Newsroom Pro's 8 things at 8: Auckland's 5 feedback loops and how to fix them

There are some perverse feedback loops stopping high housing prices generating the much needed supply in Auckland. Photo: Lynn Grieveson

In today's email we take an in-depth look at why high prices aren't resulting in the generation of more housing supply in Auckland, detail some worrying statistics about Auckland's mental health services and detail why the managers of charter schools are on tenterhooks.

1. Auckland's five feedback loops

I've taken more of a stand-back look in this piece at some of the perverse feedback loops that are currently preventing Auckland's high house prices from generating a housing supply response.

I've identified five areas where the trebling of prices over the last 15 years is actually stopping houses from being built, rather than encouraging them to be built.

They include the effects on developers, investors and bankers, although there are some long-term effects too on the capacity to build new houses because of a lack of staff able to work in Auckland due to high rents and social problems caused partly by poor and expensive housing.

2. The Christchurch counter-factual

Politicians and others point to the Christchurch example as a model for Auckland. A surge in supply after the earthquake has dampened house price inflation there to a trickle since 2014.

But that's only because the usual rules around consenting were relaxed because of the earthquakes and the central Government poured cash in to build infrastructure. It is the exception that proved the rule, and only happened because a natural disaster broke the business-as-usual rules.

The other issue that appears to be slowing Auckland's response relative to Christchurch is the respective rent levels at the start of the ramp up of employment of construction workers.

The median rent in Auckland has risen 25 percent to $500 in the last five years, which chews up much of the after-tax and after-student loans incomes of apprentices and those joining the construction industry. Just when Auckland needs to be ramping up supply, rent already takes more than half the income of lower paid workers.

When the Christchurch earthquakes hit, rents for construction workers were around $300 per week. They did rise 30 percent to $400 per week between 2011 and 2014, but the starting point was at a much more affordable level and they're now falling.

3. Five ways to break the cycle

I've gone on in the piece to look at five suggestions for breaking the cycle, particularly by resetting land prices.

This is the elephant in the room of the debate because the nose-bleedingly high level of land prices is stopping the building of affordable housing.

Even the Government appears worried about taking a risk with housing developments that might force down the price of land and force a revaluation of asset values on Housing NZ's balance sheet.

But that is short-term thinking for a Government that should have a multi-generation time horizon and a highly rated borrowing capacity. A house building programme would be the ultimate social investment.

Essentially, until land prices come down, this problem will not be solved.

4. An Auckland mental health problem

The three percent-plus growth in Auckland's population is also causing all sorts of pain in transport, education and health systems.

Shane Cowlishaw has picked up on a sharp rise in demand for mental health services in Auckland that is putting pressure on the system. Here's his article over at Newsroom.

Calls to crisis teams are rising, and there was an almost 600 percent jump in one year in the number of days when there there were no spare beds available at the adult inpatient units.

In 2014/15 there were only seven days when there was no space at Auckland District Health Board (ADHB) facilities, while in 2015/16 there were 54.

The Government is rejecting claims of a crisis, but the calls are growing for an Inquiry, including this one in October last year from MidCentral Health DHB member Lindsay Burnell.

5. The future of charter schools

Newsroom Pro editor Lynn Grieveson has followed up on her piece on online schools with a look at the future of charter schools if there is a change of Government.

Now with several hundred students on charter school rolls, school managers are holding their breath until the election and hoping a Labour-Green government wouldn't have the heart to follow through with shutting them down.

See Lynn's story in full here at Newsroom Pro.

6. Strange bedfellows

Newsroom Co-Editor Tim Murphy has taken a deep dive into the latest NZME and Fairfax submissions to the Commerce Commission. He found some unlikely support for the merger -- or at least NZME and Fairfax claiming unlikely support.

TVNZ chief executive Kevin Kenrick, who formally opposed the merger, is quoted liberally in support of the Fairfax and NZME's argument that changes in the media landscape demand they be given authorisation to merge.

7. Teething problems

That's another one. In the wake of Countdown pulling eggs from its shelves, another company has had to respond to a Newsroom scoop.

Newsroom's environment and health editor Eloise Gibson reports on how a maker of homeopathic teething tablets has had to pull its product after Newsroom asked about reports of seizures in the United States.

Medsafe told Trade Me to remove the products from sale after Newsroom contacted the Ministry of Health. The auction website says it removed the listings immediately and will monitor the site to make sure no new listings emerge.

Here's Eloise's story in full on Newsroom.

8. One fun thing

It turns out President George W Bush didn't think much of Donald Trump's inaugural address and expressed it in a way that was very 'W'.

“That was some weird sh*t," he was reported to have told three people there after he left the dais. New York Magazine has the report.