Grim prediction for Hamilton's housing debt

OPINION: In 1998 I wrote to the Department of Building and Housing about what I saw as an imminent crisis in the building industry.

One of my builders had contacted me about a project just starting construction. There was no treated timber available in the country, and ordering some required a special production run that would take three months 'til delivery.

A change of building regulations by the government had allowed untreated timber to be used in wall framing. This was, perhaps, reasonable for some construction systems that were built to a high standard in well-designed houses, but was certainly not reasonable for every situation.

Some common construction systems at that time essentially relied on a coat of paint to seal the house, along with other dubious practices. Eventually maintenance would obviously be a problem, especially where cracks could not be easily seen or accessed for repairs.

Nothing happened and six years later the leaky building disaster hit the headlines when the rot got right through the framing. None of my projects were affected because I avoided the likely problem areas. But I was shocked and disappointed by many horror stories.

In 2006 I wrote to the Commerce Commission about finance company lending. I couldn't make sense of Bridgecorp offering investors 12 per cent returns when they were lending that money out at 10 per cent to builders whom the main banks wouldn't touch.

There was no way the finance companies could make money. When I heard about related-party loans below the inflation rate, I got concerned. They weren't even trying to survive and appeared to be Ponzi schemes.

Nothing happened and later that year, the first finance companies went under with Bridgecorp following in 2007. In all, 67 failed, taking the deposits of 200,000 people.

In 2015 I wrote to Nick Smith, the Minister for the Environment, identifying the core planning failures that were leading to inefficient land use and causing the housing affordability crisis. I honestly don't even know if Smith read my letter as there was no reply, but Special Housing Areas came out pretty much as per my recommendations.

I'm not writing this to claim credit or blow my own trumpet. I am disappointed because the government has recognised the cause of the problems and has changed the rules for government projects but not for the rest of us.

At the same time, I wrote to local councillors about those issues. The opportunity for change was the District Plan review. Council did change – it got worse. Last month, the chairman of Local Government NZ, a group that helps councils manage their processes, publicly complained about exactly the same thing, so it's not just me moaning about it.

I finally realised I was writing to the wrong people. Bureaucrats won't change unless it is to their personal benefit - there are always other people to pay for any mistakes.

Over two-thirds of submissions to Hamilton City Council were against the new theatre, so council is very good at ignoring people. Instead I started writing to you, the voters.

This is an election year for council, so you can make the change.

I am writing to warn you about the risk of big rate and rent rises linked to Hamilton City Council's debt. We have already been committed to a 54 per cent rise over the next 10 years, but it will get worse.

The purpose of the rates increase is to allow council to borrow even more money. Debt is set to double and your property is used to guarantee it.

Debt isn't necessarily a bad thing, especially when used for investment. It just depends on the return from that investment. The business case for this debt is flawed. The investment is in expanding Hamilton's suburbs, which is essential.

Something has to be done to avoid a crippling land shortage, which incidentally was caused by council planners' "compact city" ideology.

But the cost of the new infrastructure is too high. It seems all government and council projects add another zero to the price. There are several reasons for this, none of them good.

As a result, the return on investment depends on charging development contributions at such a high rate that developers will cut back progress.

Growth should pay for growth, but growth is not going to pay for council's excessive spending.
There is a solution if we act soon enough. Council costs must be cut instead of raising rates. Alternative infrastructure arrangements must be made so less borrowing is needed.

Compliance costs must be cut to allow growth to proceed fairly.

I am not saying it is easy or that it will keep everyone happy. If nothing changes, the outcome is predictable and it is going to hurt a lot of people. I am not a lone voice in this. The Hamilton Residents and Ratepayers Association is very concerned. Join us in electing people who will actually listen to you.

* Andrew Bydder is spokesman for the Hamilton Residents & Ratepayers Association and an architect.


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