2 Feb 2021

No 'silver bullet' will fix housing crisis

From Nights, 7:12 pm on 2 February 2021

The housing crisis in New Zealand stems from structural problems 70 years in the making and there is no silver bullet to fix the problem, a construction expert says.

John Tookey, professor of construction management at Auckland University of Technology says a multi-pronged approach is needed.

Professor John Tookey from AUT’s School of Engineering

Photo: https://www.aut.ac.nz/

Strategies by both National and Labour led governments are too narrow in focus, he told Nights.

“National says more land, more land, we’re going to free up planning constraints, more land, more land, more land and it’s a constant refrain and it is like Blackadder economics, it’s the same plan we used last time and umpteen times before that.”

Freeing up land is just one factor that will help, he says.

“The analogy I would give you is if you dumped a million tonnes of sheet steel outside of Toyota’s factory in Japan, would you get more cars?

“No, what would happen is they would expand production to meet the available resource, but they wouldn’t outstrip the capacity of the factory.”

The same is true with the construction sector, he says.

“Just because you’ve got more land to develop doesn’t mean to say the rate of land development increases, because it is constrained by the ability of people to do it.

“When it comes to National putting forward the more land option - can it help? Yes, it can. Is it the silver bullet? No, it’s not.”

Labour’s Kiwibuild policy on the other hand lacked a focus on outcomes.

“You notice nobody talks about 100,000 homes any more.

“You can target as many homes as you like, but just because you will it to be so, and you’d like it to be so for politically expedient reasons, that does not mean to say you’re going to get builders to take on board the risks.”

Most builders are loathe to over extend, he says, because they know the market could “turn on a dime.”

“Sitting there and looking at developers to do the right thing is a little bit of a fool’s errand, you have to sign a contract and say I want 10,000 in this domain by that date and here’s the money.”

People owning rental homes should also be encouraged to “liberate” those properties, he says.

“We have lots of houses currently held by people who are trying to fund their retirement, instead of trying to punish them and give them a CGT, why don’t we seek to liberate homes from buy to let property holdings - if you release your property holding to a first time home buyer for example we’ll allow you to ring fence your capital gain in KiwiSaver as part of funding your retirement for old age.”

A strategy to tackle the crisis will require governments undertaking multiple tasks, he says.

“On the one hand you commit to building, on the other hand you look to encourage people to divest themselves of their rental properties into owner occupancy.

“The issue here is we’ve taken 70 years to create the problem that we’ve got now, it is not going to be solved overnight, it’s not going to be solved in a few months, it’s going to take multiple years.”

Current plans on offer from the government fall short, he says.

“There’s a lot of encouraging people to do the right thing, but that’s not the same as bankrolling it.

“What happened with Kiwibuild, the idea was fine, but unfortunately what was absent was the large-scale commitment to build stuff.”

The commitment to build social housing at scale shown in the post war period is possible today, Tookey says.

“We most certainly have the capability if there is a willingness to do it.

“Even mentioning the notion of state housing, a large chunk of the population has a tendency to look askance because there is a perceived potential for negative effects on valuations.”

He does not believe this is the case but that doesn’t mean a return to low-density monolithic models of the past.

Selling off old public housing is not a bad idea in itself, he says

“The notion of selling things of when it gets to the end of its cost-effective life is perfectly sensible because older properties cost more to maintain.

“And the original stuff that was built just after the Second World War tended to be very low density.”

The problem was the lack of a rigorous replace strategy, he says.

“The problem I have is when there’s no replacement strategy, or a minimal replacement strategy, because not only do you have to replace what was there, you have to build more.”

That was never committed to, he says.

“Multiple governments over multiple years have all contributed their own little piece to this particular puzzle.”

In the end government must bankroll large scale construction, he says, as New Zealand builders are too small scale to undertake the task.

“You have to sign big contracts and use the controls and strictures that are put in place by contract to drive outcomes. Because sitting waiting just for industry to step up and do the right thing, it doesn’t work that way.”