NZ Government too late the hero on housing supply

By Leith van Onselen

Back in 2007, then National opposition leader, John Key, lamented the woeful housing affordability in New Zealand (Auckland in particular), and promised to undertake a wide range of supply-side reforms if elected into government. John Key was elected as Prime Minister in November 2008 and the National Government has ruled ever since.

In 2012, then finance minister (now Prime Minister) Bill English released the Government’s response to the Productivity Commission’s housing affordability inquiry, which again promised fundamental reform to New Zealand’s housing system:

“High house prices matter because many New Zealanders spend a large portion of their incomes on housing and that has helped fuel household debt and contribute to damaging imbalances in the economy,” Mr English says.

“In particular, high housing debt diverts money from more productive investments, contributes to New Zealand’s significant overall level of indebtedness and exposes taxpayers to growing demands for State assistance with housing costs.

“Those factors make it vital that housing becomes more affordable. In addition, projections suggest that many more homes will be required in coming years than are being built”…

Having carefully considered the Productivity Commission’s recommendations, the Government is today responding with a comprehensive work programme with four key aims:

Increasing land supply – this will include more greenfields and brownfields developments and allow further densification of cities, where appropriate.

Reducing delays and costs of RMA processes associated with housing – this includes introducing a six-month time limit on council processing of medium-sized consents.

Improving the timely provision of infrastructure to support new housing – this will include considering new ways to co-ordinate and manage infrastructure for subdivisions.

Improving productivity in the construction sector – this includes an evaluation of the Productivity Partnership’s progress in achieving a 20 per cent increase in productivity by 2020.

Fast forward to 2017, and nine years of inaction has seen Auckland’s housing crisis reach catastrophic levels, with the average dwelling value hitting an insane $1,045,000 as at May 2017, having increased by 9% over the past year and by 91% since the pre-GFC peak:

Auckland dwelling supply has also failed miserably to keep pace with the National Government’s mass immigration program.

Over the past year, Auckland added an insane 44,500 people:

Driven by a 35,772 increase in net overseas migration:

By contrast, Auckland’s dwelling construction continues to slow, with just 885 dwelling consents issued in May and 10,379 issued over the year, with a downward trend clearly evident:

Recent population projections from Statistics New Zealand also estimated that Auckland’s population will rise between 56% (medium growth scenario) and 75% (high growth scenario) between 2013 and 2043:

Driven by mass immigration:

Auckland will continue to be New Zealand’s fastest growing region. Among regions, Auckland is projected to receive over half New Zealand’s net migration, and account for over half the country’s growth in the period to 2043…

And yet, just two months out from the General Election, the National Government has again promised to fix New Zealand’s housing crisis by committing $600 million for a new public-private fund for investment in road and water services to new housing estates. From Interest.co.nz:

The government has set up an investment company to encourage building of user-pays trunk infrastructure in Auckland in an effort to speed up certain road and water pipe construction for new housing developments.

Finance Minister Steven Joyce and Local Government Minister Anne Tolley announced the creation of Crown Infrastructure Partners over the weekend as a vehicle for government to co-invest up to $600 million alongside councils and the private sector to fund and own specific infrastructure projects.

Targeted rates and volumetric charging will then be imposed on residents in housing developments using that infrastructure. Investors in each special purpose vehicle for the respective projects will receive a dedicated long-term revenue stream from councils passing on these charges…

“This new model is another way in which we are helping Councils in our fastest growing cities to open up more land supply so more Kiwis can achieve the goal of home ownership”…

Opposition housing spokesman, Labour’s Phil Twyford, is rightfully skeptical, wondering why it has taken the Government nine years to come up with a solution:

“What took you so long?” is Labour’s response to the Government’s announcement of a new infrastructure investment vehicle.

Labour’s Auckland Issues spokesperson Phil Twyford said Labour announced its policy in 2015 to debt-finance infrastructure and with debt serviced by targeted rates.

“You certainly could not accuse this Government of being even a fast follower. Now weeks out from an election, and after nine years in office, they are desperate to look like they are doing something.

“This Government cannot be trusted on housing and urban growth.

“Auckland Council has been telling the Government for the last few years that its growth was hamstrung by lack of infrastructure, and a council balance sheet already up against its debt limit…

“National has spent nine years cynically blaming Auckland Council for the city’s failure to manage its growth, but it has done very little to reform the planning system or turn on the tap for infrastructure finance.

“Labour will abolish the urban growth boundary and replace it with a smarter planning approach that allows the city to make room for growth. And we’ll roll out bond financing infrastructure with the debt serviced by targeted rates,” says Phil Twyford.

Labour’s housing policies are certainly far superior than anything offered by the National Government, promising fundamental action on both the demand and supply sides.

It will be interesting to see whether New Zealanders care enough about housing affordability to vote Labour into office. We’ll find out 23 September.

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