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Insights 2: 27 January 2017
Why Germany may hold the key to solving our housing woes
Roger Partridge - Getting to the guts of the housing crisis
2017 Demographia International Housing Affordability Survey

A wake-up call for global housing policy
Dr Oliver Hartwich | Executive Director |
This week, the Initiative scored plenty of media mentions – not just in New Zealand but worldwide. Under normal circumstances, this would be a reason to celebrate. However, the occasion is bittersweet.

I was honoured to provide the foreword to Demographia’s annual housing affordability survey. Over the past decade, the Demographia surveys have become a benchmark in international house price comparisons.

Each year, the global affordability problem is getting worse. This year was no exception. Demographia’s 2017 report is the most depressing read so far.

Traditionally, housing markets were regarded as ‘affordable’ when a median house would cost up to three times a median household’s income. Believe it or not, until two or three decades ago, many New Zealand, Australian and Canadian cities still met this benchmark.

The current study shows much of the world has lost its housing affordability. Melbourne has a ‘median multiple’ of 9.5, Auckland stands at 10, Vancouver 11.8, Sydney 12.2 and Hong Kong 18.1.

On such measures, it would be wrong to say that the housing ladder had only lost its bottom rungs. It is worse than that.

In cities like the ones mentioned, society has been divided into two disparate groups: owners and non-owners. If you are not already in the property market, the chances of you ever becoming a home-owner are slim.

As we at the Initiative have often argued in our reports, housing affordability is the single biggest social policy issue of our time.

The collective failure of many countries and cities to provide their citizens with affordable housing is a tragedy. It is a tragedy because this is a public policy disaster that would have been entirely avoidable.

As I wrote in my foreword:

“Demographia’s reports and countless other surveys and studies do not leave the slightest doubt that unaffordable housing is almost everywhere and every time caused by the same factor: housing supply restrictions. The more restrictive the market, the more prices will increase over time.

To any undergraduate student of economics, this will not come as a surprise. But it is still a relatively novel discovery for many planners and politicians.”

At least in New Zealand, there is a growing consensus across the political spectrum that housing, planning and local government finance reforms are urgently needed.

As the Demographia report makes clear, the time for action is now.

Read the 2017 Annual Demographia International Housing Affordability Survey here.

An alternative to alternative facts
Dr Rachel Hodder | Research Fellow |
‘Alternative facts’ has been the phrase of the week. President Trump’s attempts to increase the crowd figures at his inauguration demonstrated a new low in post-truth politics.

However, ‘alternative facts’ are nothing new in political debates. Prejudices, distortions and outright lies are not a Trump invention. We encounter them all the time when people are led by what they want to believe to be right (as opposed to what is actually the case).

It is then the role of academic researchers, journalists and think tankers to set the record straight. And this was the motivation behind the Initiative’s new report on immigration which we will launch on Monday.

When it comes to immigration, many people think they know what is going on. They have picked up bits of information in the media such as New Zealand’s recent rise in long-term arrivals. They may have read about problems with some migrant groups in some countries (not necessarily in New Zealand). They are concerned about what immigration might mean for housing, crime, social cohesion or public finances.

Out of this mixture of factual pieces, gut instincts and anecdotal evidence an opinion may then be formed about what immigration could mean for New Zealand. However, when it comes to complex topics such as immigration these opinions can stray from reality.

Understanding how immigration affects New Zealand requires a comprehensive examination of the evidence. And this is where our new report comes in.

We have listened carefully to what people are concerned about when it comes to migration. We certainly share many of their concerns because we too want to see a New Zealand that benefits from migration. We too want to make sure that migration is a win-win story for New Zealanders and migrants alike.

For our new report we thus had a look at the financial contribution that migrants make to the public purse. We asked how much of an impact migration has on our housing market. We sought good data on how well migrants integrate into our society. We wanted to know whether immigration may be affecting job opportunities for Kiwi workers.

On all of these measures, we evaluated the evidence and compiled it into one concise report: The New New Zealanders.

Stay tuned for the launch of our new report on 30 January. You may be surprised by the many impacts migration is having on our country.

Monument to stupidity
Jason Krupp | Research Fellow |
Public art can be a powerful thing. It can inspire, uplift, and even get us to think introspectively. Now that Michael Parekowhai's The Lighthouse has been unveiled on Auckland’s waterfront we can add ‘give rise to bitter irony’ to the list.

The piece is a near scale replica of a 1950s state house, and as the name implies it is meant to symbolise safe harbour and welcome to people coming to the city. Yet the most recent Demographia report shows that the city, as measured by its housing market, is anything but welcoming.

As Oliver discusses above, the only cities the study found that were more expensive to buy a house than Auckland in 2016 are Sydney, Hong Kong, Vancouver, Santa Cruz and Santa Barbara. New Zealanders love stories where we top global rankings, but when it comes to housing this is a list of shame.

The artwork cost $1.5 million to build, which is only half a million higher than the average house price in Auckland. If the city’s current pace of house price inflation were to continue, it will only take four years until both prices are the same.

Bitter irony indeed.

Though unintentional, Parekowhai's piece might actually be a monument to the policies that have choked off the supply of housing, in Auckland specifically, but also New Zealand in general to some degree.

Chief amongst these is the Resource Management Act, which has trampled on private property rights and given nimbyism a steroid shot in the arm. The leaky building fiasco and central government’s regulatory remedy have also played a major role in choking off building supply by making councils jointly liable for third party building inspection failures. And Auckland Council also shares a major part of the blame by artificially limiting land supply within the city with an urban growth limit.

But perhaps I’m being unfair to the artist and his artwork. A better monument to our regulatory stupidity would be to leave the space empty, except for a plaque explaining that the void symbolises all the houses that could have been built, but never were.
On The Record
All Things Considered
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  • It's great: The Netherlands welcome Trump in his own words. (4 mins).
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  • They're in every neighbourhood: Was 'Central Perk' from the Friends sitcom responsible for the rise of coffeeshops?
  • Rhode Island vs. Oklahoma: What it will set you back to rent a holiday home in the US.
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