Tuesday, 9 July 2013

The Rent is Really Rather High: Christchurch edition

The median two-bedroom property available for rent in Christchurch today, listed on TradeMe, is going for $395 per week. There are 173 2-bedroom properties available. There are fifty properties listed at $340 per week or less; that's also the price at the 25th percentile. When I'd checked this back in March, the median Christchurch price was $365 and the 25th percentile price was $300 per week. So the median is up by 8.2% since March and the 25th percentile is up by 13.3%. 

The Christchurch Press continues to report on the rather substantial consequent problems.
Christchurch economist Robin Clements said it would ''take a long time to relieve the issue'' of the shortage.
''It's still going to take years to increase the supply, even if action is taken now."
Even the slowness of the cental city rebuild was affecting the housing market, Clements said.
There's a shortage of hotels, so visiting businesspeople have to stay in motels. Then people having their homes repaired can't get a motel, so they're taking up rental homes.
"Every section of housing has got some sort of pressure, and it's all linked to the pace of the rebuild.'' 
Every homeowner with temporary accommodation coverage in his home insurance policy is pretty price inelastic in demand for the duration of repairs. Inelastic and increased demand meets fairly inelastic supply and results are pretty predictable.

Everybody knew or had to have known this was going to happen. There was even talk about doing something about it. Here's Roger Sutton from June 2011:
Speaking to about 50 mostly red and orange-zone residents yesterday at a community meeting in New Brighton, Sutton said the region's land prices were a "real concern".
The authority's extraordinary powers could be used to reduce the cost of development land, he said.
A "common theme" from the meetings was that many properties in the red zone, where land cannot be rebuilt on, had a rateable value under $100,000.
"There's very little land on the market for those prices at the moment," Sutton said. "We have to move as quickly as possible to give an assurance that there is actually going to be land and house packages, or at least land packages, to begin with, at prices you feel you can afford."
Residents told yesterday's meeting that some developers had increased land prices after last week's Government announcement.
Sutton said supply-and-demand problems were expected, but cutting red-tape costs, such as planning and resource consents, was possible.
"I have quite extraordinary powers to actually bypass those planning laws, but my preference would be for the normal legal processes to work," he said.
For the next two years we instead stuck with Council's normal legal processes, which turned out to be so incompetently administered that we don't even know how many recently consented buildings actually meet Code. It's not as though Council weren't putting lots of hoop-jumping in the way of those trying to build: it seems rather that they were enforcing a random-draw set of rules often orthogonal to actual building safety. The resulting potential liability has had Council's credit rating downgraded. Council had planned on substantial borrowing to finance its share of the rebuild costs, and sensibly so. But this will now be more expensive.

Central government could be tempted to take over more of Council's functions; it would be hard to blame them, given Council's rather substantial demonstrated failure and the importance of getting this mess sorted out quickly. I don't know Douglas Martin, who has been appointed by central government to fix Council's consenting issues, but I don't share the engineers' worries about his not being an engineer. Council needs somebody who can sort out their processes and who can listen to engineers.

But perhaps we might instead pay some attention to what our very own Cassandra, Hugh Paveltich, recommended shortly after the earthquakes. Instead of abolishing local government, perhaps instead decentralise further. Instead of running everything out of Council's offices, and out of Earthquake Minister Brownlee's offices, devolve building consenting down to a far more local level. Paveltich then recommended:
  1. COUNCIL REFORM REQUIRED: Dealing expeditiously with the systemic problems of the Christchurch City Council, in moving quickly to a “One City – Many Communities” approach. Thankfully there is a strong core majority of sound Councillors (as your article “A shaky future” explained). The current CEO needs to be replaced with someone having engineering training and a proven track record of project management. I am most impressed with the performance of Orion's CEO Roger Sutton – a person I hold in the highest regard.
    There need to be about 8 Community Service Centres – Akaroa, Lyttleton and about 6 in the city, which again need to be led by people at the staff level with engineering training and a proven track record of project management.
    After all, local government's primary responsibilities are infrastructure and buildings.
    These Community Service Centres need to be supported by building and environment regulators with enabling attitudes and the capacity to solve problems. It does not appear many within the current centralized structure have these skills. There would need to be constant monitoring of the performances of these building and environmental officers, so that those lacking the required skills are replaced quickly.
    The Central Office should be a small one, fulfilling a coordinating role where required (and importantly not, when it’s not required), responsible also for the central area within the four avenues.
    The highest polling elected representative should be the local chair and city councilor. The mayor should be elected on a city wide basis.
Spreading consenting across a lot of local units builds robustness. Failures get contained to that unit.

It would be interesting if Paveltich were to run for mayor. At least we'd get substantive discussion about urban planning and how it might facilitate rather than hinder recovery.


  1. In the Internet age there is no compelling rationale for councils to be building consenting authorities. The whole point of the Building Act 1991 was to impose a national code and do away with local variance. Co-location with planners and being at the end of a local telephone call are the only advantages you get from leaving the consenting process in councils and, as I say, that is no longer compelling.

    Of course that Act also introduced the concept of private certifiers who certainly did exist for a while. The leaky buildings debacle administered the coup de grace to the last of those when they could no longer obtain liability insurance,

    It would be fairer if the Building Control units in the 70+ councils around the country were recognised for what they are: field offices of the Department of Building and Housing. As indeed Environmental Health Officers are field workers for MPI.

    In the meantime councils are left with all the responsibilities and no control over their destiny.

  2. "The Rent is Really Rather High" doesn't have quite the same effect as Jimmy McMillan's catch-phrase, though you might promote more economically sound solutions to the problem.