Monday, 23 April 2018

Banning 'foreign' buyers

The Government has hit back at International Monetary Fund claims that New Zealand's foreign buyer ban is "discriminatory", saying Kiwi homes should not be traded on the global market.

IMF officials, in New Zealand this week, called the Overseas Investment Amendment Bill "discriminatory" and hinted that banning foreign investment in housing was an over-reaction to a problem that might not even exist.

"Foreign buyers seem to have played a minor role in New Zealand's residential real estate market recently," IMF division chief for Asia and Pacific Thomas Helbling said on Tuesday. He added that there were other ways for the Government to respond if large volumes of unwanted foreign money suddenly flowed into New Zealand's property market.

Associate Finance Minister David Parker said the Government disagreed with the IMF.

"It's a matter of values," he said yesterday. "We believe New Zealand homes should not be traded on an international market."
Except his government's bill does more than that. It hits a lot of people who live in New Zealand - not just 'overseas' speculators. And it makes it hard for developers to build new housing. If the developer is considered an overseas entity because it has more than 25% foreign shareholding - which happens easily if you're publicly listed - then there's more hurdles in front of your next project. If your planned apartment tower is going to be partially financed by off-the-plans sales to foreigners who'd rent the apartment out to Kiwis, and if there aren't locals who'll pay the same price off-the-plan, then you're going to have a harder time financing that apartment building.

And there are a whole host of other problems too. Very few of the problems were caught in Treasury's Regulatory Impact Assessment, or more likely Treasury knew about it and chose not to say anything to avoid picking a fight with the Minister about the very obvious adverse consequences in the bill.

I covered some of those off in a couple of pieces at The Spinoff last week. The first one went through how we wound up with a dumb ban on foreign buyers, and the second one went through a lot of the problems with the legislation as written. And I summarized in this past week's Insights newsletter.

And it is darned depressing if Treasury pulled its punches in laying out the likely consequences of the bill in the Regulatory Impact Assessment for fear of getting offsides with the Minister.

There is very little evidence that New Zealand homes are really traded on an international market. Banning people who live here from buying houses and banning people who would help get more housing built from doing so seem very bad ways of addressing the housing shortage. The former does nothing to alleviate any shortage because people who live here still would have demand for housing - they'd just shift from owning to renting. The latter makes it harder to get new stuff built.

The only real way that foreign speculators contribute to a shortage of housing is if they buy a place and leave it empty. The housing shortage is the difference between the number of dwellings being built and the growth in demand for dwellings that accumulates over time. Empty houses can contribute to the problem. But there's no evidence that there's a growing problem in houses being held vacant, and no evidence that any vacant dwellings are disproportionately foreign-owned. And if there were a problem with vacant housing, you find a way of dealing with vacant housing rather than banning foreign buyers. Or, even better, just ease up the rules and make it easier to build so it doesn't matter if somebody keeps a house vacant for a bit.

Twitter and Facebook comments on my Spinoff pieces lead me to believe that a lot of Kiwis think they'd be banned from buying houses abroad, or would face big hurdles in doing so - and especially in places where there are housing shortages.

Let's take a spin. Please tell me if I have any of these wrong.

Here's Experts for Expats on the rules on buying property in the UK - London included. London is crazy expensive. What are the rules? You might have trouble getting a mortgage if you're based abroad, but that's about it. A Kiwi can buy a house in London. A Brit won't be able to buy a house in Dunedin.

San Francisco. That's the classic crazy one, right? Huge housing shortages. Could a Kiwi buy a house there without living there - and even maybe leave it vacant? Yes. Or I can't find any evidence there being any rules against it. Here's one real estate adviser website on it. Expect a few hassles around anti-money laundering stuff, but that's it. It'll just be proof-of-identity stuff. And that's the same for the whole rest of the US. A Kiwi can buy a house anywhere in the USA, regardless of whether there's a housing shortage in that city. An American won't be able to buy a house in Kapiti.

The only place in Canada that has any kind of restrictions thus far is a tax on foreign home buyers in Vancouver. You can go and buy a house or apartment in Montreal or Winnipeg the same way that I could - by paying the owner of it. But a Canadian wouldn't be able to buy a house in Nelson.

Heck, it will be easier for a Kiwi to go and buy a chateau in France than it would be for someone in Paris to buy a house Haast. And selling a house in Auckland could pretty easily let you afford a French chateau too.

This isn't just making things even with other places that put restrictions on Kiwis. Other places don't do that. Or at least not other reasonable places like the US, the UK and Canada. The Labour government is putting more restrictions on a foreigner buying a house in New Zealand than even Trump has put in on foreigners buying a house in America.

Labour seems to get a bit tetchy about being compared to Trump. On this one, they have out-xenophobed Trump by miles. The parts of the left that used to get mad about xenophobia have gone kinda quiet because their team's in office. If you think this bill is targeted at 'foreign speculators', you're deluded. The bill isn't written that way. It blocks people who live here from buying property. And since it does nothing to increase the number of houses available, and arguably reduces construction, it sure isn't a housing proposal. It's an anti-immigrant proposal.

And if your answer is "Why should foreigners be allowed to buy houses in the first place?", your whole morality is backwards. The presumption should be that voluntary transactions among consenting adults should be allowed, not the other way round. Banning people from doing things requires evidence of real harms to others. And nobody has provided any on the foreign buyer ban.

Friday, 20 April 2018

Precious arable land

I just don't get the fixation with making sure that nobody builds a house on agricultural land.
The government plans to make it harder for councils to approve new homes and lifestyle blocks on productive land near urban areas.

A report out today, called Our Land 2018, shows New Zealand's urban sprawl is eating up some of the country's most versatile land.

It highlights that between 1990 and 2008, 29 percent of new urban areas were built on some of the country's most versatile land.

Lifestyle blocks were also having an impact - in 2013 those blocks covered 10 percent of New Zealand's best land.

Environment Minister David Parker said one area that was at particular risk was Pukekohe, known as Auckland's food basket.

"We obviously need more housing around Auckland, but we also need to protect our elite soils.

"So we are proposing a National Policy Statement under the Resource Management Act which will require the councils when they are planning where to allow subdivisions or even rural lifestyle properties, they'll have to make sure that they don't encroach upon our most precious soils."

Mr Parker said the horticultural sector had been saying for some time that too much of its best land was being lost to housing and lifestyle blocks, and it was time to take some action.
Where to start.

First up, it's probably worth agreeing with one bit that the anti-sprawl people have right. Zoning in Auckland is stupid. It is stupid that people who live on major transport and passenger rail corridors can't turn their houses into apartment buildings to accommodate a lot more people. All of the restrictions against building up encourage building out instead - to the extent that that is allowed. And if infrastructure charging is wrong, that problem will be compounded.

But the solution to that problem isn't banning people from building out. The solution to that problem is a massive upzoning everywhere in town combined with congestion charging and better user-pays forms of infrastructure delivery like special purpose tax vehicles to pay off the bonds levied to put in infrastructure kit needed for urban expansion.

And it's very much worth fixing all that.

But suppose you have an agricultural paddock near town. The land can produce horticultural crops worth, say, $1m per year net after costs. The present discounted value of that stream of profits gets capitalised into the price of the land. And so the price of the land will already reflect peoples' expectations about the value of the agricultural produce that will come out of that land over the long-term.

If a developer is able to pay the farmer more than that, that tells us something important. It tells us that the value of that land in housing is higher than the value of that land in agricultural use. The value of all the agricultural output is already accounted for in the price of the land.

So you really don't need to protect valuable agricultural land from developers. The price of agricultural land already does that. If for some other policy reason government has decided to artificially subsidise building on that land as compared to other places, the solution to that isn't banning the development, it's getting rid of the subsidy. Shift the infrastructure to a user-pays basis.

Banning development on that land only makes sense if you really really believe that the person putting in the ban knows better than either the owner of the land or the purchaser of the land the future price path of agricultural products or dwellings. And in that case the person putting in the ban should just be buying the land directly and reaping the huge and obvious profits from knowing better than the market about futures prices.

We got into this stupid housing mess because the "Let's protect Precious Agricultural Land" people teamed up with the "Let's protect Precious Neighborhood Amenity" people and banned anybody building anything anywhere.

I get depressed when a government that came in promising to fix the housing crisis screws this stuff up.

Update: To address the likely first objection before it shows up: you don't have to worry about the "what if everybody did that" scenario. If land were being bid out of agricultural production and into use in housing, then the expected future price path of food would be a bit higher than otherwise - and the price of the next bits of agricultural land will be bid up. We do have access to imports too. And to address the second likely objection - if you're going to complain about the cost of food rising as consequence while ignoring that the cost of housing would drop, and ignoring that food can be imported while housing can't - there's something wrong with you.

Saturday, 14 April 2018

Choice of baseline matters

Looks like folks are back to arguing about whether there's a J-curve in alcohol consumption. The J-curve plots out the relationship between all-cause mortality and drinking. Non-drinkers are at the left-hand upwards tip of the J, light-to-moderate drinkers are in the dip, then heavy drinkers are in the upwards tilt at the right hand side.

And the ballpark numbers I keep in my head on this are from Di Castelnuovo and Donati's metastudy from 2006 that has light drinkers (about a drink a day) with a relative risk of about 0.84 as compared to non-drinkers when former drinkers are excluded.

The Lancet has a piece up that the press are covering as showing no J-curve.

But they start their curve with a reference category of light drinkers: people consuming a small amount of alcohol per week. The J-curve normally starts with non-drinkers as a reference category. If you pull the non-drinkers out of any J-curve, then you'll have a hockey-stick instead: no downward tilt followed by a sharp upwards lift.

And, as Chris Snowdon points out, they do have the standard form buried over in an appendix. Page 31 of the appendix. I've copied that figure below. The one on the right is the all-cause mortality one. Once you put non-drinkers back in, you have a J-curve again. If you also have ex-drinkers, you have a sharper J-curve. The ex-drinkers are the even higher risk folks at the far left.

The reference category are people consuming from 0 to 5 standard drinks per week - so a bit under a drink a day. The category that always has the lowest all-source mortality because they're drinking a bit less than a standard drink per day. And the risk from drinking about 4 standard drinks per day (300 grams per week) is the same as the risk among never-drinkers - with much higher risk beyond that.

The same as we've known since Donati 2006.

Am I missing something? The newspapers are yelling about how the study means there's no J-curve.




Friday, 13 April 2018

US CTPP accession?

Trump's made some noises about seeking to join the CTPP agreement - after having pulled the US out of the TPPA negotiations. 

Should the CTPP countries let him in?

Recall that Trump's steel tariffs, from which Australia are exempt but New Zealand is not (or at least wasn't when last I checked) were justified on national security grounds. WTO Article XXI allows tariffs to protect industries critical for national security. The tariffs weren't put in place for national security. They were put in place for domestic political reasons or because of demons in Trump's head. But try proving that quickly or cheaply in a WTO dispute tribunal.

The CTPP has similar protections built in.
Article 29.2: Security Exceptions
Nothing in this Agreement shall be construed to:
(a) require a Party to furnish or allow access to any information the disclosure of which it determines to be contrary to its essential security interests; or
(b) preclude a Party from applying measures that it considers necessary for the fulfilment of its obligations with respect to the maintenance or restoration of international peace or security, or the protection of its own essential security interests.
These kinds of provisions (standard in trade agreements I believe) work among states that you can expect to behave like adults. The United States isn't like that currently. Why let them in? If they are admitted, what are the odds that Trump just invokes security exceptions again to undo whatever's negotiated?

There's risk we'll have eaten dead rats on copyright only for Trump to declare butter in need of protection for national security reasons.

Is Vaping Legal?

The Fairfax papers have a good summary out today of what's going on in vaping - as of a month ago. 

They write:
When British public health experts first said vaping (using e-cigarettes) poses only a fraction of the health risk of tobacco smoking, the trend surged in popularity around the world, including in New Zealand.

But it remains illegal to sell or manufacture nicotine juices, or devices here. So how come there are shops openly touting vaping products containing nicotine?

THE LEGAL VACUUM

Currently, it's legal to import juices containing nicotine, but only enough for personal use. Nicotine juices and devices, however, still cannot be legally sold in New Zealand.

But anyone who vapes knows stores sell those products anyway, and aren't likely to get prosecuted. Basically, the law just isn't enforced.
But I don't know that that's right anymore.

Let's put up a giant caveat here first though. I Am Not A Lawyer. This Is Not Legal Advice.

The Court decision in the Philip Morris case on their Heat-Not-Burn said that the SmokeFree Environments Act [SFEA] doesn't apply to oral tobacco products unless they are used in a manner sufficiently similar to chewing. That's the bit that was used previously to block the sale of vaping and Heat-Not-Burn.

Unless the Medicines Act restrictions on nicotine are read as applying to nicotine formulations used in vaping - and nobody seems to know whether it should be read that way - vaping and sale of all the associated kit is legal in New Zealand.

And it's also important that the judge said that the restrictions on reduced-harm products were contrary to the purpose of SFEA. I expect that means that that same judge would not look kindly on back-door efforts to bring stuff back under SFEA - or on other attempts to sue manufacturers and distributors of reduced-harm products through plain packaging rules and the like.

That's it on the law stuff. Was a bit surprised that it wasn't mentioned in the piece. But we still have a ton of uncertainty out there. Nobody knows if the Ministry will appeal. Whether or not it appeals, it can still choose to implement a regulatory framework for reduced-harm devices. And Nicky Wagner's member's bill is sitting in the ballot that would bring vaping back under the SmokeFree Environments Act - that bill was relatively liberal relative to the status quo of a few months ago, but is very restrictive relative to what I think the current status quo is.

Wednesday, 11 April 2018

The Heckman Curve is flat

It sounded good in theory. Interventions targeted at youths could very plausibly have been rather more effective than programmes targeted at older cohorts. Heckman's foundation thing made a pretty infographic about it.

But it's fundamentally an empirical question. The infographic is based rather more on intuition than on any real lit survey. 

Rea and Burton checked it out. They went into the big Washington State intervention database, sorted interventions by age, and just plotted out the cost effectiveness. There was no curve - just a noisy mess. And the regressions found nothing either. 

Here are the key tables. 





Figure 3's the kicker. Compare it to the stylized Heckman curve. Ocular least squares really are enough here. 

It also links into my other worries about the Perry preschool stuff that Heckman's been pushing and that seems really not to have fared well in broader roll-outs in Tennessee or in Quebec. 

If there is a Heckman Curve, it's hard to see it in the programme evaluation work compiled in the Washington State database

Tuesday, 10 April 2018

Please don't run active shooter drills in NZ schools

I sent this off to our school this morning after hearing the morning news on Radio New Zealand.
[preamble that needs not here be repeated]

Radio New Zealand this morning reports that a lot of schools are contracting with some security company to provide lockdown drills.

I'm writing to ask whether our school is doing this, and if it could please consider not doing this.

The baseline risk of a shooter in New Zealand is exceptionally low. The kids hear about that kind of stuff on the news, and they're comforted that we chose to live in a place where that kind of thing really doesn't happen.

While drilling for this kind of thing can feel like making the kids safer, it really doesn't where the background risk is low and where the drill itself is a kind of a harm. It puts a terrifying scenario onto kids for no particular benefit. Earthquake drills make sense because the background risk is far from trivial - they need to keep that stuff front of mind. They don't need the drills for shooters.

Please don't bring these guys into our school.

Sincerely,
I hope that we get a reasonable answer back. But it is depressing that this part of the Asylum Wall is crumbling.