Comments on my previous article assume I am a dinosaur and have no idea about the future of cities; and there is no alternative to what the three headed political hydra dictates. So I reply. 


I fully support densification of our cities, getting people back living in our central cities and along transport routes. Up zoning, to allow higher buildings is essential. This may be into mid-rises (5 to 12 stories – cost effective to build and houses lots of people – but there are issues about if people want that and is it good for them) or low rises but that may create another densification problem in the not too distant future. We can’t ruin more farmland with greenfield developmnents. And most importantly of all, I want ‘affordable’ housing in well designed, nice to live in neighbourhoods, in nice cities. 

All this central city living will adapt people to not need or use cars, we get less congestion, less infrastrure costs pipes/schools/community facilities etc as when building in greenfields, less cost to build roads, less carbon used so we would be actively dealing with climate change; a core challenge our society is facing. And with less imports of costly oil we would be wealthier and healthier.  

And I welcome new buildings being able to be well designed for all users especially those with special needs. I love the ideas of cities being people friendly for walking and biking like many cities in Europe. I do not have a car so I’m a full on public transport user or walker (too dangerous to bike) so this all 100% suits me and I enthusiastically support all the above. 

But the National/Labour/Greens (NLG) law changes – zoning changes and Resource Management Act removing objections rights – will do nothing to deliver affordable housing or liveability.  The purpose of changes is to stimulate the private market to build because we have an affordable housing crisis.   But history shows a maximise profit ethos can’t deliver affordable housing. The market fails to deliver affordable housing or we wouldn’t have a crisis. I’ve previously linked to the acadmic research paper about Brisbane ‘We Zoned for density and got higher house prices: Supply and price effects of upzoning over 20 Years’. This shows affordable housing can’t be delivered by zoning and bully building law changes with an assumption more ‘supply’ brings lower prices.

Only government contracting to build has a histroy of making affordable housing. Governent aren’t out there looking to maximise profit; so that means lower mortgages or rents, which leaves more money in the domestic economy to stimulate other businesses. 

And even with the current market going down the prices are still not affordable. Also first home buyers won’t pick up these ‘lower’ prices because the law changes are creating a maximise profit bonanza for developers to buy houses at a low price and then to ‘build to rent’ (rent for life). This ‘build to rent’ model is a massive tax give-away to larger developers where they get interest deductability for tax. And they will get relatively wealthy middle class people to pay high rents because those people now can’t afford to buy a house.  

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This highly profititable ‘build to rent’ (rent for life) model will suck huge amounts of our scare investment capital into this non-productive sector (housing) and New Zealand can’t get rich by selling housing to each other. This scare investment capital needs to go to productive export orientated sectors which are starved of capital.

The laws on ‘build to rent’ put no guidance on pricing rents to make sure they are affordable because, that will be hard to do. Market can do that?? This unleashing of the private sector is a classic National party approach to problems. Labour/Greens terrifed of the difficult to solve affordable housing crisis want to be on board with National believing they then won’t be blamed for the problem. Some people still believe in the tooth fairy. This is a weak fear driven strategy without economic insight.

This approach can’t fix the afforable housing crisis as new builds are not cheap. (They are also very carbon intensive, and to be cheaper – full of plastic).  And the cost of buildng is compounded by stimulating the building market, as this will soak up scarce building resources (people and materials) which will drive up prices to build reducing the chances of housing being affordable. 

Also investment demand for housing is still high (rentals are good income) and that drives up housing prices, and that means high mortgages, and that high cost is simply passed onto renters. There must be a reduction in investor demand to lower prices – removing interest deductability (I certainly pushed that) was an excellent move to stop investor demand but returning interest deducabiltiy to the ‘build to rent’ model simply redirects existing investment into that model leaving existing housing still subject to investment forces that push prices higher.  

The correct and urgent strategy for Labour and the Greens is to distinguish themselves from National by rolling back the interest deductibity tax breaks for ‘build to rent’. Removing the zoning changes that allow private developers to bully build to 3 or 6 or 12 levels in our residential areas. Doing this will take all the heat and economic distortion out of the build market. Private developers or investors will pull back leaving build resources free to work on government Kainga Ora build contracts to actually build affordable housing. That releases the private investment capital that was going to be put into housing to be ‘available’ for investment in the productive economy, where it should be.

With less competition for building materials/people, build costs to government should be lower and with resources focused the affordable housing crisis can be dealt with more quickly. And government purchasing of existing housing can fix the crisis even quicker e.g. a scheme for housing investors to trade in a rental property for a long term govt financial instrument paying a good rate of interest while repaying capital and interest  over a set period (in the same way an investor would get rental payments; because investors want income to live). Or even move into the reverse mortgage market to try and drive out the current vultures in that business.  Government will guide the above investment by borrowing. If government holds the mortgages, e.g. through Kiwibank, the books of account won’t look too bad for the borrowing. 

The fact that government has not done any of his reflects not only the scared lacking in vision politicians of these three parties but more importantly it reflects extremenly poorly on our mandarins, economists and commentators who our politicians rely on for ‘moral economic’ support. This is the core problem in our economy – the subservience and indoctrination of our economic advisors to neo-liberal market driven solutions. Almost everyone of them blinkered and holding our economy back. 

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