Making progress on housing?

I’ve been quite sceptical that either side of politics –  whichever group of parties won the election – would address the fundamental distortions that have rendered urban land and houses so expensive.  After all, successive National and Labour-led governments had enabled us to get, and overseen us actually getting, into this mess.  And for anyone looking to the minor parties, New Zealand First had previously been part of, or supported, governments of both stripes, and the Greens –  with a taste for rapid population growth and restrictive planning laws –  didn’t seem any more hopeful.   Neither the Prime Minister nor the Leader of Opposition, before or after the election, seemed interested in seeing lower house prices.

An optimistic supporter of the Labour Party yesterday put it to me –  it was Reformation Day , and the 500th anniversary of Luther nailing his theses to the door of the church in Wittenberg –  that not even the Pope could stop an idea whose time had come.   As I noted in response, the general point was no doubt true, but plenty of aspirant reformers misjudged when “the time had come”, when the mood and opportunity for change had become irresistible.   Often they paid a dreadful price.   In modern democracies, of course, that usually only means losing the next election, or quailing at the prospect and just not doing anything much of substance at all.

As I’ve noted various times previously –  including in this post a year ago – while there are plenty of examples of successful places (notably now in significant parts of the United States) without tight land-use restrictions limiting housing development, I’m not aware of any country (or even region/major city) that, having once adopted the morass of planning laws and associated restrictions, has ever successfully unwound those controls.  And thus we have house prices as they are in New Zealand, or Australia, or much of the UK, or California (and many other parts of the United States).

Housing was a significant issue in the election campaign, but perhaps less significant than it might have been if Auckland prices had still been rising strongly this year.  Four of the items on Labour’s pre-election 100 day plan were housing-related:

  • Pass the Healthy Homes Guarantee Bill, requiring all rentals to be warm and dry
  • Ban overseas speculators from buying existing houses
  • Issue an instruction to Housing New Zealand to stop the state house sell-off
  • Begin work to establish the Affordable Housing Authority and begin the KiwiBuild programme

 

Whatever the merits of some of them, nothing on that list was seriously likely to address the fundamental regulatory distortions that have stopped the housing and urban land markets working effectively.

Today the headlines are dominated by the announcement that the government appears to have found a way to ban non-resident non-citizens from buying existing homes, by amending the Overseas Investment Act to classify all the land under such dwellings as “sensitive land” (for which we reserved rights to “adopt or maintain any measure that requires the following investment activities to receive prior approval by the New Zealand Government under its overseas investment regime” –  page II-59 of this Annex to the Korea-New Zealand agreement).      Given that the Act requires a “national benefit” for any overseas investment in “sensitive land”, and it is difficult to conceive how a potential non-resident purchaser of a house could demonstrate such a benefit given the criteria set out in the Act, it looks to this lay reader like a clever wheeze that should, largely, be effective.

But to what end, other than political signalling?   At the margin, presumably transactions costs for all purchasers of houses, anywhere in New Zealand, will increase a bit forever (will we all have to verify that we are residents or citizens?).    More importantly, is there any evidence at all that a law change like this will increase housing supply?    And is housing supply, as distinct from land supply, the real issue at all?   The argument is supposed to run that if non-resident foreigners want to buy in New Zealand they will have to build, or buy a newly-built house, instead (as is, indeed, the law in Australia).    If the law discourages foreign purchases in total it will, to some extent, ease overall demand pressures –  although experiences with provisions like the British Columbia stamp duty suggest the effect might be quite shortlived –  but if it simply leads foreigners to bid for new houses rather than existing houses, presumably residents and citizens will –  at the margin –  buy more existing houses rather than new ones.     The law is likely to change, at the margin, who buys which type of dwelling, but why will it increase overall supply?     The land market is rigged, by regulation, to be as unaffordable as ever.  That won’t change as a result of this policy.  Any issues around development finance, council consenting, or infrastructure won’t change either.   In many cases, non-resident non-citizen purchasers –  however many there truly are –  probably already prefer new apartments (if, for example, what concerns them is an easily-maintained and secured store of value).    Perhaps there is evidence from some other places that such a restriction has increased effective supply?  If so, it would be good to have it drawn to our attention.   As it is, as I noted the other day, if the goal is real impact on housing affordability for New Zealand there is probably a stronger case for banning all house purchases by non-resident non-citizens than simply banning purchases of existing dwellings.

For the moment though, it is telling that the sound and fury –  perhaps even lifting the government’s poll ratings –  is around a measure that might dampen demand very slightly, and should do almost nothing to increase supply.    No doubt there is a place for signalling in politics.  But if you want to believe that real structural reform is coming, wouldn’t it have been reassuring to have seen something tangible around land supply in the 100 day plan, or emerging –  together with the non-resident ban –  from yesterday’s first substantive Cabinet meeting?  The Minister of Housing is quoted in the media talking about potentially using the Public Works Act to confiscate private land (and the Public Works Act provisions, while necessary for some limited purposes, never adequately compensate owners).  But not about allowing private land owners to use their own land more freely.     Labour went into the election promising

Labour will remove the Auckland urban growth boundary

Couldn’t that have been made part of the 100 day plan?   Or what about a piece of legislation allowing any geologically-stable private land to be used for housing, up to two storey height, without further resource consent (preferably for the whole country, but at least say in a circle with a radius 100 kms from downtown Auckland)?     Yes, there are still transport and infrastructure issues to be resolved –  so perhaps make the commencement date of the new legislation 12-18 months hence – but changes in this area –  land-use rules –  get much closer to the heart of the problem.    If there is a problem with “land-bankers”, it is a problem created by regulation and legislation, which removes the element of free competition from the market for developable land.  And, perhaps to balance the potential to increase the physical footprint of cities, how about a Working Group to report back within six months on options for allowing groups of residents/existing owners to contract out of existing planning restrictions when collectively those owners judge doing so to be mutually beneficial?

But this all highlights the question as to whether the government is really willing, let alone wanting, to see house and urban land prices fall.    On that score, the evidence is mixed at best.    Both the current Prime Minister, and her predecessor as leader of the Labour Party, have fallen over themselves to deny such an interest, and both have proved very reluctant to talk prominently about land-use reform (although I’m told that in small meetings  –  including during the Mt Albert campaign – the PM can talk fluently on the topic), favouring instead a public focus on (a) tax changes, (b) non-resident bans, and (c) state-driven building activity (much of which is likely to displace other building, since there is little evidence of unmet excess demand at current house+land prices).

On the other hand, Labour’s official housing policy has sounded promising, and both Phil Twyford (Minister of Housing) and David Parker (Minister for the Environment) have a promising track record.  In the previous Parliament, Parker moved an amendment –  which came very close to passing –  that would have removed the urban growth boundary around Auckland.  But Opposition –  when you don’t live with the consequences (gains and costs) – is different from government, and tactical embarrassment of an incumbent government, is different from managing a tri-party government and implementing serious structural reform.   Greens/Labour/New Zealand First agreement was presumably easy around the non-resident ban, but will probably be lot harder around fixing the land market (especially now that the government has recommitted to the “big New Zealand” approach to immigration and population).

I’m not ready to be very critical of the new government yet. But my scepticism about the prospects of serious reform remains.  It isn’t really about individuals or personalities –  as I’ve noted, past governments for 25 years have also done little or nothing –  but about incentives, risks, and precedents.  In that post I wrote a year ago I concluded

Individual political leaders can make a real difference.  It would be great if one would stake a lot on urban land use reform, but anyone considering it needs to recognize the lack of precedents, the potential losers, and the worries and beliefs that underpin the durability of the current model here and abroad. And they probably need to find not only the right language to help frame repeal choices and options, but find a package of measures which helps allay – even if only in part, and for a time –  the sorts of concerns some have.

(If anyone was serious about reform, and lowering house prices, I suggested a possible limited compensation scheme here.)

In a three year electoral term, if serious reform is going to happen it needs to be got under way quite quickly.  Whatever the possible merits of KiwiBuild (and I don’t have strong views) at present it looks as if there is risk that it –  with lots of activity –  will crowd out addressing the real issues around land use law that have, unnecessarily, given us among the highest house price to income ratios anywhere in the advanced world.

 

48 thoughts on “Making progress on housing?

  1. Not sure whether you’re familiar, Michael with various articles on Houston and Harvey – and the issues of their laisse-faire planning regime, but here is an example of the reporting;

    https://www.bloomberg.com/news/features/2017-08-31/a-hard-rain-and-a-hard-lesson-for-houston

    And the best link within that article is to this really well put together, more technical explanation;

    Boomtown, Flood Town
    https://projects.propublica.org/houston-cypress/

    Written before Harvey.

    It’s just important I think to understand that infrastructure really does matter and hands-on planning has to get that right.

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    • Thanks Katharine. I have read some of those articles, and also one which seemed (to me) quite persuasive in rebuttal – I will try to read your link, and find the response piece I read a while ago and link to it. But, as I understand it, many of the issues are specific to the soil-type around Houston, which is also a very low-lying city. There are plenty of places elsewhere in the US without those problems and – on the other hand – plenty of places where planners (and subsidised federal insurers) have allowed development on flood plains that would be unlikely ever to have secured private insurance.

      I’m not disputing that there are issues to resolve, but that isa different point from allowing bureaucrats and councillors to impose their visions of what cities or neighbourhoods should look like. Sadly, there is still far much of the latter.

      (And, of course, if we stopped the immigration insanity, there wouldn’t be much more building just – with freed up land use – a lot cheaper houses and urban land in existing cities)

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      • Indeed these matters are Houston-specific but Auckland its own specific characteristics/problems with flooding, particularly inadequate upgrade and provision with respect to stormwater infrastructure;

        http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11787221

        http://www.radionz.co.nz/news/national/326509/water-infrastructure-needs-billions-in-investment

        Not that that is an excuse for not addressing matters associated with the effect of the urban boundary – just that we always need to be mindful of also addressing infrastructure adequacy and cost.

        I was involved in a similar issue in Kapiti some 15 or so years ago and one engineering consultancy report which quantified the extent of their problems suggested a moratorium on new development in areas which were prone to ponding in their pre-development state (which was most of the vacant land in the main urban centres) until such time as the existing/current problems were resolved. In other words, upgrade first to cope with current issues before you create more.

        The then council did not heed the advice and, like Auckland, the backlog has grown and the problems foreseen have materialised.

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      • It goes beyond just areas that are prone to ponding and inundation

        With the large increase in in-fill housing since 2000 the hard-covering of land has resulted in intensification of storm-water runoff from roofs and driveways and hard-cover preventing the usual absorption provided in the past. Golf courses and football fields and playing fields provide some of that facility. Sufficient to say the pre-existing storm-water systems have not been upgraded commensurate with the increased demands.

        This is simply evidenced by the abnormal number of land slips that have occurred in Auckland in the past couple of years. The cost of upgrading Auckland’s sewerage and storm-water infrastructure is enormous and is now being felt

        Look and Listen. Worse is to come. The warning signals are there.

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    • The use of Houston as an ideal city planning rules has always been laughable. Houston sits on 29,000skm. They are largely a circular/semi circular city with 6.2 million people. Travel distance north, The Woodlands to Texas City South is 118km. Auckland from Leigh, north to Pukekohe, south is already 129km and we are already full with 1.5 million people on 5,000skm. We are geographically a extremely long city as it is, with water on 3 sides, 57 sacred Volcanoes with severely restrictive visual height restrictions called the Viewshaft under a heavily publicly contested Unitary Plan which took 5 years to resolve and agree on. Labour in their dreams intend to throw out the rule book within a year? Labour and Jacinda Ardern tells lies to get into government.

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      • Yes, it is an interesting alternative – don’t worry about flood protection/mitigation, just take the waste to the tip and (re)build new. And it works when energy is abundant and money (debt) is cheap.

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  2. Good article Michael. A couple of points -I think there is evidence of excess demand at current prices in some parts of the housing market. There is a mismatch between new residential supply being traditional 3-4 bedroom family homes and new residential households being more singles and couples. Shamubeel Eaqub published a bar graph of this in his book Generation Rent. I think this leads to more couples and singles sharing larger houses with others when their preference might be to live in a smaller house on their own.

    But Michael I agree with your general point that KiwiBuild and other housing reforms will quickly fall over if land use regulation is not part of the mix. Interestingly I have written an article about housing optimists versus pessimists which largely hinges around land use reform vs tax reform.
    View story at Medium.com

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    • The right to build 2 dwellings is already in the Unitary Plan for most of the residential zones at a cost of firewall partitions an extra small kitchen and toilet facilities within or alongside or on top of an existing house. However for most private owners they do not want to offer up their right to privacy by having a neighbour right alongside them. This 2 dwelling right is only for existing houses. You cannot build a brand new 2 dwelling concept that is being offered on existing houses.

      “H4.6.3. The conversion of a principal dwelling existing as at 30 September 2013
      into a maximum of two dwellings
      Purpose: to enable a dwelling existing as at 30 September 2013 to be converted
      into a maximum of two dwellings and to provide for sufficient outdoor living space
      for each of the dwellings.
      (1) Where a principal dwelling existing as at 30 September 2013 is proposed to
      be converted into a maximum of two dwellings each dwelling must have an
      outdoor living space that is:
      (a) at least 5m2 for a studio or one-bedroom dwelling and 8m² for a two or
      more bedroom dwelling; and
      (b) at least 1.8m in depth; and
      (c) directly accessible from the dwelling”

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      • This is where Katherine Moody gets lost as well. The rest of the available land are the 57 sacred mounts which you can’t drive cars up let alone build houses. The public parks and green spaces which the neighbourhood would lie down in front of bulldozes. The rich soils of market gardeners and agricultural produce is already at critical loss levels. The height limited viewshafts of land surrounding each public park that needs a view of everyone of those 57 sacred mounts. The 8 metre queens chain alongside each and every stream and river from the high water mark. The Waitakere Ranges laden with Kauri and Manuka natives. The Greenbelt surrounding Auckland to filter and to provide clean drinking water. The Maori reserve land not subject to any planning rules, untouchaeble by any government, not recorded on LINZ and administered solely by the Maori Courts.

        There are the golf courses. I know Fletcher building does own a number and are planning buildings of considerable density but as you can see with 3 Kings it has been a nightmare of 10 to 15 years for Fletcher building just to build 1600 houses.

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      • Something like 1% land is built on. Actual physical, geologically stable and not in National Parks, land is one thing that NZ isn’t short of. From memory, David Seymour – not someone i often cite approvingly – identified huge amounts of developable land close to the city. But even if it wasn’t there, Akld isn’t so obviously highly productive that it would be a problem if lots more of the new development was happening, say, just over the Bombays or towards Helensville.

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      • Not short of in NZ but unfortunately severely short of in Auckland. We have put our largest gateway city on the smallest piece of dirt in NZ. When you stretch too far on land that has hills and valleys, streams and rivers and beaches and coves in almost every corner, the infrastructure requirements become very prohibitive.

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      • But there is nothing unique about Akld. It isn’t some centre of highly productive activity – like london or San Francisco. Even if useable land was genuinely scarce in Akld, there would no obvious problem with a major new city growing up north of Hamilton.

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      • The central hub is still centered around the Auckland Harbour, (550skm the size of Singapores harbour city) which is physically restricted by surrounding sacred mounts and the Waitakere Ranges. All roads leads to that central hub. To get to that hub you have to cross streams, rivers, hills and valleys, beaches and coves. The costs to connect the metropolitan hubs ie Albany and Manukau is a 30km to 40km gap to the central hub. The travel gap between Leigh to Pukekohe is a 129km gap. The connection requires the building of bridges and tunnels whether you are trying to build roads or put in rail tracks. The Len Brown’s pet train set to get from the Harbour to Mt Eden has already a $2 billion cost overrun from the original budgetting plan of $2 billion. That cost is now closer to $4 billion and mounting. Note that you can easily walk to Mt Eden, distance of less than 5km and the cost is $4 billion. Can you imagine the potential cost blow out to try to get monorail/intercity rail into the airport or to Manukau or Albany??

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      • I tend to agree with GGS’s point that it makes more sense to go up than out for Auckland. I think that if height restrictions were removed, people would choose to live in tall buildings near the centre rather than bungalows 40km away, and be very happy living there. I don’t think the market would simply build tons of low quality studio apartments if it were a free market.

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  3. It is good to know that Jacinda can talk fluently on the issue of land use reform, that there are reports of her doing that in her local electorate Michael. On the issue of crowding out the private sector whereby KiwiBuild housing justs replaces what the private sector would have built anyway. This issue was addressed by Andrew Little in a speech to the Property Council a year ago. It would be good for Jacinda to familiarise herself with that speech.
    http://www.labour.org.nz/andrew_little_speech_to_the_property_council_s_residential_development_summit

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  4. Initial reaction – a true macro view – the bigger picture

    However, from my observation, newcomers, migrants, foreign buyers do not “tend” to be active in the new-build space, preferring instead towards the individual dwelling with attached land – particularly the chinese to whom the land underneath is more important than the building sitting on top of it.

    Urban residential new-builds tend to be the domain of FHB’s because the build will tend to be in the outer suburbs further away from the CBD and tend to be dispersed whereas the bulk of the foreign money has been going into Auckland’s North Shore and High-Net-Worth Eastern Suburbs.

    Auckland’s land restrictions are borne by new-build developers and spec-builders and custom-builders. However, around Albany, Hobsonville and North Harbour on Auckland’s North Shore many of the builders operating there are of a migrant background of a particular ethnicity. The NZ Rose Gardens High Rise apartment buildings in Albany are not being developed and promoted by domestic players. http://nzrosegarden.co.nz/

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  5. Someone should organise a public symposium and get officials from, say, Houston, Tokyo and Berlin to answer public questions about how they manage to achieve affordable housing in their much larger cities, without turning them into hellholes.

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    • Auckland is an artificial island more akin with Singapore with high rise around the harbour around 500skm very similar in size to Singapore. Our 57 sacred mounts create an artificial island similar to the water that surrounds Singapore. Our highway 1 is akin to the bridge linking Singapore to Malaysia.

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      • The phrase ’57 sacred mounts’ is not neutrally descriptive. You do have a point but how many of the 57 ancient volcanoes actually impact building? For example Mt Smart used to be one of the biggest but it doesn’t seem to be preventing development.

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      • There are a total of 38,940 parcels of land within viewshaft coverage, with an estimated total area of approximately 43.9 million square metres. Viewshafts start from each public park from eye level which restricts heights in most of central Auckland. Mt Smart developments are low rise developments with extensive ground coverage and very little height coverage which maintains a low population density per sqm.

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  6. Seems like a long article to state to obvious points.

    Stopping foreign non-residents buying is political signalling but a worthwhile signal reminding us that NZ is a sovereign country and we are not dissolving into some undemocratic amorphous global entity.

    It is the cost of land that makes houses expensive and the cost of housing land is kept high by regulations especially the arbitrary urban growth boundary.

    Professionals on occasion have to make difficult decisions: Doctor – your leg will be amputated; Economist – you cannot afford it. Politics is the same; so good politicians have to make hard (unpopular) decisions. To achieve the power required to act you do not advertise unpopular policy. So your “” Neither the Prime Minister nor the Leader of Opposition, before or after the election, seemed interested in seeing lower house prices “” is naive. Of course they didn’t.
    However that is appearance and may not be reality. Where you are right is saying these painful decisions are best made at the beginning of a term.

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    • Not naive: my point is that I understand their incentives, and they are the same incentives – not enough NZers really care about getting lower prices – that make it unlikely that the structural problems will be fixed.

      Effective leaders make a case, generate a compelling narrative and alternative vision, and take people with them. I’m quite sure there would be few takers for a return to 1987 – when Labour published its manifesto the week after the election – or 1990/91, when National reversed on of its key (wrongheaded) election pledges within months of taking office. Ardern seems to me to have a mandate to do stuff about foreign buyers, Kiwibuild, perhaps even some tax things, but I doubt she has a mandate (or a majority, unless she is willing to reach across the House) to do the structural stuff that matters. But time will tell. I’d love to be proved wrong. But it doesn’t seem so long since in 2007/08 the Nats in Opposition were talking of structural fixes too.

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      • Maybe ‘naive’ was a little strong; today is one of those glass half empty days. Threatening house prices is political suicide. A significant reduction means the majority of the population benefits with new home buyers and owners planning to up-size immediately and renters benefit when rent begin to subside. All taxpayers benefit eventually when government accommodation allowances and FHB subsidies reduce. However only the potential new home buyers will be motivated to help your political ambition. On the other hand most home owners, developers, owners of retirement villages and owners of investment properties will be upset. The home owners will be mildly aggrieved that they seem to be getting poorer but the other three categories will be furious with an attack on their wealth. Although a minority these groups are the most politically aware and have the time, money and energy to stop political parties.

        I like your simple phrase ‘effective leader’. It is what distinguishes Thatcher from Wilson and Blair (which is to say Maggie caused a change of direction whether or not you liked it is another matter).
        Jacinda Ardern has control over her party and a mandate to change NZ which gives her a brief moment of real power to tackle the structural stuff that matters. She worked for UK PM Tony Blair’s Cabinet Office so should know that major problems should not be postponed, evaded and swept under the carpet. I am hoping for a series of quiet changes which will result in Auckland land prices going down (at least halving); even now the last thing the government or the country needs is a panicking house market. A better balanced economy would be more resilient to property price fluctuations.

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  7. I don’t think anyone is seriously suggesting we replicate Houston, the question is what we can learn from them. I am guessing their mandatory parking minimums and building on the flood plain are probably not to be emulated, whereas flexible zoning rules seem to be working pretty well.

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    • Houston has 29,000skm to be flexible with on a big circular/semicircular city. Auckland is already full with 5,000skm on a elongated city already stretched longer than Houston. Google it.

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  8. Michael
    Increasing the supply of housing is clearly a vexed issue. I happen to really believe that English and Smith were committed to pressuring Councils to alleviate planning restrictions and to introducing more targeting ways to fund infrastructure. The two key areas of microeconomic reform that are necessary.
    Their struggles illustrated how hard it is to get councils to shift and to infringe what individuals regard as their property rights.
    The NZ Initiative has come up with a suite of ideas along similar lines, but also a few more macro ones around infrastructure funding and metropolitan urban limits. New Housing Minister Twyford has embraced their advice.
    What happens with all this effort/enthusiasm remains to be seen.
    Labour’s 10,000 homes a year initiative and interdict on housing corp sales/developments are driven by different philosophical views and different views about the merits of central planning and top down solutions.
    One real test of Labour resolve and priorities will be whether it preservers with the local social housing initiatives now underway. That is where local community/social agencies seek to build housing using public private partnership funding; the what/where decisions being driven by local providers, the PPP partners providing capital and disciplines, and the Crown subsidies.
    A genuine third way to State Houses and Council Flats.
    Tim

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    • I heard/ read Twyford saying that Special housing area’s are gone. So developers will now join the same old queue that they were always in. Not sure how that will build more houses. Most of them are not particularly interested in lower cost and I believe that in Auckland quite a few have ditched the Special Designation as it restricted their profits.

      Apart from a land issue which is relevant except say in Tauranga where we have had plenty of sections going back to at least 2006 the identifying of the real problem for affordable housing seems to escape all the brains trust. Bob Clarkson had it right but weas prevented from building as was needed.

      The issue is one of status. i.e. peoples grand expectations of who they are.
      Back in the sevnties we could build a 80 sq meter house, either in a factory and load it on a truck or on site. Thousands of these were built and thosands remains as very durable first homes.

      No one can do this anymore, oh we can build them but try and find a section to put them on.
      There is the problem.

      Developers no build subdivisions for the elite or those with high status. Siubdividers are not interested in developing area’s of lower value land for lower value houses and they protect this situation be insisting on building covenants that describe in lots of detail the type, size, heights etc of any house built in the subdivision. Now all that is commendable for the owners of those high priced houses but it also props up the market.

      The best thing a labour govt. or any other govt. would be to allow a subdivision of Crown land that allows smaller houses, starter houses. The ones that don’t have an inbuilt garage, TV room etc but basic 3 beddy’.
      One can always add a garage or another room when money permits and so on.

      Want to fix the affordable housing situation. That’s what you do.

      Been saying this for yonks. It just ain’t rocket science nor do you need a degree in anything to see the obvious, just the will to make it work.

      Which is what Bob Clarkson wanted to do until he was stiffed by a council who was bullied by developers.

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      • Yep, I’m with you on that one – which is what I understood NZ First’s housing policy to be;

        Recognise that there is a housing crisis by establishing a new state agency to acquire and develop land for residential development:
        – Provide first home buyers with affordable residential sections under long term low interest sale and purchase agreements of up to 25 years.
        – Purchasers would build their own homes using normal bank financing, with title to the section transferred to them and the amount owing for the section, secured by a second ranking statutory land charge.

        http://www.nzfirst.org.nz/housing

        Government acquires the land, subdivides, puts in the infrastructure and sells the sections to FHBs at cost. FHBs put whatever they want on the section using their own initiative and their own finance. No need for any private sector partners that have a profit motive.

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      • Housing New Zealand has more than $10 billion of land and building. Bill English was initially very enthusiastic to fix this problem and volunteered to build low cost social housing. He volunteered as the Finance Minister to also be in charge of social housing and take on the Housing NZ ministry. Seems easy enough. Government owns the land just move forward and build eh. First problem was the fact that everyone of those $10 billion parcels of property had tenants and also the Government still have to abide by the local council rules. Many of tenants are aged and have lived there for more than 20/30 years. The National government and police could not be seen dragging thousands of old folk and poor people and dumping them somewhere else like caravan parks in order to build those thousands of cheap affordable housing. Strike 1.

        John Key is a solutions man so he goes and offers it to the Salvation army and the various private social groups. Here you go, buy this $10 billion of this land and we will even help with the loans. Salvation Army was initially very keen and even spent their own money on the feasibility studies very keen to sort this social housing problem. Ooooops the Salvation Army cannot be seen or associated with removing thousands of old folk and dumping them into caravan parks or tents while the building takes place. So all the groups came out and said Can’t do it. Strike 2.

        Nick Smith jumps in and try and look for spare land and force Council to bring forward the Unitary plan. Nick Smith goes hunting for

        Golf Courses – Fletcher Building has already spent $600 million buying up any large land available including the Manukau Golf Course and several others. Also the Todd Family is on a billion dollar buying spree after having sold their stake in Shell. Appoints ex Sky City CEO as their new development CEO. Nothing much left over for the government to buy. Strike 3
        School Grounds – The neighbourhood parents object. Strike 4
        Parks – The neighbourhood protests. Strike 5

        Move the Unitary Plan forward with Special Housing Areas.
        Initially 125 SHA zoned for Terrace housing/Apartments but with 25 metre road frontage neighbours just looked at each other and wondered if they could buy their sections. Strike 6

        Nick Smith yells Landbankers and goes looking for Landbankers. Oooops found out that these are little old people on their quarter acre family homes. Strike 7

        Expand the SHAs to 154 and include the Mixed Housing zones which are actually intended for single house subdivisions and looking more like desperation. Then Auckland Council yells out sorry also did not tell you all that Unitary Plan brought forward under SHA does not have sufficient infrastructure, not enough water, not enough sewerage, not enough drainage. Strike 8

        The National Government came to a very startling revelation. This housing problem is actually very very hard to fix with all the various Special interest groups like Maori heritage, Auckland 2040, Heritage NZ, Nimbys etc.

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      • You make out as if National actually tried to address the problem with respect to affordable housing with their SHA initiative. It was primarily a ruse to provide them with further ‘breathing space’ to flog off high value ex-state housing land without copping the criticism, e.g.,

        https://www.tvnz.co.nz/one-news/new-zealand/part-low-cost-auckland-housing-site-instead-house-chinese-airline-staff-layovers

        http://www.radionz.co.nz/news/regional/305404/queenstown-'in-crisis'-as-property-prices-soar

        http://www.radionz.co.nz/news/national/304291/queenstown-state-house-auctioned-for-%24665k

        And then having fueled the crisis – there was ‘shock and awe’ at their rising emergency accommodation/motel costs;

        http://www.newshub.co.nz/home/politics/2017/07/govt-admits-it-had-no-idea-of-emergency-housing-costs.html

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  9. The more rightwing readers of your blog Michael are probably not aware of the urban planning history paper by Chris Harris titled ‘Lost City: Forgotten plans for an alternative Auckland’.
    http://www.thesustainabilitysociety.org.nz/conference/2007/papers/HARRIS-Lost%20City.pdf

    The left-wing political/economic history goes that in the 1920s/30s NZ had amongst other economic calamities -a housing crisis. In particular Wellington was overcrowded and its rents were the highest in the country. The newly formed Labour party campaigned on the issue of an overcrowded Wellington. This issue being spelled out in the following Labour Party leaflet from 1919/20?
    http://mp.natlib.govt.nz/search/?tc=0&l=en&numResults=20&q=Labour+leaflet+no.9&t=items&s=a

    The first Labour government made good on this urban development campaign promise. Purchasing land to the north of Wellington and providing rapid transit in the form of a commuter rail system. Economically this was largely successful (I have concerns about the crowding out of private development and the artificial creation of dominant players -Fletchers). But despite the constraints of a large international economic depression, followed by a world war these urban developments worked -they probably were more stimulatory rather than inhibiting on the economy.

    Arguably though they did not work politically. A bitter Labour Party joke from the 1949 election expressed this crucial electoral shift: “They walked to the polls to vote us in, and drove to the polls to vote us out.”

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    • Thanks Brendon. I’ve long been intending a post on the first Labour govt’s state-house building programme (the books have been sitting on a little pile for a year now), so perhaps now is the time. Of course, interesting as that episode is, it isn’t a clean test of anything, given the interposition of the war and all the private building restrictions etc.

      Do recall that the first Labour govt’s expansionism (on various fronts) ran us into the 1938 fx crisis, near default on our foreign debt (saved by the coming war) and the all the associated import and fx controls that lasted for decades. And that having assumed office in an economy that was, by 1935, genuinely recovering strongly. For all the woes of the Depression – pretty bad here – we were in the 1930s still one of the 2 or 3 richest countries in the world.

      Liked by 1 person

      • Michael I wouldn’t suggest the current Labour led government repeat the 1935 housing/urban development model in every respect, but acknowledging and learning the lessons of the past should be done. A review the 1935 state housing program would be helpful.

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    • I don’t get much if a warm feeling about these Govt schemes when I drive around Cannons Creek or much of the Hutt Valley. They might have been acceptable when they were new but the social effects of corralling all the low socio-economic people in one area have been catastrophic.

      Famous New Urbanist Andres Duany had a few simple rules for social rental housing. No more than two per street and they must look the same as other houses. He also slammed architects for their indulgence in adding bright colours to social housing schemes – like a orange door or a lime green panel. You never see these on private housing – but apparently the occupants either need cheering up or maybe its a sign to the outside world that “poor people live here” The Wgtn CC are particularly guilty of this.

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  10. Your 3rd August 2017 article – reference proposal #1 – much lower construction costs

    Since the writing of that article, the protection that has been afforded to the construction and building industry over the years has proven (in the last month) to be misguided, misplaced, wasted, and probably corrupt

    In spite of all the protections Fletcher Building have enjoyed over the years the company is now seen to be inept, in fact one can surmise the comfortable environment it has existed in has been detrimental and certainly not beneficial to itself or the public consumers of its building materials.

    Given the financial set-backs it has disclosed one assumes there won’t be any hard competition coming from them in the home-building and material-supplies space – watch that space when it comes to tendering for kiwibuild projects

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  11. Surely, in addition to restricted land use such as the rural/urban boundary, we should also address how difficult it is to build a modest set of townhouses or terraced housing in traditionally suburban areas? This kind of housing does not strain infrastructure nearly as much as a high rise would, so it’s much easier to spread people around, but locals always lose their rag when it’s proposed.

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    • I don’t think we should be riding roughshod over local interests, but as I noted in the post I would favour a model in groups of local residents (eg whole blocks, or neighbourhoods) should be able to agree to contract out of existing land use provisions if they concluded it was in their interests to do so. That could mean liberalising, but in some cases might mean something more restrictive – and would mirror the very common covenant provisions now included in most new developments.

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  12. For Auckland,

    Ideally I’d like to see all the zoning rules go and have effects based development only (the original intent of the RMA, not the tow & country planning act type zoning that it ended up with), but that’s not going to happen – so for a starter:

    1) remove the urban growth boundary
    2) impose congestion tolls in the peak periods – review every 6 months like singapore
    3) set up a city development corporation if it doesn’t already exist with the rights to designate land
    4) designate the land parcels around the rail stations, buy the parcels and amalgamate them, or otherwise do it through open market where there are willing sellers
    5) rezone the land around the stations for high density transit oriented development (TOD) (mind the view shafts of course) including park & ride facilities at all appropriate TODs
    6) On sell the development rights by tender to the market the right to develop the TODs

    One could even see the northern bus line eventually become TOD rail if there is enough strength in the AH bridge to handle the weight?? and somewhere to terminate the rail in the CBD.

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    • I am quite impressed by the Northern Bus line – it works better than planned (car parks full). I am puzzled that it needs to be replaced by rail/tram/light rail – seems to have plenty of reserve capacity but I am told otherwise.

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      • It would depend on the demand level. There are high capacity BRT systems around the world so rail is not absolutely essential.

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