Dom Post on affordable housing

January 29th, 2013 at 1:00 pm by David Farrar

The Dom Post editorial:

 Making promises is a politician’s stock-in-trade. Unfortunately, delivering on those pledges is often not as easy as voters have been led to believe.

There are few policy areas in which that is more true than , where there has long been a disconnect between grand promises and brutal reality.

It was therefore unwise for leader David Shearer to allow those struggling to save for their first home to get overly optimistic about his promise to build 100,000 new dwellings in 10 years at an average sale price of $300,000. That would simply not be possible in many parts of Auckland, at least not for the sort of houses, complete with sizeable gardens and lawns, most of the present generation of first-home buyers grew up in.

Mr Shearer has now made clear that many of the 40,000 to 50,000 homes Labour plans to build in the city will be apartments or terraced housing. The same will probably also be true in Wellington, where $300,000 would be an unrealistic price for anything other than a small apartment or a terraced townhouse on a meagre section.

Their policy should be called Affordable Flats not Affordable Houses, or at one person suggested – Affordable Rooms :-)

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40 Responses to “Dom Post on affordable housing”

  1. MT_Tinman (3,202 comments) says:

    (Just) affordable slums would probably be more accurate.

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  2. RF (1,402 comments) says:

    We should know by now that when Shearer makes political promises .. Talk is cheap. The man is not to be trusted.

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  3. BeaB (2,125 comments) says:

    And I still want to see those $50,000 homes if the ‘average’ sale price is going to be $300,000. A shoebox? Garden shed?

    Shearer is becoming an embarrassment – and now a plagiarist as well. Hollow man.

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  4. Rich Prick (1,705 comments) says:

    BeaB, I think you will find most at that end of the scale have wheels.

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  5. Sidey (250 comments) says:

    It’s almost enough to make you feel sorry for Labour MPs, having to toe the party line and nod enthusiastically while knowing what a load of shite this “policy” is. I assume most of them own their own home and have a vague idea how the property market works and where it’s at right now (apart from the wide-eyed zombies parachuted in with their freshly-minted Pol Sci or Sociology degrees that is), and how unworkable it is.

    Apologies if I’m giving Labour MPs too much credit! It’s just that from a distance and with their mouths closed, they seem a little like the rest of us normal folk.

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  6. david (2,557 comments) says:

    The sad part is that this just gets written off as an unfortunate politican’s unmanageable policy promise whereas it should be called for what it was all those months – a cynical and deliberate untruth – AKA a big fat intentional lie.

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  7. Sidey (250 comments) says:

    Promotional website for Labour’s new housing policy:

    http://www.mytrailerpark.com/

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  8. RF (1,402 comments) says:

    Sidey (2). Now that was funny. Labour’s new housing policy.

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  9. Rex Widerstrom (5,354 comments) says:

    There’s an Australian housing construction cost calculator which lets you adjust things like number of bedrooms, whether you want a rumpus room etc and gives you the cost of construction.

    Without wanting to fiddle too much I just used the buttons at the top to ask for a new home, medium sized, on a “good” section (i.e. not steeply sloped but not perfect either) with a basic finish. It tells me $282,580.50 for a 144.1m2 home with 36m2 garage.

    We’re constantly told construction prices here are mental because demand massively exceeds supply and they can’t train tradespeople fast enough. In Perth, realestate.com.au estimates there are and average of 27 people interested in purchasing each home it lists; there are 20,000 new homes under construction at any given time; and each year the shortfall (which of course compounds) is about 17,000 homes. And there’s a <1% rental vacancy rate. Other major cities aren't as bad, but all have similar stories of undersupply.

    So one would assume Australians would be paying over the odds for a home, yet can build one (albeit not including land) for $282,000.

    Why is it so expensive in NZ then? I hear talk of land locked up by councils, but then I hear that here too (except it's the State government which approves new land releases). Have all NZ's builders joined the gold rush to Australia? Yet I have a son in the trade who had a pretty average year last year (though he tells me 2013 is improving).

    Has anyone thought to look at alternative building materials? In Aboriginal communities there's some groundbreaking work going on in cheap construction using recycled materials. I'd be surprised if an even greater level of innovation wasn't present somewhere in NZ, it'd just be a matter of tapping into it.

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  10. ross69 (3,652 comments) says:

    Why is it so expensive in NZ then?

    It’s not. In many parts of the country you could build a 144m2 new home for 280k.

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  11. Jim (398 comments) says:

    Shearer’s price guesstimates aside, surely apartments or terraced housing make a lot of sense anyway. Efficient on land use, construction cost, energy use (heating/cooling), public transport.

    The idea of the standalone house on 1/4 acre is rather dated. Much of the overpriced housing stock in central Auckland was built in the age of the Ford Model T / horse and cart. My place in Auckland central certainly was.

    Anyone who automatically thinks apartments offer an inferior living experience to a million dollar pre-1914 weatherboard home is deluded, or has never left home.

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  12. chris (647 comments) says:

    The idea of the standalone house on 1/4 acre is rather dated

    Maybe, but it’s what an awful lot of families with kids would like to live on. We’re on a sub-divided section (which was once a 1/4 acre) with a decent sized house and small bit of grass at the front. We’d like more land and often talk about moving out of the city, but we’re comfortable where we are and I can’t see us moving for many years. We were really lucky to have bought and sold at the right times since we bought our first house in 2000 and moved in 2005.

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  13. Fost (102 comments) says:

    We recently built a 184m2 home (4 bed, 2 bath includes the 2 garage) which is pretty much what you have looked at in the Hutt Valley (Wellington) for NZ$280k – that is all inclusive price (earthworks, consents, paths, deck, heat pump, etc. – completely finished). We up-spec’ed quite a few things, and had a few engineering issues due to wind/slope to have to deal with that upped the price a bit so a more basic model on flat land would be closer to NZ$240k plus land prices.

    In most cases in Wellington the land costs as much as the house – and in most cases would need far more earthworks that we did to get a usable building platform – one thing they don’t have a problem with in most of Australia – building land is generally flat. Even where we are out in the Hutt Valley land (plus engineering/earthwork costs) is at least $150k or more – any section cheaper than $150k usually need a lot of earthworks – this discounts the price.

    So our experience (with the last 2 years) matches the Australian price – so I don’t see NZ being any worse in building costs – it will be land prices that are the sticking point.

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  14. markm (114 comments) says:

    A weak editorial as they dont seem to be getting into the lie of the numbers.

    Shearer is now admitting that “houses” in Auckland will cost $550k and wee apartments $300k.
    If he only builds 10% of these houses in Auckland and 40% of the apartments in Auckland then the remaining 50000 homes slash flats in the rest of the country need to average $250k.

    This assumes that houses in the likes of Wellington and Christchurch can be built dramatically cheaper than auckland , which is total bullshit.

    This also assumes that over the 10 year period that their is no building price inflation, when a broad guesstimate would be 50 to 100% increase

    The media only need to do some primary school level maths , which so far they seem incapable of, to see that Labour are economically illiterate, massive liars or more likely a combination of both

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  15. Richard29 (377 comments) says:

    Except that the policy was never called ‘Affordable Houses’ – from the outset the policy has spoken of “homes”. The challenge they are up against is a rural and small town NZ mindset that everybody will live on a quarter acre section – this is simply not possible in a glabal city and doesn’t happen anywhere in the world.

    It was obvious from the outset that the policy was never going to deliver homes on sections in Auckland for sub 300k. This is not a failure of the policy – if you go back and look at the policy that was released it indicated a mixture of prices (averaging below $300k) and a mixture of housing types including apartments and units. This was a huge failure of media management by Shearer’s media team – they could and should have shut down happy mischief and rumours on day one by explaining the policy. Instead they chose to inflate peoples expectations of the policy (and spun the post conference poll bounce this caused as being a result of Shearer’s ‘decisive’ dealing to Cunliffe – Labour focussing on internal battles rather than communicating with the public – nothing new here).

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  16. Peter (1,712 comments) says:

    The fact remains we don’t need government (taxpayers) to build 300K apartments and 550K houses. The private sector already does this.

    The policy makes no sense from start to finish.

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  17. Sir Cullen's Sidekick (890 comments) says:

    The Kiwbuild policy, though it is a con scheme is a vote catcher. The Kiwi suckers who voted for the 1999 rich pricks’ tax have already been fooled by this scheme and are now planning to vote Labour thinking they will get a free house. These are the suckers who supported paying more tax to spend for education and health.

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  18. Richard29 (377 comments) says:

    @Peter
    Here is my attempt to make sense of this for you.

    National has chosen to focus primarily on land availability and red tape as their response to the housing shortage in Auckland. This is a good fit ideologically because it focusses on reducing bureaucracy and government restrictions. It is a good fit politically because it gives them a popular issue with which to drive through RMA reforms that business have wanted for ages and allows them paint the Greens as valuing green fields over the needs of people and it sets them up in opposition to the left wing mayor of Auckland (who they plan to try and get kicked out in this years local govt elections). Best of all framing the problem as being all about land supply innoculates them from being blamed if they don’t achieve anything as central government is not actually responsible for Auckland land supply.

    Labour is focussing their policy on another area. In the Demographia Housing Affordability survey Bill English included the following in his foreword:

    “New Zealand’s residential build volumes are small, and the construction sector is highly fragmented. Only five firms in the country built more than 100 homes in 2011. The vast majority of builders build only one house each year. New Zealand is a late adopter of prefabrication and use of standardised materials. In New Zealand, if a window is to be added into a house, it will usually be
    measured and built by hand. Construction industry productivity has stagnated in the past 30 years, and is now below where it was in 1978. Industry regulation favours single person operations. New Zealand has inadvertently created a cottage industry to supply one of our most important asset classes.”

    If it is executed well (and that’s a big “if”) then the Kiwibuild policy could really turn around this element of the underperformance of the housing market by providing massive stimulus to support small and medium sized building operators to deliver economis of scale. The reality is that if I am an experienced builder with a few employees and I rock up to my bank seeking to borrow 10 million to develop 40 townhouses/apartments at an average cost of 250k they would laugh in my face. So instead I leverage the equity in my home to build maybe one or two homes a year on a small scale.

    Under Kiwibuild the government is proposing to provide capital for 200 homes a week for 10 years. If this is broken up into hundreds of contracts for prefabrication, building, fitting etc it has the potential then by the end of the 10 years you would expect to see substantial expertise in prefabrication and use of standardised materials – there would be a whole bunch more companies in that ‘more than 100 houses a year’ category and several of them may even be listed entities by that time. It is still the private sector building the houses it’s just that the government is providing the capital (at cheaper than bank rates) and adopting much of the risk if the properties don’t sell (which is unlikely given that they are planning to sell them pretty much at cost).

    There are any number of reasons why the policy might fail – but if it succeeds then it would transform the industry, create employment and business growth and go a long way to resolving a key determinant of high housing costs.

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  19. chris (647 comments) says:

    @Richard29 A lot of what you say makes sense, but why should I, the taxpayer, have to pay for someone else’s house? I am a responsible taxpayer and home owner who lives within their means and am already paying for my own home. Why do I have to pay for theirs too?

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  20. HC (154 comments) says:

    @ Richard29:

    “If it is executed well (and that’s a big “if”) then the Kiwibuild policy could really turn around this element of the underperformance of the housing market by providing massive stimulus to support small and medium sized building operators to deliver economis of scale. The reality is that if I am an experienced builder with a few employees and I rock up to my bank seeking to borrow 10 million to develop 40 townhouses/apartments at an average cost of 250k they would laugh in my face. So instead I leverage the equity in my home to build maybe one or two homes a year on a small scale. ”

    Well, if such a scheme is initially financed by the government, and bonds issued get refinanced over years and eventually a kind of “life time” for homes built, this policy could be financially feasible and offer cheaper housing. There could also be savings possible by contracting and sub-contracting, streamlining supply of building materials and so forth.

    But sadly the Kiwi Build policy has not been sufficiently thought through, and the debate about land costs, the recent “correction” and “qualification” by Shearer (rather 550 k for 3 to 4 brm homes on a section), has not basically discredited the whole policy.

    It is not so much council consenting now that is the issue, also creating more sprawl around large cities is not going to save in the long run, as infrastructure and maintenance costs will catch up with initial “savings” on land.

    The Greens launched a smarter version, offering rent to buy options (under strict conditions).

    Yet none of this, such isolated measures, do not address the root-causes of the exploding house prices in Auckland and Christchurch. Policies should be introduced to spread migrants and new buyers more over the country, balanced projects, including apartments, town houses, rows of units, mixed with section houses and green spaces are the answer.

    More can be done, but so far, National has delivered next to nothing that will really make much of a difference longer term.

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  21. Rex Widerstrom (5,354 comments) says:

    @Richard29 your 4:06 pm comment is informative, well-reasoned, concise and has the ability to make people look at the proposal quite differently; at least it certainly had that effect on me. Yet Shearer and his advisors seem incapable of achieving the same result with all the resources at their disposal.

    Often I find comments on KB add to the sum total of knowledge on a topic, and try – when it’s in my field of expertise – to do so myself. And we’re a fairly random self-selected group.

    I’ve long advocated politicians open up policy and decision making beyond the confines of party membership. Why should I have to buy into everything a party says just to have input into an area where I know something?

    I remain convinced that in a nation known for innovation, we could collectively come up with a solution to affordable housing, probably incorporating National’s and Labour’s policies but going well beyond either and being greater than the sum of its parts. Sadly policy on this issue, as with all others, is determined what will, as you put it, “fit politically” and not on what may produce the best outcome.

    If only MPs would unionise. Then when they regularly went on strike over some triflling slight to their egos, we could offer to scab and install some of these solutions while they were on the picket line :-D

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  22. Richard29 (377 comments) says:

    @Chris
    You as the taxpayer aren’t really paying for the house – the cost is recouped when the houses sell. The cost is really only the government’s cost of borrowing for the year between when they start building and when they start getting money back from the sales. If the houses don’t sell then the policy will only last 12 months as they have planned that each successive year is payed for by the sales from the previous year.

    If what Shearer was proposing was a massive extension of subsidised public housing I would share your view a bit more, but what he is proposing is a pretty centrist if not right wing approach to housing policy.

    There is still a valid philosophical question about whether it is the place of government to help pay for housing – I guess the argument is that the market is failing to deliver sufficient building infrastructure and it is in the interests of the average NZ taxpayer to allow the intervention, with an added benefit that it creates jobs and domestic economic activity.

    I think very similar case has been put forward by the government in support of ultra fast broadband – it irks me slightly that there is 1.5 Bn of my tax money spent to improve the average NZ punters porn download speeds. Broadband is a readily available product with plenty of private provision – the private sector is entirely capable of rolling out UFB without government subsidy if there were sufficient paying customers demanding it – however the demand does not justify the expense so the taxpayer is being asked to help out.
    But at the end of the day the project will help transform business and raise productivity in the long term and in the short term it is a good Keynesian way to counter the recessionary downturn in employment by getting a large number of people to quite literally dig holes in the ground and fill them back in…

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  23. chris (647 comments) says:

    @Richard29

    I think I must have got the Green’s policy confused with Labour’s one. From what you have said, it doesn’t sound like such a bad policy if it can get turn around of housing. I still have a problem with them one minute saying housing isn’t affordable and the next minute offering housing at current median house prices…

    Interesting that you should talk about broadband. There had been going to be a roll out of VDSL a few years back (much faster than ADSL in both directions, but not as fast as fiber) and there are many VSDL capable roadside boxes around the place (there’s one 100m from my house) but just about none of the ISPs are selling it. Why? Because of UFB.

    I’m happy enough we’re going to finally get fibre (although annoyingly our street is just outside where they have laid fibre, and we won’t get it for another couple of years) but it does seem pretty crazy that 1.5 billion is being spent on it when VDSL would have been almost as good and the cable infrastructure was already in place (the existing copper) and all that was needed was the roadside cabinets. As I mentioned above, there are already thousands of these around the place.

    There may have been an argument to roll out fibre in some areas, but certainly not all. I think a mix of fibre and VDSL would have worked just fine, and been a lot cheaper.

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  24. Griff (7,791 comments) says:

    The cost of housing is around 1500 to 2500 per meter.
    A small three bedroom house is around 100 squares this only 150,000 the rest is the cost of land.
    National is proposing to ease the supply of land that is the main driver of the present high cost of housing
    Auckland needs to expand. The council wants to restrict supply to save new infrastructure costs The left leaning council in Auckland is intent on forcing people to use rail They envision a city of apartments from the east coast bays to Avondale to Penrose
    Most people do not want to live in such a fashion but Auckland council and choochoo are going to force it upon us
    The labor policy if it ever happens will be to build the modern equivalent of the two up two down terraced slums and the disgusting council flats my ancestors escaped from.

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  25. gazzmaniac (2,307 comments) says:

    Griff

    A small three bedroom house is around 100 squares this only 150,000 the rest is the cost of land.

    Where do I get one of these small three bedroom houses built for $150k?

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  26. Komata (1,191 comments) says:

    I asked this yesterday and got no answers from the Labourites in our midst, so will ask agin:

    If housing is the problem, (and according to Mr. Shearer it is), then what is to stop Labour from returning to the policies introduced by the first Labour Government in 1935 and as a definite policy, build state-funded low-cost and low rental workers housing, (perhaps on a rent to own basis) while also reviving the old State Advances Corp’ to provide low-interest loans to first home families. It certainly worked then and was revolutionary at the time, so why can’t it be done again; Cheap, affordable housing and government-provided loans that took no more than 30% of the individual family wage? Yet since Roger Douglas et al scrapped the State Advances system and increased everything to ‘market rentals’, Labour seem incapable of continuing with what their forebears started – cheap housing for all. M J Savage would be highly un-impressed.

    Any thoughts from Labour Party supporters as to why it can’t be done? It would be a definite vote catcher.

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  27. hj (7,031 comments) says:

    “Immigration and tax breaks for investment in residential property are being cited as the underlying causes of steep increases in the cost of housing over the past decade.
    New Zealand now boasts one of the highest rates of home unaffordability in the world as a result of prices rising far faster than incomes, and the government’s Savings Working Group blames that squarely on the policies of successive governments.
    Although “the favourable tax treatment of property investment” accounted for about 50% of house price increases between 2001 and 2007, the working group said, there was also strong evidence that rapid swings in immigration brought about price-rise “shocks”.
    There was a sharp spike in immigration in 2001, 2002 and 2003 and, said working group committee member Dr Andrew Coleman, it appeared that property prices did not fall anywhere near as greatly when immigration fell again.
    The report added that there was little evidence that immigration boosted local incomes. In fact, the need to build roads and schools meant that net migration contributed to the national deficit. ”
    http://www.stuff.co.nz/business/money/4622459/Government-policies-blamed-for-house-prices

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  28. hj (7,031 comments) says:

    80% of our population growth in the last couple of decades has been the net inflow of non NZ citizens

    “When a family falls on hard times, and has to devote lots of energy to stabilizing the
    situation, and then decides to have another child (whatever the other merits of the
    case) that will almost invariably worsen the family’s economic position. It is a folksy
    comparison and breaks down at some points, but NZ is in some respects that family:
    choosing to have lots more kids, as it were, just when were in a position to capitalize
    on the good positioning reforms put in place by successive governments in the late
    1980s and early 1990s. In that story, housing is more than a symptom but less than a
    cause.”
    http://www.treasury.govt.nz/downloads/pdfs/mi-jarrett-comm.pdf

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  29. Colville (2,269 comments) says:

    gazzmaniac (1,440) Says:

    A smallish budget plan house can be built easily for $1200 a M2 (at 100 M2) for $150K is doable.

    100M2 is TINY tho and certianly no garage.

    Plus land you understand.

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  30. gazzmaniac (2,307 comments) says:

    Colville – I will repeat my question – who will build such a house, and where?
    I used to live in a 99sqm house, it wasn’t really that small. No garage though.

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  31. Colville (2,269 comments) says:

    Gazz. Any builder will build it. There is a quid in small cheaply finished houses. What is the problem?

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  32. Colville (2,269 comments) says:

    Gazz.

    Here is Pamly North (Palm Springs :-) ) there are sections for $125K So a budget house for $275K?

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  33. Nostalgia-NZ (5,218 comments) says:

    Exactly Colville. In Auckland the biggest available land for homes on that budget rate is held by HNZ, so it could easily be done in Auckland as well. At the moment it looks like it’s getting sold off to developers on ‘sweet’ deals.

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  34. Richard29 (377 comments) says:

    @HC and hj
    The problem as I see it with what you are proposing is that it is all about trying to restrict demand to fit the constrained supply. That is a vision of an Auckland which is not growing. Firstly I don’t think that trying to artificially stop Auckland from growing would work and secondly I don’t think that it is desirable. People come to Auckland (from all over the world as well as all over NZ) because it is a centre for employment and economic activity. There is a lot of research that shows that cities have higher productivity the more dense they become – again this is good for NZ which has poor productivity growth (and that’s the real measure of wealth).
    I think Labour and the Greens will need to accept more land opening up but they do make a valid criticism that you can’t grow outwards forever eventually you have to build up. It seems to me that Bill English’s point in the Demographia report foreword is very valid. The cottage industry of small scale builders doing one of a kind properties on individual sections worked well in the past but it’s not going to allow the kind of scale you need for Auckland to build up. Sadly the Nats are not showing any plan of substance to address this challenge.
    Kiwibuild (if executed well) could be a policy to turn this around. Its very centrist which gives an indicator of what we can expect from Shearer. If he’d tacked to the left and announced a massive state home building program Kiwibuild is exactly the kind of policy I can imagine National countering it with. I’m curious to se if they end up borrowing elements of it in the next couple of years or if political point scoring will win the day.
    If Labour comes into government in 2014 and starts Kiwibuild after National have already freed up more land and reformed the resource management act the policy will be even more successful. The Greens especially will kick up a huge fuss over RMA reform but they’ll have a hard time getting Shearer to roll it back once it’s done.

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  35. Richard29 (377 comments) says:

    @Colville
    I live in a 110sqm home in Auckland and it’s just fine – plenty of room. 100sqm is perfectly ok for a first home – by all means get a bigger home later but people should expect to move into a McMansion straight out of university…

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  36. Johnboy (16,651 comments) says:

    Here in Wainui you can have a Mansion with a pool or two and more sheep than you can screw for $500,000! :)

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  37. Griff (7,791 comments) says:

    Kit set or transportable there is many firms out there that will tern out a tidy home at 1500/sq or less
    Keep it simple avoid big windows fancy corners and flashy cladding and you keep the price low. The building code has a guide for a simple house that has minimal extra rubbish If you are capable of deciphering bureaospeak and drawing straight lines you could easy design your own saving engineer and architect costs
    just keep the bloody missis away from the extras. When they start asking for fancy kitchens and bathrooms tiled entryways and other bling you start the eye watering price rises

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  38. Rex Widerstrom (5,354 comments) says:

    @Johnboy

    Now you’ve gone and ruined it! Everyone will want a piece of paradise now, and your sheep will be be lured unto the path of sin by them city folks and their ‘fisticated ways…

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  39. Johnboy (16,651 comments) says:

    A simple man, with no morals, could get rich by selling some of his unused sheep to the perverted city folks Rex (at top dollar of course) and then I could afford that “Pool- Guy” that the wife keeps bugging me about.

    Who says us rural folks are dumb eh? :)

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  40. HC (154 comments) says:

    To Richard29:

    “The problem as I see it with what you are proposing is that it is all about trying to restrict demand to fit the constrained supply. That is a vision of an Auckland which is not growing. Firstly I don’t think that trying to artificially stop Auckland from growing would work and secondly I don’t think that it is desirable. People come to Auckland (from all over the world as well as all over NZ) because it is a centre for employment and economic activity. There is a lot of research that shows that cities have higher productivity the more dense they become – again this is good for NZ which has poor productivity growth (and that’s the real measure of wealth).”

    This supposed logic if higher efficiencies with everything – e.g. urban centres – growing bigger and bigger, being “centres” for population, work, business, innovation and whatever else, this is flawed thinking.

    By that logic all mega cities in the world, from Sao Paulo to Mexico City, from Manila to Shanghai and Calcutta, would be booming centres, with economic activities and much else only offering benefits, but no negative side effects.

    Just look at Auckland now, nearing 1.5 million or more population. It already needs water supply from the Waikato River to feed the pipes in homes and businesses. Imagine a population of 2.5 million. Where is the water supposed to come from? That is just one resource and infrastructure issue. The cities mentioned above all face immense challenges, and water supply is just one of them. To cater for millions you need much development and create high costs to build infrastructure.

    Auckland may need desalination plants, if local water may not be enough. Add roads, bridges, tunnels and more, and this growth and efficiency talk will show it all has a price to pay.

    Well developed countries like Germany have few large cities. They have realised, a good size city is between say 150,000 and 450,000 population. Once you have larger cities, the environment suffers, and hidden costs will be paid by future generations.

    Hence NZ should develop other centres a bit more, so more diversity and less density is created.

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