Save the Humans

The Problem with Social Housing

Social housing is a silly idea whose time has passed. The idea is that people who cannot afford to house themselves are covered by the state, or the local council. These people are charged less than market rent. There are few limits (if any) around the duration of the lease. Allocation is based on 'need' rather than means, as this is the entire point of the policy.

Any economist will tell you that this doesn't work. There are many reasons, so I will only cover the really basic ones. The BBC has just done a little show on it, and the story is on their website.

Firstly, since the joint is offered at below market cost, the demand will be higher than it would otherwise be. In fact, demand can be assumed to be infinite, up to the population of the country, and beyond if people immigrate and are eligible for cheap housing. In practice, demand starts out moderate and slowly increases year on year as more and more people learn about the programme and become ensconced. This means there will always be a waiting list. Almost by definition, this waiting list cannot ever clear, except temporarily, and even then only with additional funds. So we see:

And there are plenty of people waiting to be housed. There are more
than 70,000 people currently in desperate need. They are being housed
in temporary accommodation like bed and breakfasts. More than two
thirds of them are in London.

It is thought 2 million people could be on English housing waiting lists by 2011

Secondly, social housing gives the government a way of introducing really silly housing policies, without causing a popular revolution. Green belts restrict the amount of housing land available and push the price up to silly levels. The process is gradual, but you can see the result of 40 years of land restrictions in the UK. People live cheek by jowl while green space lies idle, building land costs millions of pounds per acre (versus 10-20k for farming even with production subsidies in place) and first time buyers cannot afford a pad.

Thirdly, social housing creates a relatively large group of people who are not paying their way. Seeing this in political terms, it becomes impossible to reform the policy, since so many people are reliant on it. In fact the green belts (which create a rigged market) and social housing both create dependants. The social housing beneficiaries cannot afford to be turfed out into rigged market, and the rigged market 'owners' cannot afford to be turfed out into a real market, as without green belts their property values would collapse. Both of these policies produce uncertainty and are captive to changing political winds. So the housing market is much more unstable than it should be. Buyers and sellers are operating more in a lottery situation than a real market.

He saves more than £500 a month by renting a one-bed housing
association flat from a friend and insists that he cannot afford to pay
market rates.

[a related point is that without the green belts there would not be a need for social housing in most cases, or at least the need would be drastically reduced. Social housing and green belts are perhaps two sides of the same coin]

Fourthly, it creates a secondary market where people who can benefit from social housing have a strong incentive to bargain it away to others with cash. If you imagine an impoverished family living in a massive London house, they could double their income by moving elsewhere and renting the place out. While the secondary market is really only a symptom of the rigged market, it is a corrupting influence on society. The cost of uncovering this fraud is substantial too:

In these cases the landlords are often making huge amounts of cash from subletting their property at market rates.

In some inner city areas people can make more than £12,000 a year from subletting - money rarely declared to the Inland Revenue.

Southwark, in London, has a dedicated team of housing investigators specially trained to interview suspected tenancy fraudsters and find evidence using various data. Between them they recover more than 100 properties per year, saving hundreds of thousands of pounds.

Fifthly there is the massive, insane cost of it all. Just one family is costing Ealing council £150,000 per year, close to half a million NZ$. This cost is borne by the general ratepayer, and drags down everyone as a result.

Sixthly, need is a relative term. Need can be created. I don't need a new car but if someone offered me one, I have a feeling that would change. Perhaps I would even crash my current car or drive less carefully to create the need. You get the idea. We need people to live their lives so that they don't need assistance, not so that they do. Or put another way, as someone once said, don't fund what you don't want more of.

Finally, let's face it, state/council housing is not the best. Ugly concrete blocks which are a blight on the landscape and scar the residents for life. These buildings are definitely a 'negative externality of social housing policy' Children brought up in this environment would be considered deprived in countries like New Zealand. Councils are not good at doing it well. This leads to 'sink estates', high crime areas, and other social problems like day leads to night.

It amazes me that the policy itself is not being questioned. Talking about the fraud (which is surely a side issue) is a bit like discussing the type of bullet you want to be shot with, and ignoring the impending death.

Let's hope it is social housing that gets the bullet.

The Fires of Hell

It is a frightening disaster. The death toll, for a western country, is almost incredible. The harrowing tales and the massive effort to get the situation under control suggest a fight to the end between the good guys and a monstrous, evil force bent on human destruction.

I was still trying to get my head around the 60 people burnt to death, when the toll shot up to 100. Now it is heading over 200. While not quite in the league of a natural disaster in a 3rd world death trap, the death toll is well beyond what we might call 'acceptable' for such an event.

Obviously people will say that fires are hard to control, that they start easily, and that this has never happened before. But it is still unacceptable.

Questions will have to be asked as to whether people should live in such dangerous surroundings. Most are aware of the risks, but do the benefits of living in the bush outweigh this risk? Are there enough fire bunkers spread around? Is it not possible to reduce the risk using very wide fire breaks, evacuation plans / drills, or early warning systems? Is there enough water and firefighting equipment standing around for when it is needed? Should people actually live somewhere else?

I think the number of dead will force a rethink of some of the above. For now the fight is still on, but already a royal commission into the bush fires has been announced. Lessons must be learned and this mustn't happen again.

Or mustn't it? How much of this is in fact a natural and random event over which we have no control? Has human arrogance, fueled by our mastery of building houses, air conditioning, shopping malls and comfortable cars, led us to believe that we control the world? Environmentalists even talk of our industrial output setting the temperature of the planet. Perhaps we have forgotten that we are a few tiny life forms on a ball of molten rock in a massive, freezing vacuum and orbiting a nuclear explosion?

We have lost our humility, and perhaps become over-confident about who runs what on this little planet. We should instead lose our conceit.

CCC Council Tenants Vote With Their Feet

From The Press today:

Tenants are leaving Christchurch City Council homes in droves after a controversial rent rise, and social agencies are warning it will get worse.

Council figures show that 110 tenancies ended in July and August compared with 65 in the same two months last year, a rise of 70 per cent.

I'm not sure why this means things are getting worse. This housing is subsidised, so any reduction in demand is to be welcomed. It might mean that residents have a better offer elsewhere? If so that is the market at work.

The council says the increase in departures is not because of the rent rises, with no tenants citing that as their reason for leaving.

This is probably weasel words. Did the council ask each tenant? I doubt it. The problem is that the CCC is such a dishonest and crooked organisation in so many areas that it has no credibility when it speaks about anything.

What has happened to the massive waiting lists? Have they dropped? Are people in real and genuine need now able to get into a flat, instead of the same people hogging it for years? They don't say.

The Joys of High Density Living

This from Auckland's Viaduct development:

'Every weekend at 4am, noise is still at a ridiculous
level from drunken customers, car horns, shouting, screaming and
smashing bottles.'

'It is unreasonable to expect anyone to live in the Quays with this excessive noise.'

'I have been woken up often by the rowdy manner, foul language, throwing
up on public walkways and using the lamp posts and rubbish bins as a
toilet facility.'

Christchurch has a similar problem. Councils have sought to encourage inner city living over the past 10 years - here is a CCC note from 10 years ago:

Planning policy for the city over the last 30 years has looked to encourage inner city living. There are real benefits to be gained in supporting the commercial activity of the central city. People can live close to work and avoid long distance commuting. It puts people back into the heart of the city, restoring a sense of community, as well as supporting facilities and services existing in the area.

They have duly sought to create these 'real benefits' with mixed results. For one, the sense of community is a mirage. It does unite poeple in opposition to the bars and restaurants around them, but in reality people soon find out that the noise and lack of parking makes for a lonely existence.

Greater development and a growing population does, however, mean change for the local environment. Much of the existing housing stock is older and design and architectural styles often differ from those of new housing.

Translated: the existing houses must be torn down and replaced with much closer, higher density ones with no green space and no trees.

Townhouses and apartment buildings tend to be larger, closer together and more prominent in the landscape than the older housing stock they replace. With greater building density, issues of design become particularly important, the way buildings look, the way they relate to neighbouring properties and the contrast of old and new.

Thankfully, this problem has been solved. The particular building look that has been chosen is 'ugly'.

[updated to fix typo]

Smart Growth = Unaffordable Housing

Smart Growth seems to be the flavour of the month at the moment. NZ councils generally have a strategy which means Smart Growth about 1300 times in the space of 100 pages.

This leads to 5 major policy errors:

1. In the name of Smart Growth, councils charge massive levies and taxes to cover the cost of building infrastructure in the sticks. Such fees target the greedy, rich developers, as if this won't be simply passed on to house buyers.

2. In the name of Smart Growth, councils fight any major subdivision in court, to try to keep the city boundaries intact. Of course this massively distorts the property market, so you get unstable prices, and bubbles a bit like the one we are now coming out of.

3. In the name of Smart Growth, councils can't make up their mind whether roads are good or bad. Many council employees would love people to live in central apartments and walk / bus everywhere. It saves on infrastructure. Of course it saves on children also.

4. In the name of Smart Growth, councils spend a fortune on 'planning', which is defined as 'deciding' where people will live, as if a council has any idea on that. They invariably end up deciding that people can live nowhere that doesn't already have a house. See 2.

5. In the name of Smart Growth, councils try to mix affordable housing with normal housing, as if it isn't their own policies which are making housing unaffordable. It's like meddling in the market to undo the meddling you are doing in the market.

About a year ago, a woman who was apparently in charge of ChCh's growth strategy (she wishes) was in the paper saying how pleased she was that the people of ChCh had rejected urban sprawl. This was apparently in response to a survey they commissioned. You can imagine how it went: 'Do you agree that nasty evil hint hint urban sprawl is undesirable and we should aim for the pleasant perfection of urban crush... I mean compact human friendly zones instead?' No? I'm sorry, that's the wrong answer, please try again.

I am not claiming that council people are stupid. Or at least not in IQ terms. So how do they get it so wrong?

Partly, New Zealand often seems to follow along behind the rest of the work, making the mistakes other countries made, only 10 years later. Perhaps at the moment a lot of English public servants leave their jobs having failed to control everyones' life and move here to try again.

Partly we haven't had a massive planning failure yet, or the issue is still under the radar. So planners get to play in the sandpit with very little supervision. This tends to encourage the wackier elements.

Partly these people somehow escape blame for sky-high section prices, although I really don't understand how.

But also it is because the entire premise of planning is wrong. Decisions on where to live are made by individuals who weigh things up and make their decisions. They pay for their decisions and they suffer or celebrate accordingly. Council people, on the other hand, try to figure out what is going on, try to change it, but really don't care since they have no stake in it actually. Councils can get away with 'planning' which it operates at the margins, but when they really start distorting the market, the chickens come home to roost.

Councils should of course try to predict, model and understand what is going on in their areas, so better to react to the irrational, random and sometimes violently fast changes in housing demand. But when councils resort to 'planning',. they are getting above themselves, to the detriment of all.

Eco-towns - What Next?

The environmentalists are confused. On the one hand they hate anything that involves building a house on some land. On the other, they love anything with 'eco' in the title.

What to do about Eco-towns?

Housing stock should be 30-50% affordable housing with a good mix of tenures and size of homes in mixed communities

Affordable housing in the UK is generally a term that means social housing. This means that rate payers and neighbours foot the bill either through rates or built into the purchase price of the house.

What do people think of it?

But the government continues to back the plans. On Monday, it argued the general public supported eco-town development - 46% of adults supporting the idea, while 9% against, it said a YouGov survey found

That's pretty impressive, when you consider that England has a massive anti-development lobby, which has assisted in making housing unaffordable almost anywhere in England except for those on very high incomes. Is the eco label really that powerful?

This changed to 34% support and 15% opposition when people were asked if eco-towns should be built within five miles of their home.

Not as powerful as NIMBYism, apparently. Just read some of the comments to see the depressingly closed minds of the English. Perhaps the reason it is so hard to find a cheap building site in New Zealand is that so many English have landed up here?

Perhaps they wouldn't need so much social housing if the real stuff wasn't so insanely expensive?

$400,000 for a Shoebox with No Parking

The SST reports on an apartment block in Auckland, shown above (sorry can't find it online)

What would you pay for a 47m2 unit? That's about 7 x 7m, or a little larger than most people's living rooms.  I would pay about $9.20 and I would keep my dog in it. I wouldn't conceive of making anyone live there.

By proportion, our living room cost around $37,000 and for that money we got a whole house. Admittedly that was a few years ago, but even so, $400,000 is crazy money. That's around a lifetime's savings for most people.

Stand up at the front door and take 7 good-sized paces forward. You've just fallen out the window. How can people live like this? Why would you live in a shoebox in a country like New Zealand with so much free open space?

Don''t have a party either. The units do offer two car parks, but only for an additional $145,000. I've got about 50 free car parks outside if anyone needs them, provided not too many of my neighbours are having a party also.

Is there the future of housing according to the environmentalists? I hope not. Where is the green space, the garden? Where can I sit and contemplate anything other than the traffic? Appartment living is ludicrously overpriced. Why?

The Risk of Social Housing for Ratepayers

A letter in The Press today points out something which ratepayers must keep in mind:

The controversy over the Christchurch City Council housing rentals, and the narrow victory for the ratepayers at the recent council meeting, highlights the fiscal risk to ratepayers and the urgent need to review all aspects of council housing.

On no account should the number of units be increased, because even the present relatively small proportion of council tenants came close to forcing ratepayers, many no better off than the tenants, to continue to shoulder the burden of the tenants' income support.

The rentals should be at market rates, and those tenants who qualify for a subsidy should get it from central government. This would have the advantage of portability as the subsidy would apply to the person, not the house.

Rents must be set annually so that large increases are unlikely. It is obvious that increasing the rentals is a political nightmare but they are part of responsible management...

This is a very good point. As I mentioned earlier, perhaps 1.5% of ratepayers are in social housing. It is amazing the number of friends they have. It seems like almost an entire industry has risen up on their side - there has been a barrage of letters nearly very day for weeks. This is one of the very few to be printed on the side of the ratepayers.

Affordable housing is a very important issue. The way to resolve it is to remove council restrictions on land development which have raised prices to ridiculous levels.

24%: God's gift of wisdom and compassion not enough

I am genuinely surprised that the CCC has voted to continue with its 24% rent rise for social housing. It must represent a first in recent years, in terms of the council deciding to spend less. Hopefully this is the first turn in a possible rate reduction in the near future.

I think the reasoning is sound - in fact I don't believe that social housing should be provided by a local council at all. After all it is the council which has carefully worked to increase land prices in the city to the point where sections are completely unaffordable for most. Most major subdivisions in recent years have been turned down and then fought by the council in court. The CCC has worked assiduously to increase subdivision fees, consent costs, etc. This is not the work of a council which has any regard for the cost of housing. It would be highly hypocritical to spend lots of effort increasing housing costs on the one hand, and subsidise housing for the lucky few.

If we must have social housing, it should be provided by the government, which should also take a careful look at land use restrictions imposed by dodgy councils.

But you have to love this quote from the Rev. Jim McKenna:

"As you consider the motion [to raise rents], I pray that God will grant you the gift of wisdom and compassion."

Perhaps God was busy and they got one without the other.

The 'Disaster' of Affordable Housing

A depressing article from one of the lucky people who already has a home in De Press this morning. Ian Burford (a building surveyor for AA House Checks) unsurprisingly decides that we need every bit of regulation we can get, to make sure that if we ever could afford a house, it would be leak free.

I can't see it online yet. He starts with a title 'Shortcuts to disaster', then:

Making new houses "affordable" and cutting council "red tape" costs in building is the new flavour of the month, but taking shortcuts can come at a heavy price

The quotation marks around "affordable" are in the original and this is surely a sign that Mr Burford thinks that affordable housing is not worth having. If poor people can afford it, then it obviously was built on the cheap.

It is ludicrous to suggest that cutting red tape is taking a shortcut. Cutting red tape is cutting red tape, getting rid of the bureaucracy which gets in the way of productive work.

It is fascinating and also disturbing to get inside the mind of a bureaucratic apologist and see how the logic breaks down. Nowhere is there any suggestion that the council is doing anything other than essential, important work. The impression given is that without the council inspections the houses would just fall down.

He even defends individual consents for each house in a subdivision on the basis that every house is different because it is in a different position. Duh. The Press has cheekily inserted a picture of a subdivision in case people haven't realised how stupid this is.

Let's recap why we let our councils issue consents at all. It is because we want them to keep records of what houses are where and provide a convenient place where future buyers can obtain information on the property. We also want to make sure that people are not encroaching on their neighbours' property rights.

We should not confuse consents with building inspections. These could be done by independent firms.

Mr Burford says:

There are many good tradespeople in the industry. However, others just don't perform to an acceptable level and are seriously lacking in building understanding

Exactly the same can be said of council inspectors. I recall during our renovation that a 20 year-old best described as a dropkick turned up and tried to tell our builder of 20 years experience that he was doing it all wrong and needed to start again. Luckily for all parties the builder ignored this, with our full support. The builder won a major national award the same year. Our house is still standing. No doubt the council dropkick has been promoted. There was no supervision from a more senior council dropkick.

Just because someone works at the council doesn't mean they have the faintest idea what they are doing. Just because someone works in the private sector doesn't mean that they are crooks. At least a hopeless builder was able to convince a punter to give him the house project. The council inspector just turns up and the punter has essentially no idea of credentials.

He finishes with

At the end of the day there are few - if any - acceptable shortcuts to building good homes

In the spirit of this I propose that:

• The council should have a clear 10 years to approve the building (so they don't make a 'mistake' in a 'hurry', you understand)
• Central government should employ overseas 'inspectors' to roam around the country checking on building sites (so that we fit with best practice internationally)
• No new building materials should be permitted unless they have been tested and used for 100 years
• The army should  accompany council inspectors in military vehicles to ensure that builders do not intimidate anyone
• Neighbours with a 6km should have to agree in writing to each new building, and have adequate time to check the building quality themselves
• If the council feels that it might be 'a bit tricky' to deal with the extra traffic created by a house, then it should not be allowed
• If the new owner doesn't agree with recycling and global warming then the consent should not be given
• Any other religious or pseudo-scientific superstitions which might apply to the site should be considered (actually I think the council is ahead of me on this one)
• Gib board should not be attached for 6 months after the owners move in, so that any leaks are clearly obvious

I think anything less is just taking shortcuts.

It's no wonder our houses are so expensive. The council stops anyone building on the land, and if that fails they try to make it so expensive and painful for the builders that they all have to employ a full time person just to deal with the council, and if that fails, they demand tighter rules and start again.

We need to be very clear about our aims. Are we trying to build houses or employ a bigger council?

Council housing

Many letters in The Press this morning about the council raising their rental on flats by 24%. It didn't seem very controversial to me at the time, but then I suppose I'm a member of the hard-hearted 98.5% of households that actually pay the rates rather than the 1.5% who are in council housing.

One letter from Barry K Morgan of Manukau says:

Surely the good people of Fendalton, Merivale and Cashmere, most of who have profited directly or indirectly from the efforts and spending of low income people over the years, would not mind an additional $5 to $10 a year being added to their rates bill in support of those less fortunate than themselves?

I will leave aside the question of what an Aucklander is doing talking about our rates, although when they do it would be better if they didn't witter on about the 'New Right'.

I want to see the rates halve. They are far too high. At the moment we pay about $2500 for a 1/4 acre in St Albans. This is from after-tax income so amounts to perhaps $4000 of pre-tax income, or $80 a week. I don't understand how this is supposed to be affordable - even on a very decent salary of $80k it is 5% of income.

Strangely this weekly amount is about the same as the bedsit rental ($76, about to go up), except that I thought we owned our house. On 2700 properties, assuming an average rental of $110 and a cost of $10 for not having to increase it, this is 2700 x 10 x 52 = $1.4m. which amounts to about $9 for each ratepayer. Of course because of the unfair way rates work, in St Albans we will pay $26 while in Parklands they will pay $6.

If you are wondering why I used $10 increase instead of $25, this from the same article:

The 24% rise would see the for a bedsit increase from $76 to $94 a week.

This rise would be subsidised by the housing benefit, and so would amount to a $5.40 rise for the tenant.

So we pay 70% of the increase through our central government taxes anyway.

If the council really wants affordable housing it should offer it for 100% of residents, not just a few. It could do that by abolishing its subdivision charges, approving building plans within 7 days, allowing growth of the city without always fighting it in court, firing the half of its staff that gets in the way, etc. Housing costs in poor little ChCh are far too high, and we will all be forced into social housing the way things are going.

Space

Loburn in North Canterbury is a gorgeous place with rolling hills, nice views and no one about. In the last decade there has been quite a bit of what they call subdivision out here. This is different to the city though - here subdivision means creating 4 hectare (10 acre) blocks.

Given the amount of land about I suppose this makes some sense. But many people out here only want 1 hectare and find managing 4 is a lot of work. Why is there nothing in between the small town 0.1 hectare town sections and the 4 hectare block. OK there is to some extent, but why not more?

The answer appears to be environmental. This is from a Taupo Council document:

The Proposed District Plan will be amended to provide Council with greater control over development in the rural environment. This is likely to involve increasing the minimum lot size to 10 hectares in the rural area, and making subdivision below 4 hectares a non-complying activity. This is designed to create a “true rural environment” that recognises rural amenity, creates a clear distinction between the different forms of urbanisation and rural land use, and reduces the future demands and cumulative pressures on roading and other infrastructure

This is at least an honest. More ridiculous is the idea that the land can only support a few people per 10 hectares because of the septic tanks, etc.

But it is still very poor policy. By restricting people's choice, we are forced to purchase more land than we need at higher cost. Much of this land is then wasted, because we don't use much of it for anything productive. In fact we resent at least half the block because of the hassle it causes. It certainly makes the place look rural, but why do we need these sharp divisions between town and country?

It is obvious that people want to live in mid-sized blocks, perhaps an acre or two, and many find the upkeep of 10 acres takes over their lives. Also, the large waste of land this entails means it that land is lost to farming uses, or is farmed on such a small scale as to be non-viable.

Finally, it pushes up the cost. A block out here costs $250k at the moment which is a stupid amount of money for a section in the middle of nowhere. Where, exactly, are people with not a lot of money supposed to live? I think a reasonable price would be $50k, like it was 10 years ago.

There has been quite a bit of stuff written about house prices going up. A two-year-old Moku report tried to work out the relationship between price and supply and found that a 10% increase in land supply (relative to population) decreases house prices by 8%. I wonder what amount of decrease in supply we have had over the past 10 years. Based on these numbers, a lot.

It is high time that the councils stopped acting to restrict the supply of land. It is not their job to tell us what section size is good for us. We can figure that out for ourselves, thanks. I suggest a rates penalty on the council if housing affordability reduces 3 years in a row. If the environmentalists want to keep the land in 4 hectare blocks, then they can buy it.