You Think Rents Expensive......

[Zardnaar]

It's worse here. Least affordable housing in OECD

The Property Market is Destroying Our Social Fabric

How did we get here — and what is it doing to us?

northandsouth.co.nz

And it's been a crisis for almost a decade. It was an election issue 2017.

This isn't the first time I've talked about it but that article explains it better than I do. It also references immigration.

It's been building since 1991 when they poured gasoline on the embers that date from around 1988. NZ had the highest immigration rate per Capita in OECD. If you think your country has high immigration double or triple it.

Net result is social housing stock is less than 1991 while the population surged 25% in 17 years. Prices started going crazy when immigration numbers started rising.

Article also notes that Labour (left wing) generally builds houses while National sells them. National is also pro migration while Labour is willing to restrict it. Note even if they cut vusas in hhal that only brings new arrivals down to levels similar to other relatively migration friendly members of the OECD.

Also point out there's no capital gain tax here.

Anecdotally as a kid our rent didn't increase from 1988-97 it was NZ $90 for a three bedroom house. We moved 1998 to a better house $100 a week.

That's a 3 bedroom house for $45-$60 a week depending on exchange rates. My friends rent in the city 1996 was $40 a week for a room (student allowance $150 NZD). 1998 a two bedroom granny flat 1/4 acre section sold for $14k nzd in my hometown. That's around $7k-9k usd. It was next door to our $100 a week house. My friends dad was a corporate type on 70k a year (1996). They had a flash house $150 ($75-85 usd) a week in rent.

Australia, Canada, UK, USA are going down this road now we just started earlier and went harder. Prices are starting to fall now due to interest rates going up. House prices doubled in 7 years.

Before you claim Zards off his rocker about immigrants try reading the article. Unlike USA it's not really racial here it doesn't matter where they're from and our rates per Capita were double or triple your countries. Migration here is also skill based so illegal immigrants, refugees etc are not a problem in any serious capacity. You get the occasional overstayer that does a runner.

Also note Zard lives in the cheap part of the country house 100 meters up the road went for around $500k usd at the height of the craziness. In a "working class" suburb in our cheapest city. NZ dollar has gone down since then and prices are currently falling.

So perfect storm of demand via migration meeting a hands off approach and cheap debt and tax free capital gains.

 

[EnglishEdward]

Do the landlords and landladies in New Zealand have the right to readily evict tenants on a no fault basis ?

 

[Zardnaar]

Do the landlords and landladies in New Zealand have the right to readily evict tenants on a no fault basis ?

Sort of. They need to dress it up as a relative moving in, 42 days notice.

But there's no real follow up or proof required/cousin moves in for 1 day.

Landlords were doing rent auctions at one point. The state is also essentially subsidising the landlords which replaced the old system.

 

[Gorbles]

So, the short version is rent is expensive?

It's unsustainable, and the longer it goes on, the worse the fallout is going to get.

 

[EnglishEdward]

Sort of. They need to dress it up as a relative moving in, 42 days notice.

But there's no real follow up or proof required/cousin moves in for 1 day.

Landlords were doing rent auctions at one point. The state is also essentially subsidising the landlords which replaced the old system.

Thank you.

In the UK once the fixed period of a tenancy expires and it becomes a de facto rolling tenancy, landlords
have a statutory right to give notice without giving any cause at all and readily obtain a court audit to evict.

Housing Act 1988

An Act to make further provision with respect to dwelling-houses let on tenancies or occupied under licences; to amend the Rent Act 1977 and the Rent (Agriculture) Act 1976; to establish a body, Housing for Wales, having functions relating to housing associations; to amend the Housing...

www.legislation.gov.uk

This means that a landlord can fail to maintain a property.

If the tenant complains, they may be served with an eviction notice.

This means that a landlord can announce an increase in rent.

If the tenant demurs, they may be served an eviction notice.

And if the landlord defaults on paying a mortgage payment,
the finance company may very simply obtain possession.

 

[Zardnaar]

Thank you.

In the UK once the fixed period of a tenancy expires and it becomes a de facto rolling tenancy, landlords
have a statutory right to give notice without giving any cause at all and readily obtain a court audit to evict.

Housing Act 1988

An Act to make further provision with respect to dwelling-houses let on tenancies or occupied under licences; to amend the Rent Act 1977 and the Rent (Agriculture) Act 1976; to establish a body, Housing for Wales, having functions relating to housing associations; to amend the Housing...

www.legislation.gov.uk

This means that a landlord can fail to maintain a property.

If the tenant complains, they may be served with an eviction notice.

This means that a landlord can announce an increase in rent.

If the tenant demurs, they may be served an eviction notice.

And if the landlord defaults on paying a mortgage payment,
the finance company may very simply obtain possession.

Here there's two types of agreements. Rental vs lease.
90's was mostly rental agreements you could move with 6 weeks notice. Signed first lease 1999 iirc which locks you in for a year.

Once lease expires your agreement is over it doesn't automatically renew. In every case landlord has asked me if I want to renew but I haven't signed one since 2008 iirc.

 

[EgonSpengler]

I'm curious, did anyone important in NZ subscribe to "trickle-down economics", or anything like it, in the 1980s?

I'm not a scholar on the subject, but I believe here in the US, a lot of the concentration of wealth that has occurred in this country - and the myriad problems resulting from that - can be traced to that period when Ronald Reagan was in office. I guess I wouldn't be surprised if people in the UK can thank Margaret Thatcher for some of the straits they're in. I don't know how much the US economy has directly impacted other countries in the last 40 years, or if other countries have their own versions of those types, or some combination. Wikipedia says the PMs of NZ in the '80s were Robert Muldoon of the National Party (1975-1984) and David Lange of the Labor Party (1984-1989). Of course the concentration of wealth is a natural consequence of capitalism, if you don't keep a firm hand on its leash, no matter who's in charge. I certainly can't claim to have predicted it back then, but in retrospect, the global housing crisis seems kind of inevitable, doesn't it? I think a lot has been written about how much wealthier the wealthy have gotten in the last 4 decades.

 

[Zardnaar]

I'm curious, did anyone important in NZ subscribe to "trickle-down economics", or anything like it, in the 1980s?

I'm not a scholar on the subject, but I believe here in the US, a lot of the concentration of wealth that has occurred in this country - and the myriad problems resulting from that - can be traced to that period when Ronald Reagan was in office. I guess I wouldn't be surprised if people in the UK can thank Margaret Thatcher for some of the straits they're in. I don't know how much the US economy has directly impacted other countries in the last 40 years, or if other countries have their own versions of those types, or some combination. Wikipedia says the PMs of NZ in the '80s were Robert Muldoon of the National Party (1975-1984) and David Lange of the Labor Party (1984-1989). Of course the concentration of wealth is a natural consequence of capitalism, if you don't keep a firm hand on its leash, no matter who's in charge. I certainly can't claim to have predicted it back then, but in retrospect, the global housing crisis seems kind of inevitable, doesn't it? I think a lot has been written about how much wealthier the wealthy have gotten in the last 4 decades.

Yes 1984 we got Rogernomics who was a finance minister in the Labour party.

They went harder and faster than Reaganomics in the USA and Thatcher in UK. They pushed trickle down very hard. Reagan and Thatcher never dreamed of this stuff and the speed it happened.

That labour government destroyed the old social order followed by a hard right national government in 1990 who smashed the unions (1991 unemployment hit 11% cf 15% great depression). Interest rates hit 18% as well. Trickle down was sold as the solution to this.

The article did cover some of this it was essentially predicted.

 

[El_Machinae]

What is the major factor slowing down construction of new housing? Here we have steadily increasing construction costs, a reasonable fraction of which must be bureaucracy, but also a lot of nimbyism. Piles of it.

Infill is this interesting paralysis, because small houses can be too nice to infill. Even though we have lots of small houses that are being rented, and obviously doing infill to make a larger rental space would increase income, the spread between the old income and the new income isn't worth it.

The baby boom is large enough here that it's going to have a noticeable impact on the property market. What we don't have is the political will to cause housing prices to come down, because they are the nest egg for a lot of people who have adapted their expectations

 

[GoodEnoughForMe]

Margins in construction are very low and continue to be that way. One way developers can get around that is by being allowed to build duplexes/quadplexes/whatever but in America we love single family home sprawl because it’s important the boomers have a permanent underclass.

Upzoning will def help, but this will honestly take public housing too, that’s the reality. There’s nothing inherently wrong with it, but it’s such a dirty word in the US because previous attempts were intentional ghettos designed to fail that it’s hard to see a big push for it coming back.

There are also a lot of owners who just sit on empty land until it becomes worthwhile to build, LVT would help. This is especially pernicious in Detroit where tons of wealthy people swallowed up the entirety of empty lots as the city fell apart and are now just holding onto them until “Detroit returns” which obviously it can’t really do so until they build on said lots.

 

[GoodEnoughForMe]

People don’t really realize but a whopping 2/3 of American adults own a home, and about 40% of home owners have their place entirely paid off. That’s just a massive constituency to protect home prices, since we decided that making the single most important thing to literal survival (shelter) the average person’s largest purchase and investment vehicle. Good thinking past humans.

 

[Birdjaguar]

Looking at the past, as boomers retire there may be a trend to downsize and move south or west. That will put lots and lots of homes on the market. I would expect declining home prices in much of the country and increased prices in boomer retirement areas.

 

[9gkj548hkm20vk79dj689bnj4]

The commission was one cog in a sophisticated housing system that had built up over the 50 years since Michael Joseph Savage carried a dining table through the front door of New Zealand’s first state house in 1937. That system had been tweaked and refined through the post-war decades, but it was underpinned by a broad consensus that it was good for social wellbeing if families owned their homes, and that they should be supported by the government to do so where necessary. For those who couldn’t afford to own, there would be state houses at subsidised rent.

perhaps that consensus was wrong.
what evidence is there to suggest that homeowners simply do better at all aspects of life than renters?

*edit*
the answer I would anticipate is that "because people look down on renters", and to which I would say: then they shouldn't do that.
and also, if there is still a lingering perception that landlords (like lawyers) are simply a group of people that no one likes...to put it mildly...which is why everyone should own, then that ought to change just as equally.

 

[GoodEnoughForMe]

Looking at the past, as boomers retire there may be a trend to downsize and move south or west. That will put lots and lots of homes on the market. I would expect declining home prices in much of the country and increased prices in boomer retirement areas.

The funny thing is there’s been several studies and polls lately that have shown that retirees who want to downsize just haven’t been able to because of the complete lack of inventory. People are aging in 2500 square foot homes they can’t maintain because there is nowhere to downsize to.

 

[Birdjaguar]

I guess there is a need to build more apartments and condos in Florida and Texas.

 

[EgonSpengler]

Margins in construction are very low and continue to be that way. One way developers can get around that is by being allowed to build duplexes/quadplexes/whatever but in America we love single family home sprawl because it’s important the boomers have a permanent underclass.

Upzoning will def help, but this will honestly take public housing too, that’s the reality. There’s nothing inherently wrong with it, but it’s such a dirty word in the US because previous attempts were intentional ghettos designed to fail that it’s hard to see a big push for it coming back.

There are also a lot of owners who just sit on empty land until it becomes worthwhile to build, LVT would help. This is especially pernicious in Detroit where tons of wealthy people swallowed up the entirety of empty lots as the city fell apart and are now just holding onto them until “Detroit returns” which obviously it can’t really do so until they build on said lots.

Last summer I listened to a podcast about the housing situation in Toronto. The reporter found zoning laws still on the books that dated back decades, which were specifically drawn up to discourage immigrants from moving into the city. The zoning prevented prevents the construction of multifamily buildings (e.g. 6-unit apartment buildings). There's one multi-unit apartment building that was built before the laws went into effect and has been well-maintained ever since, that is immensely popular and has become one of the most expensive places to live in the entire city because people love it. I think it's like 12 or 14 units, or something. There was another building of 6 or 8 units that's just sitting vacant, because the owner had to do major renovations, but now the law prevents him from leasing it. And even though the zoning laws are ancient now, nobody wants to change them because they don't want anything to effect the values of their single-family houses. (The reporter was quick to point out that he was using Toronto as a case-study, and the problems exist all across N. America.)


EDIT: Found it.

99% Invisible, 17 May 2022 - "The Missing Middle"

Toronto’s missing middle problem is pretty serious, and it can be traced back to early 20th century zoning laws. In the late 1800s, there was a big wave of immigration to North America, and most of these immigrants were moving to cities. In Toronto there was already an established population of British immigrants, but much of this new wave was eastern European. New multi-unit tenement buildings cropped up to house these new people.

But there was a backlash against these new immigrants, and in 1912, Toronto banned apartment buildings in most of the city. This ban was an early version of exclusionary zoning — the kind of residential zoning where large swathes of urban centers are reserved for single family homes, and only single family homes. Cities across North America were passing these kinds of zoning laws, and they were driven by a misguided perception that apartment buildings were dens of iniquity.

 

[Zardnaar]

What is the major factor slowing down construction of new housing? Here we have steadily increasing construction costs, a reasonable fraction of which must be bureaucracy, but also a lot of nimbyism. Piles of it.

Infill is this interesting paralysis, because small houses can be too nice to infill. Even though we have lots of small houses that are being rented, and obviously doing infill to make a larger rental space would increase income, the spread between the old income and the new income isn't worth it.

The baby boom is large enough here that it's going to have a noticeable impact on the property market. What we don't have is the political will to cause housing prices to come down, because they are the nest egg for a lot of people who have adapted their expectations

Nimbyism,red tape and construction costs. Eg the price difference between a small "cheap" house and a larger one are fairly minimal so there no incentive to build cheap housing. Some costs are essentially fixed (water, electricity connection, consent process).

Mostly they can't build fast enough to keep up with demand. Covid kinda changed that though as immigration dropped to a few thousand vs 70k+.

Politians love quoting consents issued vs numbers built though.

Christchurch was the cheapest city due to earthquake rebuild now I think it's my city.

 

[Zardnaar]

The commission was one cog in a sophisticated housing system that had built up over the 50 years since Michael Joseph Savage carried a dining table through the front door of New Zealand’s first state house in 1937. That system had been tweaked and refined through the post-war decades, but it was underpinned by a broad consensus that it was good for social wellbeing if families owned their homes, and that they should be supported by the government to do so where necessary. For those who couldn’t afford to own, there would be state houses at subsidised rent.

perhaps that consensus was wrong.
what evidence is there to suggest that homeowners simply do better at all aspects of life than renters?

*edit*
the answer I would anticipate is that "because people look down on renters", and to which I would say: then they shouldn't do that.
and also, if there is still a lingering perception that landlords (like lawyers) are simply a group of people that no one likes...to put it mildly...which is why everyone should own, then that ought to change just as equally.

Well the emerging data is the flow on effects are very disruptive.

If you can't get secure housing you have to move every year. That costs money. You may not be able to go to the same school which means kids routines get disrupted (you lose all your friends).

There's no security or stability for the kids.

It's also really expensive for the government. If you're on welfare for example the more rent you pay the higher the subsidy is. Article covers that as well. Additionally the people who kuss out get emergency housing which is motels which charge out at a premium to do it (more wear and tear on the facilities, rough crowd).

Had they bothered maintaining the old paradigm (adjusted for inflation) the would have had a big housing portfolio themselves and tens of thousands of extra social housing units the governor wouldn't have to pay billions to subsidise.

A couple of hundred million over 30 years would have constructed thousands of houses.

Now it's costing them 2 billion a year in supplements plus emergency housing and they own 0 extra houses themselves.

They could always sell off older social housing and build new ones. They sold them off and didn't build new ones.