The Productivity Commission's come up with some great ideas to resolve our housing issues - but also implicitly explains why the ideas will likely be rejected

By David Hargreaves

The Productivity Commission's Using land for Housing report pulls off a fairly neat trick.

It manages to offer some very sensible solutions to a vexed issue, while at the same time implicitly giving reasons why few if any of its major recommendations will be picked up.

Bill English's sparse, six-paragraph, media statement acknowledging the release of the report (see below) would, I suggest, be an early indication of where this is all heading.

I confess I have not yet had the chance to wade through all 374 pages of the commission's report (it's on the list for New Year's Resolutions next year), but so far as I can see the word "nimby" is not used.

And yet the not-in-my-backyarder is omnipresent in the document.

This document gives one of the better explanations I have seen as to the way in which existing land holders zealously protect their interests and ensure that land values keep rising.

Consider these four points as articulated in the document:

• Groups that have high home ownership rates have higher rates of participation in local government elections.
• Restricted housing supply will tend to inflate the value of existing homes.
• Existing homeowners have an incentive to be risk-averse in opposing developments that could affect the amenity and value of their home.
• Existing homeowners have an incentive to oppose development that involves council expenditure on infrastructure that does not benefit them but will be recovered through general rates. 

And there's more, but you get the message.

You almost wonder if there is an element of the authors of the report attempting to shame those who can do something about it into acting. If that is indeed the intent, I would say they've not done a half bad job.

There's apparently 38 recommendations in the report and many of these amount to some commonsense tweaking. The cynic would suggest that it's the commonsense tweaks that will be picked up by the Government and local authorities - to be seen to be doing something - but I would be much more surprised if some or any of the "big" ideas in this report are given even half-serious consideration.

The biggest among the biggies is the creation of an urban development authority. Such authorities are apparently under consideration for Auckland and Christchurch. However, the report appears to favour the idea of one agency for the whole country.

The idea would be that this agency could compulsorily acquire land blocks. The productivity commission argues that large tracts of land are owned in small parcels by large numbers of owners. This makes it difficult to carry out the kind of large-scale housing developments believed to be needed particularly in Auckland.

So, the urban development authority would have the power to compulsorily acquire large numbers of adjacent properties to consolidate into large-scale developments. Makes a heck of a lot of sense to me and presumably would be fought tooth and nail.

I have already had amusing thoughts and conversations today about the possibility of vast areas of Auckland's Herne Bay (which happens to be where the interest.co.nz offices are) being compulsorily acquired for the provision of high density low cost housing! Was that a large, pink, flying pig that just shot past the window?!

But all joking aside, I do hope this recommendation is not just cast aside, because there would appear to be real merit in it.

A perhaps surprising suggestion in the report is that councils borrow more money. This again is something the nimbys get reasonably worked up about, but the Productivity Commission says there's room on most councils' balance sheet for more debt.

And another one that wouldn't delight the nimbys comes on the controversial topic of provision of infrastructure. The commission suggest that those who benefit from the infrastructure help to pay for it through targeted rates.

Likewise, in a similar vein, is the suggestion of user-pays roads. Given that the Government's already been reasonably dark on Auckland Council's suggestions for doing similar things, these again look like very meritorious ideas not likely to be seriously considered.

And probably the idea that will be dispensed with first of all is the suggestion that the Crown loses its exemption on paying rates on Crown land. Now that's a really great idea that surely won't fly.

Somewhat to my disappointment the commission doesn't suggest land tax as such - but it does suggest paying rates on land rather than capital value. Surely that is an idea that could be picked up? It would encourage the land bankers to develop vacant plots since the current incentive to NOT develop would be removed.

I think this is an excellent report and I really will be reading it all.

I would love to think that large parts of it could be picked up, but, really, as I said at the start, this report itself probably gives the best reasons of all just why little of it is likely to be adopted.

The fact of the matter is that the majority of people have a vested interest in seeing property values continue to skyrocket. When push comes to shove, why would they really want to adopt measures that would harm their capital gain chances?

So far as I'm aware, turkeys don't vote to have Christmas.

This is Bill English's statement on the report:

Govt welcomes draft Productivity Commission report on housing

The Government welcomes the Productivity Commission’s draft report on using land for housing, Finance Minister Bill English says.

“In September last year, the Government asked the Productivity Commission to investigate ways to improve land use regulation and infrastructure provision for housing by local authorities,” Mr English says.

This draft paper follows the 2012 Productivity Commission report which highlighted that the most important thing for housing affordability is to increase the supply of houses.

“That is why the Government is focused on special housing areas, reforms to the Resource Management Act and making better use of our Crown owned land – for example we are redeveloping Crown owned land in Tāmaki to add an extra 5,000 houses,” Mr English says. “The new Productivity Commission report will help inform the next steps in our housing work programme.

“Local authority processes such as planning, zoning and the provision of roads and water infrastructure also clearly have an impact on land availability and housing supply – which is why we asked the Commission to look at this important issue in more detail.”

The Productivity Commission is seeking submissions on the draft report, available at www.productivity.govt.nz, by 4 August 2015.

Mr English has ministerial responsibility for the Productivity Commission.