Up Not Out: Are We Really Serious About the Housing Crisis?

Last week we looked at the need for more homes. In this final part of the series on the New Zealand housing crisis, why building up and not out is the way to go.

Auckland City Council yesterday approved the Unitary Plan. For those outside of the City of Sails, this is an overarching plan which will guide how the city grows in the next few decades. It has been needed and overall it sets out clear ideas and guidelines as to how Auckland will look in years to come. It will see more concentration of housing and more apartment living.This is necessary and vitally important.

It also signifies a shift in thinking in New Zealand. For years we have clung onto a 1950s ideal of a house on a quarter acre section with a  white picket fence. While the section has stayed the same, often the houses have turned into something akin to a 1980s Eastern European athlete pumped full of steroids. That ideal should be banished to history. It is no longer valid or logical. Let’s consign it to history where it belongs.

Instead of holding onto an outdated ideal, we need to build up, embracing apartment and townhouse living. Our family sizes aren’t getting any bigger so why shouldn’t the size of our houses reflect this? And in a sprawling metropolis like Auckland, building up solves not just the housing crisis but many other problems as well, so long as it is done well.

What do I mean? Well, we should focus on efforts on building town centres in and around key transportation hubs. No more NIMBYism (Not In My Back Yard). All parts of Auckland need to embrace this. Whilst the council may like to showcase Flat Bush and Hobsonville Point as great examples of the way forward, the big problem with those new suburbs is that neither is near a major transportation hub. People will still need to jump in private cars and add to an already congested roading network. I think we need to look more towards New Lynn and make that our blueprint.

New Lynn has the third busiest rail station in the Auckland region behind only Britomart and Newmarket. Next to the transport centre is an apartment block and behind that the public library. Across the road is Lynnmall. A medical centre is in the lower floors of the apartment block. Looking west, on the other side of the transport hub is Les Mills and behind that a new housing area which will fill up with townhouses, expected to house 5000 people where the old Crown Lynn and Monier Brick companies were sited. Up the road is a local primary school. All within walking distance. Commuter trains travel in and out, as do across town buses. There are also smaller commuter buses, gathering people from the wider catchment and dropping them to the transport centre. The only thing truly lacking is some decent playgrounds and green areas for families. That’ll change but the point is this is the way forward. Building up. Creating more concentration. Utilising space better.

Building up means a more concentrated population. It makes public transport more doable and appealing. It increases housing supply and also cuts back on the number of single occupant vehicles on the roads. Whilst there are plans for building out in the unitary plan, I strongly believe that the emphasis needs to be on building up.

Building out means taking more farm land and turning it into suburbia. It sprawls Auckland even more. It pushes people away from their work places and forces them into hours of commuting on congested roads each day! More outlying suburbs mean less farmland to produce the food we need. Look at Pokeno, just south of the Bombay Hills. Where farmland and cows once stood, a whole town has now popped up. And it is pretty much all people who then commute into Auckland, some 45-50kms away.

Building out is old world thinking trying to solve a problem of today. It’s time to build up. It’s time to invest in public transport infrastructure. It’s time to see multiple town centres sprouting up throughout Auckland. It’s the only logical way forward and the most sensible way of solving the housing crisis without creating a new problem on the roads.

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This is the final part of a 6 part series titled “See Are We Really Serious About the Housing Crisis?” Thanks for all who journeyed all the way through. For those who may have only come in part way, please feel free to read all the parts as I attempt to offer a multi-faceted solution to the current housing crisis.

This is a Time to Build: Are We Really Serious About the Housing Crisis Part 5

Last week I looked at the importance of financial education. This week I look at the need for more homes.

Everyone is talking about it. We have a housing crisis on our hands. One of the major contributing factors to this crisis is that we aren’t building enough houses for the growing population. Demand is out-stripping supply. Particularly in Auckland. It’s a major issue. The reality is that for too long our housing stock has been increasing far too slowly.

Not only that, but some of our housing stock is in serious need of being replaced. Unfortunately it seems to be at the bottom end of the housing market where landlords and tenants haven’t looked after the property. Of most embarrassment to us as a nation is the fact that many state houses are the worst offenders. They look disgusting. Many of them are poorly insulated, mouldy, cold and drafty. They were built in a time where building codes weren’t as stringent as they are now and successive governments have dropped the ball by not making sure they are liveable. In their negligence they have made a mockery of the name and crapped all over the legacy of Michael Joseph Savage.

Admittedly, there are issues with building new homes that do hold things up. The RMA, building consents, local councils, building supplies, even labourer shortage. All have been used as excuses to try to explain away why we aren’t building the homes we need. Enough is enough though. No more excuses, because the excuses are being used as a scapegoat for inaction.

Some of the so called excuses are important steps in the process and I would hate it if we cut corners with them. We don’t want a repeat of the leaky home catastrophe of recent past. We want homes that are good, solid, long-lasting. They should be built to be healthy, warm, and energy efficient.

But we need to build. Not only that, but we need to reconsider what type of homes we are building. It seems that our average house size is getting bigger and bigger. Section sizes are remaining the same, but the buildings look like they are on steroids. Four bedrooms, two lounges, an office, and at least two garages. It seems more like a mansion, particularly seeing as family sizes aren’t really increasing. We need to relook at how we house ourselves. We need more and we need them smaller. Readjust our expectations of what the size of our houses should be is important. We also need to plan well and strategically, which is why I support the Unitary Plan that Auckland Council is considering. It is an overarching, region wide plan on how our biggest city can grow and plan for growth now and into the future.

 So let’s get building and let’s do it well. We owe it to ourselves and to our children. This is a crisis we can’t pass on to them to deal with.

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This is part 5 of a 6 part series. See Are We Really Serious About the Housing Crisis for the summary. Next week, I conclude this series with why I believe we should be focusing more on going up rather than out, particularly in Auckland.

Future Proofing & Educating Ourselves: Are We Really Serious About the Housing Crisis Part 4

Last week I looked at Capital Gains Tax and Comprehensive Capital Income Tax. This week I look more longer term with the importance of financial education.

Kiwisaver has been going for nearly nine years. 2.5 million of us are enrolled, with $28.5 billion in assets *. Truly it has been a success and of huge benefit to the country. But, despite this, we are still very financially illiterate as a nation. Not many people would be able to differentiate between a share and a bond. We are buying up homes like they are going out of fashion, and are very happy to put ourselves heavily into debt to do so.

Why this push towards houses? I believe it is for two reasons. One, a house is very tangible. You can see it, touch it. It’s like sticking your stake in the ground, declaring to the world, “this is mine!” The second reason is that we just don’t know about other investments while we continue to fool ourselves into thinking that because we live in a home we understand the property market. We are deluding ourselves.

But it doesn’t have to be like this. Simply saying “uncle Bob invested money in a finance company and lost everything, therefore I won’t trust the sharemarket” shows how much we don’t understand things financial. It is possible to learn about financial investments and not be afraid of them. We just have to spend a little time to do so and Kiwisaver is a fantastic way of doing this. In fact I believe that a non negotiable in signing up to Kiwisaver should be to participate in a four part course on investing basics, the sharemarket and the importance of diversification. If at the end of this course you decide to opt out of Kiwisaver that is fine but at least you have learnt about investing and long term financial planning.

I’ll share my story to explain. When I was enrolled into Kiwisaver I knew nothing about investing and the sharemarket. I was nervous about it, even a bit fearful. Growing up in the eighties I had memories of the 87 stockmarket crash. I let that fear dictate how I looked at Kiwisaver for three years. But one day I looked at my Kiwisaver balance in the default scheme I was in and I decided that I had to do something about it. The first (and probably best) thing I did was read. The most comprehensive and helpful book for me was Mary Holm’s The Complete Kiwisaver. Then I heeded her advise and researched the schemes available, deciding on one I felt would be the best fit for me. But I didn’t stop there. The scheme I moved my Kiwisaver into allows me to select what funds and companies I invest my money into. So I decided to use my Kiwisaver as a platform for learning about the sharemarket. I took a four part investor basics course my provider runs. I learnt how to read market research. I keep an eye on how my Kiwisaver is going. I have regular reviews with the advisor my scheme provides for me. I don’t regret doing any of this at all. And I don’t share this to say look at me. I share this to say if I can do it, so can you. It isn’t hard but it is worth it.

I still have a lot to learn about investing and the sharemarket. But I’m not afraid of it as I once was. I don’t see that the only way to get ahead financially is to buy property. In fact I am so relaxed about the sharemarket that now, with housing prices in Auckland so ridiculously over-inflated (around nine times the average wage), I am very comfortable with the idea of not purchasing a house and instead directing that money into the sharemarket and other investments. And that is where this links into housing crisis. Too many of us throw money into property simply because we believe it is the only way to get ahead. With so many of us doing that it over-inflates the housing bubble. It will pop one day. It won’t stretch on forever. Now is the time to re-educate ourselves and get rid of our fear of the sharemarket and non-property investments.

* The stats used are from the FMA (Financial Market Authority) released Kiwisaver Annual Report 2015
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This is part 4 of a 6 part series. See Are We Really Serious About the Housing Crisis for the summary. Next week, the desperate need of building more homes before I complete this series with why I believe we should be focusing more on going up rather than out, particularly in Auckland.

Not the Silver Bullet But a Start: Are We Really Serious About the Housing Crisis Part 3

Last week I looked at misdirected investment. This week it is that dreaded term that has been bandied around as both a miracle cure and a poison that will slowly destroy and unduly punish Kiwi investment. Yes, it’s Capital Gains Tax.

If there has been one thing that has got New Zealander’s collective backs up over the housing crisis it would have to be a Capital Gains Tax. Labour campaigned on it last election and failed. John Key is adamant that it will not benefit the nation. However, as Duncan Garner pointed out quite clearly in two blogs last year, politicians from across the floor have a vested interest in not introducing some type of tax on property. That vested interest is that many of them own more than one property. Why own more than one? Because we as a nation don’t treat property the same as any other asset or capital. Therefore, in order to pay as little tax as possible, people invest in property. This helps fuel the housing price bubble, particularly in Auckland and isn’t the best thing for the country.

And this isn’t about revenue gathering. It is about trying to bring balance and fairness into our current tax system. At the moment it is heavily sloped towards investing in property and the ones who end up paying the most tax proportionally are salary and wage earners. We need to bring some balance back to the field. In researching for this particular blog I discovered that perhaps one of the fairest and balanced ways of correcting the faults in our tax system is something that the Morgan Foundation propose - a Comprehensive Capital Income Tax. It brings balance to our tax system and would see less money invested in property and more money invested elsewhere (This would help solve the issue I raised last week of misdirected investments).

Whichever way we go, the point is we can’t keep doing the same thing as we will always get the same results. No tax on property = heavy investment in property. Introducing a fair tax on all income (basically introducing tax where there isn’t tax currently) = a balanced investment in property and shares and local businesses (in other words, diversification).

And whilst a change in the way we collect tax isn’t the silver bullet, having it as part of a raft of ideas would cool the housing balloon without it going pop. It would bring balance and generate tax revenue that could be used for the benefit of all New Zealanders in areas like health, education, the environment (increasing what DOC gets would be a great start there) and even a reduction in the income tax people pay.

It’s a win win for the nation. We just need our politicians to stop serve their own and their mate’s interests and do more to look after the interests of we the people who voted them in and have the power to vote them out again. 

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This is part 3 of a 6 part series. See Are We Really Serious About the Housing Crisis for the summary. Next week, the importance of Financial Education and why we all benefit through learning even the basics of investment. In later blogs I'll look at  increasing the current housing stock and finally why I believe we should be focusing more on going up rather than out, particularly in Auckland.

43 Years of Silence, 43 Years Too Long.

43 years ago today this was the view from on board HMNZS Otago. It was sent there officially to be a physical presence of the New Zealand protest against French nuclear testing on Mururoa Atoll. Prior to the Otago leaving, Prime Minister Norman Kirk said that its presence (and HMNZS Canterbury's when it relieved the Otago) would be "a silent accusing witness with the power to bring alive the conscience of the world".

Since then the men who went on Big Norm's Mystery Tour have been silently suffering and a nation whose proud anti-nuclear stance was built on the success of that 1973 protest has stayed silent in its appreciation and gratitude to those men who did their duty and served their country when called upon. Shame on us as a nation that we have forgotten these men who made the world aware of what the French were doing. Their mere presence meant that minutes after the nuclear test, word was sent to Wellington and then to the world of the detonation, sparking what former NZPA correspondent David Barber referred to as ‘a barrage of international protests that prompted New Zealand's Prime Minister Norman Kirk to say, "Never before has world opinion on nuclear testing been so stirred.”’ It was groundbreaking. One small nation in the South Pacific had boldly confronted another over nuclear testing and won. It was a major victory. 1973 was the last time the French undertook atmospheric nuclear testing.

Yet how many Kiwis know about what happened? How many of us are aware of the efforts of those brave men on board two of our Navy frigates? How many are aware that far too many of them have died in the following years of cancers and leukemias? How many of us know of the suffering that those sailors who are still alive have had to endure? Continual cancer treatment, often for rare forms of the disease. The psychological effects of watching your former shipmates dying and knowing the high probability that you could be the next one to contract cancer or leukemias. The effects on the wives, partners, children and now grandchildren as their husband / dad / granddad suffered.

This has got to end. New Zealand must acknowledge these national heroes and do the right thing by them. On the day of the Otago’s department, Norman Kirk said that a grateful nation would not forget the men and would look after them if something happened. Something did happen, and continues to happen to the sailors and men on board those frigates. It is time our nation stayed true to those words spoken by Mr Kirk 43 years ago. Lest we forget.

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DISCLAIMER: I sit on the executive committee of the Mururoa Nuclear Veterans Group Inc as the co vice-president as well as the Media Officer. The group is made up of former sailors on the HMNZS Otago and Canterbury and the HMAS Supply, wives, partners and children of those sailors who served on the 1973 Tour. 

Misdirected Investments: Are We Really Serious About the Housing Crisis Part 2

Last week I mentioned 7 ways I thought could be implemented to help solve the housing crisis. This week I want to turn to the idea of foreign and local investments.

Let me state at the outset that I am not against foreign investments. As we are part of the global economy they play an important role in the New Zealand economy. However, unlike some of the rhetoric that has come from the right about investments and the housing crisis, I do not believe that foreigners buying up our housing stock can be called foreign investment. The problem is that buying up land and houses directly contributes to our housing crisis and adds little or no value to the economy. The house is purchased, and the investor sits on it until they are ready to move their money on. Under our current tax regime, that is an easy thing to do with no consequences. Any profit can be taken out of the country without any tax being paid. How does that help New Zealand? Not only does it push up house prices and reduce the housing stock available, it also denies money flowing into our small and medium sized businesses which are an important and significant part of our economy.

What would be better is to discourage foreigners who want to invest in New Zealand from purchasing our housing stock. One way this could be achieved is by some form of capital gains tax and a tax on money leaving the country. Not only would this be fair, it would also bring us in line with other countries around the world. In addition, it is important to incentivize investing in New Zealand businesses, thus encouraging money out of our housing stock and into the business sector, thus growing businesses and growing our economy. Whilst I am not sure how this could be achieved, some ideas could be a rebate on money invested in small and medium business, or a reduced tax rate. The point though is that with proper investment, our small and medium sized businesses, which are significant contributors to our economy, could grow resulting in more people employed, exports increasing and more money brought into our economy. We would all benefit. With the current situation, the only ones who benefit are the speculators buying up the housing stock.

In the same way, we can also incentivize Kiwis to put their money into small and medium sized businesses. We as a nation seem to be allergic to investments outside of property but we need to turn this around so our economy can grow and strengthen. It would also help make our economy more resilient as money flows into more diverse sectors. Like with foreign investments we could incentivize by offering rebates or reduced tax on investments in our small and medium business sector.

The one thing we can’t do is nothing. We can no longer keep putting our collective heads in the sand, denying the existence of a problem. That will only result in the housing balloon expanding until it pops.

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This is part 2 of a 4-6 part series. See Are We Really Serious About the Housing Crisis for the summary. Next week, Capital Gains Tax - Not the Silver Bullet but a start. In later blogs I'll look at  Financial Education, increasing the current housing stock and finally why I believe we should be focusing more on going up rather than out, particularly in Auckland.

Are We Really Serious About the Housing Crisis?

This past weekend Labour celebrated 100 years of existence. As part of that centenary they announced a Housing policy they would enact if they became the next government. Despite what the right say, it is clever politicking by Labour for two reasons; 1. it’s an attempt to address a growing issue and 2. it harks back to the 1930s era of Labour governance where state housing originates from. Meanwhile, yesterday National announced that it didn't expect a dividend from Housing New Zealand which will, in theory, allow HNZ to invest in building more state houses.

This crisis has been an ongoing issue for years yet has been ignored by the politicians until now. With both main parties deeply rooted in neoliberal economic policy there has been an unwillingness to interfere with the market, choosing instead to believe the market will right itself. There has also been a push to emphasise one issue or another. We’ve heard that not enough houses are being built, too many foreigners buying up our houses, it’s Kiwi investors, it’s councils not releasing enough land. What we haven’t heard is a concerted combined attempt at solving this growing problem.

I have decided that instead of complaining, I would have a go at offering a combined solution to the problem. Admittedly I am no economist, or finance advisor, nor do I claim expertise in this area. But as a lay person I think some of these ideas, as part of a wider ranging policy, have merit and should be openly discussed.

1. Discourage foreigners purchasing housing stock. 

This is often seen as being “anti-foreign investment”. I believe that’s a false label used to dismiss this idea but this idea needs an alternative offered in conjunction.

2. ENCOURAGE foreign investment into local businesses. 

This is that alternative. The problem isn’t foreign investment. The problem is where that investment is going. Housing stock doesn't generate wealth for our country. Foreign investment in our small and medium sized businesses does. These first two ideas have to go hand in hand.

3. ENCOURAGE local investment into local businesses. 

Likewise, local investment shouldn’t be sunk into multiple homes. Local businesses generate wealth, employ people and return money back into regional economies.

4. Capital Gains / Property Tax. 

People hate this idea but the reality is that currently there is little to no tax on property investment. A graduated tax based on the number of properties one owns seems to be a fair way of taxing. If you want to make your money in property go ahead, but you will be taxed just like any other investment.

5. Education on Investments. 

Too many Kiwis have no idea about how the sharemarket works, what a share is, what a bond is. We fear the sharemarket because we don’t understand it. As a nation we need to financially school ourselves up and get over our fear. 

6. Build More Houses. 

It is a no brainer but the population is growing, particularly in Auckland. Not enough housing is being built to cover the growth. 

7. Build Up, Not Out. 

Building more suburbs in our major cities, particularly Auckland will not solve the issue but will simply create more complex problems. We need to have a long term plan to make compact people-friendly cities. Sprawling metropolises like we have now are car-friendly, use up valuable farmland and don’t work. The desired quarter acre section with a white picket fence is an idea best left in the 1950s where it belongs.

So seven ideas. Not rocket science but at the same time if done properly can help to solve the housing crisis. Some of the ideas won’t see immediate effects but are necessary to stop the speculation and correct the craziness that currently inhabits our property market. I’d love to see all of these ideas implemented. I’d love to see politicians with the guts to actually work together to solve the crisis. But I fear that that won’t happen. I fear personal interests will trump what’s best for the nation and that the housing crisis will only get worse until something snaps, plummeting us into the abyss of fiscal depression.

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This will form the start of a 4-6 part series. I will attempt to expand on some of these ideas over the coming weeks. Next week, redirecting investment away from housing and into Kiwi businesses (this will attempt to expand points 1-3). That will be followed by a look at Capital Gains Tax, Financial Education, Increasing the current housing stock and finally why I believe we should be focusing more on going up rather than out, particularly in Auckland.