Housing minister economically illiterate
At the end of last week he suggested that the solution to houses being seriously unaffordable -- with the average price being roughly six or more times the average income, as opposed to three times the average income as it has been in earlier times and still is in other markets -- the solution he said is new regulation to force developers to build affordable homes on land made unaffordable by earlier regulations. Somehow he thinks developers will be queuing up to lose money on new projects.
This economic illiteracy was lapped up by an equally illiterate commentariat, including Sainsbury, Campbell, Uncle Tom Cobley and all.
Then last night Carter dreamed a new dream. As the Housing NZ report issued ten days ago concluded, the problem with unaffordable housing is not lack of demand, it is serious restrictions on land supply that have pushed land prices up over 300% across a decade, and the construction of new houses some four- to twelve-thousand units fewer per year than required to meet demand. That serious demand-supply imbalance is what is driving the serious unaffordability of local housing. Carter's dream ignored that altogether. Carter's new dream is not to free up supply -- not to increase capacity, not to remove restrictions so that four- to twelve-thousand more houses can be built every year to house New Zealanders and clear the market -- but to inflate housing demand even more!
Despite even a high school economics student being able to tell him what happens when you inflate demand while continuing to restrict supply, no one in the MSM has yet to call him the fucking moron that he is. Perhaps that's because they're mostly as economically illiterate as he is.
Housing Minister Chris Carter said last night [his "shared equity" scheme] would be a way to provide direct financial assistance to buyers faced with prices which would otherwise stop them getting into the housing market. "You would have partial ownership and share the results of any increase in value," he said on TV3 News. TV3 said a pilot scheme was likely to start in Auckland next year which could involve the Government paying for a 25 per cent or 30 per cent stake in a house.
The answer is not to further inflate demand; it is to free up supply: to shred the RMA; to get the town planners' the hell out of the way and their hands off people's property; to allow the market in land to function just as every other working market does. If the housing unaffordability crisis could show us anything, it should surely be the imbecility and destructiveness of thinking that meddling mends markets. It doesn't: It makes them worse.
Economic illiteracy is not a winning strategy.
UPDATE 1: Right on cue, the economically braindead Herald columnist John Armstrong weighs in with an encomium to statist stupidity that begins by invoking the "spirit" of Michael Joseph Savage, which, says John Junior, "has been passed down through successive Labour ministers holding the housing portfolio," before sinking into a bottomless pit of nauseating stupidity when it calls the illiterate Carter both "smart" and "savvy" in succeeding sentences.
"Labour," says John, "can hardly be blamed for soaring house prices." Well, yes they can, since the Clark Government has done nothing to avert the outrageous restrictions on land supply brought about under the RMA, and everything to encourage an expanding exchange rate and soaring credit.
Armstrong just gets worse every time I have the misfortune to read him.
UPDATE 2: The economically literate Mike E is also a prospective first-home buyer, but he's no more impressed with Carter's dreams than I am.
This is the government proposing to *subsidise* 25% of a properties value. So for most places this would be about $100,000. To put this in perspective, what have I done, to make me deserve $100,000 of your money - why do I deserver it more than you do? why am I so special? The correct answer is, nothing, I am no more deserving of the money you earnt than you are. I can't support the use of force to have my assets subsidised by your work.Frankly, who could justify that?