Unaffordable housing? No wonder!

ONCE AGAIN BERNARD HICKEY offers the insalubrious example of a commentator who knows something is wrong, yet knows nothing about how to fix it. Nothing that is beyond yelling “Something Must be Done!” And by “something he means “someone.” And by someone, he means the government.

First, the problem:

Auckland and Christchurch now have massive shortages of waterproof and undamaged homes that regular families can afford to own…
    The Department of Building and Housing forecast this month that New Zealand needs to build around 20,000 to 23,000 housing units a year over the next five years to keep pace with population growth. Meanwhile New Zealand has been building at a rate below 15,000 a year for the last three years…
    The crisis has intensified since 1999 with the introduction of the Metropolitan Urban Limit and the revelations that an entire generation of homes is leaky and will have to be either reclad or rebuilt…
    This crisis is playing out in a variety of ways.
    There is, of course, a rise in homeless numbers. But the more obvious increase is simply in the price of homes and rents. Both are rising quicker than the wider inflation rate and price rises outside of Auckland and Christchurch. There is an inevitable reaction to this, which is for young Auckland and Christchurch workers and families, those who are not property owners, to simply give up.

He is right that rents are rocketing and new homes are becoming less and less affordable.  The annual Demographia study has shown for years that even during this Great Recession house prices as a proportion of income in New Zealand’s cities are among the highest in the developed world—and increasing*. And the Productivity Commission (from whom Hickey got his figures) point out that “for younger people and those on lower incomes there is a missing step on the property ladder, particularly in Auckland. The chances of them ever purchasing their first home are decreasing.”

He is right, too, that while would-be home-owners burn, governments in Auckland and Wellington continue to fiddle—with train sets in Auckland, and with a pathetic, partial, poorly-done privatisation programme in Wellington.

The problem then is this: what is to be done? And the problem with Hickey is, he has no bloody idea.

So like every simple statist who Wants Something Done, he simply cries that Gummint Should Do Something!

“Government-owned land would need to be opened up and town planners overruled,” says Hickey, getting it half right, before heading down the route of statists immemorial in calling for “taxpayer money … to be invested and lots of it.” Presumably building those affordable houses that the government has made it unprofitable for private builders to build, using resources that will cost more than the sale price.

It’s the same “solution” put forward by Fran O’Sullivan (left) a few months back when she called for private land to be nationalised—expropriated outright by the grey ones—newly stolen land on which the Gummint Should Do Something.

Like O’Sullivan, Hickey is a business columnist. Yet just like her he has no idea how business works.

And they both write and talk about politics. But neither apparently have any conception of how politicians have caused the very “market failure” they describe. Because while calling for government to fix the problem by doing more, they never even bothered to ask themselves this fundamental question: whether it is government activity itself that has largely caused the problem.

And it has.

IN A NUTSHELL, THE big problem is that government has gone beyond right: it has passed laws giving the Reserve Bank the power to print money, bureaucrats the power to prescribe the methods and materials by which houses are built, and  planners the power to control and restrict people’s land.

Let’s look at these one at a time.

In recent years, the new money printed by the Reserve Bank (i.e., monetary inflation) has spilled over into the housing market, producing one housing “bubble” and thousands of NZers deluded into thinking their wealth has increased.

Meanwhile, the Department of Building and Housing were given the power to tell builders how to build houses. Rather than deregulation, which never happened here, builders have endured a flood of new regulation: producing pages and pages of gold-plated building regulations and a rise in the cost to build a house that has out-paced even the rate of house price rises.

And while the printing presses were going overtime printing new regulations and new money, the town planners were busy strangling land-owners and ring-fencing cities under the new powers given them by the Resource Management: the power, essentially, to restrict development of  new, affordable housing while charging builders and developers more for the “privilege” of trying to build something on their own land.

THE NET RESULT OF this three-pronged attack on property was to pump up demand with all those freshly-printed dollars while restricting the supply of the stuff they wanted to spend them on.

No wonder we saw a housing bubble.

No wonder price inflation on housing (which is all those price really increases were) went through the roof.

No wonder so many people were deluded by the price inflation into thinking they were becoming rich-instead of just seeing their dollars devalued.

No wonder land prices now account for up to 60% of the cost of a house in Auckland.

No wonder new homes tend to be at the top-end of the market.

No wonder things began to become insane, with the cost to build a house beginning to outstrip even the cost people were prepared to pay for it—meaning the model for speculative housing** (which has for decades been building the means by the vast majority of new affordable homes was built) is now permanently broken.

And as a simple measure of when affordable housing will be built again, it will be when the model for speculative house building returns.

How do we do that?

Simple. We stop what should never have been started.

We get rid of fiat money; we get rid of zoning; we shut planners up and put a stake through the heart of their Resource Management Act; we stop fighting so-called “sprawl” with “Urban Walls” and instead leave people free to develop their own land according to demand.***

In short, we give power back to builders and property owners to do what they do best while taking power away from those who only get in their way.

Yes, government could do more. It could do a whole lot more by doing a whole heck of a lot less.

And Bernard Hickey could either write less, or learn more.

* * * * *

* As the Annual Demographia Surveys ( www.demographia.com ) clearly illustrate - households should not be paying any more than 3 times their annual household income to house themselves - with mortgage loads around 2.5 times.  Unfortunately in NZ’s major cities home-owners are now paying from 6 to 8 times their annual household income to house themselves , a figure that increases ever year.

** What is speculative house building? It’s when Joe Builder buys a site, builds a house on it, and sells it to Mr and Mrs New-Home-Owner for more than he’s shelled out—giving him a small profit which he can use to build his next one. This is how “spec” houses have been built since Adam was a lad—but now can’t be.

** The Productivity Commission in its recent report on affordable housing is only half-way there with its own solution, which would at least be a start. The Commission’s key recommendations include:

• The urgent need for more land to be opened up for housing, especially in urban areas, because sections now average about 40% to 60% of the cost of a house.

• Reconsideration of Auckland’s draft spatial plan. Auckland faces significant housing affordability challenges and the Commission found its current plan, with a target of accommodating 75% of new homes within existing urban boundaries, will be difficult to reconcile with affordable housing.

• Improved processes for consenting, to speed up the service and lower costs.

• Improving how local council development charges for infrastructure are calculated and applied, including making them reviewable. The Commission found the current model has too much regional variation and is not transparent. 

Perhaps Mr Hickey and Ms O’Sullivan could read them?

QUOTE OF THE DAY: “Creating a job is easy. Creating a remunerative job is not.”

 

The 'Consumptionist' Dead End
Jonathan Hoenig:  Why the persistent belief that the economy will grow as a result of government spending is flawed.
If you keep repeating a lie long enough, people eventually start to accept it as truth. So even as government debt hit new record highs and bankrupt entitlement states like Greece collapse, how else to explain the persistent belief among many politicians and policymakers that … the economy grows as a result of government spending….

FRIDAY MORNING RAMBLE: Take a look at these!

Another short ramble around a few things that caught my eye this week…

• A new report suggests an earthquake in Wellington would  dwarf the economic damage of the Canterbury earthquake .  The report, however, takes no account of the enormous economic benefit to the country of the complete destruction of Wellington’s government departments. (We can dream, can’t we?)
  Cost of a major Wellington quake? $40b – N Z  H E R A L D
• Stolen memos and fabricated documents from the climate sceptic Heartland Institute reveals that private individuals who agree with the aims of the Institute gave them money (shock, horror!). Meanwhile, the Institute advanced funds to fellow skeptics like Anthony Watts and NZer Bob  Carter to the tune of $88,000 and $1600 respectively, giving such scientists an unfair advantage in over the $1,2 million sucked from the taxpayer by James Hansen and the $300 million warmist campaign of Al Gore.
  In other words, “What the Heartland document show is how badly warmists have been beaten by those with a fraction of the resources they’ve enjoyed.”
  Hippies hate Heartland -  D A I L Y   B A Y O N E T
  The Anatomy of a Global Warming Smear – Anthony Watts, W A T T S   U P   W I T H   T H A T
• If the philosophical father of America was John Locke, then that of New Zealand was utilitarian Jeremy Bentham.  Murray Rothbard examines the thought, economics and failings of the man whose corpse now entertains students at University College, London.
  The case of Jeremy Bentham, should be instructive both to historians of this funny little country, and to “that host of economists that attempt to weld utilitarian philosophy with free market economics.”
  Jeremy Bentham: From Laissez-Faire to Statism – Murray Rothbard, M I S E S  DA I L Y
• The Ayn Rand Institute is thrilled to announce two new ARI ventures “that we believe have the potential to make a huge impact on the fight for capitalism”: a new book, and a new blog.
  Free Market Revolution: How Ayn Rand’s Ideas Can End Big Government 
  – by Yaron Brook and Don Watkins
  Laissez-Faire: The Uncompromised Case for Capitalism – A R I

Yaron Answers: What is Capitalism and Why Do You Say It’s Moral?

• We’re near the endgame. But when will the tipping point into currency collapse begin? Author of the Paper Money Collapse Detlev Schlicter reckons the EuroZone crisis is just the beginning. “The tipping point comes either when concern about inflation or concern about sovereign solvency (in major countries) reaches a certain point. When people sell bonds and demand higher yields we are in the endgame.” Watch him and his interviewer here:

• Steve Coogan used to be a comedian. Now? Not so much.
  What the Dickens has Coogan become? – Tim Black, S P I K E D
• You want music with a joyful sense of life? You want musical fluency? Then the Hot Club of France are your men.  Here’s some rare film of the genii doing one of their quieter numbers (filmed, unfortunately, by a cameraman eager not to show Django’s unique fretwork dexterity).

Check back soon for more…

DOWN TO THE DOCTOR’S: Seagull? No, it’s a duck.

Don’t look now. Dr Richard McGrath is back with his formerly regular column. This week: Is that a bird, or a plane? No, it’s a duck!

Assuming Trevor Mallard still possesses any shred of integrity after a lifetime in the public trough, then his exposure this week as a 'ticket-scalper' will only move forward its inevitable extinction. 

In 2006 The Mallard stated quite baldly: "When there is bulk buying of tickets to [major] events simply for the purpose of profiteering, scalping is a rip-off that could deny many people the opportunity to see [the] event."

It’s now revealed he made a tidy TradeMe profit on a major Wellington event happening this weekend.

In 2011 his party went to the polls demanding those accruing profit on their assets be his hard by the grey ones.

And despite him "struggling to see the difference in principle between tickets and houses,” he sees no problem now with either the sale or his price-gouging.

If any integrity is left him after his playing away from home and his court appearance for assault, his lies about “bag men” and cash for policies and his attack on Brethren church-goers as “chinless scarf wearers, then to retain whagt little is left he should at least hand over the dirty profits to the ticket issuer, or perhaps pay a contribution to the government based on capital gain—a voluntary proposition the IRD website helpfully makes possible.

Not that I se any problem myself, mind you, in either ticket scalpers or profit-takers. Unlike the daily labours of politicians, both help the market.

In my view, and against the previously stated views of The Duck, all laws that impede a free, uncoerced market in goods should be scrapped—including any that prohibit the reselling of concert tickets. Ironically, under a government 'led by my Libertarianz party, Scalper' Mallard would be able to sell as many concert tickets to unsuspecting teenagers as he liked. But not a government headed by his own party.

It is difficult however to see how an unapologetic Mallard will possibly be able to explain his way out of this latest disaster, unless of course he truly believes there should be one law for politicians and another law for the rest of us.

Perhaps now the Hutt South Scalper has realised the virtues of the market first-hand he could do the decent thing for a change: "So how about a ticket to the Lady Gaga concert for my daughter?"

Dr Richard McGrath is a Masterton GP and the leader of New Zealand’s Libertarianz Party.
When prodded hard, he writes a regular semi-regular very occasional column for NOT PC.

Blasphemy

A man has just been deported from one country to another to face the death penalty for a crime that is the ultimate in victimless crimes, i.e., a crime that has no victim.

The man has been deported from Malaysia to Saudi Arabia to face a charge that he blasphemed, i.e., that he defamed Allah in a tweet, i.e., that he “insulted” a non-existent being.

Which means he defamed a victim that doesn’t exist, in a medium few if any in Saudi Arabia are allowed to read, from a jurisdiction that has nothing to with them.

And Islam is still a religion of peace.

Mojo

Much discussion this morning about the MP with the coolest name in Parliament, Mojo Mathers, and whether you or I should pay for an electronic note-taking system so the new Green MP can do her job.

She’s deaf, you see, and can’t do the job properly without one. It will cost us around $30,000, apparently—about the size of Bellamy’s bar bill on a slow afternoon.

So fair enough, surely. It’s a small enough sum; it can be taken out of the existing Parliamentary Budget without any problems; and this is supposed to be a representative democracy, surely, and when folk from all walks of life are in Parliament their democracy should provide whatever’s need to do their job, no?

No. Not really. Not exactly.

Because Speaker Lockwood Smith is reportedly examining whether to impose a new  obligation on taxpayers, rather than spending less elsewhere. Like subsiding Bellamy’s, for instance.  (Bad Lockwood.)

And yes, it’s a small sum.  But even a small sum has to be authorised; has to be taken from someone.  And there is nothing in law to justify a new imposition like this. (Laws about subsidising the trough at Bellamy’s on the other hand…)

And fundamentally, small though the sum involved is, the argument about spending it goes back to the nature of government and of parliament ,and and what they’re there for. 

Government’s job is not to raise the self-esteem of its participants—its job is to protect individual rights. That’s their only justifiable job.

So Parliament’s job, in this sense, is not simply to be a club wherein participants are made to feel better about themselves. It’s not a place where you go to raise your self-esteem. It is instead an arm of government (at least in principle if not in practice) that helps keep the other arms somewhat in check—to ensure they are protecting individual rights.

And frankly, then as long as taxpayers continue to vote people in to do that job (at least in theory) it doesn’t matter whether you’re deaf, dumb, blind or transgender. If you’ve been voted in to do the job by taxpayers (and even some Green voters do pay taxes)  then you should have the tools to do that job.

After all, there’s extra reinforcing needed for Parekura Horomia’s seat. And we’re obliged to pay for that, aren’t we?

Aren’t we?

* * * * *

* Paid for by those taxpayers who voted for them, ideally.

Come on baby, be my econo-Valentine

It’s not quite “come on sucker, lick my battery” stuff, but economists are warming up for Valentine’s Day with the #FedValentines tag on Twitter [hat tip Offsetting Behaviour]. My favourites, from the SanFrancisco Fed:

I'm going to extraordinary measures to increase your stimulus.

My love is elastic, my commitment too big to fail.

And from NPR’s Planet Money:

But, soft! What light through yonder discount window breaks? It is the East, and Ben is the sun.

I'll be your lover of last resort.

And the Marvin Gayesque:

When I get that feeling I want quantitative easing.

With those out of the way, Craig Biddle identifies a more serious point: the connection between Say’s Law and Romantic Love (and you were going to say you’d just been thinking along those lines, huh?):

The realm of romance, like that of economics, is governed by Say’s Law. Supply constitutes demand. What you produce (supply) is what you have to trade in the marketplace (demand.
    Say’s law does not mean that if you create something people will want it—or “if you build it they will come.” It means that if you want to trade with others, you have to produce something with which to trade—something of value. The values you create—whether computers or works of art or educational services—constitute your demand on the goods and services created by others. What you create is what you have to offer in trade for what others create.
    The same is true in romance. If you want a relationship of mutual love, you have to produce something with which to trade—something that a good person will want and be able to love. The one and only demand you can exert in the realm of romance is what you have made of yourself. That is your “supply”; it’s what you bring to the table.
    This is not an analogy; it is the literal truth. And it applies to both mind and body…
    If we want a wonderful, lasting romantic relationship—if we want to fall in love and stay in love with a great girl or guy—then we have to make ourselves of value to such a person.
    Supply constitutes demand. “Take what you want and pay for it”….

* But maybe if Flight of the Conchords were to try econo-ditties as well as Robo-boogie?

Peace activists?

Yes, folks, the trial of the Urewera 18, 16, 15, 4 has finally got under way this morning in Auckland’s High Court.

So we may finally hear some facts about what this motley lot are accused of, rather than the self-serving soft-soaping they and their chums have been peddling on their behalf.

It has now been four and a half years since the 18 were arrested. Four and a half years! Four and a half years in which the crown muddled while defendants and their lawyers and their friends in the media churned out press releases, interviews and media events in their defence. In the absence of a real trial we had instead a trial by media—a “trial” in which defendants were feted while all the substantive evidence against them was suppressed at the behest of their own lawyers!

Law has been very much the loser in this case.

But let’s not accept any crocodile tears about how long it’s taken for this crew to finally get before the court—like the crocodile tears John Minto et al were crying this morning about how tough it’s been for them to be on bail for so long.  Because right from day one of this whole debacle, the Urewera 18, 16, 15, 4 and their lawyers have been using every delaying tactic in the book. (That their requests for suppression only delayed proceedings even longer puts their crocodile tears now over the delays into damning perspective.) But if a justice system cannot pull together a case in four years, while fending off the shysters out looking for a loophole, that’s a pretty serious indictment of the system’s failure.

And while out on bail Tame Iti was allowed to dance his way around Europe on the taxpayer.

Only in New Zealand, one suspects, would a man facing charges of participating in an organised criminal group, unlawful possession of firearms and possession of restricted weapons be allowed to swan off around Europe on a dance tour while taxpayers sit here at home picking up his tab.

So let’s hope we finally do hear some facts in coming days. Or else we’ll be left to conclude only that our “justice” system is little more than a laughing stock.

That’s a hell of a price for a train set

“Socialist governments traditionally make a financial
mess.  They always run out of other people’s money.”
- Margaret Thatcher

His ambition, he said, was to make Auckland the world’s most liveable city.

It seems, however, that after dreaming up a new train set, a fancy new bridge and various other fantasies, mayor Len Brown is instead intent on making Auckland among the world’s most expensive cities in which to live—with petrol, tax and rate hikes mooted to make up the $10-15 billion shortfall between reality and his fantasies.

And this is on top of the general rates rise he and his minions agreed last year to impose on us this year.

Nice, huh.

We’re in a deep and worsening recession, and all this clown can think about is means by which to extract even more of the hard-earned from those who earned it.

Thank goodness for the “Super” City, eh.

Glendowie Montessori

I’ve written many times about the benefits of Montessori education for your youngsters, not just through their early years but right on through primary and high school. If you can find them in your neighbourhood, and if they’re not just Montesomething schools instead of the real thing. 

Well, lucky old Glendowie. If you’re lucky enough to live in Glendowie, Glen Innes or anywhere in that area, I can tell you that a new Montessori classroom has just opened for your two-and-a-half to six year olds—and this is very much the real thing. It’s called the Glendowie Montessori Preschool, and it opens for business today at 227 West Tamaki Rd!

What’s more, there’s also an excellent Montessori primary classroom that can take your children at six.  So if you have young children and this is your stamping ground, then you’ve just fallen on your feet.

QUOTE OF THE DAY: "I am beginning to think that Christianity has a lot in common with Marxist-Leninism..."

"I am beginning to think that Christianity has a lot in common with Marxist-Leninism... God is dialectical materialism; Christ is Karl Marx; the Church is the Party, the elect is the proletariat, and the Second Coming is the Revolution."
"How do heaven and hell fit into that?" I asked.
"Heaven is the socialist millennium, of course. I think hell must be the punishment of the capitalists."

And...

"The medieval Church and the Communist state share four basic dictums. Firts and foremost comes the instruction to seek the life of the spirit: seek pure Marxism. Don't waste your efforts on other trivial things. Gain is avarice, love is lust, beauty is vanity.
"Two: Communists are urged to give service to the state, as Christians must give it to the Church--in a spirit of humility and devotion, not in order to  serve themselves  or to become a success. Ambition is bad; it is the result of sinful pride...
"Three: both Church and Marx renounce money. Investment and interest payments are singled out as the worst of evils.
"Four, and this is the most iportant similarity, there is the way in which the Christian faithful are urged to deny themselves all the pleasures of this world to get their reward in paradise after they die."
"And Communists?" she asked.
"If they work hard and deny themselves the pleasures of this world, then after they die their children will grow up in paradise..."
"You missed out number five," I said... "Victory over the flesh. Both Church and Communist state preach that."

- Excerpted from Len Deighton's novel 'London Match.'
Views are expressed by a defecting Communist.