6 steps to fix the Labour/Green driven affordable housing crisis

By
Stephen Minto
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51
1043
There are quick fixes (existing housing for emergency housing) and longer term fixes (building housing), both are needed, and there are tourism and immigration impacts.
Firstly, focus our scarce building resources on building affordable housing. A focus will help bring down the price to build.  So remove government supports for private demand for building resources i.e.
  • Remove interest deductibility for tax on ā€˜build to rentā€™ businesses. This brings them into line with other rentals, so they have to stand on their own two feet without government tax subsidies.
  • Remove the ability of developers to bully build up to 6 stories in our historic green residential suburbs.
Why? Private enterprise builds housing; but to survive they must maximise profit. If a price is high, as currently for housing, they will work to keep the price high as that will maximise profits e.g. the rental market in Wellington has hundreds of rentals available but empty. This helps retain high rents on their active rentals elsewhere. There arenā€™t cheaper options for existing renters to go to, so they stay. Housing sales also follows same techniques to maximise profits even though the market is down.
Note: With housing values dropping are we getting affordable housing?  Real Estate Institute reports the national median house price for August 22 was $800,000.  And the median hourly wage from Stats NZ for June 22 was $29.66 ā€” so x 40 = $1,186.40 a week, x 52 = $61,692.80 for a projected median annual salary. Houses used to be 5 times the salary. So for there to be affordable housing in New Zealand the median price for a house should $308,464. Get real, this is way off being affordable. The best you can hope for with these prices is a crushing mortgage for the rest of your natural life. Say goodbye to having children.   We are still in the thick of a housing affordability crisis despite dropping prices.
Secondly, because it is a crisis you must also suppress excess demand on our limited supply of housing.
  • Turn the immigration tap down.
  • Turn tourism down a bit. The short term rental market for tourism uses housing, e.g. AirBNB.
  • A targeted tax on short term rentals that are in houses. (apartments?). This can be policed as they must advertise.
With emergency housing using motels, where are tourists going to stay? Freedom camp? Just as Government is trying to clamp down on it. It raises the question, is there co-ordination.
Thirdly, plan where to build.
People want to be near existing services, (shops, entertainments, social services) transport. This saves on new infrastructure costs, like light rail. Savings can be used on building for the  affordable housing crisis.

 

In Wellington build affordable housing over retail car parks, and near or over train station car parks (sound proof them) on Hutt and Porirua lines.  E.g. Kilbirnie Pack n Save has a large north west facing carpark with lots of sun and views. Countdown across the road.  Over Jā€™ville Mall carpark. Croften Downs (but no others are suitable on J/ville line).  Te Aro is full of asphalt car parks.
In Auckland build affordable housing over or very near existing train stations. So much retail and semi industrial could be accommodated under housing  (not all stations are suitable if they shade or overbear too many). Sylvia Park has huge capacity for affordable housing. Great views on that line and you’re not destroying the suburbs or your voters. Onehunga Line, create an extra rail line beside the existing lines and extend it to the airport with much fewer stops so its a faster train (large cost but can be done with Public Works Act). This better networks the public transport system and adds more value to the recent extension for the City Rail Link.
But Government must change zoning laws to allow residential to be linked to retail and transport, so down the lifts and youā€™re in the shops and transport. What businesses lose they gain in customer proximity. Use the power of government to bend a few private business owners. Don’t delegate your power so others can bully your voters.
Fourthly, what to build is mid rises (5 to 12 stories)  Most cost effective for the amount of housing needed and gained for the effort.
Chinaā€™s building downturn means there is huge building capacity available now. (Having seen You Tube clips, perhaps we do the foundations and finishing ā€” which would speed up building more). I suggest China because the crisis is urgent and very real and they are a major trading partner. There are obviously political considerations.
Fifthly, existing housing stock must be fully used. Government needs to get hold of houses urgently for emergency housing as it is too long to wait for building.
  • Ghost houses. Either seize these houses under the Public Works Act or create an instrument so they are repaired to an excellent standard for emergency housing. The cost to do this becomes a loan to the owner of the house with interest. If not fully repaid to the government at the time of sale, the balance is recovered at that point. Govt accounts balance with an asset, the loan.
  • A large tax on empty houses?
  • A legal requirement to rent out your rental or a large charge applies after two weeks vacant. This forces the market down and will positively impact even existing customers as they could move.
  • Change tax rules so no tax loss on ā€˜aā€™ rental is allowed. Then no advantage in having a property empty to offset to other rentals.
  • GV sale offers to rental owners looks good in this market.  If they sell the consideration is some sort of 10 year government bond/instrument (owning a house was a long term investment, so the bond is long). Government then pays back interest and principle fortnightly at a rate as if the person was getting rental income. This means the money doesnā€™t just pour out of the government and keeps a continuity for the person.
There are many more ideas than this.
With the building resources focused government can more cheaply contract with builders.  Once built they can sell apartments at cost to first home buyers or for a small profit. Some must be used for emergency housing. Contract to build at minimum 100,000 apartments in mid rises. The urgent need is 30,000 for emergency housing but you also want others living in the areas so ghettoes are not formed. Using exisiting housing will help and these newer houses will bring down prices.
Sixth, wake up centrist Labour and Greens and use the power of government to build affordable housing for all first home buyers. Not to delegate your powers to private developers to bully build over your voters so they donā€™t vote for you.  Cooperation and pandering to National has not blunted their criticism. This is your crisis and you are bungling it. Your facilitating private enterprise plans have failed because, only the government can build affordable housing.
p.s. Stuff, has not taken up the option to publish this or other articles about affordable housing. They do seem to more readily publish articles pro intensification and bully building.

51 COMMENTS

    • Reply to Andrew at 8.02am “Hi, Yes i agree it’s Bizarre that the government is following this failed private enterprise route to deliver affordable housing. Private enterprise just can’t get it up.’

  2. Instead of all this talk in society these days about ridding churches of their tax exemption status, let’s encourage them to fund more social housing.

    • Reply to Dan at 8.46am “Hi, Churches should have their tax exempt status taken away because they are very much businesses now. Having weekly concert performances, strobe lights, rock bands. If they want to do social housing nothing is stopping them. If your word ‘encourage’ means give them money to do this. Then what accountability will the funder have? Many non-profits simply lack the professionalism and experience to do housing efficiently and effectively. As a govt contract is simply cheaper and more efficient. Less middle men.

  3. It’s even worse than you highlight.
    Houses used to be 2.75 times medium salary, BEFORE financialisation that started in the mid-late 80’s.
    You used to only be able to borrow 2.5-2.75 times the first salary and 50% of any second (partners) salary, PLUS the bank/building society, wanted to see that you had actually saved up (with THEM) the MINIMUM 20% deposit.
    Like USA education, once people could borrow more, price PURELY went up because they could, and due to ‘money prinring’ caused purposely by Govt/Central banks, what ‘Joe Public’ calls inflation. It is really money depreciation-devaluation.

  4. You have made some good points. I agree with point3, that significant intensification (5+stories) needs to happen around areas with good community infrastructure, such as in cities centres, near train stations and malls. Johnsonville town has too much under utilized space, and that is all on the mall owners and council.

    Tax is a tool that either encourages or discourage investment. Labour has penalised private landlords and incentivized large company investments. The new taxes added by labour are an anomaly when compared to tax in other investment classes. Labour tried to fix rise in housing prices, created due to low interest rates, printed billions and easy access to cash, by creating a tax anomaly.

    I do agree that ghost houses should get tax penalty. However 2 weeks will never fly. Houses being empty for 6 months would be more practical.

    I had to laugh at “only govt can build affordable housing”, is that a joke? Govt are good at spending other peoples money, after all someone is always there to pick the tab.

    • Reply to Benny at 10.51am ‘Hi Benny, you make some good points. I agree that the changes Labour made have favoured large companies holding housing. Particularly ring fencing just targets the ordinary person holding a house. I agree with your point about anomalies and I have written about how to fix that previously but at the same time if you want something done variations can be done by tax changes or fiscal changes. Either can work. it’s true private enterprise can’t build affordable housing. Where is it? 30 square metre or less studio apartments are no good for families. The big growth in affordable housing came with the 1st Labour government. I think Labour/Greens are desperate to fix the affordable housing crisis but everything they do is making it worse because they are listening to the wrong people.

  5. Start planning and building a set of model houses in allowing for individual living with reasonable privacy, but on a neighbourhood style and do this in remembrance of Queen Elizabeth ll. How about that along with this one day to remember someone who carried on with her duties as head of her nation and many offsiders.
    https://www.rnz.co.nz/news/national/474637/remembering-the-queen-new-zealanders-react-to-bonus-day-off

    Queen Elizabeth Drive we have in Nelson. What about a Queen Elizabeth hamlet* in each town and city. When I was in London I lived in a flat in a divided house in Kilburn – it had a short garden in front and at the back which was walled there was a door leading to a large playing area lying along the backs of the houses surrounding it on four sides. Excellent in closely built up housing areas. Go for that and you have a wonderful, great disruption to packing case housing put up by those with calculators where other people’s pleasure in humanity and soul would be found.

    *hamlet – (not a small ham!): a small settlement, generally one smaller than a village,
    and strictly (in Britain) one without a church.

    • Reply to Grey Warbler at 11.38am. ‘Hi, I’m not against your ideas in some places. It just sounds a bit sprawling and takes up a lot of land and that means more pipes etc. As long as it didn’t take good farm land.

  6. I’ll bet when you walked out of IRD for the last time, it was a load of your shoulders @ Stephen! Now free to see the utter stupidity of the cistern the managerialist ideologues have created.
    If the past 5 years are not evidence enough that any of these brilliant ideas can’t happen, the next election is probably going to be.
    Me thinks things probably have to get worse before they can get better, and probably the sooner the better before you run out of life.
    There used to be an old saying in them there ‘olden days’: Too many Chiefs and not enough Indians.
    Starting in the 80s, and accelerating ever since, it’s got worse. The Chiefs job now is to monitor KPIs and tick boxes; lie (or tell “mis”truths); call meetings; capture their responsible Munster by whatever means; and inculcate the Indians with the latest managerialist ideology with various nudge nudge wink wink promises, often hinted at in their performance appraisals. And it’s worked by and large.
    Strange a it may seem, IRD are the least of the problem, and those such as yourself act, and acted ethically.
    Not so elsewhere – and it will continue until it collapses under the weight of its own bullshit and spin.
    Unfortunately the left politicians, whether Labour or Green don’t and can’t get it because they now have an investment in the very cistern that’s keeping it all going. (UNTIL it no longer can). The sooner it plays out, the better.

    • Reply to Once was Tim at 12.57am ‘Hi, thank you for your insights. My only doubt is I’m not sure its about our politicians having an ‘investment’ in the system, it’s more about a deep seated insecurity around taking actions that may cause criticism. They are economically rudderless and copy many National/Act policy approaches because of their philosophy to facilitate business. A simply look at New Zealand History shows private enterprise consistently failed and had to have government bail it out. That is why we had a Public Trust, A State Insurance, a Bank Of New Zealand. They worked because private enterprise failed. And you have far more of a deterministic framework than me. It could easily just play out to more conservative and controlling governments.

      • ” My only doubt is Iā€™m not sure its about our politicians having an ā€˜investmentā€™ in the system, itā€™s more about a deep seated insecurity around taking actions that may cause criticism.”
        Points taken. Criticism/critique should be welcomed though
        …and …..
        “And you have far more of a deterministic framework than me.”
        Not only is that because I, and a few others at the time have had successful employment court cases brought about by devious and lying senior public servants committed to the managerialist bullshit neoliberal agenda (even though they’d deny a neoliberal label). And also because I closely monitor what’s going on in places like OT, and the Munstry for Everything and some of the other more dysfunctional government agencies. There are some good, and some bad. Unfortunately, the bad are really bad.
        Keep on doing what you’re doing – even if progress is slow, it’s liberating šŸ™‚
        I’ll give you a wink next time you visit S&B

  7. NZ has to look after their existing citizens without allowing more people to move to NZ often with large families that then go into poverty and need Kāinga Ora assistance.

    “Marie Tuu, Paulo Petelo and their five children Sola, Milton, Rosie, Alisi and Solema, lived in emergency housing at the Camberley Court Motel in Hastings for nearly three years.

    They moved to New Zealand from Samoa at the beginning of 2016 and stayed with Tuu’s sister before she moved to Australia.

    When the landlord of the property decided to sell, they had no choice but to move into emergency housing in 2019.”

    While some sympathy for this family, they are a large family that moved to NZ from Samoa and after being in emergency housing for 3 years are now given a NZ state house. Apparently they are crying out for workers, everywhere, but for what ever reason people either don’t have to work or the work they have is so poorly paid they can’t survive in NZ.

    More and more overseas citizens in poverty will come to NZ if you are looked after here and can get NZ residency and benefits very easily, but this is at the expense of Kiwi kids who are then competing with all the newcomers in poverty.

    Likewise today announced government are funding more overseas teachers coming to NZ. Nothing for existing teachers to retain them in NZ with higher wages.

    That is the problem with NZ’s revolving door, poorer people are coming to NZ with children and elderly parents who require a lot of NZ services, this puts pressure on existing services and standards of care for NZ children, and experienced people can’t afford to stay in NZ, while government do nothing to try and incentivise them to stay.

    Soon NZ is going to be a place full of crime and poverty, if government keep pushing experienced professional people out of NZ while incentivising large families to come here, that can’t make ends meet.

    • “Soon NZ is going to be a place of crime and poverty”

      The stats support your assertion. NZ style of immigration while it makes business owners richer makes eveyone poorer on average.

      1973 population 3 million. Per capita GDP. OECD rank #16

      2003 population 4 million. Per capita GDP. OECD rank #22

      2021 population 5 million. Per capita GDP. OECD rank #26

    • Reply to saveNZ at 2.07pm “Hi I agree with a few of your points. On education the government should have given a much better pay settlement to teachers. That would bring up the quality of the teachers and their ability to stay in the profession. Labour seems always to want to spend on infrastructure not people. National would always ‘spend’ on it’s ‘core’ people. We are a pacific nation and I welcome our pacific people coming here. Yes there does need to be rules otherwise the islands might be stripped of their best and brightest. Business people are the main people who want immigration as they are more pliable for work and pay rates. They don’t want to raise wages and they don’t want employees they perceive as difficult. So it’s not about the Samoan family coming here its the ability of the work they get as being able to support them. National has made New Zealand a low wage economy by attacking unions.

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