by Ian Apperley
Why can’t we control affordable housing? The problem is that no one central authority controls house affordability. It needs the co-ordination of groups that are often at odds with each other and with the citizens of New Zealand as well.
Imagine a system that managed housing. It would have a series of inputs and feedback loops. How many houses on the market, wages, location, transport, interest rates, reserve bank policy, private bank policy, cultural attitudes, land availability … the list goes on and on.
Local government is trying to deal with a series of situations that are fluid, where problems change and continually affect each other. It’s a “mess.”
Unaffordable housing, roughly by definition, is housing that people cannot afford to buy or rent because what they earn is not adequate. Affordable housing should then be provided by central and local government along with private companies. But these private enterprises, trusts, and other third parties are motivated by one thing only. Money. Which is what helped get us into the mess in the first place.
One of the answers is to build the affordable housing. The Wellington City Council owns a great deal of affordable housing, invests in it well, and is preparing to build more.
On a national level, Housing New Zealand is tasked with the same problem and is doing a poor job in my opinion. HNZ has reduced its housing stock by 20,000 since the nineties, and stock has remained static for the last decade while wage disparity increases. The government’s attitude to this has been to deny it, in a rather post-truth Trump-like way. This gives HNZ permission to continue with their less than effective policies. Worse, emergency housing, in some cases costing over $1,300 a week, is expected to be paid back by beneficiaries, dooming them to debt for the rest of their lives.
Let’s get that last point straight. It is the government’s responsibility to provide emergency housing, and when they can’t, our most vulnerable are forced into motels and have to pay the bill back? There’s a constant demand from people who cannot afford to live themselves. They are the ones who are living in cars or jammed into garages on top of each other.
Affordable housing will not change either rents or house prices, though there is a myth it will.
Despite the view that house prices drop where affordable housing is built, home prices still increase, and so does rent.
The problem in Wellington is where to build affordable housing. Every time the words are mentioned we get a huge community reaction from people who are ignorant of the facts. Grenada has been the latest case of this, as reported by the DomPost:
Residents of a northern Wellington suburb are “appalled” by plans to build 150 homes in the area, saying affordable housing could ruin the character of the suburb. In a community newsletter, the Grenada Village Residents’ Association said the planned development would lead to an “extraordinarily large concentration of budget housing” that would be “unacceptably out of character with Grenada Village”. “Not only will all our property valuations be affected by this, but the long-term effects of such an extensive clustering of cheap housing could be disastrous for obvious reasons,” the association said.
The Association is wrong. Such myths about affordable housing have been roundly disproved. Affordable housing has zero effect on house prices, and what on earth does “disastrous for obvious reasons” mean?
Opposition to affordable housing comes from mainly white, older, more affluent, communities. Ignorance fuels it. Concerns about losing local green areas are often used as a fig leaf to cover prejudice.
Another issue is what is affordable? The Mayor and his Deputy seem to have set this figure at less than $500,000. Now, there are a couple of problems here. The first is that the Council is driving towards people owning their house and the second is that $500,000 is a lot of money, and not realistic.
We need to realise that the dream of owning a house is over apart from the wealthy. People can’t afford to save $50,000 then pay $600 a week for a mortgage plus another $200 a week for rates, insurance, maintenance, and the like. Plus, the moment a property is built for $500,000 it’s going to increase in price. On last year’s figures, a house completed in 2015 for $500,000 would be now worth $610,000.
In my next article, I want to look at solutions. If you have some ideas, I’d love you to comment so I can include them.
Denials of housing crisis are lies