Achieving a compact Christchurch

 Blog5The Land Use Recovery (LURP) Draft plan outlining where and when future housing, business, infrastructure and leisure should be provided in greater Christchurch, was handed to Minister Brownlee on 5 July.  ECan, under instructions from the Minister, had been developing this future Christchurch plan, and opened it for public submissions in April.

We offered a green submission guide, and in June hosted ‘Achieving a Compact Christchurch’ with UC academic Dr Stacy Rendall. Our public meeting was packed to the rafters with people wanting to discuss best practice alternatives to the LURP plan that was suggesting a sprawled city, catering for those wealthy enough to afford new McMansion houses, living well-beyond our energy means.

Many of our Green supporters made submissions on LURP calling for smarter sustainable planning that involved creating a compact city, by developing existing urban land with medium density affordable housing.

It was encouraging to read Dame Margaret Bazley summarising the public feedback, that many of our concerns raised were strongly supported in submissions. In fact, to see our call for a “compact city” repeated feels like a small win, in that the conversation is broadening. This does not have to be a city just for developers, it can be a vibrant inclusive lively city again.

Dame Margaret says comments received “encouraged the strategic partners to look more closely at how intensification and providing a mix of housing can be promoted in existing urban areas, and to focus on rebuilding communities, not just buildings.”

So now the plan looks at development within existing urban areas, and sets a target of 18,000 new households to be built, as well as two catalyst medium density affordable housing projects. Great timing considering my colleagues Metiria Turei and Holly Walker are coming to Christchurch specifically to talk about affordable housing.

The great green garden city is not guaranteed yet though. The revised draft LURP is not yet online. We need to check just how much it has reduced the urban sprawl originally proposed by allowing 42,000 new sections mainly in greenfield developments.

The revised LURP  is open for public comment from 6 July until 2 August and should be here.  We’ll have a green submission guide to follow shortly.

11 Comments Posted

  1. The long-term approach is to limit the amount a bank can lend based on the salary of the potential homeowner.

    Back when interest rates were higher, this was the natural order of things, banks would onl lend 2.5 x salary (or something similar) and houses were affordable. As banks became willing to lend more and more, house prices rose to accommodate the purchasing power available. LegIslate to omit loans to a fixed multiple of salary, and the problem is solved.

    Doesn’t fix the historic issue, but fixes going forward. You’ve seen how I would fix history 🙂

  2. We can deal with home owners being underwater by saying a bank on a mortgagee sale can only take a proportion of the sale price equal to the proportion of the loan to the valuation they lent on/original buying price at the time of the loan. This should also scare banks away, somewhat, from pushing up house prices to increase their lending income.

  3. I wasn’t going to be that radical, but making it law that banks can only lend on a proportion of the rental earnings of a property would help re- aline house prices with rental income.

    Then there is capital gains tax, restricting offshore ownership of land, cutting bank interest rates, to overseas levels, to keep hot money out of the housing market, restricting mortgage lending, bank prudential ratios, and supply side interventions like charging land bankers, addressing the duopoly which keeps our building materials so expensive, State housing, and rent controls.

  4. I have a radical plan to deal with the banks.

    The government announces a house price adjustment, in exactly the same way it would announce a currency devaluation, ie, in secret with zero notice.

    As part of this announcements, mortgages are revalued too. Remembering that bank loans (by the magic of fractional reserve banking) are created out of thin air, they can be evaporated just as easily, and without capital loss to the institution.

    The losers are those who own a home outright (ie not mortgaged), who really have lost money. This is one time I might make an exception, and allow the government to print money to recompense those who have lost, to some fraction of that that they have lost.

    Wild enouigh for you? Workable??

  5. Trouble with houses dropping in value is the banks reaction. As they see the value of “their” security, drop.

    Not to mention the deflationary effects of a drop in perceived wealth.

    We all know house prices, and land prices in general, should be lower, and the types of interventions which would do it, but too fast a drop would be economically distressing for too many people. Good in the long term, but devastating short term.
    Land has been the only sensible, and possible, leveraged investment ordinary people can make.

    Not a good vote catcher, unless the message, that it is necessary, gets across to enough people. Unfortunately vested interests will make sure the message is as distorted as possible. Including all the MP’s, on both sides of the house, who own property.
    Which is why political parties will only play around the edges.

  6. We’re not disagreeing here.

    If Fred has a $500K house, and a correction of 30% occurs, then Fred has a $350K house. Fred has apparently “lost” $150K.

    On one hand, Fred’s ability to trade up and trade down in the housing market has not changed one iota, ‘cos all house prices have dropped by 30%.

    On the other hand, that $150K Fred apparently had has evaporated into thin air. Fred could have taken that $150K down to Armstrong Prestige and bought driven out with a BMW each for the family. That is what Fred will have seen he has lost.

    You say, correctly, “What’s more, over-inflated housing is fools gold. You can only cash-in if you downsize your home aggressively, and most people don’t.

    The problem is, Fred could have had his fleet of BMWs, and now can’t.

  7. dbuckley:

    Yes, but for most people the drop in market value drop will not affect them. Here’s the full extract on that point:

    Won’t the introduction of affordable housing make my home worth less?

    In terms of local market value, yes, but this is a correction and it must happen if we are to ever see rationally priced housing.

    What’s more, over-inflated housing is fools gold. You can only cash-in if you downsize your home aggressively, and most people don’t. Note that every dollar of appreciation you win from the artificially inhibited land supply, your children lose (and more) for when their time comes to buy a home. So you’re hardly winning them an inheritance.

    Finally, the impact of artificially restricting land supply goes well beyond the residential sector. Forcing commercial operations to pay-out big money to landlords for industrial/commercial land makes your locality a bad choice for new investment, likewise inhibiting economic growth (often severely). It also, of course, drives-up local prices for almost everything.

    What we’re seeing, basically, is nothing more than a mass-collective monopoly of landholders using political savvy to rig the game so as to inhibit their new-build competition. The result is a major (and totally unfair) wealth-transfer from those who don’t hold land to those who do. The landlords win, everybody else loses, and economic investment gets suppressed.

  8. On Andrews linked blog post, he notes that:

    Won’t the introduction of affordable housing make my home worth less?

    In terms of local market value, yes, but this is a correction and it must happen if we are to ever see rationally priced housing.

    And this is actually the real problem. To engineer a “correction” requires that we all give up existing house value, and this requires the housing equivalent of turkeys voting for Christmas.

    There are not one but two problems, not just the affordability of housing, but the availability of housing. A house price crash could be engineered which would solve the former, but not the latter.

    The current state of affairs is that “the market” considers $500K starter homes in Auckland to be acceptable, and they are selling, no doubt about that, and as long as that situation continues to persist, thats what the current generation of first home buyers will be looking to spend.

    What I have no idea about is how we can realistically transition from a house (example pictured on Andrews blogpost linked to) that today is “worth” $700K (and I think thats a low estimate) that someone has presumably paid (or is mortgaged to the tune of $700K) to it being available for $240K, or even $400K, or $500K. Someone has to take a bath over that price drop. I’ve plenty of ideas how it could be done, but the political party that engineers such a destruction of “value” is unlikely to be ever elected again.

  9. I know. Lets do away with family homes all together! We can build an edifice that has bedrooms for half the number of sexually active adults that will be allowed to live in it, dormitories for everyone else based on having no more than 2 years spread between the oldest and the youngest in any one dorm (we will need five types of course for each age group).

    With central catering, bursary and education, we could all live a great life based on rules established by those with the ability to persuade others of the correctness of their stance on every point put forward for a plebiscite. Also of course, a plebiscite would decide if an accused criminal is guilty or not, and if they are, what the appropriate punishment would be.

    All in all, perhaps the great archeologies documented by the likes of Larry Niven will really be our destiny rather than his worst nightmare.

  10. Let’s start from here:

    Quote:”catering for those wealthy enough to afford new McMansion houses, living well-beyond our energy means.”

    Total ignorance. It’s the anti-sprawl policies that DRIVE McMansions. When land is given back to people at rural fringe values, the market opens up for modest houses and the property developers respond.

    Please, for the love of god, so some B.A.S.I.C homework ON. THIS. ISSUE. Currently you people have no damn right to propose yourself as politicians for this nation. Your thinking on this most critical issue is a total mess.

    …and lose the “endearing” profile photo. That’s not who you are. You are a very highly strung zealot.

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