Govt to open up more land for houses

Twenty years ago the average price of a house cost around four times the average income but now it is nearly double that.

### tvnz.co.nz 5:30AM Monday October 29, 2012
‘No silver bullet’ for housing affordability crisis – PM
Source: ONE News
Prime Minister John Key says fast tracking the supply of land should help solve the current housing affordability crisis. The long-awaited housing plan is due to go before Cabinet today to be signed off, seven months after the Productivity Commission released a report on housing affordability. […] “The sorts of things the Productivity Commission is talking about, and the Government’s going to adopt, is how do we speed up the supply of land so that’s both what we call greenfields, paddocks sitting out there that you extend the urban limit, and secondly brownfield development, so that’s where you don’t have a lot of intensification in a certain area but you allow that to happen more quickly.” […] The soaring price of property has been blamed on a shortage of availability, and Key told TVNZ Breakfast this morning that changing the Resource Management Act (RMA) to speed up the development of land will help solve the supply and demand issue. He said the RMA process at the moment it is often arduous and long – to the detriment of the consumer.
Read more + Videos [Link not available]

New Zealand Productivity Commission
http://www.productivity.govt.nz/

“We’ve got to be careful about Government not blundering in here too much into council business because we don’t understand all the local issues.”

The Government plans to change local government legislation and the Resource Management Act to make it easier for developers to build houses. Finance Minister Bill English wants to make more land available for housing – and to speed up consent processes. [Today] he will take a paper to Cabinet, outlining a response to a Productivity Commission report on housing affordability. Finance Minister Bill English said the cost of building is too high and there is a supply shortage, particularly of good quality, lower priced housing.
DOMINION POST

“The Government owns $15 billion worth of houses, and, in most cities, the best opportunities … [are] on the government-owned Housing Corp land.”

Tackling the high cost of home ownership:
* Government will work with councils on urban planning to make it easier to build houses on “greenfield” sites outside city boundaries and on “brownfield” sites within cities.
* Further Tamaki Transformation-style redevelopments of state housing assets will be done.
* Changes will be made to the Local Government and Resource Management Act to make it easier, quicker and cheaper to build houses.
* Building costs will be reduced through work on the Building Act.
NZ HERALD

### radionz.co.nz Monday 29 October 2012
Morning Report with Geoff Robinson & Simon Mercep
07:15 Government to change rules to make houses more affordable
The Finance Minister, Bill English, has indicated that changing the planning and consent process is among the changes. (4′57″)
Audio | Download: Ogg Vorbis MP3 | Embed

### radionz.co.nz Monday 29 October 2012
Morning Report with Geoff Robinson & Simon Mercep
08:12 Cabinet to decide today to relax planning rules for housing
The Cabinet will decide today on changes aimed at making new houses more affordable. (3′13″)
Audio | Download: Ogg Vorbis MP3 | Embed

### radionz.co.nz Monday 29 October 2012
Nine To Noon with Kathryn Ryan
11:07 Politics with Matthew Hooton and Josie Pagani
Talking today about the Governments response to the productivity commission. (24′02″)
Audio | Download: Ogg Vorbis MP3 | Embed

Posted by Elizabeth Kerr

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28 Comments

Filed under Architecture, Business, Construction, DCC, Design, Economics, Geography, Heritage, Media, Name, People, Politics, Property, Town planning, Urban design

28 responses to “Govt to open up more land for houses

  1. Anonymous

    Affordable housing is an oxymoron, up there with happily married. Regardless of how much land national or local government open up, it will still be unaffordable and everything to do with big returns on land grabs, sub-divisions and resale. Once the agreed Stakeholders have received their millions, it will then have something to do with making homes available for purchase and retrofitting the infrastructure. For those stakeholders wanting to get their pipe enlarged, now would be the time to get on council so you’re in place to deal with any complications with your development. It worked for Syd Brown.

    How much land would a stakeholder buy
    If a stakeholder could buy land?
    He would buy, he would, as much as he could,
    And buy as much as a stakeholder would
    If a stakeholder could buy land.

    How much land would a Stakeholder sell
    If a stakeholder could sell land?
    He would ask Cousin Farry or Eion Edgar, as much as he could,
    And sell to Delta Investments Limited he would
    Then the Stakeholder could live by Queenstown Lakes.

    • Elizabeth

      Aww. The Monday Poem.

      • Elizabeth

        How property speculation works for the rich under a National-led government.

        ### ODT Online Mon, 29 Oct 2012
        No quick fixes as Govt tackles housing
        By Adam Bennett – New Zealand Herald
        The Government is to place a six-month time limit on councils processing consents for medium-size projects, including housing developments, as part of its push to make homes affordable. It is also looking to councils to free up more land for building and has announced an inquiry into the building industry to identify barriers to improving housing affordability. -APNZ
        Read more

        Home affordability: The Government’s four key aims:
        1. Increasing land supply – this will include more greenfield and brownfield developments and allow further densification of cities, where appropriate.
        2. Reducing delays and costs of Resource Management Act processes associated with housing – this includes introducing a six-month time limit on council processing of medium-sized consents.
        3. Improving the timely provision of infrastructure to support new housing – this will include considering new ways to co-ordinate and manage infrastructure for subdivisions
        4. Improving productivity in the construction sector

  2. Peter

    Housing is also more offordable if people stop thinking that having more than three bedrooms and two bathrooms is ‘essential’… especially given that households are smaller these days. More need for two bedroom and one bathroom homes for singles and couples.

    • Elizabeth

      Agree, Peter. Given what we’re seeing going up in Christchurch, ticky-tacky boxes in the obsolete style of ‘nuclear family’!
      What I’m after is relatively large floor area, with an anchored services pod and heating unit, the rest of the space flexible with movable partitioning, or not as the mood takes me for work and living. Not sure the average speculative developer could cope with the engineering of that, or the passive solar requirement – or recognise the market audience for this.

      Building & Housing Group is located within the Ministry of Business, Innovation and Employment (MBIE)
      The MBIE came into existence on 1 July 2012. It integrates the functions of the former Department of Building and Housing, Ministry of Economic Development, Department of Labour and the Ministry of Science and Innovation.
      http://www.dbh.govt.nz/

      The Building and Housing Group’s aim is to improve building quality and housing availability in New Zealand. They assist everyone involved with buildings, whether they build, own, live or work in them. They set standards so homes and buildings are better built, safer and healthier, without needlessly adding to the time and cost of building them.
      http://www.dbh.govt.nz/about-us

      Sector information and statistics
      Bringing together a range of building and housing-related information, trends and statistics collected by the Building and Housing Group, other government agencies, and organisations such as the Real Estate Institute of New Zealand and Quotable Value Limited.
      http://www.dbh.govt.nz/sector-information

      ‘Housing NZ’ designers are/were well down the track of researching and designing for a range of different household units, including for extended family and different ethnicities.
      http://www.hnzc.co.nz/

      The New Zealand Housing Report 2009/10 provides a broad overview of housing market conditions in the building and housing sector. It is the first document to pull together in one place all the information available and look at the overall balance of housing demand and supply.

  3. Calvin Oaten

    Can’t comment on the Auckland market, don’t know about it. But the ‘bubble’ which exists for existing housing, making it out of reach of the masses is purely a product of the financial industry. The advent of loose credit from bank and other institutions simply fueled inflation. In more honest times the rule of thumb was that a family home should be priced around 2.5 to 3 times the average wage. The mortgage ought not take more than 25% of the net income of the average wage earner. The banks and institutions had a cautious policy requiring 1/3rd of the selling price deposit and 2/3rds mortgage. This put the onus of the market to save to meet the conditions, and the supply to more or less match demand. Result, a reasonable chance for home ownership. Then the free for all began, mortgages up to 80 and 90% of value, and sometimes 100%. No deposit required. Off the market took and very soon demand outstripped supply and prices began to escalate. It happened all over the western world, ‘crazy prices’ were achieved until the bubble burst. It happened first in Japan about 1990, and has not recovered. The USA has just experienced its biggest meltdown in memory and hasn’t finished yet. Australia is looking very dodgy in most Eastern States, I have a niece in MacKay who wants to sell and return to NZ but has found out that their house is now valued at many thousands below their mortgage and falling. In the popular term “under water”. Why hasn’t it happened here? Two reasons. First, the banks haven’t yet clamped down on their lending ratios. The real estate industry keeps ‘spruiking’ the market telling everybody who listens that houses are a hot seller and they will never be cheaper. Just wait. When it bursts it will be the same as elsewhere and the finance market will tighten up and demand will dry up. Supply will catch up and prices will drop. Those forced to sell because of financial reasons will ‘take a bath’ and others will pick up the benefit. It is always thus. Those who bought long ago will have seen their values leap, and if they stay on will see it revert. Meanwhile it will be the same house, nothing changed. The only way you can genuinely increase value is by increasing content, anything else is just inflation. Any market which moves from the “mean” to excess always eventually reverts to the “mean.” It is a basic law of ‘economics’. The problem at the moment is the young blood ‘economists’ haven’t yet experienced anything but boom times. They think it lasts for ever. They will learn. Meanwhile, the incessant talk by politicians talking up the problem as if they can solve it. It will solve itself, we just don’t know when. I predict it won’t be too long, probably within the next year or two. Wait till the stupid USA election is over and the Euro Zone collapses and we will see it all happen. House prices might just be the least of our worries.

  4. JimmyJones

    Is that what you want, Peter? – (spin) Doctor Bidrose and her planners telling you what sort of house you can build, where to put it and which part of it should face north? And you won’t be allowed a lawn because that conflicts with their Densification ideology.
    If we have to have Town Planners, I suggest that they all be re-educated to respect the citizens’ right to make their own decisions.

  5. JimmyJones

    Calvin, the other “only way you can genuinely increase value” (house prices) is to have a council that decides to restrict the supply of land or imposes extortionate levels of fees/taxes. Councils seem to have no insight into how their behaviour affects house prices.

    There are other systemic influences like immigration, employment etc that pushes prices around. I think there is no mean price that prices revert to after a bubble etc.

  6. Peter

    Jimmy. It’s not really possible, I think, for councils to order what they think people should have in terms of housing. (Certainly public as opposed to private housing can provide options.) I was more talking about a general attitudinal change that could help people be more realistic about their housing needs. Granted this change doesn’t happen overnight.
    It’s interesting the change that has come with more ‘promiscuous’ attitudes to debt re housing, as Calvin outlines. I remember the house I grew up in Melbourne was, for years, a work in progress. My father improved the house as he saved money to do so. The house had pink primer for years till it was properly painted!
    OK, I guess times have changed and we tend to want it all done now, but I can’t help thinking many of us could return to this way of thinking and the ‘unaffordability’ of housing becomes less a major issue. Naive? Maybe.

  7. Calvin Oaten

    Jimmy; By ‘mean price’ I mean the level set by supply and demand. This is determined by availability and ratios of finance, regional growth, employment immigration etc., All these systemic factors point to a massive re-evaluation of values. Why should a house which changed hands for $75,000 12 years ago now have a market value of $227,000? It is essentially the same house, wages haven’t changed to any extent, inflation hasn’t been rampant in that period. The only real factor has been the cheapness and free availability of finance. In normal times I suspect that house would be worth $110,000 – $115,000 max. That’s where it is likely to arrive at one day.

  8. Hype O'Thermia

    Meanwhile Auckland is where the worst housing shortage is, and the worst unaffordability. Why alter the ability of people to live where there are few & overpriced houses by creating more, which will surely also be overpriced? In other parts of NZ houses fit to live in are much more affordable. “But the jobs are in Auckland” – true, some people are in careers that require them to be in Auckland. Others have rather ordinary occupations and have to work 2 jobs just to manage the mortgage. Leave the shortage as it is and publicise the fact that people could afford a decent house on fewer hours in a lower paid job, and have time to have a life. At a guess the majority of those who can’t buy a house (in Auckland, or in any major city) are on low incomes and often in occupations with no future e.g. cleaning, aged care. Smaller towns need people who can do that. Cheaper commute from A to B too, it’s not so far, usually.

  9. JimmyJones

    Peter, I think that people buy what they can afford. Some will end up in smaller or older houses than what they would have liked. I don’t hear them complaining, except for some politicians who seem to expect anyone to be able to own their house irrespective of income. Houses cost a lot and some people have to rent.
    It seems like we have it a lot easier now than 50 years ago. My impression was that for many couples most of their working years were spent struggling to pay off their mortgages. I didn’t hear them bleating on about housing unaffordability or poverty or income gaps and their children went to school with shoes and lunches. It is easier for us now, but politics has cultivated a strong sense of entitlement in some susceptible individuals, amplified by our populist news-media.

  10. Peter

    Jimmy, I think people often buy what they can’t afford. Hence the greater level of private indebtedness in this country. It is probably easier, in one sense, to get the money together to borrow for a house. Except when you live in an area like Auckland where housing is so dear to get on the property ladder in the first place. It is taking longer to pay off the mortgage these days because houses are more expensive and there are other demands like student loans and users pays costs for other services.
    I agree with your last sentence entirely.
    A capital gains tax would probably be a good idea to free up rental housing from marginal landlords and allowing people to own their own homes.

  11. Rob Hamlin

    Calvin is quite right. High house prices are the result of increased credit – largely provided by the banks. In the UK, vast areas of 1920s houses stand testament to the housing bubble that drove the crash that create the Great Depression. It was the same in the USA. The reaction to this event was to eliminate banks from the residential housing market and only allow building societies funded by domestic savings to lend on houses. This anchored house prices to savings rate. No savings = no money = no mortgages = no pressure on price.

    This kept things stable until Thatcher’s minions let the banks back into the market again. Once this happened, the bubbles started all over again. A pattern repeated all over the English speaking world, including here once Roger was at the controls. The reason for this rise in prices is simply mathematics. The supply of housing can only grow slowly, but the supply of credit can simply grow as fast as the banks can create money. It is no coincidence that the price of housing and the growth in non-cash Sterling money supply increased pretty much in lockstep with UK house prices throughout this period.

    Therefore if you triple the supply of credit available for house purchase you will triple the cost of accommodation, either directly to buy or indirectly to rent from somebody who will want the same rate of return on their now inflated asset valuation. By doing so you also triple your revenue from the interest rate spreads with no input of hard work or risk from you. You probably more than triple your personal income from bonuses etc – if you are a senior bank executive.

    The normal Joe, caught in this trap is neither greedy nor foolish. If they want to put a roof over their family’s heads they will have to pay – either by mortgage or rental. Thus has an entire generation been enslaved by the financial whizzes – of whom Jonkey is a fine example.

    Of course, nobody in the Government or any part of the 1% elite want to talk about this – they are the prime beneficiaries of the process. This vested interest leads to the odd situation where shelter is the only necessity of life where increases in its costs are usually reported in the media as a good thing.

    This will continue to be the case until the majority of the population have been squeezed out of home ownership – at which point the politics start to work in the opposite direction. This process home ownership elimination is actually occurring quire rapidly. If one buys one’s first house at 30 and is carried out of one’s last house in a box at 80, then this gives a personal turnover rate within the housing market at around 2% a year. Home ownership is falling at rates approaching this at the moment – indicating that very few people are now entering the housing market.

    When then the numbers are right, something will be done, because it will be politically worthwhile and possible to do it. Measures to ‘crash’ house prices will enjoy majority support, and more politically advantageous economic activity will be generated by any such crash as renters (who will spend more as rents decline) will by then outnumber owners and landlords (who may spend less if they owe large amounts) as house prices fall. Maybe this will be ‘on’ when home ownership and the realistic aspirations for it have fallen to below 35% of the population. Effective measures include:

    1) Elimination of all capital except that generated from domestic (and within country) household savings from the housing market.

    2) The requirement that all domestic houses are held by citizens or permanent residents of the country.

    3) The elimination of corporate bodies from domestic property ownership (this would include trusts).

    4) The introduction of effective death duties.

    5) The introduction of an inflation adjusted capital gains tax on all properties including the family home.

  12. Calvin Oaten

    Rob does a very explicit coverage of what is in essence a simple economic fact. The law of supply and demand. In the case of credit supply the demand is endless so if no limits are placed then no limits will be achieved. In the case of housing, endless cheap credit guarantees that the demand will outstrip the supply. Result: price escalation. Tighten up the supply of credit and almost overnight the housing demand will diminish and correct to the supply. It of course won’t correct the vast supply of overbuilt overpriced properties which have been built during the ‘bubble’ period, again, due to the easy availability of funds allowing folk to build beyond their true means. These are the most vulnerable to the ‘Great Correction’ which is to come. ‘McMansions’ they are termed. But regardless of ‘granite’ benches, triple garages etc, at the end of the day they are only worth what people can/will pay for them. Enough desperate sellers and the dam will burst. The politicians talk of increasing housing in Auckland will only result in prolonging, but not addressing the problem. Where they should be addressing is the lending institutions and setting criteria to restrict the nonsense that has created the problem. It is an industry inhabited by ‘rascals’ intent on profit and personal gain, without thought of the mayhem and sorrow their actions have and are causing. Again, I say it will revert, history shows us that it always does. You just don’t want to be there when it does.

  13. Peter

    It’s a complex, multi-factor problem. Easy credit with low interest rates, far too expensive homes with all the mod cons, expensive land in higher population centres, expensive building supplies. Those selling services and supplies have got a lot to lose when the correction comes.
    Sometimes you just have to let the crash come.

  14. Jimmy, while it’s easy for you to take cheap shots at town planners, you’d better think about the impacts of covenants imposed by subdivision developers. I hadn’t realised until talking to a friend that works for an architecture firm that many subdivisions now have a *minimum* floorsize.

    As an example: http://www.aidanfield.co.nz/covenants.html

    I found a few quite quickly, and some pretty standard themes emerge
    *House >180 sq m
    *Only wooden fences
    *Garages, sheds etc must be in permanent materials matching house
    *Restrictions on the use of cheaper exterior cladding for the house
    *Massive setbacks at the front of the property, American-styles, for a large open lawn at the front of the house, but then no space for a more private lawn at the back.

  15. JimmyJones

    James, I don’t see the problem, my guess is that the minimum floor area of 180m² wouldn’t affect most new constructions. If you are saying that this restriction prevents lower price houses being built there, then you are probably correct, but I don’t expect this to have a general effect on house prices because –
    » people building new houses mostly don’t want a small cheap house.
    » building new houses increases the supply and pushes down average
    prices of the existing houses even if the new ones cost more than the average. More is better.

    I think that any effect of these covenants will be small compared to the DCC implementing their Densification Policy. Densification will increase prices.
    Also, not every jobless glue-sniffer deserves to own their own house. These people have lower cost options than house ownership.

  16. Hi Jimmy – You can get a four bedroom, 2 bathroom, 2 living space McRaeway in at 154m2. Or a three bedroom, single bathroom with double garage in the same floor area. Just as examples. Sure some people are going to want bigger houses, but actually, it seems to me that lots of people ought to want new small houses, especially as the number of people living in each house in NZ continues to decrease.
    » we’re not talking just about small cheap houses, but also smaller highly kitted out houses, and sensible medium size houses. What if you are retired and cashed up, kids have left home, and you’d prefer a warm, flash, slightly smaller house, but you can’t find anywhere to build it?
    » while building new houses increases supply, it’s mostly increasing the supply of large houses that people can’t necessarily afford or want; why not let the market decide?
    The effects of these sort of covenants is massive. You only need to visit newer areas of Mosgiel, Rolleston, Hornby, Albany or Dannemora to see what it produces.

  17. Hype O'Thermia

    Hello Baldrick. Something to do with turnips?

    • Elizabeth

      The ‘manager’ (at left) represents good value should the council head into another round of ‘planned’ redundancies. Speaking of Jim’s root vegetables, the cost saving would surely be worth it.

  18. Anonymous

    Added to that list is this candidate for the Who Invented That Fluffy Title Award in today’s D Scene:

    ‘Dunedin City Council Safe and Sustainable Transport Co-ordinator Charlotte Flaherty says Portobello’s School’s approach to a road safety problem has been impressive.’

    So the school recognised a potential safety issue. And addressed it with a bit of lateral thinking and commonsense. What would they have ever done without Super DCC?

    The five million dollar Spook Department is making its coin today.

  19. Phil

    The market only knows what it knows. People are buying bigger because they are being offered bigger. Houses today have an increasing footprint while occupancy levels within the houses are decreasing. No-one wants to return to the 1800s but the reality is that people do not need the amount of space they are being offered and, as a society, it is irresponsible to do so. The theory that people should have the right to decide is typical of an isolated island. In the majority of countries it is local and central government who decide on the location and type of housing which can be built. Only they have all the relevant information to make an informed decision. Developers know nothing about society synergies and nor do they care. Councils do. I firmly believe that developers should be forced to follow District Plans, and not be permitted to re-write it as they see fit. That is why we have the chaos we have today.

  20. Phil

    I’m going to jump back up to a very good list of ideas from a couple of weeks back. While they might read as extreme, it’s worth noting that they have been standard rules in many other countries for generations. There is that argument that it is in fact New Zealand who is out of step with their property ownership laws (or a lack thereof).

    Property ownership being restricted to residents of the country. That’s standard. In most countries you need a population register number in order to purchase property and you can’t receive that without first being registered as living in the country. So nothing unusual about that as a law.

    Tax on the profit from any property sale is standard, including the family home. An exception is made where the property is your primary residence and you are buying another property of equal or greater value. In that case you are still liable for the tax, but the payment of that tax is deferred. Again, perfectly normal.

    Corporate identities such as family trusts can not purchase a primary residence property. Corporations can purchase apartment complexes etc, but those corporations are made up exclusively of all the dwelling owners who become jointly and separately responsible for the property. Likewise with separate dwellings. No hiding behind the Trust name.

    Worth taking a pause to consider before condemning “new” ideas.

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