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The runaway housing madness

19 Jan

It is widely known there is a housing crisis in NZ, especially in Auckland and Christchurch, yet month after month, year after year, the house price inflation in Auckland keeps getting worse.  Clearly it’s the property speculators and land developers that have the power, and are leading the socially and economically destructive spiral.  They are exploiting people’s need to have somewhere to live, and making live an ongoing struggle for the least well off.

Auckland photo by Greg Bowker NZ Herald

Auckland photo by Greg Bowker NZ Herald

And now, an international survey has shown just how bad things are in Auckland.

Shamubeel Eaqub, principal economist at the NZIER, and NZ Herald’s Anne Gibson (the attributions are confusing), state, in an NZ Herald article today:

Auckland housing affordability has worsened and it remains one of the 10 least affordable big cities in the world.

Auckland’s surging housing market is now only slightly cheaper than London but pricier than Los Angeles, Toronto, New York, Perth, Brisbane and Boston.

The latest Demographia survey, released today, compares prices with incomes in 378 cities, including 86 with more than one million people.

Auckland is one of the most unaffordable places due to its high house prices and low incomes.

The buck stops with the government.  Labour’s Phil Twyford rightly takes Nick Smith to task for its failures here.  Smith, of course, does the usual smoke screen of talking about how much is (allegedly) been done to improve the situation:

Labour Party spokesman Phil Twyford said the Government’s housing policy had failed. “Nick Smith has been minister for two years now, and under his watch housing affordability in Auckland has got worse. They have failed to significantly increase the supply of new homes. Consents are running at about half what Auckland needs just to stand still.”

Auckland Council does have some responsibility here, but they ultimately are hog-tied by the government’s unwillingness to challenge the dominance of the property developers, investors, and speculators.  And this is where Len Brown is quite wrong when he says:

“…Council and the government doesn’t build houses, by and large we provide the right framework for the building of the houses, we make sure the red tape is got rid of so people can actually build quickly.”

Wrong!.  The government would go some way to easing the crisis, if they had been working to increase the amount of state housing, rather than selling off what Housing NZ already has.  This would put downward pressure on rents and thus the housing speculation and profiteering.

As a life-time renter, who has moved 3 times in the last 3 years, I have a pretty good understanding of the renting situation in Auckland.  I am lucky that I am on a reasonable (though relatively modest) income. Landlords have way too much power, and can get away with leaky, tatty, noisy and, in other ways inadequate rentals.Some are getting away with illegal practices.

I think this is Shamubeel Eaqub’s prescription to improve the situation:

Auckland is extraordinarily expensive relative to incomes and rents but the solutions need to be broader than what Demographia argues on land supply.

Land supply is not really the problem.  Too much development is focused on higher end housing.  Fairly high density living is not a problem if done correctly.  I really like the new multiple storey apartments in New Lynn: right next to the train and transport centre, as well as to the mall, library, community centre, and usable outdoor public spaces.  Sizable balconies for some outdoor home space, and, I imagine, some pretty good views at higher levels.

We must make renting more attractive. Tenancy policy and agreements provide flexibility but this is a barrier to regarding renting as a substitute for owning. More balanced tenure and tenants’ rights in Britain and Germany support renting as a normal alternative.

Exactly!

Eaqub also says:

We must eliminate the property investment bias in banking.

Indeed!

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