Monday, May 23, 2016

Why housing supply is strangled

Common taters seem to assume that it's purely a Gubmint issue - ban furriners, build anything anywhere, tax the living daylights outta Them As Wot As Deemed Bad. Essentially, take one or two simple actions, wave the wand, and presto, Nirvana is delivered. Etc., etc.
The issues are much more numerous, intertwined and complex than that. A sampling:
  • The price of land, as the Productivity Commission has long since noted, is wildly distorted by MULs, RUBs and other emissions of Plannerz Feeble Brains.
  • The price distortion is of such long standing as to have become structural. That is: inflated land prices have spread to neighbouring properties, suburbs, localities and cities.
  • If the land price is wrong (ht the much-missed Hugh Pavletich), everything on top is wrong.
  • Gubmint policies to "help the FHB" such as Welcome Home loans have instead served to cement in a price floor, thus institutionalising the price ratchet effect.
  • Building material prices are in the steel vice-grip of a cosy duopoly, so materials alone are much more expensive than they need be. A quick Google of Bunnings, the and the, should serve to convince the unbelievers.
  • The LBP mania rules out self-builds, sweat-equity and other self-help possibilities. Time was when anyone could build their own. Norman Kirk did. No more.
  • TLA 'contributions' can be measured at close to $100K per dwelling, for all manner of things, on a take-it-or-leave-it basis. A natural monopoly, completely unregulated...
  • Elfin Safety adds $5-10K layers at every turn: for such innovations as scaff, fall protection, site meetings, inspections, certifications of scaff and electrical cords and tools, Most completely unknown (and, arguably unnecessary) 15 years ago. Ask older tradies (who have, sensibly, quietly faded into the shadows or gone under the radar)
  • Building inspections and other regulation is mainly concerned with liability avoidance, not actual structural assessment. Witness the mountain of Producer Statements for every bracket, beam, bolt, fitting and component. Easy to count and file to get the ticks, very little relationship to (say) the performance of the structure in a severe earthquake. There's little to no dynamic testing (e.g. exerting a 0.5 tonne upwards force on a purlin to test security in a gale or pushing a corner of a building sideways with a known pressure) All cost, close to zero benefit.
  • Few builders exceed 100 units per year, and most is done outside, in the weather, with close to zero QC, by indifferently skilled hammer hands (drug-tested, if you're lucky). Contrast that to the build regime for boats, aircraft, caravans and portable structures: indoors, tight QC, tight tolerances, done in volume and serial-numbered/guaranteed. Spot the difference? Check a local build, and count the weeks the frame stands outside, unprotected, in the rain...
I've touched on only a few of the major aspects of the whole shemozzle, but perhaps y'all get some idea of why Gubmints are so reluctant to grapple hard with this tar-baby......

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