Productivity Commission dumps on land-owners

Governments pass laws to fix the unintended consequences of their previous laws. Today’s new law is tomorrow’s set of unintended consequences.

NZ’s severely hampered housing market has been so skewed, so hampered by decades of previous laws that have stripped property rights from land-owners, made building slower and more expensive, and given gobs of counterfeit capital to borrowers with which to buy existing houses that the median price of a house in Auckland is now rapidly heading towards ten times Aucklanders’ median income.

So along comes the Productivity Commission last week suggesting ways the whole clusterfuck can be fixed. Their recommendations however form a whole new clusterfuck of their own—recommending “changing everything” (everything? really?) from “the way rates are calculated to which buildings are protected.”

So, not “everything” at all then.

“Everything” for example does not include making property rights stronger. It does not include reducing Reserve Bank expansion of credit—or taking planners hands off land-owners’ throats. Instead, to “fix” the problems caused by the previous intrusions of government and its planners, the recommendations are for greater intrusions by even bigger government.

To a man, woman and small sausage dog however, the commentariat has ignored the big government bulldozer in the wings and talked instead about the only ‘more-market’ thing they noticed. What got the headline last week for example was the Commission’s recommendation that planners use price signals to rezone land. Nowhere however was there any recommendation from the Commission that the planners stop fricking zoning people’s land—one important key to avoiding boom and bust, and a very important key to recognising land-owners’ property rights.  

What should have made headlines but didn’t was the recommendation for the greatest intrusion possible by big-and-growing government, for an Urban Development Authority given virtually carte-blanche power to do anything they like, including steal your land. In America, where they’ve had these things before, they call these Authorities the Federal Bulldozer. And with good reason. Imagine a Federal Bulldozer driven by Gerry Brownlee and you might get some idea of the problem.

The Commission’s specific recommendation to create Brownlee’s Bulldozer is that

• The Government should legislate to create a regime similar to Special Housing Areas whereby certain developments undertaken by local urban development authorities are designated by Order in Council as having the potential to deliver significant numbers of dwellings, and within which the urban development authority will operate with different powers and land use rules.

“Order in Council” means without parliamentary oversight (not that that means much anyway with the currently hopeless opposition). “Different powers and land-use rules” means that the Bulldozer can do whatever the hell it wants, and ignore whatever rules it wants to--much like the Government did when it decided to extend Mt Eden prison to block the view of the mountain itself, something no-one else would have been allowed to do.

More frighteningly, they recommend that

• The Government should legislate to grant compulsory acquisition powers to local urban development authorities for ‘designated developments,’ subject to the normal processes, compensation and protections of the Public Works Act 1981.

“Compulsory acquisition powers.”

Got that?

As Daryl Kerrigan might explain, that means the power to acquire your land compulsorily.

In a word: Confiscation.

In the year that Magna Carta was commemorated – the legal foundation of the idea that a man’s home is his castle* – these meddling bastards propose confiscating people’s land to “coordinate residential development.”

Compulsory acquisition of your property if your face doesn’t fit the planners’ plans.

The taking of private land by the state, to be given (no doubt) to cronies who suck up to nanny.

You know, all those things that the Waitangi claims are supposed to be about, but proposed now, today, here in the Twenty-First Century.

And nothing at all about hammering a stake through the heart of the thing that has constrained for two decades what people can actually do with their own land: the RMA.

Nothing about fixing the disastrous planning rules that underpin the motivation of property owners to leave land undeveloped.

Instead: Legal theft.

Taking a hammer to the hampered housing market, with property owners being made to be the nut.

Another demonstration of the dictum that controls necessarily lead to further controls, and on ad infinitum.

Not even the Chinese have compulsory acquisition of private land.

But it’s in “the public interest” you say!

Bollocks. As Michael Reddel summarised the Commission’s draft doggerel: “there seems to be a too-ready sense that government is the source of on-going solutions, rather than the source of the underlying problems.”

At one level, the claim that “compulsory acquisition of property by the state can be justified if it is in the public interest” is circular.  What is “the public interest”?  The public interest might, for example, involve the protection of private property rights, including the right to hold property undisturbed. 
    This is another example of the Commission’s apparent reluctance to grapple with pervasive government failure and abuse of regulatory powers. 
    The abuses of eminent domain powers in the United States should be a salutary warning here….

And so they should be. 

In the States, “compulsory acquisition” is known as “eminent domain.” Among the worst abusers of eminent domain is the odious Donald Trump, who once “persuaded” Atlantic City bureaucrats to confiscate the home of elderly widow Vera Coking so he could construct a limousine parking lot for the customers of his Trump Plaza Casino and Hotel. (Google "Susette Kelo" for another horrible story, or get hold of Ilya Somin’s new book on the problems with eminent domain, The Grasping Hand: 'Kelo v. City of New London' and the Limits of Eminent Domain.)

As PJ O’Rourke observes, when legislation is introduced about what’s bought and sold, the first thing to be bought is the legislators—those not politically connected are the first ones to suffer by it; those (like Trump) who are the first to gain.

The Commission simply washes its hands of such thoughts.

   As if to water down the rather shocking nature of this proposal, the report suggests that powers don’t need to be exercised much, as they can provide leverage (in the same way a mugger with a baseball bat won’t need to hit me to get my money) and the chair is also quoted as suggesting the powers might only be to deal with “holdouts”.    
    But it just is not clear why such powers should be given to public agencies.  In [an unhampered market], housing is readily provided by the private sector.  Public agencies and political leaders got us into this mess, and why would we expect that new powers would not be abused?  
    Have powers of compulsion worked well in central Christchurch?  It hadn’t been my impression.

Has it been anyone’s?

But, I hear you cry, don’t worry: Bill English and John Key would put a stop to this!

"It would be a bit of a stretch to get to compulsorily acquisition, but the idea of better co-ordination of building houses, of getting water and roads in place is an attractive idea," English said [yesterday], adding he wouldn't rule out compulsory acquisition because the Commission had only issued a draft report that was open to submissions.

Oops, maybe not.

But surely John Key … oops, maybe not: point 2a of his first "four-point plan" to fix housing envisioned forcing land-owners to build on their undeveloped land or face confiscation.

Fact is: This is an idea the politicians and planners just keep coming back to.

They can’t help themselves.

So it might presage the worst violation of property rights ever in this country. It might show what happens once respect for property rights is dead. It might be against the stated principles of the party presently in power.

So for all those reasons and more, don’t bet against the recommendations becoming law.

* * * *

Oh, there are other recommendations too. Like toll roads, “targeted rates,” and lifting councils’ debt ceilings (have you noticed them being reluctant top borrow?!). All recipes for growing control and growing governments so, quite naturally, all applauded by enthusiasts for both.

“There seems to be a too-ready sense that government is the source of on-going solutions, rather than the source of the underlying problems.” Daryl Kerrigan should have hung that up in his house.

Mind you, at least he could still afford to buy one.

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* Famously commemorated in a superb film, the name of the Castle Coalition, and Lord Denning’s pithy observation in Southam v Smout[1964]:

The poorest man may in his cottage bid defiance to all the forces of the Crown.
It may be frail—its roof may shake—the wind may blow through it—the storm may enter—the rain may enter—but the King of England cannot enter—all his force dares not cross the threshold of the ruined tenement.” So be it—unless he has justification by law.