The housing crisis is the issue of the moment but is at risk of being appropriated by a multitude of interests, many of them vested, each who frame the debate – and the solutions, in their own ways.
There are at least two important elements – a housing affordability problem, and a housing availability problem. It’s now almost an unreachable ‘kiwi dream’ to own your own home, especially in Auckland, but these days many kiwis also struggle to find one to live in. Property prices are out of control, property wealth is accumulating in the hands of the few, there’s a housing shortage, overcrowding, homelessness.
Developers and land interests would have us believe both housing affordability and availability would be solved by freeing up land supply. But a recent report, ‘Long Term Vacant Residentially Owned Land in Auckland’, commissioned by the Auckland Council, found about 8000 vacant, residentially zoned sites already available for development within Auckland’s urban limits. They found ‘significant development opportunity for new housing on plan-enabled residentially zoned land within Auckland’s built up area’, including new parcels, free-standing vacant land, and newly subdivided sites not yet built on. The study found the main reason owners of vacant, residentially zoned sites weren’t developing their land, was because the benefits of holding on for later speculative profits outweighed financial and building risks and development costs.
The potential for housing development on readily available land doesn’t seem get to the attention it deserves, with a “strong bias toward greenfield development on the urban fringe” according to the report. That bias in favour of greenfields development has been accelerated for the long term with the removal of the Auckland Regional Council and the Metropolitan Urban Limit, and in the short term through the fast tracked Special Housing Area sites, brought in through the Housing Accord between the Council and the Government. There’s actually a lot of residential land currently available, and lots also being built on – if you haven’t noticed Kumeu, Riverhead, Westgate, Hobsonville, Silverdale, Pokeno, Karaka, Long Bay, Orewa and more. The Unitary Plan indicates relentless more capacity though infrastructure servicing is not so well provided.
But a sudden rush of land supply hasn’t helped speed up additional housing availability, with few houses developed in the SHAs so far. Given the limited capacity of the building industry, and existing trade shortages, only so many houses can be built in so much time. And even in a setting of unlimited land supply, owners will still stage the release of property for sale to retain a premium and not flood the market.
Housing availability through land supply doesn’t necessarily lead to housing affordability either. About 1000 new houses are currently being built in my hometown of Kumeu, with another 2,500 expedited through local SHAs. But still, large houses on small sites are on the market for around $900,000. The word around town is that both offshore and domestic investors are buying many of them for rental and capital gains.
The Reserve Bank refers to the ‘tax preferred status of housing, especially investor-related housing”, driving speculation, and prices up. The potential for tax free capital gains provides a pretty strong incentive for those with equity to buy and sell property in any context. If you’re lucky enough to already own property in Auckland, or somehow have enough equity, you can make money quick by getting on the property ladder and becoming a landlord and speculator. That drives the prices up for everyone else and further locks low income earners out of the market.
TV programmes like ‘The Block’, and ‘Our First Home’ celebrate quick and dirty property speculation and the resulting capital gains, trading houses like they’re disposable commodities. In ‘Our First Home’, the winning speculators “pocketed $194,000 profit” over the course of the 10 week competition.
The Auckland housing economy in particular is like a game of monopoly, where winners and losers are clear and sitting at opposite sides of the table. Fortunes are not decided by virtue or hard work, but by access to property ownership and the ongoing financial leverage it provides in a predominantly housing economy. But housing is a human right, it shouldn’t be left to chance – or the free market.