Thursday, December 6, 2012

Affordable housing? Is there any hope?

Andrew D Atkin:

Believe me I hate being a pessimist, but the truth is what it is.

The New Zealand prime minister, John Key, has openly declared that young New Zealand can forget about housing affordability.

Quote from this article: 

Speaking in response to the TVOne poll at his post-Cabinet press conference on Monday evening, Key said it was not the government’s intention to make moves which would lower property prices.

"That would actually undermine the value of everyone’s home in New Zealand – that probably wouldn’t be welcomed by the bulk of New Zealanders, certainly not home-owners," he said.


Wow. Ok. So how does the government provide or facilitate affordable housing, while ensuring that existing property values are left unscathed? There is only one way you can do it. Make sure your new, affordable housing is...crap. Make it housing of the type that no-one really wants.

If affordable housing is of the type that people want, then existing property values in Auckland (and the wider New Zealand) will collapse relative to where they are today. If you're building affordable homes that are good to live in then you won't have those thousands of people lining up, desperate to buy into the now-existing housing stock. And that pressing demand is, of course, exactly what the massive property inflation that we have today is dependent on.

So there is no hope for housing affordability coming from our current government. I know this and so does John Key. But don't hate Key for it because he can only be a puppet to the dictates of the National party collective. The truth is he is our friend on this issue, because he outright stated the truth. He has told us, in slightly gentler words, that his hands are tied and that he will likewise continue to allow established land-holders rip-off rights over young New Zealander's. And it will be done for political (vote buying) reasons. That is the situation that he's basically admitted to.

John Key has given us our cue to rebel. He has informed us that his government will not be providing young Kiwi's with any real solutions. In fact he will suffocate the solutions so as to protect the status quo.

In comes Labour:

And so now we have our hero respondents. The Labour party. THE VERY PARTY THAT CREATED THE HOUSING CRISIS TO BEGIN WITH, from the last time they were in power.

Lucky for Labour, people are nearly as ignorant on their history as they are on their economics. What can I say? Asking Labour to fix the housing crisis is like asking Satan to breastfeed Jesus.

Anyway, the solution offered by Labour is the building of 100,000 new affordable homes in Auckland. The problem is it's a "solution" that will not include the adequate release of land for new-builds, which has long been the core of the problem. In other words, Labour wants to build 100,000 chicken-coop type dwellings as affordable housing. And they want to build them for about $300,000 a piece. (Is that really even affordable? Affordability = $200,000 or less).

National's (probably staged) response to Labour's ambition is that it's unrealistic. Well, what a great way to ensure that Labour looks like the housing affordability party - that is, have the opposition tell everyone that they're being "too ambitious" on housing. And what a great way to suffocate the development of a real rebellion. Make the false rebellion look credible.

Note: Understand that if you're not reducing the actual cost of housing supply for new-builds, then you cannot expect progress towards affordability. Labour does not propose to reduce the cost of supply, and it therefore makes no sense to see their ambitions as any kind of solution. Turning the state into a property developer will not make a material difference.

The media:

The propaganda behind the housing crisis is founded in a central lie that nearly every (and usually ignorant) public commentator on the issue adheres to. That is, the belief that the housing crisis is a complex problem.

No it isn't. Behind the near-endless volumes of junk-commentary on the issue is the economics-101 of it all. I have explained it myself in a single blog post. Also, I will include that New Zealand's best (true) expert on the issue, Hugh Pavletich, has said also that the housing problem as a "nonsense problem"...because the solutions are so obvious. And Hugh is of course right.

But alas; the media, the banks, our major political parties, local governments, and even Australian and other national governments have all co-functioned, wittingly or not, to preserve this bizarre and unnecessary madness of radically unaffordable housing. As it appears, all the safety valves have been removed.


BOTH main political parties, National and Labour, have functionally colluded to destroy hope for the development of affordable detached homes, with a bit of garden and lawn. This is the kind of housing that most people want, especially if they want to make a family.

And, so sadly, most young people will now believe that their hope is with the Labour party. Alas, false hope is the ultimate expression of no hope, because you don't then even seek out the alternative.

....and no, the Green Party is even worse than Labour. These semi-communist pseudo-environmentalists believe that 1 part in 125 urbanisation is too much intrusion on the environment already, and so they wish to outlaw the use of new land for housing more than any other political party today. They preach housing affordability the most, yet are functionally contradictory. And these people also seem to think that a possible [yet temporary, I will note] $20-pw increase in petrol spending is more costly than a $300-pw increase on your mortgage.


What to do?

Find a cozy little spot on the planet (that's warm and sunny and full of good-looking girls) and build a 'smart village' that is, basically, a new settlement for young rational Kiwi's who have been [economically] driven out of their country. Or find some other established place where the living is good and the people aren't too culturally alien.

My message to young New Zealander's is that, thus far, this nation of yours does not deserve your residence. I don't like saying that but I'm being realistic. (mum and dad can Skype you).

Try not to go down with the ship. Let other fools be damned.


Update: 30-1-13

The New Zealand prime minister, John Key, seems to be redeeming himself. Here is a direct quote from his State of the Nation speech:

"Labour’s so-called ‘plan’ to build 100,000 houses doesn’t do anything to fix the actual cost of building – so will either fail miserably, deliver dwellings that people don’t want to live in, or require massive taxpayer subsidies."

Very heartening and very true. (Except those 'massive subsidies', if ever employed, would only be inflationary on the general property market. Pumping in new money can only be inflationary if the under-supply is not resolved i.e land supply).

However, rhetoric in itself is still only skin deep. Politicians can show they understand a problem, sometimes perfectly, but still do nothing real about it. It is VITAL that people get educated on this issue, and to keep the pressure on.

1 comment:

  1. And no. John Key proved to be a liar. Still only pretending to solve the problem.

    Why am I not surprised?