Wednesday, September 20, 2017

That 'Free market' in housing

I think it's more likely though that the market will be left to its own devices


Wishful thinking - it's never been a free market: Let us count some of the ways it Ain't a market:


  • Dopey zoneration policies by economically clueless TLA's which serve to foobar the price of the land under them Hooses
  • A cosy Building Materials Duopoly, untrammelled by ComCom, hostile to new entrants and highly protective of their own cartelised patches
  • Consents, and other regulation, subject to local brown-cardy-staffed monopolies which have yet to recognise that Time = Money so have complete freedom to inject Time and Modest Fees into every activity under their baleful purview
  • A building industry composed of thousands of two-bit builders, clonking up houses in a manner which would not be unfamiliar to a 19th century carpenter, all vying for the same few high-end-of-market jobs, because that's where the munny is, leading to highly inelastic supply at t'other end
  • A regional price floor slipped in under all house prices by economically clueless Gubmint schemes like Welcome Home Loans (criterion - can you Fog a Mirror?) which ensures house prices - new or old - are sticky on the downside

No doubt, common taters can think of more ways it ain't a real 'market'.....so 'it's own devices' has, shall we say, a very particular meaning.

It means, being left in the gentle claws of the Opolists, rent-seekers and ticket-clippers.

Monday, September 18, 2017

New Zealand - a chain of systempunkts

The sad fact is that NZ, as a long, thin, and increasingly poor country, is just chocka with what John Robb terms 'systempunkts' - points where a directed attack or natural causes can generate an effect wildly out of proportion to the original investment.

  •     Kaikoura earthquake severed the single rail line North-South in the Mainland,
  •     Xtra's Interwebs in the NI went west a few years back via a rat on a fiber optic on one loop, and a digger (them diggers should, perhaps, be Watched?) on the other
  •     I've always reckoned that a handful of clapped-out Datsun 180's, 'stalled' on a few strategic Awkland on or off-ramps or the Newmarket overbridge, would gridlock the sorry show for a day or more
  •     And let's not forget the weeks without power to Central Awkland a coupla decades back.

A leetle story about older infrastructure in a major Wellywood Gubmint building just before Y2K (remember that?):

The crew decided to test the resilience of the backup power systems in the building. Good call, because over three attempts, this is what they found each time they disconnected the external power via the Big Red Switch:

  1.     The UPS behind the mainframe floor had never been deep-cycled. It failed after a few tens of seconds. New UPS ordered.
  2.     Weeks later, feeling a bit smug, next disconnection. UPS works, genny fires up. Genny lasts about half an hour before one phase burns out completely. Turns out the building, as it was occupied, had all power wired to predominantly one of three possible phases. Mild panic sets in. Building wiring hastily re-jigged, New genny ordered
  3.     Genny arrives. Whoops, won't fit in the basement space. Needs a hastily erected external shed. Panic turns from mild to extreme (mid-December 1999). But third time lucky, it all holds together when the Big Red Switch is thrown.

One building, in one city.

Thursday, August 10, 2017

Living Wage madness and the BOM explosion

The LW proposal, applied to indirect staff, runs headlong into the bill-of-materials-explosion issue.  An illustration:

The policy:  every contractor to a LW-signed-up organisation must pay LW to staff.  Sounds simple, right?

- LW organisation hires a contractor (the head contractor, HC) to extend a car-park.
- HC sub-contracts (SC) five contractors to do digouts, gravel cartage, kerbing, sealing, landscaping.
- the SC for dig-outs blows an excavator hose and contracts a hydraulic hose repairer to come on site and replace it.
- four of the five SC's have diesel delivered to machines on site, by 4 different small-volume diesel retailers
- the sealing contractor sub-contracts a bitumen supplier to supply the hot-mix
- the kerbing contractor sub-contracts a concrete pre-mix supplier to deliver concrete into the kerbing machine

So does the LW apply to:  
- the HC (they employ only 2 people to supervise this job, yet have a staff of 100) - LW 2, 100 or something in between?
- each of the five SC's (same distribution - 2-4 people on site for this job, 20-50 off site, employed by those SC's, on other work)?
- the hydraulic hose repairer (a contractor to one of the SC's)?
- the four diesel suppliers (contractors to each of the SC's)?
- the bitumen supplier's staff?
- the concrete pre-mix supplier's staff?

The example could be expanded almost infinitely (the lunch contractor to the SC's?  the food suppliers to the lunch contractor? The processor. packer, transporter, grower of those foods? The truck maintenance firm for the concrete premix supplier?)

It's the most impractical suggestion one could possibly conceive.....
The LW proposal, applied to indirect staff, runs headlong into the bill-of-materials-explosion issue.  An illustration:

The policy:  every contractor to a LW-signed-up organisation must pay LW to staff.  Sounds simple, right?

- LW organisation hires a contractor (the head contractor, HC) to extend a car-park.
- HC sub-contracts (SC) five contractors to do digouts, gravel cartage, kerbing, sealing, landscaping.
- the SC for dig-outs blows an excavator hose and contracts a hydraulic hose repairer to come on site and replace it.
- four of the five SC's have diesel delivered to machines on site, by 4 different small-volume diesel retailers

So does the LW apply to:  
- the HC (they employ only 2 people to supervise this job, yet have a staff of 100) - LW 2, 100 or something in between?
- each of the five SC's (same distribution - 2-4 people on site for this job, 20-50 off site, employed by those SC's, on other work)?
- the hydraulic hose repairer (a contractor to one of the SC's)?
- the four diesel suppliers (contractors to each of the SC's)?

The example could be expanded almost infinitely (the lunch contractor to the SC's?  the food suppliers to the lunch contractor? The processor. packer, transporter, grower of those foods?)

It's the most impractical thing - CCHL is perfectly right to advise against it.The LW proposal, applied to indirect staff, runs headlong into the bill-of-materials-explosion issue.  An illustration:

The policy:  every contractor to a LW-signed-up organisation must pay LW to staff.  Sounds simple, right?

- LW organisation hires a contractor (the head contractor, HC) to extend a car-park.
- HC sub-contracts (SC) five contractors to do digouts, gravel cartage, kerbing, sealing, landscaping.
- the SC for dig-outs blows an excavator hose and contracts a hydraulic hose repairer to come on site and replace it.
- four of the five SC's have diesel delivered to machines on site, by 4 different small-volume diesel retailers

So does the LW apply to:  
- the HC (they employ only 2 people to supervise this job, yet have a staff of 100) - LW 2, 100 or something in between?
- each of the five SC's (same distribution - 2-4 people on site for this job, 20-50 off site, employed by those SC's, on other work)?
- the hydraulic hose repairer (a contractor to one of the SC's)?
- the four diesel suppliers (contractors to each of the SC's)?

The example could be expanded almost infinitely (the lunch contractor to the SC's?  the food suppliers to the lunch contractor? The processor. packer, transporter, grower of those foods?)

It's the most impractical thing - CCHL is perfectly right to advise against it.

Monday, August 07, 2017

Getting stuff Built

David Hargreaves writes: If you can't make builders put a spade in the ground, and the bankers give them the money, it ain't going to work

Darn tootin' right.

It looks to me like some sorta Compulsion is gonna be needed to get anything moving, because the current modus operandi won't, and for perfectly clear reasons:


  1. The Planning is local, and incompetent at that, but the economic drivers - immigration, banking, building standards, materials costs are all central, not to say Cartelised
  2. The building industry would be quite familiar to someone from the 19th century, plonked onto a building site. A couple of days to come up to speed with nailguns, glues, portable power tools and materials, and they'd be clonking frames together in the rain along with the best of 'em
  3. The price of land screws up everything on top, so that';s why it's only worth building large footprints, and for the upper quartile of the market
  4. TLA's, desperate for non-Rates revenue streams, charge for everything they possibly can and, like the financiers, are adept at inventing ever longer chains of tickets to clip. And as a local monopoly, fat chance of getting any competitive behaviours to sort That out.

So the way forward will have to involve some combination of the following:


  • Remove TLA's incompetent hands from the Planning Tiller by simply nullifying all local Plans, and letting the effects-based RMA handle the lot
  • Remove BRANZ etc control and simply adopt whatever international standards seem appropriate for materials. We don't use BRANZ to certify materials for boats, caravans or planes, Why do they need to be in the loop for Houses?
  • Hosuing factories - lotsa them. Everything CNC, fitted out in QC conditions, under cover. Litmus test: that 19th-century builder should be totally, utterly lost on the factory floor.
  • Land, of course. So compulsorily acquire everu scrap of greenish land wherever thought appropriate, use Kiwisaver investors to finance it as there will be a return as it's developed and sold, and develop/sell it using the usual PPP approach. But, and importantly, the CG thus invented has to stay largely in the public side (KS returns, Gubmint's General Account) and applied largely to the replacement aspects noted above - getting factories, standards, etc up and humming, and a bit of trust-busting amongst the Cartels.

A thought experiment, of course - the safest kind....but at least it is Relentlessly Positive (unless yer a Planner).

Thursday, July 27, 2017

GST - the itch to impose differential rates of tax

The common taters who itch to Fiddle with GST need a reality check. Changing the overall rate is something of a mission, but do-able: the change from 12.5 to 15% shows that.

But the core feature of GST is that it has, effectively, only two rates: zero (for financial services and the like) or 15% for everything else.

[Yes, before y'all point to them, there are tiny exceptions, like the reduced rate for long-stay residential care in managed village facilities, but these are well able to be coped with where encountered because those organisations are typically single-purpose anyway].

The moment GST becomes differential for any reason, in any widespread sense (e.g. for food versus petrol) the complications start rolling, as do the domino effects:

  1.     Every business exposed to mixed sales which cross the new GST application boundaries, have instant compliance costs. Sales have to be differentiated, GST returns become much more complex (because the possibility of getting it wrong multiplies, and IRD takes a dim view of errors). These costs translate into smaller profits, which lead to price increase pressures, business withdrawal or downsizing, and other direct costs.
  2.     Differential GST requires exquisite, certain Description of every possible good or service to which a given rate applies. Supermarkets typically run 20-40K SKU's, and each and every one must be Described accurately and the correct tax rate applied. Maintenance alone is a big overhead, and the effect on typical sales techniques such as 'discount bundles' - buy three 2-litre milks, get 1 free and get a half-price pair of gardening gloves - can be easily imagined. How should this be taxed, because the weighting of the sales is uncertain.
  3.     The BOM-explosion issue arises very quickly. I buy Flour, Salt, Yeast and Butter. Are they 'Food'? Not individually but together, they make Bread. How to tax them? Go one step further back. Pepper, bay leaves, cinnamon. Food? Less certain. But a hot-pot meal would be bereft without them. Go a further step back in the BOM. Pepper grinder, pestle and mortar. Food? No, but try making that hot-pot without them. And they cannot be used for much else. Such boundary issues destroy the Certainty which is the hallmark of a good tax system.
  4.     The central administration needed to maintain the endless lists of goods, disseminate it and keep up with the constant flow of new product (whoever heard of quinoa a few years back?) is non-trivial. This is pure economic deadweight: it is substantial extra activity in a non-tradeable.
  5.     Once differentiation has commenced, the political arguments about stuffing up a nice simple tax, go out the window. The technical term is Defenestration. So every new Bright Idea has a much better chance of being incorporated (because 'It's Good for the Children/Environment/Winnie/our little business segment/our Region/our political cronies/the unions/beneficiaries/the Grey Vote...it's an infinite list). Do y'all really wanna open That up for grabs? It's a direct path to cronyism and to a tax guide the size of several phone books, updated quarterly, available for purchase for a Modest Fee.

There are two aphorisms worth recording about Tax in general.
- it's like plucking a goose. You want the most Feathers with the least Hissing.
- a high degree of Inequity is preferable to a small degree of Uncertainty.

The short version: don't foobar GST by opening the Pandora's Box of differential rates.....

Sunday, June 25, 2017

More of the same old building techniques for small dwellings ain't gonna deliver volume or quality...

So, so many common taters are expecting More of the Same when it comes to building techniques. Armies of self-employed tradies required, hopefully with apprentices tethered to their belts, same old clonking frames together out in the always-tropical Awkland weather. Four sub-classes of LBP needed for a simple build (unless you're a Carpenter - see here, and then there's Design and Site. Plus Elfin Safety. Plus Fencing, Scaff, Electrical tags on everything except battery tools (ever wonder why battery stuff is now up in the 54 volt range - no tagging needed if you charge the batteries off of an inverter in the double-cab ute...).

Plus you lose time to Weather, Working Habits of employees (or lack of them), Sick and Annual Leave, and you lose money to Kiwisaver employer contribs, ACC, GST and provisional tax. See the attraction of the sole trader?

Whereas a Factory build has to be the way forward for all of this. Site requirements come down to a foundation and landscaping, erection consists of a crane hire and a few bolt-togetherers, each for 2-3 days if it's a halfway decent design. Check 'Grand Designs' for some clues if unsure. Or (gasp) the Irish

There is just no way the current paradigms can continue, and deliver the volumes and build quality needed.

Yes, expectations need to come down to achieve 'affordability':

  • Smaller spaces - nothing over say 140 squares
  • Hip or gable roofs with actual eaves to ensure weathertightness
  • Modular designs with maximal involvement from yacht and caravan designers to ensure space is used intelligently
  • Zero involvement with architects to ensure weathertightness and intelligent use of space
  • Multi-proof consented ex factory to ensure the stupid TLA's cannot introduce mucho time and therefore $ into the construction sequence

About the only two things Gubmint can do to speed this along is to grease the skids for the aforesaid factories and perhaps backstop the multi-proofing; and snooker the land-banker by doing a FIF-like tax on land value (deemed value is the key) plus maybe a coupla massive compulsory acquisitions at rural land cost, sold on at purchase price.

Kill the chicken, but make the monkey watch....

Thursday, June 22, 2017

Welcome Home loans as a Universal Price Floor signal mechanism

The Interest article, as a sidebar, exposes an Interesting aspect of the housing market - the Welcome Home loans scheme.

This was implemented back in the glorious Helenista days - 2002-03 - as a 'solution' to the relative (even back then) inability of the battlers to get housing finance.

The unintended consequences (which, as most textbook cases do...) only emerged later.

Picking a figure at which to pitch the loan to the aforesaid battlers, took a regional price point. Of some derivation, obviously, but most likely a median/average/PDOOMA of recent sales.

This figure ($100K for Christchurch, around $350K for Awkland IIRC) ignored the fact that property could be had at very substantially less than that figure, particularly for battler purchase - small, run-down, 'needs TLC' etc.

So it served as an instant, universal oopards pricing signal for all sellers simultaneously, at that end of the market. After all, why sell that collapsing shack, for which one had privately estimated that a canny buyer would pay no more than $183K, at less than the Glorious WH loan figure plus a Modest Profit.

Which is exactly what happened. I've related my own case here - nice work if you can get it.

If we estimate the extent to which this new pricing floor conferred instant CG to tens of thousands of low-end houses, we could say an average increment of $100K, times say 30K homes in Awkland - that's $3 billion CG.

Now divide that CG thus conferred, by the number of WH loans ever advanced: say 10K.

It works out to $300K advanced via CG per WH loan.

It also explains the precipitate jump in the rate of increase in house prices thereafter, at least to some degree. Because the reaction to the re-pricing across the board was, oddly enough - 'hey, we cannot find a house for the current WH loan limit - better raise it'. E.g. here:

First home buyers can now borrow up to $350,000, up from the previous cap of $280,000.


Which, unsurprisingly - set off another round of universal price increases....which set off another WH loan limit increase which.....

The Welcome Home Loan was introduced in 2003. Between its inception and May 2009 a total of 4,482 Welcome Home Loans have been settled, translating into access to home finance of over $719 million.


The above works out to $160,420 advanced per loan. Compare this with my (quite possibly chimerical) figure of $300K given away in unearned CG via Universal Higher Price Floor, to all and sundry....

And even today, who, in their right Economic mind, would sell a house for less than the current WH loan limit? Because the essential qualification - 'can you fog a mirror' - is fairly straightforward.......

My contention is that this was easily the dopiest, most economically damaging policy, invented in recent times. Markets for houses are slick on the upside, sticky on the downside. They certainly don't need stoopid Gubmints incentivising mass upwards re-pricing....but that's exactly what happened.

Thursday, June 01, 2017

Why house prices took off 2002-3

The graph of house affordability wonderfully clearly illustrates the way in which Ms Market end-runs stupid politicians.
The immediate cause of the 2002-3 jump in unaffordability was a choice by the newly elected Labour Gubmint to 'help' poor people into their homes. The Welcome Home scheme was a typical politician's gesture to cement its electability.
Unfortunately, this was achieved (to the extent possible - the number of WHL's eventually taken up is in the low thousands) at the much wider price - gently hinted at in this 2007 article http://www.stuff.co.nz/southland-times/news/34275/Southlanders-welcome-h... - of cementing in price floors all over the country.
As the article suggests but does not pursue, if a guaranteed loan (criterion for issue - can ya Fog a Mirror?) of say $100K is plugged into a market where low-end prices are well below that, then what's a vendor gonna do?
That's right, folks, tack a '1' in front of what they were asking for the shack in question.
And once ya starts this boondoggle a'rollin', it gathers speed (higher prices), it affects most of all the exact constituency it purported to assist (the poor Labour voter) and the only way out of the mess is to raise the value of the loans on offer. Which promptly sets off another round of asking-price inflation.
After all, what vendor is not going to sell for the available guaranteed-loan value plus a Modest Margin?
The secondary cause of the price inflation was the familiar one thrashed about on these here august pages for a decade: the dreadful co-incidence of spatial planning (supply limits) and more regulation (Building Act, revised in 2004, Elfin Safety mania). The planning debacle conferred a Planning Gain to developable land (paid for by the buyer, who else) and the Regulation mania increased construction costs substantially. But that only affects new builds - the price explosion I am focussing on here is for existing older stock.
A personal example will suffice - I would invite an Auckland example (where the whole thing has exploded most spectacularly) to sit alongside my experience.
We bought a shack in 2001 for my son, just around the corner, in an eastern suburb of Christchurch, for $47K. Yes, Virginia, prices like that for 'needing TLC' properties were not uncommon. We straightened it up (it had a pronounced lean to the Left as viewed from the front - ironic, innit) tarted it up with paint, ply, grass and improved the stormwater drainage plus added a foundation to replace the rotted stumps that greeted us. All Like-for-Like, all done by my son and yours truly, a nice if small unit (around 70-80 squares, we never did measure it up) basically in our spare time.
We spend around the same amount - $40-odd K - to achieve of all this, so it owed us perhaps $85-90K.
Then, mirabile dictu, the Welcome Home scheme came along.
Overnight, it was impossible in the whole of Christchurch to buy anything that did not start with a '1'. Vendors treated the WH scheme as a universal pricing signal.
We cashed the little house in for $123K and split the proceeds 50/50. This proves the point about screwing up the low-end market by a naive and economically dopey funding scheme.
Only 18 months prior, a deserving young FHB could have gotten it at auction for $47K - it was quite livable as is provided one trod lightly over the missing-stumps bit.
That difference - $47 to $123K or 161% in original cost - is exactly what the stoopid politicians wrought by introducing a massive re-pricing incentive. And, of course, offset by the improved condition that we provided.
And the real pity is that as noted, the pricing structure this triggered off was universal, whereas the WH Loan applied only to a comparative few.
If one had the figures and divided the overall price adjustment NZ-wide by the number of WH beneficiaries all time to date, the figure would shock and horrify - it is most probably in the hundreds of millions or even low billions per such WHL recipient.
Ms Market is a stern mistress.....

Awkland Social Housing - bring in the Robots....

What would help buildings affordability (land prices aside, because they are a direct result of planning zoneration and strangulation over decades, following failed Brit-style planning fads) is a concerted effort to:
  1. Establish factories for mass production of entire houses. Panelised, SIP etc. Little labour, mainly robots, CNC and lotsa clever software, all of which exists right now.
  2. Isolate products of these factories from the incompetent hands of Councils by multi-proof consenting them at source. This leaves only founds and services to the inept ones.
  3. Contract with these factories to produce social and affordable housing, so as to guarantee volumes - factories need certain volumes above the break-even point to have any future.
  4. Crank it all up - the point of factories is fast, cheap, reliable quality, all done under cover. Great contrast with the current way of 'building' which has components clonked together by (wait for it) drug-addled hammer hands, out in the Awkland weather for weeks, and subject to the beady eyes of Inspectors who (rightly or wrongly) suspect that every single house is a Disaster in Waiting.
There's some real Social Investment, Next problem?

Thursday, November 17, 2016

Kaikoura rail prospects

The rail from Parnassus through to Kaikoura was the very last (because the toughest) main rail link to be completed.  In 1940 ish (see http://www.railheritage.org.nz/Register/Listing.aspx?c=21&r=4&l=35 and http://www.newzealand.com/int/article/where-the-mountains-meet-the-sea/ ).  There was the start of an alternative routing north out of Parnassus during the Depression and the embankments for the bridge over the Leader River are still there as evidence of that.  There was also a rail branch to Waiau, but that vanished in the 60's/70's rationalisations although the line from Waipara to Waikari is still extant, used for heritage excursions.  From Waikari to Waiau is easy country with one major river crossing (Hurunui) only.

But the talk of 'alternative routings' is fraught:  the entire area from Waiau (inland) or Conway (coast) is riven with faults, has steep gullies (inland road SH70) plus even after the much-photographed and ooh'd-aah'd over coastal section north from Oaro,  there is a long climb out of Oaro south through steep coastal cliffs, through a tunnel (Conway Bluff) then up the Conway to Parnassus.  And as those faults run across the line of the coast and of any alternative route, no route can be thought of as 'safer'.

For my money, extensive rock shelters would proof the line against the inevitable slips and rockfalls:  these are common after heavy rain in any case, let alone quake/fault events. And at least we know exactly where all the vulnerabilities are, now.   Shelters would also preserve the views, which is a major drawcard for the whole area.  They won't be cheap, though...

Friday, October 07, 2016

Schadenfreude over Energiewende

Sacrificed Landscapes – How the Energiewende Is Destroying our Landscapes.  Book (in German, initially) soon to be published:  author is Georg Etscheit.

In the book’s promotion video, a number of Germany’s leading environmental experts are seen denouncing Germany’s Energiewende, as they are aghast at what is going on.

Prof. Dr. Niko Paech, sustainability scientist, says:

"What’s awful about the destruction of the landscapes and the government is that all of it has a legitimization.”

and

"The German Energiewende has become a justification for destroying our last remaining natural landscapes.”

and

"Science is legitimizing a rampage against nature. We destroy the landscape while we claim it is serving the ecology. It’s a cannibalism by the measures. Climate protection is the aim that justifies the means to destroy all other remaining environmental media.”

Dr. Gerhard Gronauer, pastor:

Climate protection that uses technical means against nature is a contradiction in itself.”

“Greatest fraud project”

Jörg Rehmann, journalist and author:

"If we want to survive on this planet, we need an Energiewende. But what the policymakers have made of it is not an Energiewende, rather it is the greatest fraud project since the end of the second world war.”

and

"Serious science has long proven that the Energiewende cannot in any way reach its targets. Society has to bear billions in costs, already energy prices are exploding, and policymakers are driving us further into a nuthouse in the clouds.”

Hmmmm.......

Monday, June 20, 2016

Building lotsa Houses Fast

There's a win-win-win proposition possible. I've harped on aboot this for so many years that the words just write themselves. And there are of course, Trade-offs - this is a real-world deal after all.
First things first:
  • Gubmint is best at setting overall parameters, and a small amount of pump priming So the single overall parameter of note is multi-proof consented house designs, and the pump priming is getting one or more housing factories manufacturing those designs, at volume.
  • Multi-proofing the designs side-lines the stupid TLA's and their interminable and expensive consenting processes.
  • Getting a few House Factories up and running means some development incentives, and some volume: the former possible via e.g. tax or depreciation breaks, the latter via letting social-housing contracts for hundreds of houses to achieve short break-even times for aforesaid factories.
  • My personal favourite: staff these factories with re-trained and now unemployable TLA consenting wallahs. Instant productivity increase, This is, of course, not a compulsory feature. But oooh, wouldn't it be nice (to mis-use a Beach Boys lyric...)
  • Finance all of this via a combination of Stamp Duty, CGT and swingeing differential rates on buildable but bare land - could even be relatively small net cost compared to the increase in social utility via warm, snug (of which more later) and cheap houses.
Ah, those trade-offs:
  • Accept that small, highly modular designs are all there is. Small = less cost, modular = able to be cranked out by automated machinery in factories.
  • 'All there is' means abandon architects, consultants and the plethora of ticket-clippers who infest the building industry as currently constituted. If any of these types find themselves unemployed, into the Factories with 'em...
  • Alter district plans top-down, by building into the NPS the requirement that houses produced this way override district plans, NIMBY's and BANANA's and the production thereof would constitute Compliance with the NPS. This accords with the rising realisation that Awkland could well sink the rest of us if left in the bumbling hands of ACC i.e. it's an issue of national significance
The target would be not less than 15-20,000 such houses per annum, over the next five years. As Christchurch demonstrates in spades, flooding the market with lotsa land and building lotsa houses (and, BTW, doing it the old-fashioned way, with occasionally drug-tested hammer-hands clonking frames together out in the weather) has screwed house prices to affordable (barely) levels through the Magic of Markets. Doubters can consulthttp://mikegreerhomes.co.nz/home-and-land/search/ and try Faringdon: house plus land start at $419K.
I've no doubt that this is doable. It just takes the will (and the cojones and vertebrae amongst politicians of all stripes). Aye, there's the rub........(Awkland Unitary Plan pun included for your delectation)....

Thursday, June 02, 2016

Why RBNZ can't solve the Auckland Housing Bubble

Common taters who pooh-pooh the effect of Supply are ignoring the Christchurch experience.
There, a CERA-led Land Use Recovery Plan got a whole lot of large subdivisions moving toute suite, and it's possible to buy a section in (say) Rolleston, one of the new growth centres, for mid-$100K. Example: Faringdonhttp://www.faringdon.co.nz/building/house-and-land-packages/ Or try a wider search:http://www.mikegreerhomes.co.nz/home-and-land/
Read that, Awklanders, and weep into your cereal.
The solution to housing unaffordability is a complex, multi-year deal, completely out of the reach of the hapless RBNZ. Consider the following non-central-bank actions needed:
  • trust-busting action over the cosy building-materials cartel duopoly, to lower material and hence build costs
  • elimination of zoning and other Brit Town and Country Planning artefacts: zoning, amongst other evils, causes Commuting, as living and working are forced to separate areas by planning fiat.
  • Encouragement of modularised/factory built housing - CNC gear, tight tolerances, built under cover by certified workers. Not bashed together on site by occasionally drug-free hammer hands and left to stand unprotected in the weather for weeks at a time. Unemployed Planners could usefully be press-ganged into such factories - win/win/win
  • Self-builds and other sweat-equity schemes could be revived. The current crop of regulation is unlikely to cost much less than $50-100K per dwelling, once fencing, scaff, fall protection, lost time, etc etc are accounted for properly. But it's All fer yer Own Good, little serfs....If we reverted to the situation of 15 years ago, when practically none of this crap existed,.....
  • Reform TLA regulation by introducing time-money into the equation and make them responsible for accounting the opportunity costs they impose. Time costs, incremented at IRD's UOMI rate, would be a start. TLA's inject time into every process imaginable, and currently have zero awareness of, and thus have zero accountability for, the costs they thereby force onto others. Time for some transparency.
  • Bring in friction to the sale process: stamp duties, CGT, whatever. A Tobin Tax if you will. In a similar vein, make TLA's tax the living bejasus outta unimproved but buildable land. They can do this by a simple differential rate, Ten or fifty times the going rate would claw back some the unearned CG the land bankers are squatting on, and might help to get something Built on that bare dirt.
Precisely none of the above can be done by Aunty RB.
It was done in Christchurch by emergency powers - benevolent diktat if you will.
Fat chance of anything happening in a national sense though.
That would take pollies at Gubmint and TLA level with the correct combinations of brains, thick skin, cojones and vertebrae. No such animal exists, despite extensive Attenborough-type searches over the years.

Monday, May 23, 2016

Why housing supply is strangled

Common taters seem to assume that it's purely a Gubmint issue - ban furriners, build anything anywhere, tax the living daylights outta Them As Wot As Deemed Bad. Essentially, take one or two simple actions, wave the wand, and presto, Nirvana is delivered. Etc., etc.
The issues are much more numerous, intertwined and complex than that. A sampling:
  • The price of land, as the Productivity Commission has long since noted, is wildly distorted by MULs, RUBs and other emissions of Plannerz Feeble Brains.
  • The price distortion is of such long standing as to have become structural. That is: inflated land prices have spread to neighbouring properties, suburbs, localities and cities.
  • If the land price is wrong (ht the much-missed Hugh Pavletich), everything on top is wrong.
  • Gubmint policies to "help the FHB" such as Welcome Home loans have instead served to cement in a price floor, thus institutionalising the price ratchet effect.
  • Building material prices are in the steel vice-grip of a cosy duopoly, so materials alone are much more expensive than they need be. A quick Google of Bunnings, the co.nz and the com.au, should serve to convince the unbelievers.
  • The LBP mania rules out self-builds, sweat-equity and other self-help possibilities. Time was when anyone could build their own. Norman Kirk did. No more.
  • TLA 'contributions' can be measured at close to $100K per dwelling, for all manner of things, on a take-it-or-leave-it basis. A natural monopoly, completely unregulated...
  • Elfin Safety adds $5-10K layers at every turn: for such innovations as scaff, fall protection, site meetings, inspections, certifications of scaff and electrical cords and tools, Most completely unknown (and, arguably unnecessary) 15 years ago. Ask older tradies (who have, sensibly, quietly faded into the shadows or gone under the radar)
  • Building inspections and other regulation is mainly concerned with liability avoidance, not actual structural assessment. Witness the mountain of Producer Statements for every bracket, beam, bolt, fitting and component. Easy to count and file to get the ticks, very little relationship to (say) the performance of the structure in a severe earthquake. There's little to no dynamic testing (e.g. exerting a 0.5 tonne upwards force on a purlin to test security in a gale or pushing a corner of a building sideways with a known pressure) All cost, close to zero benefit.
  • Few builders exceed 100 units per year, and most is done outside, in the weather, with close to zero QC, by indifferently skilled hammer hands (drug-tested, if you're lucky). Contrast that to the build regime for boats, aircraft, caravans and portable structures: indoors, tight QC, tight tolerances, done in volume and serial-numbered/guaranteed. Spot the difference? Check a local build, and count the weeks the frame stands outside, unprotected, in the rain...
I've touched on only a few of the major aspects of the whole shemozzle, but perhaps y'all get some idea of why Gubmints are so reluctant to grapple hard with this tar-baby......

Friday, May 20, 2016

Auckland Under Fire

Henny Pulse, Deputy Squawker for the Associated Cluckfusters Collective, is all a’flutter about the challenges recently made to the proposed Unitary Plan.
Your humble scribe interviewed her on the background. Henny, resplendent in polished wattles and her customary bright pink legband, was positively crowing about the proposals.
‘As you know’, she intoned, ‘we already have a Plan, which includes a RUB.  It’s taken years and years and a whole lotta pellets kindly supplied by our ever-giving funders, to get this to the starting point.  We have a whole team devoted to it, the grey-leg-banded ones. We call them the ClusterFlock.  And we have a Hendependent Hearings Panel to make sure it goes through just like we want.  And there are 23,000, no wait, 23,005 new plans consented.  So the challenge is just piffle - there's no shortage of Potential HenHouses.’

Your scribe reminded Henny that the point of the challenge was that the land pricing was All Clucked Up because of the RUB, as shown by the Productivity Commissions Hextensive research.  This shows price differentials for raw urban land inside the chicken-fencing, that were around 10 times the price of the cow paddocks Outside the Caforesaid fence. Plus, your scribe boldly asserted, the assorted CluckFusters had caved to the NIMBY and BANANA types who infest the Wider Chicken-run.
Henny was quick to bounce this away.
‘Why’, she warbled, ‘there just hasn’t been enough thought given to the working poor and those who need to get their tiny claws on the first rung of the Ladder to Permanent Perchdom, not to mention laying the odd Egg or three in a Suitable Nesting-Box.  That's what those 23,005, no, wait, 23,023 new consents are all about.  Perches for All!’
Assuming the royal ‘we’, we then reminded Henny that this didn't at all address the two Unfortunate Obstacles to Affordable perches:  the fact that artificial chicken-fencerating raised HenHouse prices everywhere, and that practically every one of those 23.040 consents vould not be afforded by younger two-tooth chickens, or by those with Insufficient Chicken-feed to - er - Deposit.
‘Oh, that’, she waved an arm dismissively. ‘Well, as you will be aware, we now have a Team of Henconomists who have clucked around with this notion, subjected it to Henpirical Tests (I think that’s the phrase), and have advised us of their findings.’
‘It seems a rare phenomehen they are terming Henflation, has condemned a whole generation of hatchlings to nesting under bridges and at the top of power poles – all Elfin Safety Hazards in the Extreme.’
‘Therefore we are determined, after more, careful Henconomic Research, to put a stop to this in the Interests of the Wider Flock’.
We then reminded Henny that the rare phenomehen had already caused Nesting-Box prices, expressed in terms of years of pellets per annum, to rise way above 10 years’ supply:  in the Severely UnHenFordable range.  And what did she propose to do about That, given that there was, whodathunk, a link between Planning and Price?
‘Well, nothing immediate’, Henny replied.  ‘We have to rely on the Sage Advice of our Henconomists and Planners to get ourselves out of this’.
‘Now, sorry, must fly, there’s Perch Contest soon and I wanna be Head Hen for once’, and so she departed, leaving your faithful scribe to ponder why it was that the very same Cluster-Flock who had propelled us Into all this schemozzle, were gonna be relied upon to get us Out…..

Thursday, March 31, 2016

Christchurch Old CBD Precincts' fate

Press article http://www.stuff.co.nz/business/78261803/confidence-slump-among-christchurch-landlords refers.
The Precincts idea has crashed and burned, mainly because of ECON101. The Health Precinct is there all right - but between Kilmore and Bealey - not quite where the Planners Planned, but where the private health players decided to cluster.
The Justice precinct is there all right - amply funded by the person you can see in any mirror.
The rest of the Precincts are toast, because anyone with a calculator and three brain cells can see that paying $3-400 per square per year in the suburbs, leads to higher profits than paying $6-900 in the Old CBD.
And the CCC is perfectly fixated on the Old CBD.
In so doing, it is neglecting its core objective - to Serve its Customers. And, that means wherever those Customers have chosen to locate themselves. This is an abject and serious dereliction of its duty to We, the People (and, not coincidentally, the Funders.)
CCC should be concerning themselves with servicing the New CBD ( (Sydenham/Addington/Middleton/Riccarton/Hornby/Airport arc, plus the Oxford Terrace to Bealey Ave strip and Montreal/Victoria Street), which has forged ahead, safely out of the cold dead hands of CCDU and CERA, and has thereby taken most if not all of the potential business tenancies.
 Just as Selwyn DC's IZone has eaten CCC's industrial-land lunch, the New CBD has eaten the Old CBDs'.
To be sure, the Old CBD will evolve into an interesting space over the next 20-40 years.
But this evolution will be Organic, not central-planner driven.
Because, as the article clearly demonstrates, Preferences trump Plans..

Monday, February 01, 2016

NZika virus

A new variation of a very old virus has hit Auckland. It is being dubbed the NZika. It manifests by a curious shrinking, or indeed complete atrophy, of the financial brain, but seems confined only to property owners, real estate agents, and the assorted other parasites which inhabit the property ecosystem.
It results in frenzied bidding at property auctions, seemingly without regard to income, yield or cash-flow considerations - in effect, an instant lowering of financial inhibitions. The virus has rapidly accelerated through the property-owning class in Auckland, but as the transmission mechanisms (still apparently unknown) mature, it seems to be gaining a foothold in adjacent areas, thus giving rise to speculation that it is in fact spread by intimate financial transactions.
The Reserve Bank of New Zealand has made several attempts at controlling the spread of NZika.
  • It has tried an inoculation campaign, by temporarily raising interest rates so as to inject some financial reality into the afflicted subjects. However, before the results could be ascertained, it was forced to drop rates yet again on the advice of the Combined US-China Plunge Protection Team, leaving the results indeterminate.
  • It has tried a Financial Prophylactic Device, being an IRD-registered and surgically inserted Cap on certain parts of the Financial property Anatomy. Early results were promising, but as with many medical and social experiments, the potential for unintended consequences is large and there are too many uncontrolled variables (not to say, Financial body parts) to be able to say with certainty that NZika has been contained, let alone diminished.
  • It has been confounded by the fact that NZika seems also to have an intimate link with the land-use, zoning, consenting and other policies of local authorities. These institutions are staffed by people with zero financial brain capacity as a condition of employment, and thus are completely immune to the financial effects of whatever policy fad they embrace, and indeed, to NZika itself.
  • Having regard to the foregoing, financial medical researchers suggest that local authorities and NZika form a symbiosis - a mutually beneficial relationship between two otherwise completely unrelated species.
Under these circumstances, the Reserve Bank is, apparently, considering compulsory genetic modification to local authority staffers, to confer a heightened (rather than an absent) quotient of financial intelligence.
However, and at this writing fatally, the Die Grünen Collective have barred the necessary preliminary research. They aver that local authority planning staff, like the fabled Stockton Snails, are a rare and endangered species, and that the Precautionary Principle should Prevail. Preservation of said planners, no matter, it seems, how disastrous for the millions outside the Property Ecosystem, trumps any possibility of combating NZika.
Truly, some Ecosystems are more Equal than Others....

Thursday, November 19, 2015

Why it is nigh impossible to put up cheap accommodation

Roelof asks "Why can't Salvation Army be allowed to build cheap roofs over peoples heads.... Why can't we have more garages/sheds.... anything... that makes sleeping in a car or outside simply a choice rather than a brutal necessity..???"

Thinking through that very pertinent question out loud is useful, because it exposes the relentless creep of issues that have completely foobarred the housing industry in general, and quick, low cost housing in particular.

There's absolutely nothing technical about getting a living space together that is beyond the capabilities of a modestly handy bunch of people. Tiny houses and caravans are exemplars precisely because they dodge the issues which bedevil the construction of larger spaces. The sorry list commences.
  • Five sorts of LBP needed to touch a conventional house: founds, weathertightness, structure, carpentry, roofing. Hiring LBP's does not come cheap even though most of 'em were created by a mail-in form from building trade mags. Equivalent of packing the cert in with the WeetBix....
  • working at heights for anything over 2.4, which in practice means everything roof-related plus fall protection. Expect the bill to run $5-15K.
  • fencing of site and those 'Sign has Sharp Edges' hazard notices. Expect another $4-8K.
  • Electrical and plumbing need certified tradies (the attraction of tiny house 12/24v everything plus cassette loos, suddenly makes sense)
  • Use 230v tools anywhere on site? Every cord, tools, connection, distributor box etc needs tagged. It's for your Own Good, see. Expect $20 per item per year. Easily a grand a year if you are tool-addicted....
  • Oh, and the local avaricious authority will want anywhere between $10 and $80K to hook you into services like power and the three waters.
Notice, dear people, that we have not yet started to acquire the land, or buy materials. You have the pleasure of dealing with a local monopoly (the planning authority) for the former, and a cosy duopoly for the latter (Fletchers and Carters).

Now, sing me a sad song about all a them Poor Folks without a roof over their heads.....but that list above sure answers most of Roelof's very good question.

Right to Build??? Ha.....

Monday, September 28, 2015

Why Central Christchurch is still tumbleweeds

The Press appears to be mystified as to why this should be so. 

The reasons for this schemozzle are simple and unpalatable.

1 - The bureaucracy running things in the Old CBD has no notion of Time=Money. A building proposed in 2011 for $30m will now cost $40m (construction cost inflation runs at around 8-12% per annum).
So the pure elapse of time renders proposals unfeasible by the time the final box is ticked.

2 - The New CBD ( (Sydenham/Addington/Middleton/Riccarton/Hornby/Airport arc, plus the Oxford Terrace to Bealey Ave strip and Montreal/Victoria Street) has forged ahead, safely out of the cold dead hands of CCDU and CERA, and has thereby taken most if not all of the potential business tenancies.
Just as Selwyn DC's IZone has eaten CCC's industrial-land lunch, the New CBD has eaten the Old CBDs'. And even there, vacancy rates are not zero: there is plenty of $300-ish per square per year floor space for rent...

3 - The Precincts are too big. Getting tenants for a single existing New CBD floor plate is hard enough now at $300-400 - try getting an entire blocks' worth at $600-700 in the Old CBD.
If CCDU and CERA had read their disaster history (great Fires in London, Chicago) they would have realised that individual owners drive regeneration. Not city-block-size behemoths. So the Baron Haussmann fantasies are just that - fantasies.

4 - Share-an-Idea placated the masses by seeming to promise their 'input', and disguised the ineptitude that actually existed. It also promoted an absolute fantasy that building design and contract commercials could somehow be democratised. This accounts for much of the later disillusionment with planners, schemes, precincts et al.
Buildings need haggle, tenants, financiers, and persistence. Not one soul per 10,000 who Shared their (often hilarious) Idea had any skin in the game except as a passive consumer of whatever eventuated. A total failure, yet a useful circus act.

Wednesday, July 22, 2015

SquawkLand Densification

Henny Pulse, Deputy Squawker for the Associated Cluckfusters Collective, is all a’flutter about the proposed re-densification changes to the One Plan to Rule Them All (Optrta)

Your humble scribe interviewed her on the background. Henny, resplendent in polished wattles and her customary bright pink legband, was positively crowing about the proposals.

‘As you know’, she intoned, ‘we already have an Optrta.  It’s taken years and years and a whole lotta pellets kindly supplied by our ever-giving funders, to get this to the starting point.  We have a whole team devoted to it, the grey-leg-banded ones. We call them the ClusterFlock.’

Your scribe reminded Henny that the previous Cluckfusters had turned down a very similar proposal just two years ago, right on the eve of the Perch Priority Contest to establish the new pecking order.  Worried about the possibility of Falling off the Perch altogether, the assorted CluckFusters had caved to the NIMBY and BANANA types who infest the Greater Collective Catchment.

‘Why’, she warbled, ‘there just hasn’t been enough thought given to the working poor and those who need to get their tiny claws on the first rung of the Ladder to Permanent Perchdom, not to mention laying the odd Egg or three in a Suitable Nesting-Box.’
‘So, with Greater Density, there will be the opportunity for More Perches, Collective Warmth, and the growth of Nested-together Community.  Win-win-win, I say, what,  What, what, what?’

Assuming the royal ‘we’, we then asked Henny why this apparently simple approach had not been adopted years, nay, Decades ago.

‘Oh, that’, she waved an arm dismissively. ‘Well, as you will be aware, we now have a Team of Henconomists who have clucked around with this notion, subjected it to Henpirical Tests (I think that’s the phrase), and have advised us of their findings.’
‘It seems that restricting the supply of Nesting Boxes, and making onerous conditions about their Appearance, Size, Cladding and Colour, has caused a rare phenomehen they are terming Henflation, and has thereby condemned a whole generation of hatchings to nesting under bridges and at the top of power poles – all Elfin Safety Hazards in the Extreme.’
‘Therefore we are determined, after more, careful Henconomic Research, to put a stop to this in the Interests of the Wider Flock’.

Your scribe then reminded Henny that the rare phenomehen had already caused Nesting-Box prices, ezxpressed in terms of years of pellets per annum, to rise way above 8 years’ supply:  in the Severely UnHenFordable range.  And what did she propose to do about That, having virtually admitted that there was, whodathunk, a link between Planning and price?

‘Well, nothing immediate’, Henny replied.  ‘We might have Caused this, well, Partly, but we will have to rely on the Sage Advice of our Henconomists and Planners to get ourselves out of this’.


‘Now, sorry, must fly, there’s Perch Contest soon and I wanna be Head Hen for once’, and so she departed, leaving your faithful scribe to ponder why it was that the very same flock who had propelled us Into all this schemozzle, were gonna be relied upon to get us Out…..

Wednesday, June 10, 2015

German versus NZ builds

A response to another idealistic article in the Press.

Consider the following differences between Germany and NZ:

1 - Germany has a 'right-to-build' in its Constitution.  A good summary is here.    Contrast that to NZ, where self-builds are effectively ruled out:  5 different LBP licenses are needed to build a typical dwelling:  Foundations, Structure, Weathertightness, Roofing, Joinery.    And the Planning and Consenting needed for a build is bordering on the insane:  a nice, recent example:  an acquaintance with a new home had its final inspection turned down because....the shower door was not present.  Against this sort of bureaucratic stupidity, the Gods themselves rail in vain, to mis-quote Schiller.

2 - the restrictive land-use policies of the old Town and Country Planning Act (long-repealed but casting a long and spiteful shadow) mean that the land price is inflated by delays (interest/carry costs), fees, levies, contributions, and scarcity.  The Productivity Commission notes that the ratio of rural bare land to urban bare land prices is around 1 to 10:  the 'urban zoning value boost' is solely a Planning-caused phenomenon.  If the land price is out of whack, so is everything else.  Germany was never infected by the Brit Planners (motto:  'We finish what the Luftwaffe started') disease.

3 - Building is, as the Planning Commission notes, a 'cottage industry' - only 5 builders in the whole of NZ put up more than 100 houses per year.  This is in contrast to Germany, where factory-built houses or large components/modules thereof, is the standard.  And factory build mean quality control, tight tolerances, building under cover, and fast build cycle times.  Whereas clonking together raw timber frames, as is the wont of 'builders' here, carried out by a motley crew of drug-tested hammer hands, with intermissions where the frames stand out in the rain for weeks, and where Elfin Safety adds $5-10K layers of cost at every turn:  scaff, fall protection, fencing, power tool certification, credentials needed to wipe noses, is the norm.  And then we wonder why builders concentrate on the top end and large builds if they possibly can.

To be certain, I would just love to see the sort of builds you mention, David.

But we are not going to get them, affordably, given current policy settings.  Starting with land prices.

Sunday, May 10, 2015

Henny's latest Squawk

Henny Pulse, Deputy Squawker for the Associated Cluckfusters Collective, is all a’flutter about the proposed Special Henhouse Areas.

Your humble scribe interviewed her on the background. Henny, resplendent in polished wattles and her customary bright pink legband, came out firing.

‘Why’, she warbled, ‘there just hasn’t been enough thought given to the infrastructure needs of new Henhouses. Nesting materials, for example. Without a prior delivery of this material, no SHA can possibly be started. So, it’s simply the Responsible thing to do, to demand a commitment from those pushing the SHA’s, to stump up with nesting and other materials. So, along with my fellow Cluckfusters, we just won’t permit any new henhouses until this happens.’

Assuming the royal ‘we’, we then asked Henny what about the issue of Homeless Fowls, and the recent wave of immigrants from Other Farms, attracted by our local culture, the prospect of free-range dwelling, and the not incidental prospect of massive Nest-price Gains (non-taxable).

‘Oh, them’, she waved an arm dismissively. ‘Well, we already have a HenHousing Unitary Plan for that lot. It’s taken years and years to get this to the starting point, we have a whole team devoted to it, the grey-leg-banded ones. We call them the ClusterFlock.

The Plan envisages that we just stack a whole bunch of little cages up into the sky and invite these new flocks to take up residence. No need for new HenHouse Areas at all. Why, on a Good day, they can, with some effort, turn around in their tiny piece of real estate, and see the Sea!’.

At this point, a very Flustered PR Flackbird flew in, alighted on Penny’s back, took a mouthful of wattle and a right old henfight ensued.. The upshot of which was that ‘cages’, hutches’, ‘battery fowl’ and any mention of square centimeters per fowl were deemed ‘prohibited speech’ and were to be stricken from the record. The replacement phrase was, evidently, to be ‘sustainable sky-home’.

Armed with this sitrep, your scribe then turned to the Head Farm Rooster – a rare bird, sporting matching Blue and Green legbands, and asked for his reaction.

‘Henny, I regret to say, he intoned, ‘is on a hiding to nothing. Not only do the CluckFusters lay enough eggs to buy all the nesting material they need, but they actively sustain a nest-banking industry by dribbling out new-nest permits at a frankly appallingly low rate. This keeps the nest pricing structure way out of whack with eggs-per-day income possibilities. So, it’s up to them.

And, anyway, as Farm Management, we can overrule this shed any old time we feel like it. But which, to be perfectly honest, we don’t want to do. There may indeed have to be a few Omelettes, to teach this sorry flock their place in the pecking order. But you’re not ever gonna see any Blue-legband clawmarks on any of those broken eggs…..’

'We prefer to let Nature to take it's course. Red in tooth and claw, isn't that the way?'

Thursday, May 07, 2015

Awkland housing - again

Auckland City Council and the Gubmint are having a hissy fit.

ACC has overplayed a weak hand in any case.. They are infested with Brit-style Town and Country Planning Act 'planners' (the Brit's motto - we Finish what the Luftwaffe Started), who have not the slightest notion of economics, development cycles, affordability or the other aspects which, on the ground, determine what is built, where, when, and for how much. Planners are expensive in themselves, and they certainly add cost to the development cycle, if only via the injection of Time to all processes.

The build-out of the major world cities of yore was, in many cases, following infrastructure provided by private speculators, but with Gubmint incentives. London's tube (John Lanchester 'What we talk about when we talk about the Tube'  is a useful primer here, as is Kunstler's 'Geography of Nowhere' for the USA scene. Development followed the lines (tubes in London, horse trams, electric trams, buses in the US). The London tubes were private companies (and at each other's throats) until the early 1930's.

I'd point to another Gubmint aspect which is a significant contributor to housing unaffordability: regulation and licensing. Examples:

- Scaffolding (a recent and extremely expensive requirement)
- LBP - at least 5 licenses for various bits of a building = downtime, overheads, cost
- fencing and worksite safety in general - way out of kilter in terms of cost/benefit ratios. Ask an older tradie.
- tool certification (at least the battery-powered kit is proof against this madness - for now)

The question is, of course - how much benefit is actually derived from this very significant cost (I'd estimate not less than 10% of build, could easily be twice that)? Again, the older tradition of craftsmen builders has little patience with all of this: they operated in a time when one built Up to one's reputation, not Down to some Code.

The Christchurch earthquakes give us an answer.

I estimate that 70% of residential builds were done in a time when regulation was absent (pre 1950's), light (to 80's), or at least sensible (to the mid-90's).

No-one was killed by bad build structures in residences, once one excludes URM, chimneys and exogenous sources (rockfall etc). Structures twisted, tilted, and cracked. But they did not kill their occupants, in a 2+g vertical acceleration sequence.

So the 'old', lightly regulated practices and their built results, have withstood probably the most severe test Gaia could devise.

Modern codes add cost but little to no incremental benefit, compared to these.

And more cost = less affordability. It's as sad and as simple as that.

Monday, February 23, 2015

Quake Anniversary Feb 22

In the to-be-written economic analysis of the Canterbury quake series, there will be wonderful case studies for Public Policy, Management, and Engineering students, for decades to come.

Some streams/anecdotes:


  1. Most business that survived carried on.  There were no overall shortages of fuel, gas, food, power or FMCG beyond the first week:  the old adage of 'keep a week's canned food' was in practice fulfilled by barbecuing the contents of powered-off freezers.  There were certainly localised pinch-points.  But everything, basically, just carried right on.
  2. CBD businesses were decimated:  not because of the quakes, but the lockout that followed.  A few wise ones signed up as demolition workers, got their stock and records, then resigned.  Lawyers hired crane firms to swing them into their maroooned high-rise offices and retrieve case and client files.  But small busnesses either relocated and bought new plant and inventory if they could, or simply folded.  A good research project here.
  3. A Baron Haussmann frenzy then ensued:  the infamous 'Share-an-Idea' kept the masses happy typing ludicrously inept ideas about Grand Green New City, while the Planning Mandarins in CERA and CCDU hatched the equally shambolic idea of Precincts (entire city blocks) on the notion that this would encourage design elegance, uniformity, and high standards.  What they got, of course, was acres of car-park, a four-year wait with commercial construction inflation rollicking along at 12-15% per annum, endless '100-day' promises, no commercial takers and hence complete stasis on the ground.  The only tenants with deep enough pockets for all of this Poo-bah shtick are the Gubmint agencies, funded by, quelle surprise, you, me and Swiss Re.  Hence the Justice and Health precincts will survive.  The rest haven't.
  4. My own estimation of city-wide damage (my architectural eye-o-meter) is 85% just fine albeit with some ripples in the Gib, 5% totalled (say, 8,000 of the 160,000 rateable properties city-wide), and 10% somewhere in between.  This accords neatly with the business survival, which was instant (if possible at all) and which has been inestimably aided by the vast stupidity of the CCC relative to its country cousins.  Selwyn DC and IZone have, simply put, eaten CCC's lunch, as a glance at Rolleston will confirm.
  5. CERA has been rolled into DPMC, which assures it of micro-management and equally of doing nothing startling.  It has acted well over red-zone residential clearance, appallingly over CBD lock-down, and in the true spirit of unfettered bureaucracy grew to around 500 warm if doubtfully useful bodies or so at its peak.  Not counting consultants, PR, IT and other outsourced stuff.  My overall impression is that it was not bad at tactics, clueless about strategy.  But then politics (DPMC, remember) largely dictates all this.
  6. CCC is fixated on CBD-corpse-CPR.  All its traffic, planning and other energy has been poured into this (Bloomberg's words) quake-ravaged wasteland.  But the joke (and it's a bad one) is that no-one cares about the Old CBD: they have a New CBD distributed across points west (West of Avon to Bealey Ave, Riccarton, Addington, Middleton, Hornby, Airport, Rolleston, West Melton).  There's nothing to go there for except Ballantynes (an institution like K&S in Wellington, S&C in Awkland), it's painful in terms if memories, and the roads are dreadful, slow and have lost all their landmarks.  Yet CCC keeps right on pumping the chest.  In doing so, it has neglected the suburbs, their facilities, their population, and has alienated itself from them as a direct result.  Good luck with extracting swingeing rates increases from them in future....Sir Bob the Jones wrote an early article stating baldly that the CBD could not be rebuilt.  He was right.

As I said, great case-study material lies here.  People are fine or at least making do.  Their institutions, not so fine....it takes a generation or two to unremember all those mis-steps.

And, just in case yez feel in need of an alternative POV, try this:  notice the change in tone as the awful realization dawns.  It dovetails neatly, methinks.

Friday, February 13, 2015

Housing Supply - the blame game

Housing supply articles routinely ignore the tragic comedy of planning policy at the TLA level, which is where the majority of the blame lies.  This CityMetric article explains a London equivalent, and do notice that London is relatively decentralised (32 boroughs) cf Awkland.

My own solution would be threefold:


  1. Take away all local planning from the economically clueless TLA's and hand it off to local Commissioners (unelected).  Hey, can they possibly be worse than ACC's legion of brown cardies?  Thought not, but have a raft of KPI's to keep the Commishes - er - Commishing.  Like total costs not to exceed 1% of total build.
  2. Institute a risk-assessment approach to building (e.g. all single storey residential builds would be Schedule 1) to cut through the endless processing of very minor proposals.  The current rule-based approach is hopelessly Byzantine, costly, ineffective, economically disastrous in terms of misallocated resources, and easily circumvented by finding less stupid jurisdictions.
  3. Kick-start modularised, SIP, flat-pack, multi-proof-consented housing factories, partly to employ the hapless minions released onto an unsuspecting world by #1 above, partly to lower unit costs overall, and partly because I love CNC processes in general.  Cars, caravans, planes and boats are built this way - houses next....Could be funded by the zillions released from Council revenue streams by #'s 1 and 2 above...win-win-win.

Next problem?

Monday, February 09, 2015

Territorial Local Authorities (TLA's) and Risk Assessment

One aspect which has quite a lot of bearing on TLA cost structures is that of the attitude to risk.

The current attitude is rules-based, which has a number of undesirable consequences:


  • Every single proposal, for anything, has to be 'processed' and set against known rules.  Cost #1, as such processing is staff-intensive.
  • Decisions resulting from this 'hold up against known rules' are not easily challenged.  So truly dire decisions are usually just swallowed by applicants.  Cost #2, as optimal solutions are almost by definition, not taken.
  • No clear or known rule = no decision, plus a protracted consultation to plug the gap with yet mo' Rules.  Cost #3 - mo' staff..
  • Time = money, a concept any banker will be happy to explain, and all of the above adds mucho Time.  Cost #4, but as this falls on Applicants, Council staff simply don't care.  Their salaries arrive with the regularity of a sunrise..
  • While discretionary powers exist (Schedule 1 to Building Act 2004 is a good example) to end-run Rules, they are so rarely exercised that in practice these worthy provisions may as well have been repealed for all the use they get.


The alternative is a thorough exercise in risk assessment, which acts as a drafting gate for proposals.  A quick risk assessment, if decided to be low risk, should result in applications being waved straight through.

A useful example is single-storey timber-frame residential builds:  houses to y'all.  In Christchurch, my estimate is that 70% of these pre-dated modern building codes:  they were either unconsented (pre 1970's) or lightly consented (1970-90's) by the old, sensible TLA's of the era.

These structures have, in Christchurch, been through a perfect risk assessment via a series of Gaia-initiated wobbly moments.

Subtracting exogenous sources (URM chimneys, rockfalls etc) no-one died from a cause attributable to a single-storey timber-frame residential build structural failure.  Therefore, such structures are demonstrably low risk, however constructed.

So, despite the plethora of new requirements for such structures, every single one adding its own layer of cost, the net benefit of today's build versus a 1950's comparable build in a future quaky event, would be close to zero.  All cost, no benefit.

The logical regulatory outcome of this should be to include single-storey timber-frame residential builds in Schedule 1 to the Building Act 2004, on the grounds that they are inherently (and demonstrably) low risk exercises.  Just like a verandah. pergola, carport, shed.

But this would require a number of attitudinal adjustments to TLA staff culture:


  • No Mo' 'our way or no way'
  • Assessments open to swift challenge (a Low-Risk Claims Court approach)
  • Low risk = low fees, fast turnaround, layers of cost removed.
  • Staff become enablers, not obstacles.


But enough already.  One can tell from this simple example that we will wait a long time to see such a change.  We'll see trailer parks with tiny houses (which end-run the PooBahs), before we see a risk-based TLA approach.....or lower rates.

Monday, February 02, 2015

Mo' Moolah Required

The Left Honorable Sir Larry Fool, president-for-life of the Small-Nation Association For Urbanista (SNAFU), has recently spoken out on behalf of the vast majority of TLA employees who feel under threat from public demands of accountability, austerity and productivity.

'Let me be perfectly clear', Larry said.  'Employees are not elected, so youz ratepayers cannot vote us out.'

'And, speaking for the sector as a whole, the unique mixture of temperament, capability and ethic which we collectively exhibit, means that we just so totally justify our current remuneration.'

'Plus, our union will bite the generative bits off of any person, body, association, company or collective, which publicly expresses a contrary view.'

'Our main issue is that we just don't have enough moolah to pay ourselves even more.'

'So we are looking for ways to reach deeper into your undoubtedly capacious wallets.'

'Please assist us in this totally essential endeavour.'

'And, as well, we as the embodiment of all local authorities, fully intend to devolve to small local groups, the multitude of tasks and of course costs, that we cannot be arsed to bother with any more.'

'And in doing so, it should go without saying, we will retain and extend our present perquisites.'

'Over to you, our funders'.

'Turn out your pockets!'

Friday, January 23, 2015

Why local gubmint 'dithers'

Local Government 'dithering', while an accurate description as seen from outside the tent, is in fact structural.

LG is a creature of statue, and 'consultation' is firmly entrenched in those statutes.  Plus, there are three competing streams of playaz whose interactions create, extend, and perpetuate the dither:

1 - Central Gubmint, who can (dimly and fitfully) sense the macro-economic picture which emerges from the 70-odd LG layers whirling away beneath them.  CG is purposefully designed to be movable only incrementally, so observing an unwanted, emergent effect (like the AKL hoosing bubble) has no timeline for the fix, even if the causes and cures are clear (which is rare...).

2 - LG pollies, like Len the Bruin, have particular positions to cleave to, and need to not offend enough electors, in order to get elected next time around.  Pollies can only set Policy, not Manage, and particularly not micro-manage.  So they rely on unelected staff to do the heavy lifting (in every sense, including intellectually) with regard to policy options for proposed changes, day-to-day implementation for existing policy, and reporting to and from on the results of or issues with, existing policy.  Most LG pollies are to be frank cowed by the superior horsepower of staff, so tend to occupy an uncertain DMZ between staff and ratepayers.  They are essentially cheerleaders for whatever the staff du jour have dreamed up, done, or screwed up.

3 - LG staff hold most of the cards except the money one.  As a bureaucracy, they run by two immutable principles:

  • Peter (rise inexorably to one click above their level of competence), and 
  • Preservation (defend turf, extend it where possible, never yield ground.)  
This guarantees three observable aspects of LG staff culture:

  1. a united front, 
  2. a heap of dead wood, and 
  3. a rigid observance of 'rules'.  
So staff will unblinkingly decline to use discretion (not in the rules), obfuscate (to divert attention away from their core incompetence), and back each other up regardless of the merits of the event, action, or emergent effect.   As they are not elected, they regard Councillors as a passing parade of buffoons, sitting at a distant table, and having only minimal effect on their own closed world.   As staff are employed by the CEO, who is in turn the Council's only 'employee', no cultural change will occur without a change of CEO.

Dithering, as should be clear, is structural.....the only real handle the Council has is the $ one.

Christchurch Geotechnical vulnerability

The Christchurch situation (highly varied pockets of riverine silt interpsersed with gravel bars and peat) was very well known by the early 1990's:  see for example this paper, where the uncomfortable conclusion was reached that (final para of Summary) "the draft code may underestimate shaking by a factor of 2 or more".

This makes the Bexley, Atlantis (yes, Virginia, one of the worst-affected streets was named just that...) etc. subdivisions all the more inexplicable.

An early (Waitaha) name for the area was 'Waima-iri-iri' - the place of many waters, and the early Black Maps show watercourses throughout the central city that later turned out to be areas of particular vulnerability.

Both the Regional and City Councils have never really acknowledged their complicity in waving through much of the newer Red Zone subdivisions.....given the by then well-understood geotechnical vulnerabilities.

Hugh P lays the blame on the 1989 swathe of amalgamations, which wiped out much intimate local knowledge, diverted attention to organisation-building instead of community safeguarding, and introduced a quasi-corporate ethos which glorified 'growth'.  The attendant surge in rates, staffing, empires, and organisational layers is something which has come to bite the current Council, which faces a $1.2 billion shortfall in funding, against a rates income of around the $370-450 million mark, and with its head up against a debt-funding ceiling.

Hindsight is always 20/20, but the sad conclusion is that the whole shebang lacked the back-bone, the balls, and the brains to have done something to mitigate the known hazards.

The one shining exception was the electrical-supply organisation, which promptly reinforced every single one of its substations, resulting in minimal damage to that infrastructure compared to (say) the three-waters administered by the Clueless Council.

So in the light of the above, one must ask, would things be much different now, even with a shiny new RMA???