By Alex Tarrant
When is a housing shortage estimate a housing shortage estimate?
No, the word ‘not’ isn’t missing from the question above. It really was one worth posing after one of the more exasperating select committee exchanges of the year on Wednesday.
Pity the Auckland Council, for they cannot get it right.
Pity the Reserve Bank, for they cannot get it right.
Pity economist Shamubeel Eaqub, for he cannot get it right.
Pity the Ministry of Business, Innovation and Employment. The advice they give isn’t even accepted.
It was very much a case of the ‘Exaperatee’ against the Great Exasperator.
Labour’s Phil Twyford sought to eek out of Nick Smith anything he could on whether the government was working to any given housing shortage estimate as the Building and Construction Minister appeared before Parliament’s Social Services Select Committee.
The opposition’s housing spokesman tried to steer Smith into agreeing house building activity in Auckland was not at the pace required to match growing numbers of people in the city, let alone close any deficit.
Twyford put to the Minister Auckland Council figures that 7,200 homes were completed last year – a little more than half that needed to keep up with population growth.
Managing to steer clear of whether whichever numbers he believed were correct showed building was greater or less than required, Smith offered up three criticisms of Twyford’s figures.
The first was that they excluded retirement villages, while Stats NZ’s consent data included units from the sector. There was no reason for Auckland Council to not include the “substantial” number of retirement village residences being built.
Second, the number regarded Code Compliance Certificates, which Stats NZ and MBIE regard as a “poor measure of the number of homes that are completed.”
Smith even had a personal anecdote at hand, to help:
“For instance, myself and my wife built a new home. We’ve been living in it for more than a year. It doesn’t yet have a Code Compliance Certificate. It’s actually because the knob on the gas fireplace in the lounge needs a replacement part. But myself and my family have been living there. There is no legal requirement to get a Code Compliance Certificate, and my advice is actually a significant number of homes do not [have one].”
Smith wasn’t able to get to his third point. Twyford put to him estimates of an Auckland housing shortage in the range of 30,000 to 40,000 houses, which was getting worse by at least 4,000 a year.
“Six months ago, your officials advised that the deficit in Auckland would continue to at least after 2030. Has their advice changed?”
“Firstly, I don’t accept that,” Smith replied. “Actually the best measure of what’s going on in a housing market is price...because that’s supply and demand.” He dropped his post-quake Christchurch analogy – supply rose, prices fell.
“It is now universally accepted across commentators, since about October last year, that house prices in Auckland have not moved an iota. So, I think that is a powerful signal that that supply curve and that strong growth is getting supply and demand into balance…”
Twyford interrupted: “I asked if your officials had changed their advice.”
“Well the consistent advice I get from officials is that it is not possible to get a reliable measure on the deficit,” Smith said.
Twyford tried again. Advice he had seen from MBIE officials to Smith’s office was that the Auckland deficit would not be eliminated until after 2030.
“I don’t accept that advice, and I don’t accept that’s what the officials’ advice was,” Smith replied.
In the spirit of Parliamentary collegiality, Twyford offered to resend the documents to the Minister’s office.
The offer wasn’t accepted. “You have a very convenient example, Phil, a bit like your Code Compliance Certificate figures, where you deliberately misinterpret advice that’s provided by officials.”
“I’ve heard some people say there’s a shortage of 500,000 houses in New Zealand,” Smith continued. (He wasn't accepting the figure, mind.)
“The number that has a huge influence is in respect of the number you assume per person per house. Even if you just change that from a very minor amount of 2.9 people per house to 2.8 people per house, has an effect on whether the balance of the number of homes, and whether there is a shortage or not, of by about 15,000.”
“Neither government, nor Council, can accurately pick exactly the number of people per household.”
Twyford put to Smith Reserve Bank Governor Graeme Wheeler’s comments last week that the Bank generally followed the Auckland Council’s 25,000 to 35,000 shortage figure for Auckland.
“Those estimates are not as accurate,” Smith said. “I’ll tell you why. My experience in Christchurch…”
“You don’t accept Reserve Bank, Auckland Council, [inaudible], anybody…” Twyford complained.
“I’m ultimately one that believes in markets,” Smith said. He attempted to launch into an explanation of supply and demand dynamics.
Twyford had heard it before. He might have muttered something about stable prices meaning supply matched demand at the current price and that demand curves sloped downwards, meaning more demand at lower prices. But my dictaphone was on the other side of the room.
It did pick up his next point, however:
“Your own officials have told you that the shortfall of 30,000 is a minimum. You don’t accept your own officials’ advice?”
“That’s not what officials have said.” Last word to the Minister - it was time to move on to other pressing matters.
Well, at least until later when the debate resumed during Parliament’s Question Time. Above is episode 57, where Smith accepts a figure from four years ago that Auckland had a housing deficit of 30,000, but that this was four years ago.
It’s different now, apparently. How so, we still don’t know.
83 Comments
" There is no legal requirement to get a Code Compliance Certificate" - debatable. A building must be finished, Nick, within 2 years of the Building Consent being issued, and the Code of Compliance must be issued within that time, otherwise, the Council can require you to tear down what you have built! (Well, that's what I was told by the Council when I was building in 2007)
"For building consents issued from 31st March 2005, projects must be completed within two years of the granting of the building consent."
and....see Dictator below.
http://www.buildingguide.co.nz/construction/inspections-code-compliance…
Esprit is referring to Section 52 of the Building Act which requires work to start. However in practice you could start shoveling dirt and it work be difficult for a Council to prove that work hasn't started.
http://www.legislation.govt.nz/act/public/2004/0072/latest/DLM306388.ht…
Do we know exactly how many people :-
1) WANT TO RENT A HOUSE IN AUCKLAND AND CANNOT FIND ONE ?
2)ARE LOOKING TO BUY A HOUSE IN 1 YEAR
3) ARE LOOKING IN 2,3 OR 5 YEARS
4) ARE LIVING IN CARS AND REQUIRE SOCIAL HOUSING
5) THE NUMBER OF NEW MIGRANTS OR MIGRANT FAMILIES WE CAN EXPECT BETWEEN NOW AND DECEMBER 2018
It would be good if we had a handle on the real numbers , so we can get rid of all the noise pollution , posturing , and puff from politicians in Parliament
Permanent residents to NZ usually end up in Auckland or at least most of them. This year is expected to be more than ever. And a year ago they froze the family reunion category and at a guess most of those would have lived with their sponsoring family so that is yet another 10% to add to housing demand from immigrants.
Another factor is the desire of Kiwis to return from overseas (Australia, UK) but to be fair that is roughly balanced by the number of Kiwis leaving NZ.
The one group that is leaving Auckland in significant numbers is people born in Auckland.
>The one group that is leaving Auckland in significant numbers is people born in Auckland.
Making National's grand economic plan for Auckland rather an anti-Kiwi one. Make conditions so bad for locals that they move out more and more to make room for whoever else wants to take their place coming in from somewhere even worse.
RickStrauss agree with you Aucklanders born there are leaving. I left in 2015 and as much as I like the climate I do not like the traffic congestion or the cost of housing. Lots of other things are great though or should I say we're great. Cheap food ultra low property tax compared to cities up here and no capital gains taxation no death duties . If you run a business you claim GST back on business expenses. Provisional tax plus 10% on previous years income was hell but I hear maybe they're changing that ?
No Auckland was great but in my opinion there are other cities that are friendlier and less congested
Would be good to know the data that makes you comment that 'significant numbers' of people born in Auckland are leaving. The last data is from the 2013 Census and that shows a leave rate of a tiny -0.3% in the five years from 2008. That was a slower leave rate than at the previous two censuses.
Personally I doubt it has picked up, although you can always find a few anecdotes. But they don't prove anything.
That same 2013 Census data (Table 36) shows the data by age, by tenure, for all ethnicities. If you just focus on European enthicity, it shows little variation for Auckland no matter what filter you use.
I think the data suggests it's not a real issue. But if you have other data showing otherwise, I would be keen to receive it.
Auckland was a very different place in 2013 in respect to house prices, traffic congestion and immigration, things could easily have changed since then.
It's only anecdotal evidence, but I know quite a few middle-age and older people who have cashed up and left - to Northland, Bay of Plenty and Central Otago. I believe they're referred to as Auckland refugees.
Does personal observation not count in 2017? As a friend said to me on hearing I was leaving - " if I didn't have children and grandchildren up here I would be gone in a heartbeat - as have most of out friends" I grew up in Central Auckland and can't for the life of me figure what the attraction is.
'Personal observation' can be useful, but it can also just be an echo chamber. The data over many, many censuses shows that many Aucklanders have always left the city. It has been something going on for generations. There are many reasons, so you can always find some individuals 'escaping'.
But the real issue is, is that movement growing? And is it more or less than other internal migration arriving in to the city, which is large and never gets talked about. Only the disaffected talk about their concerns. The satisfied never bother.
But the data puts it all into perspective. Sadly, there doesn't seem to be a lot of current data about internal migration trends. Which leaves an opening for blind guessing.
The posh people who lobby and attend political meetings are usually not homeless. It is a mixture of those unable to keep their side of the tenancy contract such as drug addicts and alcoholics and those who are just unfortunate: honest families that have fallen on hard times. In a reasonable housing market the later would be able to rent a down market home for a small rent (something in line with housing benefit).
There seems to be strong evidence that honest Kiwi families are suffering simply because we have more families than houses in Auckland. What caused this disaster? Not a natural disaster just a simple failure by the government and the council - that is both Labour and National politicians were more responsive to voters happy to see property prices go up than they were to all the warnings they received.
rather than assign blame what should be one now: (1) build more cheap houses, (1) persuade people not to come to Auckland. To solve the latter instantly just close down the university of Auckland and AUT; OK maybe not practical but the Dept of Immigration could be more selective and that takes no act of parliament ~ they could start today..
"There seems to be strong evidence that honest Kiwi families are suffering simply because we have more families than houses in Auckland."
I disagree, there is no such evidence, only loud, sensationalized ravings from any and all pundits out to advance their own positions, financial and political, through a very emotive and divisive issue.
Show me any stat relating any regions population and the total amount of accommodation in it. Inclusive of all residential dwellings, holiday homes, Air BNB, vacant etc. Then we can tell if we have a shortage of accommodation or just a whole lot of speculative hoarders.
We should actually place the blame for Aucklands housing crisis exactly where it should be ........ at the door of Auckland's left-wing lilly -white liberal Council , who in the face of overwhelming evidence of massive inward immigration , stubbornly refused to open the city up and extend its boundaries for development .
And then took almost half a decade to draw up and approve the Unitary plan
Boatman
Wasn't it National/ACT that forced the Auckland Supercity onto locals without a vote ?
It's not just land but poor quality apartment & terrace housing that costs a fortune to build because there is a duopoly in NZ building supplies. So bad that the now defunct GatewayToQueensland outfit imported containers of Australian building supplies. There was a guy going building site to building site selling imported Gib board until he was seen off by the local distributors. NZ can't build efficiently at all. It's a cottage industry not an industrialized approach. There's more to the problem than council boundaries.
@ Boatman. The council represent the ratepayers and the council does have financial limitations. The council does not represent the people of the World yet to arrive in Auckland.
Perhaps the people who lived in NZ at the end of the last labour government 9 years ago should pay off the governments dept from that period, which at the time was 10 billion dollars. The people who have immigrated to NZ since then could pay off the dept that Nationals rock star economy has racked up.
Why should NZers be paying for the deficit of infrastructure created by uncontrolled immigration. Why blame the council, its not their immigration policy. lets go back to user pays.
"At least one in every 100 New Zealanders were homeless at the latest census in 2013, compared with 1 in 120 in 2006, and 1 in 130 in 2001, say University of Otago, Wellington (UOW) researchers." http://www.otago.ac.nz/news/news/otago613529.html
And what is so disgusting about this fact is that NZ has BY FAR the worst homeless statistics of the OECD countries. That's the fault of the government, not the council. http://www.oecd.org/els/family/HC3-1-Homeless-population.pdf
(Comment edited due to personal abuse and potentially libellous comments, Ed. Please see our commenting policy here - http://www.interest.co.nz/news/65027/here-are-results-our-commenting-po…).
...Nick Smith...likes to share his little stories like they matter. Something I advise my clients to do is get a code compliance certificate as quickly as possible. If anything happens to your house your building is still under construction. There was a fight over a house in New Brighton that had a boulder roll through it. The building had been finished and CCC was about to send the code compliance certificate but they refused after the earthquake and damage from the boulder.
If Nick Smith's house catches on fire he may find that he would not receive an insurance pay out....
bw: termination of a non-progressed building consent applies if the consent was lodged after 2004 (when the new building act came into effect). There are still building consents open from the 1990's.
There had been rumours about his defective knob. Now it turns out it fell off.
It turns out the PM talked about a housing crisis in Auckland in 2010 and here is Nick "the knob" Smith denying it.
http://www.stuff.co.nz/national/politics/93450365/pm-talked-of-major-ho…
Now let's watch them try to smear and discredit the Salvation Army in a frantic attempt to cover up the fact that they've been fully aware of this problem for almost a decade, had a timeline for how the crisis would develop, and left people to suffer while they lied and dissembled and did nothing.
I you have to remember the majority of people aren't looking closely at what is going on. The average person is oblivious to the issues for the most part and just getting on with their life. I'd say at 49% people think things are going fine. The numbers will change in the run up to election day but who knows in what direction.
You say that now but if an insurance company is looking for a way out they will use any excuse and fight it in court if necessary. Specifically when I've looked at insurance issues (from both sides) if a faulty installation resulted in the fire or contributed to additional damage that would not have been caused with a compliant installation then that would be a serious issue. The insurance company might pay out and claim from a third party, or they might refuse to pay.
Nick Smith is a moron for not sorting this out. If his house burns down he will no doubt tell a story about how he couldn't shut it off because the knob fell off and he couldn't be bothered replacing it or getting a code compliance certificate.
The knob (gas fire not Smith) would have to be causal. Which is why I used the word 'unlikely' and not 'impossible'. But to suggest the policy would be invalidated in its entirety and non gas fire related perils not covered, is incorrect.
The chances of a non compliance hazard existing and a builder or owner agreeing practical completion and occupation, are very low.
I think we can agree on this. The only item to be cautious of is in relation to non-compliant issues and receiving practical completion. There's a lot of non-compliant work out there. I believe you would be shocked at the work that's being signed off at the moment, some of it is complete crap and is a considerable hazard.
At this time MBIE won't want to move on the issues that are currently being raised as it will increase the cost of construction. Let's hope that it doesn't take more deaths for things to change.
Pity the Auckland Council, for they cannot get it right.
Pity the Reserve Bank, for they cannot get it right.
Pity economist Shamubeel Eaqub, for he cannot get it right.
Pity the Ministry of Business, Innovation and Employment. The advice they give isn’t even accepted.
PITY THAT WE KIWI VOTED FOR NATIONAL
In 2004 to 2008 the floodgates were open the other way with Kiwis going to work in the Australian mining boom, or to earn foreign currency. Now that the mining boom is over that flow has stopped and even reversed, but National failed to adjust to the changed circumstances.
Is there any chance we could work out how many people worth of housing our newly completed houses this year are worth using 1person + 1 person per bedroom per house? (Ie. studio holds 1 person, 1 bedroom house holds 2, 3bedroom house holds 4, etc) Why is it that we are building bigger houses than ever but still using only 2.x residents per house?
I think those days are long gone, where one bedroom = one person. For instance I drive past a house on a small piece of land on the outskirts of Auckland. There is the small 3 bedroom house, a large caravan, a small caravan, a cabin, a homebuilt sleepout on the side of the garage and a transit van. And anecdotally many houses in some South Auckland suburbs contain at least two families.
Yes, it could should be, because it uses the same techniques,
Of the two.
One does it for laughs, engage with the paying audience and shows the actors in a clever light
The second doesn't
Ask Mr Google
According to cognitive dissonance theory, there is a tendency for individuals to seek consistency among their cognitions (i.e., beliefs, opinions). When there is an inconsistency between attitudes or behaviors (dissonance), something must change to eliminate the dissonance.
https://www.simplypsychology.org/cognitive-dissonance.html
the "change" here could be the meanings of words, nature of data labels, skill of data gatherers....
lets just say its a display of character!
but the crowd really does go wild!
One of the reasons the debate is so he-said, she-said is Definitions.
The 'housing' definition our august pollies are arguing over is, besides being an angels-on-pinheads category, limited to 'Houses'.
If they clipped on the wide-angle lens, they would be talking 'accommodation', which is a horse of a different colour.
For 'accommodation' includes:
- Houses (urban)
- Boarding-houses
- Retirement Villages
- Boats and yachts
- Caravans
- Farm cottages and other rural dwellings
- Campervans, fifth-wheelers and motorhomes (there is, for example, a substantial 'grey gypsy' population living on the road)
All are perfectly well suited to permanent living, not all are regulated by the Building Code (boats, caravans, campervans, fifth-wheelers, motorhomes), many have characteristics such as SIP panelised construction, high-grade thermal insulation, and economy in terms of space, consumption of water and of gas - which were it not for the fossilized state of building construction in NZ, could with great advantage be emulated to give 'affordable, sustainable' housing.
Interest - you could lead the charge here by resolving to talk exclusively about 'accommodation', not 'Housing'.....
If prices leveling off is a sign of increased supply, would we not expect listings and sales to rise?
Instead we have a normal level of listings and a decrease in number of sales. That suggests to me that price rises have been tamed by reduced demand. Yet National has spent 9 years telling us demand has nothing to do with it!
Auckland is growing by 40,000 to 45,000 people a year. Yet it is only building somewhere between 7,000 (code of compliance) and 10,000 (consented) houses a year. Given that works out at 4+ people per house and the current Auckland ratio is 3, then clearly Auckland is not building enough houses to address issues like homelessness/ families living in cars/ the explosion in the numbers getting emergency accommodation.
In the year to June 2016 Auckland was only consenting 6 new houses per 1000 residents compared to Canterbury's 11 per 1000 residents.
Since 2008 Auckland house prices have doubled. The usual supply and demand response -something that Nick Smith states he believes in -would be for an increase in quantity supplied to bring down prices. That would be the free market in action. The fact this has not happened indicates some sort of market/regulatory/structural failure.
The government was aware of this structural problem - the current PM and then Finance Minister in 2010 was predicting a housing crisis by 2015/2016 -yet they lacked the political will to fix the structural problems in the housing market.
"Bill English said privately seven years ago a housing crisis was looming in Auckland, a senior Salvation Army official says.
Major Campbell Roberts said in 2010, Mr English - then finance minister - told him he feared a crisis on the horizon...... http://www.radionz.co.nz/news/political/332524/pm-spoke-of-housing-cris…
Why do governments lack the political will to fix the structural problems in the housing market? Well it is not complicated -they tell us. Look at this housing affordability announcement from 2012. Where John Key states right at the beginning of the interview that reforms would be slow because "I don't think that New Zealanders who own their own homes would thank us if we took action which would devalue their most valuable asset...."
https://www.youtube.com/watch?v=AuCchEb-XOk
That is the explanation for why the government's housing reforms have been too little and too late.
This was/is a morally corrupt choice because it places the interests of wealthy existing homeowners above those that are struggling in the rental market (or falling off it into homelessness) and future generations of aspiring homeowners.
>Major Campbell Roberts said in 2010, Mr English - then finance minister - told him he feared a crisis on the horizon...... http://www.radionz.co.nz/news/political/332524/pm-spoke-of-housing-crisi...
It's amazing what a little public profile does though. Now Bill English still insists there's no crisis.
The housing shortage is a tough, tough situation. I'm an Architect and I understand the massive difficulties building "affordable" houses.
1) the price of land in Auckland is between expensive to exorbitant
2) there is a serious labour shortage (i.e. tradespeople) and that makes it very hard to build more houses or build faster.
3) the most basic tradesperson charged $40/hour a year ago, now you cannot get anyone for under $55/hour. This, of course, feeds through to price increase for housing, qualified tradespeople are much more expensive
4) the cost of building supplies is rising and rising every year
I don't know what the solution is, we can, of course start talking about bringing in more tradespeople from overseas and others will say stop immigration altogether.
I don't know the answer but I can tell you it is really NOT EASY building plenty more houses and especially not affordable ones
Maybe the answer is like the Chinese proverb of when is the best time to plant a tree. Twenty years ago. The second best time is now.
If the government had started a house building programme 5 years ago when Labour suggested this would have been good. We would have had tens of thousand more houses. Thousands of more construction workers.... The second best time to start these sort of housing reforms is now.....
The problem is we've had a party full of property investors who have benefited personally from avoiding action for as long as possible, driving their own portfolios up in value. John Key had to put his wealth in a blind trust, but there are no such limitations around politicians dragging their feet and benefiting personally from Auckland's spiraling property prices.
They've sacrificed the chances of young New Zealanders in doing this, but you can't make an omelette without breaking a few eggs, right?
Well, as soon as we see the government starting to take meaningful action to either increase supply or reduce demand we can conclude that they could have acted earlier - much sooner after their 2007 campaigning on the urgent need to take action on the housing crisis.
Re the price of supplies, I'd be interested to hear your opinion: how much of this do you think is due to exploitative behaviour by suppliers here - i.e. just ramping up profit because of demand? Or are supplies more expensive on a global scale?
Is this something the government could work around in a build programme using Pharmac-style bulk purchasing power?
I shall, wearily, recycle a comment from - why - only a week ago.....
What would help buildings affordability (land prices aside, because they are a direct result of planning zoneration and strangulation over decades, following failed Brit-style planning fads) is a concerted effort to:
- Establish factories for mass production of entire houses. Panelised, SIP etc. Little labour, mainly robots, CNC and lotsa clever software, all of which exists right now.
- Isolate products of these factories from the incompetent hands of Councils by multi-proof consenting them at source. This leaves only founds and services to the inept ones.
- Contract with these factories to produce social and affordable housing, so as to guarantee volumes - factories need sales volumes above the break-even point to have any future.
- Crank it all up - the point of factories is fast, cheap, reliable quality, all done under cover. Great contrast with the current way of 'building' which has components clonked together by (wait for it) drug-addled hammer hands, out in the Awkland weather for weeks, and subject to the beady eyes of Inspectors who (rightly or wrongly) suspect that every single house is a Disaster in Waiting.
I've been banging on aboot this for years, see the collected works here...http://waymad.blogspot.co.nz/search/label/Housing
But as the old saying goes, nothing like a hanging in the morning to concentrate one's mind.. And a Gubmint in election year is just that.
The essential element, as I see things, is the multi-proofed consent. This gets the Councils right out of the way, and puts the onus on the factory/certifier. That guarantee alone is a big impediment for ordinary businesses thinking about factory production of housing, so an obvious help there would be some Gubmint backing or explicit legislative relief. As most legislation allows for Regulations to be thunk up today and passed at next Tuesday's Cabinet meeting with a Gazetting and OIC, that need not pose any great delays.
What's missing, as always in our hapless political invertebrates, is the Will to do it in the first place, the Spine to stand up to the endless howls of affected rent-seekers, and the Guts to slog it out for enough time to make a practical difference.
As a long experienced property investor who keeps tabs on the whole country I can clearly state that there is no shortage or properties to let in Auckland. Just go look at the 4000 properties advertised on trade me. There will be lots more available that are on web sites and not advertised on TM. What we have is a shortage of available money to rent them. The reason there is a shortage of money is the accommodation supplement had not kept pace with rent increases. If rents had been in complete synchronism with sale prices the crises would have been far worse.
So your solution is more subsidies for landlords? Don't you think that is part of the problem? Your industry uses its political connections to suck on the teat of the taxpayer rather than demand genuine housing reform to make the whole housing industry competitive? Doesn't this make you feel a bit embarrassed -being this self-entitled leech industry?
I really suggest you read this article about Crony Capitalism in NZ to understand how badly and quite frankly evil the consequences of this sort of thinking is. https://medium.com/land-buildings-identity-and-values/crony-capitalism-…
Exactly, Brendon. Landlords must meet the market, like any other business, and it's price discovery that determines market rent. Some landlords will complain about the yield, but yield when expressed as a percentage of capital value seems increasingly irrelevant as a a measure when capital values are so out of whack. Landlords shouldn't get to ask to put their hands in the public purse to goose their income.
If they don't make money they negative gear OR if they don't make money the government increases subsidies....
Hmmm...What a business to be involved in! I wish I could start a 'business' anywhere else where regardless of how non-competitive my market offering was, I got a handout from the government for doing nothing other than taking money from other citizens for an asset that they could otherwise personally own.
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