Climate change “Rule Book” only limited use

Over the last week the world has been made to come to terms with the fact that despite the 24th Convention of Parties to the United Nations Framework Convention on Climate Change, there exist some fundamental problems. There also exists, according to the United Nations and reinforced by an address by renown biologist Sir David Attenborough, a diminishing window of time to stop run away climate change.

The purpose of COP24 was to create a rule book that the world would agree to conduct its response to climate change by. And not surprisingly, with 200+ nations sending delegations, there was always going to be some disagreements.

New Zealand is part of what is considered a significant force including Canada, and the E.U. bloc who are actively pushing for a response to climate change, citing the threat it poses to humanity and the potential loss of island nations in the Pacific.

There are some powerful forces aligned against the “Rule Book” produced at the recent climate summit in Katowice, in Poland. Specifically Russia, the United States and Saudi Arabia have come out against it. None of these nations appear to be co-operating in any way to jeopardize the “Rule Book” so much as they appear to be working for their own interests, though in the background I would not be surprised if Saudi Arabian official and their American counter parts are not having some informal conversations.

I would not be surprised if Australia is also against the “Rule Book”. Whilst it did not appear to be specifically against it, domestically the Liberal Party is for the most part a climate change denial party with emphasis on trying to get the troubled Adani coal mine operational. It agrees with the approach of United States President Donald Trump who denies climate change. And Brazil, which in the past has been an active participant, under its new leader the conservative Jair Bolsonaro who believes that economics are more important than environmental sustainability, also appears to be following Mr Trump.

Coming up with rule book type plans is all well and good and represents significant co-operation between nations on an increasingly problematic subject. The lack of long term vision displayed by New Zealand in terms of how it will tackle this major issue should be of significant concern for everyone. Announcing an oil and gas ban without giving thought to how our energy needs will continue to be met is not something that has gone down well in Taranaki where most oil and gas exploration takes place.

Not everything needs a select committee to determine a course of action though. Nor does it need international meetings halfway around the world to determine rules or guidelines when common knowledge could set them immediately. Simple things such introducing a nation wide aluminium recycling scheme with a payment per kilogram of aluminium dropped off at an approved site can potentially assist straight away. Aluminium is very energy intensive to make because the smelter powers use a lot of electricity. It is also very malleable and the recycling process on needs a fraction of the energy.

Making good on requiring landlords to properly insulate houses will also go someway towards reducing energy needs in individual households. Tens of thousands of properties nationwide are still uninsulated. Some landlords are stalling because they are not prepared to cough up the cost of proper insulation. Some simply do not care and others will not necessarily understand the legal requirements of the legislation. But with six months to go before it becomes mandatory, they are running out of time.

Kiwi Build needs to get a grip

During the previous Government housing was a major headache for a lot of people. Market oriented policies, increased international pressure and poor domestic policy making all combined to overheat something that was supposed to keep prices competitive. And at the end of the day, the working man was the one who paid the price. But a year after National exited office, there still seem to be unrealistic expectations of what New Zealanders can afford – or are prepared to pay.

Kiwi Build need to get realistic about the ability of people to afford their offerings. The simple fact of the matter is that our incomes, combined with their unrealistic prices and the high demand which means competition to get into one will be strong.

Some of the houses on offer are going for more than N.Z.$650,000 which is simply too much. It might be fine if one is on a high income, but what about the many who do not earn six digit figure incomes even before tax? What about those who cannot afford to put down a deposit, which is what is often needed in order to buy a house?

I earn $17.76/hr before tax. After income tax, but before further deductions for Kiwi Saver and ACC and so on are made I have $14.65/hr. What hits my bank is therefore not quite what I start of with before tax. Add in board and $125 per week for long term savings and what I have is significantly less than the $36,900 before I started divvying and subtracting. That says nothing about all the other weekly costs most people would have to pay.

Yes, Kiwi Build is meant to target New Zealanders wanting to get on to the property ladder and own their first house. But right now the cost to many New Zealanders is simply out of their current reach, but likely future reach even with higher incomes or sharing the costs with a spouse.

Minister in charge Phil Twyford is making a botch of the issue. At no point has Mr Twyford seemed like he is in full control of this very important portfolio, with a range of concerns:

  1. Lack of ambition – an arguable one, but it was raised by economist Shamubeel Eaqub
  2. An apparent lack of effort to engage the designers of microhousing, which has minimal floor space and could be an option for those not wanting a full house, but one that is suitable for just being a place to eat and sleep
  3. How to counter urban sprawl and get councils to promote apartment living

In fairness to him each house has other costs associated with it such as getting resource consents, paying the tradesmen to put it up and including the necessary services such as electricity, running water, sewerage and a driveway of some sort. Paying for these as well as allowing for competing market demands means that even if Mr Twyford is able to get the housing portfolio down pat his hands maybe somewhat tied by forces out of his control.

But that does not change the fact that as Minister in charge Mr Twyford has to take ownership of the problems posed and do his best to fix them.

Social housing bureaucrats need a reality check

Recently the criteria to buy a house on the Kiwi-Build scheme was announced. Whilst a welcome step forward in making housing more affordable for New Zealanders, the data on which it was planned and the plans derived from it pose some serious questions about the realism of the whole scheme.

A good example is the suggestion that the upper income level of a couple seeking a Kiwi-Build home may be as high as $180,000. This is quite absurd when one considers the current pay most professionals take home – the graduate incomes for a few professions are listed below:

  • A newly graduated police officer: $45,000
  • A newly graduated nurse: $46,000
  • Graduate resource management planner: $45,000
  • Graduate primary school teacher: $43,000 / Graduate high school teacher: $45,000
  • Graduate plumber: $39,000
  • Graduate carpenter: $40,000
  • Graduate electrician: $46,000

And let us be realistic here. Let’s say that a couple who have been in their respective professions – say an electrician and a high school teacher – for 5 years and are on $50,000 and $47,000 respectively. After paying 21% income tax and %17.5 they have $39,500 and $37,530. They live together and pay $250/per week in rent each or $13,000 in rent a piece.

After adding in $240 for groceries, power, phone and internet, running a middle age Toyota Corolla and a Ford utility that would be another $200 a week each.

They want a house, and are looking for something in the vicinity of $350,000-$400,000. If they put away $300 per week each to save for that house it will take them nearly 12 years to reach the bottom of that price range. Kiwi-Build houses for the most part seem to be priced at $500,000+.

Whoever came up with this inane idea that people can somehow afford this needs a reality check. After tax this couple are on a combined total of $77,030. After weekly expenses that drops to around $56,000. This couple have no kids to worry about at this stage. But in the real world many would have one or two children to worry about by the time they reach their 30’s, which tightens the wallet considerably.

The scheme has several failings. It fails to lock out those who have lived overseas for a long period of time and will have financial assets that they can draw upon to buy a house under the scheme. It fails to acknowledge an even more basic fact: Most New Zealanders simply do not earn that much and would struggle to make the starting gate on even a house at the bottom end of the spectrum.

A person on minimum wage in something like a supermarket job would be on $16.50 per hour and have to pay 17.5% tax. I will assume for the sake of this argument that they pay 3% into their Kiwi Saver, which would leave them with about $13.11/hr after tax. That is about $681/p.w. Subtract $250/p.w. for rent and another $180/p.w. for all other expenses, that leaves $250/p.w. At best they might put away about $100-120 per week or about $6,000 per year. All of this assumes that they are single and have no dependents (kids/sick or elderly relatives).

Homes for $200,000? Winston Peters hopes so.

Acting Prime Minister Winston Peters has spoken of his desire for housing that costs not more than $200,000. The New Zealand First leader, speaking of a time when a person on a then living wage could afford a property relatively easily, was speaking of the aspirations of the Government – of a time and housing framework that allowed new families with relatively small discretionary money to be able to buy their first property.

There are a number of factors to consider in the likely price of affordable properties built from bare ground:

  1. Due to the relatively small pool of tradespeople that New Zealand has, skilled labour is always going to cost once one has added up ACC cover, Kiwi Saver investments on top of wages.
  2. The cost of obtaining resource consent from the consenting authority and any associated legal proceedings that it may have to go through
  3. Connecting the property to existing infrastructure – it must have water, sewerage, power and a driveway or other vehicle access

These factors might also be influenced by outside forces such as demand at the time for tradespeople on large commercial and industrial projects. Another is the availability of building materials that are not manufactured in New Zealand. A third and more controversial one is the availability of affordable land. A combination of increasingly competitive market forces, urban sprawl encroaching onto good arable land and a tendency towards purchasing big sections that we do not necessarily need raises challenges.

I doubt though that any decent houses will cost less than $300,000 unless there is a change in building attitudes among buyers. Is big and flashy always good? Not necessarily. I am not suggesting that everyone seek out granny flats, but if we want a serious reduction in house prices, we as New Zealanders need to be honest with ourselves: apartments, smaller and better self contained units with small floor space are going to have a much bigger say in the future.

Location. Location. Location (not the programme that used to be on TV1 – though the name certainly gives a good hint about this next talking point). The unequal economic development in New Zealand means that Auckland continues to be more of a magnet than it should be for people and the resulting population pressures are contributing to the sky high costs of renting. Much more effort needs to be made to draw economic development to other parts of New Zealand.

Finally, as I have mentioned before and which has been extensively debated in the media, the large number of migrants entering New Zealand puts further pressure on an already pressurized market. This was the subject of considerable debate at the last election. What numbers could be considered sustainable remain a point of contention and depend on ones point of view. Measures were announced by the new Government shortly after Labour-New Zealand-Greens took office in October 2017, but it is too early to tell what impact they will have.

It was announced for example just yesterday that a 15 story apartment building is proposed for Hobsonville. Few if any apartment blocks in New Zealand are that tall. It also remains to be seen in a country that prefers its housing developments to be lateral rather than vertical how long it will take for the market to cotton on to the idea.

Housing New Zealand boss must quit

Andrew McKenzie is a man skating on thin ice. As the boss of Housing New Zealand, Mr McKenzie had oversight of the meth testing done on houses in its stock. During those many tests a bill of hundreds of thousands of dollars was racked up across a number of clients who found their tenancy aborted. Now with the meth testing industry in a state of disarray and the whistle having been blown on what could be a major cover up, why is the H.N.Z. boss not being forthcoming with answers?

His reluctance to be interviewed by media – declining twice in the space of a few days – suggests an agency boss with something to hide.

However, Mr McKenzie has compounded his problems. His failure to properly stop the charging of people in meth houses for costs incurred in their decontamination is just one other problem among several. Housing New Zealand’s failure to apologize for the charging of decontamination, thus leaving landlords and tenants alike significantly out of pocket should have been Mr McKenzie’s responsibility. Comprehensive methamphetamine testing has been known to cost up to $3,000 with decontamination costing up to another $15,000.

If one believes Minister of Housing Phil Twyford, Housing New Zealand was supposed to have stopped charging tenants for meth testing that had to be undertaken nearly 18 months ago. Yet just the same day that the meth testing story broke it was found out that Housing New Zealand was still pursuing tenants. When that was put to Mr Twyford i in a radio interview, Mr Twyford said that he had felt misled by the agency and demanded that it come clean with answers.

This leaves Mr McKenzie in an untenable spot. As the person in charge of H.N.Z., he would have known what it was doing, despite making a commitment to stopping such charges. The public of New Zealand have a right to know what went on and why its word was not backed by the matching actions.

There is only one thing for Mr McKenzie to do and that is apologize and resign immediately from Housing New Zealand. He is not fight to continue in that role.

It is highly improbable that it will happen, but former Minister of Social Development, Paula Bennett who took great zeal in kicking tenants using methamphetamine out of their homes, also owes an apology. It is highly improbable since it is not like Government ministers to apologize for their past actions.

Another agency that needs to review its actions despite not committing to doing so is the Tenancy Tribunal which would have heard numerous cases of people being unfairly evicted and left to fend for themselves.

Across the board there were failures at all levels in this sorry saga. Across the board all of the agencies and individuals who knew things were not right, but failed to take the appropriate actions should be taking an ice cold look at themselves in the mirror. Are they still fit for purpose? What will it take to make them fit for purpose? And why are they not actively seeking to learn from this?