Faced with a housing affordability crisis, the Government beat its chest with great ferocity and … produced a wet bus ticket with which it didn’t even propose to slap anybody. True, there was a bit of teeth-baring towards local government, and a long-overdue investigation into the – how to put this politely? – “remarkably old-fashioned lack of competition” in the pricing of building products. But the package was a very broad to-do list, and an incomplete one at that. But you can’t fairly carp without acknowledging how devilishly tough this job is.
Go too hard in the direction of depressing house prices and you devalue the wealth of existing homeowners – through no fault of their own. In buying a home, and in many cases investment properties as well, people have only been following the prevailing market signals. Property has been a damned good investment till recently. We quite simply love our houses and governments that try to cool this love affair stand to be mauled. So if any of the Government’s critics can give us a politically and ethically fair method of depressing house prices without beggaring existing homeowners, then for pity’s sake, let’s be having you. Short of the Government “grandfathering” existing homeowners with subsidies for shortfalls in capital gains – a measure which would have to come with a water-blasting subsidy to take care of the effluent from flying pigs overhead – there doesn’t seem to be a quick or even medium-term way to rebalance the housing sector.
The course the Government seems embarked on is to institute a gradual, even glacial deceleration of land and building costs, which it devoutly hopes will over time bring house prices to more rational levels in relation to people’s incomes. If it can crack vertical pricing in the building-products sector, that’ll be a huge help. This tightly controlled sector has artificially inflated the cost of building for decades. The Government’s other vow to, shall we say, “encourage” local authorities to desist from rapacity in consent and inspection charges will also help. Builders talk of local-body charges routinely comprising 40% of a new home build. (Of course, deprived of this revenue, councils will only seek new ways to gouge ratepayers, but that, at least in theory, is a challenge for the Local Government Amendment Bill.)
RELEASE MORE LAND
More controversial is the signal to councils that they are expected to make much more land available for housing development, especially in Auckland. Finance Minister Bill English is hot on what he calls “planner-ism” – a fetish among councillors and officials for ordaining where people should and shouldn’t live, usually in line with ideologies favouring high-density city living and allergies to urban sprawl. English’s view and, inconveniently, the view of the many people who would prefer to live in houses with gardens in suburbs rather than cheek-by-jowl in planned communities, is that where possible, prospective homebuyers should be the judge of where people ought to live. The ick factor here for the Government’s critics is the rather illogical objection that this entails a role for private-sector housing developers who will of course profit. But it was ever thus. If we didn’t have dirty filthy property developers, many of us would have to live in trailers or yurts.
Cast your eyes round Auckland’s environs and there are still vast tracts of land that are not exactly begging to be covenanted under the QEII National Trust and that could therefore be developed with low-cost housing. No one is proposing to defile green belts and conservation treasures. And if, after building costs have been cleansed of council and non-competitive greed, the horrid developers’ charges and margins didn’t fall concomitantly, then they’d be next on the Government’s “encouragement” list, and good riddance. The elephant strangely not yet in the room is the role of retail banking in all this. A braver Government would be devising new rules to restrict retail-bank lending. It could at least outlaw 5% or zero-deposit lending, which helps stoke the house price furnace. National routinely mocks Labour’s plan for a capital gains tax, but in this, it’s the one being illogical. Now, when house prices, although still wildly over-valued, are idling, is the perfect, pain-free time to introduce such a tax. Labour’s prescription is positively anaesthetic: the CGT would not apply to the family home, and would be payable only on realisation of the asset. Over time this would take further heat out of the housing market.
WHAT ARE THE ALTERNATIVES?
Those who complain about the toothlessness of what’s been undertaken so far might like to take a romp through the tougher alternatives we might consider:
- Restrictions on foreigners buying houses here? Again, you deny existing homeowners the right to get the best deal for their houses – a benefit legions of others have had before them.
- Artificially jemmying the dollar down (can’t be done, but just suppose) would make our houses even more attractive for foreign buyers.
- Restricting banks’ lending for houses would disadvantage the very people we’re trying to help – first-time lower-income buyers.
Streamlining consent procedures will, as the Government is pitching the package, also make it easier for commercial developments like malls to be built. But – more profits for vile developers notwithstanding – people who live in houses seem to like, for some peculiar reason, amenities such as malls in their vicinity. Councils moan that developing more land with housing will mean they will be landed with demands for infrastructure. Correct me if I have the wrong end of the stick, but that’s what they’re there for. This might read as heresy to local authorities, but the original idea of councils is that we get to tell them where we need water, power, roads and drains, not the other way around. The Greens’ counter-argument to the package holds the most merit – that more greenfields housing development means more assault on the environment, chiefly through car travel as city boundaries extend the commuter zone. This raises the seemingly insoluble riddle of how to make public transport economical without actually banning car travel. But it’s also a facet of what has become a galloping assumption in Planner-land: that you can simply make people live where officialdom says is best for them by bluntly refusing them other options.
Again, this is not the way the system was ever designed to work. Turning it into a moral issue, as many high-density advocates try to do, will simply not work. Most people in this country do not want to live in super-high-density areas. We have no heritage of doing so. If the Plannerish politicians and bureaucrats want to do something constructive, they should be working on ways to sell high-density to us. There are some fascinating models emerging in the retirement-village sector, and ideas for cheap and cheerful starter housing that we could borrow from overseas, such as clustered houses and non-high-rise apartments with shared gardens and other amenities. Why not develop low-cost housing, with playgrounds and parks, close to railway stations – instead of trying to shoehorn people into apartments? For those of us in the planner-defying mortgage belt, the holy grail of housing affordability is almost mystical: that over time our houses might be things we live in, not things that live on us.