ACT on housing, housing and housing

David Seymour gave his first ‘state of the nation’ speech yesterday. It doesn’t seem to have attracted a lot of media attention, with most political focus on the annual party pilgrimage to Ratana.

It is all about housing and associated issues like the Resource Management Act.

Video:

Stuff: ACT leader David Seymour calls for action on housing affordability

ACT Party leader David Seymour has told the Government to “get some guts” and stop tinkering with housing policy.

Giving his “State of the Nation” speech in Auckland on Monday, Seymour said everyone knew housing had become a problem but nothing had been done.

In the past 30 years the number of homes built per capita had halved and created an asset bubble that was a risk to New Zealand’s economy, he said.

NZ Herald: David Seymour: Kiwi politicians need to have ‘guts’ to address housing affordability

New Zealand’s politicians need to get the “guts” to introduce major reform aimed at tackling housing affordability, ACT Party leader David Seymour says.

…he said ACT would boost housing supply by making it easier to build new homes and shortening approval times.

“We can’t just tinker … we need to act,” he said.

“If ACT holds the balance of power after this year’s election, we’ll be ensuring that the government accepts the housing market is dysfunctional and reforms the fundamentals.”

Speech notes: David Seymour: State of the Nation Speech

ACT’s policy summary:


The House Price Problem

ACT believes that the cost of housing is unacceptably high. Auckland has a significant housing shortage. The price of an average house in Auckland is nearly ten times the income of an average household. Internationally, three times the median income is considered ‘affordable’. The high price of houses means mortgage payments and rents are higher. Household budgets feel the pressure.

The high cost of housing is widening the gap between people who own houses, and who don’t. People who own houses have increasing wealth as house and land values increase. People who don’t are paying more in rent and their income is not keeping pace. It is getting harder for renters to save for a deposit on their house. High rents are a cause of deprivation for low-income families.

The housing shortage is placing costs on taxpayers as well. The high cost of private housing means the Government spends more on social housing through the Income Related Rent subsidy, and funds more support in Accommodation Supplements.

The Resource Management Act:

ACT believes that the major cause of the housing shortage in our cities is the RMA. Council plans and policies under the RMA determine whether enough houses will be built.

The Act gives too much power to councils to restrict development. It requires councils to provide for environmental protection and conduct consultations, but doesn’t require them to consider property rights of owners, economic growth or provide for an adequate supply of housing.

The number of new dwellings consented nationwide each year is still well below its peak of 39,000 in 1974. The Government’s Housing Accords and Special Housing areas have been a band-aid on a broken planning system but they do not address the fact that the RMA in its current form is not fit for purpose to deal with a major housing shortage in our main urban centres.

ACT’s Housing Affordability Policy

ACT believes that the shortage of housing can be filled by private developers, when local and central government get out of the way. We would change the planning law that controls development of cities, and we would give councils the funding incentives to approve more consents. We care about the social impacts of high house prices, and believe the shortage of housing is a problem that can be solved by making our planning and building laws fit for purpose.

Take Cities Out of the Resource Management Act.

ACT would rewrite the Resource Management Act, and introduce new supply-focused urban planning legislation for cities of 100,000 people or more. Urban environments, and areas at the edges of our cities should not be regulated and protected in the same ways as undeveloped natural environments.

ACT’s urban development legislation would prioritise supplying land and infrastructure, in response to demand. We would set price thresholds above which land would be automatically released for development. It would include obligations to set out future infrastructure corridors.

We would make zoning less restrictive, with fewer levels and types of zoning. We would strengthen property rights for existing owners by limiting objection rights to people who are directly affected, rather than allowing third parties to have a say.

Share GST Revenue to Build Infrastructure.

ACT would share a portion of GST revenue collected from the construction of new housing with the local council to incentivise them to approve planning of new homes.

The shared revenue would help cover the cost of infrastructure like roads, water and sewerage which councils must build to support new development. The cost of this infrastructure currently disincentivises approval of new houses and subdivisions.

We also allow councils to use more flexible funding mechanisms for infrastructure. This could include permitting special targeted rates on new developments, to pay for the new infrastructure. Councils need both more flexibility and stronger incentives to plan for more housing.

Compulsory Insurance for New Buildings.

ACT would reduce the cost of compliance for builders, and reduce the financial risk on councils, by removing council building certification, in favour of a compulsory bond or insurance over new buildings. Requiring insurance for the replacement of the building would ensure standards are upheld while reducing the time spent on council inspections and red tape.

Replacing council building certification with compulsory insurance would incentivise insurers to find the most reliable builders and best building supplies to insure. The builders’ incentive would be to get the best premiums and service, by proving they are building high-quality homes. Insurers could sign-off on building materials that are certified overseas, where councils are reluctant to today.

This is an agenda to fundamentally reform the housing market. Our great country deserves nothing less from its politicians.

David Seymour – ACT Leader

Housing supply versus demand

A summary of how we have arrived at the current housing situation from Dene Mackenzie at the ODT:

Supply, demand key factors

Dwelling consents, bank lending and net migration were three of the main factors determining house prices, Milford portfolio manager Brian Gaynor said yesterday.

Supply in the form of dwelling consents, dropped off sharply in 2009 in response to the global financial crisis and the collapse of New Zealand’s finance company sector. The latter was a major supplier of credit for house builders and property developers, he said.

In the four years to 2012, an average of only 14,850 consents a year were issued compared with an average of 26,218 consents in the four years to 2008.

“Consents have picked up dramatically and it will not be long before the annual consents number exceeds 30,000.”

Annual consents in excess of 30,000 had only been achieved five times since records began in 1966. The record high was 39,636 consents in 1974, Mr Gaynor said.

The huge increase in net migration, to 68,432 for the May 2016 year, had a major impact on demand. It represented a net turnaround of 72,085 since the net outflow of 3653 in the May 2012 year.

However, the massive increase in lending to home purchases had also fuelled the housing markets.

There much talk about loan-to-value limits but the lending statistics illustrated the regulation had not been effective, he said.

“The gap between the value of new loans and the value of new dwelling consents has widened dramatically in the past year.”

The housing market took off a few years ago because of the very low build rate after the collapse of the finance company sector, Mr Gaynor said.

Actions by banks could slow down demand. Non resident (overseas) borrowers:

Westpac was one of several banks which stopped lending to non-resident borrowers with overseas income last month, and Bankers Association chief Karen Scott-Howman said lenders were responding to signals in the market and from the Reserve Bank.

And yesterday a cutback on the term allowed for interest-only loans:

Westpac’s New Zealand unit is cutting interest-only lending terms to a maximum of five years, in a market where investors are the driving force.

Interest-only loans were often used by property investors who met the interest repayments and left the principal untouched on the expectation they could pocket a capital gain on a house sale.

Reserve Bank figures showed interest-only mortgages accounted for about 41% of all new lending in May, up from 38% in January when it first started collecting the data. Of existing home loans, interest-only mortgages totalled $60.82billion as at March 31, or 28% of total loans.

A dramatic effect could be coming:

Supply was now increasing and any reduction in immigration and/or banking lending was likely to have a dramatic impact on house prices. Housing bulls should keep a close eye on the rising supply figures, he said.

The pushes to increase supply should eventually work, and with limits put on investors in the market supply may switch from lagging to exceeding demand.

It’s anyone’s guess whether the market will flatten or fall.

“What is really ridiculous about the whole cannabis debate…”

A comment from ‘Robby’ sums up something that is really ridiculous about cannabis availability in New Zealand:

What is really ridiculous about the whole cannabis debate, is that the people who want a quality product with known medicinal benefits have to source it offshore and smuggle it past customs.

Everyone else (who just wants to roll a spliff and chill) just has to walk down the road and see ‘a guy they know’.

All the stoners get what they want, but the parents of sick kids have to go begging to politicians for medicine. The law is truly an ASS

It’s worse than that. It may be possible to source medicinal cannabis product from within New Zealand – but the quality, safety and composition may be unknown, while safely manufactured well specified product is very difficult to obtain.