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Insights 5: 26 February 2021
Dominion Post: Eric Crampton says If upzoning a neighbourhood is too hard, street-level rules could help.
Podcast: Leonard Hong discusses demographic changes in NZ and what this means for our housing crisis
Report: The Need to Build - The demographic drivers of housing demand

Transparency, please
Dr Oliver Hartwich | Executive Director |
On Tuesday, the Climate Change Commission extended the deadline for submissions on its draft recommendations by two weeks.

The short extension would give the extra bit of time needed to receive crucial information from the Commission before submissions close.

But the extension will be for nothing if the Commission does not now release the assumptions and coding behind its modelling.

Few people realise that the almost 900 pages of the Commission’s report are only the visible tip of an invisible modelling iceberg. Without knowledge of what lies under the surface, it is hard to make sense of the Commission’s proposals.

The Commission’s model has produced a few surprising policy recommendations, including a much faster transition towards electric vehicles.

A typical family car emits 2 to 3 tonnes of carbon dioxide per year. Under the Emissions Trading Scheme (ETS), motorists purchase carbon certificates for this. Fuel retailers include them in the price at the pump.

The current carbon price is $39 a tonne. It is likely to increase to $50 over the coming years. The typical car uses up certificates costing around $100 to $150 per year.

At this level, few motorists would transition to much more expensive electric vehicles, even given the lower cost of electricity as opposed to petrol and diesel. This is why the ETS has not had much effect on transport so far. Other emissions reductions initiatives such as replacing coal boilers can give you a bigger bang for your buck – for now.

There is an obvious tension between the ETS and the Commission’s transport recommendations. New Zealand may be in danger of going down an expensive but ineffective pathway to lower emissions. We need to see what assumptions the Commission used to reach its transport recommendations.

Alas, the Commission is refusing to release their assumptions and models.

So, we have now lodged a very simple Official Information Act request for the data on the marginal abatement costs of electric vehicles used in the Commission’s models to support the draft emissions budget and plan.

Under the Act, the Commission must respond as soon as reasonably practicable, but in no more than 20 working days. Delaying release leaves submitters precious little time.

The information we are requesting is simple. Yet upon it hinges a key part of the Commission’s recommendations.

An organisation confident in its recommendations should not fear transparency about its modelling. It should simply publish its models, as our Chief Economist Eric Crampton and Auckland University statistician Professor Thomas Lumley have suggested.

We look forward to finding out if the Commission can plausibly explain its conclusions.

Kiwi Dream? More like a nightmare
Leonard Hong | Research Assistant |
Last week’s Covid cases in Auckland delayed Finance Minister Robertson’s housing policy announcements. The housing shortage has been at crisis levels for a long time, but the delay in this case is not likely to make any difference.

The government has hinted that further tinkering on the demand side is coming, but enabling more building is what is needed.

Demand-side initiatives from both National and Labour-led governments have failed to address the underlying shortage, so house prices continue to rise.

If homeownership is part of the Kiwi Dream, we are deeply into nightmare territory instead.

And the problem is worse than you probably thought.

The Initiative's new report, The Need to Build, discusses the relationship between population ageing and declining household sizes. Places with older populations require more and different housing than places with younger populations. As New Zealand ages, the housing shortage will worsen. The trend holds both here and across the OECD.

The problem is hardly unknown. Statistics New Zealand and local councils already consider declining household sizes when estimating housing demand. But it is underappreciated elsewhere.

We projected new housing needs for 2038 and 2060 – the numbers are striking.

Even if the the border stayed closed for the next 20 years, we would still need to build at least 20,000 new net dwellings every year to meet demographic changes.   

For the six most realistic scenarios in the report, from 2019, New Zealand will need to build between 26,000 and 35,000 net dwellings – above and beyond the replacement of decrepit houses -  every year until 2038, and between 15,000 and 29,000 per year by 2060.

But we also have a current shortage of some 40,000 homes that also needs to be filled. There has not been nearly enough building for well over a decade. While the current construction boom has brought consenting numbers to the highest level since the 1970s, consenting rates are only a little above long term averages.

Population ageing adds fuel to the fire.

The Kiwi Dream for younger generations – Millennials and Generation Z – is slipping further away. Shortages mean high rent and little disposable income after housing costs. Continuously tinkering with demand policies such as the LVR, bright-line tests, and first home buyer programme will do little to make housing more affordable. 

The government must switch priorities to rapidly free up housing and land supply, or find ways to incentivise councils to be more pro-development.

RIP the great kiwi BBQ
Steen Videbeck | Research Fellow |
It is 2035, and the Government’s new BBQ buyback scheme has begun. It is now illegal to cook with gas, and the police are cracking down on underground Weber parties. But don’t worry, you can still invite your friends over for a nice, microwaved lunch or just go raw vegan.

Surprisingly, few New Zealanders actually miss their BBQs, and most agree it was worth the 0.0000000001% reduction in CO2 emissions. Of course, the banning of all cows last year helped the transition. BBQs quickly lost their appeal without those tasty cheeseburgers and sausages.

Interestingly, the last few months have seen an unprecedented spike in the price of gas bottles, a bubble not seen since the 2034 run on beef patties and the 2025 housing mega-crisis. Apparently, BBQ lovers, aka those who hate future generations, have begun hoarding, filling their garages, living rooms, bedrooms, and bathrooms with swap-n-go bottles. In unrelated news, there have been a series of large explosions in suburbs around New Zealand.

For the rebels that didn’t plan ahead, there is a loophole. Without natural gas, some have resorted to burning trees from their gardens. But don’t worry, these aren’t counted in the official CO2 emissions, so have no effect on global warming.

BBQ purists initially celebrated the controversial ‘charcoal exemption’, arguing that gas BBQs aren’t real BBQs anyway. Unfortunately, the Climate Change Commission’s latest modelling has now seen the exemption revoked. Special interest groups are now demanding access to underlying data.

In entertainment news, diehard grillers have been frantically re-binge-watching Breaking Bad, mostly to come to terms with their new life of crime but also for ideas on how to mask the delicious smell from potential dobbers. In response, neighbour watch groups have been set up and RVs are being treated with increased suspicion.

For those who are still craving that distinctive flame-grilled smoky flavour, there are innovative electric BBQs.  These ‘outdoor electric hobs in disguise’ are basically the same as traditional BBQs without the flame or the smoky flavour. Wait, I’m pretty sure the dictionary definition of ‘Barbecue’ includes fire. Surely this is worthy of a Commerce Commission fair-trading investigation?

While the gas BBQ is becoming a distant memory, I for one, miss them. It is still BBQ weather after all, probably because the rest of the world hasn’t bothered to cut its emissions.

On The Record
Our podcasts and videos this week
  • Leonard Hong discusses demographic changes in NZ and what this means for our housing crisis
  • Eric Crampton and Leon Grice discuss saliva-based PCR testing for Covid-19
If you would like to listen to our latest podcasts, please subscribe to The New Zealand Initiative podcast on iTunesSpotify or The Podcast App.
All Things Considered
  • Infographic of the week: Ministry for the Environment - How to get something done under the RMA.
  • Christchurch, a decade on: The last city of the 20th century.
  • Empirical maverick: ‘Thomas Sowell: Common sense in a senseless world
  • The fictional bridges that became real.
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