Affordable Housing: A big issue during the recent election. Here are a few thoughts on how to get more kiwis into houses that suit their needs.
2 weeks ago I wrote a post about the real problem facing first home buyers. Here is quick recap: (scroll down for ideas on how to solve the problem).
Leading up to the Election, a lot of focus was placed on how the kiwi dream of owning your own property is quickly becoming unaffordable (especially in Auckland). People kept asking how the government was going to help first home buyers into houses. How are we going to create more affordable housing in sought after areas?
There are plenty of ideal first homes, all over the country, in good suburbs, close to town, that would likely fit the criteria for ‘affordable housing’ just waiting for an opportunity to come on the market. The problem is, these houses are currently occupied in large part by people from the baby boomer generation.
A large portion of that demographic currently own 3-4 bedroom, 60’s / 70’s built houses. They no longer need the space they have because the kids have all grown up but they now have nowhere else to go. These homes come with large sections that are quickly becoming a major burden and the owners often don’t have the disposable income to install heatpumps, insulation or double glazing just when they need it most.
First home buyers are the ideal candidates to take over these largely well-built but cold properties and turn them into warm, energy efficient homes for years to come. These houses won’t come on the market though until the owners have somewhere else to move to.
So, where to from here?
What keeps an older couple in a large house once the family have left? Where is their affordable housing alternative?
I spoke to a number of people I know who have been (or currently are) in this exact situation and here is the feedback I received…
One aspect to recognise is that it is natural to feel at home in your own place no matter how large it is. Extra rooms can be put to many and varied uses. People who have the means enjoy the extra space. Very wealthy people seem quite happy to have more than one personal home in locations around the world. Large houses and extra space are not in themselves undesirable.
Factors that do encourage people to downsize their homes include: potential saving on rates, insurance and heating costs; potential maintenance expense; reduced inclination to maintain larger sections; cleaning chores becoming less manageable and a desire to chase a better climate.
Factors that keep them in place include familiarity with local resources such as churches, clubs, theatres, medical support and shops, together with friends and family. Not to forget their own history in the area. Their home and its location contribute to their sense of self.
For some an opportunity to shift closer to family is a very strong motivation to move. For others freeing up cash from the former family home could also encourage downsizing. But for our local retired underused-home owners the big question is where to move to? If you find yourself with most of your resources tied up in a single large property and much of your income going to support that; where are the alternatives?
Note: As low risk interest rates rise, freeing up equity and turning it into income-earnings assets becomes more lucrative. While deposit interest rates are very low and horror stories abound from failed high return options there is much less incentive to convert equity to cash.
However to make a step change in your life you would need to be drawn to something more attractive and if such alternatives already existed the process would be underway today. So where are the attractive well built homes (at least 3 bedrooms with main ensuite) up to say $400k found? Where is the affordable housing for this generation?
Just a short list would include Whangarei, Napier, Hastings, Balclutha, Otaki, Levin, Oamaru, Whanganui, Palmerston North, Blenheim and Dunedin. Even less money would be required in locations like rural Taranaki , Southland and some Wairarapa towns.
So why hasn’t everyone moved already? What could local councils do to make their towns more attractive? First take care of the basics: Rates can be ridiculously high in rural towns as they appear to compete with each other to pay council staff big city salaries. Secondly, concentrate on safe and attractive walks, parks, cycle ways and activities like farmers markets, festivals and shows. Also encourage clubs and strongly support small enterprises.
A rural council that focussed on putting in place support for small enterprises including labour exchanges, display and marketing hubs, and assistance with regulations and investments may be surprised how dynamic their towns and cities become. Perhaps use the internet and council websites to highlight opportunities and enterprises.
Nobody wants to move and then find themselves short of activities for participation and enterprise. A town that welcomed continuing contribution and involvement from retirees would be very attractive. Celebrating and promoting small hands on part time investments would do nicely.
But there are some technology changes that will also have a big impact. The internet has made keeping in touch with family from anywhere to anywhere much easier. Internet marketing for all levels of enterprise from AirBnB to Uber to crafts and produce has made earning a bit extra on the side so much easier too (more readily available education / classes would be useful here though).
However one of the biggest technology impacts (down the track) could be driverless electric cars. Cities and towns that embrace this technology could become very attractive. On a national scale low cost reliable personal transport from town to city for people who find long distance driving tiresome and challenging would increase the range from city centers, hospitals, airports, concert halls, supermarkets, shopping centers and family within which older people would find it desirable to live.
This could transform the housing markets in our cities by freeing up a massive number of properties that would suit first home buyers who have the disposable income to bring them into the 21st century with investment in insulation, heat pumps and DVS / HRV systems. At the same time it could help revitalise our smaller towns.
I would love to hear your thoughts on this. Please comment below with any feedback you might have.