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"When I was a lad, we used to sleep in cardboard box on the M1" - Tactical Ninja

Apr. 13th, 2012

10:01 am - "When I was a lad, we used to sleep in cardboard box on the M1"

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Funny, my subjective experience of this year's summer seems to be different from almost everyone else's. I keep hearing all over the place about how we didn't really get one, how the weather was cold and wet, how it never really got going. Yet for me, it's one of the best summers I've experienced in years. I've been thinking about factors that may have influenced my opinion.

1. Good shearing run - after a 3-week holdup of rain in late October, I had a straight run through in which I didn't get rained off again until after Christmas. This is unusually good.
2. The house is warm - it's only in the last week or so that I've started wearing anything more than a singlet in the house. Compared with every other house I've lived in, feeling warm all the time is really noticeable. This probably improved my view of all temperatures because the percentage of time I've spent feeling cold is relatively small.
3. Spending New Year in Sydney. I'm told the New Year period was foul in New Zealand, almost all the festivals got cancelled as a southerly storm wiped out summer for a few days. In Sydney it was 22+ every day, sunny with a light breeze. What can I say? TIMING.
4. Dr Wheel's return. Made everything seem sunnier.

So yeah, the rest of the country is probably right and the summer was probably crap, but for me it was still one of the summeriest summers I recall since moving here. I can't wait for a really nice one!


For the pagany-leaning among us that means Samhain is just around the corner. Personally, I don't buy the 'thinning of the veil' business - to me it's kind of "What veil? Isn't it all part of the same universe?" But I do like the acknowledgement of the turning of the wheel and that there's a time to be reminded to think of those now gone. I don't usually celebrate the cross-quarters because they don't really mean anything to me and frankly, I base my ancestor-acknowledgement on a feeling that has nothing to do with an arbitrary day.

However, that wasn't what I wanted to talk about. This is. We are now approaching the second winter since the main Christchurch earthquake, and the rebuild still hasn't started. People are still displaced, many houses are sitting empty awaiting repair, the rental market has reduced supply and increased demand, and Gerry Brownlee (Minister of Earthquakes) reckons it should be left to the market to sort out.

What the market is doing is not supplying enough houses. Insurance companies won't insure new builds while earthquakes are still going on (another 4.2 yesterday), and the building industry has not yet recovered from the recession, in which many companies had to lay off staff. We currently have about half the builders we need, and a lot have bailed for overseas. You see, in the same year as the Christchurch earthquakes, 2 other countries had disasters that require rebuilds - Japan had an earthquake and Australia had the Brisbane flooding. Both these countries have more money than us. They are not only sucking up the available builders, they are also sucking up the available materials and driving the prices of stuff up. The result is we have too few builders, the ones that remain have higher overheads, wages have stalled so it's not an attractive proposition for newbs to go into, and we can't train them fast enough anyway.

So what about existing houses then? Well, our house exists. It's an apartment building, fairly typical of one in Wellington. About half of it is rented, the other half owner-occupied. It's insured for a substantial amount, as all apartment buildings are required to be. Since the earthquake, it's been a lot harder to insure buildings that were built before the most recent code change. Our building was inspected prior to all this earthquake kerfuffle and it was found that since the last strenghtening, the code had changed sufficiently that it was no longer up to code and it was listed as earthquake prone, along with about 240 other buildings in Wellington. What this means is that we as owners have to pay for the building to be brought up to code. This has all been budgeted for and was underway prior to the earthquakes. But then there were earthquakes and the insurance companies got very cagey.

Consequently, the insurance on our building has increased by a factor of 4. In monetary terms this equates to approximately $100 a week more for us to pay for our apartment, just for insurance. This may reduce when the strengthening work is done, but that also has to be paid for, which is currently a cost of $50 a week to us for the next 6 years. This may increase because the cost of building materials is going up and builder charges are likely to increase due to demand.

Now, if you're a landlord, these increased costs have to go somewhere. The likely scenario here is that many landlords, who are decent people, are sucking up as much as they can. As owner-occupiers, we have no choice but to suck it all up - but if we were landlords we'd probably increase the rents on our properties to help cover it. After all, we're still paying mortgages and the cost of living is still increasing while our wages stay static as well. So, rents go up and thanks to the combination of a depressed building industry for the last 4 years and the Christchurch earthquakes taking out a bunch of houses, you have increased demand for the available rentals with a reduced supply, which in most markets pushes up the cost.

That, my friends, is Gerry Brownlee's idea of how to fix this. Dunno about you, but this particular market is not going to reach any kind of equilibrium soon, and I'm not sure that poor families living in the alley behind my building is actually fixing anything. It hasn't happened yet but I predict that it will if we continue to rely on the market (which is being artificially unbalanced by a variety of factors) to work without intervention.

By the way, everyone's focused on Christchurch but if I were you I'd be looking at Auckland as the place where this particular crisis will come to a head. They've been quietly having a deepening housing shortage up there for years. Anyone tried to rent up there recently?

Anyway, so if Gerry's Market FixTM isn't going to fix it, then what is? The government is apparently likely to veto anything that looks costly until we're back in the black (and frankly with this lot in I don't see that happening any time soon).

Where does that leave us? Well from what I can see (and I have spent a reasonable amount of time reading up about this for my work), all predcitions are that the rebuild is likely to get underway in mid-to-late 2012. It's likely to have a snowball effect in terms of improving employment prospects for labour while increasing the supply of houses and improving the incomes of builders so they can employ more staff and build more houses, and so on and so forth. However, that's several months away before it even gets started, and in the meantime it seems all we can do is cross our fingers and hope. Hope that those people currently in crisis can find somewhere to live, hope that this winter is reasonably mild, hope that there's not another disaster in a rich country that will drive the price of materials up, hope that the government's tertiary education strategy doesn't kill off industry training and force our builders to be trained in classrooms so all the new houses fall down in 5 years' time.

I would expect better than 'hit and hope' from a government that claims to be steering us to a Brighter Future, just saying.


So yeah. I'm not sure that blaming the landlords is really helpful in this situation. I'm sure there are some people who are taking advantage of the situation for their own gain, but I'm equally sure that the majority of them are people who don't even live in New Zealand, you know? The things that are influencing this are not happening at an individual level, and Mr Brownlee, we are not acting with perfect information and I don't think you can really call us rational actors, not when one person's benefit is another million in their pocket against the other person who just doesn't want to freeze to death - especially when the constraints on the latter reduce their choices to zero.

And I can't help but wonder why the government could afford $1.775 billion to bail out South Canterbury Finance and $500million for the Rugby World Cup, but doesn't seem to be able to stump up some cash to subsidise rent/insurance/training/materials costs until the building industry gets enough momentum to sustain the growth it needs to fix this.

Gosh. When did I get passionate about building?

Comments:

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From:pombagira
Date:April 13th, 2012 01:54 am (UTC)
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"Gosh. When did I get passionate about building?"

when homeless familys may end up living in the ally behind your building. because this is an example and symptom of a system that is broken, so very broken.. because a lot of NZ politicians and their ideas and how they see the world has become outmoded and dated..

and becasue somebody needs to explain..

*nods*
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[User Picture]
From:tatjna
Date:April 13th, 2012 02:04 am (UTC)
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But say you had the people, let's say for argument's sake we have John Key, Gerry Brownlee and Bill English in a room and they'd been given a drug that makes them not only have empathy but also a willingness to listen, exactly what would you tell them to do to avert the major housing crisis that we're facing?

Certainly Gerry has it wrong - the market is not going to fix this, at least not fast enough to avert disaster for a lot of poorer families - but what will fix it?
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From:whatifitworks
Date:April 13th, 2012 04:17 am (UTC)
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An housing unavilabilily indicator here in Melbs has been the rise in applications for licences to run rooming houses. Also a couple of people I know have rented rooms in share houses but when they actually go to move their stuff in it become apparent that they will be sharing their room and that there will be six people living (two beds in each room) in a two-bedroomed, one living-roomed house. And they have to suck it up because there is nowhere else to live even if they could afford it... And there hasn't even been an earthquake here..
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From:tatjna
Date:April 13th, 2012 09:05 am (UTC)
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*nod* That's the sort of thing that's going on in Auckland as well, and has been since well before the earthquakes started. They just kind of crystallised the problem in the minds of the public.

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