The housing crisis is politically unique. I can’t even recall an issue for which every political party and every voter agrees on the solution – build more houses.

It is well known that one of the biggest drivers for house price appreciation is migration. If you see net migration on the rise and if making capital gains is your objective, it’s a good time to buy a house. 

In the five years to December 2014 the average net migration was a paltry 7,500 people annually. In this post-GFC world house price growth was reasonably muted. In the subsequent 6 years to December 2020 net migration averaged more than 57,000 a year. We’re at an interesting juncture because we’re about to cross the point where we’ve had more migration to New Zealand under Ardern’s Labour government that under the previous administration. It’s officially Labour’s housing crisis.

Like many others I was critical of the John ‘do nothing’ Key government, but the current lot have severe limitations too. 

The failure of the Right is that they ‘don’t care’ and can be too accepting of problems in society. Conversely the Left think they can ’fix everything’ and usually leave us with cumbersome bureaucracy and unintended consequences. We should be content, as lurching back and forth between the two is probably not a bad way for a country to make progress. 

I have a soft spot for Labour because in my pimply youth, David Lange’s government came to power and boldly restructured our economy. They got plenty wrong but showed vision and courage I haven’t seen since. I much prefer politicians who take some risks rather than just try to hold onto the job as long as they can.

One of the greatest delusions of the Left is that justice is their motivation and the outcome they seek. History often reveals that jealousy and revenge are motivators and a desire for power the objective above all else. 

This is most eloquently surmised by Nietzsche: “Let it be very justice for the world to become full of the storms of our vengeance” – thus do they talk to one another. “We shall wreak vengeance and abuse on all whose equals we are not” – thus do the tarantula-hearts vow. “And ‘will to equality’ shall henceforth be the name for virtue; and against all that has power we want to raise our clamour!”

It seems that Labour is heading this direction, essentially lashing out at landlords and changing the rules of the game without public consultation. This is also a tried and proven political strategy – find someone to blame that isn’t the government. The problem is that history shows you don’t make the poor better off by making the rich worse off. Landlords are not the problem. I’d suggest they are more likely part of the solution. 

I’m a renter and have been for most of my life, preferring to put my money toward productive capacity. I’ve had eight landlords and known a great many more. All of them have been a middle-class battlers. When I was a student my landlords were a retired couple, who supplemented their superannuation by owning a rental property. They were lovely people and even mowed our lawns for us, which served the dual purpose of keeping them fit and allowing them to keep an eye on us.

Down the road, there were two two-story flats that had been constructed by a late-career builder, who fancied managing these four flats would provide him a path to early retirement. The residents loved him because he was the ultimate maintenance man.

Ordinary people invest in rentals because they fancy it’s better than bank interest and they don’t trust the sharemarket. They are mostly ordinary people who own just one rental property. None of the landlords I’ve encountered could be described as ‘rich people’. 

Not enough houses … full stop

The issue is too many people and not enough houses. Who owns the houses is not the primary problem. 

My rent has gone up a couple of times in the last year and I can’t say I’m happy about it, but I keep paying. Landlords are in the business of making money and are universally thrilled with the recent house price boom. It makes sense to me that, if you have one rental and ten prospective tenants, a landlord might ask: ‘Who wants to pay me the most?’ That doesn’t make them bad people. Many are spending a great deal on improvements, such as insulation upgrades, which may be unaffordable to a first-home buyer.

Recent changes to legislation, most notably removing the tax deductibility of interest costs, might encourage some landlords to exit the property market, but this won’t make houses cheaper or put a roof over the heads of the homeless. The doubling of the brightline test to 10 years is actually likely to make many landlords hold on to properties, which I doubt was its objective. It strikes me that the government wants to hurt the landlords that are making money, rather than actually address the problem.

Demand and supply is the key factor that’s driving house prices. Auction prices go crazy when there are many bidders and few sellers. The triumph and tragedy in the room is palpable and it can be fabulously entertaining for the casual observer. Demand looks set to remain strong so the only meaningful solution is to build more houses. 

Kiwibuild failed to achieve this in the last term and my bet is they’ll fail again this time. We have a shortage of skilled tradespeople in New Zealand and if you want a house built, most builders will pencil you in for sometime next year. So, in a market where the building industry is working at full capacity, how are you going to build more houses? 

The momentum here and abroad is towards pre-fabricated homes or ‘off-site’ building. They are faster and cheaper to build. The government have made some progress here and is in the process of passing specific legislation to streamline prefabs. The problem is that the leaky homes crisis still lingers and they are concerned about building quality. 

Once the legislation is passed the Government doesn’t plan to bring it into force for about 15 months while they work out the finer details. Legislators have known for years that our regulations are hopelessly unfriendly to prefab buildings and that’s a key reason they are not commonplace here. Another barrier is the builders themselves, who would rather build in a traditional way rather than be trapped on a production line building the same wall 15 times each day. This remains an area in which Government could put in place game-changing incentives.

If you really want to build houses fast, the best solution is to bring in 5,000 Filipino builders. They have good skill levels and not enough work at home. While accommodation is short here in Hawke’s Bay a great many tourist facilities are available in other regions of the country, so housing them is possible. Labour simply isn’t going to do this. The E tū union has complained previously about Filipino workers exploitation and Labour are in most respects ideologically opposed to migrant labour. Regulatory oversight is the only thing required to ensure workers are not exploited. 

Given a choice between managing the risk of exploitation and continuing to have people living with their children in the park, I know which I’d choose. 

Labour were elected on their handling of Covid-19, but their track record on housing will surely be a critical factor in the next election. There are plenty of levers for them to pull but it seems they lack the vision and courage to do so. 

Join the Conversation

3 Comments

  1. The issue with high-priced housing in New Zealand is fundamentally an issue, particularly in the largest cities, of high-priced land.

    Labour promised in the Queen’s speech 2017 to remove the urban boundary limits which, particularly in Auckland, by constraining land availability, force land prices up.

    It is simply not possible to build affordable housing when ~ 3-400 sq sections cost over $ 700,000 – See Flat Bush.

    In a little noticed press release in the dark period pre-Christmas 2020 – Labour announced this decision had been reversed and they had a better method, the details of which we still await.

    Until we have available affordable sections we will not see affordable housing.

    And that cannot happen until we have a surplus of sections.

    It’s that simple !

  2. Thank you for your common sense solutions. We need more people to hop on board and take action.

  3. I agree with much of what you say but I just wanted to add a couple of comments – all directed at local government. Firstly, I don’t think people realize how risk adverse councils have become and that this is being driven by the overseas public liability and professional indemnity insurers a.k.a Lloyds. The leaky buildings saga is the best example. Now, Building Inspectors and their employers are just too frightened to sign something off if there is the smallest amount of doubt (it used to be known as “discretion”). This is one of the biggest drivers of the upward spiral of the cost of building. Secondly, forget about Aucklanders for a moment and make a big push for infill housing within the HB urban CBD’s. There are multiple vacant properties, especially in Hastings. And what about Waipukurau’s main street desert? Change the planning rules. In fact, throw away the rule book, just open it up except for H and S issues. HDC are crazy putting yet more money in street furniture and art in Heretaunga Street East when nobody lives there. And by the way, this would also send HPUDs to the bin.

Leave a comment

Your email address will not be published. Required fields are marked *