Analysis by Keith Rankin.
I was encouraged to hear Nicola Willis, National Party’s spokesperson on housing, make the key point that the central problem in New Zealand’s housing crisis is that of people being squeezed out of the private rental market. I made this point and more in detail earlier this year (Solving the Housing Crisis: Making Homes, 30 March). Note that being ‘squeezed out’ need not mean an eviction or a discontinuation of a tenancy; it could refer to people being squeezed out from entering the market in the first place, squeezed out by city land hoarders refusing to supply the market for rental houses.
Like other people asking and answering questions on this issue, Ms Willis didn’t venture down the obvious path, which is to question what is happening to the houses that people are being squeezed out of.
Clearly, if houses are being retenanted to other families, or purchased and occupied by other families, then this is not a societal problem (though it may be a problem for the affected tenant). What is a problem is the growing mass of ‘unrented rentals’ (an oxymoron, but most commentators continue to call untenanted houses ‘rentals’). Unrented rentals are in fact hoarded properties, and their owners – inappropriately called ‘investors’ – are ‘property hoarders’. While hoarders sometime ‘flip’ their properties, the incentives in place today are for ongoing hoarding.
The authorities refuse to count unrented rentals, let alone formulate policies to eliminate the problem of hoarders hoarding unrented rentals.
The solution to the whole problem is quite simple, although not politically palatable to the political class who are themselves a large part of the problem. Essentially, the hoarding of unrented rentals needs to be banned.
All residential houses should be either: rented to their owners (ie owner-occupied), rented to other households, or (eg some houses in coastal resorts) exempted (eg as holiday homes) through a publicly transparent process (and listed on a publicly accessible exemption register). All unexempted unrented houses need to be (by law) sold by their owners within a short (but practical timeframe), and auctioned (as if a mortgagee sale) if that timeframe is not met. If not sold, they need to be acquired by the public housing authority at a below-market price.
New Zealanders are largely ignorant of their country’s history. In the 1890s, a law was passed allowing for the compulsory purchase of hoarded land; indeed, it was the defining legislation of the Seddon government. (This followed on from land taxes introduced by John Ballance, Richard Seddon’s predecessor.) The compulsory purchase provision of land from speculators was not actually performed very often; the speculators understood, and acting in the shadow of the law, they subdivided and sold their properties to people who went on to make appropriate economic use of these lands. This was a liberal Liberal government, which strongly believed in private property rights; rights that were expected to be exercised responsibly. This was not Communism!
While New Zealand does need more newly fabricated houses and apartments, the construction of new homes should not be little more than an offset to the increase in unrented rentals that Nicola Willis spoke about.
Keith Rankin, trained as an economic historian, is a retired lecturer in Economics and Statistics. He lives in Auckland, New Zealand.
contact: keith at rankin.nz