Justin Kean: Blame the motorway for your housing problems

The motorway opened up a huge swathe of land to baby boomers, a phenomenon which won't be repeated.
CHRIS SKELTON/FAIRFAX NZ

The motorway opened up a huge swathe of land to baby boomers, a phenomenon which won't be repeated.

OPINION: Sure there is a housing crisis and, as is the case in any crisis, some are getting rich whilst others are suffering.

This crisis is all about people in their 20s and 30s.

It's about people entering the work force or growing up in metropolitan Auckland and not being able to obtain that suburban dream of building wealth by pouring future income into a 3-bedroom townhouse at the end of the ring road.

Justin Kean: "Don't blame the Baby Boomers for taking advantage of the dumb luck opportunity that they were presented with.''
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Justin Kean: "Don't blame the Baby Boomers for taking advantage of the dumb luck opportunity that they were presented with.''

In any crisis, people look for someone to blame and to date it appears that's the Baby Boomers. They own all the houses, hold on to them to fund their retirement and starve off the supply to the rest of the market driving up prices.

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I am not about to suggest that this is anything other than a pretty accurate depiction of how things are unfolding in the market.

Apparently the chances of owning an additional property other than your principle dwelling increases five-fold once you pass the age of 50.

This idea of blame and hence a prolonged intergenerational conflict, however, is probably a simplistic view of a complicated truth.

The reason that the baby boomers own all the property relates largely to a series of developments which happened after WWII and can be seen repeated in many large cities around the world.

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Auckland's housing crisis of today is mirrored in Sydney, Toronto, LA, London and Paris.

Don't blame the post-war generation of Baby Boomers, instead, blame the development of the motorway.

The idea of the motorway had been in the offing for several decades before WWII and was probably most successfully, and somewhat unfortunately, implemented by Hitler with his Autobahns.

In the 1950s, motorway development took off around the world and Auckland was no exception.

This thrust for decentralised suburbs connected by motorway networks, timed with massive advances in modern automobiles, had the combined effect of releasing thousands of hectares of suburban land that was connected to the centre of Auckland.

These areas offered large sections, malls, new high streets and were perfect for bringing up young families.

Suburban Auckland more than doubled in size during the 1960s and this massive supply of land enabled the young people just starting out to cheaply get into the housing market in newly developed suburbs just 30 minutes from town.

It just so happens that the young people of the 1970s are the old people of today, and the leg up that this massive infrastructure development gave them can still be seen in the significant equity this generation now has in their residential property investments.

So it's not Gordon Gecko-style greed. It's not the tax system. It's not unbridled immigration.

It's not a generational conspiracy to prevent the young people of today from accessing property.

Much of the cause of Auckland's housing crisis is that a land supply bonanza created a couple of generations ago is finally coming home to roost.

And it can't happen all over again. Auckland just got too big for the same pattern of development to be repeated to allow the young of today a foot in the door.

The suburbs on the edge of town today are not Browns Bay, Mt Albert or One Tree Hill; they are Pokeno, Westgate and Walkworth which are dislocated soulless satellites of Auckland proper.

So – what is the solution to the Baby Boomers owning all the houses?

Tax them. Punitively. Regulate so that land bankers have to release their land into the market and force land values down.

Create a Pharmac for the building industry so that building supplies are purchased in bulk by the Government for the country as a whole to drive down construction prices.

Do whatever it takes to solve the problem.

Just don't blame the Baby Boomers for taking advantage of the dumb luck opportunity that they were presented with.

The current crop of young home buyers would do the same if they were given the chance. The problem is, they can't.

- Justin Kean is a former research analyst for JLL and an asset management director at the Wairaka Land Company.

 - Stuff

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