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A house is a home, not an asset

With house prices sky-rocketing in many countries questions are being asked why. One of the fundamental questions is: is a house a home or an asset? The answer depends on who you are asking, and there lies a big part of the problem.

A home is not a right as such, but it is a fundamental need for well-being, along with other fundamentals such as food, water and clothes. Everyone would agree that people should be housed for their health and safety. However, in many places people have resorted to living in inadequate alternatives such as garages, caravans, tents and in too many cases, on the streets.

The housing crisis in New Zealand, for example, is dire. The International Housing Affordability Survey describes New Zealand’s housing with a median multiple of 7.5 as ‘severely unaffordable’. Median multiple is the median house price divided by the median household income. A median multiple of around 3.0 is considered affordable. Consequently, the home ownership rate in New Zealand is the lowest it has been in almost 70 years. It is not just home ownership that is much less affordable either. Since rents tend to increase as house prices increase they have become unaffordable as well.

The Kiwi dream is what is colloquially known as ‘the quarter acre pavlova paradise’. Unlike some places where a rental culture is common, like New York and many cities in Europe, Kiwis have always aspired to own their own homes. It provides freedom and security and potentially a way to minimise the cost of housing by paying off your home.

In New Zealand in the early 1980s houses were deemed affordable based on the median multiple formula. However, since the mid 1980s a variety of drivers caused by deregulation of the economy conspired to make house prices to escalate. For 35 years house prices have been going up at rates much higher than general inflation and general wage increases.

Many people have bought into the housing market expecting prices to go up, which they have continued to do. However, many of these people have huge mortgages which are serviceable at the current low interest rates but when interest rates increase, which they will inevitably do, many people won’t be able to afford their repayments.

There are a variety of reasons for the escalation of house prices, and one of them is to view a house as an asset, and not a home.

House as a home

If you live in a dwelling you own, it is a home and not an asset. As a home a house offers all the considerable benefits of shelter, including comfort, privacy and safety. These all aid a person’s well-being. If you own the dwelling you have the added benefits of being more secure as well as the freedom of being able to do improvements as you like.

Initially, as a person/family pays off their house their liability (debt) decreases and ultimately they can be debt-free meaning they don’t have interest payments. The house then becomes an asset of sorts because ownership has reduced a person’s living expenses.

However there is another sense in which a house can be an asset and that is when it provides a return on investment. If you are living in a house it is not really providing a return, unless you have boarders or tenants on the property. In this case a house is still very much a home and not an asset.

There are at least four different ways in which speculators view a house as an asset, that provides a return.

House as an asset

Rentals

As house prices have risen rents have also risen to cover this extra cost and to supply landlords with a decent yield from their investment. Also, with the neoliberal ransacking of publicly-owned assets, the New Zealand government sold off a large proportion of state housing stock, and it didn’t invest in new housing.

High rents and the reduction of rental stock has meant that people are driven to other alternatives which range from moving to another area, to living in garages, caravans, cars, tents and even on the street.

Ghost houses

In 2020 it was estimated that there were 40,000 empty houses in Auckland alone. At the same time there were over 12,000 people on waiting lists for community housing. There are some valid reasons that houses are empty for short periods but some people buy a house on purpose to leave it empty for long periods because they don’t want the ‘hassle’ of tenants but they do want to realise the capital gains from house price increases. Many of the owners of these ghost houses are foreign nationals.

Of course, the more people do this, the more house prices will increase because of the increase in demand from the shortage of available housing.

There could be an additional tax on houses that are empty for more than a year, say. All of the money collected from this ‘ghost house tax’ should go to creating community housing.

Developers

People make a business out of buying property, developing it into housing and subsequently selling it for big profits.This happens at different scales from single houses to huge housing sub-divisions and apartment developments. Developers do help create higher density housing but paradoxically whilst the housing might be a little cheaper it is not proportionately cheaper. 

By way of illustration, consider the following hypothetical scenario that is the type of thing that is going on constantly. There is a single house on a large section that cost say $2,000,000 and is removed and replaced with four luxury townhouses which cost say $2,000,000 to build altogether (including financing costs etc). The developer has outlaid a total of $4,000,000. Each townhouse is sold for say $1,500,000 for a total of $6,000,000. The $2,000,000 difference between income and costs is pocketed by the developer as a speculative margin over and above a proper profit margin. Normal lending criteria for business loans is that there is a 40% deposit. The developer would need $800,000 deposit and would end with $2,000,000. That is a 150% profit margin in probably less than two years.

In this hypothetical case, the value of the land has increased from approximately $1,500,000 to $4,000,000. The $1,500,000 townhouses are effectively as unaffordable for a first-time buyer as the original $2,000,000 house.

So developers create new housing, which is good, but they sell the houses at market rate and pocket huge profits. This is bad because it escalates prices further.

Home owners

Many existing homeowners saw their paper wealth increase by many hundreds of thousands of dollars during the past 30 years. Many enterprising people have reinvested this windfall by refinancing and funding a second, third or more houses which they then rent out.

If owners see a house as a financial asset, they want prices to go up and certainly not go down. Any sort of government initiative to make housing more affordable is a political hot potato because of the competing wishes of voters.

What is the solution?

There is no easy solution. Are wages going to increase three-fold in a hurry? Of course not. Are house prices going to decrease three-fold in a hurry? Of course not. 

One solution will be use regulatory control to dis-incentivise the use of homes as assets. The recently introduced capital gains tax in New Zealand will help somewhat. Another solution is for local and central government to build a lot more community housing and also invest in more infrastructure for higher density housing to be built. Local governments need to relax rules about subdividing and initiatives like tiny house communities. There could be the aforementioned ‘ghost house tax’ or some other disincentive for empty houses.

House building alternatives | Rammed Earth House

House building alternatives

With the continual rise of housing prices coupled with human impact on the environment, we need to look at housing alternatives that are both more affordable and have a lower ecological footprint. 

Green building alternatives have become increasingly popular. Often with the use of non-standard materials like cob, straw bales, bamboo or wood pallets these alternatives hark back to the pre-industrial types of house-building but with modern twists. 

However whether you use conventional methods or non-conventional methods the key factors that make a house both sustainable and affordable are the same – small, simple and resource efficient. 

It is important to note that for the reason that they are not conventional, with some of the non-conventional alternatives it might be hard to find a builder who can construct them depending on where you live. For this reason they may end up being more expensive. However, many of the people building these alternatives are building them themselves with the help of family and friends. That way the houses are even more affordable. 

What follows is an overview of the types of eco-friendly house-building alternatives. 

Timber house building alternatives

Wood is a renewable and natural material. However, it can only be called renewable if the wood is replanted so use sustainably sourced wood. There are different ways to build with wood and a house could use any one of them or a mixture.

Log or other solid wood 

Log houses are usually made with logs that have not been milled into conventional timber, they are literally made of interlinking logs which provide their own insulation. There are other types of solid wood homes that do use milled timber that is shaped to lock together without the need for chinking between the logs. Wood is a good insulator and so log homes don’t need extra insulation in the walls. Also they don’t need any exterior cladding or interior lining, another savings.

Timber framed

Timber framing is a conventional way to construct houses. However, there are non-convention ways to do timber framing as well. For example, traditional post-and-beam houses are an alternative. They may be more expensive in some places but not in others. For instance, post-and-beam is a traditional house construction method in Scandinavia and Japan. It is a more expensive option but is sustainable.

Cordwood

Cordwood uses short sections of round or split logs which would normally be used for firewood. The wood is laid perpendicular to the wall and the gaps between are filled with mortar. Cordwood walls are also an excellent insulation and provide the natural balance between the thermal mass and insulation, without the need of using any further methods inside or outside the house. The wood is insulating and the mortar adds thermal mass. You can include other kinds of materials into the walls glass bottles are a common addition. Cordwood construction utilises a bigger percentage of any given tree. It can also utilise many different species of trees that would generally not be used for construction purposes. 

Bamboo

Bamboo is something of a wonder material (read more about it here). Like timber it is renewable, and therefore sustainable. Bamboo is strong in tension and compression. Well-constructed bamboo homes are able to withstand hurricanes and earthquakes. Bamboo is a type of grass, it grows from the bottom of the stalk and it grows very rapidly.

Bamboo houses are common in many parts of southeast Asia where bamboo grows abundantly. There are many methods of construction from log style, to timber frame, to wattle and daub or any combination of the above.

Earth House building alternatives

Using earth for construction has been done since pre-history. The methods include cob, rammed earth and earthbag buildings. A popular design concept that also utilises earth is known as the Earthship.

Cob and adobe

Cob and adobe are a material which is a mixture of straw and mud or clay, and sometimes with the addition of sand. Cob houses are similar to adobe houses, however where adobe is formed in blocks and bricks (adobe literally means ‘mud brick’), cob is applied in clumps and worked by hand in order to form a unique structure. Cob and adobe suit dry climates but they can be rendered with plaster to make them wet-climate friendly. Also, if they are built in earthquake-prone areas they will need seismic reinforcing.

Earthbag

Earthbags are flat bags filled with earth and stacked like huge bricks to make the walls of a house. Earthbags are stacked vertically to make straight or curved walls, or they can be stacked into a dome shaped building a bit like a huge igloo. The bags can be tied together in a variety of ways using wire, barbed wire and/or lengths of reinforcing bar. Earthbags are ideal for small houses, especially round ones. Larger rectangular houses will need buttresses to stop the walls bulging.

Rammed earth

In rammed earth construction, the earth is inserted into walls made of removable ‘forms’. The earth is rammed as you proceed so that there are no gaps. After the wall forms have been completely filled the forms are removed and what is left is a very solid, stable earth wall. The process is repeated until the entire house is built. Like cob and adobe you can render the walls for extra weather protection. Rammed earth has both insulation and thermal mass.

Straw Houses

Straw is another house building alternative which has many benefits. It is inexpensive and it provides excellent insulation. Straw is a byproduct of grain farming and is baled up into large bales which can then be stacked to make thick walls. The bales are ‘tied’ to each other, usually with wire. While straw bale walls can be load-bearing, it is much easier to design a post and beam or timber-framed construction to withstand lateral loads, with straw bales used for infill walls. The straw bales must be kept dry or they will rot. For this reason they may not be suitable for wet and windy climates. Straw bale houses are designed with large eaves to protect the walls from rain and the bales must be rendered with a waterproof yet breathable plaster on both sides. Considerable care must be taken to keep all points of possible ingress watertight including window and door frames.

Stone houses

Built with rocks, stone houses are natural and beautiful and don’t require painting or much maintenance. They can be built with the use of local materials. With a high thermal mass they can be passively heated with good passive solar design.

House building alternatives using recycled materials

Container houses

Construction using shipping containers (or shipping crates) is gaining popularity. Container homes are a cheaper type of construction than conventional homes. The finished structure has a very modern, industrial look to it. Containers come in a very small range of sizes, there are three different lengths and two different heights. The containers need to be well insulated, however you can get containers that were made for refrigeration and are therefore already insulated.

Earthship

Earthship houses are a hybrid housing solution that utilises a mixture of the construction methods above. The design of the Earthship, pioneered by architect Michael Reynolds in the 1970s, is based around passive heating and cooling of the house using thermal mass. In some situations the earth house is built into the side of a hill, so that three walls of the house are solid ground. On a totally flat section this idea is emulated by using rubber tyres that have been filled with rammed earth and laid flat like bricks one on top of the other. They can also incorporate a range of recycled materials that add structure and strength as well as diverting it from landfill. Earthships commonly have a green roof which adds further insulation and thermal mass.

The front side of the house (which faces south in the northern hemisphere and north in the southern hemisphere) is mostly glass. The sun warms the house through the glass during the day and the thermal mass keeps the house comfortable at night as the warmth is emitted.

Pallet (and other recycled) wood

These houses were designed as a cheap solution for temporary disaster relief housing. But wood-pallet houses can also be designed to create a permanent housing alternative. Wood pallets are very cheap and readily available. It is notoriously difficult and time-consuming to use pallet wood but extremely cheap if you do it yourself. It would suit a tiny house construction.

There are other sources of recycled wood and most of the alternatives on this page could use at least some recycled wood in their construction.

Hemp concrete construction

Like bamboo, hemp is a wonder material that is used in a huge variety of applications (read more about hemp here). One of these applications is hemp concrete, or hempcrete. Hemp concrete is a mixture of hemp, water, and limestone that is, surprisingly, more durable than regular concrete. Hemp concrete is lightweight, waterproof, fireproof, self-insulating, and resistant to pests. It also uses much less energy to make than standard concrete. It is often used in the form of large blocks that are stacked like bricks to make thermal mass walls.

Other house building alternatives

The following alternatives may or may not be considered houses but they are certainly homes to a growing number of people around the world. 

Yurts

A Yurt (in Turkic languages, or Ger in Mongolian) is the traditional transportable dwelling used by pastoral nomads in the Central Asian steppes. It is essentially a latticework of wood or bamboo to make the structure of the walls and roof and then it is all covered by hides and/or felted wool for insulation and then an outer cover for rain and snow protection. Modern yurts can be used as permanent houses, but are still made using traditional designs and methods, albeit with modern twists.

Tiny Houses

Those tiny houses have one great advantage – they are extremely environmentally friendly. And lovely! But most importantly environmentally friendly. A tiny house can be built with the use of green building materials or recycled supplies. These compact houses are so small that they don’t require sophisticated heating and cooling solutions, and can be easily moved to a different location and are designed to reduce our carbon footprint. Read more about tiny houses »

Vans, trucks, buses and other vehicles

Although they don’t have the services, or space, of a static house people make do by adding solar panels, composting toilets, water tanks and heaters (usually gas (propane), diesel or wood-burning). With very low costs and minimal ecological footprint people are increasingly choosing a nomadic lifestyle. Read more about nomad life »

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