By Tim Horsbrugh - Executive committee member of New Zealand Property Investors Federation
We hear many ways each political party talks about the housing crisis, and their solutions to fix this.
Adding a new tax and tougher RTA rules to rental property providers is obviously not the answer.
All of the political parties acknowledge we do not have enough homes and because of this lack of supply and the high cost to provide housing we have higher rents.
Rent controls, new taxes, extensions to the bright line test, new RTA rules, lower LVRs and tougher CCCFA lending criteria are all topics that put restrictions on housing supply and make the attractiveness of providing a rental property rather unattractive.
To solve a problem we need to ask “why” four times to get to the root causes of the problem and then we can start talking solutions.
Let’s start off
Q: Why do we have a housing shortage in New Zealand and why are rents so high?
A: The high cost of providing a house, whether it’s for a rental property or a home owner.
A: High building, land, consenting, insurance, rates, finance costs, high risk with less control over tenants, low return on investment, high taxes, lack of supply and it’s unpopular to be a landlord.
Under each of these headings we say “why”, then we repeat the process again.
This helps define the actual problems, so we have clarity in what needs to be solved. Solutions can then be provided. Political parties can help implement these solutions to make positive change over time.
Solutions can be many things like creating more competition in the building materials supply market and fewer restrictions and controls around what we can do on our land to create affordable sections.
Think about this? If we can build a tiny house for $130,000, but it costs $250,000 for the land and $50,000 for services and consents, our cheap house has just become expensive.
We do need to look at the Resource Management Act to help councils cut red tape and get on with infrastructure, as the more we regulate the greater the cost.
We also need to look at the banking sector who want to lend but are restricted. Why? Just ask any mortgage broker or developer about the tighter rules around gaining finance.
Just imagine if every builder, developer, land owner could get government guaranteed finance to build one, two or three spec homes. The loan gets repaid once each home sells in an agreed timeframe. This will create movement in the property market, potentially an oversupply but the banking industry may not be happy.
Building new homes, with cheaper materials, on cheaper land, with fewer fees is the key. If we have more supply, this eases demand and the need for rent increases.
Property prices will stabilise, this is the only way to help our tenants. I challenge the next Government to sit down with developers, council planners, bankers, property Investors and tenants to brainstorm the “why” and come up with workable solutions together.