From Little Things; Big Things Grow!

For over ten years now we, as a nation, have been debating and discussing housing affordability. Experts have been wheeled out for both sides of the debate. One thing they all agree on is that build prices and rental prices have been rising and there is not enough stock. They have all called for a national housing policy to solve the problem. Or some say rental price control or government assistance - the latest is removal of negative gearing . Instead, it seems to be a never-ending debate.?

Rent Controls

Rent controls, in various forms, globally are common. From New York to Stockholm and from Berlin to Paris. Broadly, control on the consumption side tends to reduce available stock for long-term rentals . Interestingly, according to a recent article in the HBR, these homes do not appear to be turned into short-term accommodation - suggesting they are simply locked up.

This theory appears to be holding true in Argentina where the removal of rent controls increased the available supply of long-term rentals over 170%! It wasn't that long ago that 1 in 7 homes in Buenos Aires was left vacant!

This experience is backup by research in the US that highlighted 54% of owners were considering selling their assets after the introduction of rent controls in their cities, leading to reduced demand for construction of highly needed new dwellings. “This latest data reinforces what we already know – the U.S. can not afford to pursue housing policies like rent control if we are to meet demand for 4.3 million new apartments by 2035."

Negative Gearing

The Hawke Labour government removed negative gearing in July 1985, however, the same Hawke government re-introduced it in 1987. Depending on who you listen to it may or may not have been due to concerns about rising rentals prices, however, the fact remains the same government reintroduced it - clearly it would seem the experiment did not work! This was backed up by research by the Property Council .

So why is the conversation about negative gearing back on the agenda? Is it partly because of misinformation? Often you hear that Australia is the only country in the world that allows negative gearing, however according to the HIA this is not correct , and it is commonplace in many advanced economies. Even across the ditch - our NZ cousins have negative gearing back in the fold after a short removal. In fact, the re-introduction of negative gearing was seen as a way to try and decease rents in NZ!.

So what is the answer?

Clearly no one seems to have the answer, and this debate has been raging for over a decade globally. Maybe that's because there is simply not "one" answer to this problem - therefore, by definition it's what is a called a "wicked problem".

Due to the complexity of the issues a multi-prong solution is needed - and even then, we may not be able to solve the issue. What is does mean is that we need to try new things and look at new ideas. Every little bit helps!

For example, for those that know me well, you know that I started my career as a radio guy. However, in my house now we don't watch any TV via the TV antenna and cabling - all our TV consumption, including watching free-to-air TV, is via the internet and an Apple TV device. So, then why do we as an industry continue to build RF based TV networks? There is a build cost saving here - albeit small - say $300 to $500 per unit but every little bit helps, especially if people don't even use it!

One of Frontier's values is "Better, Faster, Smarter". We are always looking for ways to reduce cost, pass it on, find smart solutions and improve what we are doing - every day!?

Sure, we need to build more homes, we need to reduce red-tape, we need to build faster (and I'd argue smarter), we need to unlock planning constraints BUT we also need to be open to new ideas, different ways of doing things and new approaches - no matter how small or insignificant they may seem.

In the words of Paul Kelly, "From little things; big things grow!"?