It's time to call out land bankers and require urgent action, because Auckland's lack of houses is driving people in their cars

If it had come from a less reliable source, I'd find it hard to believe. Sure, it's anecdotal and it's an estimate, but it also leaves you asking what we've come to in this country. One in ten garages in South Auckland, says the Salvation Army's Alan Johnson, is being used as a home. And he knows his stuff. 1 in 10.

It's one of several striking details revealed by Mike Welsey-Smith in his report today into the hidden homeless. When we talk about homelessness it's usually about the individual living rough on the streets, maybe a group squatting under a bridge.

But what social service agencies are now reporting is a growing - yes, growing - group of Kiwis living in their cars or renting garages. Social workers in South Auckland to a person say they can't remember it being this bad. Rents have risen 25 percent in five years and emergency houses are full. 

If you can't afford the rent, there's nowhere to go. Except your car, or perhaps someone's garage.

And this isn't just extended families bunking down in a garage while they wait for a house, as we've seen for years. This is a new rental property market; people paying strangers to live for months, even years, in a garage. You won't see it on TradeMe, but we're talking about $300 or more a week. One family had been living in a garage for two years and are paying $380/week.

Wesley-Smith was taken to Bruce Pulman Park in Takanini by Manuaku East MP Jenny Salesa, where families and individuals can be found most nights near the public toilets, sleeping in their cars. Salesa says one car-dwelling family a week turns up at her office seeking help; half aren't engaged with the Ministry of social Development.

Now there are many and varied reasons why people end up in this plight, but it's no exaggeration to draw the line between the glee of those of us lucky to own property in Auckland and the misery these folk are enduring.

As house prices keep rapidly rising - and I'm one whose home earns more per annum than I do - investors are encouraged to borrow and buy. The capital gain's just too easy. But as growing demand and limited supply drive prices up, the more you have to borrow. And the more you borrow, the more you charge in rent.

When wages have only gone up 10 percent in the same time those rents have risen 25 percent, you can see why some can't keep up and are forced into those cars and garages.

So it's time for mum and dad property investors to ask themselves a few hard questions. If the cost of your borrowing is forcing people to pay rents they can't afford, maybe you shouldn't be in the landlord business. Even if you are only one stone in the mountain, have you borrowed too much to morally justify your investment?

But even more in the gun are the property developers, especially those who are land banking in this market. It's time to call out those land bankers and say enough.

Financially, it's a no-brainer for them. Especially if they're lucky enough to own land in a Special Housing Area with all the privileges of accelerated consents and greater intensification attached. You're quids in, the government has put a premium on your land and land values are skyrocketing. So why go to the risk and hassle of actually building?

The answer: Because your land banking is making kids sick. It's driving families into their cars. It's increasingly immoral to fiddle while Auckland burns.

Auckland desperately needs houses and if you're a developer sitting on land, then you're putting your own finances ahead of the need of families to have a roof over their heads.

Housing Minister Nick Smith denies that land banking is a problem in his Special Housing Areas. He's right when he say the sections are being created, but sadly there's a disconnect at the next stage because the vast majority those sections are standing idle.

SHAs have been going for two and a half years in Auckland, creating 56,000 sections. Great. The government and council have got the ball rolling.

But the tragic fact is that 'the market' is stopping that ball in its tracks, and no-one's doing anything about it.

In two and a half years, only 1000 homes have been built on those special housing sections. Yep, 56,000 sections, 1000 homes. Not much of a return for all the privileges granted to owners.

Smith says it's not land banking, that massive earthworks are under way and building rates are increasing. Those last two statements are true, but the first is nonsense. And I suspect he knows it (he's called land banking "offensive" and "the biggest problem" facing Auckland housing in the past), because he conceded on The Nation today that he's starting to send some stern letters out to developers who aren't bothering to develop.

The government's own figures show nearly 4,000 consents have been granted on those sections. That consent means a house has to be built within two years. But that's the extent of action. Most owners are sitting on their hands... and their lands.

Clearly this market is broken. It's time the government put a time limit on those special housing rights. It's time to require those land owners to 'use it or lose it'. And before you say that's interfering with the market, consider the fact that it's government policy that has put a premium on this land in the first place. Where's the quid pro quo?

Of course this is only one small part of the housing problem. There are other solutions to try, such as banking restrictions, a capital gains tax, government building programmes, foreign buyer restrictions, maybe putting an end of negative gearing and forcing rental properties to really wash their own face.

But the government's and council's key plank in growing housing supply in Auckland
(SHAs) is clearly being hijacked by developers. And those developers are laughing all the way to the bank while families pull out the sleeping bags, push back the seats and prepare to spend yet another night in their car. It's time to act. Urgently.

Comments (10)

by Murray Grimwood on May 15, 2016
Murray Grimwood

This commentator needs to understand that growth is exponential, and couldn't go on forever.

That inclused Auckland sprawling onto food-supplying areas. How does he thing the city folk are fed? Do supermarkets magically fill, from nowhere?

And it's all - from tract-sprawl to the farming - done by the use of finite fossil fuels.

How long does that go on, Tim? Done any research?

Will Auckland ve viable in the post-oil world? Because you - let alone your kids - will live through it.

You ought to be advocating less inhabitants. That means more houses per person, without building anything. It also means more chance of a post-oil societal cohesion.

By no, we'll just grow, then grow, then grow, then............

Either we face this dilemma head-on, or we crash. It may be that we are on the way to crashing anyway - too late, too overshot, too depleted.

Where is the NZ media in this? The ones not wittering the Party line, that is.

 

 

by Lee Churchman on May 16, 2016
Lee Churchman

As house prices keep rapidly rising - and I'm one whose home earns more per annum than I do - investors are encouraged to borrow and buy.

Well, the lunacy has even hit Hamilton (of all places) as houses in my neighbourhood are all selling at or even before auction, many unseen by the buyers. The other day I calculated that due to low interest rates and rising value set against our mortgage payments our house is effectively paying for itself. While I would support a sane housing policy, how many voters are for turning down free money?

 

by Murray Grimwood on May 16, 2016
Murray Grimwood

Those who don't understand what money represents, is who.

The problem becomes a 'commons' one, though. Even if the majority understood that if you 'add $100,000 to the 'value' of an existing piece of finite-fossil-fuelled infrastructure - a house - then you actually havent added anything (same house, same planet, no real change) they's still be stuck competing.

But as the resources-available pile shrinks with exponentially-increasing rapidity, 'more money' can only be worth less.

And eventually worthless.

The vast majority have no idea. Zero (and below) interest rates, helicopter money, no growth. Why could that be, I wonder.

Upping the imagined value of existing items is the only game left in town, and you know it's near the end-game when folk can joing the party for a $500 share.

 

by Rich on May 16, 2016
Rich
I'm not sure berating people to be nicer is ever going to work. In the case of builders, it isn't really even possible: if you are a responsible and prudent builder, and you want to build some houses for sale, you'll do a stack of building costs, financing costs and expected resale price, which will tell you how much you can buy land for and make a profit. If you're a speculator, you just hope the land will appreciate at more than the interest on the loan. The effect of that is that in many cases, the builder can't afford to buy and develop land because the speculator's willing to pay more - or the builder winds up relying on price inflation to make a profit - which is why you see half-built blocks of flats and bankrupt developers. And the government actually encourages this - the builder has to pay full company tax on their profits - the speculator, if they set their trusts up right, can avoid paying any tax at all.
by Peggy Klimenko on May 17, 2016
Peggy Klimenko

Tim: "One in ten garages in South Auckland, says the Salvation Army's Alan Johnson, is being used as a home. And he knows his stuff. 1 in 10."

It's shameful, isn't it. Accommodation difficulty in the poorer parts of Auckland isn't a new phenomenon, of course. When I worked at a low-decile school there 30-odd years ago, I heard that a family with children at the school was living in a garage. And when I visited homes, I occasionally came across more than one family sharing a house - in one case that has stuck with me, 2 families in a 2-bedroom flat. But despite it being a low-income area where I worked, such instances were rare. Which is why that case of crowding made such an impression on me.

Rich: "I'm not sure berating people to be nicer is ever going to work."

No indeed. People are being charged astronomical sums to rent garages. The rent-chargers clearly don't see it as a social obligation on their part to at least keep the rent reasonable. Is it greed, or are they themselves trying to keep up with crippling rent/mortgage repayments?

Tim: "So it's time for mum and dad property investors to ask themselves a few hard questions."

I'd also call out the real estate industry: agents talk up prices and put properties to auction, which drives prices up further still. We've recently been having a poke around the Auckland cbd apartment market. We're not interested in investing or speculation: we're looking for a residence. Pretty much everything we've looked at is overseas-owned; these owners have inflated price expectations, enthusiastically backed up by the agents.

Despite – or perhaps because of - many buildings being relatively new, ie, built within the last 15 years or so, a surprising number have weathertightness issues, and some have had structural problems as well. The agents usually don’t volunteer this information, or they couch it in euphemistic terms: we have developed a “nose” for problems, and ask for information. They’re often not keen to pass it on, and sometimes they just don’t send us anything at all.

We conclude that these offshore owners are anxious to flick on their apartments once they become aware of building problems, and the agents are equally anxious to help them. Many clearly aren’t keen on potential buyers who ask too many awkward questions.

"But even more in the gun are the property developers, especially those who are land banking in this market. It's time to call out those land bankers and say enough."

Yes, I heard Nick Smith talking tough on the land banking issue. But as Rich says, people can't be forced to do the right thing. Though maybe being heavied by a cabinet minister would go some way to bringing land bankers round to his point of view?

"There are other solutions to try, such as banking restrictions, a capital gains tax, government building programmes, foreign buyer restrictions, maybe putting an end of negative gearing...."

Yes indeed. The real estate market there has all the hallmarks of a tragedy of the commons; government intervention along the lines you suggest is urgently needed. Not just one of those measures, either - there are no sufficient conditions, after all - but all of them together. I'd add another: a substantive scaling-back of the numbers of immigrants who aren't returning New Zealanders. Many more immigrants than Auckland can cope with are fetching up there: the government has the power to control that influx.

However, I doubt that the current government will do anything of moment. It should have acted years ago; whatever fiddling it does now is almost too late to rescue the Auckland market. All we'll get is another piece of fiction about who's buying and selling, which will support the government's failure to do its job.

by Tim Watkin on May 17, 2016
Tim Watkin

Rich, you may be right but some times it just gets under your skin. But actually some times drawing the link is useful. And as you say, the government encourages this and deserves to be called out.

by donna on May 17, 2016
donna

Thanks for calling bullshit on the unfortunately named Special Housing Areas.

They have resulted in an absolutely minimal amount of so-called affordable houses being built. Nor is there anything to suggest they are actually affordable, or going to those with the greatest need. And if you could buy an 'affordable' home in an area surrounded by squillion dollar homes, what incentive is there for you not to onsell for the 'market' price? It's also worth noting that the benchmark for 'affordable' is not based on median income but by what Cabinet decides (seemingly along with developers). Where houses are affordable they are often not suitable for families, more often being on tiny sections and really only suitable for singles or commuting couples.

Bill English said recently that the government had 'done all it can' for housing. If by that he means 'not eroding the value of any National minister's housing portfolio', then yep, they've done a great job.

by Murray Grimwood on May 17, 2016
Murray Grimwood

Donna - you haven't been told, by either the politicians or the media, but there is a finite amount of land. And of the resources which go into building. Then there's competition - because all the people in the houses need fed, from land.

And the whole she-bang needs fossil-fuelled. No energy equals no work-done equals no wealth generated. The demand for wealth - versus the inability to supply exponentially-more energy to supply exponentially more work - is what is driving the unsustainable suburban sprawl, and the upward 'pricing'.

Driven by an unsustainable fossil-fuelled globally overshot population.

We'd be better stopping immigration and reducing offspring to two-or-less.

by Rich on May 18, 2016
Rich

@Murray NZ has 4 million people on the same size landmass that houses 60 million in the UK and a similar number in Japan (which is bigger but has 127 million people).

Surely if you see things globally, we should be helping even things out by taking more immigration (which could actually reduce our per capita energy usage and carbon emissions through making things like advanced public transport economic to implement).

 

by Tim Watkin on May 28, 2016
Tim Watkin

On Twitter today, the NZ Initiative's economist Eric Crampton said the SHAs had failed. Which is interesting.

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