30 March 2014

Pretending to Solve Housing Affordability

The government is finding it difficult to have a real impact on the affordability of houses. It has now come up with some pretend solutions.

The issue is actually quite simple. Some City Councils are run by people who believe that we should all be living in high rises near train lines, so we can ride a bicycle to the closest lentil-and-soy-latte shop. To achieve this vision of life in East Berlin circa 1975, they prohibit people from building houses where they want. Then, the cost of the remaining land goes up, astronomically. As it would.

The government does not seem to have the stomach to stem the ideological onslaught from the central planners, so something else is needed to try to convince people that they are doing something. Minister Nick Smith put out a consultation paper that suggested exempting building products from anti-dumping laws. Apparently, plaster-board from Thailand and nails from China were found to have been sold too cheaply in New Zealand, so the local manufacturers persuaded an earlier government to protect their profits by slapping a large protective tariff against competition from imports, using the arcane anti-dumping laws.

The Minister is right when he says “I worry that high duties on some imported building products, combined with limited competition in New Zealand is allowing excessive margins by building product manufacturers”. That is just as true when the same tariffs are applied to canned peaches, diaries and hog bristle paint brushes which are all subject to anti-dumping duties.

The Ministry said, “there is no intention to reform the fundamentals of [the anti-dumping] regime, such as by introducing a full public benefit test which would measure the impact of anti-dumping duties on New Zealand consumers”. So, they propose to change it just for building products, presumably because housing affordability is always in the news.

The Minister also proposed to corrupt the duty concession system, which exempts duty on goods without locally manufactured equivalents, again just for building components, again just to be seen to be doing something (other than the obvious). This principles-free approach to public policy reminds me of Muldoon who, when confronted with the problems caused to our exporters by the high costs of protecting local manufacturers, offered to eliminate duties on agricultural tractors.