Price crashes and higher taxes don’t build houses

Green co-leader Metiria Turei’s suggestion of dropping house prices by 50% was described by Prime Minister John Key as ‘barking mad’.

It would make some houses less unaffordable but it wouldn’t build more houses which is the only way to solve the problem of too few houses for the number of people wanting to rent or buy.

Crashing prices, no matter how slowly it was done, would reduce existing homeowners’ equity.

That would only be a paper loss for people who had a low or no mortgage. They’d still have their homes they just wouldn’t be worth as much.

For people with large mortgages, whether they borrowed to buy their home, set up a business or to buy other things, a price crash could leave them with no equity at all, or worse still owing more than the value of what they owned.

If they were forced to sell their houses those properties would be more affordable for some people but the sellers would have nothing with which to buy another house. All that would be have been achieved would be previous owners losing to new owners with major damage to the economy and no increase in the supply of housing.

Greens are also keen on a capital gains tax.

I’m not opposed to that in principle, as long as it was comprehensive and other taxes were lowered so the net tax take remained much the same.

But capital gains taxes don’t build houses and in other countries which have them they have done nothing to make houses more affordable.

Meanwhile schools in Auckland are finding it difficult to recruit teachers.

A survey of Auckland’s primary schools paints a picture of severe teacher shortages across the city and at every school decile level.

The struggle to recruit teachers is being described as “a nightmare” by principals who blame it largely on the high cost of housing in the city. . . 

In a statement, the Ministry of Education told RNZ News that it met regularly with Auckland’s principals to respond to their concerns about teacher supply.

A range of potential solutions were being explored, but in the meantime the ministry was working to smooth the way for overseas teachers to work in New Zealand and helping schools which had hard to fill vacancies.

Diane Manners has talked through possible solution with ministry officials said they would help, but only around the edges.

She wanted greater urgency in dealing with the problem, especially with a growing population that will mean more children needing more teachers. . . 

One solution that won’t work is to get an Auckland differential in the pay scale.

Teachers are paid the same wherever they teach. Paying Auckland teachers more would help those who already own a house but it won’t increase the housing supply. What it will do is give teachers more to spend and therefore, like any other measure which increases buying power without addressing supply, further inflate prices.

The housing problem is simply one of supply and demand.

The solution is equally simple – increase supply and/or lower demand.

The easiest way to do that is to build more houses and for some people living in areas of high demand and low supply to move to areas where demand is lower and supply is higher.

That will get supply and demand back into kilter without the collateral damage which crashing prices and increasing taxes would inflict.

P.S.

A Cromwell man has come up with an affordable, albeit compact, answer to more affordable homes:

They are warm, quiet, easily moveable and cost a fraction of a regular house to buy and Cromwell’s master of small spaces, Darryl Taylor, reckons his tiny shipping container homes could help solve Central Otago’s temporary accommodation woes. 

Taylor does admit it requires a mental leap in many people’s thinking to see a big metal box as a desirable home but following much research and experimentation, he says his converted containers are as comfortable to live in as a regular house. . . 

The containers have a “warrant-of-fitness” and are all still cargo-worthy. . . 

Some people wanted new, others liked the rustic look, Taylor said.  Built inside a warehouse, they are issued with a code of compliance from the Central Otago District Council before they go on site.

Considerable research and trial and error had gone into fitting the units out so some details would remain trade secrets, Taylor says.  He had consulted experts in engineering and other fields to help perfect the conversions, particularly in relation to ventilation. Bernice is in charge of painting the units and the pair continue to fine-tuning the finishings.

“We can now fit out a twenty footer in around six weeks and they go out the door fully code compliant. There is no condensation, they’re all double-glazed, insulated and ventilated.  They actually exceed council requirements but you do still need a building consent for your foundations.”

Ship containers were already watertight, bulletproof and resistant to earthquakes and extreme weather.  Inside Taylor added sound-deadening insulation, wooden lining, tiny bedrooms, kitchens and bathrooms of all specifications.  Drop-down decking using an electric winch could be added, or normal decking built on, once the container was in place. . . 

Taylor says he sells the 6m containers for about $42,000 fully converted for small-space living.  

A 12m would cost closer to $75,000 and two this size can be bolted together to form a four bedroom home. . . 

One Response to Price crashes and higher taxes don’t build houses

  1. Gravedodger says:

    It was with remarkable restraint that the Prime Minister employed that description of the most recent example of the complete lack of nous in matters economic from the Mcgillicuddie Serious number 27 in the 1999 general election Party Lists.

    Barking Mad is so kind although a rather derogatory slight on my Dachshund who has opinions on many matters including food, pests, intruders, the weather and animal rights, but shies completely from matters economic.

    For a Party Leader with delusions of becoming a serious mover and shaker when the socialists regain the treasury benches, to promulgate a policy target of crashing home values by 50% to restore the ratio of income to house value is just one more indication of the total unfitness of the Melons to become a part of any Government.

    At least the master manipulator had the good sense to deny the Dopy communistic melons sheltering under a totally fraudulent cloak of environmental concern, any place in the exercise of fiscal power in her rather tawdry at times, grasp on power.

    When the crashing of the issue price for the energy company shares led to people such as Moi investing in what then became a sure bet, the irresponsibility of such manipulation of matters economic for political advantage in total ignore of the damage to New Zealand’s financial stability was only a taste of the warped thinking to be followed by the politically damaging disaster that has her Barking Mad action treated so kindly by The PM.

    James Shaw must be in despair at such moronic shallow and politically damaging stupidity from his “CO” Leader. As another commenter suggested elsewhere in that one effort Material Girl put every single vote garnered from naïve voters in leafy burbs across the Nation who still cling to the now eroded notion that the environment matters, as a central driver of The GP of Aotearoa NZ, at serious risk.

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