By Bernard Hickey
Finance Minister Bill English has again criticised council planners for regulations that he said have quashed supply of new affordable housing, pointing to rules on Auckland apartments that he said added around NZ$80/week to rents.
English said in a pre-Budget speech in Wellington that it was now difficult to build some types of affordable housing in New Zealand's least affordable cities. He said councils' "excessive planning rules" were putting pressure on interest rates, reducing investment and hitting household budgets. Higher rents also increased Government accommodation subsidy costs and higher house prices drove inequality, English said.
English gave examples of an analysis carried out by Treasury officials of data provided by apartment developers.
Planning rules limit apartment sizes in Auckland to a minium of 40 square metres, with balconies of at least 8 square metres, he said.
"These two rules alone add around NZ$80 per week to the rent. A range of other rules set minimum subdivision size, ceiling heights, bedroom size and even the width of your front door. All of these push up the cost of housing," English said.
"Local body planners and councillors are not aware of the wider social and economic effects of their complex rules and processes," he said, adding he saw three major consequences.
"First, higher house prices created by excessive planning rules put pressure on interest rates, reducing business investment, lowering productivity and hitting household budgets. And housing supply that is unresponsive to demand causes price volatility and the risk of a severe correction," he said.
"Second, as the cost of housing consumes a greater proportion of income, pressure goes on councils and the Government for greater assistance. Around 40 per cent of households that are renting receive accommodation support from the Government. This will increase if housing becomes less affordable."
"The third consequence is that rising house prices drive inequality. Inequality in New Zealand has been flat since 2004, but the situation could have been better had housing been more affordable."
The comment is the first from English acknowledging the effects of rising house prices on inequality of either incomes or wealth.
Later English expanded on his comments about apartment rules.
"In my view it cuts a whole lot of people out of affordable housing in the middle of Auckland," he said.
Asked if he wanted people living in "matchboxes," he said: "People have to live somewhere and they can choose not to live in something that's too small. There's a bit much of a mentality that a small group of people on a council know what everybody wants and needs."
"It turns out in the examples I gave today that the preferences of a small group of people about what a city should look like mean real cost for real households. If you have a set of measures that raise rents by NZ$80 a week you're putting housing in that part of Auckland out of the reach of a lot of individuals and families."
Later English told reporters the Government may detail new measures to boost housing supply in the budget.
"We'd be looking in the budget to set out some more measures to make housing affordable," he said, confirming this would be on the supply side.
"I think a lot of people have been sceptical that you can do anything about rising house prices,"he said.
"The house prices have got a bit of momentum, that does look to be slowing a bit. We've been on a programme for three years so far and the next three or four years we need to follow through on particularly working with our councils because the ultimate decision makers here are the councils and they are under pressure from some people who would like to see house prices go up forever and others who want to get into housing, and they are in a difficult position because both of those pressures are on them."
"I think one general point here is that the banks are unlikely to lend people the amount of money required to drive house prices continuously up 10 or 15% a year."
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