Govt to release response to housing affordability report later today; To focus on development costs, land supply, Finance Minister English says

By Alex Tarrant

The government will announce its long-awaited response to the Productivity Commission's housing affordability report later today.

Finance Minister Bill English told TV One's Q&A programme on Sunday that the general thrust of the policy was to "to make it easier, both commercially and in the planning process, to enable more houses - not just green fields, but also within the cities."

Prime Minister John Key talked about policies to fast-track the development of new land on TVNZ's Breakfast programme on Monday morning.

First home and lower-income buyers had been struggling to buy affordable housing since the 2000s house price boom due to constraints on the supply of cheaper housing, particularly in Auckland, English said.

While there was no one big fix to allow for building more affordable homes, the government would work closely with councils to tackle land supply issues and development costs, English said.

He also issued a warning to existing property owners, and their possible responses to the work programme.

"If the wider community decides that they want to lock up the housing market to drive up the value of the existing houses and keep other people out, then we won’t get there," English said on Q&A.

"But, look, I think most people understand that the fact that they’ve achieved the dream is a good thing, and they’d like others to be able to achieve it. And if we can get there by looking hard at the planning process and the way councils and government make decisions, then I think people will think that’s a price worth paying," he said.

The government did not have a specific target for how much cheaper it wanted new houses to be, English said.

'Fast-track development of land'

Meanwhile, Prime Minister John Key said on Monday morning that the work programme to be announced after Cabinet on Monday afternoon - the PM's weekly post-Cabinet press conference is generally at 4pm - would not see house prices fall overnight.

Constant small appreciation in house prices was "a good thing," Key told TVNZ's Breakfast programme. What was detrimental was the bubble effects seen in the 2000s.

Key said gaining building consents under the Resource Management Act could be an arduous process. In the end, the consumer was hit with that cost.

In response to criticism from the Labour Party that the plan appeared to just be tinkering, Key said policies such as fast-tracking the development of new land were bold.

He said the government needed to work to ensure "that we're funding the infrastructure in those areas."

Number of problems

A big problem hindering the supply of new affordable homes was the cost of building.

"That does appear to be pretty high, particularly compared to Australia. There’s a lot of work being done on why that might be the case," English said.

"More scale, building regulation - all of that can be improved, and that process is underway," he said.

"We’re also concerned about the supply of housing coming to the market. It does look like the councils have got a very difficult job ensuring that there’s enough new land but also enough development within our cities of more dense housing to enable enough housing to come on to the market to stop prices rising unnecessarily."

Will help NZ's foreign debt

Government would work with councils to ensure supply met demand.

"Because if that doesn’t happen, the prices will spike, they’ll rise. We’ll end up with New Zealanders borrowing more than they need to," English said.

"That makes us more vulnerable to our overseas lenders. We’ll end up with investment being diverted into housing unnecessarily when we want it in our productive business, creating jobs," he said.

Difficult job for councils

Councils, such as the Auckland Council, had quite a difficult job when it came to balancing the wants of existing home owners and those wanting more affordable new housing.

"On the one hand, the existing homeowners don’t always want new houses. They don’t always want their views spoiled..."

"[Y]ou can understand people have invested a lot in their house and they want to keep their view or they don’t want a block of three-storey, more dense housing next door to them. So the council’s got to balance that up," English said.

"It’s then got to coordinate the schools and the roads and the public transport with the new development. So the kind of things that we’ll be looking at in response to the Productivity Commission is a broader range of tools that give us more options for getting those decisions made in a way that’ll get the houses there," he said.

See Bernard Hickey's Herald on Sunday piece, The NIMBY problem.

Different views

Different parties had their own views on what could be done to fix the affordability problem. For example, while the Auckland Council was pointing to 18,000 sections free within its existing city limits, some developers were calling for more land to be opened up beyond those limits.

"And then developers are saying, ‘Well, once we’ve done this lot, we actually haven’t got anywhere else we can go where it’s going to be worth our while.’ So some of it is about how developers actually make a return on their cash, and some of it is about how the council thinks the cities should develop," English said.

"We’ve got to close that gap, and that’s been one of the first biggest steps: the government understanding the problems for councils, which are many, and then government and councils understanding how it works commercially so we can actually get more developers freeing up their land and making it worthwhile for them to build houses," he said.

Infrastructure costs

Worries about the cost of new infrastructure such as roading and sewers for new possible homes were fair enough concerns from councils.

"In the end, the infrastructure’s going to paid for by someone, either by development levies or by existing ratepayers or by the new homeowners. Often the problem is just timing and coordination. Can we get the infrastructure built a bit ahead of the market so that we can get the houses there when they’re needed?" English said.

However, councils, developers and the government all agreed development costs were too high.

"The councils want efficient processes, developers want them, government wants them. Part of this is about getting that three-way conversation so everyone understands the impact of their decisions on the other," English said.

"A big part of this is a coordination problem. Getting government, developers and councils and banks to all work together on increasing it [co-ordination]," he said.

Labour wants housing a core council service, CGT

Labour Party housing spokeswoman Annette King accused the work programme of being "token tinkering" in response to the housing affordability crisis.

“Bill English seems to think the housing affordability crisis can be solved by the usual National party hobbyhorses of weakening the Resource Management Act and lowering standards for property developers," King said.

“Such changes will only be tinkering around the edges for thousands of Kiwis. The Government clearly doesn't realise that the main problem is affordable housing for low and moderate income earners, who just can’t find houses," she said. 

“The construction of affordable housing has been described as the ' missing rung of the housing ladder' as there is a tendency for new private sector-financed houses to be large and expensive.

“Home ownership and affordable housing rates have dropped dramatically from a peak of around 75% in the 1980s to 65% today. This has impacted on younger people, the very people we want to keep in New Zealand. Nearly half our young people are now in rental accommodation compared to 20% in the late 1980s. Another reason so many are leaving the country for good," King said.

“Unless the Government thinks outside its narrow box and looks at innovative ways to get people into affordable housing the crisis will grow while the Government sits tinkering," she said.

“It's time for a long term housing policy, which includes a real partnership with local government, starting by including housing as part of their core services.

“Labour wants measures to put the missing rung of the housing ladder in place and give people a leg up to it. We need to have more houses in the NZ$350,000 to NZ$450,000 range built, have quality and efficiency standards in rentals, have more social housing and introduce a capital gains tax to deter property speculation," King said.

Background

See the Productivity Commission's April recommendations here: Productivity Commission recommends immediate release of land for residential development in Auckland, Christchurch, in final housing affordability report.

See Alex Tarrant's July article, Wholesale changes to how government approaches housing affordability as it drops helping demand and focusses on supply side.

In August, Finance Minister Bill English said the biggest opportunity for brownfields housing development within Auckland's city limits was in the hands of central government, due to its large land holdings for state housing. See Housing Minister Phil Heatley in July talk about a plan to densify the government's Tamaki land holdings in this video here.

Also see October 17 article, Govt eyes more say over Auckland development rules; says if Council accepts govt panel recommendations, then no Environment Court appeals.