The Covid-19 pandemic has shown us the Government is able to move quickly when it feels the need to, so why doesn't it feel the urgency of the housing crisis?
On March 20, in a Cabinet paper approving the creation of the alert level system, health officials wrote: "We recommend New Zealand move completely to Level 2 immediately and remain there for up to 30 days initially."
Two days later, Cabinet had resolved to put New Zealand into a Level 4 lockdown for four weeks.
It was a bold decision by the Government, unprecedented in the history of the country. Legally compelling everyone to stay home for four weeks and potentially jeopardising the economy to stave off a viral threat was fraught with risk, but Jacinda Ardern said we had to act urgently or risk losing control of the situation.
"On Saturday I announced a Covid-19 alert level system and placed New Zealand at Alert Level 2. I also said we should all be prepared to move quickly. Now is the time to put our plans into action," she said.
"We are fortunate to still be some way behind the majority of overseas countries in terms of cases, but the trajectory is clear. Act now, or risk the virus taking hold as it has elsewhere."
Ardern understood the urgency of the situation and acted accordingly. So why can't she do the same with the housing crisis?
Housing crisis pressing
To be clear, the housing crisis does not threaten New Zealanders with the same damaging health outcomes and mass death that Covid-19 posed. But it does threaten to entrench inequality and drive new rifts between the haves and the have-nots in a way that cannot easily be reversed.
Moreover, it is just as urgent as Covid-19 was in late March.
Between January and February of this year, the median house rose $50,000 in value. If a minimum wage worker saved 100 percent of their take-home pay for 18 months, they would just barely earn the same amount.
In Wellington, houses earned more in one month ($195,000) than minimum wage workers will earn halfway into the decade. And workers pay tax on their income, while capital gains broadly go untaxed for homeowners.
If you were saving up for a house in Auckland, you would have to have put away $20,000 in February if you wanted to keep up with the market, let alone improve your buying power.
Every month that goes by, thousands of people are priced out of the market.
But if the process of being left behind by the housing market comes quickly, breaking back into the market will take decades. The median house price nationwide jumped 19.3 percent between December 2019 and December 2020, while wages only grew 1.6 percent over the same period. Houses were already unaffordable in December 2019, at about 6.81 times the median wage, but how long would it take the median wage earner's income to "catch up" to house prices as they were a year ago, even if house price inflation slowed?
Ardern says she doesn't want to see prices fall flat - let alone decrease, even slightly - but rather favours "sustained moderation". Exactly what that means, she has never specified, but let's say it aligns with the target for consumer price inflation of between 1 and 3 percent.
Wage growth has slumped as a result of Covid-19, but the Treasury expects wages to grow between 2.2 and 2.3 percent a year for the next few years. If wage growth flatlined at 2.3 percent and house price inflation stayed at 2 percent, house prices would fall back to 6.81 time the median wage sometime in mid-2074.
And that calculation is based on house prices as they were in December, before they rose another 4.1 percent.
Action needed now
While every new auction pushes prices further upwards, pricing people out of the market for decades to come - well after they hit retirement age - the Government dithers on cooling expectations.
Investors are making a no-brainer decision, putting their money into what the Government has promised them is a sure bet. "It may not keep skyrocketing but it sure as hell won't ever fall," Ardern may as well say, instead of resorting to the mealy-mouthed "sustained moderation" slogan.
Now 73 percent of respondents to ASB's Housing Confidence Survey say house prices will continue to rise over the next 12 months - a record-high more than eight points higher than the previous 2015 record.
In fact, not only is the Government failing to cool expectations, it's failing to do anything at all - beyond dumping more than $10,000 on a series of promotional videos in which Housing Minister Megan Woods highlights an initiative that has put just 12 families in homes since it was announced in 2019.
When asked when new demand-side policies, set to debut at the end of February, might be announced, Finance Minister Grant Robertson says he wants to get it right, and that takes time. But we're rapidly running out of time.
If the Government had taken this approach to Covid-19, we may have found ourselves like the rest of the world - descending into lockdown as our health system teetered on the brink of disaster and forever unable to rid the country of the virus.
The Government was prescient in its decision to lock down when we had just 102 cases and before we had registered a single death. Robertson described that strategy and the accompanying economic stimulus as a path of least regret. In fact, it was the first of his three key principles to the economic approach: "First to act swiftly with no regrets."
If lockdown didn't work, we could always try something else. But if Covid-19 spread widely enough and became endemic, then there would be no Plan B.
Likewise, for the housing crisis, we are rapidly approaching an irreversible gulf in economic equality - or at least one that cannot be reversed in a working lifetime. It is far better to be bold and ambitious than to tinker around the edges while the market goes up in flames.
