By Alex Tarrant
When is a housing shortage estimate a housing shortage estimate?
No, the word ‘not’ isn’t missing from the question above. It really was one worth posing after one of the more exasperating select committee exchanges of the year on Wednesday.
Pity the Auckland Council, for they cannot get it right.
Pity the Reserve Bank, for they cannot get it right.
Pity economist Shamubeel Eaqub, for he cannot get it right.
Pity the Ministry of Business, Innovation and Employment. The advice they give isn’t even accepted.
It was very much a case of the ‘Exaperatee’ against the Great Exasperator.
Labour’s Phil Twyford sought to eek out of Nick Smith anything he could on whether the government was working to any given housing shortage estimate as the Building and Construction Minister appeared before Parliament’s Social Services Select Committee.
The opposition’s housing spokesman tried to steer Smith into agreeing house building activity in Auckland was not at the pace required to match growing numbers of people in the city, let alone close any deficit.
Twyford put to the Minister Auckland Council figures that 7,200 homes were completed last year – a little more than half that needed to keep up with population growth.
Managing to steer clear of whether whichever numbers he believed were correct showed building was greater or less than required, Smith offered up three criticisms of Twyford’s figures.
The first was that they excluded retirement villages, while Stats NZ’s consent data included units from the sector. There was no reason for Auckland Council to not include the “substantial” number of retirement village residences being built.
Second, the number regarded Code Compliance Certificates, which Stats NZ and MBIE regard as a “poor measure of the number of homes that are completed.”
Smith even had a personal anecdote at hand, to help:
“For instance, myself and my wife built a new home. We’ve been living in it for more than a year. It doesn’t yet have a Code Compliance Certificate. It’s actually because the knob on the gas fireplace in the lounge needs a replacement part. But myself and my family have been living there. There is no legal requirement to get a Code Compliance Certificate, and my advice is actually a significant number of homes do not [have one].”
Smith wasn’t able to get to his third point. Twyford put to him estimates of an Auckland housing shortage in the range of 30,000 to 40,000 houses, which was getting worse by at least 4,000 a year.
“Six months ago, your officials advised that the deficit in Auckland would continue to at least after 2030. Has their advice changed?”
“Firstly, I don’t accept that,” Smith replied. “Actually the best measure of what’s going on in a housing market is price...because that’s supply and demand.” He dropped his post-quake Christchurch analogy – supply rose, prices fell.
“It is now universally accepted across commentators, since about October last year, that house prices in Auckland have not moved an iota. So, I think that is a powerful signal that that supply curve and that strong growth is getting supply and demand into balance…”
Twyford interrupted: “I asked if your officials had changed their advice.”
“Well the consistent advice I get from officials is that it is not possible to get a reliable measure on the deficit,” Smith said.
Twyford tried again. Advice he had seen from MBIE officials to Smith’s office was that the Auckland deficit would not be eliminated until after 2030.
“I don’t accept that advice, and I don’t accept that’s what the officials’ advice was,” Smith replied.
In the spirit of Parliamentary collegiality, Twyford offered to resend the documents to the Minister’s office.
The offer wasn’t accepted. “You have a very convenient example, Phil, a bit like your Code Compliance Certificate figures, where you deliberately misinterpret advice that’s provided by officials.”
“I’ve heard some people say there’s a shortage of 500,000 houses in New Zealand,” Smith continued. (He wasn't accepting the figure, mind.)
“The number that has a huge influence is in respect of the number you assume per person per house. Even if you just change that from a very minor amount of 2.9 people per house to 2.8 people per house, has an effect on whether the balance of the number of homes, and whether there is a shortage or not, of by about 15,000.”
“Neither government, nor Council, can accurately pick exactly the number of people per household.”
Twyford put to Smith Reserve Bank Governor Graeme Wheeler’s comments last week that the Bank generally followed the Auckland Council’s 25,000 to 35,000 shortage figure for Auckland.
“Those estimates are not as accurate,” Smith said. “I’ll tell you why. My experience in Christchurch…”
“You don’t accept Reserve Bank, Auckland Council, [inaudible], anybody…” Twyford complained.
“I’m ultimately one that believes in markets,” Smith said. He attempted to launch into an explanation of supply and demand dynamics.
Twyford had heard it before. He might have muttered something about stable prices meaning supply matched demand at the current price and that demand curves sloped downwards, meaning more demand at lower prices. But my dictaphone was on the other side of the room.
It did pick up his next point, however:
“Your own officials have told you that the shortfall of 30,000 is a minimum. You don’t accept your own officials’ advice?”
“That’s not what officials have said.” Last word to the Minister - it was time to move on to other pressing matters.
Well, at least until later when the debate resumed during Parliament’s Question Time. Above is episode 57, where Smith accepts a figure from four years ago that Auckland had a housing deficit of 30,000, but that this was four years ago.
It’s different now, apparently. How so, we still don’t know.