The label does not maketh it so.

Just because Shakespeare said it (or at least, wrote something similar) doesn’t make it true.

Just as a strategic plan isn’t strategic because that’s the heading on the slideshow, a home is affordable because you label it as such.

Creative solutions to re-creation challenges

Brownfield developments are different to Greenfield developments. There’s complexities inherent in the act of re-creating something old into something new that aren’t present if you’re starting with a blank slate.

It’s a similar situations trying to create something new that comes from within an old broken entity.

For example: Trying to address the affordability issues in our current property market.

This issue, or rather, one of many, is this:

How do you create affordable homes within a system characterised my massive wealth inequality?

When we’re buying (or building) in the existing environment, the money needs to come from somewhere. Extensive philanthropic funding is a) difficult to come by and b) not a sustainable alternative.

Perhaps we need to back up a little and ask a few questions like:"

• Is there a way to go outside the system?

• Is there an alternative way to get from point A to point B. More specifically, how to go from no house, to a home purchased at an affordable price.

Re-creation challenges require creative solutions. But the outcomes are worth it, whether its an affordable home, and alternative system of a brownfield ethical development.

Diverse ownership

If making housing affordable means buying property together, the long-term picture also means living together. And your average median-priced house isn’t going to work out for a group of people all moving through the same stages of life at the same time.

The system requires diversity to work.

To start with, this is going to mean housing that can accomodate different types of people.

Multiple generations under the same roof (or at least with the same letterbox) it’s almost like we’ve been here before…

We're going to need a bigger boat

If housing affordability means we need to buy property together, we’re also likely to live together for longer. I suspect most of the median-priced housing stock won’t go the distance. To small and/or to low quality.

We need a bigger, better boat.

And by better, I mean a Good Home: Warm, dry, low-energy, efficient design, simple.

And by bigger, I mean rooms for kids.

Can we make it affordable?

It’s time for a thought experiment:

Let’s take three friends each earning the median income. Some have children, or will have children while living together, but we’ll assume part of the picture is supporting parents to stay at home full-time, so we’ll stick with three incomes.

A person on the current median annual income can afford around $210,000 of property. So our three people can afford a $630,000 home.

For our better boat, we’ll assume a build price of $3000 per square meter.

For our bigger boat, let’s assume we can get a five-bedroom house with space for 4-5 adults and a few children into 130 square meters. A little on the small side, so we’ll need some simple(r) living practices.

The affordable Good Home costs $390,000, leaving $240,000 for a section.

Not a slam-dunk by any means, but potentially, we might be able to have Good, Affordable homes if we’re willing to share them.

An affordable housing solution

There’s a couple of different measures of housing affordability:

1. Ratio of price to income (i.e. house price divided by income before tax).

2. Percentage of income (before tax) required to own a house.

The target for these two measures are generally:

• A ratio of less than 3.0 is a good target for “affordable”

• Spending 20% - 30% of gross income on home ownership is “affordable”

So what does this look like in New Zealand?

In 2017, the median personal income from wages and salaries was $45,883 (before tax). The median household income from wages and salaries was $79,000 (before tax).

Using the target of a 3:1 ratio of house price to income, a house costing more than about $280,000 isn’t affordable for 50% of households.*

Using a target of 30% of income going to housing costs and making some simplifying assumptions about costs and equity** 50% of individuals cannot afford a house costing more than $212,500.***

So with a national median house price of $549,000, and just over $850,000 in Auckland (our largest city), how can we buy houses?

Try looking at it this way:

1. A 20% deposit on a $550,000 house is $110,000, leaving $440,000 to be financed.

2. An individual earning the median income of around $46,000 can afford a mortgage of $170,000 (using the same assumptions as earlier**).

3. That means 3 individuals can afford to buy a house. You’ll need 4 in Auckland.

That’s how we do affordable housing: Together

*For an individual income the price would be around $138,000.

**Assuming mortgage has a 7% interest rate, 25 year term with bi-weekly payments, ignoring rates, insurance and maintenance costs etc, and assuming a 20% deposit is required.

*** For a household the price would be just over $370,000.

If you don't like it, change it!

I'm curious about something:

How come we look to tried and true methods to solve problems with the status quo?

The solutions to the broken system are going to come from outside. From another way of seeing the world. From another way of being in the world.

Or at least, they'll be inspired from somewhere we haven't seen before.

Unhappy with housing affordability? Why not reduce your costs? Here's a few thoughts on how:

• Buy a smaller house
• Buy a house with other people
• Buy in a different neighbourhood
• Sell your car and bike to work
• Flat with people to save a bigger deposit
• Stop dining out three times per week
• Don't go shopping every week
• Cook your own food

In short: Don't assume that home ownership needs to look the way you think. The home, the ownership, and the owner can all change.