GOVERNING:
The affordable housing crisis
Solutions:
For the entry level, mobile homes.
For volume production: MarketTowns
For government reform: Reform User Pays
The affordable housing crisis did not come about by accident. It came about by a perfect storm unintentionally created by government. It is simple to state, hard to fix.
Price:Income Ratio: When the median household price exceeds a 3:1 ratio with median household income, housing becomes unaffordable first for the poor, then at it heads toward 10:1 for the lower middle class as well as young adults, uni graduates with too much debt, elderly who failed to build home equity (by renting or by divorce), older women, Māori, Pasifika and other disadvantaged groups. Eventually society polarises into the haves and the have nots.
The answer is to get the ratio back to 3:1. This means increasing the supply of homes causing the market to drop and aggressively examining every contributing factor that raises the cost of zoning, financing and constructing new homes.
Land Supply: For every new family (net) there needs to be one additional single-family home. When planning was done by civil engineers this happened. When universities started training environmental planners, environmental protection improved, but land supply contracted. Result, higher prices for subdivided land.
Consenting costs and time: Developers say more than half the job of subdivision is securing permission. The RMA does not enable people and communities, it is a cash cow for councils and private planners. Extensive reports do not protect the environment, but they do increase costs.
Requirements: Consenting requirements add to cost without demonstrable benefit. The councils have no checks and balances, so they place demands that developers must do… and pass on to the end customer, meaning higher land prices.
Development Contributions: In theory if a developer makes money and it costs the taxpayer to subsidise the developer profits, the developer should pay a contribution. But in practice, it has become a cash cow for councils and further increases land prices.
Revenue Conflict of Interest: At one time, consent fees were low because the benefit of resource consent compliance was deemed a matter of public interest. Now councils fund their consenting departments through revenue they collect, and senior management pressures staff to generate billings. This has been tested, and it is an abdication of the role of the public service.
Building Consent Liability: Since the leaking home debacle, councils are terrified of liability, thus they set out extreme documentation requirements to ensure they are not exposed. The costs of third party consultants is added to the cost of housing, further raising above the 3:1 ratio.
Lobbying by Pecuniary Interest: Architects, engineers, the Master Builders Association, the many trade associations representing building materials, components and services have successfully lobbied government for monopolistic protection. In the name of health and safety, the rules are designed to supress competition.
Fortress NZ: In a country the size of the US state of Colorado, MBIE has written a building code that requires compliance to NZ standards written by advisory committees comprising of representatives of trade associations. No surprise that this creates insurmountable barriers to competition. What overseas supplier that meets higher international standards will spend the money to secure BRANZ compliance for a market of 5 million people?