Gordon Campbell on Housing as an Election Issue

According to a recent international study New Zealand is one of the least affordable places on Earth to own a house, given that the study’s authors estimate that house prices in Auckland are running at roughly 8 times a median income of $75,000. As Radio New Zealand has reported :

The 10th annual Demographia International Housing Affordability Survey, which ranks 360 cities in 10 countries according to their affordability, named New Zealand as having one of the least affordable markets in the world. Auckland ranked 347th of the 360 cities....Study co-author Hugh Pavletich said affordable homes should cost no more than two to three times the median income.

The international study’s findings are in line with recent trends in the housing market. Nationwide, the median sale price reached $427,000 in December, and prices are rising at a rate of almost 10%. annually. In Auckland, house prices may have fallen recently, but they remain sky high.

Prices in Auckland, which have been driving growth over the past year, fell 3.2 percent to $620,000, and were up 12 percent on the year.

Needless to say, many households in New Zealand do not enjoy an income of $75,000 a year ; and few would be getting wage increases of 10-12% a year to keep pace with house prices. In 2014, the situation is about to get worse, not better : the economic rebound will soon prod the Reserve Bank into action to raise interest rates in order to dampen down inflation, thereby pushing up the cost of getting and servicing a mortgage. Like a slow motion train wreck, the crisis in affordable housing keeps getting worse, without central or local government appearing to have any meaningful response.

The private sector seems equally bereft of sustainable solutions. The authors of the Demographia study for instance, urge government to leave things to the market...which seems to entail opening up more land at the city’s periphery and then ( somehow) building the transport infrastructure to cope with the urban sprawl this would generate.

In particular, the authors rail against government regulations meant to foster high density housing ( regulations which among other things, aim to reduce sprawl, and enable readier access to existing amenities, including transport) while simultaneously stressing that easy access to such amenities should be a central aim of policy. See if you can square these two contradictory positions. On one hand, the authors appear to recognise the problem of opening up land at the city margins, and fostering urban sprawl:

A residential location that only allows access to only a small segment of the job market in less than an hour commuting time has not much value to households, even if it is theoretically affordable. For instance, the government of South Africa has been building several million units of heavily subsidized“affordable” housing in areas that require long and expensive commute transport costs representing in some cases more than 50% of a worker salary. In this case, affordability without mobility is only a poverty trap. Affordability and spatial mobility are therefore inseparable objectives.

Indeed. An affordable home out in the boondocks and an unaffordable transport bill to get toi work is no real solution. But then the authors also seem to think the solution they favour - ie, more land opened up for real estate market purposes, and the abandonment of regulations that aim to foster high density housing etc - can be put in place without significant social and environmental cost:

....If planners abandoned abstracts and unmeasurable objectives like smart growth, liveability and sustainability to focus on what really matters – mobility and affordability – we could see a rapidly improving situation in many cities. I am not implying that planners should not be concerned with urban environmental issues. To the contrary, those issues are extremely important, but they should be considered a constraint to be solved not an end in itself.

Right. But saying urban environmental issues are important is pretty meaningless if the policies being advocated will make them worse. Because if we did focus only on those two factors - mobility and affordability - we would quickly arrive at the high cost, unsustainable solution that simply doesn’t work : namely, the building of more and more motorways. That said, it is always easy to pick holes in almost any attempted solution to the country’s crisis in affordable housing - which has been the product of ( among other things) the reluctance of successive governments to (a) build a sufficient number of affordable houses (b) devise a tax system that discourages speculation and (c) pursue a high wage, value added economic strategy for any but a select few.

Given that the current government seems devoid of significant policy on this subject, it will be interesting to see how strongly Labour leader David Cunliffe emphasises the housing crisis in his so called State of the Union address due to be delivered on January 27. The government has made it clear that it aims to fight this year’s election on its handling of an economy that is now showing strong signs of recovery. Just as clearly, Labour will be arguing that most voters will see few, if any, fruits of that recovery in their pay packets, or in their ability to provide a home for their families. In other words, the economy is shaping up to be a glass half empty / glass half full factor in this year’s election campaign. And if Cunliffe can’t make housing affordability bite as an election issue, he will struggle to get traction on any other grounds.

ENDS

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