Social housing must do better

Finance Minister Bill English didn’t mince his words when giving his view on state houses:

. . . Governments had been “grossly irresponsible” over Housing Corporation not knowing much about its houses or the tenants.

He said the nationalised housing industry “is a disgrace”. . .

Housing Corp was a poor performer and about a third of its housing stock was the wrong size, in poor condition and in the wrong place. That stock was worth about $5 billion and it was $5 b being wasted.

“There are going to have to be changes so we can stop wasting it, and we are going to learn a lot from Christchurch.”

Christchurch had “a half-clean sheet” to restart social housing.

“It is actually pretty shocking the wastefulness and politicisation and the crappy conditions that we make vulnerable people live in. So yes, we are pretty motivated about it because of the benefits for the tenants and the economy and for the Government’s books.

“It’s been a revelation to me that we run this huge asset base with all these vulnerable people and Government hasn’t known about its own tenants, it hasn’t known much about its own housing stock, it’s just been grossly irresponsible.

“We want to get Presbyterian Support, Ngai Tahu, Salvation Army, Housing Foundation involved in supplying these houses and put pressure on our own organisation, which has a record of poor performance.” . . .

The usual suspects are labelling this privatisation.

It doesn’t matter what you call it and who owns the houses, they will still be publicly funded and it wouldn’t be difficult for charitable organisations to do better than Housing Corp.

Too much good land lost to lifestyle

Landcare scientist John Dymond says too much high-value agricultural land is being lost to lifestyle blocks.

He’s called for urgent action and national monitoring of rural land fragmentation.

He also wants a national policy statement to prioritise NZ’s best agricultural land for productive uses.

“This is one case where short-term market conditions favour outcomes that are unlikely to be in the nation’s long-term interest,” he said.

In research published recently in the journal of the Royal Society he said in some areas the rate of subdivision of high-class land was very high. Already lifestyle blocks covered 35% of Auckland’s best agricultural land.

There was no reason to expect the demand for rural subdivisions to subside but NZ’s best agricultural land was valuable, limited and a non-renewable resource, he said.

Lifestyle blocks make up 5% of NZ’s non-reserved land and 10% of all high-class land.

Lifestyle block developments had far outstripped loss of land through urbanisation in recent years, he said.

“Fully one-tenth of NZ’s most productive agricultural land has already been converted to lifestyle sections and this has increased rapidly in the last 10 years.” . . .

Real Estate agents love lifestyle blocks because they tend to turn over regularly.

People move out with rosy dreams of a rural lifestyle but soon get sick of the demands the care of their few hectares put on them and the time wasted commuting to work, school, sports and social activities.

Planning rules in some areas aim to retain the rural character by requiring subdivisions to be bigger than the 1000ish or 500ish square metres (quarter and eight of an acre in old money) sections allowed in urban centres.

That tends to turn once productive land into a series of over-grown gardens or pony paddocks.

Three surveys in Western Bay of Plenty between 1996 and 2005 showed up to two-thirds of properties less than 4ha and up to 82% of those less than 1.5ha were not being used for productive purposes.

On only 29% of lots did production increase and these tended to be between three and 8ha in size. . .

Unless the owners have very green figures with a horticultural bent, most lifestyle blocks aren’t nearly as productive as bigger blocks and even if they are they don’t have the economies of scale.

It might be better to allow smaller sections and high density developments on less productive land and keep better land in economic units.

However, when land supply is one of the major factors influencing high prices for houses, the suggestion of restricting the subdivision of productive land on the outskirts of cities wouldn’t be popular.

Mobile retirees could help housing affordability

Baby boomers have started retiring and a lot more will follow.

Many of them will be in Auckland. Not all of them will want or need to stay there.

These mobile retirees could sell a home there and buy something at least as good for a lower price elsewhere.

Look at what $455,000 or $165,000 could buy in Oamaru and contrast that to what you’d get for a similar amount in Auckland.

Selling up and shifting out would take some of the pressure off the housing supply in Auckland and add to the population of smaller towns and cities which would welcome inward migration.

The difference between the price gained for the house sold in Auckland and one bought elsewhere would give the mobile retirees money to spare to enjoy a less frugal retirement.

This won’t make housing more affordable by itself, but add it to other measures and it could help.

Affordable housing requries culture change

Affordability of housing isn’t a simple matter.

Someone wanting to sell, or with a large mortgage wanting more equity in their property will be happy with higher prices.

However, there are more people finding it more difficult to buy and in responding to the Productivity Commission’s report on housing affordability, Finance Minister Bill English spells out why it matters:

“High house prices matter because many New Zealanders spend a large portion of their incomes on housing and that has helped fuel household debt and contribute to damaging imbalances in the economy,” Mr English says.

“In particular, high housing debt diverts money from more productive investments, contributes to New Zealand’s significant overall level of indebtedness and exposes taxpayers to growing demands for State assistance with housing costs. 

“Those factors make it vital that housing becomes more affordable. In addition, projections suggest that many more homes will be required in coming years than are being built.”

There are no quick fixes and improving affordability isn’t just the government’s responsibility but it has a programme with four key aims:

• Increasing land supply – this will include more greenfields and brownfields developments and allow further densification of cities, where appropriate.
• Reducing delays and costs of RMA processes associated with housing – this includes introducing a six-month time limit on council processing of medium-sized consents.
• Improving the timely provision of infrastructure to support new housing – this will include considering new ways to co-ordinate and manage infrastructure for subdivisions.
• Improving productivity in the construction sector – this includes an evaluation of the Productivity Partnership’s progress in achieving a 20 per cent increase in productivity by 2020.

Decisions made by local councils not only affect their local communities, but have wider effects on the economy and the Government’s books. 

“Many of the changes that will make a difference lie with councils and the Government expects them to share the commitment to improving housing affordability,” Mr English says. . .

These measures will help, but a culture change is also needed.

My generation and older were brought up with the idea of a single story house on a quarter acre section as the norm.

That is still possible in some places but in cities, notably Auckland, where demand for housing is so high and land supply inadequate it is no longer realistic.

People who want to live in those places need to accept that their sections will have to be smaller and houses higher. Terraced housing and apartments are normal in most other parts of the world where a lot more people are packed into cities which cover far smaller areas than ours.

Not PC discusses some options and shows some examples.

Denser housing will affect communities too – if people no longer have big sections round their homes, there will be a need for more public green spaces and play areas.

Those not willing to accept the change will have to move to smaller cities and towns where there’s less pressure on land and prices which could be good for both the city they leave and the place where they settle.

The full report is here.

Is affordable or wantable the problem?

When I first left flatting there wasn’t a great deal of difference between the house I lived in and my parents’ home.

The flat wasn’t as well built and the home was a bit bigger but it was just an ordinary three bedroom, one bathroom houses with few bells and whistles, as most houses were back then.

I was only renting but had I been looking at buying that’s the sort of house I’d have been looking at too.

Now the difference between what many young people are used to in their parents’ houses and what they can afford to buy as a first home is much greater.

Their parents probably started in modest houses, and only after saving a good proportion of the price for a deposit. Then by dint of hard work and saving upgraded to something  bigger and better.

It’s so much easier to go up than down and it’s understandable that people accustomed to designer kitchens, multiple bathrooms and other domestic comforts don’t want to do without them.

But it’s unrealistic for most young people to expect to start out where their parents finished.

Cactus Kate points out:

Until my generation (X) and younger realise that they cannot afford to live in the sort of homes in their 20’s and 30’s as their parents do in their 50’s and 60’s then housing affordability will always ultimately cause disappointment because somewhere and somehow we all want to own or rent a bigger home in a nicer area that we are stretched to afford.

Don Brash has a point about the supply of land on which to build impacting on prices .

Some towns and cities do have a land supply problem which pushes up the price.

But buyer expectations are also part of the problem.

If would-be home owners lowered their sights a bit and a little less demanding in defining what’s a wantable house they might find it’s a more affordable one.

Location, location location

It’s better to buy the worst house in the best street than the best house in the worst street.

That’s the real estate rule summed up as location, location, location and it’s one reason that the affordability of housing depends not just on the house but where it is.

The  Productivity Commission’s report on housing affordability found that land prices had increased faster than house prices over the last 20 years. That suggests a shortage of land where people want to live.

One solution to that is to free up more land for residential development.

The Greens are opposed to this because it means generally means people have to travel further. I think it’s a pity that productive land is taken over for housing.

There is another solution  and that’s for people to live where land is cheaper.

Sections in smaller towns is usually much cheaper than it is in bigger cities.

A few years ago the Waitaki District Council decided to use that to entice people from Auckland to move to Oamaru. Some did and found they could buy a much better house than the one they ’d sold with a good deal of money left over.

Life in a small town doesn’t suit everyone but people prepared to be flexible about location will find housing is more affordable than those who want to live in the best streets.