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 and the, 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…..