Elections are normally fought over policies and personalities, but governments are judged by how they deal with unexpected events – such as the Thatcher Government’s response to the Falklands War.

So far, in our own election campaign, our competing parties are focusing on their policies and personalities, but the voters may soon be more interested in how they plan to deal with the emerging threat to almost everyone in the electorate.

I am referring to the collapse of the housing/finance double-bubble which has already thrown our economy into recession and which may well drive us into long term depression. The two bubbles have fed off each other in a cancerous symbiotic relationship.

The present Government will find it difficult to develop suitable remedial policies because they would have to admit error and accept some responsibility for the inflated housing bubble and the generation of a frenzy of lending and borrowing against over-valued assets.

Prior to the days of the “double-bubble”, property developers financed their projects using regular bank borrowings, secured against the value of the land, and progressively increased their borrowing against the added value of real improvements, as they were put in place. Applications were processed quickly and costs and conditions seldom changed during the process.

Applications that used to take weeks, now take years. Many projects are abandoned, even after resource consent has been granted, because the conditions of consent impose such financial burdens, and extend time-frames so much, that the projects are no longer viable, especially in the current market. Quite minor developments now require millions of dollars to be handed over to councils as development contributions for roads, libraries, recreational facilities, bus stations, and anything which is deemed to be a cost imposed by newcomers, as well as bonds for landscaping, private-roads, stormwater and sewage management. These largely unforeseen imposts have been funded by finance companies that have stepped into the value gap. Now that sales have stalled the developers cannot pay the interest. So the finance companies collapse, and take down the property companies with them, setting up a truly vicious circle.

Any new government should take the steps necessary to enable our otherwise flexible and responsive economy to claw its way out of recession rather than sink into long-term depression. Obviously we need to reform the RMA but other pieces of the jigsaw must be put in place at the same time. Here are some starters.

Ban so called “development levies”.

No council knows how to calculate the long term costs or benefits imposed by a new household on a local population. The present Government perversely recognized this truth by removing the right to challenge the calculations in the Environment Court. These “Fines on New Development” must be replaced with long term local body infrastructure loans.

Make Affordable Housing a National Policy.

We must forget about direct government intervention in the supply side such as Inclusionary and Linkage zoning schemes. Just remove the barriers to affordability – such as metropolitan urban limits, urban intensification, gold-plating of everything, and excessive reporting.

Limit Council Liability on Construction.

In most developed nations Council liability for construction failures ceases after a given time (say five years) or after the first sale. This allows a private market in guarantees and insurance to develop and means that Councils are not saddled with an unreasonable duty of care. Such private systems provide more real satisfaction to badly served consumers. Making claims against local and central governments is expensive and time consuming as the leaky building drama demonstrates. Councils should also enable lots on an “as is – where is” basis, and shift the liability to the buyer. Councils do not issue permits for building cars or boats. Just as well or they would be hugely expensive – and leak.

Limit Council Liability on LIMs.

Councils now have an indefinite liability for Land Information Memoranda. What happens when the Council changes its Plan? Does every LIM holder have to be sent a new LIM? Council staff are probably already setting up new LIM-writing empires to drag more money out of the system.

Abandon the Emissions Trading Scheme.

The Emissions Trading Scheme if full of uncertainties and such schemes have disrupted markets and investments wherever they have been introduced. The next bursting bubble will probably be built on carbon. Can we afford another merry bubble-go-round?

Rank infrastructure on efficiency grounds.

We traditionally assessed infrastructure projects using readily understood and well-defined measures such as economic efficiency. Then we introduced “sustainability” into the mix and the result is ignorance cubed. No one knows what “sustainability” means, and no one knows how to rate one project as more or less “sustainable” than another. What on earth is “sustainable urban form?”

Make short-term, flexible plans.

We know next to nothing about the future. Past trends are no longer a guide to future outcomes. We cannot reliably forecast the growth and distribution of population, or the nature and distribution of employment, or the impact of new technology. The only useful plans are those which enable us to adapt to change. Long-term plans reflect Romantic yearnings for a stable past. Twenty-year plans are fantasies built on delusion.

Rubber on Road beats Steel on Rail every time.

Rail promoters either believe they are perfect forecasters, or they believe their railway lines will force the future to follow their own myopic vision. Rubber-on-road is a flexible system which can rapidly respond to changes in demand, prices and technology. Spending billions of dollars on rail in Auckland will destroy even more of our national savings.

Protect our Property Rights.

Government is making ominous noises about giving councils power to take private property (using US style powers of eminent domain) to promote “urban revitalization” – the new word for urban renewal. This is hardly the time to be eroding the few property rights we have left. We need stronger rights in our property – not further assaults on one of the key ingredients to economic growth and development.

Pull DoC’s Head In.

DoC was never meant to be a Department of Economic Destruction. (DeD) Get them out of the courts and back into the woods where they belong.

General Change in Culture.

Councils need to be rewarded for promoting growth, development and employment, rather than encouraged to treat such activities as sins to be penalized by development fines and suffocated by interminable processing times and crippling compliance costs. For example, if some of the GST take was redistributed to local councils according to the ratio in which they generated the national revenue, councils would encourage economic activity rather than punish it. This particular method may be flawed, but serves to illustrate the approach we need to restore the can-do culture that used to make New Zealand a rewarding and exciting place to live.

And please, lets ban imports of planning fads from America.

Summary.

Any party intending to be part of the next Government should have policies designed to end the recession caused by the collapse of the “double-bubble” and to ensure we don’t repeat this tragic exercise with a carbon-bubble, or whatever.

Most of these policies must target Local Government because that is where the housing bubble began, where the bursting “double-bubble” is doing so much damage, and where the cure must be found and applied.

The good news is that many of the present Mayors and Councillors seem ready and willing to accept the challenge. Give them the tools and they will do the job.

1238 words.