I’ve written several blog posts talking about challenges facing local democracy and consultation processes. This is an important issue. Harvard economists Daron Acemoglu and James Robinson make a convincing argument that inclusive political institutions, such as broad electoral franchises and transparent policy processes, are the essential element for countries’ long-term economic and social success. Governments that listen to their citizens are better at delivering higher levels of wellbeing. Governments that don’t are seldom awesome.

Consequently, it’s worth paying close attention to the details of democratic and consultative processes. When they are done well, they can provide valuable insight into people’s needs and preferences. But when done badly, they may instead provide avenues for narrow-minded minorities to hijack the policy process.

One challenge in developing a better understanding of people’s values is there is relatively little opinion polling on a lot of major policy issues. This can leave politicians to make policy in a bit of an information void, relying upon anecdotes and comments from people who choose to call or write them. This anecdata might be representative of the general public sentiment… but then again, it might not be.

With that in mind, it was interesting to see the results of two new polls released in the last week.

The first was commissioned by The Spinoff as part of its coverage of the Unitary Plan decision and Auckland’s local government elections. They asked a representative sample of Aucklanders how they felt about the Unitary Plan:

The Unitary Plan, which The Spinoff and others have been banging on about recently, was signed off by Auckland Council with a surprising lack of rowdy opposition last week. It turns out our newly reformed pro-density politicians were channelling the views of Aucklanders at large, with more than a stonking 85% of those who expressed a view broadly supporting the plan – albeit most with some reservations – in an SSI poll for the Spinoff, commissioned with Jennings Murphy.

Asked, “Do you broadly agree with Auckland’s Unitary Plan and its plan to allow for 422,000 new homes in the city over the next 25 years?”, 19.1% of respondents chose the option “yes, great idea” and 55.8% “yes, but have some reservations”. Just 12.4% answered “no” and 12.8% said “don’t know”.

spinoff unitary plan poll

This is a big result. It follows four years of public and sometimes acrimonious debate about the ultimate shape of the plan. What we seem to have got out the end is a planning rulebook that will make a useful contribution to allowing Auckland to build more homes to meet the current shortfall and future growth… and a fair degree of public consensus that doing so is a good thing.

The second poll, which Bernard Hickey reported on Interest.co.nz, asked New Zealanders whether they’d like to see house prices rise, flatten, or fall. The result was resoundingly in favour of lower house prices:

In news that counters assumptions about home owners opposing falling house prices, an opinion poll conducted by UMR has found 60% of Aucklanders and 55% of home owners would prefer that house prices either fell a bit or fell dramatically over the next year.

The poll of 1,000 New Zealanders over the age of 18 was taken from July 29 to August 17 through UMR’s online omnibus survey and found a total of 63% who would either prefer house prices to ‘fall but not too much’ (37%) or to fall dramatically (26%).

UMR, which conducts polls for the Labour Party, found 55% of home owners would prefer house prices to fall a bit (40%) or dramatically (15%).

The poll found 14% of respondents preferred house prices either kept rising rapidly (4%) or at a slower pace (14%), while 17% of Aucklanders wanted house prices to keep rising rapidly (4%) or at a slower pace (13%). A total of 15% of home owners wanted house prices to rise rapidly (2%) or at a slower pace (13%). There were 633 home owners and 331 Aucklanders in the poll of 1,000 respondents.

The poll also asked if there was a housing crisis at the moment and found that 81% of all respondents and 85% of Aucklanders thought there was a crisis, while 79% of home owners thought there was housing crisis. Fourteen per cent of those polled thought there was no crisis and 5% were unsure.

This is a fascinating result. There’s a high degree of consensus that high house prices are currently a major problem (“crisis!”) and broad, although not universal, agreement that they should be lower.

In July, former Reserve Bank chair Arthur Grimes caused a stir by suggesting that we should build a lot more homes in Auckland to cut prices by around 40%. (Remember: real house prices fell by around 40% in the 1970s, after rising rapidly due to a confluence of supply and demand factors. So Grimes is not arguing for something that has never happened before.)

Prime Minister John Key’s response was a bit skeptical… but possibly not very much in touch with the public perception:

“I think it is crazy. Go and ask the average Aucklander who has got a mortgage with a bank if they want to see 40 per cent of their equity disappear.”

Now, it’s one thing to want house prices to be lower in the abstract, and another thing for the value of your own home to fall. So if prices actually started dropping, people might not be so enthused about the outcomes. (Especially if the flow-on effects on consumer confidence and construction activity led to a recession.) But I think we can conclude that:

  • New Zealanders are worried about high housing costs, and their ill effects on young people and low-income households
  • Policies that enable more housing to get built are popular
  • People don’t think current high prices are a good thing and would like to see them change.

This is a good thing: there is public support for solving New Zealand’s housing affordability problems. In a democratic political system, this should translate into policies that better reflect our values. Reasons for optimism…

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41 comments

  1. One thing is for certain, this government has to go to sort out this crisis in property, both residential and commercial. They are part of the problem not the solution!

    1. Yes, central government is part of the problem. For too long they’ve ignored all sorts of independent advice on property related issues, such as capital gains taxes, land taxes, and capital controls.

      Meanwhile, other countries have been busy tightening the way they tax property. Funny then how ao much money flows into NZ property?!?

      Mind you, local government has (supply related) issues of its own that it needs to tackle. Here’s hoping the passage of the unitary plan is the first step in that process.

      And the first step to lower property prices.

  2. Excellent post Peter, got a view on the following?

    I do wonder though what an abrupt correction would to to new starts? Wouldn’t lending to developers, builders, and individuals tighten considerably? Leaving only the government standing as a new dwelling provider, and currently they aren’t adding to their housing stock at all. Or I suppose they could become a lender for others. But, given that the financial system may be facing huge stresses anyway in that situation, is this likely?

    1. The great balancing act: a price correction needed to make housing affordable, but also not to the extent that investors stop funding the building of new houses. Decades in the making yet no one has any actual answers yet 🙁

  3. Surely it’s going to come to a point where schools, hospitals and other essential services struggle to get qualified staff as they can’t afford to stay in Auckland.

    The weird thing is this government is well known for constantly polling the shit out of everything. Usually when Key says “the average NZer thinks” he knows as he’s already asked (at least those that are in the large, conservative voting bloc). Do we conclude that this poll is wrong, or that it asked different questions (the general rather than the personal?)

    1. I think different questions plays a large role. Stated preference surveys are notoriously unreliable when it comes to nitty-gritty details

      The question of what Ke’s government is doing, and why, is an interesting one.

      i think they’ve made enough policy “announcements” on housing issues to suggest that they are aware the average kiwi is concerned.

      The bright spot in all this is that, again, we have evidence that aucklanders don’t just blindly go for what’s in their self-interest.

      This is good news.

      1. It’s been interesting to see the Labour and Green response on affordable housing, which was to say they don’t want a crash and just want to slow down the growth in house prices. This of course won’t result in housing affordability unless there is significant inflation. One thing is clear though, there is political consensus across the house that no government wants to be anywhere near a price slump or crash.

          1. Apologies, I missed that. I’m sure I recall James Shaw saying words to the effect earlier that he would not support a house price crash, but I can’t find any reference to it, so looks like you are right, the Greens look much more willing to put their neck on the line.

          2. There is a big difference between a crash and a managed decline. One of the two has to happen as property is grossly overvalued atm. The gradual decline will be much better for NZ Inc.

      2. The last sharp correction, the 1970s, was accompanied by multi years of net population loss. So unless you see that as likely, then the only probable mechanism of such a jolt would be, like in the 1930s and 1890s, a global depression. AKL is no longer the dull bore-fest, with little employment or social diversity it was in the 70s; shoving anyone with any gumption overseas, so I see a secular change in push factors now. AKL is an attractive city for work and life now.

        A crash not unlikely given the global economic funk we are in, but I then wonder how much NZ would be subject to even stronger net migration gains in such a situation, not least from returning NZ passport holders? We have a huge proportion of our population offshore (second only Ireland I read somewhere) and not even Winston can surely bar them from returning….?

        So I’m picking a more gradual correction as more likely, on the back of new supply, I hope.

        1. Being facetious again Patrick… it isn’t a good look for you.
          Why would Winston want to stop Kiwis from returning? He and NZF are all about looking after Kiwis.
          What he is trying to stop is the unchecked stampede of immigrants from 3rd world countries that are currently swamping NZ. Returning Kiwis are also much more likely to live in the regions than new immigrants (particularly those from 3rd world countries – plenty of Brits for example live all over the country). Returning Kiwis are also more likely to actually make a contribution to NZ rather than just using it as a money laundering scam or as a way of bring in the entire extended family to abuse our social welfare/health system. They are also not likely to be sending remittance to whichever country they are from which directly contributes to our balance of payments deficit.

          1. “Are all NZF supporters unreconstructed bigots Bruce? Or is it optional?”

            “I hear you’re a racist now Father…Should we all be racist now?… Only the farm takes up most of the day and at night I just like a cup of tea…. I mightn’t be able to devote myself full time to the old racism”

          2. What a disgusting racist comment Bruce. We are all immigrants or sons and daughters thereof. And to say it is unchecked is factually wrong. Who are you to stand in the way of someone wanting to follow your own family’s footsteps and build a better life for themselves in this wonderful country? Particularly someone coming from a place where the living standards and prospects are objectively worse than NZ.

  4. I think in the case of the major source of equity/security for the majority of personal, small business and developer finance in New Zealand was to reduce in value significantly there would be a considerable decrease in the willingness of both borrowers and lenders to take on more debt. ESPECIALLY if that lending was specifically for the creation of more dwelling supply which would (all else being equal) place further downwards pressure on the value of that equity.

    When considering the potential other implications of dwelling backed loan finance as fuel/contribution to the overall economy (hiring, consumption and production) I don’t imagine a scenario in which reduced dwelling prices can improve overall affordability (price over incomes), particularly for lower income people who would likely be disproportionally affected by home owner belt tightening.

    1. I tend to disagree. I think property prices could drop 20% or more, in which case incomes might only drop a couple of % points. Reason being that people on low incomes have welfare to fall back on, thank goodness. This means impacts of house price falls on incomes are somewhat mitigated.

      1. OK, so, how much do average/median house prices have to fall, for an average beneficiary to be able to make payments of less than (say) 30% of their income?

        And how many (currently non-beneficiary receiving) people would then be beneficiaries in that scenario due to un/under employment? (ie how close would the average income move to the average benefit/minimum possible income?)

        I don’t want house prices to stay high, Im just worried we might be a bit wilfully blind to the potential implications to the broader economy (and welfare of everyone in it) if/when the golden goose stops laying eggs.

        A wicked problem?

        1. Probably 50% in real terms over 20 years would do it. That would mean static house prices in nominal terms and 2% inflation year on year. This is an entirely reasonable way to manage housing prices down but would almost certainly require government building and money printing.

          1. Agree that the rate and means of the change in expectations and prices is important to avoiding the negative implications from offsetting the potential upsides.
            Your suggestion of a long slow rate of steady decline (in real terms only) is hardly a headline grabber or likely to be the content of a ministerial press release trumpeting the success of a policy 🙂

        2. Don’t get me wrong – I’m not wishing for a rapid collapse in house prices. Steady slow deflation of say 2-4% per year would be good for about a decade. Basically, no one loses their shirt too much, and financial/economic stability is preserved, while housing becomes cheaper.

  5. We must be due for another financial crisis. If housing becomes affordable in the next one then at least something good will come out of it.

    1. Yes! I thought the same thing. For all our procrastination over different prognostications, the main (immediate) threat to NZ economy and by extension house prices is probably a melt-down in European financial institutions. Which is not as far-fetched as many imagine.

      P.s. don’t buy euros.

  6. I listened to Alistair Cooke once talking about how polling changed US politics. Prior to polling they had statesmen. You had to stand up and give your views, if the public agreed with you you got elected and if your views matched the public’s views over a long period you got to stay in and were called a statesman. After Gallup, politicians would stand up and state the public view rather than their own. It has been that way since. Maybe it is better, but sometimes we see through the hollowness and people get angry with them. Stated preference has a big weakness. The thing to remember is there might be hundreds of thousands of people who are angry enough to vote for Trump but who would never admit it to anyone, even their family, and most especially a pollster.

    1. In general polls do reasonably well at predicting results of elections, referendums etc, probably because what you are saying is countered by people loving to make sure their opinion is known. But I think you are right when it comes to people like Trump, where it is not acceptable to be heard to be a Trump supporter. I imagine a reasonable number of people who answer polls have someone else in the room who can hear them as well, and may only really say the truth in the privacy of a ballot box.

    2. I think there are some problems with poll-driven policymaking, but on the whole I would prefer for our elected representatives to have a better understanding of our preferences.

  7. There are similar problems in Australia with an overheated property market in the big cities, as tax concessions for home ownership have encouraged investors and speculators to jump in in the hope of capital gains. When the left-wing opposition recently proposed winding back the concessions, the right-wing government must have done their polling and decided that pandering to the investors and speculators was safer than trying to help young first home buyers. They found some statistics appearing to show that investment property ownership extends quite a way down the income scale (I don’t know the full details), and used that to spin some truly laughable hooklines to the effect that the opposition’s proposed reforms to the tax concessions would deny those deserving nurses, teachers and firies the opportunity to ‘accumulate a bit of wealth’
    There’s no doubt that this is a war between the people (mostly older, richer) who are already on the merrygoround and the people (mostly younger, poorer) who would like to get on it.

    1. The ‘haves’ are also whiter, and the ‘have nots’ generally browner. It is a bog standard classist, ageist, racist war by the privileged against other, presumably undeserving, groups.

  8. Average house prices could fall ~40% while retaining value in existing homes IF the new homes are smaller/apartments (and/or are built at the end of the motorway).

    1. Excellent point – important to distinguish between changes in house prices sold at the margin and value of existing dwellings.

      It could be that we bring a whole load of cheap housing to market, reducing average sale prices, without reducing value of existing dwellings too much.

      1. Easy way to reduce the average sale price, get the buyers to dot he opposite to what they are doing now and stop buying the expensive houses and start buying the cheaper ones.

        1. Problem: our planning regulations prevent cheap housing being built. All those reegulations liks minimum lot size, height limits, minimum apartment sizes, minimum parking requirements, balcony requirements, minimum stud height etc push up cost of delivering small, affordable dwellings.

          I’d say that people would buy them if they could be delivered.

          1. Agree, the next step after UP is getting rid of minimum parking requirements for MHU, minimum sizes and balcony requirements.

          2. Stu the problem is not so much regulations preventing cheap housing, the problem is the industrial-military complex aka regulations, council planners whims and developer profit seeking behaviour not building affordable housing in places where people actually want to live.

            There are more than enough examples all over Auckland already of “cheap” housing and apartments having been built for decades and its still on going.

            Until the UP design guidelines get some real teeth, and the planners actually use them then nothing much will change.

  9. I’ve been thinking about those comments from Mr Squirrel Money said about young people buying flash cars and new TVs when they should be saving for a house. Then while watching a the rugby on Saturday night they were advertising a new car for under $18,000 and was struck by the thought that modern history has basically seen a reduction in the number of hours taken to buy a good or service almost universally. Flying is now cheaper than I’ve ever seen, consumer goods, cars, even some food items are all cheaper/better/more diverse than they were even just a decade ago. Clearly something is wrong with the market if the price of one type of item is rising while everything else is decreasing or stagnating relative to income

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