Greg Pritchard is just another person watching nothing be done about the housing crisis. We’re told it’s too complicated and impossible to fix – but, as he points out below, it’s actually terrifyingly simple. 

Millions of words have been written about the housing situation in Auckland. TV networks have screened countless hours of renovation shows whose clear subtext is that I’m weird for not owning a house. It is, in short, a speculative bubble that is a risk to the national economy and damaging to my self esteem.

Bubbles can occur in stocks, property, technology, and tulips. They are fun while they inflate, but as far as I can tell, when they burst they are 100% terrible. I keep seeing articles blaming it on tax, or zoning, or immigration, but I have not yet seen an article that lays out the whole thing in one place. None of the causes are hard to figure out either – it’s basically the opposite of a riddle wrapped in a mystery inside an enigma, whatever that is.

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First off, I’m writing this as a non-property owner, a non-politician, and a non-financial genius. My main interest in the housing market is that I don’t have a house and the only way I’m going to get one is if the market collapses and takes the whole economy with it, which is an exhausting moral position.

We have to stop pretending there are just one or two causes of the housing situation. As I said earlier I’m no genius and I can see at least 8. I don’t have the solutions, because no-one is paying me $200k+ a year to work on them.

So anyway here are the causes, in no particular order, that need to be acknowledged to save you lot from losing your shirts (if it’s not too late). I’ll offer some reckons here and there but really my main purpose is just to really lay out the complexity of this issue because the people who should have fixed this are too dumb, greedy or lazy to do it.

Land Supply

Ponsonby – and to a lesser extent Grey Lynn –  are massive suburbs close to the CBD that should be largely filled in with well designed and efficient terrace housing from 3-6 stories.They escape this because influential people live there and they have convinced the council that Auckland needs to keep thousands of draughty of old wooden villas. I say if you want to keep the villas put them on a truck and build up the special housing zones out at Huapai or whatever with them. The place for high-density housing is close to the CBD, not out at the end of the motorway.  In recent months the property-owning Baby Boomers of the Eastern Suburbs have also managed to scupper intensification in their own noisy and thoughtless way. Auckland has a real knack of allowing a small group of people to ruin it for everyone else, except this time the actions of property owners of Ponsonby and Pakuranga is having an impact on the whole country.

Apartment Living

It’s not so bad. I’ve lived in apartments in Europe and Asia and as long as they’re well-insulated for sound and cold it’s fine. I would suggest that a lot of people could learn to enjoy a life where they don’t have to spend half their weekends doing gardening. A neighbourhood where there is medium to high density terrace housing with a nice wee park, bakery or cafe every block or two can be very enjoyable, and the Franklin Road NIMBY’s could probably still do their Christmas lights too. I hear that the rules around Body Corporates need to be sorted out as part of this. I don’t have the answers but I doubt these problems are insurmountable.

Tax and Investment

I pay tax on my income so you should pay tax on your capital gains. This should be the case even without the presence of this big dumb bubble. Face it people – we’re not going to get rich selling houses to one another. The current setup sucks huge amounts of money into property instead of into investing in small to medium businesses or R&D, and that is bad for the economy. Most economists and tax nerds agree that there should be capital gains tax and/or a land tax. Don’t @ me. You know it’s true.

Of course no political party wants to be the first to introduce these because although they’re necessary on a national level, any rational individual is going to vote against them. This means that National and Labour need to get together and work out a CGT and Land tax that is best for the country that phases in over say 3 government terms. In other words they need to work together for the good of the country.

In parallel with this Government should be working flat out to make other investments attractive. I don’t know if these are infrastructure bonds or tax breaks for startups or what, but at the moment the best investment by miles is property and that is imbalancing the economy. While you’re at it you might as well fix up the general dodginess of trusts, who uses them, and what they’re used for. Take the politics out of it and get it done because like I said, we’re now living with a bubble that is risking the national economy.

Banks

Let’s also remember that the banks have been making out like bandits through all this. They’re making a fortune off all your $800,000 mortgages and shipping massive profits over the Tasman. There’s no way that’s good for the economy. When I was a kid economies grew by making things and selling them to other economies. Now it seems all the money is in the financial sector, trading one inflated asset for another and punting the whole thing on debt.

As The Front Lawn put it 20 years ago, “They’re making money out of money, they’re building building out of glass. Their kids look like they stepped out of fashion magazines, and none of it’s gonna last.” Now I’m not a financial genius but after the GFC nothing much was done to attend to the causes. It seems to me that since then the Reserve Banks have kept interest rates low to keep the world economy chugging. This feels to me to be a very unrealistic tactic, and one that is guaranteed to crash eventually. That doesn’t seem smart and it tends to lead to speculative bubbles just like the one that threatens to mash us all into the ground now.

Politicians

About half of our MP’s own rental properties or own multiple properties. I suspect that might be a factor in the fact that this bubble has happened. Perhaps they should be removed from voting on the matter? It’s a serious conflict of interest surely. It’s not exactly corruption but it’s not ideal for making policy.

Also, seeing as this bubble has been the cornerstone of the illusion that our economy is doing well and has made all you property owners paper millionaires, any politician who tries to deflate the bubble will get voted out. I guess they just hope to be out of power when the shit hits the fan.

Finally can I just say that when this bubble bursts I hope the Government doesn’t start bailing you people out. I’m not a rabid free-marketeer but I believe the brainy person’s saying here is Caveat Emptor – let the buyer beware. The banks and everyone who pumped this bubble up must be prepared for the possibility of losing their shirts when it bursts. Sorry. And before you say “well that’s going to take the whole economy down,” let me just say that that is on you. The greed of property owners and banks and the weakness of politicians created this mess – not anyone else. Take responsibility for your own mess.

Immigration

This is a really tricky subject. I love immigration when it brings cultural enrichment, or when it’s providing safe haven to people who are escaping horrors in their own country. I suspect at the moment though that we have immigration in order to pump up the economy or to appease a bloc of party donors. Can we please have a talk about immigration with all the cards on the table? I am totally not an expert but I’m pretty sure that shouting “Racist!” at each other every time someone brings it up is not the best way to get results. Letting 60,000 people come into the country in a year without having the infrastructure in place to deal with it is lazy at best.

Ghost Houses

There are a reported 30,000 empty houses around the place. Victoria Crone mentioned that something should be done about it, perhaps in the form of extra rates or levies. Phil Goff and Penny Hulse were straight out there putting it in the too hard basket saying they were holiday homes or deceased estates. Fine, but I reckon that even if you could get 5,000 of those houses made available in the next year it would help. I mean, I don’t like to get too personal here but Nick Smith (or Paula Bennett or whoever else is holding the flaming turd-filled diaper by the time this comes out) could probably use all the help they can get right now. 5,000 houses could really make a difference.

The rest of New Zealand

This economy seems to be all about property, dairy, and tourism. I know you didn’t ask but I would move Auckland’s port to Whangarei and juice up the rail networks around the country. The fact that we don’t have good rail and data connections for much of the provinces is an indictment on the elected beneficiaries in the Beehive. All these immigrants stay in Auckland because if they go to the provinces their only prospect is $14 an hour on a dairy farm and all the smart-casual racism they can eat. Don’t even get me started on how tourism won’t last if we don’t start looking after our natural environment. I’m not big on Government intervention but I think there is a benefit in them providing leadership by providing the tools that will allow the provinces to grow in a meaningful way. There are a lot of really smart and hardworking people outside of Auckland who are suffering because of the money and energy we’re putting into Auckland housing. How many more Xero’s or LanzaTech’s could we have if we weren’t shovelling so many billions into Auckland housing?

So that is my non-expert, non-politician reading of the housing bubble. Personally I doubt that there is the political will or guts to act before the bubble bursts and you all end up owing millions to the banks, but I really think that the only way to fix or prevent a problem like this is to look honestly at all the causes and then be prepared to make some tough calls. If any of you politicians or banks want to pay me $200,000 a year to keep working on it, I’m open to offers.

Actually make that $300,000. I just had a look at what I need for a deposit in my area. In fact, why the hell did it fall to me to lay this whole thing out for you anyway? Make it $400,000.