How Would You Fix This?

[Zardnaar]

I have posted about the housing crisis here. Well Covid has made things worse.

They were projected to fall 9% but have instead climbed double figures up to 20% (19% here).

Covid bailouts, low interest rates, 100 000 people moving back to NZ very few leaving.

Supply and demand.

The average house has hit $800000 ($600000 usd). Getting close to California in price.

In 2017 the government campaigned on building 100000 houses. Failed. In 2020 they campaigned on no new taxes. Tax hikes won't be available until 2023 probably or early 2024 (political suicide if you do it sneaky style).

NZ has no capital gains tax. A large amount of members of parliament own property.

Supply is partly restrained by the Resource Management Act (RMA). Building consents issued have been climbing. But it tends to clog things up.

Local councils issue consents and it's a majir source of income. A lot of councils are short of money and have been underinvesting in infrastructure for a few decades. Old water pipes some dating from 19th century.

Any solution also has to be partisan. Current government very likely to be voted out 2026. The opposition is neo libs they're happy with higher immigration, house prices, foreign money. They'll happily dismantle anything the government does. Unless it's to popular or expensive.

Once the borders reopen everyones expecting a rush if people wanting to move here. Some strange mysterious reason.

How would you reign things in or increase supply in real world terms?

 

[sendos]

Is there plenty of room to build new dwellings in NZ?

 

[Hrothbern]

Start in NZ the Tiny House revolution

 

[sendos]

Start in NZ the Tiny House revolution

Yes, build more of "the Shire"!

 

[Hrothbern]

Yes, build more of "the Shire"!

We are moving in NL towards Lego houses
(and tiny houses as starter)

We have a similar housing issue in NL, though much less room.
But too many "dark forces" hinder building enough houses (also by many silly strict regulations), in effect driving up housing prices out of reach of young people.
And yeah... all the people owning a house are not that interested in slow growing house prices... many election votes.
And people feeling rich with their high surplus value of their house compared to mortgage increase the consumer economy... increase the GDP... and most politicians are addicted to that.

The perverse situation is that young people with median incomes CANNOT save enough money in advance to lower the mortgage income treshold because housing prices grow faster than you can save money in advance. They have no chance unless they partner up early in life, postpone kids and eat rice with beans. And ofc unless they have parents who help out from the surplus value of their house and parents increase the mortgage of their own house.

Tiny houses were the first (small) hammer to get things moving here because of the cracks it delivers in that undersupply, of that monopoly effect of existing house owners.

Lego houses will have the future.

The concept is that almost all elements are factory manufactured to get scale size cost efficiencies and indoor multi-shift production efficiencies..... and are easily re-usable.
The elements are also within the many building regulations we have in NL.
Building a house takes a week at location, and changing-extending, it or relocating it, at low spilled value of original assembling cost-effort-time.
It also needs lower skilled workers working with tools nearby and procedures... meaning that ups and downs in demand can always easily be followed by supply of good enough skilled workers.
What we faced in NL with the 2008 crisis and then the Euro crisis was the Keynes need to get the unemployed productive but a too big time hurdle to get the skills trained into the unemployed.
One company started now with these lego houses and is easily upscaleable to push out the traditional construction monopolies, the guilds of artisans.
(also needing lots of traffic (time and climate) because workers are all the time driving from their homes to yet another location)

 

[Zardnaar]

Is there plenty of room to build new dwellings in NZ?

Theoretically yes but land banking, consents, regulation RMA etc.

It's basically illegal to build a cheap house and small houses are uneconomic.

 

[Samson]

Theoretically yes but land banking, consents, regulation RMA etc.

It's basically illegal to build a cheap house and small houses are uneconomic.

This change has to come from the top, so changing laws should be the easy bit.

 

[EgonSpengler]

Theoretically yes but land banking, consents, regulation RMA etc.

It's basically illegal to build a cheap house and small houses are uneconomic.

My first thought was, "is it possible to relax building codes without actually killing people?" Building (and, to some degree, maintaining) even bare-bones housing is incredibly expensive, and if it's left to the market, if the only people who can do it are the ones with the capital to invest, there has to be a significant profit at the end.

Getting from home to work (or school) is one key. Commute times. Where I live, distances are shorter than, say, California - everything is more compact - but Greater Boston has worse "rush hour" traffic than Greater Los Angeles if you measure it by miles-per-hour and length of commute*. That is, the time to travel N miles is higher. This raises housing costs because people want to live nearer their jobs. Anecdotally, I remember a woman who was a teacher in an expensive town; she wasn't being paid enough to live in the town, she wasn't even being paid enough to live 3 towns over. She ended up quitting her job because she couldn't afford to live within a 90-minute commute of her workplace. (And, at the same time, the area's public transportation is a shambles - and it was long before the pandemic.) So where you live is a balance of housing and travel costs.

In theory, as new, expensive housing is built, older buildings become less desirable, shabbier, and thus cheaper. But because location is crucial for most people and, as ever, land is the one thing you can't make more of, the crush of people in hot markets makes it profitable to buy old buildings and refurbish them into expensive housing. Across the street from me, an old building caught fire. Someone bought it - well, bought the land - rebuilt the damaged building and sold it as three, 2-bedroom condos at $800,000 USD apiece (the top floor went for $850,000 USD because it has a roof deck). I have no idea how much the refurb cost, but I'd imagine the profit was somewhere north of a million dollars. Even during the pandemic, there's new housing construction on almost every available square inch of land in my neighborhood, which was a working-class area 20 years ago.

I think to drive down housing costs, you need to spread out the population, which means spreading out the economy. There are cities and towns in the US where you can get land for the cost of filing the paperwork, and still nobody wants it. I think Detroit has so many derelict buildings it's a major fire hazard. They can't knock them down fast enough. They'll practically give you a whole block, but the infrastructure is another story. Another anecdote, someone's mom bought the lot next door to her house in Detroit for $5, but she has to pay to get the streetlights turned on at night, the nearest police station is so far away she got a dog for security, and good luck to her if her water main ever needs to be replaced. The real estate taxes in her neighborhood probably wouldn't pay for a sandwich. The poisoned water in Flint isn't front-page news anymore, but the problem hasn't been addressed. If you had $10,000,000 to invest, you could build or refurbish housing on lot the size of a postage-stamp in Boston or Brooklyn and double or triple your money, or you could spend it in Detroit or Baltimore or Stockton and risk everything for a 1% return on the hope the city's economy turns around.


* Or at least it did before the pandemic. Everything's changed dramatically the last year, the city's practically a ghost town. Nobody knows what will happen after the crisis recedes, if it does.

 

[Birdjaguar]

What is the goal or goals?

• More temporary immigrants?
• More permanent citizens?
• More local population growth with less emigration?
• More houses for locals?
• More affordable house prices?
• Higher real estate tax collections?
• Investment returns for landowners?
• Suburban sprawl development?
• Dense city centers?

What is a house and what kind of houses does the government want?

• Low rise apartment complex
• Single family dwelling on its own land
• High rise apartment
• Vacation homes

If you don't know where you are going, you will never get there. You cannot solve the problem if you do not know what the best answer includes or does not include.

 

[El_Machinae]

The major addiction is that the Boomers watched their housing prices rise and aren't psychologically prepared for deflation.
An easy fix would be to increase housing supply. That requires regulation that unleashed the market. Then, use the banking rules to force people to use a larger downpayment. Counteracting the deflation would need to be some type of payout to the Boomers.

 

[GinandTonic]

I think Detroit has so many derelict buildings it's a major fire hazard. They can't knock them down fast enough. They'll practically give you a whole block, but the infrastructure is another story. Another anecdote, someone's mom bought the lot next door to her house in Detroit for $5, but she has to pay to get the streetlights turned on at night, the nearest police station is so far away she got a dog for security, and good luck to her if her water main ever needs to be replaced. The real estate taxes in her neighborhood probably wouldn't pay for a sandwich.

There was a street scheduled for demolition in Liverpool. The council sold each of the houses for £1, on condition they had to pass building regs within IIRC seven years. Young people flooded in. It was worth their time and money investing in the street because it was set to be on the up. Their neighbours had the same terraced house as them so they could swap experience and specific tools, not to mention their trades.

Win-win for everyone except the tax man and the house building corps. Which is why it doesnt happen more often.

 

[Zardnaar]

What is the goal or goals?

• More temporary immigrants?
• More permanent citizens?
• More local population growth with less emigration?
• More houses for locals?
• More affordable house prices?
• Higher real estate tax collections?
• Investment returns for landowners?
• Suburban sprawl development?
• Dense city centers?

What is a house and what kind of houses does the government want?

• Low rise apartment complex
• Single family dwelling on its own land
• High rise apartment
• Vacation homes

If you don't know where you are going, you will never get there. You cannot solve the problem if you do not know what the best answer includes or does not include.

Generally single house on its on lot.

Local councils are in charge of resource consents.

National government is usually good enough. Local government a bit useless.

They've been kicking the can down the street for a couple of decades but are running out of street.

 

[Samson]

Building (and, to some degree, maintaining) even bare-bones housing is incredibly expensive

Do you know that? I have heard that the actual building costs of the "affordable" houses they are building around here are pretty trivial. I have tried to verify it with a google search and failed.

 

[Cutlass]

Deregulate zoning. Let people build what they want.

 

[amadeus]

Deregulate zoning. Let people build what they want.

Ah, this residential neighborhood looks like a good place to build my paper mill/airport.

 

[Zardnaar]

Deregulate zoning. Let people build what they want.

They kind if did this for the Christchurch rebuild.

Mostly to speed up resource consents.

 

[Birdjaguar]

Generally single house on its on lot.

Local councils are in charge of resource consents.

National government is usually good enough. Local government a bit useless.

They've been kicking the can down the street for a couple of decades but are running out of street.

If the end is to be single family homes on individual lots, they you will get the US's suburban sprawl without all the excess land that the US has. I think that for a tidy place like NZ, that would be a very bad idea. And worse if the goal is to increase the population through immigration. Rich folks want to live there and bring their money and that will keep pushing house prices higher as the available land diminishes. Californication.

 

[Zardnaar]

If the end is to be single family homes on individual lots, they you will get the US's suburban sprawl without all the excess land that the US has. I think that for a tidy place like NZ, that would be a very bad idea. And worse if the goal is to increase the population through immigration. Rich folks want to live there and bring their money and that will keep pushing house prices higher as the available land diminishes. Californication.

That's what has happened.

This is about as built up as it gets. There's some apartments but yeah.

Due to a lack of economy if scale there's basically monopolies and duopolies on the importation side of things.

Few months ago there were 17000 houses for sale in the whole country, 100k returning though.

My city had 250 but once you eliminated sections,lots etc it was around 100-120 that a family might buy.

 

[Birdjaguar]

And unless something changes, it will continue. Pasture land will become neighborhoods. But of course no one wants to stop the train of getting rich off real estate.

 

[Zardnaar]

And unless something changes, it will continue. Pasture land will become neighborhoods. But of course no one wants to stop the train of getting rich off real estate.

In yep that's pretty much it.

Boomers also have local government locked down. One local council has central government basically sidelining them and taking over.