TV3 - The Nation, How to address the Housing Crisis

I was invited to contribute to the TV3 programme 'The Nation' over the weekend to talk specifically on the impact on the Reserve Bank's LVR changes and the impact this is likely to bring to the housing market.

My contributions were matched by both sides of the political arena with Nick Smith - The Housing Minister and Phil Twyford the Labour Party Housing spokesperson.

 

I was asked by Rachel Smalley the question as to what would be the one thing that I would do right now, to bring some correction to the market in Auckland?

I highlighted the UK policy of New Buy. This UK government backed initiative seeks to provide a government underwriting of higher loan to value mortgages for the purchase of new homes - allowing people to buy with 5% deposit

This initiative launched earlier this year appeals to me as it provides a means of creating real demand in the housing market for new building, something that is seriously needed if we are going to meet the requirements of the future growth of Auckland. 

A core issue of the current building market as I highlighted in the interview is the fact that we lack scale in the NZ new-build market. We operate new builds as a craft industry, building to bespoke designs and thereby creating no real opportunity for scale. We need to build spec housing to create a supply upon which the demand can be satisfied. A government scheme which only requires an underwriting to cover default liability rather than grants, would allow accredited building companies to make investment decisions to get more houses built.

New built houses complying to the Building Code provide a vastly improved housing stock for the country, insulated, energy efficient and built around amenities that suit the communities that can be created around scale developments rather than piece-meal bespoke homes.

I went on in the interview to also highlight my concerns around the approach we have in this country to residential property investing, how we have too biased an incentive structure towards property investing as compared to other investing options, especially superannuation. I drew reference to the need for 'patient capital' to be invested into residential property to provide more secure rental accommodation of a higher quality and surety. In other countries rental accommodation is more the remit of corporations and institutional investors than "mum & pop" landlords. As an example in the UK again, Legal & General, one of the largest insurance companies with significant assets under management made a strategic move this year to invest in rental properties.

As ever there is never a simple single answer to the housing crisis, however whilst not wishing to believe that answers only lie outside of our borders there are always valuable lessons to be learned from examining overseas markets and initiatives.