Martin Visser: State of housing in NZ and some solutions

Martin Visser says Kiwi attitudes towards housing have to change. Photo / Bevan Conley

The lack of decent, affordable housing whether to own or rent will become the epidemic of 2010-2030 and this Government's legacy.

It is a tipping point for New Zealand: a period where we come together or instead disintegrate, as the disunited United States is experiencing, into the "haves and the have-nots" and totally away from the egalitarian society we once held ourselves up to be.
House values 2010-2020 in NZ rose three times higher than income and are expected to at least double again within seven to eight years. Housing cost, our greatest expense, is now relentlessly forcing greater poverty. We are not a "team of five million".

There are solutions but no single silver bullet, because multiple issues are involved. These issues and possible remedies include:

1. House price bubble – Economist magazine for two decades has viewed NZ as one of the riskiest property markets globally. Our prices have defied gravity and logic, with now a huge disconnect between the income from property and its capital value, when economic theory requires a direct relationship. Most rental properties lose money while values soar: hence the bubble. The bigger it gets, the greater the inevitable mess. Successive governments have been frightened or reluctant to intervene (politicians owning an average of three-plus properties hasn't helped). A more level playing field is needed more than ever and must include wealth and property taxes - however politically unpalatable.

2. Housing supply - The PM now talks about more money to first-home buyers - without due consideration to housing supply - fuelling the flames. Both sides must be addressed equally. We've had mass immigration (the only real driver of our economy lately) without sufficient thought given to the housing, roading, transport, health and education infrastructure required. Ironically, we have the worst-quality housing (poorly insulated and $50b outstanding on leaky homes) yet the most expensive globally compared to income.

■ RMA – yes, it needs changes, but that's a tiny part of the answer and most attention should be turned to the root causes of fear and unfettered greed. Also, changes cannot come at significant environmental cost.

■ State housing – leaving accommodation solely to the private sector is not the answer. Setting aside $50b to infrastructure and business for Covid-19 and less than 1 per cent of that to the housing issue is incredibly short-sighted. Build state houses to fill two-thirds of the gap.

■ Local government – The Labour Government re-introduced the four (including economic) well-beings to local government. This is where Whanganui, other cities and their eco-development agencies need to partner up to demand two solutions: 1) alleviating the housing supply problem and 2) expanding local government's sources of revenue away from being the narrowest in the OECD.

It's where the rubber hits the road – out in the cities/provincial NZ – marrying government strategy with successful implementation. Germany has no house-price inflation – its cities provide long-term, secure housing to many of their citizens, in the process diversifying their revenue. Whanganui has three golf courses for example, at least one is marginal. Development may yield 250 sections and up to 750 truly affordable homes at $250-300k (or 3.5 times average household income in Whanganui).

■ Supply disruptors – speculation has made our land too expensive and houses cost too much to build. Construction firm collapses number in the hundreds due to undercutting, poor procurement, skills leakage. The Chinese 3-D print houses from concrete for $5k – mass production is needed here - we have to learn from them.

3. Accelerating poverty – Again, $50b to businesses for Covid-19 and less than again 1 per cent of that to the poor. A living wage is needed by all – as well as being fairer, it boosts the economy immediately.

4. Land-banking and homelessness – Yes, there is a definite connection. There are 40,000 empty homes in Auckland. Many of their owners are simply land-banking. NZ has the highest rate of homelessness in the OECD affecting over 1 per cent of the population - double that of next-worst Australia. Owners of empty homes should pay a fee for the privilege of leaving their properties vacant while they speculate and those monies go towards solutions funding.

5. Renters have it tougher still. Landlords now hold incredible sway across all groups and strata, unlike in most of our West European peer countries. Māori and Pasifika have had it far worse and for longer. Only 19 per cent of Pasifika own their home. Although there have to be higher priorities in life than owning a patch of dirt, much of any "new" housing made available should be offered as rent-to-buy - or at least tenanting be made far more secure including longer term.

6. RBNZ jurisdiction – The Reserve Bank has lost some perspective, but successive governments are more to blame. RBNZ is right to push back at recent criticism and it argues that taxing must be part of the solution.

7. Banks' pre-occupation with housing – Since 2000 lending on housing has grown from 1.5 times lending to business to 2.5 times in 2020. Prior, the switch was even more marked. Businesses cannot get the capital they need – with no NZ capital market to speak of. This is to the country's detriment in terms of infrastructure or any funding at all.

8. New Zealanders are the most financially illiterate in OECD. As an investment adviser I was taught "houses were for living in, not for speculating upon" (the return was inadequate and also broke all the rules of diversification) - unless you're in NZ – where we've made an art form of it. Starting at school we need to learn about the power of time and compounding, drip-feeding, dollar-cost averaging and become educated in investing in productive industries, in shares, in NZ's future – not residential property which doesn't produce anything.

9. Post Covid-19 – Right now we're attracting Kiwis home in droves. What happens when after a short time they realise that owning and renting are in a perilous state and that they can never afford to live in their own country? Many will turn around and leave.
Prices need to drop - the pre-occupation with overly-protecting current homeowners' assets will only lead to an ever-growing problem. And supply must increase rapidly. If neither of these happen, there will be much worse to come – it is inevitable.
I can only agree with the visiting UN special investigator who describes our housing crisis as a "human rights crisis".

Martin Visser is an ex-district councillor, ex-investment adviser and RMA commissioner.