Recently I have been considering the problem of monopolies in our society. New Zealand is a relatively small country (Pop. 4 million) and in a relatively small amount of time, most industries become oligopolies or duopolies. As a result, monopoly rents become possible on all sorts of products and services.
In recent weeks there has been a considerable amount of debate on how house pricing can be constrained so that first home buyers can purchase or build their first home. Even my next door neighbour raised it over New Year's drinks as he worried for his daughter who is going out with a "loser" that has persuaded her to use her savings for an overseas trip instead of a deposit on a house.
His story reminded me of an old Jewish joke where a suitor came to ask her father for her hand in marriage. When he asked the boy how he was going to provide a home for his daughter, the boy said bravely, that God would provide. He asked how he would provide for a family, the boy answered in the same way. Later as his wife asked expectantly about how the interview went, he replied that the boy thought he was God.
As a first step to thinking about this, I thought I would put down a few observations I have noted of the real estate market:
- In Christchurch 2-3 families have been land banking for decades and tie up quite a large proportion of the undeveloped land within the city limits. One of them even has their own construction company and a kitchen manufacturing firm. They only release enough lots to keep their factories busy and to keep the price up.
- Land zoning puts a collar around the city and as the city population grows, demand for land grows more quickly than supply, ensuring prices continue to rise.
- With increasing prices, homeowners can further leverage their homes by taking out additional mortgages or increasing existing mortgage loans to purchase or build more homes which they can rent to those who can't afford to purchase their home.
- Relaxed overseas investment criteria mean that New Zealanders have to compete with well capitalised foreigners who are often absentee landlords.
- Developers wanting to ensure that they maximise their profits do not build homes intended for first time buyers because smaller homes de-value their neighboring houses. As a consequence, many developments do not cater for budget buyers.
- Even when budget housing is included in a new development well-capitalised existing home owners looking for investment homes outbid first time buyers anyway.
- It is in the interests of existing landowners, homeowners, real estate agents mortgage lenders and developers to ensure that house and land prices continue to inflate. If values were to fall then mortgaged owners would see their equity vanish, real estate agents would see their commissions fall, banks would be concerned that their borrowers may default and developers would see margins and demand fall.
- Therefore politicians cannot enact laws that create significant downward pressure on land and house prices since that would lose the significant political support of these groups. Yet all that these groups have done has contribute to the creation of land monopolies which can only lead eventually to civil strife.
- In hard times, families would pool their resources to survive. After 50 years of comparative prosperity, two generations have grown up with very independent mentalities. The physical, cultural and social distance between individuals is so great that many of the skills needed to negotiate healthy relationships in extended families need to be relearnt. Instead the generation in their sixties relish the thought of their regular SKI (Spend the Kids Inheritance) holidays, selling their lands and purchasing motorhomes in a glamorous display of conspicuous consumption.
- We have plenty of land, we have willing people to work and build their own homes. But the game of monopoly is disenfranchising people. We are on the way to rebuilding a stratified feudal society.
- In this society, we spend our 20s getting educated and building up student debt, our 30s paying it off and our 40s scrambling to get a deposit for our first home, and having a (small) family, spending the rest of lives paying off the mortgage and retiring in a "rest home" far from our families surrounded by other people who discuss their doctor's and their latest treatments, and going to someone's funeral.
Land is not the only monopoly we have built in Western society. Why is health care so expensive? One of the reasons is that we limit the numbers of medical practitioners that can be produced even though there are many people who could sit and pass the theoretical and practical exams. The same could be said for dentists, lawyers, accountants, engineers and technologists. We arbitrarily limit class sizes for all these disciplines.
In Christchurch we have young people seeing back street dentists for fillings. Across the city there are extraordinarily high levels of stress, insomnia, anxiety, depression, eating disorders, self harm and suicide. These levels cannot be solely attributed to the earthquake. These problems are high in other urban centres too.
We've been through a financial crisis and it has become one of unemployment and inflation. Sure it's been exacerbated by the earthquake, yet I have met few who have heard messages from the pulpit on the Global Financial Crisis, about watching out for neighbours who might have been made redundant, or small business owners who maybe facing ruin. Instead I have heard many sermons on how triumphant the Christian walk truly is. Are we so disenfranchised from reality?
Does God not have answers for these problems? What does His Bible say? Who knows what's in it? Why are these issues not being discussed from the pulpit? Why are the believers so disempowered? How did we get this way?
Where are the Believers who confidently say that God has set out a way that we should live which solves these societal problems? What have we done to our people that they can be so silent at a time of such great need? Who are we that we cannot speak prophetically to our society in such a way that their hearts can be touched and that they will give us license to propagate much-needed change? It is time we asked ourselves "WHO AM I?" for we are not what we ought to be.
.png)
