What New Zealand Can Learn from the Venezuela Housing Crisis

Once upon a time, in a beautiful country…there was a shortage of homes. Construction companies couldn’t keep up with demand, so the supply gap continued to widen.

It wasn’t that there weren’t enough construction companies — there were several large, well-established firms capable of upscaling.

The problem was that wages weren’t increasing at the same speed as house prices. So while demand was steadily rising, the dream of owning a dry, safe home floated further away.

In stepped a benevolent authority figure. He reckoned he could sort this mess out; he just needed the power to do so.

Upon promises of tens of thousands of new houses, he wove his banner.

Because of his confidence, he managed to consolidate power upon himself…launching several new programmes to tackle the crisis.

He claimed that, to meet construction targets, he’d need to draw from both the public and private spheres…and he’d lead the country back to stability.

Here’s that country today…

Tent Communities

Tent Communities

Source: Comisión Interamericana de Derechos Humanos
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Violent Protests

Violent Protests

Source: Wikipedia
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Empty Shelves

Empty Shelves

Source: Wikipedia
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As you might have guessed, that country is Venezuela.

President Hugo Chávez rallied supporters by handling the Venezuelan housing crisis in the only way he knew how — by taking the reins.

He eventually went as far as trying to nationalise various large companies in the construction industry like steelmakers and cement producers.

Skip ahead to the end of the story…and as the BBC puts it:

Venezuela’s economy is in freefall. Hyperinflation, power cuts, and food and medicine shortages are driving millions of Venezuelans out of the country.

Oof.

Now I’m telling you this to describe one logical end of a new campaign by Housing Minister Phil Twyford.

As we reported in early October, Twyford’s been on a big push to consolidate the various housing programmes under his wing in a single, unified ministry.

Well, now it’s official. Twyford’s new domain is called the Housing and Urban Development Authority (HUDA).

Under the HUDA umbrella, you’ll find Housing New Zealand (HNZ), Hobsonville Land Company (HLC), and Kiwibuild.

The goal? To tackle the incredible housing shortage…which Interest.co.nz estimates at about 34,000 dwellings for Auckland alone.

At first glance, that might seem rational…even prudent. But here’s the twist, the creation of HUDA comes with a carte blanche — the authority to do whatever it takes to solve the problem…

And the range of powers borders on martial law.

According to an article by Jenée Tibshraeny for Interest.co.nz, here’s what HUDA will now be able to do:

  • Override, add to, or suspend provisions in Resource Management Act (RMA) planning documents;
  • Issue resource consents;
  • Buy, sell and lease land and buildings;
  • Compulsorily buy private land;
  • Build, alter or remove any building or infrastructure;
  • Have the same powers as Auckland Transport in relation to land transport, and the same powers as territorial authorities in relation to waters and drainage infrastructure and services;
  • Seek approval from the Minister of Conservation and the Housing and Urban Development Minister to use government, local purpose, recreational, scenic and historic reserves (but not natural or scientific reserves) for development purposes;
  • Suspend, make or amend bylaws.

In addition, the new agency will have full authority to go over the local council’s heads. No consent or agreement necessary.

Make no mistake — this is a significant governmental move to pool power under the Housing Minister.

But with Kiwis desperate for housing, this likely won’t ruffle many feathers…for now.

Once Twyford starts flexing his muscle — like forcing folks to give up their homes for his projects — you might see more of an uproar.

Others might appreciate the assertive action.

Here at Money Morning New Zealand, we’re more concerned with the financial aspect than the political/philosophical issue.

If Twyford manages to make HUDA more efficient, and thereby reduce the tax burden caused by his programmes, then great! Less government-spent tax-dollars is a win in our books…because, theoretically, it should mean lower taxes/fees for you…and therefore there’s more money available to spur on the economy.

But we’re not holding our breath on that front…

What we’d like to see…now that Twyford’s getting his hands dirty…is that he comes to empathise with the private business owners who have struggled in this sector due to complex regulations and limited immigration.

It may drive him to advocate for improved regulation in the businessowners’ interest. Maybe.

Because that’s the best-case scenario, isn’t it? That Twyford manages to affect change at the source level…where the fundamental issues plaguing the industry lie…and it allows for private business to thrive again.

But odds are, he’ll focus on surface-level results that become great talking points come election season. He’ll use those results to compound his relative power over the industry…

That’s the typical politician strategy after all…and it worked for Chávez…for a while anyways.

Fingers crossed we’re wrong.

¡Viva la Revolución!

Best,

Taylor Kee
Editor, Money Morning New Zealand


Taylor Kee is the lead Editor at Money Morning NZ. With a background in the financial publishing industry, Taylor knows how simple, yet difficult investing can be. He has worked with a range of assets classes, and with some of the world’s most thought-provoking financial writers, including Bill Bonner, Dan Denning, Doug Casey, and more. But he’s found his niche in macroeconomics and the excitement of technology investments. And Taylor is looking forward to the opportunity to share his thoughts on where New Zealand’s economy is going next and the opportunities it presents. Taylor shares these ideas with Money Morning NZ readers each day.


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