The real problem with affordable housing

By   /   January 22, 2015  /   25 Comments

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Leaving it to the market, the speculators and the profit margins of developers at the cost of urban spiral and our environment is a recipe for more of the same.

Even if Nick Smith gets all his wish list of environment protection amputations in the RMA, it will only reduce the cost of a house by maybe $40 000 and these impacts won’t be felt for another decade by which that saving will be meaningless.

When house prices are as unaffordable as they have become in NZ, Nick is talking about chump change. His changes to the RMA is just an anti-environment developers paradise, it’s not a solution to affordable housing.

The problem is that too many NZers are simply too poor to buy a house.

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  • The gap between high and low incomes has widened faster in recent decades in NZ than in most other developed nations
  • Across all adults. the top 1% owns three times as much wealth as the poorest 50%.
  • NZ now has the widest income gaps since detailed records began in the early 1980s.
  • The average household in the top 10% of NZ has nine times the income of one in the bottom 10%
  • Between 170 000 – 270 000 children living in poverty (depending on the measures used)
  • One of the world’s worst worst records of child health and well-being
  • One major report on children’s welfare ranked NZ twenty-eighth out of 30 developed countries.
  • There are more Pakeha in poverty then Maori, but poverty impacts Maori & Pacifica more acutely. 1 in every 10 Pakeha households live in poverty, 1 in every 5 Maori and Pacific households live in poverty.
  • Maori had 95% of their land appropriated and alienated between 19th Century and 20th Century.
  • Women earn 13% less than men and are under represented in senior positions within almost every occupation. Many are forced to take low income part time work.
  • Subsidies for Kiwisaver contributions and some Working for Families tax credits, are available only to those in paid work or, sometimes, in full-time paid work. A lower proportion of Women are in full time work so they are more likely to be excluded from these initiatives and more reliant on inadequate state benefits.
  • Pacific Islanders are 3 times more likely to be unemployed than the general population’s rate, they also, like recent immigrants, struggle alongside Maori against structural discrimination.
  • These groups represent the 800 000 NZers living below the poverty line.
  • Against that number, 29 000 people own 16% of NZs wealth, and 13 000 NZers have incomes over $250 000.
  • Wages and benefits are too low for people to live on, it isn’t an issue of budgeting, it’s an issue of income.
  • Poverty erodes voice and citizenship which generates inequality.
  • People’s ability to participate fully in their society and enjoy a sense of belonging is vital for a Democracy to flourish.

We have a system that is built for property speculators and leaving it to the market is what has gotten us into this problem in the first place. We need a State with a focus on providing affordable housing, even Labour’s much vaunted ‘Kiwibuild’ will only provide homes for the kids of the middle classes.

We need more state houses and Government backed mortgages for the poor. This problem requires actual direct action by the state and we need to punish speculators. The problem is that the only illusion of wealth that the middles classes have is from their over inflated property valuations.

Leaving it to the market, the speculators and the profit margins of developers at the cost of urban spiral and our environment is a recipe for more of the same.

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25 Comments

  1. esoteric pineapples says:

    One of the (many) problems with leaving housing purely to the free market is that in areas like where I live (semi-rural but near to a large city) houses are being built that are highly to be unsuitable for future demographic needs. They are constructed by building companies for the tastes of 55 to 70 year old retirees and semi-retirees with a bit of money to burn. They are big and expensive and on large sections. The only homebuyers who will want and be able to afford them will also need to be well-off retirees. No other sort of housing is currently being built in this particular region.

  2. […] The Daily Blog: The real problem with affordable housing […]

  3. Save NZ says:

    Developers are there to make money and since poor people don’t have any, there is no business case to make affordable housing. You need to regulate to make affordable houses, i.e. like in the UK, for some subdivisions, a percentage of new builds needs to be made affordable. That is why we used to have state houses.

    Housing is interlinked with so many other areas, wages, transport, infrastructure, council efficiency, interest rates but surprise surprise, the government wants to only focus on ways to enrich it’s friends.

    Selling off public land to cronies, making it cheaper to pollute and changing zoning to make landowners richer and less accountable.

  4. XRAY says:

    This situation NZ now finds itself in is complex. I watched an interview with Australian economist Steve Keen on RT in relation to economics in general and he explained that this style of economic management has been adopted by western nations (just like the Key government) to lift their economic performance but the bottom line is as we are experiencing, it ain’t working.

    The idea is to lift the country’s economic performance through private debt via such things as the property market speculation but as he said it like trying to lift a “lead zeppelin”, with the basic economy mired in too much debt. It kind of works for a while but it doesn’t last. In other words Bill English and National, times running out (or run out) with this badly flawed experiment!

    Listening to Nick Smith justifying gutting the RMA to save miniscule sums to build a house was the worst ever bullshit PR he has done thus far in a long list of bullshit PR statements. Smith knows damned well the RMA reforms are not about that and furthermore any saving from the RMA changes will only line the pockets of everyone but the house buyer.

    And lastly deflation is starting to affect western economies, NZ included, not the least because of inequality. Too few with too much of the pie meaning the consumerism based model is running out of customers.

    • XRAY says:

      I might add if and more likely when some or a lot of this private debt goes toxic there is not the resources held by governments to prop up their economies like there was with the 2008 GFC.

    • Dorothy Bulling says:

      Smith’s ideas on the RMA are to make it even easier for those who already have more of the world’s goods than they need, to ride roughshod over our rights so that they can make even more money. You will not be able to submit to a proposal unless you are directly affected by living in close proximity to a site for which a consent is being sought.

  5. BruceTheMoose says:

    This Government doesn’t give a sh.t about affordable housing and does nothing more than pay lip service and throw token gestures towards the issue, using the subject as leverage to loosen laws, create development opportunities for their buddies, and to gain political points scoring.

    To give a classic example of how these lying fraudsters work, take the case of Smith/Brownlee and the government trumpeting plans for 275 ‘affordable’ $400-500k homes on a block of land previously owned by NZ Transport Agency in Christchurch. After it became an increasing concern with the housing shortage and unacceptable rising house prices and rents in the city 9 months out from the election, Smith and Co were flag waving this newly planned development to prove that they were genuinely concerned about the whole matter, and the government was on the case.

    Fast forward to one month after the election, suddenly it is then proposed that there will be only 50 affordable homes in the 275 home development, with the rest going on an over inflated market, this after they had awarded the whole development project to their usual bed fellows, none other than Fletcher Residential, a company that doesn’t even have a current presence in the region where home building is concerned.

    Meanwhile, the sheep continue to graze in the meadows.

  6. adam says:

    It’s a bad joke. On any given day – count the trucks, or the rail cars moving logs to the wharf’s to be shipped out of NZ. You know the same logs we could mill, and build houses with. Some liberal however, can probably justify that, with some sort of petty economic argument. Silly me, I thought economics was supposed to work for the people – not the interest of a few. Houses can be built, and built within our means – it just takes political will, to do the right thing – something this national government is incapable of.

    • Oliver says:

      The biggest costs in housing in New Zealand are the current rebuild of Christchurch, and the Auckland Real Estate Market.

      Given that there is no housing shortage in New Zealand, we can afford to wait until

      *Christchurch rebuild construction winds down.
      *The real estate market bubble pops.

      whereupon it will be cheap to build affordable housing in Auckland, and cheap to buy the houses that are being liquidated by people who overleveraged themselves.

      And for crying out loud, stop knocking on the timber industry. We don’t have the domestic demand for those logs.

      I’ll point out the weakening of the Chinese log market is leading to more forest owners selling to the domestic New Zealand market, so you should be happy.

    • Mike@nz says:

      The reason that those logs are heading overseas (if in fact they are) is because the highest bidder is overseas. A basic case of supply and demand.

      Get your chequebook out and you are more than welcome to as many logs as you want.

      • That’s not only simplistic and naive. Mike@NZ, but is dangerous to our economy, social fabric, and the well-being of your fellow New Zealanders. You’ve just accepted a scenario where we come second to anyone overseas with a bigger chequebook.

        No wonder ACT gained only 16,689 (0.69%) party votes last year – 99.31% of voters realised that free market economics benefits only a minority at the expense of the majority.

        If you’re willing to sacrifice our socio-economic well-being on the alter of free market economics, then you’d better be prepared to accept the consequences that many goods and services may be priced out of the reach of many of your compatriots. The price of milk – now cheaper than obesity-causing, teeth-rooting, nutrition-lacking soft drinks – is a prime example.

        • Mike@nz says:

          You’ve got in one Mr Macskasy! And aren’t you and your followers lucky for that. Because I am one of those log producers (among other things). I am a rare breed. I actually produce something for a living. Something I can sell. Something another business can buy as a raw product and add value to. Something that the whole community can benefit from.

          I am a nett tax payer, a levy payer, a payer of charges, rates, commissions and any other name that can be thought up as a means to tax the producer.

          I am an employer, an environmentalist, a therapist to my staff and a philanthropist to my community. I am not a fat cat capitalist, I am a family man with exactly the same issues on my mind as you and yours; how to meet my expenses, how to the do the best for my family, etc. I, like most employers, have a terrible work/life balance that suffers through the need to cover for absent staff.

          I will NEVER apologise to anyone for selling to the highest bidder, nor will I look for praise for all the free products, voluntary hours or financial support that I regularly provide to the community.

          Just as your readers look for a fair day’s pay for a fair days work, I too feel justified to expect fair compensation for my efforts and risk and you can be rest assured that the “socio-economic well-being” of the whole country is well catered for in the taxes, levies and compulsory charges we are forced to contribute.

          • I actually produce something for a living

            Or, more likely, your workers do, Mike@NZ. And if your workers or their relatives can’t afford to buy houses because you prefer to sell to overseas bidders rather than local companies, then aside from your greed, what exactly have you contributed to this country?

            Profit?

            “Value added”?

            “Levies”?

            All well and good.

            But you can’t live inside Profits, “Value added”, “Levies”, etc.

            As the current housing shortage quite clearly shows.

            Just as your readers look for a fair day’s pay for a fair days work, I too feel justified to expect fair compensation for my efforts and risk

            No , you don’t. You are not seeking ” fair compensation for [your] efforts and risk”. You are seeking maximum profit and gain from your activities. There is a big difference. One benefits the nation as a whole. The other benefits you personally, and is at the expense of this country’s economy and social wellbeing.

            • Mike@nz says:

              There it goes again, the old “you didn’t build that” Barak Obama uninformed nonsense.

              I am sorry, I was mistaken. I didn’t realise we were a communist country. Profit is obviously a dirty word and all financial transactions and compensation should be awarded by government decree. What should we do with those pesky ratbags who, heaven forbid, think for themselves and do too well at running a business? Fine them? Jail them? Or would a ritual beating and public humiliation suffice?

              I am not being greedy selling to the highest bidder, and you shouldn’t expect an apology for it. What does classify as greed, however, is one individual who expects, as of right, to profit from the efforts of another without any compensation or share of effort or risk.

              It sounds like you have a bit of a “ant and grasshopper” thing going on there Mr Macskasy.

  7. Matt says:

    I love how you’ve quoted all the sources of your stats

  8. Mike in Auckland says:

    It was maybe in November or October, where the media reported that about 40 percent of residential real estate buyers were INVESTORS (owning 2 or more properties), and first home or replacement home buyers made up the next group. There is NO register kept in New Zealand that tells us about who buys residential property, whether they buy for them to live in, whether they are local resident investors, or overseas buyers. So we have NO reliable info, and the government has done all to not establish any register and to allow true transparency in the housing market.

    Looking at National’s core constituency, which is the middle and upper class, where the better off, mostly “professional” and business operating middle class New Zealanders (incl. new migrants) have keen, vested interests in the status quo, as most of them still can afford property, the Nat led government under Key has little interest in changing the system we have.

    There is no interest to bring in the state to play a greater role, as that will stop the increase in home values, that benefits the ones that own and have little debt to pay off. Even those with some mortgage debt, they may do well with growing market values, as they can always make capital gains, and often pay no tax on this.

    They use the equity of their homes to afford their two car, reasonably well off or even luxurious life-styles, and they are the ones that keep Key and gang in power.

    First home buyers are a minority, and the bulk of the poor cannot afford their homes anyway, and have long given up to try to get there. They are the “voters” the Nats do not need and do not bother with anyway.

    The developers are just part of the problem, but yes, they play the market to their advantage, and few will bother taking risks of building new homes, unless 30 percent gains can be made. They will of course mostly play the market to their benefit.

    All have an interest in continued migration of well resourced new migrants, often middle class professionals from overseas, who can buy homes, and afford more than many locals. It keeps the system ticking over. So the government will not stop demand, it will look at using the Resource Management as the “evil law” to “reform” and hollow out, as an excuse. As John Armstrong writes in the Herald today, the RMA will not really be the actual problem. But Nick “the Dick” Smith of course will try to get away with diverting attention from the real causes that can be addressed rather swiftly.

    He will with the government push for lessening restrictions and environmental protection, to make more land available, so that investors and developers can make more money, to build homes for a growing population. These homes will not be that much more affordable after all, and will not solve the problem.

    Demand must be curtailed, and with that it is overdue to put a cap on new migration, and to certainly also stop overseas buyers buying homes in New Zealand. The investors owning multiple properties must also be controlled, and we need state housing to provide affordable rental and other housing for those in real need here.

    That may stop price growth and even cause a drop in prices, which the government will fight with all its limbs and other powers. There lies the challenge, to convince New Zealanders that this present endless growth idea, and just freeing up land will not solve the crisis, just manifest it, and keep things as they are.

    Worth a read too:
    http://www.nzherald.co.nz/opinion/news/article.cfm?c_id=466&objectid=11389956

  9. Korakys says:

    The problem is that too many NZers are simply too poor to buy a house.

    The problem is actually that houses are too expensive. This may seem to be a quibble, but it’s not.

    Note also that house price inflation is not included in the CPI, so while the official figures say we have low inflation and not to expect wage increases the cost of living is actually going up for those that don’t own their own home.

    • Mike@nz says:

      Houses are expensive because demand exceeds supply. And while demand exceeds supply, there will continue to be good capital gains to be made on (residential) real estate.

      Supply is short because tight and idealistic zoning laws make it impossible to free up enough land to build enough houses to satisfy the demand.

      It is not the governments job to build houses. It is the governments job to create an economy conducive to sustainable development and reinvestment in infrastructure.

      • Rubbish. That is ACT policy that is endorsed by less than 1% of voters.

        It is also a lunatic ideology that has no basis in sound common sense economics. Your were raised in a country that owes more to free health-care and near-free education than any bizarre neo-liberal system.

        In fact, when you look out the window, practically every aspect of our infra-structure was built, or based upon, people acting collectively through the State to achieve what we have now. The State had to build 69,000 state houses because private enterprise was utterly hopeless at doing so.

        As for blaming zoning laws for lack of house building – that never stopped us in the past (to build houses). And it hasn’t stopped the ChCh rebuild. Methinks you are parroting the National Party’s straw-man argument, to divert attention away from the failure of the “free market”.

        Tell me, Mike@NZ – even if the entire RMA is scrapped, and private enterprise still doesn’t deliver the market’s demand – who/what will you blame next?

        Interesting to note that developers don’t seem as wedded to your belief about blaming the RMA for lack of house building;

        But one property developer said it would not make much difference if there was not also a huge investment in infrastructure.

        Equinox Group chief executive Kerry Knight said there was a lack of infrastructure in Auckland which was a problem for big projects.

        “That’s got nothing to do with the RMA. It’s got something to do with the council.”

        Developers constantly found themselves in fights with councils who tried to make them upgrade surrounding intersections, roads and pipings, he said, and it was not fair that developers be burdened with that cost.

        Mr Knight called on the government to “spend a few billion dollars” on infrastructure in Auckland.

        “Lend it to the council if you need to, and then you’ll be paid back in two or three years time. Tinkering with the RMA is just politics.”

        Source: http://www.radionz.co.nz/news/national/264118/keep-rma-standards-high-says-group

        Last word: The Nats de-regulated the Building Act in 1991/92. The result? Billions in leaking/rotting homes and other substandard buildings. Now you’re wanting more of the same? Do you right wingers ever learn from history?

        • Mike@nz says:

          Well there we go…the old “you didn’t build that” Barak Obama socialist nonsense.

          Like I said, it is the governments job to create an economy conducive to sustainable development and reinvestment in infrastructure. Mr Knight is not looking for (local) government to build houses, he is looking to them to build (reinvest in) the infrastructure between the houses. The problem is that the naive eggheads in local government think that they can ‘save’ the money that they would normally spend on boring old infrastructure and channel it in to some fluffy social project. They think they can force that expense on to the home builders, and that the home builders won’t pass the expense directly on to the home buyers through the purchase price. Ha!

          If collectivism and socialism are what turn you on, you would surely agree that the roading infrastructure and everything under and over it should be the responsibility of the collective and the house and land is the responsibility of the home buyer.

      • Korakys says:

        Houses aren’t getting that much more expensive.
        Land is getting much more expensive.
        This is because big city real estate is in the “investor frenzy” phase of a bubble.

        I have come around somewhat to the artificial zoning restrictions being a large factor argument (for Auckland anyway). But I still think the major factor in this is banks.

        For an economy to grow, banks must lend. Banks prefer to lend to people with assets as a security against default. The best assets are real estate because it is expensive and valuation is a piece of cake.

        However, real estate adds nothing to the economy (e.g. house sales don’t count in GDP figures) and bankers like to lend into rising markets. Thus, rising cost of living, little increase in wages and a bubble.

        The scary thing is that the government may not allow the bubble to pop for a long, long time by propping up the banks.

        Instead the Reserve Bank should use window guidance to directly influence the commercial banks in how much they can lend in each field (property, business, agriculture, etc). Window guidance has previously been used in Japan until the ’80s and, currently, in China.

  10. Lara says:

    I’m bemused that this government is talking supply side only, and only part of that supply side equation. Nothing is said about the demand side. And the public don’t seem to notice.

    In most areas of New Zealand we don’t have a shortage of homes to live in, we have a poor distribution of the homes we do have. Outside of Auckland and Christchurch we have plenty of homes which are empty for most of the year. They’re holiday homes, many people own more than one home. The worst cheapest accommodation is rented to the people who live in the area with maintenance at an absolute minimum.

    And in the cities we have investors. Including people from many overseas countries where they have more rich and in some cases higher incomes than New Zealand. And NZers on our low average wages are supposed to compete with them.

    Its not rocket science. Cease selling land to non residents and citizens, and government to step in and provide homes which are actually affordable, less than $300k, for NZers who need them.

  11. mary_a says:

    Along with a deliberately encouraged low wage economy, the other problem with (un)affordable housing is this government’s one sided policies, allowing all and sundry foreigners to come into the country and buy up whatever property they can get their filthy hands on! No doubt, this has led to a few backhanders being gratefully accepted by unscrupulous and very corrupt Natsy politicians for their efforts!

    All against NZ’s best interests, as ordinary hard working Kiwis are denied a fair and decent standard of living, combined with being locked out of any chance of purchasing their first home, through government encouraging foreign property investment, a situation which has got out of control!

    Now with the RMA about to be *adjusted*, it will be a property developer’s dream come true, as they pillage and rape the environment, all for a few dollars more to end up in the greedy pockets of Key’s scurrilous cronies!

    Coming up seven years now, this country has been twisted and mangled disproportionately, its economic and social structures contorted and prostituted at the expense of the majority of Kiwis!

    NZ has become a country where soon the callous overlords will be dancing on the graves of the serfs! That is unless we, the people make an effort to, reverse the situation!

    The ball is in our court to work together to end this anti Kiwi reign of corrupt deception! I’ve had a gutsful of it!

    • Mike in Auckland says:

      Most Kiwis now suffer from Stockholm Syndrom, they have fallen in love with their abuser, the NatACT brigades, with greedy hands to sell the soil from under their backsides. In future you will only be allowed on the ground here, while moving, endlessly moving, yes running, sweating and slaving to pay even for your last day, your funeral, to make others rich.

      Welcome into the hamster wheel, of incessant running and sweating, with no end in sight.

      No resting, to bonding, no feeling of ownership, it is serfdom, slavery and deception, that is the rule of the game, yet most keep dreaming, they dream, hope and long, for a “better future”, browsing their smart phones and iphones, to look at glossy pictures and trying to play games, to distract from the hopelessness there really is.

      Good luck Aoteaoroa NZ, the ship has left, the train has left, the bus has left, you are stuck now, in slavery and bondage, unless, if that ever will happen, you stand up, pick up a weapon (decisive words and action may do for a start), and fight for your rights and country. Has anybody got the courage?

  12. Mike the Lefty says:

    New Zealand’s inability to formulate good and consistent residential planning in both urban and rural settings is responsible for the urban sprawl mess in our cities, and the takeover of New Zealand’s coastlines by the rich to create their own exclusive playgrounds.


 
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