could be made.
 
[put it off until it is forced on us].
http://www.propertynz.co.nz/files/Media/NZIER%20Final%20Report.pdf

Why not encourage business  out of Auckland,  people will follow the jobs.  We have lots of unsold sections in Kerikeri and it is also a great place to bring up the kids

Why not encourage business  out of Auckland,  people will follow the jobs.  We have lots of unsold sections in Kerikeri and it is also a great place to bring up the kids

Ha, pretty simple really fix really.  Bulldoze remuera, ponsonby, etc, build medium and high density and just move more of the Auckland population into these areas.

From what I can see, most subdivisions seem to require houses with a floor plan of something like 140 sq m. at least, sometimes much more.
Quite simply, a smaller house is more affordable to build... and to maintain.  Plenty of us grew up in houses less than 100 sq m. and we were just as happy and healthy (if not more so) than kids growing up today in oversized houses.
Developers and the construction industry hate small houses of course - but how about govt (ha!) or councils standing up to them and mandating lower minimum floor areas in subdivisions. 
 

That's true about small houses. In the winter too people in older houses run between rooms.
 

"Developers and the construction industry hate small houses of course" - what??
If a developer wants to build and sell a $300K dwelling in the CBD they will have to pay around $50,000 in development tax .  If they want to sell a $600K dwelling on the fringe they will pay around $20,000 development tax. 17% tax as opposed to 3% tax.  Then the fringe dwelling is likely to be a Permitted/Controlled with certainty of getting a comparativley cheap Resource Consent.  The central dwelling is likely to be a Discretionary activity with a long expensive and uncertain Resource Consenting outcome.  It's not that developers 'hate' small houses - it's that they are made financially unfeasible.

Mist - you're a linear thinker, methinks.
 
If it isn't there, you don't have to buy it. period.
 
That gib needed stopping and painting, and the space created will need heating forever. Why put up gib anyway?
 
None in my place. No 4x2, either. No 'lads', no on-site paint, no batts, no cavity wall, - and I bet it's warmer than yours right now!
 

Ah, the cogito ergo est school of analysis ("I think therefore it is").
 
 
This discussion looks like many fine solutions searching desperately for problems. Does anyone out there know of any real research into the causes of shifts in housing affordability? Off the top of my head you could look at:

  • decline in middle class income
  • structure of NZ construction industry including suppliers
  • changes in planning practice
  • structure of NZ developer industry
  • finance issues
  • changes in expectations (e.g. bigger houses)

Kumbel -
 
The kicker is 'middle class incomes'.
 
They have been reducing sinve the mid-70's.
 
We cleverly offshored our lawnmowers and our bikes, because someonr e else had lower wages (lower incomes). We bought the same stuff from the big boxes, using increasing amounts of debt, which we underwrote by selling houses to each other.
 
The record private debt still exists. Local Govt debt has never been bigger. Govt debt is increasing; any way you look at it, the middle class are deflating. And - if some comments here are anything to go by - they're continuing to delude themselves about that.

immigration?

Re Christchurch
I sometimes wonder if the Nats have read Shock Doctrine and are applying the ideas to Christchurch.

The Shock Doctrine

 
In THE SHOCK DOCTRINE, Naomi Klein explodes the myth that the global free market triumphed democratically. Exposing the thinking, the money trail and the puppet strings behind the world-changing crises and wars of the last four decades, The Shock Doctrine is the gripping story of how America’s “free market” policies have come to dominate the world-- through the exploitation of disaster-shocked people and countries.
Basically the idea is that 'something bad happens"- you let it play out over a long time so that people are destroyed, shattered and scattered and then you move in and make money out of their suffering. - sounds about right.

I think that's what Plan B was implying Hugh....crush and conquer Christchurch (CCC?).
The irony is that having survived the earthquakes, kept the business going through the chaos our biggest threat is the bureaucrats themselves. The city is being strangled by systemic ineptitude, small mindness and general lack of vision and real leadership.
The problem is that the property sector and it's political cabal are firmly latched onto the host and they don't want to let go of the free ride and they're leaching us dry in NZ. Anyone got a good remedy for parasites?
Absolutely possible to make a vibrant, economical places to live.....except we don't have the political will or vision. The gate keepers and their torbid minons have their boot directly on the throat of average New Zealanders.
We should also be looking at prefab construction. Build them in factories like everything else is. Get economy of scale and a production line going in out of the rain. Smaller modern designs based on passive heating principles. Computer cut timber and standardised components. It works for cars and works for houses. Superfical features can be customised and you pick the model that suits your needs so you don't get that insane monotonous suburbia.
We need decent priced land and affordable housing for your average kiwi, not a speculative debt based ponzi scheme that charades as a 'freemarket'.
 
 
 

^this^

How surprising that you think we should be adding on more suburbs miles from the city and leaving your 1/4 acre in Epsom alone

7. reduce immigration

Jimmy Squirrell: immigration. too easy. last month and the month before and all the time in between there has been any amount of hand-wringing about the number of departures from nz heading for australia. yet what is glossed over, not mentioned, soon forgotten is the net figure after counting arrivals is always positive. There are more coming in than are leaving. You are correct. But why is it that the picture that is promoted is one of the country being emptied out while the reality is it's filling up. The substitution effect? Got any answers? Your thoughts?

I think cause they always compare net migration with Aus, which is put up as a country we should be at a similar economic level as, and therefore it shows up our shortcomings as a OECD nation. But as you point out, that does not stop immigrants from other countries pouring in, many from non wester countries. I'm not against immigration per se, I hate how it is used to drive the artificial housing ponzi / debt bubble. Most of the economy is stagnating, yet during a time of global crisis whose ROOT CAUSE is the debt / housing bubble, the only things with signs of life is housing and bank profits. This is caused by govt / RBA policy seemingly hell bent on driving demand factors for housing (more people, cheaper credit, allowance of large LVRs, tax concessions etc) with no more than lip service to supply factors (more land). The argument that low rates are needed to help business & christchurch is just rubbish as hardly any new lending is going to new business. Why not just enforce policy that makes houses cheaper, then we dont need to export as much to pay the ever increasing foreign debt???????? if your petrol tank leaks, fix the leak first. Then think of new ways to earn money to pay for the petrol.

The property market here in New Zealand in comparison to other industries is completely distorted.  50% of all property agents should work in the production sector.

What could they possibly do in the productive sector Kunst? Photocopying marketing material isn't really a skill......

And in the meantime we have the absolute FARCE of Local Body NZ lobbying AGAINST the governments plans to restrict their activities to the core functions of a normal council ..Who gave these paper pushing morons the authority, or even a tacit mandate, to decide to waste even more of OUR money in opposing the very thing that all councils desperately need to do - ie: get back to the basics !!! 

When houses where "affordable" going up to the 80s, one built a home, no foot paths, curtains, garage, landscaping, dishwasher.....and added these as budget and time went on.
Remove these 'added value ' components and new house prices take a dramatic decrease, which will also influnce the price of established homes....which one will the 1st home buyer by?...afford?
Im want to put a new shed on the backyard...3 survey pegs...$900... and this was one of the cheapest quotes....yes I understand surveying can be expensive, get a peg wrong can result in very expensive compensation later on.
But drainage, quotes from $1500 to $2000  to lift a 50mm hand bore out of a truck, carriy 10 m  bore a hole 1m deep, squeeze a bit of clay....fill a 2L milk container with water tip in. wait 30 mins and measure how far the water drops ..and then go home asking the owner to measure in another 30 ims and email the result....
Fortunatly only cost $920  ..40 mins to do the above, est 15 mins to put the numbers in a calculator and type up the report.....and we thought Dentists and air line piots earnt the most.
 
Affordablity comes down to removing the 'added value' content and remove the rorts of
'engineers'
Hell $200 mil for conculting fees for the Manukau 'upgrade' that has caused even a greater congestion issue and the same up at Puhoi....Degrees without common sence and any responsabilty ....This is generic not to just the construction industry.
 

Ever see a town planner or politician living in a little high rise apartment in Glen Innes??
They would all tend to have acres of land banks/investment properties/ etc
But they and Bernard etc know what is good for you!! i.e. a tiny dwelling and compulsory gambling on the sharemarket via Kiwisaver,(which has to distort the market, but that is another story)
Answer is to stop expanding obviously

Is there one single supportable fact anywhere in your comment?

The solution to Auckland's housing problems is not very difficult at all.
Firstly, free up residential controls in the existing urban area. Allow for "gentle" and "invisible" density in most locations - conversion of existing houses into 2 flats, granny flats, duplexes. Easy gains can be achieved with minimal impact. Charge development contributions on a per hectare basis to incentivise higher density. Don't have silly private open space requirements.  
Secondly, open up 3-4 key areas on the urban fringes. Set high environmental benchmarks, and require 20% of housing to be delivered as "Affordable" housing (ie. below median house value for the Auckland region). If developers have flexibility to build single storey 110 sq m 3 bedroom villas on 250 square metres sections, then such "Starter" housing should be able to be delivered for circa $370K
A friend of mine who works here in Aus for major property developer Lendlease says this product sells well and is profitable, so there is no reason developers can't supply it
Let's see whether the Auckland planners can finally get their act together and deliver with the Unitary Plan..... 

Will be hard to get the Councils to let go of their land racketering and 7% rate rise per annum Mist42. They've got their sticky fingers on the public purse and debt to spend on their paypackets and stadiums.
Anyone interested in quality passive housing the follow doco is interesting.
http://www.foursevenfive.com/index.php?main_page=page&id=30&chapter=1

Well said Mist....

Really interesting interview. As an ex-Aucklander and a landlord and parent of adult children who are presently getting govt help for accomodation or other, I feel qualified to comment on some of these issues. The problem is this insatiable demand for housing in Auckland. Why not- instead of gulping up more and more expensive land and the subsequent need for infrastructure around Auckland- focus on provincial economies? Why do people want to live in Auckland? They really want to spend 1-2 hours a day stuck in traffic to get to work for the rest of their working lives??  
While looking for an investment property in Whangarei we were dumbstruck at the number of vacant properties around the suburbs and seriously reconsidered whether buying an investment property here was a wise decision. Why are people leaving Whangarei and Northland in their droves for the mines of Australia ? Because jobs are hard to find here. Why do they go to Auckland and contribute to the problem of housing there? Because work is more readily available there. The housing shortage is a problem only in the main centres. Why not seriously encourage some of those businesses to go into the provincial centres where there is an abundance of room for growth both commercial and residential?
My daughter and son-in-law recently moved (against the trend) from Australia back home to raise a family. He has trained as an airline pilot but is currently working 20hrs a week at Mack'as to put bread on the table because they don't want to live in Auckland. When will people start to realize there is more to New Zealand than Auckland?

Good points raised, and I think they would help to reduce property prices. However, there would be some opposition, because the push for sustainable development would mean higher prices for now in terms of construction costs. The benefits of going green would not be evident in the near future, and that is what gets politicians worried.
Derek - http://www.heritagegardens.co.uk