He’s just given another, arguably even more important, laying out in words of one syllable what the Government plans to do to fix New Zealand’s broken housing market.
He began his speech to the Real Estate Institute by setting the scene:
“We need change:
And in what was quite a lengthy speech, he laid out how the Government planned to oblige councils in all significant urban areas to radically free up the land available for building houses on (sufficient suitable land for housing demand in the next 30 years), to allow greater density at least near to main transport systems, to improve the rental market, to reduce building costs, to remove the lower limit on apartment size, and to reform the Resource Management Act.
A few days later, Building and Construction Minister Chris Penk chimed in with measures to reduce building costs by forcing councils to do building inspections remotely, thus reducing the cost of building homes and reducing the ridiculously long (and therefore expensive) time it currently takes to build a house – on average, 569 days (more than 18 months on average). And that doesn’t include the time taken to get a building consent!
“We need change:
* After-inflation house prices have increased by more than any other OECD country in the past 30 years. Between 2000 and 2021, inflation-adjusted house prices rose 256 percent in New Zealand.
* In the year to June 2023, 45 percent of renting households spent at least 30 percent of their post-tax income on housing. Research by the OECD shows that this is even higher for low-income households and higher in New Zealand than in any other country.
* There are 23,500 families on the social housing wait list, a measure of unmet demand for people in severe housing need.
* And tomorrow, more than 2000 families will wake up living in an emergency housing hotel room.”
And in what was quite a lengthy speech, he laid out how the Government planned to oblige councils in all significant urban areas to radically free up the land available for building houses on (sufficient suitable land for housing demand in the next 30 years), to allow greater density at least near to main transport systems, to improve the rental market, to reduce building costs, to remove the lower limit on apartment size, and to reform the Resource Management Act.
A few days later, Building and Construction Minister Chris Penk chimed in with measures to reduce building costs by forcing councils to do building inspections remotely, thus reducing the cost of building homes and reducing the ridiculously long (and therefore expensive) time it currently takes to build a house – on average, 569 days (more than 18 months on average). And that doesn’t include the time taken to get a building consent!
In other words, the Government appears to be deadly serious about doing something to fix the ridiculously unaffordable housing market in New Zealand. Hallelujah!
Will the Government deliver on this ambitious plan? After all, the Key Government pledged to make housing more affordable after it got the Productivity Commission to do its very first report on housing affordability back in 2012, but saw house prices continue to rise much faster than incomes throughout its nine years in office.
The Labour-New Zealand First coalition Government pledged in its Speech from the Throne on assuming office in 2017 that it would scrap the Metropolitan Urban Limit around Auckland, thereby freeing up land supply in that city – but failed to do so, later promised not to do so, and saw house prices continue to climb steeply.
Over the last two decades at least, politicians on both sides of the House have talked about making housing more affordable and have utterly failed to deliver. Will this time be different? I suspect it will be, partly because the social costs of ridiculously unaffordable housing have become dramatically clear, partly because there now appears to be a much greater understanding that it has been local government policies which have been the primary cause of the current mess, and partly because Chris Bishop appears to be firmly committed to fixing the mess and he is the third ranked National Party Minister.
He has plenty of critics, some overt and some covert.
The covert ones are the ones who, having “banked” a huge increase in their personal wealth as a result of house price escalation over the last three decades, will be exceedingly reluctant to see even a small decrease in absolute house prices.
The overt critics are of three kinds.
First, there is concern – which may well be genuine – that removing the limit on how small apartments can be will result in “shoe-box apartments”, leading to slums. To which Chris Bishop has already replied: “Do you know what is smaller than a shoe-box apartment? A car or an emergency housing motel room”. Of course in practice what would happen if a surplus of “shoe-box apartments” were built, they would become impossible to sell, and developers would need to create larger apartments which people want to buy.
Second, some point out that what the Minister is proposing suits property developers, many of whom have been generous donors to the parties in the governing coalition. I have no doubt that some property developers can see profits to be made in the new environment. I also suspect that some property developers are very unhappy at the prospect that the land they bought for development on the assumption that land available for development would always be artificially constrained may suddenly become very much cheaper. But so what if some property developers make money from increasing the supply of affordable homes? We should always be delighted when people can make money supplying something for which there is a strong need in a highly competitive market.
The third argument is that if house prices fall too sharply the stability of the banking system could be threatened, and that would be a concern for the Reserve Bank and for the Australian owners of our major banks. There is certainly a theoretical possibility that house prices could fall so steeply as to jeopardize the stability of the banking system, but the fall would have to be quite precipitate for that to be even a theoretical possibility. For most New Zealanders, some reduction in the profitability of the Australian-owned banks would be a small price to pay for a more affordable housing market, where their children and grandchildren have a reasonable prospect of owning their own homes.
Will the Government deliver on this ambitious plan? After all, the Key Government pledged to make housing more affordable after it got the Productivity Commission to do its very first report on housing affordability back in 2012, but saw house prices continue to rise much faster than incomes throughout its nine years in office.
The Labour-New Zealand First coalition Government pledged in its Speech from the Throne on assuming office in 2017 that it would scrap the Metropolitan Urban Limit around Auckland, thereby freeing up land supply in that city – but failed to do so, later promised not to do so, and saw house prices continue to climb steeply.
Over the last two decades at least, politicians on both sides of the House have talked about making housing more affordable and have utterly failed to deliver. Will this time be different? I suspect it will be, partly because the social costs of ridiculously unaffordable housing have become dramatically clear, partly because there now appears to be a much greater understanding that it has been local government policies which have been the primary cause of the current mess, and partly because Chris Bishop appears to be firmly committed to fixing the mess and he is the third ranked National Party Minister.
He has plenty of critics, some overt and some covert.
The covert ones are the ones who, having “banked” a huge increase in their personal wealth as a result of house price escalation over the last three decades, will be exceedingly reluctant to see even a small decrease in absolute house prices.
The overt critics are of three kinds.
First, there is concern – which may well be genuine – that removing the limit on how small apartments can be will result in “shoe-box apartments”, leading to slums. To which Chris Bishop has already replied: “Do you know what is smaller than a shoe-box apartment? A car or an emergency housing motel room”. Of course in practice what would happen if a surplus of “shoe-box apartments” were built, they would become impossible to sell, and developers would need to create larger apartments which people want to buy.
Second, some point out that what the Minister is proposing suits property developers, many of whom have been generous donors to the parties in the governing coalition. I have no doubt that some property developers can see profits to be made in the new environment. I also suspect that some property developers are very unhappy at the prospect that the land they bought for development on the assumption that land available for development would always be artificially constrained may suddenly become very much cheaper. But so what if some property developers make money from increasing the supply of affordable homes? We should always be delighted when people can make money supplying something for which there is a strong need in a highly competitive market.
The third argument is that if house prices fall too sharply the stability of the banking system could be threatened, and that would be a concern for the Reserve Bank and for the Australian owners of our major banks. There is certainly a theoretical possibility that house prices could fall so steeply as to jeopardize the stability of the banking system, but the fall would have to be quite precipitate for that to be even a theoretical possibility. For most New Zealanders, some reduction in the profitability of the Australian-owned banks would be a small price to pay for a more affordable housing market, where their children and grandchildren have a reasonable prospect of owning their own homes.
Dr Don Brash, Former Governor of the Reserve Bank and Leader of the New Zealand National Party from 2003 to 2006 and ACT in 2011. Don blogs at Bassett, Brash and Hide - where this article was sourced
10 comments:
Don great analysis and summation. Thanks.
OK
But Bishop is the MP who said ( on record) " no one is interested in co- governance."
This will haunt him - whatever his worthy projects.
Be wary.
I am looking for a brilliant speech that addresses the demand side of the equation.
Stop this mass immigration and ruining a once great country.
NZ house prices will largely self correct not because of relaxed building requirements but because of reduced net immigration due kiwis fleeing maorification and/or chasing higher wages. Also because of the inevitable clamp down on immigrants seeking to shift their families here onto our welfare systems, or as a stepping stone to elsewhere. Availability of modest price rentals has been reduced and landlords become more choosey because of the pedantic insulation, extractors, heaters, air conditoner, sealed underfloor etc now required for the most basic rental, despite generations having survived fine without. And the inflated maintenance costs due pedantic scaffolding requirements.
Owning a rental has been made so complex that many owners have quit or placed in the hands of mangers, when greater attention is paid to maximum obtainable rent.
return to 1960s type sprawl is not going to modertae CO2 production.
Get boostered Bishop, that politician?
So a wonderful speech on how the government will fix the problem by forcing local councils to spend more money that they don't have. Forcing them to make inspections easier to bypass, all while leaving local councils liable for any long term defects.
Sounds like the typical vacuous speeches forcing councils to foot the bill. All while Mr Bishop and his cronies will crow about how special they are because they are keeping taxes the same.
Next speech will be about how councils need to get their books in order because rates are to expensive.
He is just more of the same. Labour, National, two sides of the same bent coin. So out of touch they wonder why people want to support someone as bad as Trump. Never realising they are the problem.
If they don't stop mass immigration at the same time it will do nothing to ease the housing crisis.
If the housing market collapses the big four Australian banks will suffer, and the problem is?
Maybe the banks should stop lending so much money for housing and start balancing the ledger by lending to businesses at reasonable rates. Then the productive side of the economy will grow, people will invest in productive assets and the risk of economic collapse due to lobsided lending by banks to only housing will end.
The banks have created this disaster.
The problem with building small apartments for single people because that's all they can afford, is that they can become homes for small families, because that's all that they can afford. While lack of amenities and space is no problems for single people it becomes a real problem when families move in.
"I refuse to stand by while there are people sleeping in cars" but when she deserted the sinking ship to leave a political schoolboy in charge, there were more people sleeping in cars than when she was elected.
Nice one J.A., for your contribution in making a bad problem worse.
Well, the way this country is moving into an ethnocracy, the housing price problem will sort itself, leastwise that will be far from a pressing Issue. Crime will continue to rise ; the health system will further implode; and any gains on the education front will be lost. As the brain drain continues and immigration is unchecked, society will decline and higher density housing developments will turn into ghettos. Values will fall and housing will become more affordable. But as the saying goes, be careful what you wish for.
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