Housing

The cost of housing is something successive governments have pledged to improve, but it has only ever gotten worse. There is strong evidence that the more a government interferes in the housing market, the worse the outcomes are. The two major reasons housing is so expensive is the difficulty and cost associated with building new homes, and government interference via regulations and incentives that distort market prices. The following policies should solve these problems.

Building Permits:

Building permits are currently issued by local government, but they have no incentive to make the process easy or affordable. In fact, they are incentivized to draw the process out as long as possible because this gives them job security. The solution is to open this process to the competitive forces of the free market.

The primary purpose of a building permit is to make sure that a building is safe for human occupation, including during natural disasters. Insurance companies have a vested interest in the safety of the buildings they insure, because they have to pay out whenever damage is incurred. They are also private businesses subject to the competition of the free market, giving them the incentive to offer good service and affordable prices. This makes them the perfect candidate for managing the permitting of buildings.

I propose that building permits are eliminated and replaced by a requirement to have third-party insurance. If an insurer is willing to insure your building or structure, then you are allowed to build and occupy that structure for as long as you can continue to obtain insurance (replacing building WOFs as well). It would not be compulsory to insure a building for replacement value, but it would have to cover damages to any person (including the owners) or non-owned property caused by the failure of the building. This would include the cost of any medical treatment and income support in the event of serious injury or death.

As well as making the process easier and more affordable, moving the permitting process to insurers will also allow more flexibility in building standards. Rather than a fixed standard decided on by a bureaucrat, standards are subject to a negotiation between building owners and insurers, giving the option selecting safer locations and higher construction quality to reduce risk and insurance premiums, or vice versa. This will also remove the opportunity for corruption by bureaucrats, who would no longer have the power to block competing products from being used, as well as make the industry more responsive to innovation, due to not needing to wait for bureaucrats to update the standards before using new products or techniques. 

Additionally, having insurers operating the permitting process will allow for more innovation within the permitting process itself. Insurers could contract the permitting and inspection process to specialized businesses, and form trusted relationships with architects, engineers, and builders to streamline to process. Examples of innovations could include pre-approved designs, less inspection requirements for trusted builders, and technological advances like video inspections.

To ensure open competition, the government would not require any certification, licensing, qualification, or membership of any worker in the design and construction industry. So long as an insurer is willing to insure your building, you can use any person, product, or process to construct it, including doing the work yourself. The only role the government would play in building standards is registering and auditing insurance companies to ensure they are financially stable.

Resource Consents:

Another substantial cost to building a home or developing a residential subdivision is obtaining a resource consent. While individual home builds may not always require a resource consent, it is still quite common, and developments almost always require one which adds to the cost of the housing. The two primary objectives of the resource consent system are to regulate environment impacts and manage non-standard activities.

One of the key pillars of Civilization is the concept of property rights. Without them trade is impossible, because if no one owns anything it is impossible to exchange ownership. Even if it is possible to own something, but that ownership is not strongly enforced, the motivation for work is diminished because the reward from the value you create could be arbitrarily taken away at any time. Ownership must also guarantee control - if you cannot use your property in the manner in which you see fit (provided it doesn't infringe on another's enjoyment of their property), you do not truly own it. Nowhere have property rights been more eroded that with land; the limitations on what we can do with the land we own are so extensive that it calls into question whether we actually own it.

I propose that property rights in regard to land be strengthened so that no resource consents are required for any activity on land that you own, provided that the activity has no material effects beyond the borders of your land. These potential effects include visual (obstructing or spoiling views), noise, smell, and pollution. If an existing or proposed activity has or is likely to have material effects beyond the borders of your land, the first attempt at reconciliation would be private negotiations between the landowners. If they can reach an agreement, which could include compensation or limitations on the activity, no resource consent would be required. If no agreement can be reached, a resource consent could be applied for, but only directly impacted landowners could oppose it. Local, regional, or national government would act as landowners for public land.

Many common activities will inevitably affect neighbouring properties, including the building of new homes. To further strengthen property rights and reduce the cost of homes, I propose that any activity that normal for a property's zone (residential/commercial/industrial/rural etc.) would not need to seek resource consent or permission from neighbours. Current zoning restrictions are set by local government and vary widely, so to simplify this I propose that zoning restrictions are set nationally (local government would still assign a zone to each property). The zoning restrictions would also be eased significantly, so that any activity that is necessary for achieving the purpose of the zone would not be required to obtain a resource consent provided it remained within set limits. For example, the purpose of a residential zone is to provide homes - so any earthworks or construction activity relating to roads, utilities, homes, or any other necessary structures would not need to obtain a resource consent, provided it didn't exceed set limits on things such as sediment runoff, noise during nighttime, dust, structure height, home density, etc. Only if an activity is not necessary for achieving the purpose of the zone (or exceeds the limits of the zone) AND it is likely to materially affect other properties, would the landowner be required to obtain permission or resource consent.

If a particular area, feature, or structure is regarded as historically, culturally, or environmentally significant, additional restrictions could be placed on what is included as permissible activities. To impose these restrictions, the relevant authority would have to negotiate with the landowner and would have to either offer compensation for the loss of value due to the restrictions or offer to buy the land at market value (as if there were no restrictions). The funding for this compensation or purchase could not come from general taxes or rates - it would have to be raised with private donations, and if not enough funds are raised, the restrictions could not be imposed (as the population obviously doesn't consider it significant enough to warrant the cost). Once an agreement has been reached, the restrictions can be placed on the land and would apply to any future landowners (if the authority buys the land, they can resell it once the restrictions have been imposed). If no agreement can be reached with private negotiations, the matter could be taken to the courts, who would decide on what a fair settlement would be (all court costs would be paid for by the authority).

Property owners could join together and impose additional restrictions over their own land by using a system of covenants. These covenants could include restrictions on pet ownership, building styles, landscaping quality, or noise limits. These restrictions could only limit what activities could take place on a property but not limit who could own or occupy a property. To impose, amend, or remove a covenant, a majority of landowners within the affected area must sign an agreement, or a developer could impose covenants on the properties they are developing before they are sold. The area that the covenant affects must be a continuous line of properties along a road - it would not be possible to exclude dissenting properties to achieve a majority agreement. Templates would be made available for creating covenants, and successful covenants would be entered into a government database, but all the effort of creating covenants and collecting signatures would be done by private landowners.

Development Contributions:

The cost of any new infrastructure required for a housing development should ultimately be paid by the owners of the properties that benefit from the new infrastructure (it is unfair to expect those who don't benefit to pay for it). This cost can be paid in two ways (or a combination of both); by including it in the cost of buying the properties, or by funding the cost with debt that is repaid by a targeted rate on the properties. Local government should be able to access low-interest long-term loans for this purpose from the private market, as these would be very low risk investments due to them being backed by the power of taxation. Developers would have the choice of how much cost they would include in the sale price of the property versus how much would be funded by debt and targeted rates. When selling the properties, any targeted rates due in future must be disclosed.

A common impediment to developments going ahead is when local governments charge the full cost of new infrastructure to the first developer, even when future developments are expected to benefit from the infrastructure. This would be prevented by requiring local government to consider how much future development could benefit from the infrastructure and prohibiting them from charging a developer more than their fair share of the costs. Debt could still fund the complete cost of the infrastructure, and any new properties that benefit from it would pay their fair share of the costs by choosing a combination of lump sums or targeted rates. If the expected future developments do not take place, the local government would have the option of charging the targeted rate to any undeveloped land that would otherwise have benefited from the infrastructure, giving an incentive for the development to go ahead.

Any new roads required for a development would be funded by the developer, who could choose whether to transfer ownership of these road to the local government once the development is complete or could continue to maintain and receive tolls from the roads as a private operator for 50 years before ownership reverted to the local government.

Rental Housing:

The government currently imposes significant restrictions on landlords, regarding both the quality of the dwellings they are offering, and how they treat their tenants. This imposes costs that must be passed on to tenants, discourages potential landlords from entering the market (reducing supply and increasing prices), and reduces the variety of dwellings available to tenants.

Enforcing a minimum quality standard on dwellings being offered for rent might seem like it would help tenants, but in practice it adds costs to landlords which are passed on to tenants. It also creates an artificial floor on prices and excludes potential tenants from the market who can’t afford that price, forcing them to rely on government assistance or become homeless. Provided that the condition of the dwelling is fully disclosed, I see no reason for the government to prevent a willing tenant from renting a dwelling. If there are no willing tenants, landlords would be forced to lower the price and/or improve the dwelling – this way the quality standards are set by the market instead of government bureaucrats, more dwellings will be able to join the market (bringing down costs overall), there will be a greater variety available, and compliance costs are reduced for both landlords (which can be passed on to tenants) and the government.

Rules about how landlords can treat their tenants, especially restrictions on evicting them, also seem like they would help tenants, but in practice they drive up prices by discouraging landlords from entering the market and exclude tenants that seem risky from the market because landlords are worried about being stuck with them. I propose that there should be no rules on how landlords treat tenants except for a mandatory 28-day notice period for evictions. If tenants wished to have greater certainty, they could negotiate for a long-term contract that limits the chance of being evicted. The best protection for tenants from poor treatment is to have a vibrant market with plenty of options they could choose if they don’t like how they are being treated. The best protection for landlords is also having a vibrant market where there are plenty of tenants willing to replace any that behave poorly. The bonus to this system is that good behavior is rewarded on both sides, and it strengthens property rights by giving owners more control over their property.

Public Housing & Accommodation Assistance:

The government currently spends billions on the provision and subsidization of housing, constituting a significant portion of the total housing market. This influx of money stimulates demand, which drives up prices, which leads to more people needing assistance, which leads to more government money being spent, and so on. A lot of the government provided housing is of higher quality than many private homes, which gives an incentive to make yourself eligible for a government home, reducing the incentive to earn extra income. To end this vicious cycle and remove perverse incentives, I propose that all government owned homes are sold on the private market, and all forms of subsidization of rents for homes on the private market is ended (both phased out gradually to allow the market to adjust). 

Fiscal Impact: Cancellation of all housing related support would save the government $11.9 billion.

Emergency Accommodation:

Combined with deregulation and the UBI, the withdrawal of the government from the housing market should substantially improve affordability and drastically reduce the number of people requiring assistance with housing. Even so, there will always be some who cannot afford anything resembling a dwelling, and while it would be possible for the private market to provide some form of shelter to everyone, it seems wise to prevent the type of slums seen in less developed parts of the world by providing emergency accommodation.

To do this without distorting the private market, the standard of the emergency accommodation would have to be at a low enough level that it did not compete with private housing (although it would provide a de-facto floor for standards in the private market). Emergency accommodation would be warm, dry, and safe, but not necessarily comfortable or private. I suggest hostel style dorm rooms with up to 6 beds, with each room having its own bathroom, desks, and lockable storage, and access to kitchen and laundry facilities. Water, electricity, and internet would be provided. Parents with dependent children would get a room to themselves or with other families, all other adults would share male/female segregated rooms (no provision made for childless couples living together).

Each week the demand for emergency accommodation would be tallied in each area, and bids could be submitted to provide beds with the lowest bids up to the level of demand accepted. Bids could be from purpose-built facilities, hospitality businesses with spare capacity that week, or private homes with a spare room. Tenants would be rated by their host on their behaviour each week, and those with the highest average ratings would get first choice of the accommodation options, and potential hosts could specify a minimum rating. This rating system would encourage private homes and hospitality businesses to submit bids because they could be confident that they wouldn’t be allocated poorly behaved tenants, and it would also provide tenants with a reward for good behaviour. Someone applying mid-week would be accommodated in the cheapest suitable bed available until the following week’s auction. Tenants would potentially have to shift location each week, but if they wished to secure permanent accommodation, they could come to a private arrangement with an accommodation provider.

The government would pay the accommodation costs for emergency accommodation but would deduct 20% of the tenant’s gross household income (excluding UBI) up to the cost of the accommodation. No income limits would apply – a high-income person could use the system for whatever reason, but they would pay full price.

Fiscal Impact: I estimate the cost of this program to be $1 billion.