By Alex Tarrant
A lack of affordable housing in New Zealand is a deep-seated, complex, and serious problem for which there are no quick fixes, Finance Minister Bill English says.
But the government was determined to follow up on recommendations made by the Productivity Commission on housing affordability to deal with the shortfall, particularly in Auckland, he said.
The headline recommendation in that report was for the immediate release of land for residential development on the outskirts of Auckland and Christchurch to alleviate land supply and cost issues.
It also recommended the government should look at ways to reduce building costs and timeframes, allow for greater scale of residential building, and look for ways to allow for low-cost 'brownfields' development within city limits.
In Question Time in Parliament on Tuesday, English said the government was about to release a "multi-pronged work programme" in response to the report. See Alex Tarrant's July article, Wholesale changes to how government approaches housing affordability as it drops helping demand and focuses on supply side.
English said investment in New Zealand was skewed towards housing. Allowing for more affordable housing would mean the private sector was less indebted to foreign lenders, which would help get New Zealand out of a highly-indebted club of countries facing problems stemming from their external liabilities.
It would also help the government's finances by taking pressure off income-related rents and accommodation supplement payments, while having less indebted households would be beneficial for the economy.
English noted the largest opportunity to provide more affordable housing within Auckland's city limits was in the government's hands due to its land holdings for state homes. This follows comments he made to interest.co.nz on this in August.
Earlier this year Housing Minister Phil Heatley announced a redevelopment plan for the Tamaki area in Auckland, in which Housing New Zealand owns 56% of the housing stock. The plan was to densify the area more by subdividing the current quarter and half-acre sections state homes sat on, with private enterprise and social housing providers contributing the funding.
English noted this year’s Annual Demographia International Housing Affordability Survey showed that the cost of a median-priced house in New Zealand was 5.2 times median income, and in Auckland 6.4 times median income.
“Any ratio above 5 is considered unaffordable," English said.
For more on the Demographia survey, see the website of its New Zealand representative, Hugh Pavletich, http://www.performanceurbanplanning.org/.
“We share the Productivity Commission’s view that the housing market is not working properly. For example, despite demand for low cost houses, relatively few are being built, in part because of the very high cost of land, particularly in Auckland," English said.
“Constrained supply and high prices for housing in turn force high levels of household borrowing [which is] detrimental to households and the economy," he said.
More affordable housing would mean less debt owed to foreign lenders.
“We are ranked along with the heavily indebted European countries when it comes to that measure," English said.
Housing loans comprised 93% of household liabilities in New Zealand.
“[And] as rents rise, this pushes up the cost to government of income-related rents and [the] Accommodation Supplement. For instance, income-related rents are forecast to rise by 30% over the next four years, which will cost the government around NZ$200 million per year," English said.
Seven new residents for each new Auckland dwelling
English noted the latest Massey University Home Affordability report, which he said showed an improvement in affordability over the last 12 months in all regions except Auckland.
“Massey says that the reason prices are increasing faster in Auckland than other regions is because of an imbalance of new housing supply to meet demand from increasing population," he said.
The latest Roost Home Loan Affordability monthly report, compiled by interest.co.nz, shows home loan affordability worsened slightly in August as the national median house price rose again to near a record high, more than offsetting record low interest rates. Affordability deteriorated for Auckland, Wellington, Nelson/ Marlborough, Canterbury, Central Otago/Lakes and Southland because of higher median house prices, while affordability improved in Manawatu/Wanganui and Otago due to lower median prices. See more here.
In July, Westpac economists noted that over the three years to June 2011, for every new dwelling in Auckland, the city's population increased by seven new residents.
English also noted the latest Quotable Value report, which showed nationwide house values were up 1.8% in the last three months, and 5.3% over the past year.
“These reports confirm that even in a slow economy, housing affordability remains a deep-seated, complex, and serious problem. There are no quick fixes but the government is determined to follow up on the Productivity Commission report and make progress," English said.
Labour Party housing spokeswoman Annette King asked English whether he had seen comments from Auckland Mayor Len Brown that the council believed there was enough land to build 18,000 new homes right now, but needed a partnership with central government to provide up-front capital to build affordable homes.
“If so, does his government intend to put their money where their mouth is in their work programme, and help get these new homes built as soon as possible?” King asked.
English said the government was working closely in partnership with the Auckland Council around progress with the Tamaki redevelopment, which was “the largest opportunity for brownfields redevelopment within Auckland City."
“It is a novel suggestion that the government would provide capital for property development on the fringes of Auckland. We are working with the Council to...answer the question of whether the availability of those sections is sufficient to enable actual sections to be available for people to buy," English said.
“This is part of the complexity of the issue. Government is making sure it understands them properly by working closely with councils," he said.
See comments from Housing Minister Phil Heatley on the Tamaki redevelopment in the video below: