By David Hargreaves
Increasing numbers of people driven into the arms of the state.
That's the inescapable conclusion I ultimately come to over the Government's new 'Healthy Homes' initiative.
In what's becoming rather too symptomatic of this Government, the new measure can be seen as something that's ideologically prompted, heavy on symbolism, and falling down on practicality.
I was probably prepared to cut the thing some slack, to take with a bucket of salt the moaning of the inevitable interested parties of "wooooo! It will force rents up!"
But then I read the comments of officials from the Housing and Urban Development Ministry itself, in which they warned, yes, of higher rents - and also of houses being withdrawn from the rental supply stock.
"A reduction in rental housing particularly low quality homes are likely to disproportionally effect low income households, potentially increasing demand for public and emergency housing," the officials say.
The landlords will be okay - put the rent up
They also make a, I think, quite extraordinary comment in "mitigation" for landlords. In effect they say that due to the numbers of migrants coming into the country the pressure on the lower numbers of rental houses available will force rents up - so landlords who might be put off by the changes and the costs of these measures will stay in the game because of the higher rental returns.
So, this is the agency responsible for administering this saying that the measures will reduce housing stock available for rent, will drive more low income people to seek state help, will put pressure on housing numbers generally (this in a country with an already acknowledged shortage) and will provide higher returns though for landlords who stay the course because of the high number of migrants coming here.
Now, I'm sure the ready defence of the Government would be that it's the job of officials to put the gloomy glasses on and to, in effect cover themselves, by pointing out potential problems with any new policy.
By the same token though, I think these comments are pretty strong and should be taken seriously.
One of the biggest problems I have with this new policy is that it becomes quite clear in reading all the background material prepared for the Housing and Urban Development Minister Phil Twyford that nobody has a handle on the detailed condition of New Zealand's rental housing stock.
We don't know the details
Yes, officials know that there's about 600,000 rentals in the country. And yes there's been some research done, but it's by no means clear what the condition of all individual houses is in respect to whether or not they are insulated and what kind of heating they have.
So, while the estimate has been given of perhaps over $10,000 needing to be spent by landlords getting up to scratch properties that don't meet any of the new requirements, we are all in the dark about how many properties that actually will entail.
Clearly if there's quite a bunch of those, and the landlords decide to simply quit on them as rentals then that's going to produce a hump in rental shortages quite quickly.
As I see it, what is needed in this country is to remove the existing shortage of housing stock (not make it worse) and to progressively get rid of older homes that are not now fit for purpose - if indeed they ever were. (Louvre windows? What the hell was all that about in places that get minus degree temperatures?)
More carrot and less stick
Now, it might be argued that these new initiatives by the Government will in some way actually promote that outcome. But I think this is very much big stick mentality, when applying a few carrots into the mix might have been better.
Telling a landlord they have to pony up with $10,000 or else is as subtle as a brick. Also, consider the case of a landlord who does bite the bullet and spend that money on an older style rental. They are going to consider that all the money they want to spend on the property in the foreseeable future. That means they will probably keep the old dunger property as it where is for longer than might have been the case.
Surely what's wanted here is for owners of older houses to somehow be incentivised to either remove are actually bulldoze those properties and start again. Isn't there some sort of creative incentive that could be arrived at to gently promote the regeneration of our housing stock?
Make them warm
As far as I'm concerned, what we should be aiming for is 'passive houses' - IE ones that require little or no heating. Okay, they are more expensive to build (those who promote them say about 10%-15%), but think of the money saved on power bills and of wandering around in balmy 20C temperatures when it's freezing cold outside.
This move by the Government is well intentioned. Nobody wants to live in sub-standard housing. I've lived in my share of freezing cold, damp, New Zealand houses. To this day I leave the doors of my wardrobe open because of previous disappointments at grabbing suits that haven't been worn for a few months and finding them covered in mould.
I do fear, however, that it will be those at the bottom of the pile - theoretically those who should benefit - who will be the biggest victims of this. They will be the ones priced out of the rental market, or alternatively find that large numbers of houses in their area previously available for rent are taken off the market.
Cosying up to granny
And what will happen? They'll go to the state. There will be an as-yet unquantified increase in the burden on the taxpayer. But the worst thing is that state dependency becomes a tough thing to crack. Once people are left to the mercy of granny state they tend to find it difficult to get out of the grasp of it.
If this sounds a bit melodramatic, well, I don't think it is.
Surely the real long term answer is the gradual removal of our old dunger houses and replacement of them with ample numbers of new, fit for purpose homes. And we should be incentivising people in that direction. Always encourage people toward the outcome you want.
I fear this measure from the Government does exactly the opposite. Riled up landlords who will take a hostile attitude to making any changes. Lower income people who will struggle to even find a property, let alone one they can afford. An increase in state dependency.
This is what you get when you allow policy to be run by ideology and symbolism. Time for this Government to get a good dose of pragmatism.
58 Comments
I do think this is a problem in lots of sectors. A labour government with little experience of the realities of private business, as are the civil servants. They don't see the practical downsides of increasing numbers of the population being dependent of government sourced incomes. They don't see how badly run government provided services really are, and how those capture the money that could be spent better elsewhere.
The only logical conclusion to be drawn, is that the Labour party wants people in state houses. That way they, the tenants are guaranteed to vote Left. They have little real care or concern for those effected,evidenced by their own departmental comments.
Also something that is never mentioned is the fact that all these sub standard houses met the code when they where built. This along with Asbestos etc, are not the fault of the current owner. Why should they be penalised?? Why not give them an incentive to help warm those homes. But then people would keep the property, which would be a good result for any rational (non socialist) Government. Also what about all the hard working Kiwis that own their own sub standard home? What help do they get to warm their homes? Or are they considered sub standard because they actually dare to own their home and are not dependent on the state??
Yes, we don't build very good houses. It's a cultural thing we need to change. If we looked at lifetime costs New Zealand houses are very very expensive. If we had an investment mentality we would get healthy and cheap housing at the same time. But you gotta think a century or two ahead.
That's not so long given some of the rubbish we have now can be a century already already.
Energy security is a big issue. The dividends forgone by the government never made the partial sale equation work. It was a dumb idea from a fiscal management point of view as well... I wonder now looking back at the EQC situation (i.e., the need to borrow as the fund had been used for general govt. expenses over many, many terms of government) whether the proceeds were used to make up for all the borrowing needed for that. Didn't they have some sort of debt cap as well? So, were that the case they should have just said so - i.e., we're selling these assets so that we don't have to borrow more to provide cashflow for the EQC.
Point is - no matter how much we insulate, if people can't afford the energy to heat in the first place.... hence, the winter energy payment the Labour government brought in. I'd have rather they owned those resources and lowered the price to the retailers - i.e., use regulation and ownership, as opposed to welfare.
It is possible to retrofit to Passive House standards - there is a certification process for this called EnerPhit. A project in the UK recently retrofitted a large 60s apartment block for less than cost (and significantly less energy) of rebuilding it and with tenants still in place.
Last time I looked you could depreciate such things...so you can save another 30% there.
The interest will also be deductible (as was the carpet you got for your home but booked to the rental)
And if you aint got $10k sitting around for contingency's, you shouldn't be in the game.
And most landlords have a zero budget for cap improvements...just praying that over time cap gains will outpace the deterioration of the dog box.
But woops. The dog box needs a face lift - if you want any hope of getting a decent tenant.
So the downward spiral begins....
you missed one important cog, kiwibuild
the idea is right to help people into low cost modern houses , just the implementation is a dog
it needs to be changed massively and maybe extended,
the cynic it makes me wonder why the last government put NS in charge and this government has PT
did/do they both want it to fail
they need to look at the best manufacturing offsite technics from around the world and the government needs to use scale and its buying power to mass produce thousands of houses, rather than our traditional onsite building method
How on earth low income tenants can afford the rent on new properties built to high building standards? The issue is "low income". They eat unhealthy, they live in poorly built places, drive rubbish cars, have rotten teeth, etc.
So we either need to increase their income (how?) or decrease the cost of new houses to dirt cheap (how???).
The cost of building a passively heated house for typically extra 5-10% on house cost ($20-50k more on the mortgage costing $1-2k per year) vs a few $100/year extra on electricity for a heat pump is a supremely easy decision for anyone with half a clue in economics. For the north of North Island even double glazing that adds >$10-15k to a house has marginal economics.
Govt likes it because it reduces needed expansion in grid infrastructure and makes it sound like they care, but the economics aren't good, and there are much lower hanging fruit, like basic insulation, better curtains dehumidifiers and heat pumps in all houses.
Houses aren't just a financial transaction. They are somewhere we live, enjoy and should promote health.
Case in point - I added sound insulation in all internal walls and the midfloor. There is no financial payback for this but there is definitely a benefit.
A Passive House gives you comfort, health and usability way in excess of just adding a heat pump. There is value in this. A certified Passive House overseas will sell for a premium. NZ is slow but will catch up to this idea.
It makes a lot of sense if you are holding the house long-term. Tenants will pay a premium for a permanently warm, healthy home. There is no mould, no asthma problems, no damp, no condensation, no unusable rooms.
Good tenants would likely stay longer. They can dry clothes inside and not open windows and still have no condensation or mould. No thermal curtains needed. No heat pump maintenance, MHRV just needs a yearly filter change. And no government meddling as you are already on the optimum standard.
MBIE and the politicians are a complete joke. These laws are completely ass-backwards.
The reason we have crap quality housing is because we (still) cannot build quality housing because of the red tape.
The building code and requirements around certification ensures a certain standard is met; a bad standard with very low bars. Thermal bridging everywhere. Aluminium windows frames with leaky felt seals and installed outside the insulation. No meaningful ventilation standards.
Try to actually go above and beyond the code and you're plagued with expenses, and regulatory or logistical problems. If Fletchers et al are going to price gouge us for materials we might as well make them manufacture decent products.
Better yet do away with the red tape and just require a minimum insulation and air-tightness performance tested with specialised measuring equipment.
Of course the goal should be passive houses for everyone, but that's an ideal for the future. For a century or more landlords (we'll find out in the next few years whether 100 or 10,000) have been putting tenants into homes unfit for habitation, and banking the money. At last a government is going to put a stop to it. The standard being imposed is minimal: heating one room to 18 degrees. The houses that cannot meet that standard should never have been let; if the landlords who own and tenant them decide to sell up and get out of the game, good riddance. The houses will still exist and others will buy them and insulate them and live in them. Yes, the state will have to stump up and provide more rental homes for those who need them. That's its job: to house those who can't afford to buy homes, and to protect them from exploitation.
Exeter council in the UK is now only building Passive Houses for its social tenants. They have seen a reduction in hospitalisation and fuel poverty as a result. Some residents had their first holiday in decades as they were able to save the money they previuosly had to spend to heat their sub-standard housing.
Surely what's wanted here is for owners of older houses to somehow be incentivised to either remove are actually bulldoze those properties and start again. Isn't there some sort of creative incentive that could be arrived at to gently promote the regeneration of our housing stock?
There aren't any creative ones. However there are some extremely boring ones that have been known for centuries. Reducing costs on the supply side will allow for more regeneration - high construction costs and overpriced land mean less new housing gets built in NZ.
I have a flat that I am currently using as a temporary home. If I wanted to rent it out I would have to pay for new insulation, a bathroom fan, and a rangehood. And whatever "draught stopping" entails (?). Despite the flat being warm and dry already, and without any mould problems. So it looks like once I no longer need it I will be putting it in the short term rental pool instead. It could have made a nice home for someone as its a lovely flat, in a great location. Shame really.
Cool, now check with your insurance company about whether you need to change your policy if using as a short term rental, and what will and won't be covered, account for the cost/hassle of cleaning and checking in/out guests every couple of days or paying one of those services that do that for you, allow for high vacancy over winter, and don't forget that Auckland council will want their bed tax too (if in Auckland). Cost of furnishing, and replacing that every few years too.
And that all assumes it is actually located where it will get a decent number of renters.
Its still better than dealing with crappy tenants, who don't pay rent, can't be evicted, and where damages can't be claimed. At least Airbnb has its own insurance, and cleaning costs are covered by charging a cleaning fee. As for checking people in or out, a lockbox takes care of that. Less wear and tear means greater capital appreciation and lower maintenance costs. And no property management or letting fees. And way way less stress.
Well done David for stating what should be obvious to everyone , but clearly is not .
The State simply cannot, with all the will in the world, house everyone, they have never been able to do so, (and nor was the Soviet Union able to achieve this utopian goal )
As we now know from the Kiwibuild debacle, they cant even get developers to build houses for those who can buy them .
So the only solution is to do what is already being done , and encourage private capital to provide housing rental stock . This is common practice everyone in the capitalist world , and we are no different .
The issue seems to me to be a crop of politicians who left Uni in the 1970's and 80"s and went into politics with no experience of the real world , and have this belief that they can achieve all manner of socialist and unworkable ideas .
And when it fails, then its because 'the system " is unfair , and the "rich pricks "........... whoever they are, should be taxed to make it fair .
Dragooning masses into the tender arms of the Gubmint may well, however, DH, be perceived as a Feature, not as a Bug, by this lot. Folks in - shall we say - Reduced Circumstances tend to a) not bite the hand wot feeds (and clothes and houses) 'em and b) Vote reliably for Mo' OPM.
I am a Passive House owner. Feel free to ask me anything if you want to know more.
Extra cost was $50k for a 2-storey 180m2 house vs building to code. You should also remember that this extra cost is locked in at build whereas electric costs rise every year - so my return improves over time.
What did that $50k get you? I'm imagining wood or upvc windows, insulated foundation, air-tightness barrier and ventilation system. More importantly it's the construction details where walls/trusses/fundations meet that the code skips altogether. Most new houses have zero insulation in the corners!
Triple-glazed wooden windows (note: you could also go uPVC to save a bit), under and side slab insulation, thicker studs, more insulation in walls and roof, airtightness membrane and airtight protrusions, whole house mechanical heat recovery ventilation, all thermal breaks minimised.
And most importantly, a highly-accurate energy performance model at design stage and a testing process as built to ensure it will meet its outcomes
If you aren't mortgaged then perhaps it doesn't cost too much. You can only get about 2% on your money after inflation and taxes in the sharemarket - so that $50k would only earn you about $1k compared to the maybe $2-400 year saving. But if you are mortgaged then it doesn't make sense. $2500 a year in extra interest charges means you will never achieve payback. Fine if you are motivated by factors other than money, but not fiscally prudent.
You are forgetting to add in the savings in doctor visits, medicines, health treatments, not having to replace leather/suede when it goes mouldy, not having to buy winter duvets/electric blankets/hot water bottles, less days off sick, less cleaning, being able to use every room year-round (can build smaller but have same utility). And there is the comfort - feels so good. All the Passive House owners I know can never go back. Even 5* hotels feel poor afterwards.
Also, you need to revisit your share investments as these have provided an average after-inflation total return of 7%.
Might not be such a bad idea if more people wound up on the state housing queue. I reckon it could present us with a great opportunity to completely overhaul our tenancy laws and set something up completely different, more co-operative for people who may never be in a position to buy. The current way we rent houses is utterly crap. I would prefer we set out to emulate some European or Scandinavian countries where that is concerned.
Unfortunately the neolib private housing experiment has to be closed down because it didn't deliver the service the client wants i.e. warm dry homes. This is due primarily to insufficient regulation and enforcement around the market. It has failed to regenerate its housing stock and is passing off long past use date shacks that are unacceptable. The state has rightly stepped back in to address this issue, the other issue being security of tenure as the housing stock had become a plaything for house flippers and the social fallout from that for renters was also unsustainable. Private sector, you stuffed up big time, now leave it to the responsible operators.
So much of the discussion assumes that the poor need detached houses. These are inefficient energy-wise, take up a lot of space, and are expensive to build on a per-square basis. Hence multi-storey and tower developments. But warehousing the poor in vertical if efficient towers has a long and chequered history, from the projects in London and East St Louis(Pruitt Igoe), to the banlieues of Paris. At least, with the 'concretopia' style as in Paris, it's possible to pressure-wash the whole apartment as the sole preparation for its new denizens. Perhaps there's a middle course to be steered between the detached house and the concrete tower. Because the takeaway from DH's article, is that warehouse 'em somehow, we must.
I have to laugh at the madness that is the 400sqm sections built out with single story housing. The houses in these subdivisions are packed in almost eve-to-eve with small strips of shaded grass on each side. What is the point really? Make it terrace housing with concrete fire walls. The residents would get more sun and bigger yards.
Rental might be heading for a shortage as people are selling their highly geared rental investments.
Even Hong Kong is getting a hit
https://www.smh.com.au/business/markets/the-world-s-most-expensive-prop…
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.