A magic wand won’t fix housing crisis
Afew years ago an acquaintance told me I should start buying up houses by the handful. I laughed so hard I nearly cried. She and her husband already had five, she said. It was the way of the future. You buy one, and when you have enough equity in it, use that to buy the next, and so on until you have a portfolio.
‘‘Who needs five houses?’’ I thought. I didn’t even have one house. How would I get five?
You rent them out and the houses pay for themselves, she said. If it all goes wrong, you can just sell up. As far as investments went it was, literally, safe as houses.
Despite her enthusiasm for the idea, I felt a little uneasy about it.
Only a few days before, another friend of mine had just been told her tenancy agreement wouldn’t be renewed because the landlord was selling up their other properties and would need to move back into the one she was renting.
When she moved, it would be my pal’s fifth home in as many years, each one more expensive than the last. For her, the time between being turfed out and knowing she had a new home to go to was unimaginably stressful. The entire moving process was incredibly expensive.
I thought about my friend and the woman with five houses again last week, when I read property guru Graeme Fowler’s plea for understanding on behalf of beleaguered property investors, specifically the section: ‘‘Are investors greedy?’’
No, is Fowler’s answer. The real problem is everyone else hates money.
‘‘When the Government continues to tell the public that what’s needed in the economy is to transfer money from people who are rich to people who are poor, people over time get the idea that wealthy people are bad,’’ Graham wrote, with an almost balletic leap of logic.
‘‘If you ask people to write down what is the first thing that comes to their mind when you mention the word ‘money’, it will usually consist of a list something like this – ‘struggle, broke, hard to get, rich bastards, bills’. . . To these people, their mindset is that money is bad, so people with money must also be bad.’’
His proof? When poor people win Lotto they blow it all quickly because, while wealthy people ‘‘attract’’ money, poor people ‘‘repel it’’.
This sort of economic mumbo jumbo is nothing new, and Fowler is certainly not alone in thinking that being poor (and therefore unable to afford a house), is just a state of mind you could change if you really wanted to, rather than a by-product of a society that sees buying five houses as some kind of moral virtue.
Just Google ‘‘repel money’’ and you’ll see it’s as pervasive as that old chestnut about a plate of smashed avocado being what’s truly standing between you and a three-bedroom house on the North Shore.
But I did a quick check with Victoria University’s economics department and The Secret is still not an accepted economics text book, so what’s going on?
It’s a fact that rental stock is a necessity in any housing market. I don’t begrudge a professional landlord who’s in it for the long haul and not likely to dump their property at the first sign of trouble, thus upending their tenants’ lives.
But mum and dad property investors, who go into it ‘‘because they want to have a couple of properties with no debt when they retire’’ and who many property experts, Fowler included, acknowledge aren’t very good at it, build exactly that instability into the rental market.
Don’t get me wrong, it’s true you need to work and save hard to buy a house. But as greed and inequality grow around the globe, there’s a level where the kind of hard work that’s now required starts to look more like a real-life episode of Survivor than everyday life.
Last year, I did a story about a family who clawed their way out of rental land and into a house of their own by doing things like cooking their meals on a camp stove in the back yard, because it was a little cheaper than turning on the oven inside.
In a Christchurch winter, they’d tried to live without heating until it was absolutely necessary. Their story was pitched to me by their mortgage broker as a marvellous example of ‘‘bootstrapping’’, of hard work working out, and people with the right mindset making wealth happen.
But no family should have to make the sorts of sacrifices that family did.
I think if you asked most people to write down the first thing that comes to mind when they hear the word ‘‘money’’, it would be freedom.
That’s what money really means to people who don’t have it: freedom from struggle, from bills, from fear of the future. Freedom to make choices because they have options.
If people are bitter about others seeming to own more than their fair share of properties, I can see how they came by that bitterness. Five homes in an amateur rental portfolio are five homes not in the housing supply for first-time buyers.
Clinging to the idea that it’s someone else’s mentality that stands between them and buying five houses of their own makes it super easy to avoid taking any radical measures to fix what’s so clearly broken in our housing market.
Why contemplate rental caps – as they are in Berlin – or limits on the numbers of homes a couple or individual should be allowed to own, or God forbid, a capital gains tax, when the ‘‘real’’ problem is lazy Millennials who think rich people are bad?
There’s no room in the discourse for absurd, sub-prosperity gospel hocus-pocus when the country is facing the very real and complex issue of failing to provide people with a basic right, like housing.
That’s not something any of us can afford any more.