Vain Idiots Who Believe Their Own Press

Phil Twyford's Great Confidence Trick

We have been cynically chortling into our porridge for some months.  In New Zealand we have a strange phenomenon at play which resembles more and more the Hans Christian Andersen tale  of the naked emperor.  

That tale, you recall concerns two weavers who play a huge confidence trick upon everyone except a little lad.  They tell the vain, clothes-loving emperor, that they will make him a magical set of clothes which can only be seen by upstanding citizens.  The unethical, immoral, or stupid will not be able to see his magical clothes at all.  Of course the dumb, vain emperor plays along and ends up parading down the street naked.  As we all know, the whole town praises the emperor's new outfit, not wanting to be tarred with epithets like "immoral" or "stupid".

The young lad states the obvious.  Refusing to go along with the crowd and the emperor, he baldly states, "But, the Emperor is naked."

We have just such an emperor in New Zealand who is the minister of housing.
  He has been told that he can fix the current housing shortage and nagging homelessness by a magical home-building project called KiwiBuild.  These houses will be priced to sell at around $650,000.  So far, so good.  However, lower priced houses built by ordinary, plain spoken, salt-of-the-earth builders are also selling for around $650,000.

Sadly, these lower cost houses are still far too expensive for ordinary townsfolk.  So the vain Emperor Phil Twyford--Minister of Housing--is busily talking up what a miracle his brand new Kiwibuild houses will be.  Overnight they will solve the housing shortage and reduce homelessness in the town.  Except that the people who want to buy a house cannot afford $650,000.  In reality, Emperor Phil is walking around naked.  He is engaged in a vast project that will be irrelevant and useless to folk without houses, even while his courtiers and the villagers sing paeans of praise.

Mike Hoskings explains what is going down this way:

The median price paid by first home buyers for a home, for example, in Auckland, is $699,000. KiwiBuild do them for $650,000, so yes a saving, but not a lot.  What we are discovering here, is that the Government doesn't appear to be able to do anything the market already isn't. . . .

So for those who fell under the Phil Twyford spell that somehow thousands upon thousands of first home buyers locked out of the market would suddenly magically be able to afford a home - it simply isn't true.  KiwiBuild is basically a reflection of the market already in operation. Do remember, not a single KiwiBuild home has been sold yet.

Eighteen are due in the next month or so, but as these figures show at prices not a lot different to what other homes are already selling for.  The real issue here - and this has become clearer and clearer with time and experience - is not the price of the KiwiBuild home, but the affordability.  At $650,000, you can call these homes anything you want. But affordable, for most, they are not.   And that is the political con in all of this.  [Emphasis, ours]

Actually, Hoskings is being a bit generous.  KiwiBuild houses are priced at $650,000.  Private sector built low-cost houses are coming to the market for around $700,000--which, says Hoskings, is a bit of a benefit.  Ah, but the developer of the first tranche of KiwiBuild houses has stated publicly that he will not have made any money out of this first KiwiBuild development.

Imagine a smart kid at the grand "opening day" of the sale of the first couple of KiwiBuild houses yelling out at the top of his voice, "But the Emperor has not made any money!"  Phil the Builder will be left starkers.  All his aides, his cheerleaders, his acolytes, his tame builders, and his devotees will be strangely quiet.  Watch the prices of the next KiwiBuild houses build in a profit margin.  This will mean they will be priced at around $700,000--which is the price point where the cheapest private sector houses are selling now.

As Hoskings puts it:

So join the dots, the market price and KiwiBuild price aren't that different. A small percentage of people have the income to pay a mortgage of that size, so for those that do, they're already in the market and buying.

So what, if any, difference are Twyford's houses making? Are people locked out able to buy a Twyford house? No, they were locked out before, and they're locked out now.  Yes he's adding to supply, which is good, but that would have happened anyway.

The cold hard facts: the median price versus the KiwiBuild price are exposing the rort.  They're not affordable, they are just another house.

Meanwhile Phil is parading down the street naked.  Not a pretty sight.