Housing may be top of the pops as an election issue for some, but it's not as many as you might think... and it won't be as easy to fix as you might think

Housing is shaping up to be a key issue in this year's election. So says the commentariat at the moment. But in the end, housing concerns will drive the voting patterns of those directly affected by it – not the will of the public at large.

I say this because most Kiwis are well housed. If you are staying-put, you're likely to think the present situation is just fine. If you are shifting, you will be buying and selling on the same market; you may pay a lot for your new house but you will be getting a princely sum for the house you are leaving. If you are a first home buyer you will face a substantial hurdle; that will concentrate your focus on the housing issue. But there are only a few in that group.

The second point to make is that housing has not suddenly developed as a problem. It has become pronounced recently because the growth in population and therefore the demand for houses has got ahead of the housing supply. Critics contend that the authorities were too slow to react; they have a point. But construction is always a feast or famine industry. It's not too many years since builders were struggling to find work; now they are flat tack and more are needed.

Neither is it an Auckland-only problem. It is quantitatively larger there, and gets much more media attention. The Wairarapa is my stamping ground; builders in the Wairarapa are reporting serious staff shortages. Most of the country is like that. There are a few remote unsought after spots bypassed by time and economic geography where a cheap house can still be bought, but there is an obvious reason why that is the case.

If you go behind the political rhetoric there is near universal agreement that we need more houses. It's taking a while to lift the house building rate. That is always going to be the case with a complex industry like construction. Some party spokespeople make it sound like it will be easy to lift that rate, but it will not. It is way more than just houses that are needed; it's timber and building supplies, roads, sewage systems, water supply, energy, schools, parks, resource consents, building permits, section development, policing and emergency capability, and a raft of other services.

Pulling at that together takes time and costs a lot of money.

There are no simple solutions. Some mistakenly think some ‘sweep of the hand’ new policy will deliver us from this nightmare. Capital gains tax, for example. I am not opposed to a capital gains tax; in fact I see a comprehensive capital gains tax as making our tax system fairer, simpler and more consistent overall, but we are kidding ourselves if we think this will fix the house price problem. At the most it will have a very limited impact on housing demand that will soon vanish.

Our neighbours over the Tasman have had a capital gains tax for years and they are experiencing a housing squeeze as profound as that we have here.

Andrew Little has proposed ending what is technically called ‘negative gearing’. His announcement was targeted at “speculators”; always held out as nasty and therefore an easy target for political attack. It won't work. The speculator methodology is to move in and out of property quickly taking advantage of (and earning their profits from) rising house prices.

They do not borrow and hold long term. They keep their borrowings and interest payments to a minimum. Limiting the ability to deduct interest to the rental income received on a property only will catch those who invest in a property longer term. It also makes existing houses more economic than new builds. We are trying to make new building the area where people look to invest.

All parties will offer “solutions” to the “housing crisis”. I am not saying nothing can be done. I am just pointing out that it is not simple and it is going to be a while – years – before the housing crisis is ended.

Comments (2)

by william blake on May 30, 2017
william blake

roads, sewage systems, water supply, energy, schools, parks, resource consents, building permits, section development, policing and emergency capability, and a raft of other services.

Yes that is difficult and complex but why is this government allowing 65,000 people per annum into the country without addressing them? Market rules eh? As you say those with jobs and houses are warm and fed but I disagree that they are comfortable and complacent with others being cold and hungry and won't vote to change some part of this picture. 

by Wyatt Creech on June 03, 2017
Wyatt Creech

I don't think people don't care or are selfish, but voters tend to see the world through the issues that affect themselves. Uni students worry naturally about course fees, people seeking work want jobs, people needing modern pharnecuticals have a focus on Pharmac, parents of young children are touched by services for children - schools and health services - and so on. Every issue is linked - its not "market rules". An example - the construction industry intensive Christchurch and Kaikoura rebuilds resulted from earthquakes - we need to bring in skilled people to do the rebuilds because there are not enough here - that takes immigration up - we need to house those migrants - that puts more demand for construction. If we stopped the migration as you suggest we would stop the rebuilds. No-one wants that either.

There is no quick fix. 

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