By Gareth Vaughan
The "cheer squad" make it hard to have a proper debate on housing, especially when looking to address the question of what we want from the housing market from a public policy perspective.
So says Cameron Murray, Chief Economist at Fresh Economic Thinking, a new Australian think-tank. In the latest episode of interest.co.nz's Of Interest podcast Murray talks about housing and his new book The Great Housing Hijack. He describes the housing markets and attitudes to housing in Australia and New Zealand as "culturally very similar in terms of the attitude to housing."
Murray, who has been a real estate agent, property investor and worked for FKP Property Group, says his book title essentially describes the state of the public debate in housing.
"There are so many vested interests, so many different groups and hobby horses that have lobbied, professionally or not for many decades, that it is very hard to have a straight conversation about housing in a public forum. So that is the housing hijack," he says.
"The housing hijack is all about what I call in the book the cheer squad, these noisy people on the sideline distracting us from the game of housing and, rather than understanding the plays and the strategy of the game, we're getting distracted by the noise of the cheer squad."
In the podcast Murray talks about why we should acknowledge the post-World War II to mid-1970s period was an unusual golden age in housing, what he sees as the five housing market equilibria, why he doesn't believe simply freeing up land and loosening zoning rules to enable more houses to be built is the silver bullet, KiwiBuild and the politics of housing.
Murray proposes HouseMate, a parallel public homeownership system alongside purchase and rental in the private property market. It would offer non-property owner citizens the option to buy a home from a public provider at a cheap price.
"The reason to propose this is simply that I couldn't find any examples anywhere in history or anywhere in the world where we'd sold housing for that group, that 10% or 15% of people who are renters, who are getting squeezed every time the market adjusts and people's incomes are rising. I couldn't find any examples where those people's housing had been improved without a public option of some sort. Whether that's regulated rental, like Vienna, where there's massive council housing and it's somewhat universal, anyone can access it. Or whether it's public housing home ownership, which is more of a Singapore type approach. Europeans have long term rental, but I think culturally, the Australians and the Kiwis would go for a home ownership type approach," he says.
"At the end of the day, we have to accept the economics that there is a subsidy exactly equal to the difference between the market price and what you get people into that home at. There is no sneaking around this economically."
"If I could find a way to just change zoning regulations and taxes and make housing cheap for those people, I would do it. Like, who wouldn't? It would be so easy. But I've spent decades looking around trying to understand housing, and in the last four years looking for examples around the world, and I just can't find them. I'm sorry. So we have to do it the hard way," says Murray.
*You can find all episodes of the Of Interest podcast here.
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"Changing the face of the housing market will require political will and perseverance as well as overcoming a central part of New Zealand’s economy that sees investment in housing as a way, or indeed the best way, to make individual wealth. We should remember that individuals can get wealthy off housing, but the country cannot."
The end paragraph of the summary of "Priced Out"
By: The New Zealand Initiative 2013
Just listened to the Podcast, and while there are some good points made, he completely misses the point on land use regulation.
The whole point of having more supply ie a truly free market presumptive right to build up and out is not to 'force' density and further building as he says, but to allow the supply of land to be available to meet any demand in developer real-time.
This gives at any one point in time so much potential land that it is impossible for landbankers to second guess the market and landbank.
If they try the market will be able to find other land at a better price. This means that land can be bought at a price closer to its next-best present-use value eg if it is being used as rural land, then it can be purchased closer to its present economic rural land value.
He then further compounds the issue by suggesting subsidizing housing for a certain group of people. The first principle being is that all subsidies will flow to the most restrictive part of a system and increase that price. In effect that is what happened with Kiwibuild, they just became another player(demand) in a limited market(supply).
Subsidies are not bad per se, but only make the situation worse over the long term in restrictive systems, and if the restrictions were not there, the subsidy would not be needed, or if it was, to a far smaller number of people.
He is correct that there is no place in the world that has unwound a boom in a controlled manner without economic pain, but the trick is to stabilize wherever you are at and then let general inflation catch up, in the case of housing to restore better median income multiples.
Ideally, you do this at the bottom of a cycle, which we are not quite there yet. But the planning has to start now to remove the speculative non-value added costs that are to monopolistic regulation like land use policies and council bureaucracy.
Just because there is a bit of freely available land available, doesn't automatically mean that someone wants to live there. Basically all the desirable "Central" places that people really want to live are already gone and hence the infill housing as most people want "The address" , not something out in the whoop whoops with a 90 minute commute.
Have you ever seen a time lapse (over years and decades) of central New York or Tokyo or any other successful city? The desirable central locations are built and then rebuilt only to later to be rebuilt again to provide ever more floor space (usually by building up). The desirable central locations are only "gone" if zoning or some other regulation prevents it.
Murray proposes HouseMate, a parallel public homeownership system alongside purchase and rental in the private property market. It would offer non-property owner citizens the option to buy a home from a public provider at a cheap price
KB under a different name. Aus has low build rates, half what they were in 2012, with a trend for more units/apts, far less houses.
The gnats have a viable housing plan but need more than 3 years
A bit Pas-Ag, the areas where they have a residential land/roading push are further down Nth Island and SH 16
They have a 4 to 10 year start-time, which will probably speed up... I found this:
Roads to unlock housing growth:
- Hamilton Southern Links
- Petone to Grenada Link Road and the Cross Valley Link
- the North West Alternative State Highway (SH16)
So how precisely is the following going to unlock housing growth?
- Petone to Grenada Link Road and the Cross Valley Link
Not that I think either will ever happen. The former was put on ice when it was revisited a few years ago as the steepness of the climb out of Petone plus the difficulty in cutting into the rock in the side of that same hill put a massive increase in the originally inadequate budget.
The latter was knobbled to begin with when the Maungarakei interchange was built in a way that it wouldn't link to the Cross Valley Link. The Cross Valley Link has been shot down in the past by wealthy residents on Whites Line West. Get past them and build a bridge over the Hutt River then you are still faced with replacing the Cuba Street overbridge, buying out a bunch of business owners that will be screwed over and then you have to deal with the traffic getting out of the Western End of Wakefield Street (Alicetown) onto Hutt Road. The latter made worse by, presumably, all the extra households that will exist because of all the new houses built.
Or whether it's public housing home ownership, which is more of a Singapore type approach.
Up to the time of independence, the living standards in S'pore were 3rd World for most people. The public housing system emerged as part of the S'porean govt's long-term vision and strategy. Similarly, Japan's public housing system was designed to ensure that nobody was left behind on their quest to become an economic superpower.
Something both those countries share is Confucian values. And that has been important in how well both have developed in terms of housing infrastructure. You're not going to get that in "every man for himself" Anglosphere. Neo-feudalism is arguably one of our key industries. To some degree, Japan and S'pore were breaking from feudalism.
You nailed it right there. Self interest reigns supreme here, that will prevent the kind of massive interventions necessary on housing.
David Shearer had the right idea back in the day, but that was scuttled by his mates (right wingers pretending they were centre-left)
Self interest reigns supreme here, that will prevent the kind of massive interventions necessary on housing.
Nothing wrong with "self interest" IMO. But when all the incentives and structures are designed to benefit and protect the ruling elite and their closest mates, it's not an even playing field. It's centralized economic planning and crony capitalism. We have no right to criticize the likes of China and Russia.
I agree, unfortunately it's the basic premise of our economic and capitalist beliefs, which have become our societal beliefs. It's unfortunate that Adam Smith had this limited view and that the powers that be took it as the sole truth without balancing it out with his Moral Sentiments views.
"It's unfortunate that Adam Smith had this limited view ..."
He actually didn't have the view that the people you refer to have given him. Smith was the first writer about supply and demand. He also had a lot of views about things that could wrong and why the market can't always be trusted to come up with the 'best result'.
People who haven't read what said should stop quoting him as if they have.
I'm aware of his other views too and have stated them here often.
He also (according to the literature I've read) had the view that everyone acted in their own self interest. Yes he had ideas how to limit the negatives, but that view formed the predominant basis of economics as a social science. I also believe that it was a condition of the times and culture. It has become the predominant belief that this is human nature and forms the basis of the trickle down theory. One only has to look outside their culture, outside their conditioning, outside their limited human perspective, and realise what we're taught about human nature isn't entirely true. Economic theory needed to be balanced by ethics and Smiths' Moral Sentiments somewhat proposed this. Obviously it was ignored and we have what we have now.
I've studied and researched extensively (informally I might add) and much has been distorted and misinterpreted by the ruling class. Have you ever looked into the origin of lassez faire or just taken it as gospel?
We have inherited a flawed system, flawed thinking and status quo economic thinking will not solve our current predicaments.
Supply and demand is actually a very limited economic narrative. We all know (at least I'd hope we did by now) that demand must be created first.
I think much of our problems now are because we as individuals and as a collective are no longer aware of what we're really demanding.
Throw in some Latin obfuscation if you like.
we as individuals and as a collective are no longer aware of what we're really demanding
As individuals we are demanding wealth to live a tale told of old told to us of building wealth and retiring comfortably as a core life focus. As the world has expanded and technological advances have brought us far too much to consume, and consumerism has taken the forefront over the true things that fulfil us, such as family, friends and community. More families have differences and don't speak, social cohesion took a large dive since 2020 and with the void that came from lockdowns and socials isolation, came comfort purchases to fill the emotional void. We need a hard reset to reinstate a sense of national pride and what one needs in life as opposed to what one wants.
Totally agree. Yet that demand for wealth has been programmed into us by a set narrative. And the economic/capitalist definition of wealth is arguably the causal factor. It's been inherited by cultural/societal conditioning - the illusion of scarcity and fear - and other factors that are just too deep for most to grasp. There's an interesting meme going around lately - if one monkey hoarded all the bananas while the rest suffered, scientists would study what was wrong with him. We put them on the cover of Forbes.
The things that fulfil us - add to that artistic, creative pursuits just for the enjoyment, productive leisure, charitable endeavours, and a whole raft of other things.
I really don't see our way out of it. How do we create what could be rather than what is? Policy just cannot do it given it's such a deeper issue. Even with a hard reset how many are truly capable of adapting?
Yep. I didn't understand the author's statement that he couldn't find anywhere in history of a public build ownership model. Does Labour's efforts in the 30's not meet his criteria?
Obviously conditions of the time and right leadership enabled it and now those same factors suggest we can't repeat it.
Our town planning is fairly archaic too of course and you'd think we could've learned better. An ideal town/city structure would be a wagon wheel design - living centrally and travelling outwards. If only we had foresight and actually learned from hindsight.
I know he's not popular on this site however FWIW this week TAs newsletter has an interesting perspective on what would have happened with the RBNZ OCR had people taken his advice a couple of years ago & fixed @2.99% for 5 years
The American dream of owning your own home is dead, according to the majority of renters surveyed in a new Harris poll and the areas they live in have become so unaffordable they are “barely livable”.
Though the vast majority of renters polled said they want to own a home in the future, 61% said they are worried they will never be able to. A similar percentage believe no matter how hard they work, they’ll never be able to afford a home.
Here's a link to the poll. Released in Feb.
https://theharrispoll.com/wp-content/uploads/2024/03/State-of-Real-Esta…
Far from it. Americans Moving to More Affordable Areas | Newgeography.com
It is too much of a generalization to say 'America,' or the 'USA' when making many comparisons, especially housing. The difference between California and Texas in this regard is one example.
NZers almost exclusively look to Aussie to give us the mobility (mobility being one of the factors for better opportunities) we need to be more productive. Whereas US citizens have the equivalent of 50 countries (such are the size of their States) that they can move freely to in search of whatever opportunity they are after.
In some cases it requires a subsidy/incentive to encourage the move.
https://www.nzherald.co.nz/travel/topeka-to-tulsa-these-us-cities-will-…
I like how his examples - Vienna and Singapore - have suburbs upzoned far beyond any city in NZ or Australia, yet he is opposed to zoning reform.
Though I agree with him that public housing of some form has to be part of the picture. Notably Kainga Ora are supportive of upzoning.
On twitter etc Cameron is a supply skeptic. But the weird thing is even if you believe that public housing of some description (Singapore btw is a very different model to Vienna - one is one way more centralised than the other) then you still need to free up the planning rules to enable more houses to be built. So he has some weird illogical arguments when it comes to housing.
P.S. I think NZ should build way more public housing using the Vienna housing model because even if National and Chris Bishop are successful at implementing supply side zoning reform this will be a 20-year project to get houses back to an affordable - median house price being 3 to 4 times median income - so something needs to be put in place for the generation of renters who will miss out.
Subsidised public housing.
In 1990 with a population of 3.3 million we had in excess of 70,000 public subsidised rentals available.
If we had maintained a similar ratio we would currently have 110,000 available rather than the 78,000 (claimed, though not necessarily available)
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