New Zealand’s ACT Party continues to raise the bar on New Zealand housing policy, challenging the two major parties – Labour and National – to undertake meaningful reform.
On 25 August 2011, former leader and ex-Reserve Bank of New Zealand governor (1988 to 2002), Dr Don Brash, gave a speech in which he noted the role played by regulatory constraints on land/housing supply in making New Zealand’s housing unaffordable:
It is impossible to avoid the conclusion that the interaction of the RMA [Resource Management Act], the Local Government Act and local government staff all over the country has produced a major obstacle to improved living standards.
One of the ways this has happened is through the way in which this interaction has pushed the price of housing well beyond the reach of far too many New Zealanders – or more accurately, has pushed the price of residential land well beyond the reach of far too many New Zealanders.
…housing in our major cities is now among the most expensive in the world, relative to household incomes. And why? In large part because too many local governments have quite deliberately limited the supply of residential land.
Arthur Grimes, now chairman of the Reserve Bank, found that the effect of the Metropolitan Urban Limit [urban growth boundary] imposed by the Auckland Regional Council had increased the price of land just inside that Limit by some 10 times compared with the price of land just outside the Limit.
This is absolutely nuts, in a situation where New Zealand is one of the most under-populated countries in the world, and where Auckland is one of the most densely populated cities in the world – in terms of people per square kilometre, Auckland is more densely populated than Vancouver, Melbourne, Portland, Adelaide, Perth or Brisbane…
In September 2011, Dr Brash followed-up with a fantastic speech, entitled This land is your land, in which he lamented the eroding of New Zealand’s property rights and the corresponding decline in New Zealand’s living standards, including through declining housing affordability:
New Zealand is a sparsely populated country… Only an estimated 0.7 percent of our total land area is urbanised. One might be forgiven for thinking that plentiful land for building would be one of our advantages.
But one would be wrong about that! Today we have some of the most unaffordable housing in the English-speaking world…
The evidence from the Centre for Housing Research is that it is those most sensitive to rising prices that are being squeezed out first. It is young New Zealanders, low income New Zealanders, and single parent households who are being squeezed out of home ownership first…
As a result of over-inflated house prices, we are creating a society of haves and have-nots. The haves own their own homes and find themselves with healthy nest eggs; the have-nots face a seemingly insurmountable barrier between themselves and inclusion in a property-owning society.Equity is the big loser, both within generations and between them. It is younger generations who are hit hardest, unless of course they have wealthy relatives who can help fund them into the property market.
We borrow money offshore to bid against each other for overpriced houses, paying interest on those loans, then attempt to compete against those who have lent us the money. As another former Reserve Bank economist, Rodney Dickens, has put it: “How can a small, export oriented country facing huge disadvantages because it is half a world away from some of its major markets be competitive when housing costs 30-43% more than in the U.S.?”…
There’s absolutely no shortage of land, but the myriad of constraints placed on its use has strangled the supply of land available for people to build their lives and homes…
The new planning theory in Auckland is ‘densification.’ Providing for subdivisions suitable for families is actively discouraged with the expectation that more and more people will live like students in tower-blocks…ACT wants affordable housing to again become a reality for all New Zealanders. We want to ensure that cities grow according to the wants of people rather than dreams of planners.
We would reverse the notion that people can use their property only in accordance with local government plans. Instead, we believe that central and local governments should respect the wishes of property owners. ACT wants the law to provide that, provided baseline environmental conditions are met, any activity would be permitted…
On Saturday, at its 2013 Annual Conference, incumbent ACT leader, John Banks, again argued for a winding back of the Resource Management Act, which governs New Zealand planning policy, as well as implementing a “freedom to build” clause that would create a presumption in favour of development and provide land owners with greater freedom to develop their land:
We face a housing affordability crisis in Auckland.
First home buyers face housing costs almost as unaffordable as London.
It is a problem largely created by former governments through the RMA and building regulations…
The RMA that promised so much has delivered so little.
The RMA is the epitome of a law with unintended consequences.
The original 382 pages were intended to replace 59 Acts of Parliament.
We were told it was supposed to free up development.
We were told it was supposed to bolster the fundamental freedom to build.
And we were promised simplicity.
Twenty-three years later, it is a 900 page job destroying machine.
The RMA is now one of the major constraints on investment, growth and employment.
It is now a significant cause of the housing unaffordability. It is used to constrain the supply of land thereby creating a massive transfer of wealth from first home buyers to those who already own consentable land.
The ACT Party agrees that we need to reform the timeframes in the Resource Management Act as National has proposed.
But we need to go further, much further, if we are serious about housing affordability.
And the ACT Party is serious about housing affordability.
We need to reverse the anti-development and anti-subdivision presumptions of the RMA in favour of the freedom to build on one’s own property. And we need much less prescriptive plans.
ACT’s Freedom to Build policy is our contribution to the housing affordability debate. It would do much to return the RMA to what Parliament originally intended.
The Freedom to Build is a presumption that you can develop your property if you respect the like rights of your neighbours.
This will increase the supply of land that can be built on.
The result would be that young people would be free to achieve home ownership if they are prepared to work hard and save hard.
While the ACT party will never gain widespread representation, it is to be commended for fighting the good fight on housing and providing a voice to younger and disadvantaged New Zealanders denied the opportunity of affordable housing – an opportunity earlier generations took for granted.
unconventionaleconomist@hotmail.com
The ACT party might be a right wing voice for the centre-right governing party, the National Party, so only noteworthy thing in Banks’ speech was that it was made at all! He is a former cabinet minister of a governing National party but, today, is widely disliked and ridiculed for his personal and ethical behaviour. Don’t read too much into a speech delivered by a ‘failed’ politician. As you note, ACT is unlikely to have any say in any future Government policy – they may not even exist after the next vote!
But failed or not as a PM the speech itself has truth to it, why has the RMA allowed this to happen. It is because people with vested interests go into power. I rang the helpline in NZ back in 2009 and suicide rates were sky rocketing because young people just don’t have a chance.
On top of this it seems NZ people and their chances in life are been displaced by a lot of cashed up Chinese. I guess everyone can come out and blame me for been racist, but so what.
The only way that it can change is those who do this be publicly exposed including their and their families address details. I am sure there is enough people in NZ at breaking point to show them how angry people really are.
Govt chokes supply of housing and pokes demand via immigration. The result is what you would expect.
Yea, it makes me sick, while exporting manufacturing and services. This is why so many find it so hard these days.
Another problem, everyone beats up on unemployed people saying they take to much, yet half if not more of their payment goes into rental which goes into the pockets of the wealthy. It’s like you can beatup on the poor and get wealthy at the same time.
unemployed people … half if not more of their payment goes into rental
Exactly. The payment is not for the welfare of the unemployed, it is a payment to a housing monopolist.
Given that speech… let’s hope they gain some ground. Low density policies are highly autocratic and belong in the age of soviet style central planners. What we need is a true free market. People don’t want to live like “students”, especially those of us with families.
Have a look at Texas, where there is almost no planning regulations at all. Has it been a disaster… no! In fact if all the US had Texan law there would have been no crazy property boom and financial crisis at all.
Maybe this is a little extreme, but it’s a point in case. Australia and New Zealand have the highest real estate prices in the world, with the lowest population densities, anyway outside Siberia and the Arctic – something is very, very wrong.
Sounds very much like the policy in Germany, which you wrote about a while back.
Caution will be needed in any winding back of planning restrictions to determine what can and cannot be wound back without adverse consequences.
Living in central Queensland, I have just recently witnessed an event that would have seen hundreds of houses go completely under water – with probable significant loss of life – had developers been allowed to develop wherever they wished.
While some forms of planning regulation are no doubt mainly just relatively needless red tape, others exist for a VERY GOOD REASON.
While some forms of planning regulation are no doubt mainly just relatively needless red tape, others exist for a VERY GOOD REASON.
That is true. However sometimes increased safety is desired, offered, and paid for willingly. Take the example of cars with ABS and all those air bags. Do we have this because of govt regulation?
Aren’t we lucky that govt does not allow Toyota to make death-traps for us to snap-up and save a few bucks?
I wouldn’t have thought that your average home buyer is in a position to easily understand that a lovely-looking piece of land may be vulnerable to devastating inundation once every 20-30 years or so? Best for government to ensure that it can never be subdivided in the first place.
Best for government to ensure that it can never be subdivided in the first place.
Best for govt to force the truth to be told about such land. Perhaps there is a form of construction (now or future) that suits such land.
By way of analogy,
would you say that government should allow for example, the importing of electrically unsafe appliances so long as they threaten to fine distributers if they don’t tell everyone that they are unsafe?
FFS, just ban them in the first place.
“Perhaps there is a form of construction (now or future) that suits such land.”
There is – it’s called a house boat.
would you say that government should allow for example, the importing of electrically unsafe appliances so long as they threaten to fine distributers if they don’t tell everyone that they are unsafe?
Yes. We do allow imports of crashed cars and broken unsafe appliances as long as they are marked “UNSAFE – FOR WRECKING OR PARTS ONLY”.
We allow the importation of mineral oil that would kill if sold as cooking oil. Why not just ban it? Well then how would we lubricate our car engines?
Take the example of cars with ABS and all those air bags. Do we have this because of govt regulation?
We now have it on every new car sold because of regulation. Just like seatbelts, safety glass, collapsing steering columns, and the like.
We now have it on every new car sold because of regulation.
Untrue. Regulation forced some safety features. Consumer preference achieved some others.
Toyota does not make death-traps because they do not sell. People prefer safer cars, hence that is what developers produce and sell.
Untrue.
If it were untrue, it wouldn’t have required regulation to achieve. ABS, Airbags, etc, would have been ubiquitous before the regulation was proposed, let alone enacted.
Toyota does not make death-traps because they do not sell.
This is a false dichotomy. The choice is not between “death traps” and cars with airbags and ABS.
People prefer safer cars, hence that is what developers produce and sell.
Then why wasn’t ABS in every vehicle sold for the last twenty or thirty years ? Why weren’t airbags ?
People certainly do want safer cars, which is why manufacturers use safety features to differentiate and price-discriminate different models. Which is why they don’t become ubiquitous until they become compulsory.
ABS became widespread in the last 20 years as manufacturers got its price below what people were prepared to pay.
Your precious govt could have forced its implementation earlier but would have made cars prohibitively expensive and resulted in more old bangers on the road and more deaths.
Many things become ubiquitous without being compulsory. Do you ever carry a mobile phone with 000 access when you drive a car?
ABS became widespread in the last 20 years as manufacturers got its price below what people were prepared to pay.
New cars were being sold without it right up until it became compulsory.
Your precious govt could have forced its implementation earlier but would have made cars prohibitively expensive and resulted in more old bangers on the road and more deaths.
Bullshit. ABS has been utterly boring and mundane to implement for well over a decade. The argument it adds a meaningful amount to the cost of building a car, or has any time in the last ten years, doesn’t even pass the laugh test.
Manufacturers kept it as an option because then they could charge thousands of dollars more for “safety packs” that cost next to nothing to add to the vehicle. Particularly true of certain Euro brands that like to throw 30-40%+ premiums onto the vehicles they sell in Australia.
Interesting you say that, Left-tee. Arguably, the planners in Christchurch caused more damage and loss of life from the earthquakes by adopting urban consolidation policies (thus concentrating the population in higher density developments) and precluding development on safer grounds not affected by liquidfaction.
I think that’s a bit of a straw man Leith. A bit like arguing that town planners are responsable for damage and loss of life caused by a meteorite strike.
ANY city is vulnerable to serious damage and loss of life when an earthquake occurs underneath it, regardless of what planning policies are or are not in place.
It’s pretty obvious that preventing houses from being built in areas that are known to be subject to flooding every few decades prevents such calamities from occurring in the first place – the notion that a large sprawl of detatched houses will necessarily suffer less damage and loss of life in the event of a major earthquake seems a lot less clear to me.
Do you not think it makes sense to control what we can control? We can be pretty certain where the maximum water level is likely to reach – predicting exactly what parts of a city will be hard-hit by tectonic shock and what parts will not is a science that does not yet exist as far as I’m aware.
Let’s be clear Left-tee, I agree with you that homes should not be built in areas prone to flooding, earthquakes, etc. This is common sense. I was just pointing out that planners make mistakes (sometimes monumental ones, like in Christchurch), and that your notion that planning often “exist for a VERY GOOD REASON” is often not the case.
It’s not like the problem in Christchurch was not already well known.
You are a TOOL mate, there are plenty of safe places to expand boundaries and build on around Auckland. Most likely you have some type of vested interest, do you have any property investments or own a property ?
People like you are the ones that make it hard for people who are low income or don’t have a lot of chances in life to own a home.
Your argument is pathetic at best, and it implies that we basically can’t build any more homes on any more land besides what has already been build on.
You could argue the other side. How many houses were built in these dangerous locations before the introduction of regulation? Has taking the actual responsibility away from owners and builders has now resulted in much more safe housing?
This doesn’t seem to be the case in Christchurch. Council planning and the Greater Christchurch Urban Development Strategy effectively “banned” the provision of affordable land on the stable ground at the southern, western and northern fringes of Christchurch, severely inflating the price of fringe lots and forcing development to the poorer quality and less stable swampy ground to the east.
And by inflating land prices and artificially making housing considerably more expensive, the Council also forced greater intensification and CBD living, which arguably caused more death and destruction when the earthquake hit.
I did indeed mean that if given the choice of location, as before regulation, houses may be built in the most sensible locations. Regulation takes away the responsibility of site selection from the builder.
I am glad Leith Van O has made this point. There were areas of known liquefaction risk in Christchurch that had for decades had no development permitted there. This is GOOD “planning”. But more recently, the Council allowed development to occur there BECAUSE it would keep the city “more compact” than leaving this land “off limits” and permitting development on safer land that was further away from the CBD.
Read THIS, and Joel Cayford’s other posts on the subject:
http://joelcayford.blogspot.co.nz/2011/07/councils-fudge-christchurch-seismicity.html
BTW, Joel Cayford is a raving Greenie extremist anti-fringe-growth activist whose take on this whole issue is that the ChCh Council would be wrong to allow ANY growth at all; whether on the liquefaction-prone land OR beyond it. For him, it is just another black mark against the “pressures” exerted on a Council by those evil suburban developers.
Actually keeping the liquefaction-prone areas as green space and allowing development beyond them, is not something that will have even been visible by telescope in Cayford’s ideological universe.
Aren’t we talking about Auckland, where the main problem is ? where at least 1.5 million of the 4 million NZder’s live. The biggest issue is Auckland.
This particular discussion is a digression into how urban planning can do exactly the opposite to what its supporters say it is meant to.
Lef-tee said that if it wasn’t for urban planning there would be a lot more homes built in flood-prone areas. Leith and I pointed out that in Christchurch, NZ, urban planning is fact resulted in housing being built where it was unsafe INSTEAD of where it was safe – on the basis that the urban footprint was kept smaller.
You are correct that Auckland is the main problem in NZ for affordability. But because of inter-city competition for businesses and residents, it would help if just about ANY city blazed the way on affordability. Look at the growth rates that occur in US cities that go for growth while everyone else is banning it.
On a personal note, I’m glad that planning restrictons prevent anyone from building along my back fence – it creates a nice 200 metre-wide buffer between myself and the nearest neigbours on that side, who are noisy barstards. It’s just vacant ground at present but with the increase in populaion in my little spot here, it could probably be turned into a nice park for the kids or something. Any housing built in there would need to be of the houseboat variety.
Sure, this is why LOW DENSITY mandates exist in so many US cities.
This does not result in unaffordable housing, BTW; it DOES “democratise” the amenity of pleasant green living space though. In contrast to planning that maximises the benefits to wealthy elites, the incumbents club, and the rentier class.
The “sprawl” that results does not even result in longer average commute-to-work times either. Growth containment urban planning is pure sadism. It is all pain, inflicted for no gain (apart from a few vested interests).
Especially on a day like today – another monsoonal system is hanging over us and I can see the water over the back fence rising as I type this.
And what has happened to every proposal for flood control schemes, and even storage of some of that abundant water for the dry spells?
The eco-Taleban goes nuts about the “impact” of earthworks etc – shock, horror! – on “valuable ecosystems and landforms”.
Why the voters allow the persistence of a values system to ruin their lives, where “just another hill” or desert or valley is apparently more important than humans, is beyond me. James Delingpole was right to call it “Australia’s Green Orchidectomy”.
http://blogs.telegraph.co.uk/news/jamesdelingpole/100152437/australias-green-orchidectomy/
“….A week into my Australian tour and I already I love the country and its people so much I could happily stay here forever. There’s just one small problem – well, one bloody big problem actually: the rampaging political correctness. How, in God’s name, did the robust, no-nonsense pioneer spirit of the original settlers who carved an earthly paradise out of burning hell allow itself to be watered down, warped and wimpified by a minority of tofu-knitting greens and tight-sphinctered lefties?…..”
Lol. Dellers does write a good rant.
I’m referring to regulations that are already in place Phil – they are almost cetainly the reason that there was not a lot more property damage and even loss of life here a month ago.
And I am referring to the obvious potential for avoiding most if not all of the flood damage that HAS been allowed to occur thanks to two things.
1) The CAGW-spruiking climate scientists who have promised perennial drought
2) The eco-Talban who won’t allow any alteration of natural landforms and impact on “other species” by building a few dams and flood control systems in obvious places.
The MSM has largely ignored the possibility that the Bligh govt wipeout was a long belated blow-back against this pre-enlightenment throwback, neo-pagan unreason.
One of the most sensible things I have ever seen in Australian politics, is the Abbott opposition making “water schemes” a policy keystone.
‘While the ACT party will never gain widespread representation, it is to be commended for fighting the good fight on housing and providing a voice to younger and disadvantaged New Zealanders denied the opportunity of affordable housing – an opportunity earlier generations took for granted.’
Nobody is showing much sign of taking up this fight in Australia.
True, in a way, our neighbours Kiwis are luckier than us in having better crop of politicians.
I do find it odd that Australia has a disproportionate number of intelligent voices on this issue yet little difference seems to have been made.
Patrick Troy was one of the original gurus anywhere in the world. Ray Brindle, Joe Flood, Alan Moran, Bob Day, Ross Elliott, John Muscat….
Leith Van Onselen was a latecomer but has become one of the world’s best sources of analysis.
But Australia also has some interesting examples of good people who have gone wobbly, so perhaps there is a real problem with “the dark side” over there? Chris Joye was saying some really intelligent stuff ten years ago. Glenn Stevens and colleagues at the RBA were also saying some really intelligent things at least up to 2009. Bernard Salt is another one who showed promise and then went wobbly.
In NZ, we owe a lot to Hugh Pavletich, and to the late Owen McShane. Don Brash has consistently shown himself capable of grasping the issues and understanding what needed to be done, right back as far as when he was governor of the RBNZ in the 1990′s. Had he become PM (as he nearly did) in 2005, you can bet the RMA would have been reformed as necessary and NZ would have had affordable housing by now, averting the last 25% or so of bubble price inflation in the process. NZ would also have had a genuine construction boom, with valuable capital going into actual activity rather than “sunk” in unimproved land “values”.
Good government would also have had several thousand new homes per year getting built in the Christchurch region within 3 to 6 months of the damage being done – on geologically safe hinterland greenfields.
Of all sad words of tongue or pen, the saddest are these: “what might have been”.
Well said.
What’s very sad here in Australia, is an extreme lack of acknowledgement that any problem exists at all. Among the politicians and the press. The pollies seem to be pandering to the property owning “boomers”, while the media panders to their prime source of advertising revenue, real estate interests. We have an “elephant in the room” scenario, that everyone seems to ignore, for fear of upsetting vested interests.
A better electoral system at least.