So Auckland’s average house price has now topped a million dollars and in her usual role as flak catcher and diversion from such headlines, Social Housing Minister Paula Bennett has rushed out a puny funding boost for community housing.
The $24.4 million of funding will allow community housing providers to receive a grant worth 50 per cent of any new social housing they build, or a weekly grant of up to 50 per cent of a property’s market rent.
Problem solved! At a deeper level, the truly irritating aspect of the government’s response to the Auckland housing crisis is its insistence that supply is the real problem, and that merely cranking up the housing supply will bring prices down into the affordability zone for most people. If only the Auckland City Council zoned more land, more favourably, for development – or so the government maintains- then this would boost the supply side of the housing affordability equation, and all would be well. Eventually.
Not so, not in the real world. Yes, it is great that some new houses are being built. Good that Labour also wants to build new houses and at least the Opposition recognises that an extensive number of them will have to be cheap enough to be affordable for those on low to medium incomes – for a range of socially beneficial reasons. But new homes comprise only a small fraction of the housing market. Any relief that an increase in housing supply can offer on price is still likely to be swamped (for the foreseeable) by demand side issues like the ongoing availability of cheap credit, and the tax relief available via negative gearing. After all, we are already building more houses, and the prices are, if anything, going up. When, exactly, does the theory predict that the supply will succeed in deflating the price bubble? Right, that would be sometime in the misty forever.
Yesterday, a group of Australian academics and housing NGOs and Sydney city advocates wrote an open letter to the New South Wales government taking them to task for their adherence to the supply equals affordability theory.
Increasing housing supply has been the solution pushed by development lobbies for years. And providing support to the “illusory truth effect” – that if you repeat something often enough people will start to believe it – the government has bought in, becoming itself a staunch advocate for the supply equals affordability theory, despite strong evidence that supply alone has little effect on increasing affordability…..As [University of NSW Professor Bill] Randolph told the Sydney Morning Herald, if the government understood the housing market at all it would come as no surprise that increased supply would not necessarily lower the price of housing.
“The problem is you can’t apply year 10 economic theory to a metropolitan housing market,” he said. “Nobody has ever shown … that you can supply enough housing into a market to effectively make prices fall. New supply is two per cent of the housing market. Even if that doubled, what impact would that have?”
Randolph also pointed out the obvious: the only people likely to be able to buy houses (old or new) for the foreseeable are the people who already have a foothold in the property market. Namely: existing homeowners who can leverage their access to credit, and speculators who can do likewise:
“Homes are unaffordable not because we are building too few but because the market is flooded with cheap credit…. Increasingly access to this is being channelled to existing homeowners over first-time buyers, leading to many Sydneysiders owning two and three properties while the average 30-year-old cannot get into home ownership. We cannot build our way to affordability in such a market.”
So what can be done? With interest rates sloshing around the zero to 2% mark for those with access to credit, there is no easy solution unless government directly uses its own access to this cheap money to fund people into housing – new and old – at a level well beyond Bennett’s token effort. Here below are the suggestions contained in the Sydney open letter. Obviously, some measures – eg a diversion of the inflated stamp duty receipts into not-for-profit investment in social housing – are not viable options here, but they’re indicative of the policy co-ordination required:
1.Inclusionary zoning and affordable housing targets for privately owned development sites. Many in the private sector will support inclusionary zoning if they are involved in drawing up the rules and if there is up-front certainty about planning requirements so that these can be factored into the land purchase price.
2.Use of government land destined for housing development – rather than seeking to maximise the return to the Treasury, the government should set an example by mandating ambitious affordable housing targets on its major land holdings slated for disposal (for example, regeneration sites) and accepting a slightly less-than-projected gain from the escalation in land values seen over recent years.
3.Government incentives to trigger private and not-for-profit investment into affordable housing. This would include expanding the Social and Affordable Housing Fund through, for example, designating a fraction of stamp duty receipts again inflated by the dramatic rise in property transaction values seen since 2011.
4.Using its role on the Commonwealth’s Affordable Housing Working Group to support the creation of an Affordable Housing Financial Intermediary. This would enable community housing providers to access well-priced long-term funds from institutional investors bringing down their costs and stretching the benefit of a fixed amount of government financial support.
Voting Libertarian Is A Vote for Trump
For good reason, the US political system is usually treated as a duopoly: Democrats vs Republicans. Yet regularly over the past 50 years, outsider candidates have affected the outcomes. Going further back, there were several major third party movements in play during the 19th and early 20th centuries. Post WWII, it was Eugene McCarthy’s early outsider campaign in 1968 that forced President Lyndon Johnson to retire, via a youth-driven grassroots campaign eerily similar to the Bernie Sanders crusade.
Ultimately, the segregationist outsider George Wallace won 13.53% of the vote in that bitter 1968 race, and since most of his support came from southern Democrats, Wallace did tip the election in effect, to Richard Nixon. In 1980, third party candidate John Anderson got nearly 7% of the vote, and turned a Ronald Reagan victory into a landslide. In 1992, the ultimate maverick Ross Perot won a whopping 19% of the vote, and got elected Bill Clinton. In 2000, Ralph Nader tipped the election from Al Gore to George W. Bush by raiding almost 3% of the left/liberal vote, a crucial number in that year’s desperately close race.
So what about the libertarian third party candidate Gary Johnson in this year’s presidential race? Ripe pickings exist for him surely, given the high negative ratings for both Donald Trump and Hillary Clinton. Johnson has been polling steadily around a highly relevant 9%. Unlike the Green Party’s Jill Stein – another maverick candidate, but someone who is on the ballot in only about half of the 50 states and territories – Johnson will be a voting option on all of this year’s ballots.
On the campaign trail Johnson is pitching a socially liberal message on issues such as gay marriage. Less obviously, he is far, far more at home with the Republican party positions on economic and environmental measures. The linked article gives any number of good reasons why disappointed Bernie voters shouldn’t be going anywhere near Johnson.
It should be no real surprise, of course, that libertarians are ultra conservative on everything that isn’t a lifestyle choice. Libertarianism is an ideology tailor-made for solipsists, and the Silicon Valley mogul Peter Thiel is exactly the kind of guy that Johnson himself would prefer to see running for the White House.
Keep Johnson and Stein in mind though, as you weigh those Trump vs Clinton poll numbers. If you’re doing horse race journalism, this is in reality (almost) a four horse race. A couple of months ago, Nate Silver tried to work out who Johnson would take more from – Trump or Clinton – before concluding that Johnson was costing Clinton only a 1% decline, as compared to how she fared in a simple head to head race with Trump. But that was back in July. Of late, Johnson’s appeal is still holding steady at nearly 10 per cent – at a point in the campaign when most third party candidates start to fade. On the other hand, he isn’t growing his vote, either.
More to the point, no-one seems able to make sense of whether Trump or Clinton should be worrying more about the joint impact of Johnson and Stein.
Bills, Bills and Kanye
Talking of affordability, last year’s earworm by Lunchmoney Lewis seems eternally relevant.
And talking of earworms, what about Young Thug’s new single “Kanye West”, in which YT uses a couple of the great one’s mannerisms to hilarious and dead catchy effect. Nice to hear Wyclef Jean (of the Fugees long ago) back in action again on this track, too.