New Zealand’s massive housing supply fail

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By Leith van Onselen

Despite promising for years to reform New Zealand’s planning system to boost housing supply and make housing more affordable, it is clear that the National Government is failing.

The latest dwelling consents data revealed that Auckland consented just 10,199 homes in the year to March 2017 – well below the 15,000 required to keep up with the city’s ballooning population growth:

Accordingly, Auckland’s housing shortage continues to grow, adding to the estimated existing shortfall of at least 30,000 homes in the region.

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Rodney Dickens has released his May “Rodney’s Ravings” report, which reveals that new home costs in Auckland have experienced hyper-inflation – growing even faster than existing house prices:

The Auckland Housing Accord was ratified between the Minister of Housing and the Auckland Mayor on 3 October 2013. Following that and up until September 2016 when the original Special Housing Area legislation expired, 154 Special Housing Areas were approved that had the potential to deliver around 60,000 additional new dwelling sites. The Housing Accord was supposed to “result in increased housing supply and improved housing affordability”…

Since the Accord was signed the median Auckland existing house price reported by REINZ has increased 45%… By contrast, over the same period the average of the median prices reported by REINZ for all other regions increased a relatively modest 27%…

Since the ratification of the Accord the median Auckland section price reported by REINZ has increased 52%… while the average of the median prices for all other regions increased only 22%… Over the same period the average square metre cost for building new dwellings in Auckland increased 36% versus a 19% increase in the rest of the country..

National has implemented and is working on other means of improving housing affordability. However, I am sceptical of how much the Accord and other initiatives will improve affordability especially in light of the massive deterioration since the Accord was ratified (i.e. 10 steps have been taken backwards before one step has been taken in the right direction in terms of actual affordability). It is no surprise that Labour is promoting additional policies aimed at improving especially Auckland housing affordability and that housing affordability will be a major election issue…

Labour’s proposal to scrap the urban limit and debt fund infrastructure for new greenfield and brownfield residential developments potentially offers much more hope of significantly improving Auckland housing affordability while the same issues are relevant to various degrees to most major urban centres.

The National Government has erred badly in placing all of its faith in planning reform at the same time as it ramped-up immigration to record levels.

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Now it is looking increasingly vulnerable as the 23 September election rolls around.

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About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.