Thursday, November 22, 2012
A common tater complains about Housing Material Costs
Oh, it gets better, Boatman. •Duopoly in materials (see the Productivity Commish on this) •Massive front-loading of fees on the land by Rapacious Local Governments who have Four Wellbeings to house and feed •Cheap credit, which fuels the fire •Licensing of every tradie, tool, and anyone silly enough to consider a new build •Planning which generates an unearned and untaxed capital gain (typically 10x rural land price) as soon as yer draw that MUL squiggle on a map •Land banking (in the reasonable expectation of said CG) by Them with Knowledge and Insight (and a tame Planner or three on the Inside) •Elfin Safety, which typically adds 30-50% to the raw cost of e.g. a roofing or other at-height job (scaffolding, railing, harnessing, it's a Long List) •Inspections and Engineering Certification, which can easily exceed the raw materials cost by a wide margin •And never, ever forget the time value of money, throughout this ponderous process. Recall that the 'Mericans built the Empire State in 18 months. Yer'd be very lucky to get a Notified Resource Consent through in that time, and all the while the interest costs tick up, your Banker smiles at the interest revenue stream (or Frowns when yer miss the payment), and the Gumnuts of the world reject yer Permit Application for the 13th time because you haven't Detailed that there Joint in the Gubbinses by the Roof Thatch, which is another three-week go-around with your Engineer not ter mention his Fees. And did I mention that the Banker's grin is getting wider? •Plus (the icing on the cake, economical dead-weight-wise, ht PhilBest) is that all this cost-loading then transmits osmotically throughout the entire housing market, enrichening (and without being taxed on the CG generated) every existing houseowner. Because if'n she sells, and buys new, she'll haveta pay all of the above plus the agent's commission on the sale, to get an equivalent place. Universal pricing signal! Perfection, ain't it? Tip all these ingredients into a supply-starved Housing Context, mix 'em together, and Watch Them Prices Explode! And, like getting Milk from a Latte, or populating an Aquarium from Chowder, un-Mixing this sorry mess is a trifle, shall we say - challenging!