Hard News by Russell Brown

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Hard News: Housing, hope and ideology

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  • BenWilson, in reply to Steve Barnes,

    Exactly wrong!! NO holidays. Then we get almost 10% more houses free :-)

    Of course, for reasons already given, it wouldn't work like that. There would still be people without a home. Just because you can't go to your holiday home, as if you're going to sell it to some poor person for peanuts. You'll sell it to some property investor who will rent it to tourists, and tourism will have a giant bonanza, and poor people will still not be housed (although there might be a lot more jobs cleaning up houses). Because, like I said originally, it's a whole economy problem.

    Auckland • Since Nov 2006 • 10633 posts Report Reply

  • Andre,

    Foreign ownership drives prices up since foreigners aren't constrained by local conditions such as wage, inflation or interest levels and show no local favouritism towards and have no social or cultural unwritten contract with tenants. Landlords often care about their tenants and care what the community think about them. The foreigners literally couldn't give a flying f¥<{ about us - it is just money. There are no records about real foreign ownership levels because the liberal governments we've had for the last 30 years have declined to collect the data but I suspect it's over 50% of all Auckland rental property now. These foreign investors are who this new housing policy mainly benefits, and the TPPA will set their rights to do do in stone. This is the elephant in the room.

    New Zealand • Since May 2009 • 350 posts Report Reply

  • steven crawford, in reply to Sacha,

    evidence, or stop making shit up.

    Sacha, Look, why don’t you just put your cards on the table. Are you holding PDFs that could render our input obsolete, or are you bluffing?

    Atlantis • Since Nov 2006 • 4310 posts Report Reply

  • Steve Barnes, in reply to Andre,

    There are no records about real foreign ownership levels because the liberal governments we've had for the last 30 years have declined to collect the data but I suspect it's over 50% of all Auckland rental property now.

    That old dogwhistle. Last figures I saw was about 10% foreign ownwership and the majority of that was Austrtalian, about 20% of that 10%, next was British then South Africans.
    Considering the majority of NZers came from British stock all those numbers are bollocks. Perhaps the question should be "why are so few houses owned by Maori?"
    Anyway, as I said in another post on another thread, the concept of owning your own home is out of kilter with most other countries and that is a large part of the problem.

    Peria • Since Dec 2006 • 5521 posts Report Reply

  • BenWilson,

    A couple of numbers just to put the property giant into perspective. There are 1,756,143 dwellings in NZ. (source, Census 2013). The average value $484,307 (source, QV). That means the total value of all of them is $850,512,347,901 (source, pocket calculator). Yes, that's 85% of a trillion dollars.

    For perspective, the government's entire annual revenue in 2013 is $67.3 billion (source, Treasury). ALL the money the government pulls in every year is less than 1/12 of the total value of our housing stock. Does anyone still believe the government has the power to substantially change prices just by building houses?

    They can obviously alleviate poverty by building houses and giving them at much reduced rates to the most needy people. I think they should do this. But it's not going to change affordability for anyone else. And the cost of doing it really is huge.

    It's a cost I think we should wear, but that's because I'm an "extreme" socialist, the kind of person voting for a party that got wiped out at the polls completely. No major party is proposing anything nearly on the scale of housing for 40,000 people in extreme need. Which is why I think that this problem will not be solved. It should be solved, but I'm not optimistic about there being any kind of courage to do anything more than make token gestures from our politicians. Key is suggesting a thousand houses would be too much for us to bear. In that context, his idea of giving more money to them instead is actually good. Except he actually won't give them enough.

    If they actually want to influence prices, the tools are much more than tax and spend, which might do the exact opposite in practice anyway. There are a great many macro economic options that could affect prices. But even thinking about that kind of thing is outsourced to bureaucrats, it's not a political football at all. We don't have a national conversation about it, because it's just too hard.

    What we can have is a targeted discussion about how we could build some houses to alleviate the poverty of 1/20 of those in extreme need. And they could even have their need alleviated, whilst thousands more pop up at the same time, driven that way by the simple fact of housing being unaffordable in the first place.

    Auckland • Since Nov 2006 • 10633 posts Report Reply

  • steven crawford,

    Social housing is an interesting phrase. Gated community’s, another.

    My point of view, is that there are loads of houses, big houses, with big yards and of street parking. But there are also way to many people being paid less than fifteen dollars an hour. These people are living in a different ecconomy than people who rent or buy adaquit homes. It’s hard to see how building more houses alone can change that fact. What is needed are more state houses. Or, open up the public parks to freedom camping and slum building.

    Lady’s and Gentalmen, have a class system.

    Has anyone got any experience of trying to rent a house? Do letting agents ask your occupation? Do they want to run credit checks? would it be a problem if you have a mental illness – any illness? Or is renting a house on the open market relatively strait forward, if you can stump up with a bond and two or three weeks in advance?

    Atlantis • Since Nov 2006 • 4310 posts Report Reply

  • Steve Barnes, in reply to steven crawford,

    How about we spread the rumor that ISIS are targeting all houses valued above, say $400,000 in Auckland and Wellington?. I'm pretty sure Key would run with that.
    The other thing, of course, is that builders have too many tea breaks thus causing high house prices.

    Peria • Since Dec 2006 • 5521 posts Report Reply

  • steven crawford, in reply to Steve Barnes,

    I have’t looked at the fine print in my insurance pollicy. Is the house insured against ISIS attacks?

    Sorry that took so long to write. I was a bit concerned about not being misunderstood, and finding the SIS attacking me instead. So just to be clear, I’m with team key, every one, I am apposed to Islam, I think.

    edit, shit, Steve you better delete you post, it looks like you are supporting the wrong thing a bit.

    Atlantis • Since Nov 2006 • 4310 posts Report Reply

  • Kumara Republic, in reply to Steve Barnes,

    In any case, a modest non-resident stamp duty would be a partial solution - non-residents would not be banned outright from buying houses, they'll just have to pay for the privilege of doing so.

    The southernmost capital … • Since Nov 2006 • 5416 posts Report Reply

  • Sacha, in reply to BenWilson,

    OK, so a little bit of data to bolster my point. From the 2013 Census, there are 141,366 unoccupied dwellings.

    Thank you.

    Ak • Since May 2008 • 19683 posts Report Reply

  • steven crawford,

    I just wrote a long quolitative post about my ex- maori affairs house, in Whangarei, and how I gained recorce concent to place a second hand skyline garage in the front yard. But once again, My computer locked up becouse It’s more than three years old, and I’m not buying a new one becouse I 'm going to be applying for recorce concent to place my new second hand garage, here in wellington.

    Anyho, here is an interesting link from the history of state housing

    Atlantis • Since Nov 2006 • 4310 posts Report Reply

  • WH, in reply to Kumara Republic,

    In any case, a modest non-resident stamp duty would be a partial solution - non-residents would not be banned outright from buying houses, they'll just have to pay for the privilege of doing so.

    I agree with the point you made regarding the need to tackle the financial incentives underpinning New Zealand's housing market. We've already done too much to normalise the idea that residential property investment is a free lunch paid for by your tenants.

    I don't think we gain anything from allowing non-resident non-citizens to own residential property.

    Since Nov 2006 • 783 posts Report Reply

  • Chris Waugh,

    Time to rein in the investor landlords, says Bernard Hickey. I dunno, maybe if we're going to stick with the idea of everybody owning their home, but others upthread of floated ideas of improving tenants' rights. Maybe both?

    Wellington • Since Jan 2007 • 2401 posts Report Reply

  • Moz, in reply to Chris Waugh,

    improving tenants' rights

    Both, but a bit of this would go a long way. As with many things, it's all fine as long as your landlord is reasonable (or your tenants are reasonable, as the case may be). The problem is that there's no social pressure to be a decent landlord, and no real legal requirement either. The idea that any tenant should be able to stay in the property until they're ready to leave just doesn't occur in the law, or to most landlords.

    The law is almost written around the needs to "accidental landlords", those nice upper class people who get the opportunity to study at Cambridge for a year, or a grant to finish their novel in Paris. So they want to rent out their house while they're away, but they have no idea what they're doing and they might need to come back unexpectedly (etc).

    If we flipped that and said to those people "hire a professional", and directed the law at the 99% of landlords who buy investment properties with the intention of renting them out, I think we'd do a lot better by the people we choose to exclude from home ownership.

    Sydney, West Island • Since Nov 2006 • 1193 posts Report Reply

  • artemisia,

    It is cheap to lodge an application with the Tenancy Tribunal, and resolution can be very speedy via the mediation option. The Residential Tenancies Act may not be 100% comprehensive but does have a lot of detail and generally seems to be working pretty well for all parties. (Most applications to the TT are from landlords, BTW).

    Good tenants are highly valued by landlords of course, So are unlikely to be turfed out for no reason at all.

    Not sure about the law being mainly for 'accidental landlords'. Who in any case are required to have a local agent if out of the country for more than a short time. Why do you think that?

    New Zealand • Since Nov 2014 • 8 posts Report Reply

  • Kumara Republic,

    Most agree the CEO of Barfoot & Thompson has been living in a fallout shelter. And to Artemisia: if you don't mind me asking, how many properties do you own?

    Herald readers said Thompson was out of touch, had ignored high student loans, the hardship of saving $100,000 on a low wage, being out-paced by house price rises, complained about foreign buyers pushing up prices and too many landlords.

    Eaqub said there was no quick fix to the over-valued housing market.

    "Whether house prices spiral up or down, the impacts of the necessary policy solutions will not be seen immediately.

    "No one single change will be enough," he said.

    Game-changer?
    Shamubeel Eaqub says housing will become more affordable when there is:
    Rental policy reform to make being a tenant a viable alternative to ownership.
    • Easing of planning and other rules which restrain land and house supply.
    • Better funding options to efficiently supply infrastructure for new land.

    The southernmost capital … • Since Nov 2006 • 5416 posts Report Reply

  • Kyle Matthews,

    OK, but demand is a function of how much money you have for something you want, not just of how many people want or need those things. So saying “supply does not meet demand” absolutely does not mean that there are not enough of the things to go around. It means people haven’t got enough money to pay for the things that there are to go around. Which means a great deal of the supply is completely idle.

    Here's the Housing NZ waiting list stats from earlier this year. That's thousands of people on the waiting list. See category C and D - those are people whose needs were judged not urgent in 2012, at which point we stopped even worrying about non-urgent people and stopped putting new people on those lists. Some of them are still on the list over two years later, having not moved from their inappropriate but not urgent current housing situation. Who knows how long they were on the list before June 2012.

    It's the same as our hospital waiting lists - we just don't put people on the lists any more so it looks better without actually being better.

    I find it bizarre that people are saying that there's no shortage of suitable housing problem, despite the overwhelming evidence that this is entirely the case. Even the National government admits that our housing stock is thousands of buildings short of where it should be.

    OK, so a little bit of data to bolster my point. From the 2013 Census, there are 141,366 unoccupied dwellings. That’s not unoccupied because the residents were away at the time, or unoccupied because under construction, both of which are separate categories. They are unoccupied because nobody lives there most of the time. This covers holiday homes.

    The fact that there are holiday homes that are unoccupied 90% of the time doesn't really help us at all though. They probably own it because they intend to use it. The only reason they would sell it would be if they couldn't afford it any more or didn't want it any more. But the buyer isn't likely to be the person that is currently packed two or three families to a rental in Auckland. Moving into a beach front property in Langs Beach, Kapiti Coast, or the Coromandel isn't likely to be useful for a family that needs to access schools and work daily, find a job, access public transport etc. To misquote Star Wars, that's not the housing stock you're looking for.

    I'm not sure it's as complicated system to have an impact upon as you think Ben. If there's 20,000 rental properties available in any one month, and 50,000 families/groups of people looking for rental accommodation, then demand is 2.5 times supply.

    If you can add 10,000 houses to that equation, all of a sudden demand is 1.66 times supply. But given that you're only actually looking at some regions, and withing those regions you're really only looking at the bottom end of the market, your situation is probably much better. Maybe there's 10,000 houses turning over/month and 30,000 families. Add 10,000 houses and your ratio has halved to 1.5.

    Which isn't easy to say that building 10,000 houses is easy, but we're not looking for the government to change the market for $2 million residentials in Epsom. We're looking for them to affect the situation of overcrowding and families sleeping in garages and sleepouts who need to get in at the bottom end of the market.

    The way for the government to do that isn't to suck all the private demand to build new houses out of the market by selling its housing stock to community organisations or businesses. We need private money and public money to be going into building new housing, not private money to be tied up buying existing housing stock that is already available. That's stupid.

    Since Nov 2006 • 6243 posts Report Reply

  • BenWilson, in reply to Kyle Matthews,

    If there’s 20,000 rental properties available in any one month, and 50,000 families/groups of people looking for rental accommodation, then demand is 2.5 times supply.

    You need to say the price you're talking about to make that comparison. Supply and demand are both functions of price. You are also equating the rentals in that formula, like they're a widget you can buy off a shelf, each the same as the next one. But property is inherently not like that, because their location is fixed, and the willingness of people to move into them is a function of their preferred location too. Basically, you can't talk about them in that way at all. It's not a helpful analysis. It quite literally does not mean that the rentals don't exist, that there isn't enough housing stock anywhere. It means there's not enough at the right prices in the right places.

    Trying to sum that all up with a single number isn't going to work. A person does not have a single number that they are prepared to pay for a single property, as the totality of their demand. They have a desire to take a particular property that is a function of the price (usually monotonically decreasing), and they have another one for every other property they could buy, and it could be a very different curve. And every person has a different collection of these curves.

    I know what I'm saying is hard to understand, I'm struggling myself. It's basically that the lack of housing is not simply a function of the amount of housing. It goes to the way that the housing that exists is distributed too. It's quite possible for people to be homeless when there are plenty of houses empty.

    We’re looking for them to affect the situation of overcrowding and families sleeping in garages and sleepouts who need to get in at the bottom end of the market.

    For sure, and I think state housing is a good way to help with that. So is giving the poorer families more money so that they could afford to move into houses that are actually available. There also might be a lot more incentive to rent places out if a lot more people have a lot more money to pay for them. What I don't think is a good idea is building state housing in the hope that it will drive prices down. It won't work.

    We need private money and public money to be going into building new housing, not private money to be tied up buying existing housing stock that is already available.

    Yes, new houses should continue to be built. But that's not going to alleviate poverty. That's what I'm saying. Only a policy of actually housing those in need will house those in need. Hoping that increasing supply will drive prices below demand (without even understanding what those ideas mean) will not help at all.

    Auckland • Since Nov 2006 • 10633 posts Report Reply

  • Kyle Matthews,

    You need to say the price you’re talking about to make that comparison. Supply and demand are both functions of price.

    No I don't. I'm saying there's 3 times as many people needing to buy or rent those properties, than there are properties available for rent. That will push the price up, as taught to me in 3rd form economics. If the number of houses available suddenly jumps so that for every house available only 1.5 people needing to buy or rent it, there will be much less pressure on the price. People will be able to get those properties cheaper.

    Yes it's a function of price, but if supply increases and demand remains the same, price falls, so relatively the people buying/renting are better off.

    I know what I’m saying is hard to understand, I’m struggling myself. It’s basically that the lack of housing is not simply a function of the amount of housing. It goes to the way that the housing that exists is distributed too.

    I'm not having any problem understanding it. Indeed it's what I said. There are plenty of areas where we don't need more houses, the work needs to focus on the places and parts of the market that demand seriously outstrips supply.

    So is giving the poorer families more money so that they could afford to move into houses that are actually available.

    As Russell pointed out, throwing more money into the fire isn't going to help. If there's 30,000 families or individuals at the bottom of the housing market who are seriously underhoused or living in seriously unsuitable housing, giving them each $100 extra/week only helps the overall situation if there's 30,000 suitable properties for them to move into. We know that there aren't:

    By best estimates the city is about 10,000 houses shy of what it needs and it's only likely to worsen. According to the Salvation Army, under current trends over the next 20 years Auckland will be short of 90,000 houses - more houses than were destroyed in the Christchurch earthquake.

    So while that might help some individual families, it's just going to move underprivileged families around the bottom end. Some will end up better off, but they'll likely take the place of other people who will slip down into something worse. And the major benefactor will be the people owning those rental properties because the people renting them suddenly have a bunch more money and they can increase rents and still fill their properties.

    But that’s not going to alleviate poverty.

    Poverty is definitely about more than your income. It's about your income relative to your expenses, and it's definitely about your housing, education, ethnicity etc. People living in substandard housing aren't just doing so because they don't have enough income. Substandard housing creates its own costs - financial, health etc.

    Since Nov 2006 • 6243 posts Report Reply

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    Christchurch • Since Dec 2006 • 7887 posts Report Reply

  • BenWilson,

    No I don’t. I’m saying there’s 3 times as many people needing to buy or rent those properties, than there are properties available for rent.

    It's not really true, though, or should I say it's not very precise. You mean there are 3 times more people inadequately housed than there is housing currently offered for rental. I don't dispute that. But you don't seem to get that the pool of demand for housing is quite literally everyone, not just unhoused people, and that housing offered for rental is not the only housing that could be offered for rental, it's just the only housing that the owners want to rent out at the current likely prices. If rentals are much higher, then more houses and rooms will quite likely be made available, as the income from rentals looks more attractive. If you can only charge someone $100 a month for your house you might consider it not worth the trouble to even have them in there. If they have a lot more money, then rentals can be higher. Also, they can probably afford to commute further, so property further from their place of work becomes viable.

    Yes it’s a function of price, but if supply increases and demand remains the same, price falls, so relatively the people buying/renting are better off.

    There are two main points to make there:
    1. Demand is a function of price. If price falls, you're talking about a different demand point along the curve. It will usually be higher, the lower price gets. So if price falls, demand will probably not remain the same.
    2. Quibble 1 falls into insignificance in light of the point that the supply of houses here is 1.5 million, and the demand is the entire population of people who could viably buy a house here, including people not even in the country. Can you quantify at all what the effect of adding x houses to the housing supply will do to the price? Beyond identifying that there are some forces at work, can you put any kind of figure on how hard those forces push? After all, I can exert a force with my hand on a 10,000kg truck coming at me at 100km/h. It's almost certainly true that I'll slow it down. But will it be even noticeable, apart from the bang?

    So while that might help some individual families, it’s just going to move underprivileged families around the bottom end.

    That entirely depends on how much money we are talking about, and who it is given to. If it's amounts anywhere near the order of the cost of building tens of thousands of houses, it would go a heck of a long way to rentals. It could be extremely stimulatory to private house building to the extent that thousands of houses get built privately anyway, not to mention that places currently unoccupied might become viable to rent out, or the commute from them might not be financially crippling.

    Which, again, should not be taken to mean that I don't think we should build houses. I'm just disputing that we'll get prices under control that way. Or even, for that matter, have a measurable impact on them. And without directly subsidizing people into houses (by, perhaps, offering them at a considerable discount to market rates), building them might not help the poorest people at all.

    People living in substandard housing aren’t just doing so because they don’t have enough income.

    No, but it's the single most important factor, by a long way.

    Auckland • Since Nov 2006 • 10633 posts Report Reply

  • Kyle Matthews,

    It’s not really true, though, or should I say it’s not very precise. You mean there are 3 times more people inadequately housed than there is housing currently offered for rental. I don’t dispute that. But you don’t seem to get that the pool of demand for housing is quite literally everyone, not just unhoused people, and that housing offered for rental is not the only housing that could be offered for rental, it’s just the only housing that the owners want to rent out at the current likely prices. If rentals are much higher, then more houses and rooms will quite likely be made available, as the income from rentals looks more attractive. If you can only charge someone $100 a month for your house you might consider it not worth the trouble to even have them in there. If they have a lot more money, then rentals can be higher. Also, they can probably afford to commute further, so property further from their place of work becomes viable.

    As Russell pointed out, throwing more money at landlords is not a good choice. Secondly, we all know that we are short of housing, quite a lot at a entry level price for buying and renting in certain areas. Everyone having $50 extra a week won't change that data.

    1. Demand is a function of price. If price falls, you’re talking about a different demand point along the curve. It will usually be higher, the lower price gets. So if price falls, demand will probably not remain the same.

    That doesn't change the fact that increasing supply leads to price falling.

    2. Quibble 1 falls into insignificance in light of the point that the supply of houses here is 1.5 million, and the demand is the entire population of people who could viably buy a house here, including people not even in the country

    I don't believe that's correct. If we're talking about the government building state houses - basic solid houses in unspectacular areas. Given that they won't be sold, the demand for them is only people who need housing. They'll clean out a lot of the demand for that lower end of the market - the entry level - and help keep prices lower than they would be otherwise.

    The housing price truck that you're trying to stop includes all the mid and high level houses - $800K, $1.5 million, $3 million. Which the government won't try and influence through state housing so aren't really relevant.

    If the government doesn't get some investment and building in the game, they're going to be subsidising housing that is getting increasingly expensive. That means that their subsidy is going to need to continue to rise. It's in the government's interests to keep rental prices at the bottom end of the market low, as that's the part of the market that they're paying a significant amount of.

    Since Nov 2006 • 6243 posts Report Reply

  • BenWilson, in reply to Kyle Matthews,

    That doesn’t change the fact that increasing supply leads to price falling.

    That's not a fact, it's a theory with a whole lot of caveats and disclaimers about the conditions under which it holds. Even the claim you made has the wildly unrealistic caveat of "holding demand constant". It's also a theory that makes no attempt to quantify how much pressure that it puts on prices. In fact, the concept of the quantity of this pressure doesn't even seem to have a unit at all, although please correct me if I'm wrong about that. It's not even possible to quantify it, from what I can tell.

    If we’re talking about the government building state houses – basic solid houses in unspectacular areas. Given that they won’t be sold, the demand for them is only people who need housing

    Everyone needs housing.

    They’ll clean out a lot of the demand for that lower end of the market – the entry level – and help keep prices lower than they would be otherwise.

    How much demand is that? How many people rent a house a the lower end of the market? How many people are you talking about? How much will it keep prices lower by? How much are they going up by anyway? How much will they cost? How many are being built anyway? How will it affect the quantity of the ones that are being built? How many people will the population be by the time they're finished being built? How much effect does building of new houses actually have on population?

    The housing price truck that you’re trying to stop includes all the mid and high level houses – $800K, $1.5 million, $3 million. Which the government won’t try and influence through state housing so aren’t really relevant.

    I'm lost. You want to talk only about the effect of building state housing on the price of the 750,000 houses that are valued below the median? All right, then, what effect do you think adding 10,000 houses to that stock would have? I'm not asking whether there's a vague downwards pressure here, I'm asking whether you sincerely think that could do a damned thing to drive down the prices of property that is rising by 5% per annum already anyway? In particularly, I'm not asking about a hypothetical situation in which a number of economic factors get magically held in balance. I'm talking about the real property and rental market that real people have to really rent a property tin.

    Auckland • Since Nov 2006 • 10633 posts Report Reply

  • Kyle Matthews,

    Tonight I was directed to an interesting publication by Auckland City Mission describing people's experiences and difficulties living in poverty.

    Since Nov 2006 • 6243 posts Report Reply

  • Kyle Matthews,

    That’s not a fact, it’s a theory with a whole lot of caveats and disclaimers about the conditions under which it holds.

    It's a very well held theory with lots of real world evidence. It's as fact as you can get in large complex macroeconomic systems. It's not straight maths that you can predict, but demand for housing is moderately predictable at the lower end. It tends not to be the thing that people on lower incomes skip paying - they'll skip paying food and electricity, health care costs etc first, as the above shows. At the lower end of the private market, people won't tend to downgrade into damp, cold houses if they can afford something better, just because it's cheaper.

    I’m lost. You want to talk only about the effect of building state housing on the price of the 750,000 houses that are valued below the median?

    No, I said lower end of the market. State housing competes with the bottom 10-20% of income levels - single income minimum wage earners, underemployed people, beneficiaries. It doesn't compete with the median income which isn't the bottom end of the market.

    But anyway clearly no agreement here.

    Since Nov 2006 • 6243 posts Report Reply

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