New Zealand’s Rack-Rent Housing Crisis: Five Part Series

Brendon Harre
Nov 30, 2020 · 44 min read

Executive Summary

Part One: Political Constraints

Part Two: Who are the Jedi Knights of Housing Affordability?

Part Three: Political Precommitment — Depoliticising Housing

Part Four: Is the Housing Crisis Bad for Productivity as well as Inequality?

Part Five: Housing as a Human Right — Restoring New Zealand’s Egalitarian Dream?

Further Reading

Feedback

Part One: Political Constraints

“We might make mistakes but we will make other things too”Michael Joseph Savage

Renting in New Zealand is bad. The bottom 20 per cent of income earners spend a greater proportion of their income on rent than anywhere else in the OECD. For many decades New Zealand’s housing market has failed low-income earners due to rents inflating faster than wages.

$170 a week for a converted sunroom (note the brick walls), in a flat with seven other people in Wellington. In Austria the average rent of a social house is $177 per week.

For the bottom 20 per cent of households by income, housing costs as a proportion of income have increased from 29 per cent to 51 per cent since 1988.

Source OECD -Affordable Housing Database, Figure HC1.2.3.

Too much of New Zealand’s economy is rack-rent, where those with market power exploit those without. Effectively, wages are confiscated.

Rack-rent is described in Winston Churchill’s 1909 speech about land value taxes. Churchill spoke about a bridge over the River Thames that gave a poor neighbourhood access to work in London. The bridge was tolled, but in an act of civil kindness the toll was removed. However, the workers did not benefit because rents rose by the amount the toll fell.

Rack-renting is a problem for the Covid economic recovery because the stimulus is not evenly distributed across ‘the team of 5-million’. The biggest stimulus — $128 billion of nearly interest-free credit provided by the Reserve Bank — is giving the ‘haves’ a wealth-effect of lower mortgage interest payments and higher property values, while the ‘have-nots’ are still experiencing rents inflating faster than wages.

This raises the question: how much kindness does New Zealand give to the essential workers who did the hard yards during the Covid lockdowns? Not much is the answer if they are low-income workers — like cleaners or supermarket employees — living in rental accommodation.

Landlords are not passing on their lower costs to tenants. Instead, property investors are going on a buying spree. Reserve Bank figures show the share of house buying by landlords with high loan-to-value ratio (LVR) borrowing doubled to 16% in the period between the removal of LVR rules in May and the end of October (H/T Bernard Hickey). House prices are rising as a result. First home buyers (FHB) with a fear of missing out (FOMO) are adding to the demand effect.

Source: REINZ & Tony Alexander Real Estate Survey — November 2020

As former Finance Minister Michael Cullen says in his paper titled Time for a Monetary Policy Rethink the ladder between the haves and have-nots is getting additional rungs at the top while the rungs at the bottom are being removed.

Political commentator Ben Thomas is correct to state the reason that housing “is so visceral is that it represents a fundamental break from the middle class egalitarian creation story of New Zealand (and elsewhere) — you can work hard, value education, and — even if you have a humble life — you can give your kids something better”.

What to do?

The government needs to define what its housing affordability goal is. Is it aiding the sons and daughters of the middle class into homeownership? Or is it about ensuring kiwis have a universal access right to affordable housing, like they do with free education and free healthcare?

In practical terms, is the goal returning the median house price to median income ratio back to three to four, so more first home buyers can afford a home? Or is the goal returning rent as a proportion of income back under 30 per cent for the bottom 20 per cent of households by income so that the high cost of rent does not cause those households to suffer poverty — something which is recorded far too frequently in New Zealand’s statistics. Both of these housing targets were in the affordable range up until the 1990s, and since then both have become steadily worse.

Former Prime Minister John Key seemed to have restoring the middle class home ownership dream in mind when he called the Resource Management Act (RMA) a “self-imposed straitjacket” that needed reform in his 2002 maiden speech to Parliament and in his 2007 speech to the National Party Conference where he outlined a housing affordability plan.

The problem with fixing housing affordability for middle-income earners is the goal is defeated from the get-go.

For New Zealand to restore median house prices back to three to four would require house prices to roughly halve. In other words, to give the ‘future middle class’ the opportunity of home ownership requires much of the stored asset wealth of the ‘current middle class’ to be destroyed. No prime minister or finance minister in the modern era, at least since Helen Clark and Michael Cullen, has been willing to publicly announce that is their intent. This includes John Key and, of course, Jacinda Ardern. Yet they both campaigned on housing affordability prior to becoming prime minister.

I cannot find any evidence from around the world that restoring housing affordability for middle-income first home buyers in the way that it is talked about in New Zealand is possible. It might have occurred in Japan after their 1980s property bubble. But it wasn’t an explicit policy agenda as is demanded in New Zealand.

Current Labour Party Prime Minister Jacinda Ardern has long had a picture of the first Labour Party Prime Minister Michael Joseph Savage in her various Parliamentary offices.

Yet there is plenty of evidence that it is possible to restore housing affordability for low-income households if the government builds a good proportion of new housing stock (about a quarter or more) as affordable housing (affordable rentals and progressive home ownership houses) targeting a wide band of low-to-middle-income households in schemes that prevent speculative capital gains. New Zealand under Michael Joseph Savage did it in the 1930s and 40s. Austria has been doing it for nearly a century and Singapore has done it since WW2.

In the 1920s, after WW1, New Zealand experienced a housing crisis, especially once the Great Depression halted villa-suburb building. Rents were inflating and housing conditions were poor. The newly formed Labour Party campaigned to fix this housing situation.

Note the mention of rack-renters in the final paragraph: “The Government does nothing to stop this exploitation. It will do nothing. It represents the rack-renters. If you want Good, Clean, Commodious, Cheap, and Sanitary homes for all, at fair rent, you must — Vote… Labour

The Labour Party came into power in 1935. The next year it started a large, broad-based state house build programme that targeted not just the destitute but also low-income workers. By 1940, state land development programmes accounted for 45 per cent of all housing construction in New Zealand.

The first Labour government (1935 to 49) built 30,000 state houses over about a 10-year period once the construction stoppage of WW2 is accounted for. It took four years to ramp up — by 1939, 5000 state homes had been built. New Zealand’s population at the time was about a third of what it is now.

This historic policy agenda should be a lesson for the current government and the Reserve Bank. In 1936, the Reserve Bank provided credit with interest rates as low as now. This meant the government could fund infrastructure and its house building programme — this connected monetary policy with the real economy, thus aiding economic recovery.

Despite the government undertaking a large housing supply programme, targeting rental house affordability, there is no evidence this negatively affected the asset wealth of the 1930s middle class — something our current political leaders fear doing. And the 1930s monetary policy stimulus did not cause the inequality effects that New Zealand is currently experiencing.

This monetary/fiscal spending effect wasn’t a one-off or unique to a certain time and place in New Zealand’s history. The UK also successfully used housing construction and infrastructure provision (the expansion of the London Underground, for example) as a link between monetary stimulus and the real economy. It escaped a liquidity trap in the 1930s through a combination of cheap money combined with a house building boom.

This approach could be used now. The IMF issued an unusually blunt warning in November that the world was in a “global liquidity trap” where monetary policy was having limited effect. In this situation the advice from the IMF is further interest rate cuts will do little to stimulate growth and the only way forward is a coordinated global effort focusing on large government spending programmes rather than monetary stimulus.

The current Labour government would also do well to learn the lessons from the failure of KiwiBuild. The policy failed because the government committed too little capital and the goal was to aid middle-income earners into home-ownership rather than low-income earners into good quality yet affordable rental accommodation. Unfortunately, the numbers for KiwiBuild did not stack up.

The Ministry of Housing and Urban Development’s (MHUD) 2019 assessment of first home buyer demand showed only 162,000 out of 588,000 rental households had the financial means to purchase a KiwiBuild priced home (see graph below). Of course, the number who would actually consider buying a KiwiBuild home would be much smaller due to various non-financial or personal reasons.

Source -MHUD Information on First Home Buyer Demand 5 July 2019. Note the house prices the KiwiBuild financial calculation is based on averages at $615,000 in Auckland and $425,000 in the rest of New Zealand. It also assumes a 15% deposit and 85% mortgage.

If it was properly configured, a government build programme could supply the rate of house building promised — 10,000 houses a year. New Zealand governments have built at that per capita rate in the past. Singapore and Austria do it now. The problem — specific to the proposed KiwiBuild pipeline, but not to government build programmes in general — was a lack of demand to buy even a small number of KiwiBuild homes. Since the start of the build programme in 2018 only 955 KiwiBuild houses have been successfully sold.

Lack of demand was fatal for the KiwiBuild scheme because its internal logic was reliant on building at scale. Creating more affordable housing types via investment in innovation, standardisation, specialisation, economies of scale, prefabrication, more and larger competitive construction firms, integrating housing with transport, using land more efficiently by building a range of housing types/sizes, better land acquisition, improved land assembly and master planning — these all suffered because the lack of demand generated insufficient scale.

This meant per unit housing costs could not be reduced.

Overall, the problems KiwiBuild encountered means it is a failed experiment in restoring housing affordability for middle-income earners.

If the government had invested more capital in KiwiBuild they could have increased the build rate into the economies of scale part of the production system. But that would have meant significantly subsidising build-to-own KiwiBuild houses. This would have caused all sorts of problems that providing capital subsidies for social housing does not face because the rental housing sector is already subsidised.

Switching government housing support from being income based (the Accommodation Supplement etc.) to being capital grant based would be a significant shift; it would take time, but it is a viable option. New Zealand has run that sort of system before. Other countries like Austria have very well developed systems for issuing housing capital grants to their social housing sector — something that has architectural, economic, social and environmental advantages.

I have no doubt that improving housing supply by way of reforming the RMA and infrastructure financing can help maintain housing affordability. New Zealand from the 1950s to the 1990s had relatively affordable housing due to private sector developers being mostly free in how they built New Zealand towns and cities — mainly outwards (the Kiwi dream of a quarter-acre pavlova paradise as John Key described it in his 2007 speech). Other cities around the world — in the US, Germany, Japan and so on — are affordable because housing supply responds to demand.

I am less convinced housing supply can quickly restore housing affordability to middle-income first home buyers. No prime minister or finance minister will publicly support that course of action. Without their full support, interventions will always be half-hearted. Proposed housing accords cannot be undertaken. There can be no common cause.

With the prime minister’s hands effectively tied, action on housing inevitably degenerates into the various involved parties acting at cross-purposes to each other, blame-shifting and finger-pointing. We have already seen this with the finance minister and reserve bank governor.

The better course for the prime minister would be to acknowledge political reality — housing affordability in New Zealand cannot be resolved by addressing middle-income needs first.

Politically, that might seem unpalatable. Being a centrist, the prime minister may have a vague contention that she should deliver housing affordability to middle class swing voters. Hopefully it is becoming clear to her that this is not possible — at least not in one electoral cycle, or even several.

This means housing affordability inequality should be addressed as the highest priority. The prime minister should state that the government’s housing goal is to get rent as a percentage of income below 30 per cent for the most vulnerable socio-economic groups, and that this target is what her government will aim to achieve first.

If housing inequality becomes the clearly articulated priority, it creates a common cause. A housing accord is possible. Actions from the various parties can be aligned and progress can be made without it being undermined by finger-pointing.

Over time, after a decade or two of government-led house building, the median house price relative to median income ratio may stabalise back to affordable levels. In the meantime, progress will be made by reducing housing inequality.

In the past, the Savage Labour government built state houses for the lower end of the housing continuum (see the below two videos). It was this house building effort that provided the foundation for the Kiwi housing dream of the 1950s through to the 1990s. New Zealand’s most successful set of housing policies achieved its success by focusing on helping lower-income households first.

To re-establish the Kiwi home owning dream may require Jacinda Ardern to look at her photo of Savage and think: ‘what would Michael do?’

Videos

Housing in New Zealand (1946) — Part 1 of 2

Housing in New Zealand (1946) — Part 2 of 2

Part Two: Who are the Jedi Knights of Housing Affordability?

Source

Former Finance Minister Michael Cullen recently wrote an opinion piece on housing and monetary policy. To paraphrase him: the Reserve Bank are the Jedi Knights of the economy with interest-cutting lightsabers fighting against the evil empire of inflation. This worked when the problem was stagflation — high consumer price inflation and poor economic growth — but it is not working now when the problem is poor productivity, rising inequality and high house price inflation.

The Reserve Bank (RBNZ) in December 2020 rejected Finance Minister Grant Robertson’s proposal for its monetary policy remit to consider house prices as well as its current inflation and employment targets.

Rather, Reserve Bank Governor Adrian Orr has suggested house prices be included in its financial policy remit — the way it regulates banks. The RBNZ has asked Robertson for debt-to-income (DTI) ratios be added to its macro-prudential toolkit, so it can restrict bank lending to those seeking large mortgages compared to their incomes.

In summary, Adrian Orr is not going to be a Jedi Knight fighting housing inflation but he will continue to protect retail banks from a crash in the housing market.

The Reserve Bank Governor went on to say: “Given the wide range and number of parties involved, and the complexity of underlying issues, there is a need for a single agency or ‘clearing house’ to co-ordinate the government’s response across agencies.”

This statement is not quite asking for an independent housing commissioner which I will explain could be a way forward but it is very close.

Michael Cullen sees an opportunity for monetary policy reform “in the current situation to make a quantum leap forward in dealing with some of our needs, which require large amounts of capital.” The primary needs are a big increase in the level of housing construction and infrastructure development, and a large investment in transforming the economy to meet New Zealand’s climate change commitments. There is a strong echo of the First Labour government in this policy prescription.

If the government intends to copy the Michael Joseph Savage Government and use the Reserve Bank to invest in a massive housing, infrastructure, and climate change build programme I would agree wholeheartedly.

Renting in New Zealand is bad — for low-income groups it is the most unaffordable in the OECD — as my previous paper published on Interest.co.nz showed. The government should transition from band-aid solutions like the Accommodation Supplement to comprehensive, long-term solutions like a large-scale public house building programme. But that is not the signal the government is giving.

New Associate Minister of Housing (Public Housing) Poto Williams states the government is on-track to produce 18,000 public and transitional housing places by 2024, or about 4500 government builds a year (Correction — actually 3250 public houses per year from 2020 to 2024, Note on the 21.1.21 I realised from more recent announcements that the 18,000 houses promise dates back to 2017 not 2020). This is still a significant promise. But on a per capita basis it is only one-third of the build-rate of the Savage government.

State house builds are currently running at about 2000 a year, although they are on an expansionary trend. There is also a transitional housing build programme— currently there is a stock of 3650 with 120 added in October 2020. The government is planning to have 6641 transitional spaces by 2024. There has been no funding announcement for the Community Housing Provider sector, so it does not have a significant build programme.

The promised government build programme is small relative to total house production (which was almost 38,000 houses consented in the year to October 2020); it is also less than half the rate of those countries with large-scale public housing build programmes, like Austria.

Lower quartile rent is inflating faster than average rents and faster than average wages. Source

For the rental housing market, despite some increase in supply, increases in demand is still the greater effect — it is pushing up rental prices, especially at the lower end of the market. As Stats NZ detail in a major review of housing the rental housing market is in even worse shape than thought. The government has tried to respond with initiatives such as Housing First, which created a stock of transitional housing. People are meant to live in these houses for a maximum of 12 weeks, but because there is insufficient long-term housing to move into, residents are staying much longer.

The waiting list for public housing is growing and now exceeds 21,000. This is due to a range of issues, including the private rental sector not catering for those on low-incomes, structural planning restrictions on building, and the public sector having insufficient resources to compensate.

In Parliament, Opposition Leader Judith Collins asked Prime Minister Jacinda Ardern if the $4600 increase in median rents since Ardern took office and the public waiting list ballooning to over 21,000 were signs of a housing emergency.

There are many questions that can be put to government ministers on housing. In effect asking if they are housing Jedi Knights.

The biggest question, though, is whether the prime minister is a Jedi fighting the evil empire of housing inflation. It is quite clear to anyone following politics that National are planning to beat up Labour on housing issues just like Labour did when they were in opposition. Yet, neither party is prepared to go past tokenism and implement a genuine workable housing accord.

Ardern’s recent public comments on housing are closer to former Prime Minister John Key’s then Savage’s, even though Ardern has a portrait of Savage in her office.

By stating recently that the government’s goal is sustained moderation in house prices, Ardern gave the message that the market is too big to fail — that house prices can rise but not fall, and that this price guarantee is government and Reserve Bank policy. And there does not seem to be any suggestion there is moral hazard in these guarantees. Nor even an acknowledgement of the social costs (H/T Bernard Hickey).

The problem Ardern has with progressing a housing affordability agenda is that when the government is distracted by multiple needs, such as responding to Covid-19, housing demand and supply pressures can — and did — get out of balance, meaning house and rent prices inflate excessively. This creates a new, higher floor-price in the housing market and the ratchet effect of the rack-rent process stretches renters and first home buyers (FHB) even further.

Ardern’s second problem is the rack-rent process has created the perception she is soft on housing — that there will be no meaningful consequences if house prices and rents continue to inflate unsustainability. Meaning investors’ and others’ expectations of further capital gains is being reinforced.

Environment Minister David Parker has the task of replacing the Resource Management Act with two new acts — a Natural and Built Environments Act for most consent applications and a Strategic Planning Act for issues like transport — plus a separate law on managed retreat from land threatened by climate change.

This would be a heroic task in the best of times, but with a prime minister soft on housing — like they all have been for the past 20 years (arguably the housing political football started 70 years ago when the cycle of one government building state houses was followed by the next government selling them) — the task becomes mission impossible because no legislation can perfectly align all the involved entities (local authorities, government departments, developers, construction industry, iwi etc.) for all potential circumstances.

Parker has been set a heroic task but he lacks support from the head of his government because the prime minister does not have the credibility in the housing space to get everyone on the same page. David Parker needs a friend — he needs a housing Jedi Knight.

This is not a situation unique to Ardern. The last National-led government under Key faced the same difficulty with housing. New Zealand, therefore, has already seen what happens when the prime minister has their hands tied on housing. Action inevitably degenerates into the various involved parties acting at cross-purposes to each other, blame-shifting and finger-pointing.

Politicians have been in this situation before. The stagflation of the 1970s meant politicians lost credibility to run monetary policy to tame consumer price inflation. In particular, they lacked credibility to change the public’s inflation expectations.

But public opinion needs to change, too. As journalist Andrea Vance says, housing should be a right for all New Zealanders: “we should think of it in the same way we regard universally available services, like schools, hospitals and public transport”.

Successive governments at the central and local level have manipulated the housing situation for their own ends. As journalists such as Bernard Hickey have detailed, they have taken the fiscal benefits from a massive immigration boom yet underfunded the required infrastructure. They have deferred maintenance on out-of-sight infrastructure for decades because they did not want to impose rates increases on homeowners, creating a multibillion-dollar infrastructure deficit. Local government and electorate politicians have actively worked against moderate urban planning initiatives. The political class cannot put the affordable housing genie back in the bottle.

An independent entity with clear targets and tools is required to ensure housing as a human right is delivered for all New Zealanders.

Could an Independent Housing Commissioner be the Housing Jedi Knight that New Zealand needs?

I think it could be if the independent Reserve Bank governor concept is used as a guide.

What would the policy targets be?

I would suggest the following, in order of importance:

  1. Rents as a proportion of income falling below 30% for the lowest 20% of income earners.
  2. Median house prices inflate slower than median income increases.
  3. Housing market remains stable and does not destabilise the wider economy.

What would the tools be?

  1. Ability to fund an expansion of social housing placements as needed. Preferably using the Austrian social housing model because of its cost/benefit efficiency, its stability over the political cycle, and its transparency in achieving multiple goals — social, economic, environmental, architectural/construction quality.
  2. Ability to buy land in support of urban area spatial plans and release it at cost for urban development as deemed necessary. As a last resort, the Housing Commissioner should be able to use the power of compulsory purchase if there is evidence of land banking. For each and every instance of compulsory land purchase Cabinet level sign-off would be required.
  3. Ability to appoint and direct Independent RMA Hearing Panels to review planning regulations, such as occurred with Auckland’s Unitary Plan.
  4. How to fund this? — the Housing Commissioner uses the mana of their position to publicly request funding as required — something like the Climate Change Commissioner. Austria has a 1% regional income tax that funds its public housing model. Economic theory would argue the most efficient funding method would be if the Housing Commissioner imposes a tax on urban land values to fund the acquisition of land to help maintain competitive housing markets and to build the necessary public housing. Note — the land value tax could be applied region by region on an as needed basis.

How would this work?

The housing crisis has grown for the last 30 years — it might take half that time again to resolve. Over time, the solution could look like this:

  1. Housing Commissioner focuses on their first goal — reducing rent as a proportion of income for low-income groups.
  2. Housing related inequality reduces.
  3. The Housing Commissioner’s credibility with the public increases.
  4. Capital gain expectations in the housing market declines.
  5. There is more investment in other more productive areas of the economy.
  6. Labour productivity improves.
  7. Housing Commissioner use policy tools to work on second housing target — house prices relative to incomes.
  8. Incomes rise faster than house prices.
  9. Eventually the housing market becomes affordable — first for renters and then for first home buyers.
  10. Policy success — Yah!

Part Three: Political Precommitment — Depoliticising Housing

On the basis of a warning from his erstwhile lover, Circes, Ulysses instructs his sailors to bind him to the mast of his ship and block their own ears before sailing past the island of the Sirens, whose enchanting song draws sailors to shipwreck. Ulysses and the Sirens is a 1909 oil painting by Herbert James Draper. Source Wikipedia

The end of the John Key government was marked by a desperate scramble to reverse housing policy settings. Media reports showing homeless families living in cars shocked the nation. As a stop-gap measure, the homeless were housed in motels. The former prime minister was forced to contend with the consequences of his earlier housing attention being focused on middle-income earners and his assumption that building social housing was economic vandalism, when in fact housing as a human right was the political necessity.

Source: ANZ Property Focus, Dec 2020: Housing affordability — unlocking the solution

Governments are obligated in the last resort to provide affordable housing. The call to action — to build houses — becomes overwhelming when the public is exposed to images, videos and personal accounts of homelessness being a growing systemic problem.

Only parts of Southland do not experience rental stress or housing deprivation. In all other areas economic opportunity is capitalised into high rents (and high house prices). Source -HUD-BIM P.21

Housing as a human right is something many countries are struggling with. This problem is particularly acute in New Zealand because, as detailed in the part one of this paper, rent as a proportion of income for the lowest 20% of income earners is the worst in the OECD.

The government is still housing homeless people in motels. A post-election briefing to ministers (P.9) indicates 6300 motel units are being used to house individuals, families and whānau; this might be doable in the middle of a pandemic but in the long-term motels are better used for tourists than for permanent housing. And while signs look good for the resolution of the Covd-19 pandemic in 2021, it is not clear if the government’s housing solutions for the low-income end of the housing continuum will have much impact or even what the housing targets are.

New Zealand has taken the economic opportunity of its world leading response to Covid-19 to bid up house prices.

By November lower quartile house prices reached $541,000, meaning it had increased by $95,000 since May, a 21% increase in six months. Interest.co.nz figures show “the rate at which house prices have increased over the last six months has not only erased the benefits of lower interest rates. It has also eaten up the increases in wages over that time”. Because the rental market is so tight it is inevitable that rents will also continue to inflate faster than wages. Meaning non-property owning workers and businesses will not benefit from doing the hard-yards during the Covid-19 lockdown.

The property owning ‘haves’ have taken all the economic opportunity leaving nothing for the ‘have-nots’.

Part two of this paper argued both local and central government politicians have failed on housing for so long they lack credibility to fix affordability by themselves. As is widely discussed in the media, the rational course of action for existing homeowners is to leverage up investment in housing because the actions of New Zealand’s leaders show they will not allow house prices to fall. The siren call of the one-way housing bet comes at a tremendous cost to the country’s social fabric, yet it is how New Zealand is responding to the current economic situation.

The Jedi Knight paper advocated for a housing accord to bring all the major players together and for a housing commissioner to provide long-term housing affordability direction through specific tools and targets. In effect, this would make the implicit obligation that governments treat housing as a human right explicit.

The book Ulysses and the Sirens by Jon Elster provides the theory for why governments at times use independent entities to solve difficult political problems like the housing crisis. Elster developed a theory called precommitment which he applied to the domain of politics. He asserted that direct democracy tends to reverse its own decisions and to display inconsistent preferences over time — that democracy can be “incontinent, vacillating, and inefficient.” Based on this, Elster argued that certain institutions in modern democracies may be considered precommitment devices. A democratic electorate may bind itself as a way of “protecting itself against its own impulsiveness.” The establishment of central banks, he argues, can be interpreted as an act of precommitment on the part of an electorate seeking to pre-empt the impulse to meddle with interest rates.

If the electorate decides that precommitment is needed to address the housing crisis a housing commissioner could be given the following targets, in order of importance.

  • That rent is less than 30% of income for the lowest income groups
  • That house price inflation be slower than wage increases
  • A stable housing market that does not destabilise the wider economy

And the following tools:

  • The ability to direct an increase in public housing placements where and when needed
  • To purchase and release land as needed (probably releasing land to Kainga Ora)
  • And the power to review planning regulations, by creating, directing, and appointing Independent Hearing Panels

These precommitments would in effect mean affordable housing becomes a universal public service for whānau, much like free education is for children and superannuation is for the elderly.

The precommitments could not be undermined by inconsistent positions held by political leaders, the vagaries of the various involved government departments and local government, or by private investors believing housing is a capital gains investment commodity rather than homes being shelter — a basic human need.

Going forward there would be political consistency, too. The housing commissioner’s targets and tools would outlive individual governments. Of course, like for other commissioners and the reserve bank governor, the government of the day has influence by appointing who takes up the position and the government can alter the targets and tools as they see fit. But these changes would be public decisions that would occur in an honest and transparent process.

Precommitment would mean public expectations about housing inflation, like general inflation, would be controlled as inflation would essentially be ‘tied to the mast’. It is unlikely that once the government and the public see the benefits of a consistent housing position that it would untie itself.

Giving the housing commissioner the power to direct independent hearing panels to review RMA district plans (or any subsequent planning legislation), or to increase public housing placements where and when needed — which would come at taxpayer expense — would also be good for transparency and honesty. It would expose the social cost of NIMBY objections to new housing, whether that be inner-city youth mental health accommodation, suburban infill housing, or building apartments along high-frequency public transport corridors.

If certain sectors of the public insist on vetoing private sector housing options, then more public housing would have to be built at the taxpayers’ expense. Like schools, the housing would be built where it is needed — near employment and near amenities such as educational and healthcare facilities. These are likely to be in the same urban environments that objected to private sector housing being available and affordable through the planning process.

Applying precommitment to housing would bind all sectors of society to the mast — central and local government and the public in general. Greater consistency, honesty, and transparency would be the consequence. This would be a good thing for New Zealand.

Finance Minister Grant Robertson has said he will “spend some time over the summer looking at the full package of how we’re going to deal with housing as an issue.” Hopefully, he gets to the heart of matter rather than playing around the edges.

Part Four: Is the Housing Crisis Bad for Productivity as well as Inequality?

People might vote with their feet

Actually rather than the middle-class the evidence points to the working class and the lower middle-class being the largest groups leaving California. Image Source

The first three parts of The New Zealand Rack-Rent Housing Crisis series focused on housing inequality, an issue that feeds into and underpins numerous societal ills. Bold political action is needed to make housing affordable and prevent the entrenchment of New Zealand society into a class system based around inherited property wealth. This paper though focuses on productivity.

Jenée Tibshraeny, a journalist at interest.co.nz, has done excellent work investigating the inequality effect of printing money, a strategy employed by the Reserve Bank in response to the forecast economic downturn associated with Covid-19 (articles here and here, video here). In New Zealand, that effect mostly relates to housing, raising the question: does housing inflation cause a long-term decline in productivity in addition to its inequality effect?

This is an important issue because of its policy implications.

There is an assumption — held by the Reserve Bank at least — that when house prices inflate homeowners feel more wealthy and they spend more, making it an effective way of stimulating the economy. But perhaps this housing wealth effect is only short-term, within the one to two-year forecasting window of the bank?

In the long-term, an associated decline in productivity could be the more significant effect because of how towns and cities function as labour markets (see here and here). Some economists estimate the productivity cost of unaffordable housing at $1.6 trillion a year for the United States. Housing-related productivity decline might be a slow acting yet strong long-term effect, because changes in the labour market often take time to eventuate.

For example, high house and rent prices affect where a trainee nurse will consider living in five years’ time — after they have completed their training, gained a year or two of post-grad experience and are nearing their peak productivity and employability. Entrepreneurs, too, need affordable space to focus on developing innovative products and companies; many will fail, but the long-term payoff for some will be huge.

The Green Party’s wealth tax policy has merit as a means of addressing the short-term effects of housing inflation, the distributional wealth effect dividing the country into property-owning ‘haves’ and ‘have-nots’. Green Party co-leader James Shaw last year discussed this with Tibshraeny in the linked video above. This week the Green Party continued this line of enquiry with questions in select committee from Chloe Swarbrick to Treasury and the Reserve Bank and in parliament with Grant Robertson being asked by Julie Anne Genter — “Does he agree that it’s now time to respond with bold fiscal policy, including taxation, to mitigate the current wealth inequality impacts of this unconventional monetary policy?”.

But if housing inflation also causes productivity to decline then a different set of policy reforms becomes necessary. There are implications for the governments planned reforms of the Resource Management Act (RMA), active land management by public sector agencies, housing-related infrastructure funding, and for ensuring at least some public housing is responsive to the employment requirements of low-income renters — i.e. adding the Austrian public housing model into the policy mix rather than further expanding the Income Related Rent Subsidy scheme and the Accommodation Supplement.

Quote from “The Affordable City: Strategies for Putting Housing Within Reach (and Keeping it There)” by Shane Phillips

Reforming housing in New Zealand so that it is affordable for all levels of society — the idea of housing as a human right — will require a combination of Tokyo’s housing abundance and Vienna’s egalitarian housing (a video explaining the role of the Vienna social housing agency responsible for land acquisition, infrastructure provision, project development and urban renewal can be viewed here).

Acquiring land in advance of the need for new housing is one of the reasons social housing is so successful in Vienna. Source

My New Zealand Rack-Rent Housing Crisis series describes how the government could reform housing in New Zealand. If the state fails to intervene with sufficient boldness, to put the handbrake on housing costs rising rapidly out of step with incomes, the housing crisis will become existential — an issue which shatters the foundational myth of New Zealand as an egalitarian society.

In addition to academic theories and models, there is plenty of overseas evidence showing how unaffordable and insufficient housing affects the labour market if there is an extreme imbalance like is being experienced in California.

LA County is building only one new house for every 4.5 jobs that is created

The way housing affects the labour market may not be linear. If house prices, rent and new builds are unresponsive to demand factors, such as job creation, there might be a tipping point or series of tipping points — each creating an exodus of business and employment.

Policymakers in California are concerned the state has reached a tipping point where the exodus of businesses and workers is now greater than the factors leading to innovation and inward migration that previously powered the state to be the fifth largest economy in the world (a video titled “What’s Driving California’s Mass Exodus?” describes this well).

Other parts of the world are having similar conversations about how housing is undermining society and the need for bold reforms to housing policy settings. For example Irish economist David McWilliams has a podcast with the following description. “Public housing should be addressed with the same urgency as public health. If we can close down the economy, borrow billions, furlough millions and stop the world in the name of public health, we should be able to tear up the rule book when it comes to housing. The property market in Ireland and the rest of the English speaking world is a scam, rigged to push prices upwards, indenturing working families and exacerbating the wealth divide. Here’s how to fix it.”

Source

It would be easy for New Zealand to reach a housing-related labour market tipping point; there are already large expat communities of New Zealanders overseas who would aid others leaving the country as the housing situation becomes more dire.

Reforming our housing settings will be a difficult task, fraught with finger-pointing and the shifting of blame. It is naive to think any one government minister — such as Environment Minister David Parker, who is leading the RMA reform process — is capable of solving the housing crisis. Successful housing reform will require coordinated action from ministers of the environment, housing, local government, transport and finance at a minimum. It will require a prime minister — or entity the PM has given executive power to, such as a housing commissioner — who can coordinate these ministers by publicly expressing a clear set of housing targets and tools. Without this strong, coordinated approach the various housing-related institutions will pull in different directions.

For example, Auckland Council is already pulling away from the National Policy Statement on Urban Development (NPS-UD), a directive released last year which requires councils to relax height restrictions, remove car parking minimums and encourage density. Councillors and the mayor seem to believe the issue is not the restrictive nature of the district plan but the lack of infrastructure funding (see the second half of this video of the council meeting debating the NPS-UD).

Will a future Auckland Council faithfully implement the new RMA legislation if it directs local government to further liberalise planning restrictions, or will they find excuses to obstruct it? The 1991 Resource Management Act will be repealed and replaced with three new laws this parliamentary term, namely:

  • Natural and Built Environments Act (NBA) to provide for land use and environmental regulation (this would be the primary replacement for the RMA)
  • Strategic Planning Act (SPA) to integrate with other legislation relevant to development, and require long-term regional spatial strategies
  • Climate Change Adaptation Act (CAA) to address complex issues associated with managed retreat and funding and financing adaptation.

“I expect that the complete NBA and the SPA will be formally introduced into Parliament by the end of 2021, with the NBA passed by the end of 2022,” Environment Minister David Parker said. A full explanation of this process can be read in the Richard Harman article titled — Parker is playing the long game with his far reaching RMA reforms.

Business journalist Bernard Hickey explains the viewpoint that reform to urban planning and environmental laws cannot deliver the necessary housing supply without first dealing with the politically untouchable roadblocks of population policy, infrastructure funding and the need for a wealth tax.

It is hard to know the size of New Zealand’s housing related infrastructure deficit and need for additional funding, it is probably sizeable but how big is uncertain. Transparency is not a hallmark of our urban development system. Overseas, more transparent systems, such as, Austria’s gold standard public housing provision that houses a quarter of their population and anchors their housing market is funded by a regionally applied 1% PAYE tax. Not an impossibly onerous level of funding. This indicates the infrastructure deficit and taxation/funding issues might not be the political untouchable roadblock that Bernard Hickey describes.

Although how any additional funding or taxation is spent could be an issue. If the Finance and Infrastructure Minister Grant Robertson does assess local government infrastructure deficits to be genuine and therefore increases funding to local government, would councils faithfully spend it on the required housing infrastructure (much of which is below ground, or not immediately obvious)? Or would they find other spending priorities, kicking the can down the road and allowing infrastructure deficits to mount up, as has happened in Wellington with embarrassing consequences — the raw sewage flowing down city streets and into the harbour.

What is required is an honest broker between local and central government, an entity which is not beholden to either parties’ flawed political processes. What is needed is an independent housing commissioner loyal only to a set of housing affordability targets. A housing commissioner could fairly adjudicate the issues of planning restrictions and infrastructure funding in order to get central and local government on the same page. Being independent, they would be expected to advise and direct government ministries and local councils — whatever is required in order to meet their affordability targets.

A bipartisan approach to the housing crisis at the central government level seems possible. A housing commissioner could be widely accepted across the political spectrum. Opposition National Party leader Judith Collins says suburbs will need to change their character in order to solve the housing crisis. In an interview with Stuff, Collins said Kiwis need to understand that the country needs more housing and that requires suburbs to change. Her party is now backing the Government’s National Policy Statement on Urban Development, which will stop councils from enforcing height limits of less than six storeys near major transit routes in an attempt to intensify cities.

It should be possible for New Zealand to start solving the housing crisis without blame-shifting and finger-pointing. And the sooner we act the sooner we prevent our towns and cities being priced out of contention, becoming failed labour markets that are not attractive for the next generation of kiwis.

To prevent an exodus, to address housing-related inequality and its attendant social markers — think poverty, families living in cars, rheumatic fever — New Zealand must pursue a path where housing is seen as a human right. Action is needed, not later but now.

Part Five: Housing as a Human Right — Restoring New Zealand’s Egalitarian Dream?

“While Adam delved (dug) and Eve span, who then was the gentleman?” John Ball priest — hung, drawn and quartered, 1381.

There was no privileged landed gentry in Adam and Eve’s time so why are they favoured in later times?

Source. Real health Price Index versus Real Personal disposable Income (2000Q1=100)

New Zealand is bad at housing its people — very bad. Relative to income, homes in the country are among the most expensive in the world.

New Zealand’s average house value has gone from $25,500 in Dec 1980 to an estimated $715,500 at the end of last year. Source Business Desk — “Looking back: The NZ housing boom — when and how it all began

Yet for decades housing as a capital gains investment commodity has provided bumper returns — far exceeding other investment options.

Source

The bottom 20 percent of New Zealand income earners have the highest housing costs in the OECD, an economic organisation with 37 member countries.

The disparity in emotions different groups feel about the above graphs cannot be overstated. For some the graphs represent a horror — real, visceral socioeconomic pain. For others it is a booming bonanza. Overall they depict — an explosion of the country’s egalitarian ideals.

This disparity has continued since the onset of Covid — the wealthy are now sitting on property and savings that have risen by $271.7bn, and poor families received an extra $2000 or so in benefits and winter energy payments over the last 12 months. That increase of $38 per week was easily gobbled up by a $50 per week increase in the median rent to $500 in 2020.

Renting in New Zealand is bad. Rentals are more likely to be cold, damp and mouldy than owner-occupied homes. Housing poverty diseases like rheumatic fever that have almost been eliminated in other develop countries are still prevalent in New Zealand’s rental accommodation communities — nationwide the incidence of rheumatic fever is increasing. Eviction is a real threat and tenancies are short — on average less than two years. And there is a real power imbalance: 25 percent of rental household moves are instigated by landlords.

Source

Rents are rising faster than wages for the lowest income groups.

Many low and middle-income workers in our most successful towns and cities can only afford a room in a shared rental. If renters face a financial setback, especially if they have dependent whānau, rent can quickly take the majority of income — leading to difficult budget choices as necessities become unaffordable. The situation can even deteriorate so badly the tenant becomes homeless. An all too prevalent problem in New Zealand.

The unmet need for affordable, good-quality, well-located housing is massive.

Figures from 2018 show more than 180,000 households — 10 percent of all households — are in financial stress because they spend more than 30 percent of their gross income on rent. Given that lower quartile rent is inflating faster than wages, that number is likely to be larger now.

Currently, there are over 4000 kiwi children living in emergency motel accommodation with their whānau. Emergency accommodation is now costing the government $1million per day, as revealed by Opposition Housing Spokesperson Nicola Willis. This expense is a reflection of how housing has become a significant driver of poverty.

Nicola Willis is concerned that this year between January and February, median house prices have increased by another $50,000.

The National Party suggest these immediate actions:

  1. Strengthen the National Policy Statement on Urban Development
  2. Remove the Auckland Urban Boundary
  3. Make Kāinga Ora capital available to community housing providers
  4. Establish a Housing Infrastructure Fund
  5. Implement new finance model

Nicola Willis should be applauded for making constructive suggestions. The issue though is not with the merit or otherwise of each action. The problem is strategy should come before tactics and the National party has not explained what their housing strategy is. The government have the same problem.

Discussing tactics without agreeing on strategy — is like going through the last year of Covid debating the merits or otherwise, of lockdowns, quarantines, testing, tracking and trace… without agreeing on whether the strategy was suppression, elimination or herd immunity.

For instance the housing strategy could be that affordable accommodation (spending less than 30% of income on housing) is a human right for all New Zealanders.

This strategy could be achieved by planning reforms, infrastructure provision, and government capital injection into the housing market (so similar tactics to what National is suggesting). This will build more houses which will affect rent levels. When rent falls it is important to keep building public housing at pace. Don’t slow even if the balance of power shifts — for example if the market expectation became landlords submit references to tenants not the other way around.

For the ‘housing as a human right’ strategy to be achieved, then expectations of capital gain need to be eliminated with the same degree of ruthlessness that general inflation expectations were removed in the 1980’s and 90s. This is especially important now because house price expectations are back at 2015 highs.

If expectations are not constrained the housing crisis has the potential to get much worse.

Tenants as a group pay much more of their income on rent than homeowners pay in bank interest charges. Homeowners collectively pay just 6 percent of their disposable income in mortgage interest costs, down from a high of 14 per cent in 2008. This and other favourable conditions, that business journalist Bernard Hickey details here, means those already owning property have the financial ability to keep driving house and rent prices up if the current housing settings remain the same.

In 2020 landlords and homeowners collectively borrowed more and paid down less. Given last years strong house price gains and the expectation of more housing inflation those in ‘the game’ can continue to use debt to inflate the housing market further.

The situation is so favourable to landlords and homeowners, it is no exaggeration to say the market is rigged.

For decades when tenants’ incomes rose, when accommodation and other grants increased or when landlord costs fell — in particular, borrowing costs — this benefit went to the landlord not the tenant.

This rigged rental housing market drives landlord greed for capital gains, and it drives first home buyers FOMO — fear of missing out — the fear that if they do not buy now, they will be in a worse situation in the future.

And the rigged rental market increases demand for state and emergency housing.

This process is a long term drag on the economy. It misdirects borrowing and investment, and it imposes costs on employment and business.

It is the inequality effects of the housing crisis, though, that are the most worrisome.

Discussions about the crisis are fraught, characterised by blame-shifting, finger-pointing and can-kicking. In many rental households, merely talking about buying a home is taboo because of the stress and tension it unleashes. Yet in the wider community there seems to be more housing market reckons than there are people.

For many at the sharp end of the housing crisis there is a feeling of despair — a resignation that society does not have their back. For others, there is sadness at the erosion of New Zealand’s ‘fair go’ culture, the idea that even those with modest means can make a go of it. The inequality effects of the housing crisis are so great, some believe, that it amounts to an existential societal crisis.

But discussion about the housing crisis need not be fraught. New Zealand has been here before and social democracy solved the problem by extending universal human rights.

The first Labour government led by Prime Minister Michael Joseph Savage faced a terrible existential crisis to the global economy: the Great Depression. Their solution was to extend universal rights to free healthcare, education and social security — rights that we now take for granted but which, at the time, triggered a social and economic transformation.

The Savage government was the first to provide: free hospital care; free secondary school education that was compulsory to the age of 15; and universal superannuation for all who reached retirement age.

In housing, affordable, good-quality homes became another right. The state built 29,000 houses between 1937 and 1949, including a break due to World War II. Adjusted for population, that equates to over 90,000 houses now.

These homes were universally accessible to a wide range of workers (the first house went to a Wellington tram driver’s family); unfortunately, that right to quality housing faded away, first gradually and then suddenly with the 1980s reforms.

We can see what a difference maintaining ‘housing as a human right’ has made in societies like Austria and Singapore. Their mixed state and market economies have achieved better housing outcomes. Collective action has supported the market and the common good. There are, of course, Soviet Union-type examples where government and markets became completely disconnected but success stories like Austria and Singapore show a middle ground does exist.

There are even some local politicians in the US looking at solving their housing crisis by employing the social democracy, ‘housing as a human right’ approach — specifically looking at the Austrian public housing model. When Vienna housing officials explain what they do, it is clear how competent and common sense their actions are (this provides a stark contrast with how irrational New Zealand’s housing market has become).

New Zealand does not need a fraught discussion about which affordable housing model is viable — we have done it before, and it still exists overseas.

When it comes to housing reform, the Government and market forces are not as disparate as some might think. When Auckland Council’s unitary plan was being developed, for instance, free market advocates and public housing officials were aligned in requesting a more liberal planning regime. Housing affordability activism can be a broad church.

The Black Death of 1348–49 killed about two-fifth of everyone in England. As a result, the remaining workers had their bargaining power increased — outraging the aristocracy. They responded by persuading King Edward III to pass the Statute of Labourers Law, which made it an offence for landless men to seek new masters or be offered higher wages. Workers, of course, hated it (the legislation was referred to as a contributing factor in the 1381 Peasants’ Revolt).

New Zealand has its own 21st-century version of the Statute of Labourers: regulatory and economic settings that have added needless expense and restrictions on building affordable housing near the best employment opportunities.

There is no right to affordable housing enshrined in legislation. At most levels, the rights and bargaining position of the propertied class are privileged over the landless. Even where housing affordability is specified, such as the Reserve Bank’s Monetary Policy Committee remit, it is a long way from being a universal right — for instance, the remit (see below) does not include renters in the housing affordability goal.

(d) assess the effect of its monetary policy decisions on the Government’s policy set out in subclause (3).

(3) The Government’s policy is to support more sustainable house prices, including by dampening investor demand for existing housing stock, which would improve affordability for first-home buyers.

How can freedom of movement for workers be respected when affordable housing is so hard to access? How can the bargaining position of the landless versus the propertied be made fairer? How can housing be a right for all New Zealanders, like it is in Austria? How do we prevent the right from fading away again?

The right to housing needs to be deeply embedded in New Zealand’s system of governance.

Housing in New Zealand is based on a system of land contracts inherited from feudal times as described by Alastair Parvin in his fantastic — A New Land Contract where he describes;

Mostly when we talk about the spiralling cost of housing, we refer to it as the ‘housing crisis’. But the truth is that our housing crisis is actually a land crisis; of which the housing crisis is just one of the many symptoms….And actually, it’s not really a Land crisis, it’s a Land system. It’s the rules of the game, hard-coded into the firmware of our society and economy.

New tools — such as public land buy-backs for the purposes of land value capture — are needed. This is one of the tools suggested by Alastair Parvin and is also a tool recommended in Part Two of the New Zealand’s Rack-Rent Housing Crisis series.

New Zealand needs to take a bold, innovative approach to addressing the housing crisis. As described in Parts Two and Three of New Zealand’s Rack-Rent Housing Crisis, the Government could create a powerful housing tsar, a housing commissioner who — as their legislated goal — would advance the idea of housing being a human right for all New Zealanders. This firm principle could be the basis of a coordinated state and market housing accord that over time would eliminate the housing crisis.

Ultimately, solving the housing crisis comes down to public support and the political will of elected officials. Hopefully, it does not get to the stage where the ‘peasants’ have to revolt.

Further Reading

For a more in-depth, systemic analysis of New Zealand’s housing, transport and land-use situation please read If Not Now When?

Feedback

Nice work Brendon. Just need to start building at the low price end and offering finance to purchase/rent to buy/or simply rent.
My observations are that:
1. Rents are way too high (Christchurch rents are starting to soften, but Wellington/Auckland remains a challenge).
2. Supply will certainly solve this problem.
3. LVRs for investors need to rise further (40–50% at least) and 100% mortgages (which essentially is rent to buy) be offered to first home buyers/owner occupiers. That will rebalance the field quickly.
Supply and financing….CGT is a red herring is this discussion (switching to land value and away from improvements at the rating level would certainly help). — Raf Manji — Former CCC Councillor — (Medium response)

“Excellent Brendon, a perfect distillation of the political choice that has to be made in term 2 of the Ardern Government…” — Chris Harris — Urban Historian (Medium response)

“Some savage reality checking there Brendon. The housing affordability discourse is dominated by addressing the problems of middle income first home buyers, when really they (we) are the canary in the coal mine, not the priority issue. “— Jared Humm (Twitter)

“Good, raising some very salient points for a somewhat harder discussion, that we’ve been playing a little too far around the edges with, as far as I (in my personal opinion) have seen just so far. As you say it all “might seem unpalatable” to some, but you’ve traversed it well.” — Alan (not ekshully a B’Stard) (Twitter)

“Yes. Not just about people ‘getting on the ladder’, about the impact it’s having on people’s lives.” — Julie Alp (Twitter)

“Some very valid points in here. We need a multitude of State housing with an eventual option for the tenants to buy.” — colette sale (Twitter)

“This” NZ needs to broaden the housing conversation from being just about first home buyers. That is a middle class narrative that doesn’t give any space to other concerns. The more important issue IMO is how messed up poverty and renting is. — DRD (Twitter)

“Yes #getonwithit” — Christopher Kelly (Twitter)

Good points here… If we want affordable housing we must provide affordable housing to those with the lowest income first. A large scale state housing worked before & it can work again. Trying to build affordable housing for middle income people (Kiwibuild) won’t work. #nzpolLiquid Times (Twitter)

“This is a very honest look at the problems we have in NZ to do with ensuring our housing provides for vulnerable low income earners. We need as a country bold solutions not tinkering around the edges” —Janette Walker (Facebook)

“Ohhh looks like a really good read, thanks for that. Love the illumination of the moral dilemmas I can see there. I can’t help but think we are not brave and bold enough” —Michelle Mickey Cole (Facebook)

“My good friend Brendon Harre writes extensively about housing in New Zealand. He understands the complexities of NZ housing infrastructure more than anyone I know. His articles are well worth reading” — Deborah Radeka (Facebook — The Cost of Dirty Politics group)

“Too much of New Zealand’s economy is rack-rent, where those with market power exploit those without. Effectively, wages are confiscated. #nomaterialhardship, #getcracking, #nzpol “— Marney Ainsworth (Facebook)

Interest.co.nz kindly republished New Zealand’s Rack-Rent Housing Crisis: Political Constraints. There were lots of supportive comments. The following are some that I particularly liked.

“I really don’t understand why the government is allowing the RBNZ to print money which is been used to overinflate the existing housing market and not instead using that money to build state houses with a design either to rent to own or just rent. In the 1960’s when my grandparents moved from England to Sydney (Australia) they participated in the “rent to own” scheme for state housing in Sydney, at that time there were two options offered either rent to own or rent and the house goes back to the government at the end of the day. The scheme developed new Sydney suburbs, created employment and gave the bottom quartile — hope. We know that home ownership ensures people get a step up in life and can begin to build wealth, creating a base for the next generation and breaking the intergenerational poverty cycle.” — ikimpaul (Interest.co.nz)

“My grandparents got a state house in the forties that they were later able to buy off the government. That opportunity was a springboard for three generations (and counting) of financial wellbeing. State housing can give people the social and financial stability they need to build generational security, if done right.” — al123 (Interest.co.nz)

“Excellent. A bit more in news media about what real housing crisis is (unaffordable rents for the working poor in short) would be useful instead of total focus on FHB and deposits and sky rocketing house prices.
So NZ is worst in class for rent paid by bottom 20%. What an indictment…” — mikekirk29 (Interest.co.nz)

“Great article, and an important reminder that — while middle-class FHBs are indeed screwed over by the current situation — the genuine crisis is elsewhere, and too often ignored. Also a good summary of Kiwibuild failures, and the weirdness of targeting a social housing initiative at… people who can already afford to buy a house.” — Brisket (Interest.co.nz)

“Best article in some time. Well done Brendon. I’m just curious as I’m not sure where I read it, but didn’t someone, maybe on this site wonder out loud why this extra $128b that the reserve bank is creating, why is it not going directly to the Government to spend on what we need. Why are the banks getting it (to lend on housing) when the Government should and could spend it on state house building starting tomorrow.” — Njay (Interest.co.nz)… Vested interests and their long-held ideology driven more by emotion and self-interest (rather) than reason? — RickStrauss (Interest.co.nz)

“Dear Prime Minister. The stars have aligned to give you a once in a generation chance to fix a problem that has been festering for 30 years. Do you see all those levers over there? Pull them all now. Stop talking and start doing. You have 3 years. If the public vote you out after that. So what. You don’t want to be prime minister for ever do you? Be remembered for fixing the problem…” — WestieAJ (Interest.co.nz)

“Great article Brendon. The government should keep building until rents fall to 30% of income. This would require an order of magnitude shift in the number of houses built. The government should also not restrict who can access these properties (based on ideology) but instead should allow everyone to go on the list which gets ordered by need then delivered to those most in need first. I would also suggest that the government build to international (note: not NZ) best practice. This will also resolve fuel poverty and poor health. The health savings alone would pay for any premium to meet this standard. These houses will be in place for the next 100 years so any compromises now, our grandkids will be paying for.” — kiwimm (Interest.co.nz)

“+1 Brendon. We need a massive fiscal stimulus to build state houses. The monetary stimulus we are getting is simply raising asset prices as property investors drive the market higher & does nothing to increase supply.” — Kiwi_overseas (Interest.co.nz)

“To be honest I’m actually blown away that we’ve allowed this to happen here — its like a bad nightmare yet every day you wake up you realise once again that it is for real. I never quite understood how societies could break down, but now I’m witnessing the making of it here in NZ through self interest, ignorance, greed and a general lack of wisdom.” — Independent_Observer (Interest.co.nz)

New Zealand needs an urbanisation project

A collection of essays about cities, housing, land, the…

New Zealand needs an urbanisation project

A collection of essays about cities, housing, land, the built environment and transport which collectively make the case for New Zealand to implement a wide ranging urbanisation project

Brendon Harre

Written by

Trying to optimise amenity and affordability values for urban areas

New Zealand needs an urbanisation project

A collection of essays about cities, housing, land, the built environment and transport which collectively make the case for New Zealand to implement a wide ranging urbanisation project

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