Affordable Housing – There’s No Nice Way To Do It

The old saying “you can’t make an omelette without breaking eggs” pretty much sums up the affordable housing debate. There is no ‘nice’ way to make housing affordable again.

Higher density housing is a red herring. Anyone thinking of going down that path should have to spend a month on some of the English high rise housing estates or the high rise ‘affordable’ housing on the outskirts of most major cities of the world. High rise is best left to the wealthy who want to live in the inner city to make the most of the vibrant nightlife, cafés and restaurants, and harbour views. They can afford safe, well-built, well-maintained apartments.

House prices are high. Wages are low. It just doesn’t work, no matter how you spin it. To get affordable housing, the prices of houses will have to drop, and drop by a lot.

Or wages are going to have to be pegged to house prices. Everyone on a low-to-medium is income is going to have to get an immediate pay rise of at least 50% and keep getting them in line with the rise in house prices. Not a bad idea, most of us haven’t had a decent pay rise in years. But a 50% pay rise – think of the fuss that would cause! And it still wouldn’t stop house prices going up.

Or the government buys/builds enough houses for the majority of New Zealanders and rents them out or sells them at a loss, i.e. a rate that people can afford. The government should have a decent sized stock of social housing for people on low incomes. And it could well go back to the policy of the 60s and 70s of offering very low interest, low deposit loans for first homes to people on modest incomes. But to house large numbers of New Zealanders at today’s prices would be a serious drain on government finances at a time when more is needed for health, education, and welfare. And house prices may still continue to rise, given that they are driven by investors buying for speculation; whether or not someone will live in them is almost immaterial.

The problem should have been nipped in the bud years ago when it became obvious that buying and selling property was being used as a money making opportunity. Predicting how that was going to affect housing affordability in the long term wasn’t rocket science.

The Greens have called it. Metiria Turei has very sensibly said we need a well-planned reduction in house prices by at least 50%. Other parties need to get their heads out of the sand and embrace the Greens’ position. There is no alternative.

The only discussion needed is how to avoid this impacting on homeowners with low-to-medium incomes and big mortgages. The important thing is that no people on limited incomes are left paying a mortgage that is greater than the value of their house. Anyone else, it doesn’t matter. Your house is worth less, but so is the next one you buy if you choose to sell up. And speculators, well they will just have to get a real job.