Hot on the heels of his masterful speech to the Salvation Army setting the framework for Labour’s housing reform agenda, New Zealand’s housing minister, Phil Twyford, has been presented with a damning briefing on the state of the market, which has caused “stark” inequality between young and old. From Stuff.co.nz:
The briefings for incoming Housing Minister Phil Twyford show a 45,000 home gap in Auckland.. Twyford maintains the previous Government intentionally kept the number secret.
Officials over two of the briefings on housing do not mince words, blaming high house prices for widening inequality.
“High levels of immigration and fewer departing New Zealanders, along with natural population growth has seen demand for housing outstrip supply,” they write, pinpointing the start of this trend to 2003.
Both rents and house prices have risen far faster than incomes.
“High house prices have stark distributional impacts: they transfer wealth from younger and less wealthy people to existing landowners, who are generally richer and older. The substantial increase in house prices over past decades appears to be the major cause of the observed increase in wealth inequality in developed economies, and the ongoing effect is one of restricting access to opportunity for the young and less well off.
“This flows into wider social costs, including overcrowding and homelessness, health problems, and poor educational and labour market outcomes.”
Officials note that high house prices also cause a significant drag on productivity and increase government costs.
Commenting on the briefings, Twyford lashed the former National Government for ignoring the housing crisis. From TVNZ:
“The picture that emerges from the briefings … there is a massive level of un-met demand.. the fact the government has been spending $100,000 a day on motels.”
He said he did not think it was an “anomaly”.
“It reflects a housing market that has been getting significantly worse since 2010/2011. We’ve inherited a mess, this is a social and economic disaster for the country it is quite complex.”
He said he was shocked to see there was a housing shortfall across New Zealand of 71,000.
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I noted in the lead-up to the New Zealand General Election, held on 23 September, that Labour had an excellent housing platform that addresses both supply and demand distortions via negative gearing reform, banning foreign buyers of existing homes, tighter capital gains taxes, removal of urban growth boundaries, plus bond financing for infrastructure. Its plan to reduce immigration by around a third is also sound, and would help to relieve chronic housing and infrastructure pressures, especially around Auckland.
It’s going to take every ounce of effort by Labour to turn this mess around.
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.
