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Persistent Lying About Housing Land Supply

Persistent Lying About Housing Land Supply

Hugh Pavletich | Performance Urban Planning
13 March 2013

Supplying affordable new homes today is a very formulaic business indeed – and has been since Bill and Alfred Levitt created the modern production housing construction industry soon after World War II.

This was a remarkable entrepreneurial feat, as the Levitts and many others had tried for decades prior, to emulate Henry Ford’s production methods with respect to automobiles – and failed.

Bill Levitt “cracked it” by splitting the housing production process in to specialist components and advancing from the “jack of all trades” (and master of none) horse and buggy cottage building culture.

Importantly, with the sub specialization, this allowed low and semi-skilled workers in to the residential construction industry.

The “Levitt methods” were rapidly emulated throughout the rest of the developed world at the time, triggering the “democratization of prosperity” following World War II.

The Levitts supplied new 80 square metre homes on 700 square metre lots for $US8,000 – about $US100 per square metre all up.

They supplied these homes to families outside New York with an annual household income of $US3,800 ( the median household income at the time in the United States was about $US2,500).

Generally, this was based on a single annual household income, where there was social pressure on the male to financially provide for the family, allowing the mother to focus on the care of the children and fulfil the role of “home executive. The male was socially considered a loser if he couldn’t financially provide for his family.

Rather “quaint” thinking in today’s world of course, where, rather amusingly, women have since become “liberated”. Liberated in reality to become “mortgage slaves” because of the grossly excessive costs of housing.

So, following in the tradition of the Levitts supplying new starter housing at $US100 per square metre all up – today some 60+ years later - new starter housing is being supplied on the fringes of the affordable United States housing markets, for about $US600 through $US700 per square metre all up.

In contrast, here in New Zealand, due to gross political and urban planning incompetence and persistent lying, the productivity and pricing performance of our residential construction sector has been wrecked.

It currently costs in excess of $NZ2,500 + all up per square metre for new starter housing on the fringes of Christchurch – and a stratospheric $NZ3,500 + all up per square metre on the fringes of Auckland.

Year after year, the Annual Demographia International Housing Affordability Surveys (there have been 9 to date) illustrates with the standard Median Multiple method, that normal housing markets do not exceed 3 times annual household incomes.

A “crystal clear” Definition of an Affordable Housing Market is incorporated within this year’s Survey and on the front page of the writers archival website Performance Urban Planning ( www.PerformanceUrbanPlanning.org )…

“For metropolitan areas to rate as 'affordable' and ensure that housing bubbles are not triggered, housing prices should not exceed three times gross annual household earnings. To allow this to occur, new starter housing of an acceptable quality to the purchasers, with associated commercial and industrial development, must be allowed to be provided on the urban fringes at 2.5 times the gross annual median household income of that urban market (refer Demographia Survey Schedules for guidance).”

“The critically important Development Ratios for this new fringe starter housing, should be 17 - 23% serviced lot / section cost - the balance the actual housing construction.”

“Ideally through a normal building cycle, the Median Multiple should move from a Floor Multiple of 2.3, through a Swing Multiple of 2.5 to a Ceiling Multiple of 2.7 - to ensure maximum stability and optimal medium and long term performance of the residential construction sector.”

So … the only question that needs to be asked is – why are people such as Mayor Len Brown of Auckland, persistently lying about housing issues, as the recent New Zealand Herald article – Mayor does u-turn on available housing land - illustrates?

Brown should know the “years of supply” measure is misleading as well. He has now conceded there are only an appallingly low 2,000 “construction ready” lots available on the fringes of Auckland.

The only true measure of scarcity or abundance is price.

The evidence is “staring us in the face” that if New Zealand had normal housing markets, new starter housing would be available on the fringes of our cities for at or below $NZ1,000 per square metre all up.

This would allow young families to buy 150 square metre new homes for about $NZ150,000 … 200 square metre new homes for $NZ200,000 … and so forth … with sensible mortgage loads too.

While the persistent incompetence and lying by politicians and planners on housing issues is often amusing, it is past time they started to “wake up” to the serious social and economic consequences.

The solutions are simple and are clearly outlined within Section 4 of Christchurch: The Way Forward.

ENDS

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