NZ Government launches fake housing plan

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By Leith van Onselen

Four months out from the General Election, and with concerns over Auckland’s housing crisis growing, New Zealand’s National Government has launched a state-sponsored house building plan on crown land that is to deliver 26,000 extra homes to the Auckland region over the next decade. From Interest.co.nz:

The net addition to Auckland’s housing stock will be just under 26,000 new houses. The Minister responsible for Social Housing and Housing New Zealand, Amy Adams, said the properties would be built on land currently with 8,300 state houses on.

Of the headline number, 13,500 will be social houses and 20,600 will be “new affordable [and] market homes.”

And even those figures effectively overstated the net new additions from now. Speaking to media in Auckland after the announcement, Adams acknowledged some of the number related to houses already under construction. “Some of them are already underway – Tamaki’s in the early stages, Hobsonville…we’re about to clock up our thousandth [house],” she said…

Adams said the government’s definition of ‘affordable’ related to the HomeStart price cap of about $650,000…

“So we’re looking at one- or two-bedroom apartments [at] $550,000, $600,000, as I say up to $650,000 to meet that category”…

Labour leader Andrew Little said the announcement was National finally admitting New Zealand faced a housing crisis. “National can’t now credibly claim to be tackling the housing crisis four months out from the election when, for nine years, they’ve ignored the plight of first home buyers and families in need,” Little said.

“This Government has long rubbished the idea of building houses. Time and again it’s failed to deliver any significant increase in housing supply,” he said.

While the headline looks great, it’s important to recognise that the plan would deliver, at best, around 26,000 homes over a decade, which compares against Auckland’s projected 370,000 to 443,000 population growth over the same period, and the city’s projected growth of 833,000 (+56%) to 1113,600 (+75%) people over the next 30 years:

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Of course, the underlying driver of Auckland’s break-neck population growth is the New Zealand Government’s mass immigration program, which has set a target of around 45,000 permanent migrants a year (not including Australians) – most of which flock to Auckland:

So it’s another case of a Government creating the supply shortfall in the first place via mass immigration and then offering a token solution to give voters the impression that it cares.

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Another major issue with this plan is its definition of “affordable”. Who in their right mind would classify a “one- or two-bedroom apartments [at] $550,000, $600,000” as affordable? Sure, it’s better priced than the majority of Auckland’s housing stock – where the average dwelling is valued over $1 million:

And there’s 100 suburbs with a median house price over $1 million:

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But it’s a long bow to draw to claim a one-bedroom apartment selling for $550,000 or a two-bedroom apartment selling for $600,000 are “affordable”.

I’m with Labour Leader, Andrew Little, on this one. This plan is merely a token gesture to shore up support:

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“What does ‘affordable’ mean? How will that give hope to first home buyers when speculators can buy these houses too?..

“It’s just more smoke and mirrors from a Government that’s failed miserably. It’s a mish-mash of old and new housing programmes. Many of these houses have already been announced.

“Auckland currently has a shortfall of 40,000 houses and growing. This plan won’t address the shortfall, let alone build the extra houses needed to keep up with demand…

“This cynical announcement by National should be seen for what it is – an election year fudge to paper over the cracks of its failure in housing”.

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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.