There is nothing wrong with building too many houses

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OPINION: In recent weeks, we’ve heard a lot of comments about a problem some would find strange: What if we build too many houses?

There is an oft-cited line from gang leader Marlo Stanfield in Thread it seems appropriate for a time like this: “Sounds like one of their good problems”.

Auckland councilor Christine Fletcher probably doesn’t think so, she compared a bipartisan plan to increase housing supply to ‘rape’.

If we build more houses, won't investors buy them?

KEVIN STENT / Stuff

If we build more houses, won’t investors buy them?

When someone asked her about it, she apparently doubled down and called it ‘gang rape’, then later clarified her comments to say she meant in the context of landscape ‘rape’, this which is apparently how some people use the word.

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Fletcher is truly the poorly worded tip of a global iceberg trying to deflect the Yimby ship (a movement among young people to say “Yes in my backyard” to housing and housing density).

The success of the Yimby movement, the number of its members and the ferocity with which they insist on prioritizing the supply of housing seem to have taken some by surprise, especially since their reflections do not seem to really conform to the left. traditional. -divide to the right.

ALDEN WILLIAMS / SHOCKS

By swapping concrete and steel for wood, Christchurch’s Clearwater Quays Apartments will store carbon, not create it.

An individual with socialist credentials, green credentials, or sometimes even planning credentials, is not enough to put them above criticism, whereas before, on issues such as housing many opinion leaders in these areas, would have been trusted or celebrated.

At the heart of this recent dispute over whether the Yimbys are wrong is whether we must first correct inequalities, public financing of social housing, financing of infrastructure and central bank policies. , before doing anything major to allow developers to add to the housing. supply.

More recently, there has been a lot of concern that if more homes are created, investors may buy them.

Yet even if there is a housing shortage, it will likely still be true that some people will buy more than one home.

They will use the equity in the home they live in to finance the purchase of the next one, and then use the equity in the next one to finance the home afterwards, as the lack of homes means they will always be able to find a willing tenant or buyer.

Attempting to prevent the increase in supply will only increase the attractiveness of housing as an investment asset, not decrease it.

QE was not good for house prices, but there was also a housing shortage.

Getty Images

QE was not good for house prices, but there was also a housing shortage.

While this is true quantitative easing, the Reserve Bank’s purchase of government bonds undoubtedly caused house prices to skyrocket last year, these kinds of policies are not. not always intended to drive up housing prices.

In 2013, the Bank of Japan announced a quantitative easing measure aimed at injecting US $ 1.3 trillion into its economy, Reuters calling it “the most intense burst of monetary stimulus in the world.”

The following year, house prices in Tokyo barely budged. Instead of a major real estate bubble, they got a boom in building new homes.

That year, Tokyo began building more houses than the entire English nation, according to the Financial Times.

In Japan, neighbors are not allowed to complain about the house or apartment building next door, as long as the general zoning rules are followed. There are even incentives to demolish buildings that do not meet earthquake-resistant standards.

All this construction has not caused a crisis in design or quality of life. Modern Japanese architecture is in the spotlight. Tokyo and Osaka are regularly featured on livable city lists. Paradoxically, permissive planning rules have created the ability of people to experiment and innovate.

When you allow a lot more construction, design and quality become more important, not less important. Competitive markets produce better products, not worse.

Compare that to the UK. In 2020, a UK think tank Center for Cities reported that a fifth of neighborhoods, outside of city centers, had no new homes built in their area since 2011.

The British planning system is “discretionary” and is not based on the types of zones used by the Japanese. Instead, councilors and planners have much more say in what can be built in a neighborhood.

Unsurprisingly, the UK is currently in the throes of a debate over whether it should have simpler zoning rules, and yes, there are also a lot of people worried that investors and developers real estate reap the benefits of any additional houses that might be built. .

If you look back in our history, the issue of too many dwellings often emerges as a problem. In Christchurch, the question was asked as recently as 2018:

“Whether you’re talking to bankers, economists, or real estate agents, they all say we’re in a slow, steady period of growth and that’s what we’re seeing there,” said Hamish Collins, appraiser of Quotable Value. at the time.

The year before, developers in Christchurch had struggled to sell terraced houses and prices fell by several thousand dollars.

In Christchurch, the provisions of the Resource Management Act were effectively suspended after the earthquake, and the government assisted Christchurch City Council with the infrastructure costs, resulting in the establishment of 30 years of infrastructure in one year.

So why should having more of something everyone needs, like housing, be a problem? For most other goods, we take the view that the available supply is the fact that the market is functioning as it should.

Trying to restrict the supply of housing will not suddenly stop housing from becoming an investment.

Many investors in the housing market right now, and the first-time homebuyers who crammed into the market last year, assume they’ll end up experiencing the kind of reliable two-way returns. numbers that owners have reliably collected in the past.

They are right to be confident in their forecasts because the housing supply is still lagging behind population growth.

By not allowing as many accommodations as possible, we are only extending their winning streak.


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