Wednesday, 15 October 2014

NZ Housing Crisis: Local Government Still Confused

Guest post by Hugh Pavletich

Early 2007, soon after the release of Demographia’s housing affordability survey showing NZ’s housing beccoming increasingly unaffordable, Local Government New Zealand® and the New Zealand Planning Institute® expressed concern about housing affordability, stating:

The New Zealand Planning Institute® strongly supports Demographia’s call for planners, local councils and developers to collaborate more proactively and effectively on the provision of an adequate supply of affordable new residential housing.

Now, some seven-and-a-half years later, 10th October 2014, Local Government New Zealand®  issues a media release stating … stating …

Local Government New Zealand (LGNZ) says local government, central government and the business sector need to work together with communities to address housing affordability across New Zealand.

The emphasis is mine. The sappy confusion is theirs.

My own assessment: Local Government New Zealand® is still lost and confused.

During those seven-and-one-half years since their call to “collaborate proactively” on increasing the supply of affordable housing, neither Local Government New Zealand nor the New Zealand Planning Institute have done anything either to improve housing affordability, or collaborate with those who are trying to improve housing affordability.

Not. One. Thing.

Nothing, except to resist improvement, and to help make housing affordability worse.

Remarkably, the latest media release from Local Government New Zealand states this organisation still finds this simple issue “complex” -- “a complex issue,” they say, “that needs a mix of interventions.” [Ours is an age of “complexity worship” observes philosopher Leonard Peikoff in this lecture on the nature and necessity of principles; complexity so often as an excuse for inaction – Ed]

Late October 2012, following the release of the New Zealand Productivity Commission Housing Affordability Report,  Bill English on behalf of the Government (access via ) agreed with the Productivity Commission the focus for delivering affordability must be on …

  1. Land supply
  2. Infrastructure financing
  3. Process, and
  4. Construction costs

Local Government New Zealand makes no mention within its 10 October 2014 media release of any of these.

So much for “collaboration.” Or being “proactive.”

There have been ten annual Demographia International Housing Affordability Surveys, each new Survey showing housing affordability in New Zealand being worse than the last.

The Introduction to this year's Survey is contributed by Alain Bertaud, former Principal Planner with the World Bank and currently a senior researcher at the Stern School, New York University.  Bertaud has some advice for the complexity-worshipping members of LGNZ® and the Planning Institute®:

It is time for planners to abandon abstract objectives and to focus their efforts on two measurable outcomes that have always mattered since the growth of large cities during the 19th century’s industrial revolution:

  • workers’ spatial mobility, and
  • housing affordability.”

As a city develops, nothing is more important than maintaining mobility and housing affordability.

New Zealand economists collaborated in organising and financing a three-city New Zealand Speaking Tour late July by Alain Bertaud, accompanied by Marie-Agnes, his wife and fellow researcher at NYU Stern School.

The important tour was a great success, where – on an individual basis – many responsible planners and Local Government employees participated.

Alas, Local Government New Zealand® and the New Zealand Planning Institute® played no part in this important visit by Alain and Marie-Agnes Bertaud.

It was no doubt all too “complex” for these organisations to consider collaborating.

Local Government is well known as The Great Inertia Sector,  where even the simple is made complex.

For ten years the annual Demographia International Housing Affordability Surveys have tried to make it as simple as possible, demonstrating that for housing to be considered affordable a city’s average house prices should be no more than 3.0 times average incomes. Yet the median-multiple in NZ’s major cities is far above 3.0, and rising. Something Local Government New Zealand® and the New Zealand Planning Institute® remain content to dismiss as too “complex.”

In getting solutions in place on this “nonsense issue” of housing affordability, Central Government in dealing with Local Government needs to employ the General George Washington Management Method.

Washington made a point of employing as his servant and valet the thickest person he could find in his army. Washington ran all his draft speeches and orders past this man before delivery. If his valet didn’t understand them, they were re-drafted until he did.

It is hoped Prime Minister John Key asks LGNZ President Lawrence Yule … “Following 10 Annual Demographia Surveys, what part of 3.0 don’t you understand ?”

Mr Key has been excessively tolerant with Mr Yule to date.

_hugh-pavletich-smlHugh Pavletich is a Christchurch entrepreneur, the owner of website Performance Urban Planning and the co-author of the Annual Demographia International Housing Affordability Survey.


Mr Lineberry said...

Affordable housing was the biggest load of hypocrisy in history during the recent General Election campaign as everyone jumped on the bandwagon to tell everyone else how supportive they are of the concept, and how 'unaffordable housing' is such a bad thing.

What they fail to understand is that "affordable housing" means house prices drop.
This means the value of your house drops.... too.

There seems to be a rather amusing perception amongst most people that you can build vast numbers of "affordable houses", sell them to "Charlene and Trevor" for 3 times average incomes ($165,000) yet their own houses will remain worth $600 or $700,000 .....(presumably by magic)

I have absolutely no doubt the government - central and local - puts all the red tape and hurdles in front of developers to keep prices at current levels.
If houses were to be 3 times income all the banks would collapse immediately, and the middle class would be bankrupt.....and there is no way that will be allowed to happen.

Before anyone else talks about "affordable housing" perhaps they can lead the way - perhaps they can volunteer to sell their own house for $165,000 to set an example for the rest of us, because that is what affordable housing means.

Anonymous said...

Housing is in bubble. Prepare to watch the bubble top and pop as all bubbes eventually do.


paul scott said...

I have followed Mr Pavletich’s work for years. I tried to shift to Houston as he advised , but they wouldn’t have me, something about fingerprints. I tried to slip the man 10,000 bahts, he said you are in Texas moron, this is not not Bangkok, get out of here .
In terms of housing costs, I am in line I think with Lineberry generally .

Infrastructure // How can we really reduce the infrastructure costs of roads, sewerage, water and power supply. Maybe this is possible in massive projects., I do not know, but I would take some convincing that infrastructure can get less expensive. I mean this seriously. If you make a new village outside the existing pretend boundaries , you get infrastructure and travel costs. I sometimes go out for a walk near the Pegasus township near Christchurch. If I come back at 4.30pm I can get out of my car and have a good general conversation with the poor bloke trying to drive home at less than walking pace Northwards up Marshlands road..

Releasing new land for building // Yes maybe this is the best way forward, but desirable areas will always claim good prices , and poorer areas lower. Remember how you could buy the whole village of Otira, I think it is on the Arthur’s pass route, and a house for a dollar near Tuatapere, or in fact my house TC3 7 minutes from the square Christchurch at $350,000.
Now according to Mr Pavletich formula you can in fact buy some homes affordable. Oh God but there is work, they say, to drain the place, yes that’s right, 2 Grundfos pumps, $350 each, say nothing to Council.
Building costs // reduce these how ? Maybe imported materials and labour , but last time I looked it was closing in on $2000 a meter , before you look for the carpet and the curtains. Maybe I bring back 30 Thai building Labourers but they won’t get past your local Council regulations or OSH.
Process costs // Yes 100% slack here . Sack the entire Christchurch Council elected and staff. Start again.

Repeat I generally agree with Lineberry, this is one big mountain, we built ourselves since the war, so now say CGT and you die at the polls .

Scott said...

NZ property needs to be for residents only. Freeing up land or reducing development costs will be futile as long as the doors are wide open for wealthy foreigners to compete with local buyers on low or average incomes.

MarkT said...

The truth lies somewhere in the middle between your pessimism and Hugh's optimism.

Angry Tory said...

The first problem is the notion of a Local Government with universal franchise at all: replace with a City or County Corporation appointed by the major landowners (actual ratepayers).
The second problem is the notion of planning: replace with a simple rule: personal responsibility. My land, my responsibility. Not your land? not your responsibility.

And that's it.

Anonymous said...

and try to put in a tap that isn't sold by post damp-housing-scandal cartel suppliers generally owned by Fletchers and building inspectors, if they deign to turn up at the agreed time, will withhold certification until they've arse-fucked your bank account, your pets and your kids because they're the filthy pedz they are, and local bodies will be the last to try to fix it because they're in on the whole gang rape
J Cuttance