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Letter To John Key - Housing Affordability

Pavletich Properties Limited
PO Box 13 439
Christchurch
New Zealand

3 October 2007

Mr John Key MP
Leader
New Zealand National Party
Parliament Buildings
WELLINGTON

Dear John,

Housing Affordability

Congratulations on your sterling efforts over recent months in articulating sound policies on this issue. It is clear from your recent speeches and statements and those of your Housing Spokesman, Philip Heatley MP, that the National Party as a team. is researching the issue thoroughly and developing policies which will work – and over a reasonable time – allow young New Zealanders the same housing opportunities their parents had. They deserve nothing less.

My apologies for not writing to you earlier – but my wife Marg and I have been overseas since mid July.

It is particularly heartening to me to see the progress the New Zealand National Party is making – since I embarked on this issue on a voluntary basis in late 2004, when I initiated and with my good friend Wendell Cox, developed the Annual Demographia Housing Affordability Surveys. The 2008 4th Edition will likely be released late January.

In one of his recent communications with me, Wendell Cox had this to say with respect to your speech to the Auckland Contractors –

“An outstanding speech by Mr Key. I am particularly impressed in how he sets out in such clear terms a vision with respect to infrastructure.”

The reality is of course (and all the reputable international research supports this) is that if you get the land wrong…..everything else is wrong. This then leads to inappropriate infrastructure financing, degradation of the performance of the housing construction industry and excessive household debt (for those lucky enough to have the financial capacity to access housing) - to say nothing of the social costs.

In buying new fringe homes - people should not be spending any more than 20 – 30% for the section / lot – so that between 70 to 80% of peoples limited financial resources can be directed to the actual house construction. You will note on the Demographia website www.demographia.com , a recent comparative study of Sydney and Dallas Fort Worth - where (with respect to Dallas Fort Worth - as an affordable urban market example) new starter homes on the fringes are being erected for $US700 per square meter building area all up – around $US550 for the building and $US150 per square meter directed towards the land cost component.

The focus of the next Demographia Survey will be on what pricing levels should be achieved for new starter housing on the urban fringes. My initial research is that we should be getting in new starter fringe housing around our urban fringes for $NZ700 to $NZ900 per square meter all up.

In other words – new fringe starter housing of say 200 square meters on a section / lot of 500 square meters – for between $NZ140,000 to $NZ180,000.

It is pleasing to see that the NZ Housing Minister Hon Chris Carter in a release following your speeches in August said that “those saying that we have a land problem do have an argument”. Around August last year Chris Carter gave an excellent speech to the Real Estate Institute, but sadly, his handling of this serious issue since can only be described as “weak”. He appears more interested in looking after special interests, such as his cronies at Local Government New Zealand, rather than the interests of young New Zealanders. Recent distracting and futile talk of “inclusionary zoning”, where a certain percentage of a development will be “forced” to be low cost housing is pathetic. He fails to be “straight up” with the public in explaining how much more the other house purchasers will have to pay, to unnecessarily subsidize the low cost housing component.

I was rather disappointed with the response to your initiatives by the Greens. I had had an excellent meeting earlier in the year with Russel Norman, Co Leader and the Party’s Housing Spokesperson Sue Bradford. Both expressed at the time an aversion to high density development. Their recent statements indicate an aversion to fringe development as well. That only really leaves the option of housing young New Zealanders in boats – up creeks I presume! I’m baffled – and will write to Sue shortly outlining my concerns.

One must commend organisations such as the Resource Management Law Association, New Zealand Planning Institute (strongly supports the Demographia Surveys), Council of Trade Unions, Master Builders Federation, Property Council and the Real Estate Institute, for their significant contributions to this important issue. I do hope you and your Housing Spokesman Philip Heatley are offered the opportunity to speak on this issue to these organisations and others in the near future.

Special mention must be made of the Centre for Housing Research of New Zealand (CHRANZ) and the high standard of the work this small organisation has commissioned from Dr Arthur Grimes and the people of Motu Research. In my view Dr Grimes is the leading New Zealand economist with respect to the specialist field of urban economics. There is an urgent need for most generalist economists to get a better grasp of the micro economic drivers of our urban markets. Sadly – currently most have no comprehension of what a sound urban market is – to the extent too many economists (including property valuers) have yet to figure out the difference between inflation and growth.

The recent important United Nations Report – “State of the World Population – Unleashing the potential of Urban Growth” (available via the Demographia website) is very clear within the Introduction, where it states –

“Once policymakers and civil society understand and accept the demographic and social composition of urban growth (my view – stop being elitist), some basic approaches and initiatives suggest themselves. These could have a huge impact on the fate of poor people and the viability of the cities themselves. Throughout this Report the message is clear. Urban and national governments, together with civil society and supported by international organisations, can take steps that will make a huge difference for the social, economic and environmental living conditions of a majority of the worlds population.

Three policy initiatives stand out in this connection. First, preparing for an urban future requires at a minimum, respecting the rights of the poor to the city. As Chapter 3 shows, many policymakers continue to try to prevent urban growth by discouraging rural - urban migration………These attempts to prevent migration are futile, counter-productive and, above all, wrong – a violation of peoples rights.

……For poor families, having an adequate piece of land –with access to water, sewage, power and transport – on which they can construct their homes and improve their lives, is essential.”

John – through your efforts and those of your team – you have provided the necessary political leadership – so that New Zealanders now have a clear and sound vision for restoring housing affordability.

With best regards,
Yours sincerely,


Hugh Pavletich
Co author – Annual Demographia International Housing Affordability Survey
www.demographia.com

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