Welcome back to Sunday reading. As you read this, I will (hopefully) be waking up in the Waitakeres to get on with the final day of the Hillary Trail.
As I’m writing this in a hurry so that I can get to sleep and get up and do the walk, I’m going to just suggest a few articles without too much commentary. So without further ado.
John Daley, Brendan Coates, and Trent Wiltshire write in Inside Story: “Options for housing affordability: the good, the bad, and the cosmetic“:
Governments have long promised to improve housing affordability, yet all the while house prices have continued to rise. The politics are hard. More Australians own a house than are seeking to buy a house, and making housing more affordable means house prices will be lower than would otherwise be the case. And many people who live in the established middle suburbs don’t like the idea of more density in their neighbourhoods. If governments really want to make a difference, they need to explain why improving housing affordability matters – and why doing nothing will only make the problem worse.
While making the hard decisions, governments should also set realistic expectations. Although government policy can help, housing is unlikely to become much more affordable overnight. It took neglectful governments two decades to create Australia’s housing affordability crisis, and it will take just as long to improve matters. There are limits to what even a brave government can do.
A lack of policy ideas isn’t the problem. There are plenty, but most of them simply won’t have much effect. Some will make housing affordability worse, drag on economic growth, or subtract from government budgets that are already in trouble. And a few will make a difference, but all of them are politically difficult.
Richard Florida (CityLab) writes about “The New Urban Luddites“:
Over the past several years, a growing chorus of urban economists has decried the way that NIMBY sentiment, an acronym for “not in my backyard,” keeps urban housing prices unnecessarily high. Traditionally, the presence of NIMBYs was a sign of a healthy community: These were concerned residents who were motivated to keep “bad” things, like prisons or waste treatment plants, out of their neighborhoods. But NIMBYism has grown substantially over time, and it now erupts in opposition to all manner of new development. This behavior isn’t just selfish; it’s destructive. By limiting density and clustering, NIMBYs hold back the urban innovation that powers growth.
That’s why I prefer to call them the New Urban Luddites instead of NIMBYs, which sounds more benign. The original Luddites, named after their semi-mythical leader, Ned Ludd, took hammers to the weaving machines that were taking away their livelihoods during England’s Industrial Revolution. Over the course of the next century, ironically, those factories would lift living standards to higher levels than the Luddites could have ever imagined. The original Luddites, at least, were poor. The New Urban Luddites aren’t exploited workers, but some of the biggest winners of winner-take-all urbanism.
This New Urban Luddism is codified in the enormous and complex thicket of zoning laws and other land use regulations that restrict the supply of housing in many cities. While that may not have been their original intention (much urban zoning began as an effort to keep noxious industrial operations a safe distance away from housing), when taken together, these regulations have a substantial negative effect on the economy, adding up to more than a trillion dollars a year, or nearly 10 percent of GDP, according to one estimate.
In Newsroom, Bernard Hickey describes how “1989 was year zero for Generation Rent“:
1989 was effectively year zero for New Zealand’s house price boom and its house building bust, and the beginning of a structural shift away from the home ownership rates that were rising through the 1960s, 1970s and 1980s towards the lower home ownership rates of Generation Rent .
1989 was the year New Zealand’s leaders and voters accidentally-on-purpose decided to change the rules of the system in a way that made property owners vastly wealthier. They made three big changes that made it much harder for children being born around that period to buy a home under their own steam by the late 2000s. These changes have also in more recent times made it harder for those renters to afford to rent, let alone save for a deposit.
First, in 1989, the Government quietly changed some tax rules that were to massively advantage investing in housing over other types of investing.
Otago University economist Andrew Coleman demonstrated in a research paper released this month how this decision alone contributed to New Zealand having the fastest-rising house prices in the OECD since 1990.
“New Zealand has one of the most distortionary tax environments for housing markets of any country in the OECD,” Coleman said in presentation of the paper to a MOTU event last week.
Secondly, in December 1989, the passing of Reserve Bank Act signified a major shift in the way the economy was run to drive down inflation and interest rates in a way that structurally lifted house prices.
This also meant it made more sense to invest in housing, where the tax free returns from home ownership were much more attractive than the taxed cash returns from putting money in the bank or a pension fund. A shift in the way banks put aside capital in line with new international capital allocation rules meant banks found it much more attractive to lend to home buyers, who could afford to spend more as interest rates fell.
Coleman said the fall in interest rates had the same effect on house prices as the difference in tax treatments of savings versus housing. Lower interest rates on savings and mortgages make mortgages more attractive because capital gains are not taxed.
And finally, also in December 1989, then Prime Minister Geoffrey Palmer introduced the Resource Management Act (RMA) into Parliament. It was not passed through the committee stages by the time Labour lost to National in 1990, but it was then ushered through into law in 1991 by then Environment Minister Simon Upton (who is set to become the Parliamentary Commissioner for the Environment later this year).
As the Productivity Commission and the current government has pointed out repeatedly in recent years, the RMA ushered in an era where councils and residents were more reluctant to open up land for housing, partly because it was easier to object to new developments, and partly because the funding arrangements for councils made it more difficult.
In the Atlantic, Jerry Useem writes about “how online shopping makes suckers of us all“:
Guru Hariharan uncapped a dry-erase marker in a conference room at Boomerang’s headquarters in Mountain View, California. He was talking about what had led retailers to this desperate place where it’s necessary to change prices multiple times a day. On a whiteboard, he drew a series of lines representing the rising share of online sales for various kinds of products (books, DVDs, electronics) over time, then marked the years that major brick-and-mortar players (Borders, Blockbuster, Circuit City and RadioShack) went bankrupt. At first the years looked random. But the bankruptcies all clustered within a band where online sales hit between 20 and 25 percent. “In this range, there’s a crushing point,” Hariharan said, clapping his hands together for emphasis. “There’s a bloodbath happening.”
Beyond this crushing point, traditional retailers with both a brick-and-mortar and an online presence feel compelled to compete purely on price. Hariharan talked wistfully of the days when he’d walk into RadioShack and have a salesperson direct him to the exact connector cable he needed. But once retailers enter the crushing zone, expenses like staff, training, and customer support typically are slashed. Profit margins keep falling nonetheless—why go to the store at all if no one there can help you?—and a death spiral ensues. (RadioShack traced just this path before filing for bankruptcy in 2015.)
In the Guardian, Mohsin Hamid writes about “the dangers of nostalgia: we need to imagine a brighter future“:
Since well before the dawn of history, human beings have gathered together around flickering campfires to tell and listen to tales. We still do, even if the campfires are now more often glowing screens – in cinemas, on television sets, or in our hands. There are a great many reasons for this: fictional narratives offer us so many things. But in our present moment it is worth remembering one reason in particular: storytelling offers an antidote to nostalgia. By imagining, we create the potential for what might be. Religions are composed of stories precisely because of this potency. Stories have the power to liberate us from the tyranny of what was and is.
We are all creators of fictions, and we all have a role to play in imagining our way out of the nostalgic traps strewn around us. But there are special opportunities open to those of us who create fiction for a living, and above all to those of us who are writers, because we are freer to create what we wish, without requiring funding for our projects, as a film-maker might. We are the startups of the storytelling world, the crazy solo inventors in the R&D department of humanity’s narrative imagination.
We should be glad for these opportunities. The future is too important to be left to professional politicians. And it is too important to be left to technologists either. Other imaginations from other human perspectives must stake competing claims. Radical, politically engaged fiction is required. This fiction need not focus on dystopias or utopias, though some of it probably will. Rather it needs to peer with all the madness and insight and unexpectedness and wisdom we can muster into where we might desirably go, as individuals, families, societies, cultures, nations, earthlings, organisms. This does not require setting fiction in the future. But it does require a radical political engagement with the future.
Take back control? Make America great again? Restore the caliphate? We can do better than these. Storytellers, now is the time to try.
This is a short one: That’s all for the weekend. Hope you’re also having a good time!