More than 3000 new houses a year

Sue Bradford launched the Greens’ housing policy last night in Otahuhu.  The policy signals an important shift from seeing houses as an investment for landlords to a home for people in need.  The NZPA story highlights some of the key points including:

  • raising the rate of building and acquiring state houses through Housing New Zealand Corporation to at least 3000 houses a year for the next three years;
  • a “massive” increase if funding for community and iwi based housing so a minimum 1000 houses a year could be built over the next three years;
  • removing legislative, regulatory and financial barriers to make it easier for Maori to build on communally owned land;
  • introducing a capital gains tax on all but the family home and tightening the rules around Loss Attributing Qualifying Companies and equivalent methods of achieving tax deductions.

Sue said of the policy:

The foundation of the Greens’ national housing strategy is that no one remains homeless or in inadequate or substandard housing.

Housing has been a problem that government has never really got on top for at least the last two decades.  It is going to take significant reinvestment to rebuild stock so that owning a family home is something that ordinary New Zealanders can work toward.  That will mean providing more housing for those most in need as well as changing the balance so that people who want to buy homes to live in are not losing out to property investors and speculators.

38 thoughts on “More than 3000 new houses a year

  1. Please understand the problem a lender has financing a house on Maori Land.
    The couple want to own their house and to be able to buy and sell it.
    But the house sits on land owned by Trust and the Trust is governed by the Maori Land Court.
    In order to avoid paying rates many of the owners are living under false addresses and names. If you want to get the land owners to sign mortgage documents where do you find them?
    I have just had a phone call from a Maori family down the road who want to subdivide off a piece of their family trust land so their children can have European title.
    They know the difference. Tribal land provides a nice retirement spot for Maori couples returning to their land because they normally pay cash for the house and occupy “free land”. They are old and do not expect to sell again. But the ones I speak to understand that buying into such a deal is a trap for young families.

  2. Was JUST reading about that bigblukiwi! Some guy in the Tragedy of the Commons:

    Contrary to Hardin’s claims, a community that shares fields and forests has a strong incentive to protect them to the best of its ability, even if that means not maximizing current production, because those resources will be essential to the community’s survival for centuries to come. Capitalist owners have the opposite incentive, because they will not survive in business if they don’t maximize short-term profit. If ethanol promises bigger and faster profits than centuries-old rain forests, the trees will fall.

    http://mrzine.monthlyreview.org/angus250808.html

    Still absorbing it though.

  3. Owen – your point re banks not lending against Communally owned land – strange though isn’t it that they will lend against grossly inflated property values to the tune of 120% in some cases, and to those who have no income and therefore no chance of repaying the loan. What a silly system !

    They could lend against Communally owned land if their perception was changed by removing the man-made blocks which mitigate against this type of lending. My view is that Communally owned land is no less valuable intrinsically than individually owned land. It does not evaporate, it increases in value according to supply and demand factors, it’s title is transferable, given the right rules being instituted.

    In fact it is more equitable being closer to ‘the commons’ than private ownership. I have seen perfectly defendable arguments for all land being ‘owned’ by everyone (a land agency being responsible for it, thus being safe from political interference), each plot being leased under rules designed to suit the usage of that land.

  4. The problem now is how does one capitalise WFF when it is varies depending on whether one or both partners work and changes in pay etc.

    One option, is to make one component of it universal.

    If Green policy had been applied after the 2002 election, we would not have had the house price asset value bubble. We would have not needed to increase interest rates (raising the dollar value and harming the expor sector). There is no question this is the policy we should have had in 2002.

    The question is how best to manage what we have now. And what policy is the best one to put in place for the long/longer term.

    If one reduces the tax advantages of owning rental property, this can only increase home ownership – this is a good thing.

    To say that tax advantages are required to keep the cost of rent lower is one way of looking at it. Another is that these same tax advantages allowed those who had the access to the money to bid up the value of houses beyond the reach of local workers.

    I would exempt more than just family homes from capital gains tax – also someones first property ownership (some people buy a property to rent as a way onto the property ladder).

    PS Any house market value fall resulting from tax changes facilitates a lowering of interest rates enabling more people to afford homes.

  5. Owen McShane said: A Labour Government introduced the world’s first Voucher System when it allowed families to capitalise the family benefit to give them a deposit for a house with private house building companies.

    Owen, when we’re on the topic of climate change, I vehemently disagree with you because I don’t think you understand the science.

    But here, you’ve got it right! Family benefit and the ability to capitalise it for first home purchase was a brilliant idea.

    And 17 years after Ruth Richardson so stupidly abolished it, it is back on the agenda, and giving a chance to young families with low-middle incomes to buy a home – thanks to the Greens.

  6. Gerrit said: “Design a range of modern state houses, cost the building and placement for the factory modules (I like the modular idea so that when a bathroom needs replacing it is simply remove the old and bolt in a new type of scenario), work out a strategy for finding the land (purchase?) to place the new housing units and have that amount in the budgets for the next three years.”

    I would put the design process out for tender, with conditions for sustainability and liveability and other considerations, as the Greens policy underlines in detail.

    “These sort of schemes need a champion to make sure they come to fruition.”

    Absolutely.

    “The current private ownership / state lease for state housing is very successful and its infastructure sound. Would not cost anything to expand the service.”

    These are/were a chance to privatise the provision of state housing. They may work when you want to divest ownership, or “create” a number of “state houses” quickly, but you’d have to demonstrate to me that they are cheaper in the long run than owning the capital stock itself.

    Why should the state borrow the money when private individuals will do it for them?

    Because the state gets that money cheaper, and if the state is paying for houses which are paid for by private money, they’re paying more than they have to.

  7. George,

    Be interesting to get quotations from building firms for a supply of modular housing units. My $250K was a guestimate. You may well be right that it could b eway cheaper.

    And that is the issue. The Greens housing policy is great on house numbers but very scant on costings.

    So make that the next step. Design a range of modern state houses, cost the building and placement for the factory modules (I like the modular idea so that when a bathroom needs replacing it is simply remove the old and bolt in a new type of scenario), work out a strategy for finding the land (purchase?) to place the new housing units and have that amount in the budgets for the next three years.

    I would like to see the new housing built in conjunction with the renovation/replacement of the old units. Mainly to take advantage of current state owned land in regards efficiency of utilisation.

    Which is why Nationals policy of having a minister in charge of infastructure is so important.

    Thes esort of schemes need a champion to make sure they come to fruition.

    The current private ownership / state lease for state housing is very successful and its infastructure sound. Would not cost anything to expand the service.

    Why should the state borrow the money when private individuals will do it for them? The private individual who is always asked to save more not spend and is looking for investmen opportunities. The would not borrow the money unless they had a substancial deposit in the form of equity in an existing home.

    This scheme would make that current locked up private money available for investment. Leaving the state with the opportunity to borrow money for other projects (hospitals, PT, etc., etc.).

    The other alternative would be for the Government to issue infastructure bonds to enable private investors a stake in the development of New Zealand public infastructure. Another sound National policy!

    And one I’m sure the Greens could well support when in partnership with National if the election results run to current polls.

  8. A Labour Government introduced the world’s first Voucher System when it allowed families to capitalise the family benefit to give them a deposit for a house with private house building companies. Provided these companies built to the required standard the same family could then access a State Advances Loan.
    It worked splendidly for housing and would work just as well for education.

    I am always puzzled as to why Labour has turned its back on one of its great innovations.
    They might even consider allowing Working Families to capitalise their own Working for Family benefit to pay a deposit on a house. Converts cash into an asset.

  9. # john-ston Says:
    September 2nd, 2008 at 2:41 pm

    > Certainly, if a large number of landlords start bailing out of the market, then your 4,000 extra houses a year would barely be enough to keep up with existing supply

    only if the landlords burn the houses down when they leave. More commonly, what happens is that they sell the houses, either to owner-occupiers or to other landlords. Either way, it does not reduce the supply of houses.

  10. “Remember when affordable, quality housing, courtesey of a Labour government near you, was the mark of a civilised society?”

    Ahmm….the “Labour party” did NOT provide quality housing, the tax payer were the ones who had money stolen from them to pay for an election bribe.
    Fifty years later nothing has changed.

  11. Remember when affordable, quality housing, courtesey of a Labour government near you, was the mark of a civilised society?

    Then you’re older than me. All I remember is how much I enjoyed owning one, decades after the state sold it and its vege-compatible, quarter acre was subdivided.

    It was warm, solid, south-facing-yet-sunny and easy to renovate. Bliss.

  12. “It’s already in the policy – rents will only go up if landlords can find tenants to pay the higher rent. Given that at last count there were 9,865 people on the HNZC waiting list, and additional 3000 houses in the state sector and 1000 houses in the community sector each year will significantly mitigate against this happening.

    Also, the tightening up rules around LAQCs would not be retrospective so wouldn’t impact on investment property acquired before its introduction.”

    With regards to the last comment, fair enough, however, as I read it, there would still be problems.

    As you are aware, presently we have a subsidy (I overall disagree with it, however, getting rid of it needs to be treated very carefully), and that has kept rental prices below commercial return levels. Of course, get rid of this subsidy, and you will see an increase in rents. The people that would be worst effected would be those who aren’t rich enough to afford their own homes, but aren’t poor enough to qualify for state assistance.

    Certainly, if a large number of landlords start bailing out of the market, then your 4,000 extra houses a year would barely be enough to keep up with existing supply, let alone help the people that are on the HCNZ waiting lists, especially if those got longer.

  13. Gerrit said: Reason is that once you get the gib off to insulate properly you will find defective wiring and plumbing that needs fixing. Huge cost blow out forecast in my opinion.

    What about those with scrim? Just joking, but fair point. If it’s too expensive to repair and retrofit, it should be demolished and replaced. Although that’s not in the formal policy, I’m sure the Greens would agree with you.

    And another Green housing policy:

    Support pilot projects as a first step towards factory-build mass production of high quality, low cost housing meeting high environmental standards, including within the community sector.

    that hasn’t been mentioned here fits in wth your line of thinking too. But not “little boxes on the hillside” stuff though.

  14. Gerrit, the state can always get capital cheaper than the banks, who in turn get it cheaper than the people they lend too. Leasing off private individuals would be much more expensive, not to mention introduced costs from the complication of running such a scheme.

    Also, 250k sounds like a particularly high number per house, when they’re being built in bulk with a degree of modularity on land which (I would certainly hope) is below the average market value. If semi-detached housing is being created then the cost would be lower again.

    I do think that some of the older housing stock in New Zealand (both state and private) should be demolished and rebuilt, but doing so on a large scale seems outside the mandate of this scheme.

  15. Good policy I agree toad, but I would go one step further.

    Instead of spending 1 billion under the EFT on insulating old houses, I would demolish (there must be a few dollars in heart rimu, kauri and kahikatea timber in each house plus copper plumbing and wiring etc.) all old state houses that require insulation and replace with new.

    Reason is that once you get the gib off to insulate properly you will find defective wiring and plumbing that needs fixing. Huge cost blow out forecast in my opinion.

    Best get a fixed price for a relocateable house (Keith Hay type) that is fully up to spec and drop on the section.

    Tenants would need to be relocated for less then a week for the old house to be removed and the new transported and hooked up to services.

    That way the State would get new housing stock that good tenants will look after. Meaning long term repair costs are minimised.

    However costings will need to be addressed. You just cant implement policy like that without it appearing in the budget. The Greens would need to place these costed policies before the Labour or National “senior” coalition partner so that those costs are in an actual budget PLUS the infastructure and resources made available to complete the task.

    Cost is actually $250M not $25M and that is for building only (nobody picked up my mistake?). You still need land. If we start with renewing old housing stock first, land use could be made more efficient by subdividing say two section into three.

    This was done out your way in Glen Innes. Was that experiment a success?

    Had another thought. Why is the current scheme, where private investment in housing is utilised for long term state house renting by the state, not expanded upon?

    The one were I buy a house and the state leases it off me for a 10 or 20 year period. The state then uses these houses for state tenants.

    That way the capital cost exposure for the state is reduced.

  16. PS bliss – just to clarify, I was responding to Toads point “housing stock actually appreciates in value over time”. That doesn’t occur if supply meets demand, which was Toads further point.

  17. >>Increasing supply will reduce the price.

    The way I read it, Toad said they were looking to achieve a balance between demand and supply. When this occurs, the market hits an equilibrium, and the price stays static, until supply exceeds demand (price drops) or demand exceeds supply (price increases).

    Again, Toad appears to be focused on the low end of the housing market.
    Flooding the low end with houses will indeed put downward pressure on price, although given the cost of materials, labour and compliance there isn’t that much cream left in the equation, which is why you’re increasingly seeing developers selling off land-lots rather than building houses.

    The problem is two-fold – compliance costs, particularly from councils, and land scarcity. Solve those two problems, and you’ll drive down the cost of housing. Capital gains will have marginal effect on affordability, and just turns land-lording into more of a cash-flow business.

  18. toad Says:

    BP – we’re not talking about flooding the market here. We’re talking about trying to get a balance between demand and supply.

    Then..
    BluePeter Says:

    Then the price will remain static.

    Duh! Increasing supply will reduce the price. Currently the price is too high. But this is not just due to supply and demand of housing. It has a lot to do with supply and demand of money, speculation and badly aligned investment incentives/signals.

    peace
    W

  19. Toad

    Why would anybody on 250k take a penny from the govt?

    Of course you only highlight this point to deflect that the real intention of Bradford is to circumvent the WFF package in as much as it rewards those who WORK.

    Those who cannot be bothered working do NOT deserve a pay rise under any circumstances.

  20. Just to be a Pedant,
    The NZPA story is wrong in its implication of 3000 *houses*, according to the green policy they are talking about housing *units*,

    Presumably the Green Party in wanting to foster denser living to allow more efficient public transport, and a number of these new units would be in apartment buildings,

    When news reports start talking about building new “houses” I get visions of the 1950s state housing suburbs, which I suspect is not what the policy is implying.

  21. Toad

    >>housing stock actually appreciates in value over time

    Not if you flood a market with them, it doesn’t. See the USA mortgage crisis. The increase in price mostly comes from demand exceeding supply.

    >>rents will only go up if landlords can find tenants to pay the higher rent

    You’re too focused on the low end. Look at the bigger picture i.e. the mid-range and above rental market. Plenty of room for upwards rental movement. Think school zones, scarce supply (inner city upmarket) etc….

  22. john-ston said: …what would Sue Bradford do to stop people being driven into the streets as their rents go up by $100 a week as landlords adjust their rents to a more market based return…

    It’s already in the policy – rents will only go up if landlords can find tenants to pay the higher rent. Given that at last count there were 9,865 people on the HNZC waiting list, and additional 3000 houses in the state sector and 1000 houses in the community sector each year will significantly mitigate against this happening.

    Also, the tightening up rules around LAQCs would not be retrospective so wouldn’t impact on investment property acquired before its introduction.

  23. good policy..

    especially the closing of the loop-holes..

    ..and the easing of building restrictions on communally owned maori land..

    ..not least because i am assuming those easings will also apply to non-maori communally-owned land..

    ..instead of..as now.

    .having to have only the most rudimentally/basic (on wheels/or skids) dwellings..

    ..this will open up/free up land for all the different coomunal-living models..

    ..and can only be a good thing..

    phil(whoar.co.nz)

  24. I am a landlord, and capital gains tax doesn’t worry me in the slightest. In fact, I welcome it. But it isn’t going to achieve what you think it will achieve.

    Capital gains tax, as anyone who has lived in a country with capital gains tax knows, does not make housing more affordable. It just drives rents up. Your increase in low-end supply isn’t going to affect the supply/demand equation in other market segments.

  25. Yawn. More uncosted, unfunded uber-nonsense from the Greens.

    Meanwhile, my party – the “Everything For Free” Party has gone one better.

    We will give everyone a free house! Hurrah! Maori will get two free houses! We, like the Greens, have no idea how we’re going to pay for it, but as you can clearly see – our vapourware offering is far superior. Free houses for all! Hurrah!

  26. “introducing a capital gains tax on all but the family home and tightening the rules around Loss Attributing Qualifying Companies and equivalent methods of achieving tax deductions.”

    I seem to vaguely remember that Australia, the United States and virtually all Western nations have capital gains taxes on rental properties – BUT

    They all have housing affordability issues!!! Let me guess why that is? Perhaps it is green belts that are causing the problem, and not a lack of a capital gains tax.

    Also, what would Sue Bradford do to stop people being driven into the streets as their rents go up by $100 a week as landlords adjust their rents to a more market based return? That is what would happen if you tighten the rules around LAQCs.

    And no, I don’t own any property of any sort, so I don’t have a vested interest (the only vested interest I have is keeping the rents from going up)

  27. BB said: Good point, I note that Bradford has called for a universal family benefit allowance. Of course this is Green speak for giving more money to dole bludgers and DPB recipients.

    You never stop trying, do you BB? “Universal” means everyone with a dependent child it. Even with parents on $250K.

    It’s only a small amount ($16.25 a week for the first child. $11.50 for subsequent) but it really helps people on low incomes who otherwise can’t get together a deposit for their first home because, unlike income-tested WFF assistance, it is universal and can therefore be capitalised to assist with a first home deposit.

    Gerrit, while I’m not an economist, my guesstimate is that it would cost around $800m pa. But don’t forget that there will be revenue from a capital gains tax – I’m not even going to hazard a guess what that will be in its initial few years, but confident it will be more than the cost of the Universal Child Benefit.

  28. Gerrit said: Fantastic policy, hits all the right notes, great Green initiative. Can we see where the money to build or buy 1000 houses per year for 3 years?

    Now that is one thing that Government can and should borrow to do, Gerrit. Because, unlike motorways, housing stock actually appreciates in value over time (even with a capital gains tax in place).

    Glad you like at least one of the Green policies.

  29. The best thing to do for young Maori families is to make it easier to subdivide a lot off communal land get European title.
    The senior Maori I talk to realised that Papakainga housing is a trap for young families. Banks will not lend against Communal owned land for obvious reasons.
    Hence Maori buy very cheap relocatables on hire purchase. And if they miss a payment the house gets taken away. Even if they pay it off there is no real capital gain for them because it is the land that improves not the house. I have helped Maori subdivide off a piece of their own land to give to their children but now compliance costs are so high they cannot afford to put up the money to make the gift. The best way to benefit Maori is to reduce compliance costs etc for everyone.

  30. Stephen

    You do me a disservice, I would support any party who has benefit cuts as part of its future plans.

  31. Gerrit,

    I can’t see why any legislation regards communally owned land would mention maori particularly. But there’s not a lot of communally owned non-maori land in our country, so the people who are currently disadvantaged by the way current legislation doesn’t deal well with communal title, and who would be empowered by this legislation change, would mostly be maori.

    $25 million isn’t small change, so you’re right to worry about the numbers. I’d note that as capital investment it’s a lot less than National plans to spend on motorways – and if you sleep under a flyover they’ll arrest you. The Greens Tax Policy is also worth a read if you’re interested in the numbers.

  32. I think you would find a way to trash the Greens for wanting to cut benefits big bro! We’re lacking details for the moment.

  33. Stephen

    Good point, I note that Bradford has called for a universal family benefit allowance.

    Of course this is Green speak for giving more money to dole bludgers and DPB recipients.

    Bradford also admitted that this was another un-costed Green party vote grabbing policy.

    I was also rather hoping we would see a thread about the rising cost of public transport in Wellington and the calls for further tax payer subsidies.

  34. Fantastic policy, hits all the right notes, great Green initiative.

    Can we see where the money to build or buy 1000 houses per year for 3 years?

    At a knock down price of $250,000 each, we are looking at a $25,000,000 dollar capital investment per annum.

    Easily doable, but where will the money come from? What taxes will you raise or what services will be cut?

    Seeing Cullen has already budgetted a government spending reduction of a billion dollars over 4 years.

    Seeing that neither the kyoto billion dollars nor the billion dollar insulation innitiative in the ETS are provisioned for in Cullens budgets, I would be concerned for the Greens to set policy a housing policythat is unfundable.

    Will non-maori community owned land to be included in the “legislative, regulatory and financial barriers to make it easier for Maori to build on communally owned land”?

    If not, is the policy racist and discrimatory?

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