MUST READ: Land and Shelter: Unpacking the Crisis

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Neither Labour nor National appears to have a clue about the (especially) Auckland housing crisis, because they both refuse to frame the problem correctly. We constantly hear about the unaffordability of a traditional land/house package, as if the way the first generations of settler-residents lived is somehow a birthright for all generations for all times. We hopelessly conflate the market for land with the basic human need of shelter.

We too easily talk about the ‘property ladder’ as if being on it is some kind of human right. Land ownership is a privilege, not a right. It’s a socially conferred privilege, which means that title to a piece of land is a conditional right. Property ownership represents an implicit contract between the individual and the collective, and can be revoked (in various compensatory ways with confiscation representing an extreme form of revocation) if an individual owner breaches that understanding.

If land-owners use their exclusive pieces of the planet in ways that are consistent with societal welfare then they are conforming with their contract. Three important forms of socially-enhancing land use are housing people (at density levels appropriate to the location), food and fibre production (farming), and conservation.

People who own land but do not use it in socially enhancing ways create what economists call ‘negative externalities’ or ‘external costs’. Pollution and danger are classic examples. Homelessness – meaning an insufficiency of affordable rental dwellings – is another of these external costs that arise from the misuse of ‘private’ or otherwise exclusively-titled land.

Once we see it this way we can just look at any economics textbook for the solutions. The first solution is taxation. You tax the bad behaviour to the point of eliminating it, or at least reducing it to a tolerable level. A second solution is to make the behaviour illegal, charging culprits a fine whenever they are caught; or through confiscation with or without compensation. A third solution is tradable permits that ‘allow’ bad behaviour. By severely curtailing the supply of these permits, we put a high price on bad behaviour, such as leaving land (especially land already serviced by publicly-supplied infrastructure) unused or underused.

The actual cost to a buyer of a physical dwelling – ie the dwelling exclusive of the land it sits on – is determined firstly by the cost of building a house and secondly by the price people are willing to pay for a house. We don’t really understand this price – because we usually buy and sell houses as part of a land and house package. But it makes no sense to buy a new house if you could buy a similar existing house for less.

If, as a result of anti-societal behaviour on the part of privileged land ‘owners’ and the mismanagement of building resources, both the price of land is higher than it should be and the market price of houses is higher than it should be, then the rental price paid (explicitly or implicitly) by any occupier will normally fall in the unaffordable or barely affordable range. (Owner-occupiers pay rent implicitly.)

TDB Recommends NewzEngine.com

Shelter is a human right, not a privilege. Private ownership of land is a privilege, not a human right. The debate is framed about getting ‘first-home buyers’ on the ‘property ladder’. Framing this as a right makes no more sense than having a debate about how to get people onto the ‘sharemarket ladder’.

If we sort out the negative externalities associated with anti-societal land use – and apply textbook remedies to those externalities – then the price of renting a home that meets minimum standards can become affordable.

The political problem is that the anti-societal activities of some landowners create the illusion, to many ordinary middle-class people, that the land their shelter sits on is more valuable than it really is. Neither Labour nor National want to be the ones to deflate these obviously inflated perceptions of net worth. The problem is too big for establishment politics and establishment media to remain in their state of denial.

32 COMMENTS

  1. The right to have the opportunity of buying a house is about the same right as the right to affordable shelter or the right to access to subsidised health care or the right to vote from time to time.

    None of these rights are permanent in the sense of being written in stone – not for all New Zealanders at any rate. It would be like including those items in a constitution or on some universal Treaty of Waitangi or Magna Carta. But they are no less real to most New Zealanders.

    There is a social contract in New Zealand which is no less understood for being unwritten. I would argue that, on the Common Law principle of precedent, the concept of home ownership is well established and way past the notion of a privilege. What exact rights are conveyed by that ownership are still subject to negotiation, but the core entitlement remains until a revolutionary intervention overturns continuity.

    The right to and availability of property ownership is a core part of long-established system in New Zealand that seeks to give every New Zealander a stake in the future of the country and thereby to avoid the excesses and antagonisms of social class the early European settlers sought to escape.

    The terrifying risk John Key alluded to some years ago of “becoming tenants in our own country” is only too real to the former landowning classes who now expect to become permanent renters.

    Without the stabilizing effects of universal property-ownership New Zealand will no longer be inoculated against the disruptive and damaging social conflict we see so widely spread around the world.
    We would be kidding ourselves if we imagined it couldn’t happen here.

  2. As you have so clearly put it, the government will not solve the crisis and does not want to. Clearly the government, if not part of the solution is part of the problem and will be removed at some point. What other solution are you proposing? The the united nations or another government step in and impose your solutions?

  3. “Neither Labour nor National appears to have a clue about the (especially) Auckland housing crisis, because they both refuse to frame the problem correctly. We constantly hear about the unaffordability of a traditional land/house package, as if the way the first generations of settler-residents lived is somehow a birthright for all generations for all times. We hopelessly conflate the market for land with the basic human need of shelter.”

    And:
    “We too easily talk about the ‘property ladder’ as if being on it is some kind of human right. Land ownership is a privilege, not a right. It’s a socially conferred privilege, which means that title to a piece of land is a conditional right. Property ownership represents an implicit contract between the individual and the collective, and can be revoked (in various compensatory ways with confiscation representing an extreme form of revocation) if an individual owner breaches that understanding.”

    We have with the recent discussion of the government appointed “Independent” Hearings Panel’s recommendations to Auckland Council, being on the Auckland Unitary Plan, again had a very selective and one sided focus on the issues we face.

    Sadly the likes of Generation Zero and even some non government social housing providers, and the Salvation Army, have jumped on the bandwagon of those wanting less or no rules to apply for land owners and developers, so they can with the liberally managed market deliver “affordable housing”.

    The vested interest carrying developers, builders and land and residential home owners have in their majority welcomed this enthusiasm by the above mentioned “fan body” with open arms, promising to deliver more homes to live in.

    But the alliance that has formed, is one of mixed interests, as the ones that seem to set the tone, and who get support from National and Labour, are the very young ones, who aspire to simply do the same as the much blamed, labeled “baby boomers” did when the going was good for them. They think it is their “right” to own their own home, so they can join the property ladder and work their way up, potentially perpetuating the game of build or buy, move up, acquire additional homes, and “invest” in their later years, having investment homes to let, for incomes paying a decent retirement living.

    Their “right” is one of privilege, or anticipated or aspired privilege, nothing else.

    We have a fair few who got rich, who are now investors and speculators, who have gamed the market, which is anyway only one for those equipped to play on it (the monopoly game). An ever larger number of people are shut out of this market, those who will NEVER own their own home, due to low income, no or insufficient savings and lack of opportunities.

    Nobody really represents them, and social housing service providers are also only part of the game, as they play according to the rules of government, hoping they get some windfall spending, for them to grow and expand their operations.

    Small landlords have their agendas, and others have theirs, while we become a nation of renters and tenants in our own land. More and more real estate and wealth is concentrated in fewer hands. The Unitary Plan will not change this, only offers new opportunities to grow and do more business, and shift ever more wealth from the bottom and middle class to the top.

    Ownership comes with responsibilities, and that must include social responsibilities. When a market does not function to serve the whole of society, there is something wrong, and the rules need to be looked at and be changed.

    As Keith points out in his timely post, we must look at taxation, at smart rules and at incentives to change the way the market operates. The recent recommendations by a supposedly “independent” Panel on the Unitary Plan, that surprisingly suggest a very liberal, reduced rules framework for Council to adopt, do clearly favour the developers and land and property owners, seeking “opportunities” to do more business and “intensify”, add stock and cater for those who can buy into a privilege to own.

    It does little if anything for those shut out of the market, and nothing really to ensure affordable housing is delivered. It will enable those who want to maximise profits, and that with little or no social responsibility required of them.

    Perhaps it is time for the politicians to wake up and realise, that only the state can address the major issues we now have in Auckland, and increasingly also in other regions in New Zealand, to take a very active role and interfere in the market, by setting new rules, and by also providing homes itself, through a large construction department that can perhaps be created as part of a reformed Department replacing Housing NZ.

    So far the market has failed, and catered only for those who have money and access to it, which is the better off, the upper middle class, the upper class and returning or new migrants that bring their own savings to buy homes. It is time to create a market that delivers on the basic right for shelter, in the form of truly affordable housing, that is created under new rules (placing responsibilities on land owners), and also with a reduced or not for profit approach.

    • “But the alliance that has formed, is one of mixed interests, as the ones that seem to set the tone, and who get support from National and Labour, are the very young ones, who aspire to simply do the same as the much blamed, labeled “baby boomers” did when the going was good for them. They think it is their “right” to own their own home, so they can join the property ladder and work their way up, potentially perpetuating the game of build or buy, move up, acquire additional homes, and “invest” in their later years, having investment homes to let, for incomes paying a decent retirement living.”

      Well that’s just bullshit, speaking as one of those ‘young ones’. Most of us just want more readily available flats that aren’t moldy, damp or poorly constructed, and cheaper to rent. We don’t think it’s our ‘right’ to buy a home, because we can’t even dream of affording one! We’ve long given up on that hope and know we’ll probably be renting for the rest of our lives. Our real problem right now is being able to afford rising rent prices, while our incomes are largely stagnant. And don’t even get me started on what it’s like being a tertiary student…

      • “…the very young ones, who aspire to simply do the same as the much blamed, labeled “baby boomers” did when the going was good for them.”

        You may note that I refer to those “young ones” who aspire to do the same as the “baby boomers”, which does of course NOT mean ALL young ones, same as NOT ALL baby boomers were working towards owning their own patch and climbing up the property ladder.

        The ones who aspire to own their property seem to be the more vocal ones, seem to be the group that National gives some humble “help” (using KiwiSaver) to get their first homes, they seem to be the priority clientele of Labour’s ‘Kiwi Build’ policy (100,000 homes for FIRST home buyers), they also seem to be the young ones the Greens want to help (to rent to buy), they seem to be the young professionals active within Generation Zero, they seem to be the focus of the MSM, and they are the ones that are setting the tone, as it seems.

        I hear and see NO organised young people, or vocal young people, who are happy renters, who do not wish to own property, who want to live in rental homes for all their lives, who make their voices heard, but they were not the ones I was referring to anyway.

        We live in a capitalist system, where we have for nearly 3 decades now had clearly neoliberal policies that dominate us, and we have a generation that knows nothing else. So many rather try to get up the property ladder, with or without the help of the banks, and/or their parents, and they work within the system.

        This post by Keith is about the question whether there is an overly strong focus on the “right” to own property, while there should perhaps be a stronger focus on the right to shelter (which means owning, renting or whatever).

        As I see it, the ones promoting property access and ownership are the more vocal ones, also among those now signing up to support the recommendations by an government appointed, supposedly “independent” panel to Council re the so-called Unitary Plan.

        What disturbs me is that some who may also be happy to just rent, or who want social housing, including many young ones, are not well informed about the recommendations and even the notified Plan, and what the small print reads.

        Do they seriously believe that by supporting a Plan with few rules, allowing the construction of dwellings with NO minimum size, the construction of blocks of units like that, with no required dwelling mix, with no requirement for storage, for sufficient bicycle or other parking, with minimum other requirements, and having NO requirement for a certain percentage of homes built being “affordable”, that this will deliver the housing they want and need?

        This disturbs, me, the blind reliance on a plan favouring developers, and land owners, and those seeking 20 per cent profits on what they create, to deliver us housing we need.

        Surely there must be an alternative, and it is the despair by some, that is being exploited, it is naive and short sighted, to rush and support something, when in great need, which is unlikely to deliver good homes, which will be a thing we will have to live with later, possibly regretting having gone ahead this way.

        That is my issue, and I understand your sensitivities about being young and somehow referred to, but baby boomers who do not own a home, and who are not rich, and who live also in poverty, of which there are a fair few, they will understand where I come from, so perhaps you may also understand now, how it feels when some go on about those “nasty” “boomers”, who are supposed to “all” be “greedy” and “speculators” and so forth.

        But sorry for “offending” you, or hurting your feelings, if it did offend you, what I wrote.

    • The market has not failed.

      It has been a part of the transfer of assetts of housing to property speculation and rentier investment.

      Norm Kirk saw this as the inevitable long term shift and was contemplating the work of Henry George in estqblishing land reform.

      Henry saw that the Govt should own all land and charge a fair rent to land users who established occupation of a piece of land they could afford to upkeep with rental. The system stops speculation and land as an investment but also brings in Govt revenue and so taxation is no longer the sole Govt revenue. Cooperatives can establish to share land and provide more secure tenure. Laws prevent speculation with tenure of land occupation.

      In many parts of Europe families can’t own land as it is held by wealthy gentry for generations and also of expanding corporations. The tenant even have to find new tenants if they wish to vacate. Complete serviture to the land Barons.

      The capatalist system will use the market to transfer wealth and assetts to the few.

      So any smoke screen NACT puts up is only useful in terms of giving time for the present transfer to cntinue and become more established.

      No solution is sought.

      • “The market” as we have it for housing, certainly here in Auckland, where I live, has most certainly failed the ones who have no chance at all to ever own their own home, due to exorbitant property prices we now have.

        That “market” is only a segment of a larger national market, and part of an array of markets, for other things, and it has been distorted. The so often called “free market” is a strange beast, it does not really exist anywhere, as any society and any nation has laws and rules, and they curtail what activities are permitted and also encouraged.

        The academic, totally uncontrolled market is a concept that certain economists like to refer to, in that trying to justify more of what you describe, the freedom to trade as people please, which will inevitably lead to the formation of some owning more and more, forming monopolies or dominant cartels at least. With property we are increasingly see this happen, where fewer and fewer become the land and property barons of the future, and they will offer the rest of us little and perhaps not so little tenements, to occupy, for RENT.

        The least I ask for a a firmly controlled, regulated market, that at least restores a bit more of a balance, and where the accumulation of wealth is constrained by higher taxes and strict rules.

        Also we cannot allow a “global property market” to operate here, as that will allow the many more rich and powerful to buy the real estate and the rest of the country up.

        We are heading that way, so I agree with you, it is time to take action and stop all this madness. Sadly though, most people live by choosing to dream of some miracle to happen, or to make ends meet somehow, and just get on with it, and do little else but “adjust”.

        People distract themselves, or behave like opossums looking into the head lights of a car, not knowing what to do. What I mean is, I see NO action, I see NO protest of significance, I see endless conforming, insular, self focused thinking and behaviour, escapism, procrastination and so forth, while others try all to keep up with the Jones’.

        It is time to wake up and take some organised action, and that must include more than casting a vote every three years. If people cannot be bothered, they should not complain, as they then will get what they deserve, and finally they may wake up one day, and revolt. But is it not better to take action earlier, than let things get totally out of control?

  4. Whack on a land tax. Extend the “bright line” capital gains tax to twenty years and make it the same as company tax. (It IS a business, after all.) And bring in a Financial Transactions Tax.

    Then build more State Houses and make them available to tenants for as long as they require them.

    The only reason we have a housing crisis is because of intellectual laziness and political feet of clay.

    If our forebears had had this kind of trouble, we’d still be living in mud-huts.

    European settlers built everything from scratch with minimal resources (including cheap land stolen from Maori), and the polis are telling us that all of a sudden we can’t meet the housing demand?? WTF??

    Not good enough.

  5. Unfortunately there is no such thing as a human right, as hundreds of millions of people through the ages have discovered when they were killed, robbed, enslaved, had their ancestral lands stolen, got put in to concentration camps, got starved to death, had their homes bombed by ‘liberators’ etc.

    George Carlin put it succinctly: “Right this way” [as American-born citizens of Japanese ancestry were led into the barbed wire enclosed detention camps].

    At the moment the psychotic sociopaths that infest the top of the economic pyramid find it convenient to divert sufficient resources to the social sector to prevent the streets becoming littered with bodies (alive of dead) but that will not be the case for much longer.

    At the moment some of the psychotic sociopaths that infest top of the economic pyramid still manage to keep up the pretence that they care about others in society, but that will not be the case for much longer.

    Communal hunter-gatherer living (no land ownership) is the only form of social structure known to have ever persisted for more than a relatively short time. And that lifestyle is the very antithesis of what the merchants of greed who control western societies want or will allow. And there are just far too many people everywhere, anyway.

    • Hey, Afewknowthetruth!
      Rights are established by philosophical settings. Philosophical settings are forged by experience and all to frequently, self-interest. The idea that there are no ultimate human rights is as self-evident as it is trivial.

      You describe those at the top of the socio-financial pyramid as psychotic sociopaths. Maybe you are functioning on different settings from them, but what is most likely is that, given the same context, you would do exactly the same self-serving things.

      Working from that setting will make you sadder, wiser and maybe more effective.

      • Throughout modern history there have been groups who have exploited, controlled and manipulated the masses -kings, priests, army commanders etc. -but such groups only arose after the commencement of agriculture and city-building. Those at the top decided what rights those below them had. And that is still the case… right down to public comment at council meetings, where those in power decide what may be talked about and for how long.

        There is much evidence that psychosis and sociopathy are vital elements in achieving so-called success in the modern world. Orwell pointed it out in ‘Animal Farm’: ‘All animals are equal but some are more equal than others’. I would suggest that so-called leadership in the modern world requires a combination of deceit, constructed ignorance and complete disregard for the well-being of the bulk of society, with particular focus of complete disregard for the needs of the next generation.

        We are now witnessing the culmination of a series of ‘mistakes’ made by humans over the past 10,000 years or so -not least being the invention of fractional reserve banking and the charging of interest on loans, and the establishment of societies dependent on fossil fuels -which are totally unsustainable foundations for societies.

        There is now no way out of the present predicament, other than via collapse of current systems -all the issues were identified decades ago and were not dealt with. So those in power will do their whatever they can to keep present unsustainable arrangements going for a long as possible -whilst in the process making everything that matters worse. Attempting to keep current, unsustainable systems going will require ever greater reduction of ‘rights’ for the bulk of society and ever greater surveillance -just as suggested by Orwell in ‘1984’.

        When the system does collapse (almost certainly between 2020 and 2025) we will find out how many ‘rights’ we have, and what remnants of true humanity remain after the imposition of consumerism by industrialists (check the work of Bernays) wrecked western societies. Logic suggests that those who have learned dog-eat-dog and get-ahead-by-trampling-on-others which have been the foundations of modern consumer societies will fare very badly compared to those still living in hunter-gatherer communities.

  6. So lets say I had no shelter. You would provide it for me Keith. Its my right you say. Or would some one else provide and you write about it. Tell me. No not the collective. We don’t believe the collective .

    • “Rights” stand in laws, conventions and declarations, traditionally “on paper”, now of course also in digital records.

      Of course rights are commonly not honoured, I think Keith just tried to explain a difference between a more basic right to shelter and a perhaps somewhat privileged right to own shelter.

      Some have neither, and that must get us all very worried, and urged to take effective action to bring about change.

  7. “People who own land but do not use it in socially enhancing ways create what economists call ‘negative externalities’ or ‘external costs’”

    So that would be the 33,000(!!!) “ghost houses” in Auckland. Nobody talks about it, because apparently it is a right to own property and do exactly nothing with it? Who knows. I suggest we introduce (or even just threaten to introduce) squatter rights. Watch how fast these properties are either sold or rented out, pretty much solving the current housing crisis for at least a year for two.
    http://www.metromag.co.nz/city-life/property/running-on-empty/

    • The counter argument to externalities is you pay a bit more tax. I mean every one pays a bit more so the culprits throws all the debt into the public arena for the tax payer to pick so the rich can stay rich.

  8. Everyone should vote for the Maori Party for their party vote at the next election, because at least the Te Puia marae opened its doors up to the homeless.

    • Pretty naive wha left.

      The Maori Party are part of the problem, not the solution. They support a coalition government of National, Maori Party, United Future and ACT that are depriving kiwis of international human rights under the United Nations Declaration of Human Rights, especially Article 25

      Article 25.

      (1) Everyone has the right to a standard of living adequate for the health and well-being of himself and of his family, including food, clothing, housing and medical care and necessary social services, and the right to security in the event of unemployment, sickness, disability, widowhood, old age or other lack of livelihood in circumstances beyond his control.

      It’s no wonder your beloved Maori Party is disrespecting Helen Clarke, especially when the Maori Party have colluded with National, ACT and United Future of depriving the most vulnerable, including Maori, of internationally recognised rights

      • 1000% WINNIE, We seem to forget who hitched up to who’s wagon!

        And many hitched to National to set their course to “get rich quick”

        Disgusting performance from all these Planet Key cling-on’s.

        • Insiders say that Key has copped some considerable flack for supporting Helen Clark’s bid for the top UN job. Such is Key’s desire to be everything to everybody, sycophancy rules supreme.

          But ‘Teflon John’ can’t come out and re-neg on his endorsement, so he gets one of his coalition lackies to put the boot in.

          Classic cake and eat it. Little tidbits of info are constantly leaking from within the Nat & coalition camp. Mainly from the coalition, trying to distance themselves from National and its apathy on housing, tax and social issues.

          Roll on July 2017.

    • The Maori Party voted in favour of National’s legislation to sell off state housing. The Te Puia Marae opening it’s doors had nothing to do with National’s Maori Party, they saw a need and responded, they did what this government and its partners like the Maori party should have done.

    • You are assuming that the Maori Party control everything that concerns Maori, and that is patently wrong.

  9. “The actual cost to a buyer of a physical dwelling – ie the dwelling exclusive of the land it sits on – is determined firstly by the cost of building a house and secondly by the price people are willing to pay for a house. I disagree with this:-

    1) “The actual cost to a buyer of a physical dwelling – ie the dwelling exclusive of the land it sits on – is determined firstly by the cost of building a house”. Obviously true though it should include the cost of services to the home.
    2) ” and secondly by the price people are willing to pay for a house.” Not true at all. For a would be buyer, who has to pay the mortgage in weekly instalments, the amount of his disposable income available for the repayments is the entire issue. This amount determines the whole market price of the house and land package. If a couple estimate that they can pay a weekly mortgage of $400, this may translate to a house and land package of, say $300,000. The price of a two bedroom self contained house can be worked out within tight margins and may be $170,000 , so the price of the land must be $130,000. So where there is an acute shortage of housing, as now, the answer to the question “What decides the price of land?” is “How much spare cash have you?”
    A solution to that predicament is that land should not be part of the sale price. All land should belong to all Kiwis, and the government should be responsible for its care. A buyer buys land and service facilities only, the land is rented on a renewable 99 year lease. The problem of the present system is that it encourages speculation and its the land, not the house, that provides the speculative opportunity.

    • The price of a property, including the land, depends on its location. I suspect that if the land was removed from the equation, capital gains, if there were any, would then attach to the house.

      • I have pointed out that the speculative component in a house package is attached to the land. If the land is owned by the state there should be no such component. If a person buys an existing house on State land I cant see why he should pay more than the construction cost. If that did happen, the money would go to the State, not a speculator.
        Incidentally this idea will reduce inflation though you wont see it in the Statistics because the government doesn’t include house inflation in its statistics.

    • “A solution to that predicament is that land should not be part of the sale price. All land should belong to all Kiwis, and the government should be responsible for its care. A buyer buys land and service facilities only, the land is rented on a renewable 99 year lease. The problem of the present system is that it encourages speculation and its the land, not the house, that provides the speculative opportunity.”

      I agree with you, Dennis, and you might like to know that I’m starting a political party that addresses this issue in its ‘Housing and Land’ policy. The policies are on my website (http://glentimms.com/Tranzition/) and I make no apologies for how ‘radical’ some of them are.

      We, here in NZ and the world in general, need some serious reforms. REAL changes instead of the tinkering that constantly happens when political parties take office. My focus is ‘people before profit’ and I want to see a fairer, more equal and balanced society… most of us do I think.

  10. I just checked: The Bill of Rights Act.

    There’s is no such right to own property of even have shelter. Especially not in Auckland.

    • I just checked: The Bill of Rights Act.

      There’s is no such right to own property of even have shelter.

      Andrew, do you realise what you’ve just said? Go back and have a read.

    • ??????

      Quote:

      “Part 3
      Miscellaneous provisions

      28 Other rights and freedoms not affected

      An existing right or freedom shall not be held to be abrogated
      or restricted by reason only that the right or freedom is not
      included in this Bill of Rights or is included only in part.”

      ?????

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