Richard Prebble: How to fix the housing crisis
Here is why we have a housing crisis.
It took 133 years for New Zealand’s population to reach three million. Thirty years to reach four million and just 17 years to reach five million.
We are trying to stuff an extra million people into the country. The nation did not build the housing or infrastructure for an extra 59,000 people a year.
Planning restrictions made it harder to build. In 1974, when Roger Douglas was minister of housing, 37,919 new homes were consented. By 2011, housing consents had more than halved to 14,000. We are only now returning to the number of building consents we had half a century ago.
Housing is a crisis in both demand and supply.
Labour’s election promise to “deliver 100,000 quality, affordable homes for first-home buyers” has shrunk to quote housing minister Megan Woods to ”our Progressive Home Ownership Scheme has helped 12 families into their own homes”.
Minister David Parker admits it will be four years before the reformed Resource Management Act will have any effect on house prices. His priority in the reforms is to “give effect to the principles of the Treaty of Waitangi”. Good luck with that. His four-year timetable looks optimistic.
The proposed law changes will make it even harder to build houses.
Having given up on the supply of housing, the Government is focused on demand.
Lowering the demand for housing would require something no government has ever had, a population policy. Immigration has been great for New Zealand but half of the latest million population increase was immigration. Without that increase there would be no housing crisis.
The Government has no intention of reducing demand for housing. The Government wants to ration demand to favour new-home buyers.
Everyone is in favour of encouraging home ownership. Home ownership gives people a stake in the country.
As overall demand for housing will not change, who are the losers when the market is rigged in favour of first-home buyers? Landlords do not live in their rentals. The losers will be tenants. Fewer rentals means higher rents. More New Zealanders will be pushed out into homelessness.
The highest occupancy is in rentals. Already our aging population is seeing the average household size fall. A tiny reduction in the average household size results in the need for more housing. Favouring those who can afford to buy their first home at the expense of those who cannot will increase the housing crisis.
There has been a hidden rapid increase in homelessness. The Government took advantage of Covid to house the homeless in motels. The motel accommodation was free until after the election! The demand for a free service is infinite. The number declaring they were homeless exploded.
The Government knows if it buys the motels for housing it will create instant slums.
Evicting families from motels will be a PR disaster.
While the Government cannot decide what to do, the taxpayer is paying $1 million a day renting motels.
Hotels are being used for managed isolation and motels for the homeless. No wonder Jacinda Ardern is reluctant to create travel bubbles. When the country re-opens it will reveal a shortage of tourist accommodation.
The Reserve Bank’s printing money did not cause the housing shortage but it has fueled the price rises. Housing is now an asset bubble. Asset bubbles always end badly.
Cheap credit is creating extraordinary distortions. New Zealand’s purchasing power per person is 29th in the world. Credit Suisse says “New Zealand is the world’s fifth richest country as measured per adult wealth”. Unless you sell your house and buy a luxury caravan, as someone I know did last week, wealth based on house prices is an illusion.
What is real is the increase in the wealth gap between home owners and renters. The left are using the housing crisis to be “courageous” and advance their socialist agenda of redistribution. Wealth taxes will not create a single new house.
Housing is the reason the Government has failed to reduce child poverty.
Gesture politics cannot solve the housing crisis, only substantive policies.
• A policy to hold the population increase to what the nation can house.
• The Reserve Bank stopping printing money.
• Ardern accepting Judith Collins’ offer of bi-partisan support to amend the RMA, in four weeks not four years, as was done to enable the Christchurch rebuild.
• Recognising ratepayers cannot fund the needed infrastructure. Government sharing the GST on construction with local government to incentivise councils to zone land for housing.
• Require builders to take insurance to guarantee the quality of new housing rather than the ratepayer being the de facto insurer.
• Creating a building regulatory environment that encourages productivity improvement.
Locking down the country was easy. Solving the housing crisis is the real test of competence.
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