Smith should roll over the council

Head-in-sand approach to housing supply shows complete inability to read the future and plan for it.

Here's my advice to Nick Smith. Roll them, roll right over the top of them.

The Auckland Council, in yet another display of its complete inability and ineptitude, has bought a fight with the Government over special housing sites by blocking three of them and holding the Government to ransom.

In a week in which we have discovered the average sale price in Auckland is now $800,000, in a week the Government's bumped the affordable homes prices by about 50 grand a house, in a week in which Barfoot & Thompson tells us it has never sold so many homes, the last thing Nick Smith needs is a bunch of head-in-the-sanders telling him what they're putting up with and what they're not.

I think we've worked our way through the whole "housing crisis" enough to understand most of it has nothing to do with the Government.

Indirectly the Government is responsible for the conditions which exist, ie a strong economy, cheap money, booming migration ... but these are broad-based market conditions and in many respects we should be welcoming them.

The bit that does have to do with the Government is supply.

You want to slow prices rising? Build more homes.

The more you build, the more supply there is, the more that supply soaks up demand. None of this is hard, unless you want to make it hard, which the council clearly does by blocking progress.

Which is really where a lot of this trouble starts and stops.

The council.

The council has been anti-growth. It doesn't want more land released. It doesn't want to build up or out.

It doesn't actually want to do much of anything and when the money is cheap and the population booms and the arrivals start asking where the houses are, your classic demand-supply equation unfolds before your eyes.

Those with the money buy what's available, those without, miss out.

The mere fact the Government has had to enter this debate tells you all you need to know about the council's inability to read the future and plan for it.

It is a widely known fact that migrants stay where they land. The main point of entry to New Zealand is Auckland.

It is widely known that as we've boomed and Australia has hit the wall, the migration movement has turned around.

It is widely known that as the economy has hit rock star status, money has become cheap and given inflation is low and staying low, money will remain cheap.

Note to the council ... it will most likely be even cheaper by the end of the year.

The Government's big picture problem is by entering this debate in the first place it has created the expectation it has the answers which, of course, it doesn't. Not unless it takes control of the council decision-making process over the availability of land, which it might have to.

The council's argument is infrastructural. What about the transport routes and what about all the issues that come with new houses and new people?

The answer is rates. With new people comes new revenue and don't get me started on this council's ability to raise revenue.

This is the council run by the mayor who promised rate rises of no more than 2.5 per cent, until it became 3.5 per cent, which was a straight-out broken promise.

The irony of the 2.5 per cent promise was that Len Brown argued it was roughly in line with inflation, which, of course, it wasn't, given inflation is basically zero.

Then Len rolls in with his newly invented transport levy taking rate rises to 6.5 per cent.

So how about a bit of that money going towards the new infrastructure?

After all, you either want to grow your city or you don't.

Of course if you have followed my thinking on this in previous columns, all of this will eventually resolve itself.

There is no crisis, there is no bubble. Increased numbers of houses will come on to the market, interest rates will rise, migration will slow ... market forces will meld their way into their own natural solution.

This is the way it's always been in this country.

Do remember the oft quoted fact - in 45 years we've never actually had a housing crash.

The global financial crisis (GFC), at its worst point saw prices here fall 9 per cent.

Pre-GFC they had gone up close to 100 per cent; they fell 9 per cent when the world stopped. They've since regained all of that and a whole bunch more.

I have spent no time sweating this stuff, but for those who have and are ... let's deal with this with some common sense and professionalism. Holding a government to ransom the way the council is trying it on with Nick Smith is asking for more trouble than a local body will be able to cope with.

Look what the Government did to Christchurch City Council post-earthquake.

If I were Nick Smith I'd be looking to shunt this lot sideways as well.

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