MaximusMarch 29, 2008
No affordable housing?
On Thursday, Wellington held the Inaugural Housing Policy Forum. Admirably timed to help debate housing policies before the election, the Forum set out to examine New Zealand’s peculiar obsession with owning your own home: especially your own, detached, quarter acre, 4 walls and picket-fence type home.
The range of speakers included the right wing: Don Brash, Phil Heatley, Owen McShane, and Hugh Pavletich – and their answers are a predictable right wing response: tax cuts, develop greenfield sites, reform the Resource Management Act. All these measures will – if you are a believer in right wing National Party / Act policies – allow housing to become more affordable. Key repeated issues such as the high increase of the land price component of houses, and the increasing disparity between wage inflation and house price inflation over recent years (the figures cited indicated a shift from houses costing 320% of wages (1991) to 400% in 2003, and 600% in 2007). That all ties in well with the announcements earlier in the week from Labour’s Shane Jones, that simplifying the Building Consent process will bring the cost of housing down. Umm, yeah right, Shane. Not really an answer to the housing problem.
Hugh Pavletich, of Demographia, has been banging on about freeing up land for more sprawling suburbs for quite some time now. His annual “Demographia Housing Survey” advocates for release of more greenfield land, to permit the market to develop the land and keep those suburbs expanding. The ability of the city’s infrastructure to cope with the expected growth is not seen as part of the problem of the developer. Its the same thinking that drove cities such as Los Angeles to expand from being an idyllic sea-side town, into its present incarnation as an unholy sprawl / smog-laden megalopolis. Originally people flocked to Los Angeles as it was an orchard area, famous for the smell of orange blossom filling the air as you neared the coast (John Steinbeck wrote about this in his depression era novel, The Grapes of Wrath). Oranges aren’t grown in LA any more. The most notable thing still growing in LA now is car ownership, and roads.
Brash and Heatley, both National Party stalwarts, advocated tax cuts, as you would expect. The likelihood of tax cuts miraculously making houses more affordable has not been thought through that well by the Nats, given that a $20 weekly extra in the hand will have little effect on the price of a half million dollar home. The gem in this seemingly predictable lot was the National President of the Real Estate Institute, Murray Cleland. Cleland was great in his undermining of stereotypical expectations. New Zealand needs to abandon its dream of the detached house and its section he claimed. He also referenced Unitec economics lecturer Keith Rankin who distinguishes “affordable housing” from “affordable property ownership.” The first, Cleland argued, was the responsibility of the government which was responsible to ensure decent housing as a humanitarian objective. The second was equity – like shares – a private investment which other taxpayers shouldn’t subsidise.Cleland stated in no uncertain terms the New Zealand had a lazy approach to land use, that the high land prices were a commercial reality, and that land banking was a fact of life. To address housing affordability he advocated for both tax cuts and a more astute reduction of the land use factor of house prices. Increasing density and appreciating iternational examples of high quality medium to high density urban housing is critical. Government policy needs to stop prioritising the detached house because it is too expensive. In addition to its poor land use, he argued that the construction costs of a three bedroom apartment were two-thirds that of a three bedroom bungalow. Equally local council have to revisit the shoe-box aberrations that were giving apartment living such a bad name, as well as addressing the high costs of building consents which were a major impediment to lower cost apartments. He also recommended council rebates for apartments greater than 70 m2.
Pieter Burghout, CEO of the Master Builders, raised several interesting observations. Apparently New Zealanders customise their houses more than other nations. To illustrate this he noted that 90% of the owners of new houses in New Zealand already own sections, meaning that NZ owners have greater input into house design. NZ has 50 window colours; Australia has 7, suggesting he asserted, that New Zealanders like to individualise their homes leading to extra costs. Wow. Window colour as an indicator of individuality. Life must be fun in the suburbs. But is that statistic true, I wonder? Is Australia just a giant land of honey-coloured brick and tile, like a nightmare large version of Huntley? Tell me that ain’t true…
Burghout also argued that the NZ Government was only addressing factors with low impact on the problem, in contrast to Australia which was putting $500 million into rental assistance, committed to building 100,000 extra houses and finding/importing 15,000 more builders. Guess where they’ll be looking for them to come from…
Ernst Zollner, from Wellington City Council, presented material familiar to most well versed with Wellington’s local politics. He stated that affordable houses = affordable cities, which located housing where marginal costs are lowest and where the average operating costs are either low, or where they are high and can be reduced with additional units. He advocated for total lifecycle costs made up of capital, servicing, and locational costs. This costing needs to be considered for all parties (householders, ratepayers, employers, service providers and taxpayers). Zollner was quite up front that his talk was focussed on one aspect of this – infill development, and he set the ground for the WCC’s policies on targeted development and the by now well-known Johnsonville to the airport “growth spine.” He argued that recent increases in stronger controls had been more effective in delivering more good urban design outcomes, and he staunched defended his/WCC’s policy position of not prescribing minimium floor areas which had received a heavy “middle-class reaction” and their misplaced paranoias of slums.
Zollner is an intriguing guy, young and active, a former European and therefore possibly more atuned to metropolitan living. Yet, he still hangs doggedly to his mantra of no minimum housing size for apartments, stating that they offer a good range of choice for pockets and people. Zollner asserts that minimium square meterages (such as those implemented by Auckland City Council) effectively zone housing for only certain income groups, preventing the lower classes from living in the city. Its a view that seems curiously out of place with the facts of the current housing crisis. There’s a glut of tiny apartments in Auckland at present, with Olly Newland in the DomPost today noting that: “As predicted the market for small, crowded “shoe-box” apartments has crashed, but prices have soared for quality, well-appointed units with good security. He predicts growth in this area with more families living in apartments.”
There’s something wrong with the situation therefore. That here we are, with a housing crisis, with a shortage of anywhere to live, and paradoxically at the same time a glut in the supply of tiny one room bedsits and studio apartments. What’s wrong with these poor people – don’t they know a bargain when they see one? They should be snapping up the small size homes, moving in en mass to fill the Scene in Auckland. Instead, they’re staying away, preferring to rent a house than to buy a depreciating asset of a rabbit-hutch sized room.Perhaps instead they know the truth: that the small apartment is not such a bargain, especially on a price per m2 basis. Larger apartments are more expensive, but not proportionally so. Its actually far better value to buy a larger apartment (equating to, say, $3500 / m2) than it is to purchase a smaller apartment (say, $5500 to $8000 / m2). And the sad truth is that those lower income people never get a chance to even buy one of the hutch sized apartments. They’re snapped up by the “investor market” of middle-class buyers, who then rent them out on short term leases to the average lower income workers. Small apartments are basically a rip-off, both to those living in them, as well as those foolish enough to buy them.