I’ve never been to Las Vegas, and have no intention of ever doing so. The idea of living there (desert, casinos etc) mostly seems quite unappealing – although I can imagine people from Las Vegas may feel the same about living on an earthquake fault line and sending your kid to school in a spot the inevitable Hikurangi trench tsunami will one day sweep through.
But a reader was in Las Vegas earlier this week and left this comment here last night.
I just got off the plane from Las Vegas yesterday. I stayed there with a nice young couple who live in a townhouse about 10 years old. He’s an iPhone repairman and she’s a stay at home mom. He makes enough money to rent their nice, 10 year old, 140sqm 4 bed 2.5 bath townhouse with garage. I viewed an open home of an identical property going for US$275,000. They’re a short 3 [minute] drive from plenty of public amenities and only about 15 minutes from the city center. Driving around I saw a lot of new properties from single family homes to apartment buildings all prices at commensurate levels. Those properties were built en masse, in large developments each about half a square km block at a time. Similar young kiwi couples in their early 20s can only dream of this relatively idyllic lifestyle in cities of anywhere near similar size!
These were the kind of communities that made headlines 10 years ago for plummeting property prices in the subprime mortgage crisis. Now, they’re affordable, new, well-built homes for young families and in spite of the relatively low prices, developers are still hard at work building block after block of new market-rate affordable housing.
A cruel irony of New Zealand is things here cost more, but you still earn less. I thought the example in Las Vegas put to shame supposedly progressive polities like Los Angeles, San Francisco, and New Zealand, all of whose governments virtue signal in favour of “affordable housing” but cannot deal with market realities.
Sure, you always have to be a little careful in cross-country comparisons of individual house prices. In the United States in particular, properties can come with quite high ongoing obligations to cover infrastructure costs etc (in New Zealand much of that cost falls directly on developers and is embedded in section prices). But there is no credible way those sorts of charges are going to explain the differences between the prices of those Las Vegas townhouses and what our politicians here inflict on New Zealanders.
If I’m not keen on the idea of Las Vegas, it seems that many Americans are. This is the data for the population of the metropolitan statistical area including Las Vegas.
Lots of people, rapid population growth (faster than Auckland’s), and (it appears) wholly affordable housing.
As it happens, there is a big (well, by Wellington standards) townhouse development going on 100 yards or so, as the crow flies, from here. I think the individual townhouses have mostly been presold, but I did find one advert still online. These places are perhaps 3 minutes drive from the park and beach, 15 minutes drive from the centre of town. But they are only two bedrooms, have a carpark rather than a garage, a single bathroom,and are only 76 square metres. The asking price was $735000.
And this is Wellington, not as bad as Auckland.
You have to wonder why there isn’t more public outrage about a situation that gets worse (more people hooked into debt based on current high prices) with each passing year.
But what of our so-called leaders – Ardern, Bridges, Twyford, Collins, Goff, Lester (and 30 years of their predecessors) who let this situation develop, know the problem (well, most of them do), and still have done nothing to fix the mess. Not one of them will even suggest that house prices as cheap as those in Las Vegas is something we can and should aspire too. What are they, by their indifference, doing to our kids?
I know the distributional challenges of fixing this mess, once National and Labour in turn got us into it, are real. A couple of years ago, in a post on options a new Labour government could consider if they were serious about reform, I proposed a compensation scheme. If it helped overcome the obstacles to the sort of reform Phil Twyford and Judith Collins both talk about wanting, I’d support something like this.
No one will much care about rental property owners who might lose in this transition – they bought a business, took a risk, and it didn’t pay off. That is what happens when regulated industries are reformed and freed up. It isn’t credible – and arguably isn’t fair – that existing owner-occupiers (especially those who just happened to buy in the last five years) should bear all the losses. Compensation isn’t ideal but even the libertarians at the New Zealand Initiative recognise that sometimes it can be the path to enabling vital reforms to occur. So promise a scheme in which, say, owner-occupiers selling within 10 years of purchase at less than, say, 75 per cent of what they paid for a house, could claim half of any additional losses back from the government (up to a maximum of say $100000). It would be expensive but (a) the costs would spread over multiple years, and (b) who wants to pretend that the current disastrous housing market isn’t costly in all sorts of fiscal (accommodation supplements) and non-fiscal ways.