Red Alert

The appearance of activity

Posted by on February 27th, 2013

Five weeks ago John Key appointed Paula Bennett as Associate Housing Minister, putting her alongside Nick Smith and Tariana Turia in a housing team to emphasise National’s commitment to tackling the crisis of unaffordable housing.

Problem is Ms Bennett still has no responsibilities – “to be advised” – according to the Government website. She doesn’t even have ‘general duties in the portfolio’ as others have.

She has no housing staff in her office and has been unable to answer written questions about her priorities. In fact a written question about her goals as Associate Minister of Housing was referred to Housing Minister Nick Smith’s office and then back to Bennett, and then back to Smith again.

Smith claimed in a written answer he has “formal and informal” meetings with Bennett on housing issues. It’s hard to imagine these will be much use if Bennett doesn’t know what she is doing!

National’s response to the housing affordablity crisis is all about creating the appearance of activity: a three member housing team, blaming Councils, threatening to tinker with the RMA.  Meanwhile with Kiwibuild, Labour has a robust, achievable plan that will get 100,000 Kiwi families into their own homes over the next 10 years.


13 Responses to “The appearance of activity”

  1. Arkonaut says:

    Hullo Phil, why does Labour have a three person Arts portfolio? What do they all do? Have the Arts now suddenly got so big that you need to dish out tickets to three Arts spokespeople to attend them all? I looked on Labour’s website but there were no statements from any Grant, Jacinda or Darien on the arts that I could see. Is this three person dream team coming up with a fancy new arts policy or is it just an appearance of activity?

    Why didn’t you become an Associate arts spokesperson too? Don’t you like going to the ballet?

  2. jennifer says:

    I’m struggling to understand why Labour supports kicking first home owners in the guts by raising the deposit requirement? To be fair, it actually supports giving the RBNZ the power to do it, but same result? With the average property in Auckland selling for around $650,000 now, a 20% deposit would be $130,000. Raising the deposit from 10% to 20% effectively doubles the time it takes even a frugal young couple to save the deposit, adding years to their dream of getting into their own place. The policy might look great on paper to the academic economists, but what about the folks?

  3. Phil Twyford says:

    Jennifer, Labour has been calling for the Reserve Bank to get extra tools to control inflation as part of modernising monetary policy. Loan to value ratios (LVRs)are one of those tools – and as you say, they would mean people would have to front up with a bigger deposit. One of the main factors driving the last housing bubble was the fire hose of overseas money being poured into home mortgage lending. We need to do something about that.

    If the Govt implements LVRs on their own they risk hurting first home and low income buyers. That’s why Labour takes a much broader and bolder approach to housing affordability – building 100,000 affordable homes, capital gains tax to take out the speculators, reducing cost of building materials, quicker consenting, improving productivity in building industry.

    There is also the possibility of exempting first home buyers from the LVR rules.

  4. jennifer says:

    @ Phil, now that makes perfect sense, putting the LVR up as part of a coherent package to solve the housing problem. At least someone’s been thinking.

  5. Matt says:

    “One of the main factors driving the last housing bubble was the fire hose of overseas money being poured into home mortgage lending.” – Everytime I hear this statement I cringe.

    RBNZ can set the rules, but it cannot control loan creation/money supply. But, monetary policy works with a lag! Bah! Increasing LVRs would further hurt a younger generation of NZs who face uphill task to get into their first home. Add in unnecessary SL debt, low-wages, excessive income taxation… Until Labour deals with vastly inflated house/land prices and foreign ownership of all forms of property, little will change. And the current CGT Labour proposes is just asking for more shuffling of assets and financial buffoonery.

  6. bbfloyd says:

    Let’s be fair Phil… the only thing the nats CAN do is playact at governing in a democracy… Without their cheerleaders at fairfax giving their every utterence credibility, they would be hopelessly outclassed on every front…

    Congenital liars like that really have no place in any realistic administration that actually governs for it’s people..

  7. SPC says:

    Matt, a 10% deposit for first property buyers should be simple prudence from banks that the RB should insist on. A higher deposit rate for investor buyers 20-33% (plus say 2% per annnum increase in equity to cover value inflation) would restrain their practice of leveraging to buy more and more properties (on funds from offshore) – as this leads to inflation of property value.

    I agree a residency test for residential property ownership
    would help – especially in the Auckland market.

    PS Is your objection to Labours CGT, to a CGT, or this form of CGT?

  8. Matt says:

    10% is fine. Mortgages should valued on the income stream of the property. That would force banks to appraise risk correctly. No collateral should be accepted, only the deposit and the estimated mortgage value. That would stop the debt, on debt, on debt ponzi finance seen under the last Labour govt. Banks should maintain the payment system and advance loans to credit-worthy customers. That’s all. No finance or insurance arms on the side.

    Investors would be the same. The residency would be future-based on all NZ proprety.

    Second, progressive land taxation (1-5%) based on cumulative holdings of property. Quickly variable as well, ala HK. Foreign holdings would attract the 5% rate as well as trusts regardless of value. This would see falls in house prices as well as maintaining a lid on future price inflation. B) property hoarders/speculators would soon find themselves bankrupt when coming to re-mortgage under new rules, unless they could sell off portfolios to a functioning level. Oh and NO bloody interest deductions.

    I guess you can see why I say scrap GST/lower-income tax levels – highly regressive towards low-wage earners.

    Why? Because I can see this happening. Father owns property A, wife property B (ie. bach), maybe older sibling property C (investment), maybe D in a trust. Imagine the money made by tax lawyers/accountants!

  9. Pete says:

    The throw away line about councils in the last para needs some scrutiny. In my opinion councils bear significant responsibility for lack of affordability. There is very little that can be done about construction prices. NZ’ers don’t get the same value for dollar spent as Australians do.
    The main component in house prices is land price. There are several reasons why I attribute responsibility to councils. My comments apply to Auckland council. First, even when land is zoned for medium density residential and a complying application is made council takes up to 18 months to approve resource consent applications, and some times even longer. This greatly increases risk, and also costs. I attribute the main reason for this as a lack of actual experience in planning and consent staff. Their first instinctive response is to put an application on hold, rather than asking the question, ‘how can I enable this application?’
    Second, councils restrict the supply of raw land making it a scarce commodity. Thus developers have to pay high prices for suitable development land. Additionally, on the North Shore council has been very restrictive about subdivision of existing lots to allow for second dwellings.
    Thirdly, councils frequently act in a capricious manner, and go outside the rules when it suits them. In my view ratepayers have little idea how untrustworthy, unreliable and sometimes dishonest councils are to deal with on a ‘business to business basis’. I have found that councils frequently change their minds without good reason, and are very disorganised. In one development this led to the waste water and sewerage systems being redesigned three times, only to go back to the starting point. This adds significant cost and also serious time delays.
    Fourthly, council development charges are very onerous. I added up council charges, development levies, resource consent fees and GST and found they contributed $90k in a $250k section. In Auckland $250k for a lot is very average. Try putting up a 180 sqm house for under $300k and you will find that you have around $550k for a very modest new build and there is absolutely no profit margin in that. The same development charge would apply if the section was $180k or $1.5m.
    Fifth, council have too many newly qualified planning staff with too little experience. Most have no idea about the ramifications of their actions, and even more don’t actually care.
    There are significant issues that have to be dealt with as far as councils are concerned. The RMA was a great idea, but it has been hijacked and it is used as a weapon. This area is very complex, and honestly I do not believe that by and large our elected officials have the intellectual grunt to grapple with these problems.
    I would like to hear how Labour will streamline processes in this area, because if we are to make housing as affordable as it can be, then this area of cost has to be tackled.

  10. bbfloyd says:

    @pete.. some interesting observations… Whether you intended it, or not, your comments touch on much wider issues, that in my opinion, inform some of the situations you describe…

    “up to 18 months to approve resource consent applications, and some times even longer. This greatly increases risk, and also costs” … The first thing that comes to mind is the effect of inflation on costs….Most residential developments take the rma into consideration(or should do) at the planning any responsible budgeting should be able to take that into account when doing cost projections..

    A question…How much of the “red tape” tangling up the process is in response to attempts to sabotage, or bypass the act by developers? Are we looking at a situation where the people who ultimately own the houses are subsidising developers efforts to remove any protections of the environment in the pursuit of profit?

    “lack of actual experience in planning and consent staff”…not surprising given the relative youth of town planning in auckland..(Sir Dove Myer Robinson should go down as a hero for forcing future planning onto the city “fathers”)..But is that the underlying reason for the tendency to delay applications?, or are we seeing a culture of litigious considerations informing the behavior of councils?

    “ratepayers have little idea how untrustworthy, unreliable and sometimes dishonest councils are to deal with on a ‘business to business basis’”….I won’t argue that point, as I can attest to similar situations on jobs i’ve been involved with….What I will say, is that, in every case, the people who have been making what can only be described as a “sows ear out of a silk purse” were “contracted” to the council….So how much are we paying to support the great “user pays” experiment? Have we proved that tendering out council work, has actually done what it was supposed to?

    I well remember the “little hitlers” in councils, and the feartherbedding that led to people being open to privatising council business, but honestly…. does anyone(apart from those profiting from it) really think what we have now is an improvement?

    “they contributed $90k in a $250k section”…Which one would have to agree is rather steep… small point..
    If the 250k is inclusive of the 90k… then 300k to build a house on that seems a tad high, unless one uis using top quality materials, and fittings…. And 180sqm is a reasonably large house… Considering the shrinking area that represents available land for building subdivisions, shouldn’t a realistic assessment be at 150sqm or less?

    Are you suggesting that compliance costs should be indexed to property values? I have no particular position …but it would be an issue worth exploring, if only to confirm the reasoning behind the blanket approach taken by council on charges..

    Considering that the days of suburban sprawl are, in reality, largely behind us, shouldn’t the emphasis be on utilising already developed land? As in all the major, (and minor) cities around the world that have had to deal with the reality of limits to expansion… they have built on top of the old….

    What would the process of demolishing old houses to make way for more high density dwellings do regarding compliance cost calculations? (I ask this because it seems you have the expertise to answer coherently)..

    “council have too many newly qualified planning staff with too little experience”.. Redundant, as the point has already been made (second paragraph), but again, a relatively new developement(town planning)… the fact is that experience can only be gathered over time… twenty years of experience takes….twenty years…. to accumulate….meanwhile, the great neo liberal economic adventure continues to drive those who would have had an appreciable amount of knowledge, and experience, to other parts of the world….

    Please don’t assume this is any kind of personal attack on your perspicacity… (too many already have fallen into that little cul-de-sac)this issue needs people who have hands on experience to inform it..

  11. Pete says:

    No, I do not take this as any kind of attack. I think this is a very large issue, and it should be dealt with on an apolitical basis.
    Just a few comments in response to your post. Yes, developers do take the RMA into account, but some things just cannot be planned for. For instance when council during due diligence prior to purchase of zoned bare land for subdivision says it will provide water and waste water connections and then 15 months into the consent process following purchase says it will not provide connections (real example) making the land not worth what it was purchased for, and not able to be used for what it was zoned for.
    A ratepayer or an applicant should be able to rely on advice received from council staff. Council’s response to protestations was simply, ‘we made a mistake, if you don’t like it take it to the environment court’. There was no mistake, it was merely a cynical ploy to drag the application from one fiscal period to another, whilst surprisingly their contributions jumped from $15k per lot to $33k per lot. How do you budget for that? In my view applications should be subject to the fee applicable at the time they are lodged and that would avoid the problem.
    At a meeting to resolve the issue there was a board room full of council managers. The deputy water engineer could not speak english and the overall manager was hopelessly out of his depth. It was not until the developers threatened a civil suit (not the environment court) that the council decided to play by it’s own rules.
    Another example. Council requested a developer put in over sized wastewater pipes on a development already under construction and fully consented. Council agreed to pay the difference in material cost, which came to $40k. When the time came to pay development contributions (over $1m) and for council to pay the $40k they told the developer they had changed their minds. Five council managers were at the meeting. How is it ok for public officials to engage in that sort of fraud?
    On construction costs – the number quoted is an economy home builder’s price level for a house of that size. If you reduce the area to 150 sqm then the price comes down, but not by a pro rata sqm rate as some costs are incurred no matter what the sqm of the dwelling.
    No, I was not suggesting a sliding scale, just pointing out that affordable housing level sections are still subject to the same level charges.
    North Shore City made it very difficult for ratepayers or developers to provide infill solutions. Auck City may well relax some of these restrictions. They became very restrictive. In my view infill development is a good solution, and it should be able to be provided by Mom and Pop as well as the large developers. There are some examples of high rise that should never have been approved (eg Orewa’s Nautilus). Historically, Auckland city has allowed significant large scale apartment development, but much of this is substandard. It is certainly not a solution for family housing.
    Re your comment on planning. The issue here is that council adopted a policy of not employing practically experienced staff in these roles. There are simply too many young planning grads who have their own agenda and are happy to delay and obfuscate if they do not personally like a development, regardless of whether an application is within the rules or not.

  12. bbfloyd says:

    Thanks pete…The picture you paint is of individuals within councils treating the job like their own personal feifdom…Which tells me that not much has changed over the last few decades…

    The sort of cronyism you have highlighted suggests to me that a large percentage of these “officers” are working to an agenda that bears little relevance to true council operations…

    So does political affiliation have a bearing? I say this because there was a major clean out of tory councillers in the last auckland council elections…

    I am assuming your anectotes relate to the period before that?

    What i’m asking, is whether their has been an improvement in council behavior, or not, since the clean out?

    “No, I was not suggesting a sliding scale, just pointing out that affordable housing level sections are still subject to the same level charges.”…. Fair enough… But it’s an issue that could, and maybe should be revisited…regardless of the minefeild that it is….

    “council adopted a policy of not employing practically experienced staff in these roles. There are simply too many young planning grads who have their own agenda”…

    Aaaah the joys of cost cutting outcomes… Will we never learn?

    The overriding impression I get from this is that we are now suffering, and have been for quite some time, the effects of interference, and deliberate neglect by every tory administration since their inception…..

    Auckland has been at the mercy of self serving political agendas, and plain old fashioned bigotry for longer than I have been alive… (I remember my father, and uncles talking about it when I was still a preschooler, they were from “up north” so it wasn’t an issue for them, but it was acknowledged that auckland was at the back of the line when it came to proper governance, and infrastructure support…Thank god for Sir Dove Myer Robinson)

  13. Pete says:

    Actually, I don’t think this has much to do with Tory councillors at all. I believe that there is quite a disconnect between elected officials and council staff. I am not a conspiracy theorist, but I believe that the ranks of council staff have become tainted by people with their own agendas, and they have abandoned the traditional apolitical approach of staff in public corporations.
    Some 3-4 years ago I was privy to a meeting in Auckland to discuss a consent application, where the applicant’s solicitor pointed out that the application conformed in all aspects to the Councils published water catchment plan. The solicitor was told by council officers that Council was operating off a ‘different plan’. The solicitor asked for a copy of it so that it could be perused, and was told’ it is really more a collection of ideas in a particular persons (I won’t name him) head’. To which the solicitor responded ‘oh really, can we please get the head in the room?’
    The applicants were left scratching their heads and asking themselves how could you make a complying application when council was making up the rules on the run? To make matters worse they insisted on notifying this application even when there were no grounds to do so, and when no objections were received they tried to bully the applicants into going to a hearing- all over a totally complying application on land council had zoned for medium density residential.
    Obviously, I have my own political views, but I am really loath to politicise this issue. I would really like to see our public officials managing our public entities on a more open and transparent basis, and I would like to see them more accountable. Council officers are too willing to ‘flannel’ elected officials and hide behind petty regulations when it suits them. The prime example here is the request for more information. An applicant can supply exhaustive information in making a straight forward application, but if the council officer doesn’t like it for some reason he or she can invent a whole host of spurious request for information, which automatically puts the file into suspension and allows council to sidestep its legislated requirement to respond within a certain time period. These sorts of abuses have become endemic.
    Not so long ago it took council 5 months to issue a straight forward building consent. In the process they told the architect that they didn’t like where he had placed the ‘ground floor’ title on the plan and made him redo it. They told the engineer (one of the most experienced in the country) that he had done his drawings on the wrong scale and made hime redo it. they even asked the home owner a list of puerile questions one of which was ‘ how many nails were going to be used in the project?’
    From all this you will see that from my perspective this is less about politics, because once you know the rules then every one can operate within them, whether they like them or not. For me it is more about ethics, honesty and competence in public officials. I really don’t care if my elected officials are green labour or national, as long as the processes are open and the council is administered on a completely transparent and accountable basis.