Exploring how taxes, zoning laws, and policy can rebuild trust in New Zealand's housing market. Housing doesn't just affect where we live, but how we live together as a society.
Hi Natalia. This is a more wide-ranging view of housing affordability than we usually see, though the list has missed what might be the biggest driver of house price inflation -- bank credit. This article by the late Brian Gaynor explains it very well, along with some of the history that got us here. https://businessdesk.co.nz/article/the-life/looking-back-the-nz-housing-boom-when-and-how-it-all-began You might also look at this site for a lot of relevant information including links to research. https://positivemoney.org.nz/
Some of the biggest misconceptions about money and banks unfortunately reside in Economics departments so it’s not surprising that your review of the academic literature turned up little about this. As the Bank of England diplomatically puts it: "The reality of how money is created today differs from the description found in some economics textbooks".
Banks can and do take advantage of demand/supply mismatches and their ability to expand the money supply through lending to stuff far more credit into the housing market than it needs. The result is housing inflation -- too much money chasing too few houses -- and it has allowed them to mop up an increasing share of household income gains. As Gaynor’s article explains, their natural desire to expand profitable lending used to be tightly constrained but that ended in 1984 and the era of house price inflation exceeding wage and CPI inflation began. Mike Rehm at Auckland Uni has done some good local work in this field. https://www.thebigq.org/2019/09/17/why-is-housing-so-unaffordable/
I live in Mangere. Once Auckland relaxed the zoning laws, three story townhouses started popping up like mushrooms around here. Over the road from us, where there used to be 4 homes there are now 32 apartments. These are tiny pigeon coops and our street is suddenly full of resident’s cars. It’s a bugger but I think it’s right.
There are acres and acres of cleared ground waiting for new builds to get under way, around here and in Penrose where I work.
The new constructions are not high-end, with high-end profits (although I have nothing but respect for high-end profits). They have not been built because of a direction from government at any level. They are here because of relaxed zoning and the fact that there is a demand for them.
Can government intervention help increase the supply of less expensive houses? I would think so. Local government needs to manage the angst of incumbent residents who don’t want changes to the character of their neighbourhoods. And then (as with the supermarkets) we could do with more competition in the supply of building products. Maybe central government can help facilitate this. Profit will go to the (likely foreign) new suppliers, but the result will be lower construction costs. Interest rates unfortunately need to remain outside of anyone’s control, other than the Reserve Bank.
Pain to the right of them (people living in suburbs with sections with grass, gardens and trees), pain to the left of them (an unholy alliance of people who don’t like the market together with the vested interests), pain in front of them (the economy and interest rates), into the mouth of hell rode the three coalition partners.
Hi Natalia. This is a more wide-ranging view of housing affordability than we usually see, though the list has missed what might be the biggest driver of house price inflation -- bank credit. This article by the late Brian Gaynor explains it very well, along with some of the history that got us here. https://businessdesk.co.nz/article/the-life/looking-back-the-nz-housing-boom-when-and-how-it-all-began You might also look at this site for a lot of relevant information including links to research. https://positivemoney.org.nz/
Some of the biggest misconceptions about money and banks unfortunately reside in Economics departments so it’s not surprising that your review of the academic literature turned up little about this. As the Bank of England diplomatically puts it: "The reality of how money is created today differs from the description found in some economics textbooks".
Banks can and do take advantage of demand/supply mismatches and their ability to expand the money supply through lending to stuff far more credit into the housing market than it needs. The result is housing inflation -- too much money chasing too few houses -- and it has allowed them to mop up an increasing share of household income gains. As Gaynor’s article explains, their natural desire to expand profitable lending used to be tightly constrained but that ended in 1984 and the era of house price inflation exceeding wage and CPI inflation began. Mike Rehm at Auckland Uni has done some good local work in this field. https://www.thebigq.org/2019/09/17/why-is-housing-so-unaffordable/
I live in Mangere. Once Auckland relaxed the zoning laws, three story townhouses started popping up like mushrooms around here. Over the road from us, where there used to be 4 homes there are now 32 apartments. These are tiny pigeon coops and our street is suddenly full of resident’s cars. It’s a bugger but I think it’s right.
There are acres and acres of cleared ground waiting for new builds to get under way, around here and in Penrose where I work.
The new constructions are not high-end, with high-end profits (although I have nothing but respect for high-end profits). They have not been built because of a direction from government at any level. They are here because of relaxed zoning and the fact that there is a demand for them.
Can government intervention help increase the supply of less expensive houses? I would think so. Local government needs to manage the angst of incumbent residents who don’t want changes to the character of their neighbourhoods. And then (as with the supermarkets) we could do with more competition in the supply of building products. Maybe central government can help facilitate this. Profit will go to the (likely foreign) new suppliers, but the result will be lower construction costs. Interest rates unfortunately need to remain outside of anyone’s control, other than the Reserve Bank.
Pain to the right of them (people living in suburbs with sections with grass, gardens and trees), pain to the left of them (an unholy alliance of people who don’t like the market together with the vested interests), pain in front of them (the economy and interest rates), into the mouth of hell rode the three coalition partners.