Hide on housing

December 3rd, 2012 at 4:00 pm by David Farrar

writes in NBR:

You gotta love politics.

Think of the care, the anguish, the endless calculations, the budgeting, the fear, the heartache that the average household endures before determining to build a house.

Politics dodges that.

You just announce it. No care. No anguish. No calculations. No budgeting.

And not one house. One hundred thousand houses.

It’s think bigger!

In business you would be dismissed as a quack and jailed for fraud. That’s why politics is so wonderful. It turns the world upside down.

Newspaper editorials have enthused over the policy.

These same editorials condemned finance companies for their recklessness.

The 100,000 house policy makes the finance companies appear paragons of transparency, analysis and proper budgeting.

I am amazed that no media outlet has tried to seriously analyse the numbers behind the policy.

The backers of the 100,000 houses policy don’t have to trouble themselves with a carefully worded prospectus that could land them in jail should the plan go pear-shaped. Nope.

They just have to announce it.

Politics has no need to attract investors. Inland Revenue works day in and day out fleecing citizens of their hard-earned cash precisely to fuel such grand projects, the very stuff and substance of politics.

Yep, the taxpayers are the ones who will for out $30 billion or so in the belief that the Government will be able to sell houses in Auckland for under $300,000 and only lose $15,000 on them.

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40 Responses to “Hide on housing”

  1. PaulL (6,013 comments) says:

    Hmm. This is like a call option, right? Limited upside, but unlimited downside. So if everything goes to plan, we all lose $15K per house, assume 30% are in Akld, that’s $450M.

    But if things don’t go to plan, we probably have:
    – bureaucrats administering the mess. Assume 40 staff @ $100K per annum (loaded cost) for 5 years. $20M
    – $100K cost per house, not $15K. That’s $3B instead of $450M

    How much wrong can they be on prices? What if it’s $200K per house?

    I guess if it was structured as “govt issue tender to buy newly built houses in Akld for $315K each”, and corporates such as Fletcher building then tender to build say packets of 100 of them….then there’s little financial downside (nobody tenders houses, then none get bought, policy comes to an end). Question is what happens when they turn out to be leaky buildings or the equivalent.

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  2. RF (1,363 comments) says:

    Has Rod Oram, Labours darling commented on this spend up.

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  3. cha (3,918 comments) says:

    Politics has no need to attract investors. Inland Revenue works day in and day out fleecing citizens of their hard-earned cash precisely to fuel such grand projects finance my post parliamentary lifestyle, the very stuff and substance of politics.

    FIFR

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  4. OTGO (535 comments) says:

    Wouldn’t it be better to offer for sale the existing stock of state houses built in the 1960’s to 1980’s to the current tenants at a “reduced” market price? Don’t get involved in lending the money, the banks can do that, the desired result is to collect the cash on these houses which cost the taxpayer millions to maintain annually. Then take this money and build more modern houses for rental. Then when these houses get older than say 50 years sell them and start the process again.
    Actually on reflection the existing state houses should be sold for market price. Sorry brain went into screen save there for a moment!

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  5. RRM (9,759 comments) says:

    Politics has no need to attract investors. Inland Revenue works day in and day out fleecing citizens of their hard-earned cash precisely to fuel free air travel for MPs’ partners, the very stuff and substance of politics.

    Fixed. :lol:

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  6. Reid (16,174 comments) says:

    Why doesn’t Liarbore just get it over with and announce if they’re elected, they plan to level the buildings at No.s 1 and 2 The Terrace and manage the economy without them, since they just impede and block progress at every turn and who wants to listen to that all the time.

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  7. lastmanstanding (1,261 comments) says:

    Buy FBU shares They have already gone up from a bit over $5 when I bought 18 mths ago to well over $7 and will go to $13/14 if the socialist party wins in 2014.
    These morons will pay Fletchers the difference between the real cost and their BS $385K a house.

    AND this on top of all the work Fletchers are getting out of the CCh rebuild. Years and years of guaranteed work.

    Theres no way they can build 100K houses in 10 years but as a FBU s/holder who cares. For me its just a way of getting some of the taxes I already pay back by way of the increased share price and dividend as result of the moronic socialists subsidy to Fletchers.

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  8. pq (728 comments) says:

    jesus christ we worked so hard for Rodney Hide to to speak true , and it worked ,
    speak or write Rodney

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  9. cha (3,918 comments) says:

    These morons will pay Fletchers the difference between the real cost and their BS $385K a house.

    It’s been done before.

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  10. emmess (1,416 comments) says:

    Reminds me of this guy

    http://www.youtube.com/watch?v=DkGMY63FF3Q

    Actually, he seems to be talking about these green jobs we hear so much about from Wussel Norman and co.
    But the applies to the socialists as well

    Phase 1 is already complete, it is up to someone else to implement it

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  11. marcw (241 comments) says:

    @OTGO: “Sorry brain went into screen save there for a moment!”

    +1

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  12. Monique Watson (1,062 comments) says:

    I have been trying to build two houses in Khandallah wellington for the last ten years for under five hundy thousand each.
    It can’t be done. The rock anchors required run the cost up by 70,000 each dwelling but even so flat land construction cannot be done these days for the 800/m2 it was done for a decade ago. Though I don’t like to be hasty, it is my thoroughly researched conclusion that Shearer is a complete cock for putting forward the suggestion that this can be done.

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  13. Richard29 (377 comments) says:

    Why do you assume they will sell the houses at a loss?
    The policy they announced says they will sell them for cost + govt bond rate + a 1% margin.
    The policy is also non specific on the price of a given home – it says they “should” be able to build them for under 300k. It also says that they will build a range of sizes and cost (including apartments) and they will be inside and outside of the major centres. It doesn’t say that all the houses will be sold for under 300k regardless of the cost of building them.
    In fact the policy clearly states that they are only building 10,000 homes a year and that the subsequent builds will be funded by the sale value of the first 10,000 so it is clear that they are not selling them at a loss.
    Fomenting Happy Mischief…?

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  14. bhudson (4,736 comments) says:

    Has anyone considered the emissions from building these homes?

    On behalf of Gareth Hughes, I call for any inquiry.

    [That was a typo - it was supposed to be "an inquiry", but, on reflection, "any" seemed more appropriate for Gareth.]

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  15. shoreboy57 (137 comments) says:

    DPF – “I am amazed that no media outlet has tried to seriously analyse the numbers behind the policy”

    Really David – you were expecting more from MSM??

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  16. Richard29 (377 comments) says:

    @Monique
    I agree – all homes for under 300k each is not going to happen.
    A minority of the homes will be under 300k and they will either be smallish apartments or homes outside the main centres. They may try to fudge it by saying that they are aiming for a long run average price of under 300k so the only way to judge their success is to wait till they are all built – which brings me to my second point.

    100,000 homes is also not going to happen.
    According to the press release the plan is to ramp up to 10,000 a year from the end of their first term. So if Labour wins the 2014 election that means 10,000 a year from around 2017 till 2027. It also means they are assuming they will win the 2017, 2020, 2023 elections with no changes to this policy – to say that is unlikely is a serious understatement….

    So apart from not building 100,000 homes and not building them for under 300k he’s right on the money…

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  17. duggledog (1,486 comments) says:

    A very very good point from Rodders about irresponsible spending and the general lack of accountability for these decisions.

    Then again, how many opposition parties have told the voters they were going to do something and then found any excuse not to do it?

    They won’t do it. It’s just another dog whistle to those people who believe the government has all this money they just… have.

    Mind you it looks like Russell will be able to find some!

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  18. OTGO (535 comments) says:

    I’ve thought again about the “housing shortage” and if we think forward about 20 years a lot of housing stock will come on the market when the baby boomers start to die so I’m picking on a glut around 2032.

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  19. pq (728 comments) says:

    how can I bring this man Rodney Hide back into central politics.
    Can I nominate him for Epsom National. please tell me because I will not rest or resile..
    We will have him back because our country needs him.
    You people up there can vote for Rodney Epsom, and I down here vote for Winston.
    What you think somewhat lively. go on vote here

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  20. PaulL (6,013 comments) says:

    You know what. Ignore everything you know about this policy (as it will probably evolve over time anyway). Imagine I said to you:
    – The problem in the housing market is that there’s no economy of scale, what we need is large scale house building (sure, I’d be wrong, but imagine I did)
    – I’m going to create bulk contracts with major contractors to build houses. They’ll be a bit different, but a bit like state houses in the past they’ll be made of similar materials, giving lots of economies of scale
    – I’m going to tender, and someone like Fletcher’s Building will promise to build me 500 houses in Auckland at about 10% less than anyone else can, as they’ll build in bulk
    – I’m going to finance that at government bond rates, and I’ll sell them to you at whatever it costs me to build them plus the interest whilst they were built plus 1%

    Would that be a bad idea?

    One of the things that strikes me about houses in NZ is that our interest rates are quite a bit higher than, for example, the US. In the US you can get a fixed rate mortgage as low as 2-3%, for 20 years or longer. Who wouldn’t buy a house at that rate? You get a tax deduction as well. It also makes me wonder whether that’s partly why they have more small business than us*, if you can borrow against your house at 3% and start a business, your cost of capital is pretty amazing compared to what a small business in NZ pays.

    *unsubstantiated claim, I don’t actually know they have more small business than us, I might have made that up.

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  21. mikenmild (11,246 comments) says:

    pq
    Maybe you could start a political party (“RodneyFirst”) and beg him to be your leader.

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  22. OneTrack (2,959 comments) says:

    pq

    +1

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  23. Griff (7,202 comments) says:

    Every one seems to be stuck on stand alone housing
    Think leftys and choo choos
    and squalid little cheap apartments
    Instant slums built along lens train tracks.
    Auckland will be the target it is where the lack of housing and high pricing is

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  24. Luc Hansen (4,573 comments) says:

    For a pro-business, free enterprise guy, allegedly, Rodney has remarkably little faith in the ability of the private sector to step up to the plate and do, well, business.

    The house building sector will be on to a winner, apprentices will reappear and people will be able to find affordable housing. It’s got to be good for us!

    Here’s the economic reality. The private sector is sensibly deleveraging, thus reducing aggregate demand. We need the government to balance that deleveraging with stimulus, especially as we close in on the zero lower bound, to avoid deflation and depression. The Labour policy is essentially getting its retaliation in first for when monetary policy can (soon?) no longer do the trick of keeping us in the style to which we have become accustomed.

    Rodney’s ideology has run up against the brick wall of economic reality. Long may he remain an irrelevant, if somewhat squawkily comedic, Chicken Licken.

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  25. Anthony (789 comments) says:

    Luc why not just say that HNZ will build 10,000 new houses a year and sell its older and less popular stock at market values? Far more sensible with no need for wild promises about affordability and no need for housing lotteries, but not nearly as headline grabbing!

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  26. Yvette (2,761 comments) says:

    The backers of the 100,000 houses policy don’t have to trouble themselves with a carefully worded prospectus that could land them in jail should the plan go pear-shaped. Nope. – Rodney Hide

    And another Prospect that may go pear-shaped : Oops – well, whuck! The Maori do own the water after all

    Surely enough to keep Prospectus Penny going for ages :-)

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  27. Nick K (1,199 comments) says:

    Luc, if we want your economic analysis, we’ll ask you for it. Don’t hold your breath.

    I followed Conor Roberts’ move to massive property developer Todd Property with interest. Yesterday’s Herald (http://www.nzherald.co.nz/property/news/article.cfm?c_id=8&objectid=10851340) was enlightening:

    But the developers do. They say the Resource Management Act creates too many costs and delays; that the Government and councils pay lip service to increasing New Zealand’s housing stock, but are slow to put their money where their mouth is.

    At Todd Property, which is building Stonefields and a satellite town at Long Bay in the north, external relations manager Conor Roberts agrees that hold-ups cost money.

    “Time is cost, so any delay adds cost to the eventual development,” he says.

    That makes it harder to provide low-cost housing from families and first homebuyers. The biggest problem, though, is soaring land values.

    Roberts says the Government will have to provide cheap land if it wants housing provided at anything less than market value.

    “If you’re talking about providing large scale affordable housing at below market value, then the only way you are going to have an impact is when the Government or council provides subsidies or cheap land to bring down the cost. It’s as simple as that.”

    Roberts, a former adviser to Mayor Len Brown, said his previous job was handy for “knowing the process council worked to” but there were no other benefits for the company, which was also developing land at Long Bay on Auckland’s North Shore. He believes the council needs to give developers more flexibility in the planning process.

    He acknowledges his council experience is handy, but says there are no other benefits for the company. No privileged access, no special treatment.

    Roberts says council shouldn’t just roll over current policy, because it is too restrictive on what housing can be built, where.

    This is where taxpayers money will be going if Labour is elected – to New Zealand’s largest private company to build houses.

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  28. bhudson (4,736 comments) says:

    The private sector is sensibly deleveraging, thus reducing aggregate demand. We need the government to balance that deleveraging with stimulus…

    Luc,

    That is nonsense. The private sector is not “deleveraging”, people are saving. Given our high levels of private debt, that is a good thing. It is also a correction to the debt-fuelled consumption of the early 2000’s. A correction that our economy needs for long term stability and capacity to weather future economic uncertainties.

    The last thing we need is to offset that saving with further borrowing (govt stimulus.) Nor do we need higher taxes, which would undermine people’s ability to continue saving, or businesses investing.

    In short, the last thing we need is some Keynesian-derived ‘stimulus’ plan.

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  29. Nick K (1,199 comments) says:

    Oh, stop talking sense Mr/Mrs Hudson. It’s quite amusing reading left wing nonsense.

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  30. bhudson (4,736 comments) says:

    Nick K,

    There’s no keeping him down. No matter how many times, or how hard, he is knocked down with logic and truths, he keeps bouncing back. Just like those soldier toys of old.

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  31. Key is our man (866 comments) says:

    Say what you want, the public loves this plan and it is winning votes for Labour. So zip it and get on with life. This will start to happen in 2014 when the Labour-Green government is in place.

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  32. RightNow (6,961 comments) says:

    I’m already looking forward to the leaders’ debates. Another “Show me the money” moment. I wonder if Shearer will have his sums done by then – I’m betting it will be $400k per house by 2014.

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  33. RightNow (6,961 comments) says:

    Mind you, there’s always a way.
    Back to the future with Labour: http://www.nzhistory.net.nz/media/photo/state-houses-in-porirua-east-1950s

    (be sure to read the caption)

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  34. sparky (235 comments) says:

    I have never heard so much rubbish coming out of the mouths of both Labour and The Greens. The Greens have already got themselves ensconced in cabinet, and Labour are saying no way, to certain Port Folios. If it wasn’t terrifying, the very thought of either of these Party’s in power, it would be an hysterical Drama. They can’t agree out of Government how the hell would this be for NZ in government. Goooo National, we will be voting for you, we don’t want morons in power. Wussel go and find your flag. And Mr Shearer go back to the UN.

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  35. Rich Prick (1,648 comments) says:

    Given that Norman will be our next Minister of Finance, lets just print 100,000 houses.

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  36. Paulus (2,589 comments) says:

    It is the 196 houses completed a week which excites me.

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  37. alex Masterley (1,507 comments) says:

    RP,
    With 3d printing technology advancing as it is you soon will be able to “print” a house.

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  38. cha (3,918 comments) says:

    It is the 196 houses completed a week which excites me.

    So the prospect of a house every twenty hours will excite you.

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  39. hj (6,794 comments) says:

    Ahhhh! so the price of land is too high:

    PM says ‘no’
    Prime Minister John Key reiterated later a land tax and broader capital gains tax were still off the cards. Asked whether the implementation of one or the other could allow government to reduce income taxes to give people more income to spend, he replied:
    “At the risk of repeating myself from last year, we looked at a land tax, and land taxes, one, reduce the value of land in New Zealand, by definition, and it has an impact on every single homeowner in New Zealand.”
    http://www.interest.co.nz/news/52737/imf-recommends-govt-broaden-capital-gains-tax-base-and-introduce-land-tax-your-view

    Outraged developers in Queenstown have blasted a proposal before the Government suggesting radical changes to the tax system.

    Yesterday the Tax Working Group, a think tank set up to look at the tax system, published their findings.

    The report labels the tax system broken and recommends a range of changes including introducing a land tax on all properties and raising GST from 12.5 per cent to 15 per cent.
    http://www.stuff.co.nz/southland-times/news/3248188/Developers-slam-land-tax-proposal

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  40. SPC (5,531 comments) says:

    It’s a good idea – given the National government has no plan to create the growth required to emerge from its endemic budget deficits.

    Building 10,000 house a year creates some growth, and also reduces upward pressure on rents and property values. Lower housing costs will also give people more discretionary income to spend.

    We cannot afford to continue to build up debt funding budget deficits, so this development is positiive news.

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