On housing affordability and transport: it’s the parking, stupid.

There are two parallel debates going in Auckland that really need to be combined.

On the one hand, we have a housing affordability crisis. The solution, we are told, in the very disappointing  Productivity Commission draft report, is to free up more land for development on the fringes of the urban area. This will presumably bring down house prices, though it will result in higher transport and infrastructure costs.

On the other hand, we have a chronic transport problem, which we hear about all the time. The Auckland Council has a huge funding gap, and have just released an (also slightly disappointing) paper on possible ways of raising revenue to fund all the big roading projects and the critical city rail link.

The Government’s supposed solution to congestion is to spend over $1 billion a year for at least the next decade on just a very few expensive motorway projects (which will do nothing to lessen congestion on existing local roads), raise fares on buses, and stymie the Auckland Council from raising revenue to pay for the city rail link.

I bet if I told you there is an extremely low cost solution to both of these problems, which will actually be better for business and households (and developers!), you would think it is too good to be true. But it is not.

Cars take up a lot of land. So much more than we realise.

For decades, planning rules have set aside huge amounts of land for car parks, which inflict large costs on developers and reduce the availability of land for productive uses including housing. These costs are passed on to us, of course, through higher rents, and higher prices for goods and services. Because we rarely pay directly for parking, we all collectively pay much more for it. And “free parking” and car oriented development, forced on us by traffic engineers and council planners (who meant well), has resulted in worse peak hour congestion, by 1) massively subsidising single occupant vehicle trips, and 2) making it nearly impossible to get around the city in any other way.

Proponents of car oriented sprawl claim they want to improve housing affordability, but try to deny the huge cost of minimum parking requirements.  One would think good free marketeers would support removing bad government regulations. They also attack ‘smart growth’ and compact development as being unaffordable.

But wait, why would compact development result in higher land values than sprawl?  It takes up less land, and per capita infrastructure costs are lower.

Is walkable compact development more expensive because in fact, people prefer it to sprawl, and the transport costs are lower?

It’s no accident that the least affordable cities in the world are the places where people want to live, and vice versa.

I’m not saying that everyone wants to live in walkable neighbourhoods. But the Urban Land Institute has done some research that has shown the market share in the US is something like 30%. The supply of housing stock that is compact and walkable is about 2%.

This is a significant market failure caused by planning and traffic engineering regulations, among other things, and it likely the reason why compact walkable neighbourhoods well-served by public transport are unaffordable — the supply is very low relative to demand.

This seems to be a problem in Auckland as well, as noted by Barfoot and Thompson yesterday on morning report (at 6’08”). The suburbs that have become the least affordable in Auckland are largely inner-city suburbs, many of which are fantastic and walkable, because people don’t want to waste time commuting if they can avoid it.

So in fact, the solution to our land affordability and our transport problems is one and the same: get rid of minimum parking requirements. Allow more urban land to be used for truly productive uses. Invest in better infrastructure for walking, cycling and public transport.

There are other tools we can use to improve housing affordability, like a capital gains tax and increasing the supply of state housing. But increasing car-oriented development on the fringes of Auckland is not a long-term solution to housing affordability. It will result in higher transport costs and worse traffic congestion, and we could just follow the USA down the path of financial ruin.

We can retrofit our existing low density, car-oriented urban areas for less than what we are spending now, and it will improve transport AND housing affordability, plus create lively, walkable neighbourhoods that New Zealanders obviously value. (Example below, or more here.) But we need to put the paradigm shift on the radar of the Productivity Commission, the Government, and the Auckland Council, because for the moment they are missing our best opportunity to respond to the environmental and economic challenges we are facing, and foster smart green towns and cities.

Use the slideshow controls at the bottom ^ to browse through.

53 thoughts on “On housing affordability and transport: it’s the parking, stupid.

  1. Okay, ok. Let’s start here:

    Hoe do you determine the true cost of parking land? The best bottom-line way to do it is to compare two scenario cities, built from the ground up. As follows:

    Take one city that you build that supports say 100,000 pop and put a standard amount of car-parking in it, and another 100,000 pop city with only half as much car-parking in it:

    So what will the final parking infrastructure costs be of each city?

    Well, you would have to base the cost of the land on rural values because that’s what it costs for a city being built from the ground up. You might find that the raw (rural) cost of the land for each park is only a couple of hundred dollars. But then there is the access road factor, and the fact that the city will be a little wider to accommodate the parks overall. And that also means a bit more plumbing and wiring.

    But what would the real cost be? Comparing the scenarios, probably nothing at all like what Julie is suggesting. The true cost of car-parking in her model excludes “bottom-line” perspectives and real ultimate costs, and factors in urban land values that are are naturally inflated due to developed access value – not inherent land value. Remember access (at that includes car parks) is the very thing that makes urban land fetch a high price in the first place.

    I agree with Julie that we should look at replacing minimum car parking requirements with direct pricing systems, but I doubt hugely that it will create some kind of economic revolution for the consumer.

    Look at the two-cities scenario cost modelling again: Where are the great savings? Are they really there? Again I can’t see it.

    Like or Dislike: Thumb up 3 Thumb down 2 (+1)

  2. Here are some more facts:

    -Low-density cities are not more transport efficient than high-density cites.

    -Enforcing MUL’s does (and has) driven up the cost of land hugely. No debate. This is a blunt fact. (which is why the “anti-MUL” brigade won’t let it go).

    -High-density cities have worse congestion than low-density cities.

    -Higher transport costs from living in the fringe is a myth – most new transport demand is localised to the fringe.

    -Infrastructure costs for intensification are less when existing infrastructure is operating under-capacity. When intensification requires demolish-and-rebuild it is hugely more expensive. High-risers cost about 2x as much per-area as traditional homes, due to the materials required to support their own weight. (Regardless, if the sprawl market pays its own way this is not an argument.)

    Here is a more comprehensive piece on it. I wish Julie would read it herself. She has been fed a tremendous amount of nonsense at school, and she needs to dare to ask herself if that is in fact the case.

    http://andrewatkin.blogspot.co.nz/2009/06/smart-growth.html

    Like or Dislike: Thumb up 4 Thumb down 5 (-1)

  3. Hi Andrew, thanks for your response. I am afraid that you don’t cite any actual peer reviewed evidence to support your claims. A youtube statement of some guy from “Roads first” saying something you agree with, which is controverted by the data, isn’t a winning argument. There is a wealth of very neutral scholarly data that is available — but if you want a libertarian perspective I suggest you start here: http://www.fcpp.org/publication.php/2839

    I’ve worked for years in this field, for councils and developers, and the results of our anayses have very consistently supported the case that parking requirements have a significant impact on land use and transport choice.

    Even in New Zealand it is easy to see the initial consumer response to removing minimums (though it is blunted by the fact that most of the urban area is still distorted). In Auckland and Wellington CBDs where there are no minimums there have been increases in density, increases in walking, cycling public transport, and people living in those areas spend less on transport. In Auckland, the population of the CBD went from several thousand in 1996 to over 30,000 by 2006, as a result of zoning changes that allowed new residential development (unfortunately most of it was crap, for other reasons).

    There is a large untapped market for higher density (which does not have to mean high rise) walkable neighbourhoods supported by good PT. The reason it is untapped is largely bad city council regulations.

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  4. Andrew, I looked at your website. It’s telling that you used to think sprawl was bad, and now you think it is good. I don’t think it is bad or good. You say that planners are trying to force intensification on people. My point is that actually it’s the opposite. Car-oriented development does not make economic sense, and it’s only happened because traffic engineers and planners forced it to happen, and are still forcing it to happen, through rules and design standards in district plans. The evidence is that many (but not all) people want to live in walkable, cyclable, more lively neighborhoods but they can’t because the supply is too low relative to demand. Let’s get rid of the bad rules that are inhibiting this, and see what happens. I guarantee you that if you allow intensification to occur in a way that doesn’t destroy amenity, many more people will chose that to living way north of Auckland in car dependent suburbs.

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  5. Julie:

    Thanks, but in posts like mine I rarely cite peer reviewed evidence. I know people don’t absorb it. My goal is to demonstrate principle with reason and commonsense, and to show people that the debate is not as simple as “Sprawl = bad, Intensification = good”, which I know is what the public has been led to believe for decades.

    Careful not to just look at data – it can “prove” ANY possible bias someone may want. For me, the conclusions must also make sense in concrete terms for me to take them seriously. The “why” behind the data must be understood – real-terms comprehension is the only defense that any of us have to being led down an intellectual black hole.

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  6. Julie:

    Thank you again, but those RUB’s tell me Auckland is not in the business of allowing sprawl. And I am on your page that I do not have a problem with intensification for those who want it (so long as we all pay our own way on a level playing field). What I argue against is the false arguments used to justify outlawing it.

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  7. Right Andrew, but while the Council is trying to limit sprawl with the MUL, they are also causing it through their planning rules, their rating scheme which penalises high value/high access properties in town centres, and infrastructure investment which also devalue centrally located property and subsidises vehicle trips to urban fringe areas. They don’t realise they are doing it, which is why I am dissapointed with the draft plan and options paper on transport funding. If you never had a distorted transport market to begin with, we wouldn’t the MUL. As it is, I think we better ditch the bad rules and regulations before we ditch the MUL.

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  8. Julie: I 100% agree with straight economics that don’t lead to cross-subsidies.

    One thing: Housing unaffordability is devastating. We’ve got thousands of people locked out of the property market for good (where their rent could have otherwise been working for them in asset accumulation), and sky-high mortgages right at the point where people are trying to bring up a family. I actually think this should be respected as an emergency situation. And so, as I believe, I think we should waste no time with whatever policy is going to bring housing affordability back fast.

    -Also I sincerely respect you taking the time to respond to my comments.

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  9. Limiting or forbidding foreign ownership would be a good start.

    CGT on everything but family homes under, say 500k, would help also.

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  10. Kudos to Julie Anne for staying around to participate.

    Whereas there is undoubtable some truth in what Julie Anne proposes, it is only a relative effect; it doesn’t attempt to answer the question of when housing is “affordable” or “not affordable”, merely notes that there are some ways we may be able to tweak it.

    The idea that if we free up more land to build more houses it will reduce house prices may have some merit, but only in extremis. If we build a few thouseand more houses then the effect will be fairly small, as demand continues to outstrip supply. What if we doubled the number of houses in New Zealand. Would that make houses “affordable”?

    What is an “affordable” house anyway?

    I have the answer, which I posted the other day, but I’ll repeat it with embellishments.

    As (almost) all property (farming, commercial, residential) purchases are founded by loans from the banks, property is valued by the banking industries willingness to lend money.

    Think on it. One can put one’s house on the market for any price one likes, but one will only sell when there is a buyer who has the capability to raise the money required and considers the purchase to be of adequate “value”.

    So back in the day when banks would lend an absolute maximum of 3.5 times salary for a house purchase loan, there was no point in the average house being priced at $380K or whatever it is these days, as average salary x 3.5 had to equal the average house price. Otherwise it was no sale. So prices were much cheaper than they are now, perhaps they were even “affordable”.

    For a while now banks have been willing to finance increasingly large amounts for essentially the same size of asset, and so prices have gone up.

    So essentially affordability is determined by the banking institutions. House prices will rise or fall to match what the banks are willing to lend.

    So no matter how Julie Anne tries to game the system, the banks will always win, as they are the ones holding the purse-strings.

    And, of couse, it’s not for no reason at all that New Zealand has massive consumer debt; it’s all in mortgages.

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  11. Julie Ann asks:

    Is walkable compact development more expensive because in fact, people prefer it to sprawl, and the transport costs are lower?

    It’s no accident that the least affordable cities in the world are the places where people want to live, and vice versa.

    Theres no debating that bottom statement; it is certainly true. But how does that link to the former statement?

    London is a big city that has (over a large chunk of it) a fabulous public transport system. It has lots of higher density housing, some of which falls into that “highly desirable”, least affordable category. Other parts of London are far less desirable, despite the fact that there is almost no difference in the quality of the housing stock, its density, its access to public transport, and in some cases, even in ammenities.

    Why the difference? It comes down to neighbourhoods. Good neighbourhoods and bad neighbourhoods.

    It’s both socio-economic and racial.

    For affluent folks in good neighbourhoods, even black affluent folks who have escaped the bad neighbourhoods, then London is truly a great city to be in.

    In the slides you quoted by Tim Hazeldine, he created a scenario where lack of public spaces included by a developer can cause slums. Here’s the news: people create slums. People can (and perhaps more surprisingly, have been known to) uncreate slums too.

    And thats the danger with optimising for housing density. It can work well, but it can also end badly.

    Of course, the right answer is to fix the socio-economic problems first.

    Here is a very good day from my youth, see it on YouTube.

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  12. Kerry says “Next. Employ people in the building industry to build the needed number of State houses.

    The govt should be selling off state houses that have significantly increased in value. Using $750,000 of taxpayer capital to house a family of three is a waste of our money.

    They should then use the money to build two houses so they can house twice as many people, in much healthier and more efficient houses.

    Just like they are doing now in a limited way.

    However they need to expand this programme and build a larger number of more modest state houses – in sufficient numbers that they can build them significantly cheaper than standard market rates.

    Then they need to offer them to the market. Those that don’t sell can be used as state houses.

    One of our problems is that most new houses built are large and expensive. There are almost no cheap modest houses built.

    So this needs to change either by the govt building cheap houses themselves, or finding a way (and there’s many ways) to encourage private enterprise to build them.

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  13. dbuckley:

    What Julie is talking about is functionally increasing land supply by freeing up existing parking space for other uses, by getting rid of minimum parking requirements.

    The better utilization of resources can indeed make land more affordable for housing, but as you suggest the demand factor can always overwhelm the (temporary) increase in supply. An advantage of “sprawl” is that it can function as a potent supply safety-valve that makes serious under-supplies of land difficult to develop, regardless of spikes in demand.

    As for demand it all depends on what central government does with immigration – too much too soon?

    You are right about the banks, too. Market value = what you can sell your house for. And if the banks just aren’t lending big cash then you can’t sell your house for big cash. The money isn’t there. Period.

    But the banks are only one dynamic. It doesn’t matter what the banks are prepared to lend, people won’t borrow $500,000 unless they can’t build their own new home on the city fringe for half of that. Strict MUL’s are the lid on the pot that allows the pressure to build.

    You might like to check this out:

    http://andrewatkin.blogspot.co.nz/2009/10/explaining-new-zealands-property.html

    It’s my full explanation.

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  14. Hmm – when I look around, I see many, many empty houses, offices and commercial premises. As I walk a lot, I can absorb the real estate signs better, and many in the areas I walk are around for over a year now. If demand was actually outstripping supply per se, I would expect every empty house to be picked up within days. This is actually what I see with the rental apartments in my house – people moving in and out are literally shaking hands, and these are no cheap shoe boxes. This, granted, empirical research on a rather small sample tells me that we have to differentiate what sort of supply shortages we actually have.
    One thing we can probably safely say is that the market, featuring the typical distortions from pure capitalist theory, is failing large portions of society. This is because some players have the power to -more often than not supported by government policy – rig the cards, and any attempts of levelling the playing field will be fiercely lobbied away. The nanny state looks well after its sponsors!

    While we should probably try capitalism one day – just to see if it actually works – I predict we will not get there in the short to medium run. In the meantime, I believe government needs to become a player in the market, and an enabler of third sector activity. Housing co-ops as one example are a very successful model for providing sustainably affordable housing overseas. Housing co-ops are hampered here with legislation, who sees them in the same boat as for profit businesses, and subject to i.a. the Securities Act.

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  15. Karo:

    If we get rid of the costly land from artificial scarcities, and unnecessary regulations and fees that drive up the cost of construction, then people can go to the bank, borrow $150,000-170,000, and just build their own way out of the problem.

    That option has been taken from people, and this is where and how all the bull***t has begun. This really is the core of it.

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  16. Andrew: agreed – but it’s not only the MUL creating the artificial scarcities, or do you actually believe that land banking will stop once the MUL is released? The Queenstown example says: no way. Look who’s so eager to have the town belts loosened, and who applauds local government bowing to constant lobbying. Look at adds for large pieces of land at TradeMe or realestate.co.nz; pretty much every substantial piece of land available is advertised for land banking.

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  17. If we get rid of the costly land from artificial scarcities…

    Please explain how you can make a landowner sell his land at less than the currently perceived value?

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  18. dbuckley

    blockquote>Please explain how you can make a landowner sell his land at less than the currently perceived value?

    Easy, councils just change the zoning on the land from rural to residential.

    Increases in land rates force the owner to sell. Land increases in value due to change in zoning and present land usage cannot support the now massive rates bill.

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  19. Hardly, such change to the zoning increases the value of the land.

    Sure existing users of the land may find the rates burden high, but they won’t sell at a loss. And those who have surplus land could sell it and pay off the mortgage on the rest of the land.

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  20. 1. the historic high value of residential land has motivated many section owners to sub-divide and enable in-fill housing.

    This has coincided with smaller families. This has allowed former 1/4 acre section housing to become the new cheap housing for families. Thus most new housing is gated community/at the top end of the market. Otherwise urban location apartments. This has all been in accord with modern urban planning – more intensive housing.

    However we have reached the point where this is leading to such high cost of land for new housing that we are borrowing large amounts offshore to finance this. We have taken this about as far as it can viably go. We can no longer use high land price alone to direct the housing sector. Especially when it appears we (already a low waged country) are going through a low wage growth period.

    2. the increase in value of lifestyle and rural land when rezoned residential, should ultimately lead to a lower value to residential land.

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  21. 2. the increase in value of lifestyle and rural land when rezoned residential, should ultimately lead to a lower value to residential land.

    I keep hearing it said, but there is still no explanation as to why this will be the case.

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  22. Karo: Land banking that does not make economic sense in terms of revenue potential is bubble economics. Bubbles must burst eventually, and when they do the banking which takes land out of supply will end. So it should be a temporary effect on its own.

    Demographia has demonstrated that there is no such thing as an affordable property market in the context of open land supply (no, or light MUL’s). Generally you must put that lid on the pot before the “games” can begin.

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  23. In NZ, land banking began even before 1840. The first plan for Auckland was drawn up by Felton Mathew with the express intent of maximising gains when on-selling the pieces. The story of NZ settlement is riddled with land banking and land speculation. Over centuries, this has made excellent economic sense for the lucky ones who had the resources in the first place, with land offering much higher returns than most other forms of investment. Temporary effect? Last I checked we had a national obsession with dealing in dirt.

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  24. dbuckley:

    When you open up more land supply at the fringe, the market value of other existing properties must compete with it. Existing properties must compete with cheap new-builds at the fringe, which inevitably forces the sale prices down.

    You just can’t sell a typical existing house for $500,000 when people can build a new (and probably better) one for less than half of that at the city fringe.

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  25. There’s an interesting article here about the cost of living further away from a city and how the more expensive housing may actually cost less if you factor in the amount being payed in transportation costs. http://www.theatlanticcities.com/housing/2012/02/how-more-expensive-housing-can-actually-cost-you-less/1347/
    It’s just one article but it makes sense. The cost of petrol is not likely to ever decrease in any meaningful way (no matter what the oil companies trying to drill here will tell you) and fuel costs are one of the largest costs families face. The way we live is going to change whether we like it or not, and trying to prepare for it by making cities more people friendly is a good start. Freeing up land that is wasted with parking spaces would be a good start. We could also make it so that any new buildings have the parking located beneath them, reducing their footprint.

    Also, here’s a good blog http://transportblog.co.nz/

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  26. You just can’t sell a typical existing house for $500,000 when people can build a new (and probably better) one for less than half of that at the city fringe.

    Yes, you can. If (a) you can raise the finance, and (b) you believe it is a value proposition.

    But that isn’t the point of argument.

    The issue is why would a landowner sell his land for a lower price than he can actually command? In a free market (hah!) why would a builder build a cheap house with thin margins whereas on the same land he can build a m,ore expensive house with bigger margins and be pretty much guaranteed he’ll find a customer for it?

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  27. dbuckley:

    Check your first response. I said ‘typical’ house.

    Quote: “The issue is why would a landowner sell his land for a lower price than he can actually command?”

    The idea is to *reduce* the price he can command. Please read my previous post more carefully.

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  28. Sorry Andrew, I must be thick. I’ve re-read each of your posts and can find no answer.

    I agree as I stated above if there was a sudden massive supply of land then its possible that there may be depression in land prices, but adding enough for a few thousand homes won’t move the market because the pressure with the money is from the upper end, whereas the pressure without the money is from the bottom. Pressure at both ends, but one end has the money. Follow the money.

    I think this is what I have the most problem with:

    When you open up more land supply at the fringe, the market value of other existing properties must compete with it. Existing properties must compete with cheap new-builds at the fringe, which inevitably forces the sale prices down.

    I embellish and restate the question as above:

    Why would a landowner (he’s the one that will have his land “opened up” (as you put it) to development) sell his land for a lower price than he can actually command? In a free market (hah!) why would a builder build a cheap house with thin margins whereas on the same land he can build a more expensive house with bigger margins and be pretty much guaranteed he’ll find a customer for it?

    Please help me understand how the landowner and builder will not work the way as described despite the fact they can charge more and thus make more money.

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  29. The builder who can build on/access cheaper land can either get a higher value for the house, or at least sell it more easily in a competitive market. This lowers the risk for the builder. At the moment with land prices so high and the price of new homes so much higher than existing property there is a risk of having to reduce margin or take a loss to sell the property. Hence little home building.

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  30. SPC: that is understandable – but why does it have to be the builder/developer who buys the land? Why not the future home owner, who then hires a builder? No risk – smaller margin – lower cost – everyone happier?

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  31. On the issue of the thread, of course better utilisation of space is beneficial – even in-fill housing has met the demands of smaller family size (even if caused by rising land value) and maximised use of land.

    But that better utilisation of existing land use would be more affordable if there was more space available as well to take down land price – and thus the cost of development projects.

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  32. You are right Karo, people can buy land and get their own architects, or hire one of those companies that sells offers a standard (small) range of buildings. Often land is on sale with this latter option. Sometimes the developer and building companies are inter-related.

    Whereas builders use to buy land and build a property to sell (as a way of gainful employment), now they buy and offer themselves for hire to build the property (they advertise on site) – such is the change in the market.

    There is a problem with competition in the land supply market, land banking means new land comes onto the market at a controlled rate to maximise sale price (this maximises the price of new housing and the amount of foreign debt we carry for home mortgages). A CGT that only applies when land is sold does not change this. Maybe we need to time limit the ability to charge interest on land mortgages as a business cost to encourage the land coming onto the market earlier and/or restrict any one company from owning too large a share of land available for new housing in any market?

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  33. dbuckley:

    When you have the situation of say 20 land suppliers trying to sell to say 15 customers, then the sellers all go into a competition among themselves to not be one of the 5 sellers that will miss out on a sale. In turn the sale price collapses like in any glut.

    Buy all the materials, and hire your builder to build your house. Pay him by the hour. If it’s a small house he’ll knock it up pretty quick. The builder doesn’t need to be a middleman – just a tradesman.

    That’s the best I can do.

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  34. SPC: “Maybe we need to time limit the ability to charge interest on land mortgages as a business cost to encourage the land coming onto the market earlier and/or restrict any one company from owning too large a share of land available for new housing in any market?”
    Or, bring a powerful new player into the market that has the ability to buy and float land at the right time to offset artificial shortages: the community, represented by (local) government. Well used method overseas.
    If anyone cares to check out which countries have a bubble and burst housing economy, and which have not – you’ll find eery similarities with governments that are active players in the market, or rely on the market to sort things out. Add to this the strengthening of the third sector – people providing for their own housing organised in building societies or housing co-ops – and you are en route to sustained housing affordability. Unfortunately, our legislation is not conducive in this regard.

    To go back full circle to minimum parking: a policy used overseas enables people to buy their way out of parking requirements at cost below the cost for actually providing the parking. This indulgence, so to speak, goes into a pool a government agency uses to buy land, which can then be used for purposes outlined above. Win-win.

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  35. When you have the situation of say 20 land suppliers trying to sell to say 15 customers, then the sellers all go into a competition among themselves to not be one of the 5 sellers that will miss out on a sale

    Now I see clearly why you state what you do. Supply and demand.

    The way I see it is that there is no real pressure for landowners to sell land; if there was they would already be competing. And until the position is that there is vastly more land available then pressure to build then the situation wont change.

    Theres no real pressure because the land sitting there doesn’t have a significant operating cost. In the normal course of supply and demand, the prospective seller has to make sales or they are in schtuck, as they have production costs (or whatever) that must be paid, so there is a (quite big!) element of desperation to sell.

    Which is why I say that if there are just thousands of sections becoming available, then the builders with grander schemes (and thus more money) will win the sections, because the number of new houses that are able to be built will still not exhaust the purchasing desire of the upper end of the market.

    For this theory to work, the numbers of sections and houses able to be built must fully satisfy the market with the greater money and higher ambition. I reckon that is nigh on impossible.

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  36. Well dbuckley, Demographia has shown that when you basically get rid of the MULs, property markets can’t inflate to unaffordable heights.

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  37. Back on the “what’s wrong with the housing market?” debacle are we.

    Let me count the errors.

    1. Excessive council involvement in the process of building houses.

    2. Insufficient council involvement in the process of preparing land FOR houses.

    3. Inadequate housing regulations in the past leading to extraordinarily poor houses occupying extraordinarily valuable land.

    4. A piss-poor tax and benefit code for much of the past decade, which hit up the folks in the middle (incomes between 60 and 80k) for as much as 90 cents on each additional dollar they earned.

    5. An LAQC that made the process of buying a property and renting it to someone else, a good way to avoid the stupid tax code.

    6. Lack of a Capital Gains tax (which exacerbated 4&5).

    7. Councils being “responsible” for a house being certified habitable. (is this British habit?)

    8. Banks in control of the issuance and creation of money.

    9. Banks having control over the central government as a result.

    … sorry, I know there is more, I am just tired and want to go get brunch.

    Basically, if there is any imaginable thing that NZ did NOT do wrong with its housing, I don’t know what it is. Maybe we should start that way.

    Things NZ got right about its housing market:

    .
    .
    .
    .
    .

    .
    .
    .
    .
    .

    .
    .
    .

    …and I can’t think of any either.

    :-) Teatime.

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  38. Demographia are welcome to their opinion. I think their extrapolation to our market from what happens in other totally dissimilar markets is erroneous.

    Because the housing situation is driven by money (as outlined above), then unless you fix the money equation on one side or the other then good housing will continue to be an unaffordable option for many New Zealand families.

    The ordinary marketplace is not going to deliver affordable housing until it has delivered all the unaffordable housing there is a market for. And we are in no way on the slope necessary to achieve even that.

    This is why council and other similalrly owned rental accomodatiuon was invented.

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  39. dbuckley:

    I think we are on the same page here. It was my idea from a while back to make it illegal for banks to lend for than 4x a household annual earnings for a house, to cap access to credit and therefore cap the massive property inflation.

    I saw it as an emergency policy until the supply sorts itself out. I would have hoped, at least, that people didn’t have to turn themselves into life-long debt slaves. But alas – I’m still wondering if the latter is the real idea!

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  40. …would have hoped, at least, that people didn’t have to turn themselves into life-long debt slaves.

    But thats the reality. People who can afford houses want “a nice house: and therefore will go all out to get the best they can, that limit often being determined by their creditworthioness.

    …make it illegal for banks to lend for than 4x a household annual earnings for a house

    The capping of the ability to borrow money for a house is fundementally a good idea, in that it sends exactly the right sorts of signals to the marketplace.

    Unfortunately there are other buyers with alternative forms of debt financing, so there needs to be some other things done as well.

    Any right winger will tell you that the market can (and has) sorted out the issue of property by matching house availability to ability to pay, but that leaves out a lot of people. That is where the issue is.

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  41. What are the benefits of maintaining Minimum parking requirements? I don’t understand why we keep doing this, is it because “I had to, so should they…”

    If a business can see an opportunity to attract customers via any mode why should they be forced by planning rules to provide parks for users of just one of those modes? Conversely if a business neglects to provide needed parking space shouldn’t they be the ones to suffer the consequences. Ultimately this rule is pretty arbitrary, and continuing it seems to distrust the market’s ability to guide parking provision.

    We all pay for those parks in higher costs of goods and services.

    The only reason I can think of for keeping them is that successive governments, councils and planners have (in Auckland anyway) embraced a 1950’s US oriented transport/land use policy relying primarily on motorways and private cars, and its a way to force tax/rate-payers to prop up their ideology.

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  42. joust and all:

    The truth is we are on the brink of a transport revolution that will eliminate the need for most parking as we know it.

    Cars are moving into full automation, which has been already mastered and demonstrated by Google. The result, in turn, will be network-based transport so we can hire rather than buy cars. So, we just order up the car we need (usually a single-seater), then it drops us off at our destination and then moves on to its next customer.
    Incredibly efficient, and eliminates most need for parking.

    Watch out for this over the next decade. The technology is moving extraordinarily fast.

    http://www.youtube.com/watch?v=bp9KBrH8H04

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  43. Honestly, I cant wait for cars that drive themselves.

    Driving as an activity is a pure waste of life.

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  44. Andrew Atkin – Have you ever actually lived in a high density city with good public transport? If you say London, then the answer is no, as that does not have agood public trabspoirt system compared to most small European cities, let alone the big ones.

    My example is always Prague, where I lived for 3 years. Prague works like clock work and the congestion is MUCH less than Auckland with about the same population. I could easily get around on an excellent metro, or switch to a tram or bus (that always arrived on time as there was little traffic). The Czech Republic is now at least as wealthy as NZ but car ownership is far lower.

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  45. Andrew Atkin – also you seem to think that high density means only apartments, and of course apartments are the ultimate high density. But the best examples of high density in Auckland are Ponsonby, Grey Lynn and Freemans Bay etc. These are also the highest priced areas in NZ. When you say housing is unaffordable, it is unaffordable in areas that people want to live in i.e. nice, walkable suburbs with good PT links). I have just bought a house in Auckland and there were plenty of affordable houses. But they were far from the CBD and frankly of low quality (a general problem in NZ). So I dont see how sprawl will solve the problem of creating areas people want to live in. There are people who want a McMansion on the fringes, but far more who want a nice, comfortable house on a small section in a nice, walkable neighbourhood. I have lived in 8 cities in 6 countries and never seen nice sprawl.

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  46. Driver less cars? I think you have watched Minority Report one too many times. How will we fund the resources to build/convert driverless cars? What will they run on (if you say electric cars then think how we get the rare earth for 1 billion + car batteries). There is nothing that will replace oil and eventually (whether it be 20 years or 100 years) it will run out. And NOTHING can replace it. Even fusion power will only give us a lot of cheap electricity. I guess we could convert coal to liquid fuel but there is no way we will produce enough of that fuel to replace the stuff we just pump out of the ground now. Sprawl will make all these problems worse in the future. You cant extrapolate trends from the past, only to the future.

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