Productivity Commission Helpful - But Too Verbose
The Productivity Commission is to be commended for its focus on the need to open up fringe land supply with urgency.
THE GOVERNMENT MUST FOLLOW UP ON THIS WITH URGENCY
The housing construction industry has been strangled for far too long. No wonder its current performance (including
pricing ) is lousy.
If you get the land price wrong - verything else is wrong as well.
The Report overall though is way too verbose (160 pages) and while much of the information is "interesting" - it lacks
focus on the key problems and solutions.
Unfortunately - this is typical of academics and illustrates why it is essential that they work closely with industry
practioners to ensure the required focus.
In this regard, the British Government in working closely with industry practioners in endeavouring to address the
issues, is far more advanced than we are.
Academics have a role - but it should only be a supporting one. It is impossible to understand issues adequtely without
solid practical experience.
The Commission failed to understand adequately, that the key driver of the problem, is that Local Governments have lost
control of their costs and their ability to cope with normal growth and the infrastructure responsibilities they have to
their communities. I covered this recently within a Scoop NZ article "How Housing Bubbles Are Triggered".
It was a massive failing by the Commission to completely ignore the United States Municipal Utility District Bond
Financing Model. Properly - all infrastructure should be paid for via this type of vehicle other than roading and
footpaths. As economists - the Commision people should have recognised this for intergenerational and efficiency
reasons. Just basic stuff.
Another major failing is that the Commission did not compare our development / construction costs with those of the
normal and affordable housing markets of North America (as identified within the Annual Demographia Surveys www.demographia.com ).
It was odd in the extreme that comparisons were made with the severely unaffordable and dysfunctional housing markets of
Australia, which has the most severely unaffordable housing within the Anglo world.
Basic housing construction costs in New Zealand are around a shocking $1,200 per square metre; Australia $A800 per
square metre; affordable United States markets $US500 per square metre. I spelt all this out in "chapter& verse" within an interesst co nz article March 2010 "Houston: We have a housing affordability problem".
For those of us who are interested in seeing affordable housing built in this country - and after more than 7 long years
discussing these issues - we have had more than a gutful of having to wade our way through academic waffle on these
issues.
The problems and solutions are well understood. And they are NOT complex.
Indeed - they had been well understood at the time of the 2008 election, following Parliaments Commerce Committee
Housing Inquiry led by Hon Gerry Brownlee 2007 / 08. Hon Phil Hearleys visits to the USA and UK and the National Party
Housing Policy Statements as well. March 2009 Prime Minister Key told Mary Kissel of the Wall Street Journal article
"You cant spend your way out of a crisis" that his Government was going to get on and solve these structural problems in
the economy.
It is well past time this Government of "Filleted Conservatives" stopped playing games "kicking the can down the road"
and worked with people with real experience from within the industry and Local Government, to sort these matters out.
It is a nonsense that in a small country of just 4.4 million people (much smaller and poorer than decent size cities
internationally), that these issues are not dealt with more effectively and expediciously.
The reality is that people should not have to pay any more than 3 times their annual income to house themselves - with
mortgage loads of 2.5 times. A Definition of an Affordable Housing Market is on the front page of my website. And it
doesn't run to 260 pages of waffle.
I will respond comprehensively to the Productivity Commissions Draft Housing Report over the weekend - and submit it to
Bernard for his consideration.
Hugh Pavletich FDIA
Co author - Annual Demographia International Housing Affordability Survey (2012 8th Edition international release 23
January)
Christchurch
New Zealand
ENDS