9 ms·

The high cost of expensive housing and how Auckland fixed it

95 points by barry-cotter 4y ago

robocat 4y ago
The article lacks all nuance: simplifying the housing market to a single cause and effect. These are the points that I have experienced in Christchurch, New Zealand: 1. Buyer sentiment matters. Prices were cheap 3 years ago, but I couldn’t convince friends to buy, even offering to help my friends with the deposit. Then Suddenly everybody wanted to buy a house and prices went up 30%+. 2. Demand outstrips supply by at least 3X. It is virtually impossible to increase supply enough: people invest, people buy second homes, wealthy people with empty houses because they don’t get enough rent to make it worth letting, everyone wants their own home instead of sharing, children and marriage breakups want their own homes. 3. People will bid as much as they can afford to pay. All disposable income is dedicated to paying off the mortgage. If their income increases, many people move to a more expensive home. Edit: so house prices on market are a fn(income distribution, mortgage rates, irrationality). Some poor people have to miss out because they are below some median earnings figure and can’t afford the minimum bid. 4. Popular areas will always be expensive. Home prices are a status symbol, perhaps even a Veblen good. You can’t fix that by increasing supply in a popular area. New York ain’t cheap even with high density housing. The proper way to fix the housing crisis is to allow the population to decrease, or for people to not live as long (which also increases house demand). However that causes structural problems to the economy (see Japan). Edit: that is tongue-in cheek. In New Zealand, one major problem is that property is a better investment than a business. I made more money by owning two properties than by owning a moderately successful business over the last few years. New Zealand lacks a capital gains tax if you own a home for more than ten years, so the taxation advantage of property is huge compared to investing in any business. Wealthy New Zealanders invest in multiple properties because our government sets the incentives for property, and our government relatively penalises business owners or investors. Edit: anyone that bought at the peak in Auckland, and whose property still meets the bright-line test, and the value has gone down significantly in value, should consider selling their home and claiming the capital gains loss? Just a thought the CGT can probably be used to your tax advantage significantly if you overpayed for your home, or a second investment? I am guessing that is possible, but consult a tax specialist! Say you are on 32% marginal tax, and you lose $200k moving homes, then you can claim back $64000 on tax which is big biscuits to me.
- JauntyHatAngle 4y ago
  1, 3 and 4, yes. 2... I disagree with, in the sense that you should still try to reduce the gap and we arent doing enough. You can make it less attractive to own multiple homes or curb airbnb etc to somewhat alleviate supply issues. It is not a panacea but you can reduce the issue.
  - robocat 4y ago
    I get ya, it seems as though adding more houses should change prices, but Christchurch is adding heaps of new houses and prices are still stupid. There is a lot of demand remaining, but if you look at a graph of house prices, there’s a very steep wall at the lowest house price and you can’t buy anything below that wall price. Where does that wall come from? From unmet demand and the amount that a person with an average wage can only just pay the mortgage. Everybody bids against everyone else to get a house (a true zero-sum game for the New Zealand economy), and house prices are set by that bidding process. Adding some houses won’t fix that, until you reach a point when there are a few too many houses and prices crash due to #1 and everybody who had a lifetime of savings in their home from working is sad. Also we get people on the benefit who inherited a property, and then get paid more in capital gains than a working person (one working couple I know have saved a few hundred thousand over decades, while a mum with teenage kids on the benefit has “saved” twice as much by doing nothing but owning her home). Meanwhile there are people that don’t earn enough to save for a deposit, or get a big enough mortgage to compete, who have to rent. So we get landlords profiting off their circumstances. There must be a market for rent-to-buy for flatmates??! In summary: there is a lot of trite solutions out there, usually with political party affiliations. The problem is deeply complex, and some parts of the system have to be unfair because by definition not everyone can live in a high status area. The only fair way is to make everybody equal by removing wealth from the rich (which unfortunately still doesn’t fix the status issue because status is not just money - see non-capitalist societies).
  - epistemer 4y ago
    It just isn't that complicated to build a bunch of smaller cheap homes and pass a law that says you can't buy one these types of homes if you already own other property. You can't own these homes within a corporate structure. A single family home for a single family. This wouldn't be much different than the post WW2 construction boom. The difference now though is we all know the system is so captured that this could never happen in the US. Wallstreet would never let this happen. There would be bullshit arguments about market efficiency and how this would be harmful to single families. The right political palms would be greased and the whole idea would be dead on arrival. Problem solving at this level is literally a type of kayfabe from Pro Wrestling style performance art in 2023.
tharax 4y ago
1. Jacinda Ardern is no longer Prime Minister. This is a recent change without much fanfare, so it’s not unreasonable the author made this mistake. 2. ...Is Auckland suddenly more affordable? As someone who grew up there but currently living overseas, it’s news to me. A lot of my friends are saddled with large mortgages they could only get with help from their parents. In a low wage economy they will struggle to pay if interest rates rise from their historic lows.
- BirdieNZ 4y ago
  Regarding (2), it depends on what you mean by affordable. It is becoming more affordable to buy land compared to the last few years, because of interest rate rises making the cost of credit increase. It is becoming less affordable to build a house or other capital improvements, because of construction material cost increases and a labour shortage. Rents are rising but not as rapidly as the rest of NZ because of a declining population combined with an increase in the supply of housing. This last point is really what the author is touching on, but those who rent are not your friends that have large mortgages.
  - osigurdson 4y ago
    I'm surprised that NZ has a declining population. Is this correct?
    - BirdieNZ 4y ago
      Auckland specifically has a declining population, although it may change this year with immigration returning to pre-Covid levels. Aucklanders often move out of Auckland either overseas or to cheaper cities, when the economy slows, in a mild version of a boom bust cycle. Usually immigration offsets this but it hasn't quite picked up to the previous levels yet. NZ as a whole doesn't have a declining population, and Auckland usually does not.
    - djrobstep 4y ago
      A ton of young people leave, because NZ has low wages, very high cost of living, and is very isolating because most places feel suburban/rural and car dominated. NZ is terrific if you’ve got family wealth to fall back on, but without you’re doomed. I wanted to stay, but in spite of graduating top of my computer science class, couldn’t find decently paid work. I moved to Aus 5 years ago and immediately >doubled my salary, could afford a house, and lived in an exciting city instead of a low wage semi rural small town. Australia of course has many problems of its own, and in particular, treats poor disadvantaged people terribly. But NZ is grim for everybody except the already well off property owning class.
BirdieNZ 4y ago
I think it's way too early to say Auckland has fixed house prices. Auckland has made some improvements to zoning through the Unitary Plan, and the New Zealand government has 2-3 pieces of legislation which also increase the potential for supply in all NZ cities, but the Auckland City Council still does severely restrict supply, and the fundamentals of property ownership, tax, and landlording haven't changed, so I don't foresee house prices returning to a more sensible price-to-income ratio, even if they improve somewhat. Hopefully we can implement a land value tax and/or build lots of public housing, to fix the fundamentals.
- teruakohatu 4y ago
  I agree, in my opinion it is a vast exaggeration to say the high prices of housing in Auckland is fixed, or Wellington and Queenstown for that matter. Construction costs are out of kilter. The fact that we run out of essential materials such as gib (I believe Americans call it sheet rock or drywall) means the high prices are not going away.
  - stubish 4y ago
    The article doesn't say anything is fixed, which is always going to be subjective. It says rental prices are growing slower than other NZ cities, and prices in some areas has dropped. It theorizes that this is because of the changes to zoning laws.
    - teruakohatu 4y ago
      > It says rental prices are growing slower than other NZ cities, and prices in some areas has dropped I would say rental prices most likely have dropped due to the property bubble in Auckland bursting. The bubble was bigger than almost everywhere else, so I could expect rents to drop accordingly. I really do wish this was not the case, I would love for the problem to be fixed.
      - pradyuprasad 4y ago
        Author here, I think that comparing Auckland to other cities is a relevant metric because the property bubble was nationwide but the zoning reform was Auckland only
osigurdson 4y ago
I agree all points regarding de-regulation, but not sure about the productivity = f(density) argument. Maybe it mattered in the past but outside of industrial areas, cities have no real reason to exist any longer. The entire downtown area of most cities is largely obsolete at this point as virtually everyone can work from home. I think smallish, super nice, resort-like, walkable towns make more sense now. Note that I'm not suggesting cities are bad or people should not like them. It is merely that people will begin living where they want to live vs where they have to - a good thing imo. I think that this will most likely re-shape things over time.
- jltsiren 4y ago
  According to the latest estimates I have seen from around Europe, working from home means 10-15% reduction in public transport usage from 2019 levels. While working from home is possible, most people continue commuting to work. Some jobs cannot be done remotely. In some jobs, people are less productive when working from home. And some people want to go to the workplace, perhaps to get away from home or to meet other people.
  - osigurdson 4y ago
    >> Some jobs cannot be done remotely Yes, but virtually all downtown jobs can be done remotely.
    - jltsiren 4y ago
      I'm not sure what is your idea of downtown and downtown jobs. But when I think of a downtown, I think of services like museums, theaters, restaurants, hotels, and healthcare centers where physical presence is the key. I think of places where people come to have smaller events and meetings. And I think of office jobs that deal with confidential matters and cannot be done in places outsiders (like your spouse and kids) have access.
      - osigurdson 4y ago
        I mostly think of downtown jobs as white collar professional type work (accountants, engineers, lawyers, etc.). Restaurants and hotels exist to support these workers (and their visitors of course). Museums and healthcare centers don't strictly need to be downtown but it is fine if they are. I suppose there are some jobs that deal with extremely confidential information (where all work is done in a air gapped environment) but those have to be very rare. Since the white collar jobs can be done from anywhere, my thesis is that downtowns don't strictly need to exist. Maybe that is a bad thing and we should try to keep downtowns more vibrant via artificial means (change taxation, etc.) but it is always more difficult when unsupported by economics.
EdwardDiego 4y ago
Yes, we liberalised building rules to allow more construction, but, Auckland fixed its expensive housing? Oh dear, very much no. The policies might've helped by now, but then Covid. And Covid intersected with the legacy of successive governments who were really into neoliberalism from the mid 80s until the early 2000s, which, for the purposes of building houses, manifested as the fact that we had sold nearly all of our manufacturing capacity, and either the land that produced the raw materials, or the rights to harvest those forests, to overseas companies, in the name of a belief in the Invisible Hand. The end result is that New Zealand's forest products are largely owned and harvested by foreign companies[0] who ship the logs overseas for value-added processing in their own mills (China imports 54% of the logs we export), and then we import our building products, because we no longer have the ability (or desire, I guess) to process them domestically. So when Covid disrupted global supply chains, any potential significant increase in construction due to regulation changes was immediately inhibited by building supply shortages and massive price spikes. And given how very far away from everyone New Zealand is, we were rather low on the priority list for resumption of supply. I'm very much in favour of the regulatory changes, but very sad to say that Auckland hasn't fixed anything yet. Oh, and friends don't let friends do neoliberalism, and Substack writers writing about the NZ market, should perhaps run it past an NZer first. [0]: https://www.stuff.co.nz/business/farming/agribusiness/116369097/foreign-forestry-companies-nzs-biggest-landowners https://www.stuff.co.nz/business/farming/agribusiness/116369...
- cgrealy 4y ago
  I have to say I literally laughed when I saw the headline. Housing in NZ is still ridiculous. It’s dropped a bit in the last 6 months, but NZ easily ranks in the top 10 least affordable countries to buy a house, ESPECIALLY in Auckland https://www.newshub.co.nz/home/money/2022/03/new-zealand-ranked-sixth-least-affordable-country-to-buy-a-house-report.html https://www.newshub.co.nz/home/money/2022/03/new-zealand-ran...
Benjamin_Dobell 4y ago
> Because they are closer to each other, they can produce more output than they could if they were far apart. This is what makes cities such great places This really needs a (recent) reference. What is output being measured, and what's the cost of this output?
aclatuts 4y ago
I am starting to think zoning is completely outdated now. It may have been needed during industrialization when people did not understand pollution and fire safety. I think the only strict zoning needed is heavy/medium industrial. I think people have a good idea of what to expect from certain buildings and industries and people can raise concern on a case by case basis.
- ido 4y ago
  Not quite - would you want a brothel or a casino to open next door in the middle of a quiet residential neighborhood? Otherwise I’m with you, no reason why shops/restaurants/offices/light industry (one that doesn’t create too much noise/pollution) etc shouldn’t be on the same street as housing.
  - larsiusprime 4y ago
    To be fair, you can regulate against brothels and casinos without resorting to Euclidean zoning, especially mandatory single family zoning and parking mandates.
    - ido 4y ago
      Yeah, I wasn't disagreeing - I live in a residential neighborhood in Berlin and there are 2 bakeries, a bar and a couple ground-floor offices in my little street alone. The street after that has many shops, restaurants, a post office, etc. It's great!
  - Ekaros 4y ago
    Why shouldn't brothel be allowed? Maybe not show explicit outside advertising, but I don't really see how one would hurt. They don't have that much traffic, and we already had peepshows and sextoy and porn shops that actually blended quite well in. Casinos maybe not, too much traffic. Though I don't see any reason why they wouldn't be in a shopping mall for example.
    - ido 4y ago
antman 4y ago
Although it mentions zoning as the core problem, many European countries always had zoning laws. It mentions in passing the actual important profit drivers: Removing parking lots and Increasing density the combination of which is obviously unsustainable. Another premise "People closer are more productive" which also is meaningless with WFH and many white collar jobs. European municipalities association (might have the translation wrong...) pushes instead fir large cities deurbanization and the support of livable a few hundred k people cities. This planning includes high tech hubs in each city, proper city planning which also includes investment and work related incentives cross cities network development, obvious improvements in quality of life, properly distributed civil services hospitals etc. Currently the global smaller gov policies have delayed such projects especially in Germany who was the main driver. Disclaimer: I was employed as an engineering business and sustainability consultant a few decades back for one such commitee. The plans seemed to me sustainable even without WFH.
- saiya-jin 4y ago
  This is nonsense and waste of time and money, nobody is tearing down 1000 years of construction, even if badly planned from modern perspective, just because it would look nice on some plans and some statistics would go up. Things are as they are in terms of construction, get over it and focus on winnable fights. Also there are few examples when bureaucratic idiots came up with similar ideas and actually made it into reality from scratch on green fields, ie Brasília in Brazil or some other examples. Half-empty cities, empty vast highway, tons of resources poured into failed ideas.
StopHammoTime 4y ago
I have many friends from New Zealand and I am under the impression from them that most housing in places like Auckland is the most expensive in the world for what it is. The prices (apparently) make purchasing housing an unattainable goal. I think this article is making an (incorrect) assumption that an increase in new builds and land sale drives the prices down which is not necessarily the case.
- nerdponx 4y ago
  If it makes you feel any better, much of the northeast USA is in a similar situation right now. A basic nice house in New York or Massachusetts (other than in the middle of the woods) is generally unaffordable without intergenerational wealth or a high-end tech salary.
  - sokoloff 4y ago
    I live in Mass and have many friends who work in careers outside of tech who own houses inside of Rt 128 (Boston’s loop/beltway). They can’t afford a swank condo on the river in Boston, but they can afford a basic 3/2 in a city inside the greater Boston area (or a 5/4 in a bedroom suburb, but that’s more towards your “in the woods” which many people prefer).
- blitzar 4y ago
  I laugh in London at my friends in NZ who a) get paid higher wages and b) have cheaper housing while c) having a lower cost of living. Everyone everywhere thinks they are personally succeeding in the face of the greatest adversity.
  - rowanajmarshall 4y ago
    Equally, I've got friends from Auckland who moved here to London because 1) the salaries are significantly better, and 2) the houses are often _more affordable_.
thriftwy 4y ago
You all really need to give some Russian developer like PIK a blanket construction license. In a few years you will plead for mercy watching them turning any blank spot into arrays of 25-story buildings of 400 sqft apartments which you can buy for a cost of a new good car.
- Klaster_1 4y ago
  I have an impression the human-hive situation in Russia happens due to similar reasons - a set of regulations promoting an undesirable result. If the building code was changed to favor other, more humane, construction practices, I'm PIK would still do fine.
  - thriftwy 4y ago
    PIK and others also build much nicer apartments, but for way higher price. Most people just can't and won't afford that. I'm not sure why having low cost airlines is considered normal but low cost housing is a no-no. Isn't it supposed to be the other way around?
  - barry-cotter 4y ago
    > a set of regulations promoting an undesirable result. Affordable housing is a desirable result, not an undesirable one.
deleted 4y ago
[deleted]
deleted 4y ago
[deleted]
sokoloff 4y ago
> High housing in big cities means lesser tech companies from San Francisco, lesser biotech startups from Oxbridge, lesser finance companies in New York and you get the idea. I get two ideas from that. Maybe we need fewer tech companies from San Francisco, even if not necessarily fewer tech companies overall. Same for {biotech, Oxbridge} and {finance, New York}. Second, perhaps the causality implied by the article here is backwards. What if only the highest financially productive companies can be formed in these places (due to their high costs)? Spreading out tech companies allows more people to benefit from being employed there and allows “gentler” (for lack of a better term) business models to thrive. If I don’t need to feed the San Francisco real estate market, I might not have to adopt a winner-take-all business model, but could focus on making something sustainable where we make something for $50 that is valued at $100 by its users.
- dan-robertson 4y ago
  The idea that you’re arguing against is mostly the agglomeration effects of cities. You ought to be able to search for that topic and read more about the research if you’re interested in the idea and the evidence for/against it.
eouwt 4y ago
>> "how Auckland fixed it" Anyone who lives in Auckland: bahahahahhaha
paulez 4y ago
Even with removing regulations, you still have a limit to how dense a city can be. > The authors ask the obvious question: if homebuilding is a competitive industry, then why don’t prices fall to the cost of building a home? Well in dense cities, it's all about the land value. Every country has seen increase in rent and property values in their largest city. Meanwhile value in rural area and not attractive cities is also dropping in many parts of the world. Is this because of regulation? Probably not as it is happening in various countries with different law and policies. It's probably more about where people want to live and the centralization of economy to only a few large cities. In Europe to get the best jobs you have to move to London, Dublin, Paris, Amsterdam. Those cities are getting more and more expensive. In the US, SF, Seattle, New-York (and I miss others) see the same phenomena. So limiting this to "that's a regulation" issue looks pretty narrow sighted. If your model doesn't work, change the model instead of trying to change the world to suit your model.
- dan-robertson 4y ago
  What is your estimate for the limit for the density of a city and how does this compare to the current density of the cities that are claimed to have density limited by regulations on zoning/planning/permitting?
richardatlarge 4y ago
As someone who lives in Auckland I wish this was a real and lasting trend. But can’t see it because of a massive bottleneck involving skills, workers, and scarce and crap building supplies. Auckland needs to look at Vancouver and require big builds to go taller
negative_zero 4y ago
Aucklander here... I'm sorry to be so terse (and it'll probably get me horribly downvoted) but: What the absolute f**? Just ... What? Huh? Housing crisis ... Fixed? Who paid you? And how much? It most certainly, absolutely, positively is NOT fixed. And if I recall correctly, the recommend changes that are linked in TFA were not adopted because of a NIMBY backlash and Auckland council caved (like they always do). All they ended up doing was scrapping the "green belt" border allowing the awful urban sprawl to resume full tilt. The only "maybe" meaningful change that has happened was by central government at the end of 2021 by tweaking the RMA Act and essentially forcing councils to allow denser builds. (https://www.rnz.co.nz/news/political/457924/resource-management-act-amendment-passes-final-reading https://www.rnz.co.nz/news/political/457924/resource-managem...) And that won't be enough. Deep structural changes have to occur: economically (introduce capital gains tax), politically (both major parties are currently useless on the matter) and culturally (everyone pours money just into housing rather than more productive investments just because the stock market detonated in 1989) to have any chance of fixing this. I also love how there are no graphs on incomes, house prices, housing affordability, immigration, crime, homelessness, the massive price inflation during covid, or the current housing bubble deflation that's occurring. I'm sorry. This article is a giant load of insulting rubbish. I can't figure out if it's just very poorly researched or some sort of propaganda piece. edit grammar
elliottkember 4y ago
> This piece was previously titled “The High Cost of Expensive Housing (and How Auckland Fixed it)”. I’ve changed it The author has updated the title of the article, presumably in response to the backlash from people actually familiar with Auckland. This post is slowly drifting from the front page to where it belongs, but if someone were to update the title to match the article’s title it would be a small mercy to those of us who left NZ and are now priced out of returning.
dablweb 4y ago
Banks create money out of nothing when they give you a mortgage. It's called fractional reserve banking. They're not "lending" you anything... your house becomes the collateral they use to create money from the mortgage contract itself. This means a large amount of inflation gets funneled directly into the housing market. This skews economic signals and turns housing into a financial asset for the wealthy. The wealthy don't complain, because they are already on the property ladder. So our entire financial system is fundamentally broken and this brokenness manifests most visibly in the housing market.
Slava_Propanei 4y ago
[dead]
RagnarD 4y ago
"But the issue is that land use regulations (also called zoning laws) restrict the supply of housing. They impose minimum size requirements, they require permission of local authorities, they require parking lot requirements etc. While some of these might be justified for safety reasons, it is unlikely that all of them can be justified, and the cumulative effect of all of them is to massively restrict housing supply." Summary: whenever such issues exist, look for the fundamental reason: government. Human beings left free to use their minds to solve problems, will solve problems. It's the dead hand of force that stops that process cold. The solution is removal of the force, never more of it.
- cgrealy 4y ago
  Yes, unfettered market forces have a fantastic track record in solving problems of wealth disparity. Btw, I have this amazing bridge for sale….
kubatyszko 4y ago
Well, Auckland probably has a lot less NIMBY's so there's a good chance it might work out...
paulette449 4y ago
The article headline has been re-written by the original author as "The High Cost of Expensive Housing (and How Auckland Might Fix it)"

95 points by barry-cotter 4y ago

The article lacks all nuance: simplifying the housing market to a single cause and effect. These are the points that I have experienced in Christchurch, New Zealand: 1. Buyer sentiment matters. Prices were cheap 3 years ago, but I couldn’t convince friends to buy, even offering to help my friends with the deposit. Then Suddenly everybody wanted to buy a house and prices went up 30%+. 2. Demand outstrips supply by at least 3X. It is virtually impossible to increase supply enough: people invest, people buy second homes, wealthy people with empty houses because they don’t get enough rent to make it worth letting, everyone wants their own home instead of sharing, children and marriage breakups want their own homes. 3. People will bid as much as they can afford to pay. All disposable income is dedicated to paying off the mortgage. If their income increases, many people move to a more expensive home. Edit: so house prices on market are a fn(income distribution, mortgage rates, irrationality). Some poor people have to miss out because they are below some median earnings figure and can’t afford the minimum bid. 4. Popular areas will always be expensive. Home prices are a status symbol, perhaps even a Veblen good. You can’t fix that by increasing supply in a popular area. New York ain’t cheap even with high density housing. The proper way to fix the housing crisis is to allow the population to decrease, or for people to not live as long (which also increases house demand). However that causes structural problems to the economy (see Japan). Edit: that is tongue-in cheek. In New Zealand, one major problem is that property is a better investment than a business. I made more money by owning two properties than by owning a moderately successful business over the last few years. New Zealand lacks a capital gains tax if you own a home for more than ten years, so the taxation advantage of property is huge compared to investing in any business. Wealthy New Zealanders invest in multiple properties because our government sets the incentives for property, and our government relatively penalises business owners or investors. Edit: anyone that bought at the peak in Auckland, and whose property still meets the bright-line test, and the value has gone down significantly in value, should consider selling their home and claiming the capital gains loss? Just a thought the CGT can probably be used to your tax advantage significantly if you overpayed for your home, or a second investment? I am guessing that is possible, but consult a tax specialist! Say you are on 32% marginal tax, and you lose $200k moving homes, then you can claim back $64000 on tax which is big biscuits to me.

JauntyHatAngle 4y ago
1, 3 and 4, yes. 2... I disagree with, in the sense that you should still try to reduce the gap and we arent doing enough. You can make it less attractive to own multiple homes or curb airbnb etc to somewhat alleviate supply issues. It is not a panacea but you can reduce the issue.
- robocat 4y ago
  I get ya, it seems as though adding more houses should change prices, but Christchurch is adding heaps of new houses and prices are still stupid. There is a lot of demand remaining, but if you look at a graph of house prices, there’s a very steep wall at the lowest house price and you can’t buy anything below that wall price. Where does that wall come from? From unmet demand and the amount that a person with an average wage can only just pay the mortgage. Everybody bids against everyone else to get a house (a true zero-sum game for the New Zealand economy), and house prices are set by that bidding process. Adding some houses won’t fix that, until you reach a point when there are a few too many houses and prices crash due to #1 and everybody who had a lifetime of savings in their home from working is sad. Also we get people on the benefit who inherited a property, and then get paid more in capital gains than a working person (one working couple I know have saved a few hundred thousand over decades, while a mum with teenage kids on the benefit has “saved” twice as much by doing nothing but owning her home). Meanwhile there are people that don’t earn enough to save for a deposit, or get a big enough mortgage to compete, who have to rent. So we get landlords profiting off their circumstances. There must be a market for rent-to-buy for flatmates??! In summary: there is a lot of trite solutions out there, usually with political party affiliations. The problem is deeply complex, and some parts of the system have to be unfair because by definition not everyone can live in a high status area. The only fair way is to make everybody equal by removing wealth from the rich (which unfortunately still doesn’t fix the status issue because status is not just money - see non-capitalist societies).
- epistemer 4y ago
  It just isn't that complicated to build a bunch of smaller cheap homes and pass a law that says you can't buy one these types of homes if you already own other property. You can't own these homes within a corporate structure. A single family home for a single family. This wouldn't be much different than the post WW2 construction boom. The difference now though is we all know the system is so captured that this could never happen in the US. Wallstreet would never let this happen. There would be bullshit arguments about market efficiency and how this would be harmful to single families. The right political palms would be greased and the whole idea would be dead on arrival. Problem solving at this level is literally a type of kayfabe from Pro Wrestling style performance art in 2023.

tharax 4y ago

1. Jacinda Ardern is no longer Prime Minister. This is a recent change without much fanfare, so it’s not unreasonable the author made this mistake. 2. ...Is Auckland suddenly more affordable? As someone who grew up there but currently living overseas, it’s news to me. A lot of my friends are saddled with large mortgages they could only get with help from their parents. In a low wage economy they will struggle to pay if interest rates rise from their historic lows.

BirdieNZ 4y ago
Regarding (2), it depends on what you mean by affordable. It is becoming more affordable to buy land compared to the last few years, because of interest rate rises making the cost of credit increase. It is becoming less affordable to build a house or other capital improvements, because of construction material cost increases and a labour shortage. Rents are rising but not as rapidly as the rest of NZ because of a declining population combined with an increase in the supply of housing. This last point is really what the author is touching on, but those who rent are not your friends that have large mortgages.
- osigurdson 4y ago
  I'm surprised that NZ has a declining population. Is this correct?
  - BirdieNZ 4y ago
    Auckland specifically has a declining population, although it may change this year with immigration returning to pre-Covid levels. Aucklanders often move out of Auckland either overseas or to cheaper cities, when the economy slows, in a mild version of a boom bust cycle. Usually immigration offsets this but it hasn't quite picked up to the previous levels yet. NZ as a whole doesn't have a declining population, and Auckland usually does not.
  - djrobstep 4y ago
    A ton of young people leave, because NZ has low wages, very high cost of living, and is very isolating because most places feel suburban/rural and car dominated. NZ is terrific if you’ve got family wealth to fall back on, but without you’re doomed. I wanted to stay, but in spite of graduating top of my computer science class, couldn’t find decently paid work. I moved to Aus 5 years ago and immediately >doubled my salary, could afford a house, and lived in an exciting city instead of a low wage semi rural small town. Australia of course has many problems of its own, and in particular, treats poor disadvantaged people terribly. But NZ is grim for everybody except the already well off property owning class.

BirdieNZ 4y ago

I think it's way too early to say Auckland has fixed house prices. Auckland has made some improvements to zoning through the Unitary Plan, and the New Zealand government has 2-3 pieces of legislation which also increase the potential for supply in all NZ cities, but the Auckland City Council still does severely restrict supply, and the fundamentals of property ownership, tax, and landlording haven't changed, so I don't foresee house prices returning to a more sensible price-to-income ratio, even if they improve somewhat. Hopefully we can implement a land value tax and/or build lots of public housing, to fix the fundamentals.

teruakohatu 4y ago
I agree, in my opinion it is a vast exaggeration to say the high prices of housing in Auckland is fixed, or Wellington and Queenstown for that matter. Construction costs are out of kilter. The fact that we run out of essential materials such as gib (I believe Americans call it sheet rock or drywall) means the high prices are not going away.
- stubish 4y ago
  The article doesn't say anything is fixed, which is always going to be subjective. It says rental prices are growing slower than other NZ cities, and prices in some areas has dropped. It theorizes that this is because of the changes to zoning laws.
  - teruakohatu 4y ago
    > It says rental prices are growing slower than other NZ cities, and prices in some areas has dropped I would say rental prices most likely have dropped due to the property bubble in Auckland bursting. The bubble was bigger than almost everywhere else, so I could expect rents to drop accordingly. I really do wish this was not the case, I would love for the problem to be fixed.
    - pradyuprasad 4y ago
      Author here, I think that comparing Auckland to other cities is a relevant metric because the property bubble was nationwide but the zoning reform was Auckland only

osigurdson 4y ago

I agree all points regarding de-regulation, but not sure about the productivity = f(density) argument. Maybe it mattered in the past but outside of industrial areas, cities have no real reason to exist any longer. The entire downtown area of most cities is largely obsolete at this point as virtually everyone can work from home. I think smallish, super nice, resort-like, walkable towns make more sense now. Note that I'm not suggesting cities are bad or people should not like them. It is merely that people will begin living where they want to live vs where they have to - a good thing imo. I think that this will most likely re-shape things over time.

jltsiren 4y ago
According to the latest estimates I have seen from around Europe, working from home means 10-15% reduction in public transport usage from 2019 levels. While working from home is possible, most people continue commuting to work. Some jobs cannot be done remotely. In some jobs, people are less productive when working from home. And some people want to go to the workplace, perhaps to get away from home or to meet other people.
- osigurdson 4y ago
  >> Some jobs cannot be done remotely Yes, but virtually all downtown jobs can be done remotely.
  - jltsiren 4y ago
    I'm not sure what is your idea of downtown and downtown jobs. But when I think of a downtown, I think of services like museums, theaters, restaurants, hotels, and healthcare centers where physical presence is the key. I think of places where people come to have smaller events and meetings. And I think of office jobs that deal with confidential matters and cannot be done in places outsiders (like your spouse and kids) have access.
    - osigurdson 4y ago
      I mostly think of downtown jobs as white collar professional type work (accountants, engineers, lawyers, etc.). Restaurants and hotels exist to support these workers (and their visitors of course). Museums and healthcare centers don't strictly need to be downtown but it is fine if they are. I suppose there are some jobs that deal with extremely confidential information (where all work is done in a air gapped environment) but those have to be very rare. Since the white collar jobs can be done from anywhere, my thesis is that downtowns don't strictly need to exist. Maybe that is a bad thing and we should try to keep downtowns more vibrant via artificial means (change taxation, etc.) but it is always more difficult when unsupported by economics.

EdwardDiego 4y ago

Yes, we liberalised building rules to allow more construction, but, Auckland fixed its expensive housing? Oh dear, very much no. The policies might've helped by now, but then Covid. And Covid intersected with the legacy of successive governments who were really into neoliberalism from the mid 80s until the early 2000s, which, for the purposes of building houses, manifested as the fact that we had sold nearly all of our manufacturing capacity, and either the land that produced the raw materials, or the rights to harvest those forests, to overseas companies, in the name of a belief in the Invisible Hand. The end result is that New Zealand's forest products are largely owned and harvested by foreign companies[0] who ship the logs overseas for value-added processing in their own mills (China imports 54% of the logs we export), and then we import our building products, because we no longer have the ability (or desire, I guess) to process them domestically. So when Covid disrupted global supply chains, any potential significant increase in construction due to regulation changes was immediately inhibited by building supply shortages and massive price spikes. And given how very far away from everyone New Zealand is, we were rather low on the priority list for resumption of supply. I'm very much in favour of the regulatory changes, but very sad to say that Auckland hasn't fixed anything yet. Oh, and friends don't let friends do neoliberalism, and Substack writers writing about the NZ market, should perhaps run it past an NZer first. [0]: https://www.stuff.co.nz/business/farming/agribusiness/116369097/foreign-forestry-companies-nzs-biggest-landowners https://www.stuff.co.nz/business/farming/agribusiness/116369...

cgrealy 4y ago
I have to say I literally laughed when I saw the headline. Housing in NZ is still ridiculous. It’s dropped a bit in the last 6 months, but NZ easily ranks in the top 10 least affordable countries to buy a house, ESPECIALLY in Auckland https://www.newshub.co.nz/home/money/2022/03/new-zealand-ranked-sixth-least-affordable-country-to-buy-a-house-report.html https://www.newshub.co.nz/home/money/2022/03/new-zealand-ran...

Benjamin_Dobell 4y ago

> Because they are closer to each other, they can produce more output than they could if they were far apart. This is what makes cities such great places This really needs a (recent) reference. What is output being measured, and what's the cost of this output?

aclatuts 4y ago

I am starting to think zoning is completely outdated now. It may have been needed during industrialization when people did not understand pollution and fire safety. I think the only strict zoning needed is heavy/medium industrial. I think people have a good idea of what to expect from certain buildings and industries and people can raise concern on a case by case basis.

ido 4y ago
Not quite - would you want a brothel or a casino to open next door in the middle of a quiet residential neighborhood? Otherwise I’m with you, no reason why shops/restaurants/offices/light industry (one that doesn’t create too much noise/pollution) etc shouldn’t be on the same street as housing.
- larsiusprime 4y ago
  To be fair, you can regulate against brothels and casinos without resorting to Euclidean zoning, especially mandatory single family zoning and parking mandates.
  - ido 4y ago
    Yeah, I wasn't disagreeing - I live in a residential neighborhood in Berlin and there are 2 bakeries, a bar and a couple ground-floor offices in my little street alone. The street after that has many shops, restaurants, a post office, etc. It's great!
- Ekaros 4y ago
  Why shouldn't brothel be allowed? Maybe not show explicit outside advertising, but I don't really see how one would hurt. They don't have that much traffic, and we already had peepshows and sextoy and porn shops that actually blended quite well in. Casinos maybe not, too much traffic. Though I don't see any reason why they wouldn't be in a shopping mall for example.
  - ido 4y ago

antman 4y ago

Although it mentions zoning as the core problem, many European countries always had zoning laws. It mentions in passing the actual important profit drivers: Removing parking lots and Increasing density the combination of which is obviously unsustainable. Another premise "People closer are more productive" which also is meaningless with WFH and many white collar jobs. European municipalities association (might have the translation wrong...) pushes instead fir large cities deurbanization and the support of livable a few hundred k people cities. This planning includes high tech hubs in each city, proper city planning which also includes investment and work related incentives cross cities network development, obvious improvements in quality of life, properly distributed civil services hospitals etc. Currently the global smaller gov policies have delayed such projects especially in Germany who was the main driver. Disclaimer: I was employed as an engineering business and sustainability consultant a few decades back for one such commitee. The plans seemed to me sustainable even without WFH.

saiya-jin 4y ago
This is nonsense and waste of time and money, nobody is tearing down 1000 years of construction, even if badly planned from modern perspective, just because it would look nice on some plans and some statistics would go up. Things are as they are in terms of construction, get over it and focus on winnable fights. Also there are few examples when bureaucratic idiots came up with similar ideas and actually made it into reality from scratch on green fields, ie Brasília in Brazil or some other examples. Half-empty cities, empty vast highway, tons of resources poured into failed ideas.

StopHammoTime 4y ago

I have many friends from New Zealand and I am under the impression from them that most housing in places like Auckland is the most expensive in the world for what it is. The prices (apparently) make purchasing housing an unattainable goal. I think this article is making an (incorrect) assumption that an increase in new builds and land sale drives the prices down which is not necessarily the case.

nerdponx 4y ago
If it makes you feel any better, much of the northeast USA is in a similar situation right now. A basic nice house in New York or Massachusetts (other than in the middle of the woods) is generally unaffordable without intergenerational wealth or a high-end tech salary.
- sokoloff 4y ago
  I live in Mass and have many friends who work in careers outside of tech who own houses inside of Rt 128 (Boston’s loop/beltway). They can’t afford a swank condo on the river in Boston, but they can afford a basic 3/2 in a city inside the greater Boston area (or a 5/4 in a bedroom suburb, but that’s more towards your “in the woods” which many people prefer).
blitzar 4y ago
I laugh in London at my friends in NZ who a) get paid higher wages and b) have cheaper housing while c) having a lower cost of living. Everyone everywhere thinks they are personally succeeding in the face of the greatest adversity.
- rowanajmarshall 4y ago
  Equally, I've got friends from Auckland who moved here to London because 1) the salaries are significantly better, and 2) the houses are often _more affordable_.

thriftwy 4y ago

You all really need to give some Russian developer like PIK a blanket construction license. In a few years you will plead for mercy watching them turning any blank spot into arrays of 25-story buildings of 400 sqft apartments which you can buy for a cost of a new good car.

Klaster_1 4y ago
I have an impression the human-hive situation in Russia happens due to similar reasons - a set of regulations promoting an undesirable result. If the building code was changed to favor other, more humane, construction practices, I'm PIK would still do fine.
- thriftwy 4y ago
  PIK and others also build much nicer apartments, but for way higher price. Most people just can't and won't afford that. I'm not sure why having low cost airlines is considered normal but low cost housing is a no-no. Isn't it supposed to be the other way around?
- barry-cotter 4y ago
  > a set of regulations promoting an undesirable result. Affordable housing is a desirable result, not an undesirable one.

deleted 4y ago

[deleted]

deleted 4y ago

[deleted]

sokoloff 4y ago

> High housing in big cities means lesser tech companies from San Francisco, lesser biotech startups from Oxbridge, lesser finance companies in New York and you get the idea. I get two ideas from that. Maybe we need fewer tech companies from San Francisco, even if not necessarily fewer tech companies overall. Same for {biotech, Oxbridge} and {finance, New York}. Second, perhaps the causality implied by the article here is backwards. What if only the highest financially productive companies can be formed in these places (due to their high costs)? Spreading out tech companies allows more people to benefit from being employed there and allows “gentler” (for lack of a better term) business models to thrive. If I don’t need to feed the San Francisco real estate market, I might not have to adopt a winner-take-all business model, but could focus on making something sustainable where we make something for $50 that is valued at $100 by its users.

dan-robertson 4y ago
The idea that you’re arguing against is mostly the agglomeration effects of cities. You ought to be able to search for that topic and read more about the research if you’re interested in the idea and the evidence for/against it.

eouwt 4y ago

>> "how Auckland fixed it" Anyone who lives in Auckland: bahahahahhaha

paulez 4y ago

Even with removing regulations, you still have a limit to how dense a city can be. > The authors ask the obvious question: if homebuilding is a competitive industry, then why don’t prices fall to the cost of building a home? Well in dense cities, it's all about the land value. Every country has seen increase in rent and property values in their largest city. Meanwhile value in rural area and not attractive cities is also dropping in many parts of the world. Is this because of regulation? Probably not as it is happening in various countries with different law and policies. It's probably more about where people want to live and the centralization of economy to only a few large cities. In Europe to get the best jobs you have to move to London, Dublin, Paris, Amsterdam. Those cities are getting more and more expensive. In the US, SF, Seattle, New-York (and I miss others) see the same phenomena. So limiting this to "that's a regulation" issue looks pretty narrow sighted. If your model doesn't work, change the model instead of trying to change the world to suit your model.

dan-robertson 4y ago
What is your estimate for the limit for the density of a city and how does this compare to the current density of the cities that are claimed to have density limited by regulations on zoning/planning/permitting?

richardatlarge 4y ago

As someone who lives in Auckland I wish this was a real and lasting trend. But can’t see it because of a massive bottleneck involving skills, workers, and scarce and crap building supplies. Auckland needs to look at Vancouver and require big builds to go taller

negative_zero 4y ago

Aucklander here... I'm sorry to be so terse (and it'll probably get me horribly downvoted) but: What the absolute f**? Just ... What? Huh? Housing crisis ... Fixed? Who paid you? And how much? It most certainly, absolutely, positively is NOT fixed. And if I recall correctly, the recommend changes that are linked in TFA were not adopted because of a NIMBY backlash and Auckland council caved (like they always do). All they ended up doing was scrapping the "green belt" border allowing the awful urban sprawl to resume full tilt. The only "maybe" meaningful change that has happened was by central government at the end of 2021 by tweaking the RMA Act and essentially forcing councils to allow denser builds. (https://www.rnz.co.nz/news/political/457924/resource-management-act-amendment-passes-final-reading https://www.rnz.co.nz/news/political/457924/resource-managem...) And that won't be enough. Deep structural changes have to occur: economically (introduce capital gains tax), politically (both major parties are currently useless on the matter) and culturally (everyone pours money just into housing rather than more productive investments just because the stock market detonated in 1989) to have any chance of fixing this. I also love how there are no graphs on incomes, house prices, housing affordability, immigration, crime, homelessness, the massive price inflation during covid, or the current housing bubble deflation that's occurring. I'm sorry. This article is a giant load of insulting rubbish. I can't figure out if it's just very poorly researched or some sort of propaganda piece. edit grammar

elliottkember 4y ago

> This piece was previously titled “The High Cost of Expensive Housing (and How Auckland Fixed it)”. I’ve changed it The author has updated the title of the article, presumably in response to the backlash from people actually familiar with Auckland. This post is slowly drifting from the front page to where it belongs, but if someone were to update the title to match the article’s title it would be a small mercy to those of us who left NZ and are now priced out of returning.

dablweb 4y ago

Banks create money out of nothing when they give you a mortgage. It's called fractional reserve banking. They're not "lending" you anything... your house becomes the collateral they use to create money from the mortgage contract itself. This means a large amount of inflation gets funneled directly into the housing market. This skews economic signals and turns housing into a financial asset for the wealthy. The wealthy don't complain, because they are already on the property ladder. So our entire financial system is fundamentally broken and this brokenness manifests most visibly in the housing market.

Slava_Propanei 4y ago

[dead]

RagnarD 4y ago

"But the issue is that land use regulations (also called zoning laws) restrict the supply of housing. They impose minimum size requirements, they require permission of local authorities, they require parking lot requirements etc. While some of these might be justified for safety reasons, it is unlikely that all of them can be justified, and the cumulative effect of all of them is to massively restrict housing supply." Summary: whenever such issues exist, look for the fundamental reason: government. Human beings left free to use their minds to solve problems, will solve problems. It's the dead hand of force that stops that process cold. The solution is removal of the force, never more of it.

cgrealy 4y ago
Yes, unfettered market forces have a fantastic track record in solving problems of wealth disparity. Btw, I have this amazing bridge for sale….

kubatyszko 4y ago

Well, Auckland probably has a lot less NIMBY's so there's a good chance it might work out...

paulette449 4y ago

The article headline has been re-written by the original author as "The High Cost of Expensive Housing (and How Auckland Might Fix it)"