Closing The GAP On Housing — A short time ago the Government finally, badly, made an effort to do something about the housing crisis. (Part 1)

The crisis is increasing income and wealth inequality, tearing apart the fabric of our society and doing nothing for our economy.

Housing development under way in Levin

But sadly the Government’s effort has come to nought.

This paper will raise eyebrows!

So the Closing the Gap group has put together a paper which will raise some eyebrows and maybe get some action.

Peter Malcolm (Income Equality Aotearoa NZ Inc—-Closing the Gap) says:

‘Much has been written about the reasons contributing to the crisis in housing affordability in New Zealand and its immediate and longer term consequences.

‘How we got here — and what can be done’

This paper draws on research and commentary about how we got here and what can be done to help people in Aotearoa New Zealand  have a decent home, whether through owning it or renting/leasing it.

There is no easy or quick fix to New Zealand’s over-valued housing market.

Whether house prices spiral up or down, the impacts of the necessary policy solutions will not be seen immediately. Not one single change will be enough.

The solutions need to be a complementary set – it’s like taking a Swiss army knife to a knotty problem” ( Ref: NZIER (NZ Institute of Economic Research) Public discussion paper – the home affordability challenge, Working paper 2014/4 July2014 pg 1 Prepared by Shamubeel Eaqub).

“Housing Unaffordability is an enormous problem in New Zealand, with especially significant consequences for our young and most vulnerable – and trends continue to move in the wrong direction.

Making meaningful change is urgent, and change needs to be bold to reverse the tide.” (Ref ANZ New Zealand Property Focus, Dec 2020). Consequences include:

Consequences include:

Housing development under way in Levin — where growth is extolled above all

  • The median house price is now around seven times the average income, compared with three times in the early 1990s (Ref: ANZ New Zealand Property Focus, Dec 2020).
  • It takes 15 years to save for a $20% deposit even if house prices stand still, about twice as long as a few decades ago.
  • Mortgage rates have trended down, making debt servicing easier.
  • Supply or building of homes has not kept pace with our population growth or been sufficiently responsive to changes in demand, financial conditions and price.
  • Scarcity of buildable land has been an increasing problem, due to planning and zoning restrictions, land banking, urban drift, poor infrastructure provision and other land-use pressures, partly because of very strong immigration cycles.
  • Real income growth has been sluggish in large part due to our poor productivity record.
  • Significant rise in house prices.
  • Homeownership has fallen, especially for those in their 20s and 30s. Homeownership is at its lowest in almost 70 years (Ref Statistics NZ Homeownership rate lowest in almost 70 years, 8 December 2020).
  • Extensive disparity between Māori and New Zealand European over decades in homelessness, high rental costs compared to income, low home ownership rates (28% compared to 57% for the general population in the 2013 census). Māori are 36% of public housing tenants despite being just under 15% of the general population and resulting low equity and intergenerational policy. Māori are five times more likely to be homeless than Pākehā. Overcrowding and multi-generational housing pressures are also more likely to be felt by Māori and Pacific. Māori women and their children are also more likely to experience housing deprivation. In 2018 10% of people in New Zealand households lived in a crowded dwelling. This was the situation for 21% of Māori.
  • High homelessness (about 1% of the population at least – including overcrowding, couch surfing, staying with friends). It particularly impacts on Māori, young people and women and also increasingly people aged over 65. )
  • Significant portion of incomes taken up with housing costs from owning or renting.
  • When interest rates fall, house prices are pushed up significantly. If housing and land were more responsive more stimulus would be channelled towards home building and improvements instead.
  • Large housing cycles are the norm because building is slow to catch up when demand increases. Countries with more responsive housing supply have lower rates of house price inflation and smaller cycles.
  • The market is vulnerable to short-term, painful corrections when interest rates rise, income prospects change, supply responds, population adjusts or risk-taking behaviour changes, exacerbated by high debt levels.
  • Productivity is weaker than it otherwise would be, with households having to spend more time saving for a deposit, which diverts funds away from business ownership and investment.  (Ref: ANZ Research Housing affordability – unlocking the solution, December 2020).
  • A significant portion of incomes is taken up with housing costs from owning or renting.

A few points to note in your article. Quoting Shamubeel Eaqub is interesting given this self proclaimed expert’s past role in promoting rentals as a viable alternative to home ownership. Both political parties should accept responsibility for net migration increases which have grown significantly since 2014. To my knowledge no rationale has been advanced to justify these large increases and their distorting effects on the housing scene. Finally there is no open discussion on the cost of building materials and how the monopoly players were permitted to drive small smaller suppliers out of business. I’m thinking of the small sawmillers here but there are other examples.

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