Controlling the housing market

Another question from the latest Newshub/Reid Research poll is on Government control of the housing market.

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It’s sort of normal for people to look to the Government of the day to fix problems, but what should be done to control the housing market?

Should the Government take control of the Auckland City Council?

Should the Government take control of banked land?

Should the Government double mortgage rates to deter house buyers? That would deter local buyers but those with international finance would be unaffected.

Should the Government take control of house designs to enforce cheaper housing development?

What controls would actually make a difference without imposing, ah, imposing Government controls?

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54 Comments

  1. Alan Wilkinson

     /  30th May 2016

    Governments facilitate markets, they don’t control them. When they control them it is no longer a market, it is a disaster. Which is what we have.

    Reply
    • Blazer

       /  30th May 2016

      Perhaps youi can give some examples of efficient markets where Govts do not influence them,then again perhaps….you CAN’t!

      Reply
      • Alan Wilkinson

         /  30th May 2016

        Trademe, food, hospitality, motor vehicles, ….

        You are clueless, Blazer.

        Reply
        • Blazer

           /  30th May 2016

          plenty of regulation applies to each and every example you mention.

          Reply
          • Alan Wilkinson

             /  30th May 2016

            Government’s role is to provide the rule of law and the sanctity and honesty of contract so that markets can operate honestly and efficiently. As soon as they attempt to control price, access or supply they cause disaster.

            Reply
            • Blazer

               /  30th May 2016

              ever heard of the Monopolies Commission,just one of many agencies to control/monitor your so called efficient markets.

            • Alan Wilkinson

               /  30th May 2016

              How many interventions per annum can you cite by the Monopolies Commission on any of the markets I mentioned?

              Give up, Blazer. You are just full of b.s.

            • Gezza

               /  30th May 2016

              As soon as [governments] attempt to control price, access or supply they cause disaster.
              How did they cause disaster providing the supply of power stations and the original roading network?

            • Alan Wilkinson

               /  30th May 2016

              Gees, Geeza, you need to drive some of our roads up here if you don’t know the answer to the second part.

              As for the first, you must be too young to remember the power cuts every winter when the Government provided electricity.

            • Gezza

               /  30th May 2016

              I’m not really sure when the problems with roading up your way started Alan. I haven’t seen any evidence that roading down here has improved in any way since MoW got disbanded & council workers and they were replaced by private contractors. Road maintenance seems to be about the same or worse.

              Power cuts – yes I do remember them. We still get local outages, mostly in Winter though not for as many hours, but I’d expect that situation to have been improved with the installation of more modern equipment for maintaining supply & handling sudden capacity loss at some sub-station.

              What I do also remember is that the power bills weren’t particularly onerous when we moved into our first home around 1980, and the $1k+ the HVEP&GB gave all its consumers back, from their accumulated surplus for re-investment in plant & equipment, when they were sold off to private interests in the 90’s. After that power prices rose steeply and still rise every year or two. It’s quite a pain hawking around looking for the cheapest deals every year.

        • Joe Bloggs

           /  30th May 2016

          and a couple where the government does influence them…

          alcohol (through alcohol excise tax and drinking age restrictions)
          tobacco (through “health-driven” tobacco excise tax and age restrictions on smoking)

          I’m not sure that I would describe either market as a disaster in the sense that you are using the word ‘disaster’, Alan … just sayin’

          Reply
          • Alan Wilkinson

             /  30th May 2016

            They are both disasters in respect of efficiency of meeting demand with supply, Joe. That for social reasons that may be justifiable simply means this is the best market you can have when you don’t want to have a market.

            Reply
            • Joe Bloggs

               /  30th May 2016

              both disasters in respect of efficiency of meeting demand with supply

              Sorry Alan, but I don’t understand your reasoning…probably because you don’t give any.

              Can you elaborate? If so then would you ..?

            • Where housing is concerned I’d probably go along with “the best market you can have when you don’t want to have a market … for social reasons that may be justifiable”?

            • Alan Wilkinson

               /  30th May 2016

              @Joe, an efficient market provides the product all consumers want at the lowest economic price. Neither of your examples do so.

            • Blazer

               /  30th May 2016

              as renown right winger J.Bjelke.P. used to say…you’ve got one leg on each side of a sticky fence..Al.

  2. Blazer

     /  30th May 2016

    @Al..if you are looking for b/s read your own generalisations that are easily dispensed with.No such thing as a free market…fact.

    Reply
    • Kitty Catkin

       /  30th May 2016

      Governments cannot and must not control markets to the extent that people find that their houses are now worth much less than they paid for them. This happens from time to time anyway, of course, but for any government to suddenly reduce the value of people’s largest asset would be dreadful. The banks aren’t going to reduce the mortgages of these houses because the market value has plummeted, It would be disastrous, I bet that the people who are calling for government interference would take a dim view of their own houses being devalued-who would want to be paying a mortgage on a house they bought for $500,000 and which is now only worth $300,000 ? If they needed to sell it and buy another one, they would be even worse off. It would be all right for those of us who are mortgage free-we’d be trading one house for another, so to speak. But otherwise-forget it.

      I can’t see what can be done about land-banking if it’s been done by people and not companies . A man I know had the sense to buy some land next to his own section when he heard that a subdivision was going in, reasoning that he couldn’t go far wrong (and making the rest of us kick ourselves for not having had this foresight) This could be seen as land-banking, and good for him for thinking of it. Which of us would not hold onto something that we knew would rise in value ?

      There is also a limit to how much central government can interfere in local body government.

      Reply
      • Gezza

         /  30th May 2016

        Isn’t Central government threatening to intervene very soon in local body government in Auckland Kitty?

        Reply
        • Kitty Catkin

           /  30th May 2016

          They’ll be damned if they do and damned if they don’t. Interfering if they do, uncaring if they don’t. This must be done only in specific cases, I think, and those must be extreme ones.

          Reply
    • Alan Wilkinson

       /  30th May 2016

      I’m not looking for b.s., Blazer, merely trying to stem your continuous flow of it.

      No such thing as a free market – just a quibbling point with no substance. It’s easy enough to find markets that are working well and those that are not, and inevitably the latter are impacted by Government interventions promoted and sustained by idiots and crooks.

      Reply
      • Gezza

         /  30th May 2016

        Are you saying there are idiots and crooks in the Government Alan?

        Reply
        • Alan Wilkinson

           /  30th May 2016

          Where there is destructive intervention in markets, absolutely yes, Gezza.

          Reply
          • Gezza

             /  30th May 2016

            Which ones have been the crooks?

            Reply
            • Alan Wilkinson

               /  30th May 2016

              The housing/building/land markets have been skewed by both. The idiots think the Government has to fix all problems and won’t leave it to the market to find its own solutions. The crooks make fortunes from manipulating supply and taking advantage of shortages and scarcity.

            • Gezza

               /  30th May 2016

              Yes but crooks are dishonest people and criminals. Which particular people in the government are the dishonest and criminal ones?

            • Gezza

               /  30th May 2016

              And what evidence have you got that they are dishonest or a criminal?

            • Alan Wilkinson

               /  30th May 2016

              How would I know any more than you would, Gezza? I don’t think it’s very common in NZ but I don’t think we are exempt. Local government zoning and rule changes are a great way to make money from inside influence. So are approvals, supply contracts and licences wherever government has control. I was told directly by a supplier once that they had been told to provide a kickback if they wanted a big government contract that was being managed by an outside consultant. They had passed on the opportunity according to the manager who told me.

            • Gezza

               /  30th May 2016

              But don’t you believe it’s utterly foul to accuse individuals or even groups of people of dishonest and criminal activity without producing any actual hard evidence of their dishonesty and criminality? Isn’t that what you have been saying for weeks now on threads about the Panama Papers and others?

            • Alan Wilkinson

               /  30th May 2016

              You are getting all defensive without cause, Gezza. The discussion of free markets where this statement arose was general and not specific. I haven’t accused anyone but if you want to find examples of bureaucratic and political corruption resulting in criminal convictions you can find them here and elsewhere.

            • Gezza

               /  30th May 2016

              “You are getting all defensive without cause, Gezza.”

              Just asking questions Al. Was experiencing some cognitive dissonance with your statement above about crooks in the housing/building/land markets, which was pretty specific, and some of your other statements re how unfair it is to make unproven accusations about dishonest or criminal activity by other groups of people without actual evidence of wrongdoing.

            • Alan Wilkinson

               /  30th May 2016

              Ok, I should have explicitly said “and/or” instead of “and” Gezza because that was my intended meaning.

      • Blazer

         /  30th May 2016

        You think a fact has …no substance…no hope for you.

        Reply
  3. Blazer

     /  30th May 2016

    @Al…’ The crooks make fortunes from manipulating supply and taking advantage of shortages and scarcity.’…so this is the ‘free mkt’ in action,you approve of …or….are you looking for intervention to prevent this happening?

    Reply
    • Alan Wilkinson

       /  30th May 2016

      It is control of intervention that is required to stop it happening, Blazer.

      Reply
  4. Between facilitate and control I think there is another long-standing historical degree of government involvement in housing, I call it significant influence based on sense of social responsibility or perhaps “ethical social influence”?

    The government built and managed State Housing, Social Housing, and provided State Advances Corp low interest loans to get young families into their own homes. This led to a boom in affordable housing. Wonders! The banking enviroment was more regulated I think? I hazard a guess they also influenced the regulations governing the release of land for subdivision as well? They provided some or many elements of the infrastructure?

    Whatever they did, which seems to have been a complex mesh with other social policy, it appeared to do much more good than harm?

    Successive governments since 1984 have abdicated this social responsibility, and, in deference to Alan, also further regulated the housing/building environment, perhaps in an attempt to still control it in absentia?. This might be hedging bets? It might also be an acknowledgement that social responsibility can’t really be abdicated?

    Some of the deregulation-reregulation was pretty bizarre – ‘cowboy regulation’ – resulting in the leaky homes disaster. I liken it to the worst of regulation cross-bred with the most vicious free market philosophy? Total hybrid fuck-up of the worst kind. We should make no bones about this, it rates somewhere below Chch and the GFC among recent NZ man-made and natural disasters? Part of said regulation may also be in response to a ‘cowboy’ element of the free market?

    Is this a reasonable analogy: The government was ‘King’, General or Leader in the field for a long time, perhaps two generations. Then the government abdicated … ?

    Through various leaderless battles – boom and bust – the housing ‘troops’ have eventually become like a dog chasing its own tail?

    Reply
  5. It is merely the function of economics in the economy at work. If you intervene on the supply side or in the demand area you set up forces which bring artificial changes into the economy which can be exploited by those who see the opportunities of the imbalance. Land banking is an example of artificial changes to the exercise of normal supply and demand interactions. Marginal utility for houses is virtually a straight line related to the size of the population, but changes when extra houses are purchased for investment thereby pushing the line upwards. If supply remains the same and demand grows, artificial movement in price of housing increases because everyone needs to be housed. This is the simplistic view of why so many people agree that the Government has’t done enough. The options open apart from increased supply of houses is to stifle house purchase for investment purposes for example by requiring lending organisations to require second of more house purchasers to provide significantly more cash deposits to banks etc lenders. The introduction of Capital Gains is a device which in the New Zealand context is fraught and will cost the introducing Party any chance of governing in the future because so much of NZers wealth is in the family home. Selective implementation of Capital Gains for “investment houses” is a negative approach to investment and is ideologically opposed by the majority of NZers. It also affects the rental market which is an alternative to buying a home and would result in fewer investment houses being built/purchased thus affecting supply and meaning prices will go up for rentals even though the demand for housing remains the same. My solution? Require all housing purchase for investment purposes including overseas purchasers to be for brand new houses, and let everything else remain the same?

    Reply
    • Blazer

       /  30th May 2016

      ‘for investment purposes including overseas purchasers to be for brand new houses, and let everything else remain the same?’…pretty damn good,,simple start at least!

      Reply
      • Housing involves the finite natural resource ‘land’. We have already intervened with this finite resource to make it into private property. Property in the soil. Hence we begin with an imbalance which makes ‘free market’ impossible. There isn’t anything BUT imbalance. Where imbalance exists and given human nature’s proclivity to exploit it, I prefer ‘government’ to intervene, that is, our democratically elected governance function …

        Indeed, how can we not intervene in the so-called housing market? Housing requires all sorts of public and private services. For instance, we’ve decided that some of these requirements are architectural plans – private – and town planning – a public bureaucratic function.

        We, the voters, need to drive this intervention. Personally, I want more. Housing is not only central to our economy but to our whole way of life, our national lifestyle(s), and our very lives.

        Reply
  6. Goldie

     /  30th May 2016

    Blazer: “‘for investment purposes including overseas purchasers to be for brand new houses, and let everything else remain the same?’…pretty damn good,,simple start at least!”

    Can you define “investment purposes”? How does the Government prove that a person has bought a house for “investment purposes” as opposed to any other purpose?

    Reply
    • Blazer

       /  30th May 2016

      if you have more than 1 house,it is for investment purposes.HOUSES ARE HOMES FOR PEOPLE TO LIVE IN.

      Reply
      • Alan Wilkinson

         /  30th May 2016

        Yes, Blazer. There shouldn’t be any houses available for rent. Everyone should have to buy their own.

        Reply
        • Blazer

           /  30th May 2016

          would be great ,wouldn’t it!

          Reply
          • Alan Wilkinson

             /  30th May 2016

            Yep, no need for Housing Corp., no accommodation for temporary workers or transferees. Bonanza for hotels and motels.

            Reply
            • Blazer

               /  30th May 2016

              not forgetting a saving of over $2 billion of supplements paid to rapacious landlords.

            • Kitty Catkin

               /  30th May 2016

              I think that some landlords would take issue with that, like the one I knew whose tenant stopped paying rent, living at his expense, as she took the view that he had no rights over what was her house as she was living in it-not even the right to come in. She even threatened him with the threat of an accusation of sexual assault when he moved towards her. Some hope. he has a husband at home.

            • Alan Wilkinson

               /  30th May 2016

              @Blazer, yep, just a lot of dead people.

            • Blazer

               /  30th May 2016

              comprehension required here Al…read posts,not just your own.

    • Blazer

       /  30th May 2016

      meanwhile in Sydney…’The demand for the homes comes as 34,300 new apartments are due to be completed in the next year, with the number set to more than double to 81,696 in the next 24 months, as soaring home prices led to a building boom, according to research firm CoreLogic Inc.

      The Darling Square precinct is due to be completed in 2019. The A$3.4 billion project will house 4,200 residents, according to LendLease.Sold out in 4 hours.

      Reply
      • Kitty Catkin

         /  30th May 2016

        A friend in the Health Service there and a partner also with a good income couldn’t afford to buy anything without government help, although on that income even Auckland would be affordable. The place they finally bought was well out of the city. They were afraid that they’d be renting forever or only able to buy a pokey place in some rough suburb-and he had sold a place here, so had some money for a deposit.

        Reply
  7. Thank you Blazer for recognising the simplicity of my solution, I confess it was the Australian experience that put me on to it. And yes, it must be accompanied with firm action against those supporting land banking within local governments. We have the land assets so use them for god’s sake, together with a comprehensive population plan which takes into account environmental pressures. Look at what the UK has done and what Australia is doing. All these aspects are linked. Someone tell Mr Little please.

    Reply
    • Blazer

       /  30th May 2016

      I think Mr Key and co…need to be told,they are in govt and have ignored the problem for nearly 9 years!

      Reply

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