Wednesday, 8 April 2015

Money won’t do it

Sometimes there is more foolishness written in the papers than it’s possible to properly countenance.

The Otago Daily Times has taken up the cudgels on behalf of a “regional solution to housing” that appears part of  a new regionalism post-Northland that is well trumpeted by other commentators, including Interest.Co.NZ.

The ODT calls for government action to recognise the regions and to make them more attractive. How, somehow?

Dunedin, Invercargill, Timaru and Nelson are seen as very affordable places for first-home buyers, but the consistent drift north of jobs and government services, in particular, make it difficult for young people to find work.
To find work, many go to Auckland or Christchurch, and the problem continues.
    Dunedin has a median house price of $281,500 and Invercargill’s price is $210,000. If more could be done to encourage people to live and work in the South – say through a regional development policy – some of Auckland’s housing problems will disappear.

Do you see the problem? They call for a “regional development policy” to help make home-buyers consider the regions a more attractive proposition for first-home buying. But they seem to ignore the sheer bloody attractiveness already of median house prices in the regions being nearly three-hundred thousand dollars cheaper than they are in Auckland.

So, obviously, money isn’t going to do it…


  1. Not only that, but they seem to oblivious to the fact that, if such a policy worked, then the prices of houses in the regions would rapidly rise and reduce the difference, making movement less appealing again but also entrenching the subsidy which would be impossible to remove, politically.

  2. I don't entirely agree with this. Economic development does make the crucial difference whether people want to (or rather can) live in a place or not - and all the southern cities mentioned above have suffered declining or static populations largely due to declining economic fortunes. An example of the opposite is Ashburton, which in recent decades has enjoyed prosperity (and increasing vibrancy) due to it acting as the service town for the surrounding rural areas which are highly productive and perhaps the most efficient in the world. It also has house prices similar to Christchurch, without being a dormitory suburb of it. This prosperity can be traced back to two key things: one being the removal of subsidies in the 1980's forcing farmers to become more efficient, and secondly the huge investment in irrigation in the surrounding area. Without these two things then the town would have suffered a similar fate to the others further south.

    Of course I agree that gov't subsidies are not the answer either - both on moral and economic grounds. Macdoctor is right about the distortions this would create, and in Ashburton's case we have a town that has prospered because of subsidies being removed, combined with irrigation development being permitted. If we can encourage local authorities to think of regional development in terms of removing the regulatory hurdles to development, and competing with each other to make themselves attractive destinations for economic development (without subsidies), that can only be a good thing.

    In fact I'll go further and say that if the increasing strangulation of economic development caused by the RMA is ever to be arrested and reversed in my lifetime, I think it will probably be economic imperatives that force local authorities to make the changes and 'compete' with other authorities on who can remove the most hurdles.


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