Housing Minister Chris Bishop is promising to deliver a “trifecta” of policies to drive growth in New Zealand’s cities and tackle the housing crisis.
He said buying a home was out of reach for many young people and councils needed to rezone as much land as possible, both at the edge of cities and inside their central suburbs.
New infrastructure funding tools and financial incentives will be provided to change the “political economy” problems that have led to councils’ restrictive zoning rules.
“I call that the housing trifecta: the zoning and regulations, the infrastructure funding, and then also the incentives. We're determined to make progress on all three of those critical areas,” he said.
Research by BNZ economists, released on Tuesday, found there had not been enough houses built to keep up with the post-pandemic population boom. According to Statistics NZ, New Zealand’s population grew by 145,100, or 2.8%, in calendar year 2023 - with estimated net migration, migrant arrivals minus migrant departures, accounting for 126,000 of this.
Immigration Minister Erica Stanford recently said the Government plans to crack down on low-skilled work visas and devise a long term population plan to guide future policy settings.
Mike Jones, the chief economist at BNZ, said New Zealand needed to build as many as 50,000 residential dwellings in the year ending June to accommodate the record population growth.
“It's highly unlikely these sorts of numbers will be delivered … we think no more than around 35,000 dwellings might actually get built”.
Jones warned the margins of error in these kinds of estimates could be huge, but it still showed construction was lagging behind demand in many regions.
The areas with the biggest mismatch were likely to be Bay of Plenty, Otago, Waikato, Auckland, and Southland.
Auckland doesn’t stand out in the data, despite enjoying stronger-than-average population growth, as it has also had strong building numbers for a sustained period.
“That’s something that, along with Canterbury, is a key point of difference,” Jones said.
Housing advocates often point to Auckland and Christchurch as examples of how generous zoning can improve affordability in both purchase prices and rents.
Crisis diagnosis
In a speech and a cabinet paper, Bishop said New Zealand had one of the least affordable housing markets in the OECD.
Inflation-adjusted purchase prices rose 230% since 2003 while the median household income had grown by just 114%.
Almost half of renting households spent more than 30% of their disposable income on rent in 2022, up from just 19% in 1988.
Houses were expensive, in most of the country, because of restrictive zoning which created “artificial supply constraints” inflating the value of land.
“My goal is to flood urban housing markets for Tier 1 and 2 Councils with land for development,” Bishop told Cabinet.
The first step in his plan will be to make the Medium Density Residential Standards (MDRS) optional for councils. Those who opt out will have to zone 30-years of housing growth “immediately”.
A Cabinet decision approving this change is expected to be made by the end of next month, and will likely include more details on other elements of the “housing trifecta” policies.
Time to waste?
Stuart Donovan, a senior fellow at Motu Economic and Public Policy Research, said the cabinet paper signalled good intent and showed Bishop understood the issue well.
However, the big question was whether the plan could be developed and delivered fast enough to offset the negative supply effect of making the MDRS optional.
“The effectiveness of the overall package of reforms that the Minister wants to advance is likely to hinge very much on the policies that are yet to be announced and especially whether they are able to identify and implement some quick wins,” he said.
Bishop has assembled a ministerial working group to coordinate housing policy with other portfolios.
It includes the ministers of finance, transport and local government, building and construction, and an Act Party under-secretary for infrastructure and Resource Management Act reform.
Finance Minister Nicola Willis helped to write the original MDRS policy, which the National Party supported before Christopher Luxon became leader.
Interest.co.nz asked Willis if she would encourage local councils to keep the MDRS rules once they were made optional next month. She said it was up to each council to decide.
“I'd encourage every council that's worried about their people's ability to afford housing, to afford the rent, to zone for as much housing as possible”.
“New Zealand needs to build more houses and we need to make it easier to build more homes,” she said.
Interest.co.nz also asked Act Party leader David Seymour, who opposed the MDRS, whether he would like to see further densification in his home electorate.
He said Auckland’s Unitary Plan, which was passed in 2016, already allowed for “an enormous amount of densification” in Epsom.
“What I'd like to see less of, frankly, is smartass reporters that are five years late”.
The electorate has been zoned for a wide range of housing—including apartment buildings and three story units—but many parts are still limited to two storey suburban style homes.
Up & out, but mostly up
Donovan said economists encourage cities to allow building both “up and out” but NZ’s local governments have tended to allow sprawl more than upzoning, and have increasingly allowed neither.
The majority of new builds required to tackle the housing shortage will likely come from densification in existing urban areas. This could be as much as 80% in geographically constrained cities like Wellington and, to a lesser extent, Auckland.
However, rezoning land on the city fringe would still help to anchor land prices across urban areas. That greenfield land would act as a “pressure value” when urban land prices climbed too high.
Bishop said each square metre of land inside Auckland’s Rural Urban Boundary costs roughly 4.3 times more than the land immediately outside it.
While the Government's proposed policy is agnostic about where councils choose to zone new housing, the Housing Minister emphasised the benefits of density in his speech.
“Cities are engines of productivity, and the evidence shows bigger is better. On one estimate, doubling a city’s population increases productivity by 15%,” he said.
“When we stop people building houses, we lock people out of cities. That makes us poorer”.
However, people living in these big cities needed to be able to move across them quickly in order to get these benefits.
“If a worker living on one side of the city cannot reach a job on the other side of the city in a reasonable time, say 30 minutes, then the worker and job are effectively in different markets”.
132 Comments
Luxon embracing NIMBYism by backing off the MDRS was a big problem. I am hopeful that Bishop and Willis - who seem better on housing than Luxon - will actually progress more and the pressure to enable 30 years of supply rapidly will actually be brought to bear.
Seymour remains a NIMBY and pretend-Libertarian (redundant language, obviously, as there doesn't seem to be any other kind of libertarian).
30 years of supply
Based on what immigration settings?
If based on natural births/deaths we likely already have 30 years of supply - as I think those are trending in reverse.
Point being, perhaps Nicola needs to release her population policy before asking the councils to identify 30 years worth of supply?
Moreover, supply of what? High density, medium density, low density residential? The whole ask is a big joke from a planning perspective - this is a purely political move - central government trying to show the electorate it is doing something. Something that has already been done by many a council over - just google '30 year growth strategy new zealand' - this type of consideration is like trying to replay a broken record.
And had the new government left the legislation for the Spatial Planning Act in place - then these plans could have been generated in the correct way - with all relevant agencies (transport, infrastructure, education, police, etc.) properly contributing.
The more I hear, the less sense this 'policy plan' to address the housing crisis makes sense.
That's going to depend entirely on where it is.
But generally it's around a hundred grand to satisfy a council to create a section.
And a 150m2 house is going to cost you circa $500k to knock up, if you want things like a driveway and a lawn also.
So at a rough guide you'd need $600k just to generate a new house, the way things are currently running. Or a grand a week in mortgage.
Cheap?
If you paid 6% on the value of your zoned productive land the price would drop, regardless of supply issues. It would drop until land value was at a level the tax paid became acceptable. Sell it or pay the deemed rate of return. The closer to town, the more tax to pay.
Maybe we're having different discussions here. There's one discussion on whether Government and Council policy should promote arbitrary large windfalls for landowners, at the expense of higher housing costs for the rest of society, and what the alternative structures could be.
You are discussing whether we should try to put ourselves in position for those large arbitrary windfalls. A question of morals and means, rather than policy. To me, a much less interesting question and one that you seem to be using to shut down discussion of the former issue.
People often refer to profits for speculators, but sometimes speculators don't win, they lose.
There's always whining calls for taxes on profits, but what would happen if there's a sudden decline in house prices and the government has to cough up billions for losses?
I could send money offshore, or buy property in Australia. Both my kids live there. No one would build houses, rents would go up, and so would the price of existing houses.
You could try making something unprofitable, but there's always Newtons Third Law - 'To every action, there's an equal and opposite reaction'.
An asset tax....that's one way of sending the wealthy offshore. It's all been done before in the 1980's. Corporal Muldoon taxed the so-called 'wealthy' 66c in the dollar, and there was death taxes, so the wealthy went to Queensland where they were welcomed by then Premier, Joh Bjelke-Petersen.
People are very mobile, both my children packed up and left for Aussie, with my blessing.
I'm always amazed by the number of posts alleging tax-free capital gains, but the posters never seem to want to take advantage of the so-called 'easy money' themselves.
Why is that?
I'm the same. I've been making use of the tax free situation in shares. It doesn't mean I don't want CGT to be introduced and for those shares to then be taxed.
If we're all taxed the same then it doesn't really matter as ultimately we're in competition with each other so it's just a bit of a handicap all around that then lets us pay for those school buildings they've just scrapped.
Losing speculators on existing assets is not a great loss to society. Better to cut income tax in comparison to reward those with skills and enterprise.
Milton Friedman knew that taxing work was the worst tax, while taxing land value the least bad. We don't need to reward value takers, we can reward those who add value to society.
Working for someone else isn't very risky, borrowing a million dollars or lots more, to develop property is. Discouraging risk takers can be colossally bad because they're not going to employ others.
I've got a subdivision going in next to where I live. The developer does a ripping job of his subdivisions and gets top dollar for his sections. There's been people working here for months - surveyors, contractors, machinery, millions of dollars of concrete, electrical contractors, etc.
It's all contributing to NZ's economy, but apparently according to mostly socialists...it's 'bad'.
Right now, the one type of property you don't want to own is office space.
Ah, you're talking about the people going out and building stuff. I don't think people mind them, particularly.
We're talking about the people who buy up land in anticipation of zoning changes and then flip it for a profit. Restrictive zoning regulations allow this windfall profit to the detriment of the rest of society.
I guess sometimes they are the same people and the line gets blurry.
Development is production. Quite different to speculating on existing assets - and if someone borrows to gamble that is no argument that society should reward or incentivise speculation.
Milton Friedman was not a socialist. Retreating to calling names suggests you've run out of supporting arguments.
There's nothing wrong with speculating on existing assets either, I've done a few. Most were run down and in need of renovation. I renovated one house in Te Atatu South, where the neighbours were ecstatic to see me after I bought it at a mortgagee sale...very, very risky.
The house was rented, full of total losers that had abused it, cut holes in the floor and walls, the toilet was disgusting, there was junk everywhere inside and out, and the house full of fleas. I made a lot out of it, but no one else was willing to bet on it.
If you're renovating you're adding value, being productive. Simply speculating on existing assets doesn't add value to society, so us deciding to subsidise and reward such speculation is necessary. We should incentivise those who add value instead.
You don't need to have taxpayers and ratepayers subsidising unimproved land value gains, to be rewarding such productivity as renovating.
And if they are productively adding value to a house like you did through renovation they will be accordingly rewarded with the value uplift commensurate with their improvements.
Just as we see with renovation tv shows the world round. That these shows also exist in various other markets that tax speculation also highlights that we don't need to foster and subsidise unproductive speculation on existing stock, yet we can reward productive enterprise such as development and improvement.
Reward the value makers, not the value takers that don't add to society.
As far as zoning regulations, it is already mostly possible to construct high density projects along most public transit nodes in Auckland. One request I would strongly recommend is the removal of volcano viewshafts to enable greater potential to be achieved, or at least to not allow good sites to be restricted.
A non zoning challenge is, in order to construct a new apartment building for example, you require a parcel of land of an appropriate size. But many of the existing properties around Auckland are on very small parcels, so it would be necessary to amalgamate many individual titles before you’re able to develop a new building. This is very difficult, because how do you convince 5 or 10 owners of individual parcels to sell together?
Median wage 20% higher in Australia
Who will build? Builders are too small outside Auckland to build to scale
Finance more expensive than in last 15 years
Looking at news , immigrants are 25 to a 2 bed house, not buying then?
Builders need price rises to exceed increase in building costs. Which it hasn’t been for 2 years at least.
Builders release in batches so as not to flood market. So building a lot wil not mean a lot more on sale
Affordability is worst for low paid renters who are ignored as usual
Trifecta?
“I call that the housing trifecta: the zoning and regulations, the infrastructure funding, and then also the incentives. We're determined to make progress on all three of those critical areas,” he said.
Incentives? I think he means more market distortions in an already massively distorted market.
He'll come out in 12 months time and say high house prices is a world class problem, just like 2 faced john key did. This is just noise with no substance, it's a vote gatherer, that's all.
Bingo. Not that long after Princess Xindy came to power, she announced affordable housing for all, but no falls in house prices because "people wouldn't like that."
The fan club went wild. I looked on dumbfounded.
Ardern caving to property owners' entitlement mentality was quite the disaster for NZ society, just as John Key doing the same was. Seems like they both invested in property too.
I am a property owner. Let the prices fall. Treating property as a source of free money for older owners is too damaging to NZ society, in so many ways. We should be rewarding and incentivising hard productive work, not using policy to effectively hand out money to property owners.
He's always sounded like, acted like, looked like, and behaved like the Pillsbury Doughboy.
It's an interesting play: councils that don't adopt the Medium Density Residential Standards are going to get stuck with creating and maintaining a more diffuse infrastructure that will cost a lot more - and no-one can afford to properly maintain what's there now.
In theory the higher density makes a lot of sense, but the sticking point is NZ's propensity for minimum possible design standards warring with ever more complex and prescriptive rules - so we end up with ill-made hutches no-one actually wants to store people, rather than comfortable homes. Look at how hard it's been to sell apartments in Central Christchurch.
Density isn't always cheaper. Depends on the capacity of the existing services. If your sewer pipe isn't big enough it might need replacing right through to the treatment plant not just within the dense area... through all those roads ... reinstating all that asphalt with all that traffic management... very expensive to do.
Because in order to address the decades of undersupply, aging population driving more smaller households, floor area demand increases from existing households, and the replacement of the old unfit housing stock..... you need to do massive housing reform anyway. To handle this, the new system would easily be able to scale to any foreseeable immigration rate.
Natz have made zero commitment or plan to increase affordable housing supply.
Pushing it back to the biased, under funded Councils to play around with RMA & zoning is going backwards as it has been proven in the past, achieve the reverse.
Natz have looked after and prioritised the wealthy again.
They need to take a presumptive right-to-build approach, less exceptions, like Texas does.
Just as Houston is also sending the message on how to intensify.
https://yesinourbackyards.substack.com/p/how-national-can-save-the-medi…
This stops land banking and all the other unearned capital gains most homeowners have been gifted.
And will make housing way more affordable on a like-for-like basis, allowing housing and work to be better co-located thus helping with transport issues.
Relaxing zoning rules should achieve this, if done right. In his speech he talked about residential zoned land being 4x the price of adjacent non-residential land. Some of the noises he's making are promising, let's see if he can deliver.
For this to work, they need to free up sufficient land so that the price inside the border falls to be close to rural prices, rather than bringing up the price of the newly zoned land to match current residential prices.
There is ample evidence now showing that the jurisdictions that allow this face higher costs down the line. Sprawl is more expensive to build and maintain, mainly due to transport infrastructure costs. It seems cheaper because the overall costs are not factored in. In the US their infrastructure is crumbling.
Yes, it used to be this way before they introduced restrictive land use policies, But of course, the immediate adjacent 'rural' land to what is zoned residential has been land banked and carries a premium in anticipation of it being rezoned, and then deliberately withheld from demand to extract as much rentier monopolistic gain as possible.
This increases the price of all land right into the CBD, making all housing, at any density and location less affordable, and with fewer amenities for new properties as they get smaller to compensate.
The key is to allow the developer to choose any land, subject to exceptions, and this on paper gives more land to choose from that anyone can get a benefit from land banking as there is no ability to have a monopoly, and thus land can be purchased closer to its present economic rural use.
I find it incredible that this is even an issue at all in New Zealand.
The Auckland Council is spending $7b building the CRL, and simultaneously allowing vast amounts of greenfields land to be opened up in Westgate, Drury, Silverdale etc. where is the logic in this?
Simplicity Living purchased 1.4ha land in ellerslie from the race course, and is about to build 330 rental apartments on the site. That’s just the start for them, many more similar projects announced and pending.
The reality is you don’t need a lot of total land area to achieve 100% of the housing our population requires.
Ever been to a reasonable sized city? I lived in apartments in a few cities in the UK (not London, so not even particularly large cities) without a car - it was absolutely fine.
Peoples' wants eventually get cut to what is affordable - we cannot grow Auckland and provide the same lifestyle that people had 50 years ago.
The thing missing is councils actively managing parking. Charging a market clearing rate, only designating on-street parking in practical places, and enforcing the rules.
Consumers are perfectly capable of making choices and tradeoffs about parking. I wouldn't mind hobsonville, but people that choose to live there and also own 5 cars they park in the street need to internalise their costs. The tradeoffs need to be clearly signalled.
Yes exactly, In Japan you are not allowed to own a car unless you can show you own/rent a private space for it.
For councils to allow developers to increase density without needing to take into account whether the people they are selling to have a car and where they are going to park, it shows how councils are easily willing to forgo other people's amenity value if it increases councils' revenue.
I live in a normal suburban house (garage, garden, etc) and hear neighbours fighting and screaming at their kids every day. The noise from loud cars and trucks going past comes straight through the single glazed windows. Many older (wealthier) people are actually moving into well-built townhouses because they quieter, better insulated, and in general more comfortable.
I'm living in a new build apartment at the moment, haven't heard any of the neighbours at all surprisingly, it's got a carpark as well then I have another car street parked. Don't have to mow the lawn anymore and it's a two minute bike ride into work, not that bad really.
5x household income (depending on the size and quality of the home) is still a huge multiple. Long term we need to be aiming for 5x median salary for a 2/3 bed place, especially if Luxon wants us to be having more babies like he said a year or two ago.
They really need to encourage and support mixed use developments if their sprawl/urban fringe idea is going to be feasible for any length of time.
Many have a similar problem. If you can keep supply and demand in check then cheap debt isn't such an issue, but most places that have done that either have low demand because people don't want to live there, or high supply due to building infinite sprawl creating a different problem.
The Unit Titles Act. A very good reason for not owning a unit or apartment.
I owned a 430 sq. m. factory in a block for 30 years, but finally sold it about 4 years ago because I couldn't be bothered with the infighting, and big-noters on the committee spending other people's money.
Fortunate to have lived in a block of 20 apartments. So, small and manageable. With most importantly an outstanding body corp: reduce outgoings, maintain the building, question line-items (including the BC management), and build a long-term contingency fund. One of the better experiences.
Why do so many people think increasing regulation which result in decades of delays, land taxes of all kinds and building houses suitable for extreme cold will make things cheaper. As a provider of residential rental homes I see nothing proposed that will encourage me to reduce the rents? Sure help first home buyers but they only make up 1out of every 20 buyers. Rental investors usually make up 30% of all buyers because 30% of all dwellings are rentals.
FHBs have been out-borrowing investors for years, I'm not sure what stats you are looking at. They may be fewer in number and borrowing more, but the idea that there are 3x as many investor purchases as FHB purchases doesn't square with the lending stats.
Unless you are inferring that the majority of investors are buying with cash and no mortgage?
https://www.rbnz.govt.nz/statistics/series/lending-and-monetary/new-res…
Just zone 30 years supply?
Is the government really that thick?
If we are going to have yet more sprawl, the very least we can do is properly plan it, with public transport and main arterial roads protected, requirements for town centres and business zoned land not just dormitory suburbs, public amenities like parks etc.
That cant be left to developers who only give a shit about profit margins and are happy to socialise the costs, like ever more people being loaded onto existing motorways.
I just cant get over how backwards this country is.
I sold a house at auction a few months back, it was in my mother's will that it was to be disposed of. Nice place with a view up the harbour, brick and tile, 3 brm, 2 garage, 1/5th acre. Needed a bit of TLC, but not much.
It created quite a bit of interest being an auction and deceased estate.
A white guy wandering around saying in a loud voice "this place is worth no more than $750 thousand'.
Sold to Chinese for $1.296m. Probably the smart money.
Bishop in his speech made the comment, "that each square meter of land inside Auckland's Rural Urban Boundary costs roughly 4.3 times more that the land immediately outside it".
Well it should because the land inside the Rural Urban Boundary has had a lot more invested in it to prepare for development
As for the MDRS Policy it demonstrates the lack of understanding of infrastructure and its provision. For established urban residential areas the infrastructure provision was based on 5 to 7 households per gross hectare. The engineers being conservative generally apply a safety margin of 2 to manage extreme events, therefore in theory the density could increase to 14 households per gross hectare using the existing infrastructure. There are solutions that can stretch that density but issues begin to arise where when extreme events occur the number of system overflows or failures increases.
Te Atatu Peninsula is an example where development density has increased but the infrastructure network has not been replaced/renewed to cope. You only need to look at the number of wastewater overflows recorded in Watercare's reporting and Te Atatu Peninsula is not alone with this issue.
My issue with the MDRS Policy is that it allows density to exceed the capacity of the available infrastructure. This proposed density increase then requires Council's to upgrade all infrastructure in all areas at the same time as they do not know in which part of the city the density increase will occur. For the record, the Auckland Unitary Plan has created the same problem.
The result within the existing urban area will be undersupply of infrastructure in some areas with system failures and an oversupply of infrastructure in others.
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