Reader commentary: 'Too big' tourism the root cause of housing crisis

As you'd hope any good editorial would, Crux managing editor Peter Newport's views on 'Queenstown's housing shame', and contributing factors to it, sparked a reaction from readers. One, Nick Page, put pen to paper (or fingers to keyboard) to write a strong counter-argument. 

Crux reader Nick Page couldn't let our recent editorial go unchallenged.

I am a fan and supporter of Crux and particularly your coverage of local issues, but I think you have fallen for an urban myth over the housing crisis issue. 

To quote your editorial of June 27.

"The reasons (for the housing crisis in the Queenstown Lakes District) are actually well understood and there’s not even disagreement on these two causes. Empty $2 million holiday houses and expensive short term visitor accommodation."

I contend that your statement is absolutely incorrect and that these are definitely NOT the causes of the housing crisis, whether you think they are well understood or not.

Holiday houses

Let's take your "$2 million holiday houses" first.

They have virtually no effect on the housing shortage. Consider this.

Imagine if every "holiday house" in the QLDC area of whatever value permanently disappeared next Wednesday. Poof, gone, house, section and all. 

On Thursday the housing crisis in the region would be exactly the same. Why? Because the supply of housing for the workforce wouldn't have changed one iota, but equally importantly the demand for labour, and thus housing, in the region would not have changed significantly either!

So we would lose maybe (complete guess) 3,000 houses overnight and it would MAKE NO DIFFERENCE to the housing crisis. It would however cause a huge loss of rates for the council, and leave a lot of unhappy ex-owners! 

Holiday houses are not the problem. I accept that on the margins they could be a small part of a solution if some of them were brought into the rental pool, and that if the occupants of those holiday homes, when they are here, go to a restaurant etc they may marginally contribute to the demand issue, but I stress again, holiday house are not the problem.

In reality of course the owners of most of those homes are never going to put them into the rental market. That is not why they own those homes. I do not think that it is reasonable to expect the housing crisis in QLDC to bring about a fundamental change to the western capitalist model, or the situation of the owners of the holiday houses, so let's not make those houses disappear but equally let's not vilify those that own them.

Holiday houses are NOT THE CAUSE OF THE HOUSING CRISIS.

Expensive Short Term Visitor accommodation

Air B&B - not the cause of our housing woes?

And so to your second cause, the evil operators of expensive short term visitor accommodation, frequently attributed to Air B&B.

As I noted above, it is unreasonable to expect the housing crisis in QLDC to bring about a fundamental change to the western capitalist model. We all generally accept it as meritorious that people strive to succeed in our economic system, and choose how to invest their energy and capital to do so.  

Some see expensive short term visitor accommodation as their preferred method of investing. Some of those people buy shares in hotel companies, while others develop and operate Air B&B's. Coincidentally some people choose to invest in expensive tourist attractions instead of short term visitor accommodation: ski fields, gondolas, restaurants, bungy jumps etc. This latter group, which we collectively know as "the tourist industry", are the primary drivers who generate DEMAND in our region.Those that provide expensive short term visitor accommodation are responding to, and taking advantage of, that demand, by supplying a product sought by those who are part of that demand. 

So the expensive short term visitor accommodation is there in response to the demand generated by the tourist Industry, it is NOT THE CAUSE OF THE HOUSING CRISIS. 

Again I accept that on the margins they could provide a small part of a solution. If some of the short term accommodation was to be brought into the longer term rental pool, where their owners see that as an equally or more attractive investment for their energy and capital, they may marginally contribute to increasing the supply. However I stress again, expensive short term visitor accommodation is NOT THE PROBLEM, but we are getting warmer. A hint of the problem is emerging…

The Housing Crisis

So what is the behind the housing crisis?

Land and housing prices in QLDC are such that provision of a significant quantity of additional, moderately priced, medium term rental housing is clearly not currently an attractive investment option for many, and that such will not happen without some additional investment driver.

The evidence of the housing crisis is a shortage of affordable, decent, medium term accommodation for workers in the QLDC area, but that in NOT the underlying cause. The underlying problem is what is bringing the influx of people looking for (almost non existent) medium term, affordable housing to the district, the TOURIST INDUSTRY. 

Going back to imaging a scenario.

If the tourist industry evaporated overnight (instead of the holiday houses): poof, no more tourists, would it solve the shortage of decent medium term accommodation in the district? YES. Witness Covid!

The expensive holiday house owners would carry on regardless. The expensive short term visitor accommodation would not be needed so a portion of that would be available for reasonably priced medium term rental (since that option would then make economic sense) and of course most importantly the workers in the tourist industry would not have jobs, so they would simply go elsewhere to live and work. CRISIS SOLVED. 

So it's simple really, the solution to the housing crisis in the district is to ELIMINATE THE TOURIST INDUSTRY.

The tourist industry

Tourist arrivals - what's the magic number?

Now eliminating the tourist industry may seem a bit extreme to many, but even if it is it hints at a solution.

Let's accept that poof, no more tourists, is a bit extreme. But poof, LESS tourists, hence LESS workers, hence LESS housing demand…now there is a thought!

The reason for the QLDC districts HOUSING CRISIS should be well understood and there should be no disagreement on the cause. 

TOO BIG A TOURIST INDUSTRY.

So what is the solution? 

Balancing the size of the tourist industry with the ability of the region to cope, including most importantly for this discussion, the availability of affordable, medium term accommodation for the industries workers.  

How can that be done? Potentially by tackling both sides of the equation, supply and demand. 

Increasing the supply of appropriate housing can support the capacity of the tourism industry in the region. 

Equally, reducing demand for housing by reducing the size of the tourist industry in the region offers a potentially effective solution to the housing crisis.

So how can supply increase? NOT in any meaningful way just by targeting holiday house owners or Air B&B hosts, or indeed hoping property investors will suddenly see the QLDC region, with its inflated prices, as a good prospect to invest in, as illustrated above. 

The tourist industry make the money out of tourism and it should take responsibility for housing its workforce. The existing tourist operators should be the ones providing the additional investment driver that makes investing in housing their staff attractive, and no new tourism operations should be allowed unless they fully and permanently facilitate the housing needs of their proposed staff.

Council and Central Government should immediately move to couple granting of any new consents for the development or expansion of new hotels or tourist businesses directly to concurrent provision of sufficient and appropriate dedicated worker housing. It should be an integral requirement for the approval of any proposal. This should not just apply to big operators. It should apply to any and every tourist business that will employ staff.

Alternatively, how can the current size of the tourist industry be reduced and its growth restricted? 

There would seem to be several option here. Increased costs, such as the bed levies, overseas tourist levies, conservation levies etc  have the potential to dampen demand but of course will require central government cooperation. Local zoning rules can and should be tightened, severely restricting the land zoned for tourist enterprises and the density of development allowed in those zones should be reduced. While this process may take some time to have an impact, and will clearly face opposition from the tourist lobby, it does offer a worthwhile potential for the longer term.

I note that the temptation to try and achieve reduced tourism through false, unenforceable restriction needs be avoided and called out. A classic current example of this is airport capacity. It has become clear over the last few years that attempting to restrict tourist numbers through restrictions on the capacity of Queenstown Airport are destined to fail, because if restrictions are persisted with, alternative, and in all likelihood far worse, growth promoting options will emerge, such as the proposed wide bodied jet airport at Tarras. Potentially using airport capacity as a control of tourism numbers could work, but only if central government takes control of the issue and  prevents alternative airport capacity being developed. This currently seems unlikely, with every indication that the tourist lobby is far stronger than the homeless or environmental lobbies.

Summary

So, in spite of what was you said in your editorial, there is absolutely DISAGREEMENT with what you postulate as the causes of the housing crisis in the QLDC region. The cause is neither empty $2 million holiday houses nor expensive short term visitor accommodation . The cause of the regions worker housing crisis is the size and growth of the tourist industry in the region, and the fact that its demands continuously outstrips the ability of the regions housing stock to cope.  

The solution is certainly not to unhelpfully try and scapegoat holiday home or Air B&B owners. Rather, the solution is to make the tourist industry take responsible for the problems it is causing, to make it provide or facilitate housing for its workforce and to take measures to restrict its size and growth to a level which the region, including it's housing, can properly cope with. 

Read the original editorial here: Queenstown's housing shame - Why is it 'not the job' of these CEOs?