Housing promises don’t compute

Vernon Small points out that political rhetoric on housing does not match reality, and it simply does not compute when you look at some basic numbers.

Stuff: Promises houses can be more expensive – and more affordable – do not compute

But whether it is a crisis or not, it is certainly becoming a farce.

No more so than in the mutually-exclusive policy aims that Building and Housing Minister Nick Smith has to trot out on behalf of all his colleagues – and he was at it again over the weekend.

Policy goal one is that house prices should not fall, but should rise by single digit percentages.

Policy goal two is that the ratio of house prices to income should fall from the current nine time (going on 12 times) to an average of four to five times across the country.

Policy goal three is that incomes should rise steadily, but not in a highly unsustainable or inflationary way. That will not, for yonks, deliver the $200,000-$250,000 a year household income needed to ensure the average $1 million Auckland home is around five times the average household income.  

Play around with the figures, and give Auckland a price margin over the rest of the country (shall we say six times household income?) and you still have a very long wait.

Then add in percentage house price increases that even in single digit percentages are likely to outpace wage increases and  … well you get the picture.

The picture is very clear.

Unless house prices come down a lot or wages go up a lot then ‘policy goals’ are way off the mark. They don’t compute.

And not just for the Government.

Labour MPs are hoist on a similar petard by refusing to publicly admit they would like to see a fall in prices. They have one mitigating grace; that they are prepared to use Government cash to build a swag of affordable houses; but refuse to face the inevitable (perhaps even desirable) truth that house prices must soften – not just rise more slowly.

But Labour’s policy of providing tens of thousands of ‘affordable houses’ comes nowhere near close to making what is actually affordable to people on modest wages possible in Auckland and other cities and regions.

Only Green co-leader Metiria Turei – and a raft of clear-eyed economists – seem prepared to utter the unlovely truth; only a big dive in house prices, especially in Auckland, will provide a significant easing in home affordability in the next 10 to 20 years.

Many may not agree with what Turei has proposed but at least she is being honest about the numbers.

We either need significant housing deflation, or some honesty from National and Labour.

They don’t seem to be inclined towards either.