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.)
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.