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Opinion piece by Hugh Pavletich
2 February 2008
Restoring
the Housing Opportunity |
The
2008 4th Edition Demographia International Housing
Affordability Survey released recently, illustrates clearly why so
many young and vulnerable New Zealanders, are being denied the right to
the opportunity of affordable housing.
I
am particularly heartened to see this annual international survey I
initiated back in late 2004 – assisting people throughout the six
nations surveyed, gain a growing understanding of what housing should be
costing and the causes of housing stress in too many markets. Prior to
these annual surveys being generated, most New Zealanders and Australians
simply didn’t have a clue about firstly, what “affordability” meant,
and secondly, how poorly we rated in comparison with so many other cities
of the Anglo world.
The
sad reality is that due to ignorance and inadequate management skills –
our local authorities are deliberately starving and inflating the price of
land on the urban fringes and denying too many people the opportunity to
purchase affordable housing.
In
mid 2007 - Demographia released a Sydney
& Dallas Fort Worth Fringe Starter Housing Cost Comparison Study ,
which clearly sets out (with easily accessible hyperlinked examples
provided) how young people in Dallas Fort Worth can purchase new fringe
starter homes for $140,000.
We
too should be supplying new starter housing for young people, around our
urban fringes for about $140,000 - with about 20% of this or $30,000 for
the section and 80% or $110,000 towards the actual house construction.
That’s what young people within the affordable markets of North America
pay. Our young people deserve nothing less.
Currently
in New Zealand – the sections cost more – and often much more – than
what a completed house and land package should cost.
We
should not be required to spend any more than three times our annual gross
household income to house ourselves.
This
years Demographia Survey of the six nations of the Anglo world
(United Kingdom, Republic of Ireland, United States, Canada, Australia and
New Zealand) has been expanded to cover 227 urban markets including seven
of New Zealand’s larger urban markets. These are – Auckland,
Wellington. Christchurch, Dunedin. Hamilton, Napier – Hastings and
Tauranga.
Based
in the “Median Multiple” (as recommended by the United Nations and
World Bank) where the median house price is divided by the median gross
annual household income – New Zealand with Australia are an appalling
6.3 times annual household earnings; the United Kingdom 5.5; Ireland 4.7;
the United States 3.6 with Canada achieving 3.1 times household earnings.
When
interest rates are added – New Zealanders overall are in the worst
position of all the Anglo nations surveyed.
Put
simply – local government has forced New Zealanders to pay twice as much
as Canadians for housing.
It
is obvious to most New Zealanders now that “something must be done” to
restore housing affordability. The international evidence with respect to
the cause of the problem – is clear, overwhelming and irrefutable.
The
“deniers” have had their day.
Dr
Donald Brash, Governor of the New Zealand Reserve Bank (1988 – 2002)
within the Introduction to this years Demographia Survey, summed it
up very well when he said –
“Despite
all the evidence, governments continue to pretend that they are powerless
to make housing affordable or, worse still, implement futile interventions
which make the situation worse, as the New Zealand Labour Government is
proposing for this year”.
The
process of unwinding the mess and restoring housing affordability, will
take at least ten or more years, depending on the severity of housing
stress within individual urban areas.
Sadly
- local government has severely degraded the performance of our
residential construction sector. Many will recall the waves of builders
who departed these shores for better opportunities in Australia during the
1980’s and 1990’s.
No
wonder the starter housing construction costs within the affordable North
American markets are currently in the order of $US550 per square metre.
Ours are substantially more. Our New Zealand builders are just as clever
as their North American counterparts – and their productivity and
pricing will improve substantially over time – as and when Central,
Regional and Local Government, decide to provide adequate and affordable
land supply and give them a “fair go”.
The
focus must be on (a) opening up fringe land supply (b) appropriately debt
and equity financing infrastructure and (c) getting simple and clearly
understood performance standards in place, to assist local government to
restore housing affordability over reasonable and realistic time frame.
The
problem – and the solutions are not at all complex. The only
“ingredient” required – is the will and commitment to restore
housing to affordable levels.
As
New Zealanders - we owe it to ourselves to start on this path - now.
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