Thursday, 9 October 2014

Child Poverty, Housing & the RMA

Eric Crampton's argument connecting child poverty with the RMA has given the government a terrific angle. Bill English miscued it though, claiming that
"our planning processes have probably done more to increase income inequality in New Zealand than most other policies" 
and was rightly skewered by Max Rashbrooke noting that inequality is an old problem in NZ, whereas rampant housing costs are relatively new. English would have been on safer ground if he'd either referred directly to child poverty directly or to increasing inequality of disposable income.

But enough with the backward-looking stuff: we should at least welcome the new focus of the government and the NZI on inequality and child poverty. Let us look forward then, to what can and should be done about inequality and child poverty in New Zealand.

We should start with the split in household budgets between the income and cost items. The income side of this split is left largely unexamined by the government or the NZI - the market rules here, and that seems fine by them.

But even if we want to ignore labour market contracting issues (don't mention the minimum wage!), we can't think about the impact of RMA/housing costs without considering at least the location of jobs. At which point it is much less obvious that the RMA is to blame. Instead, it seems to me that

  • manual jobs have largely migrated out of city centres as have manual workers, and
  • apparently more productive sectors such as FIRE have displaced them - jobs and workers both. 

These movements show that/how markets adapt to changing values. All workers want the best pay close to nice & affordable accommodation and all employers want happy workers. But why, even after following their jobs to the edges of cities, do manual workers still struggle to avoid poverty?

I'm also uneasy about assuming that removing environmental protections and consultation opportunities from the RMA will reduce housing costs. Even if it does lead to more housing being built, market forces are likely to allow them to be sold at current prices. Unless there is a very big surge in construction, we are not going to see significant house price reductions.

So the best we can hope for with housing policy is that it might stop making child poverty a lot worse. That's not nothing. Major changes to the RMA might, if we're lucky, help stop or reduce future growth in child poverty, but it will not address the problem we currently have.


  1. Income inequality has been pretty flat lately, both in BHC and AHC terms. But I do note that After Housing Cost measures will miss that a lot of poor families are stuck doubling or tripling up. Their housing costs then have dropped, but they have really really crappy housing environments. Will need to check back into that to see how well the MSD data corrects for housing intensity. I expect that housing costs have then done more on experienced poverty than on inequality.

    I note too that RMA has made it kinda hard to start up lots of businesses that would provide employment. I'm told consenting even to open up a gravel pit (think you guys call it aggregate or metal, which never made a whit of sense to me since it isn't metal, it's crushed rock, and rock isn't metal) is crazily difficult. Gravel pits leave a potentially unsightly hole, but they don't leave dangerous tailings or have other leachate issues. It's just pulling gravel out the side of a hill. We have a lot of hills.

    A few other things I think would be worthwhile in addressing poverty / inequality, in addition to fixing housing markets (not just RMA/district plans, and consenting costs, but also the other bits that ProdComm identified on housing costs like materials - why can't we just get container loads of building materials that are good enough for use in other wet and shaky places like Vancouver?!)

    - improving schools;
    - easing up on occupational licensing where it's proving binding: make it easier to get kids into trades;
    - fixing some of the tertiary funding so that we stop trying to push so many kids through Uni where better trade-school funding could do more good for the same amount of money;
    - figuring some way out of the mess of very high effective marginal tax rates in the lower-middle income ranges where abatement schedules all pile on top of each other.
    - continuing the government's gradual welfare reform focusing on ensuring that teenagers' first contact with benefits doesn't become a lifetime thing. There hasn't been enough work done on how this has been panning out; I'd love to see more on it.

  2. We do call it gravel (and aggregate and metal!) and I wasn't aware new pits are hard to open - they shouldn't be. Also agree re building materials and reckon that more aggressive/proactive antitrust is likely to be the most useful tool here.

    Occupational licensing looks like more problematic in the professions (medicine, law etc) than the trades to me - allowing the apprenticeship scheme to fall into disuse may be the biggest factor here.

    Also agree re high EMTRs. But these are a direct result of targetting welfare support which we love apparently. Pick one.