Roger Partridge: The Engine of Discontent....

....Why democracy’s defenders should pay more attention to the price of a house

There is a story that countries in the English-speaking world like to tell themselves about houses. Rising house prices made them rich. Not the speculators and not the banks – the ordinary families who bought a home, paid it off through recessions and redundancies, and woke one morning to find themselves wealthy. The equity in the family home funded the business, the renovation and the retirement.

The young complain, as the young always have. But the ladder that looks cruel from the bottom looks different from the third rung. Every generation of first-home buyers has ended up blessing the market it once cursed. If anything deserves our fear, it is falling prices. When the housing market sickens, the whole economy catches the disease.

The story is told in Remuera and Mosman, in Fulham and Palo Alto, with local accents and identical logic. Industry economists repeat it. Politicians hint at it when they think renters are not listening. In my think tank role, I hear it every week – from friends, from business colleagues, from politicians on the left as readily as the right (the property-owning conflict of interest knows no political bounds). It sounds compassionate about the younger generation while defending the arrangements that exclude them.

But the story is wrong in almost every particular. No country shows this more clearly than mine. Indeed, New Zealanders believe the story more completely than anyone and pushed house prices further against incomes than in almost any nation on record – even as the country runs a serious experiment in reversing them.

The wealth that was not there

In 2023, the UBS Global Wealth Report ranked New Zealand fourth in the world for median wealth per adult, behind only Belgium, Australia and Hong Kong. The conventional wisdom reads this as vindication. A country of five million, with a chronic productivity gap and a sharemarket smaller than many single American companies, had somehow made its ordinary citizens among the richest people alive. Whatever we were doing, the argument runs, it was working.

A 2022 Reserve Bank of New Zealand analysis explains the trick. The country’s housing stock is worth more than seven times all the companies listed on the local sharemarket combined. More than half of everything households own is residential land and the buildings on it. And the Bank is blunt about where the value came from. Most of the gain is the land underneath growing dearer.

But when a firm’s shares rise because it has built a factory or found a customer, the country has more than it had before. When the price of land rises, nothing new exists. The same quarter-acre sections, under the same sky, have merely been repriced.

The result?

Mortgages, disproportionately burdening a younger generation, now account for roughly nine-tenths of New Zealand household debt. Much of the median-wealth miracle, examined closely, is a transfer from those who needed houses to those who already had them.

Scarcity made the family home the best-performing asset an ordinary household could own, decade after decade. Households did the sensible thing and held their wealth in houses rather than in anything that employs people. The consequences are set out in the OECD’s 2026 survey of New Zealand. Capital markets are shallow by international standards, constraining funding for innovative firms, and there has been no major domestic float since 2021. A Kiwi firm raising a few million dollars is too small for international markets to notice and too costly for the local exchange to list.

Treasury has been describing one of the consequences since at least 2005: less capital behind each New Zealand worker than in most comparable economies, and a productivity gap that sets the ceiling on every wage in the country.

None of this is visible from the kitchen table. The equity in the family home really did fund the renovation, the daughter’s degree, the small business that survived a bad winter on the strength of a second mortgage. For each household the wealth was real.

That is what a fallacy of composition looks like from the inside. Five million individually rational balance sheets, adding up to a country that had invested its savings in its own front lawns.

The scarcity machine

A decade or so ago, my colleagues at The New Zealand Initiative traced the history of the country’s housing crisis in Priced Out: How New Zealand Lost its Housing Affordability. And the government’s own Infrastructure Commission has quantified it. Between the late 1930s and the late 1970s, prices rose about half a per cent for every one per cent increase in population. After the late-1970s move towards more restrictive planning – crystallised in the Town and Country Planning Act 1977, which handed objectors the power to block development – they rose two per cent for every one per cent.

The land had not changed. The rules had. Scarcity was the result.

Objecting neighbours were nothing new. Every proposed apartment block has always had them. And the objectors have always had their reasons – good and bad.

What changed in the late 1970s is that the law started taking their side. My own generation are the NIMBYs. My fellow boomers somehow believe they have a right to their suburbs looking just as they always have, at no charge to themselves. The young couple who would have lived in the flats that were never consented appear on no submission list. Nobody at the hearing speaks for them.

Councils could have pushed back. They had every reason not to. A council that consents a subdivision must connect it – trunk water, roads, stormwater – while the tax revenues from growth flow to central government. The objectors vote in local elections. The young couple does not live there yet. So the people with the power to say no said no, hearing after hearing, for four decades.

For the next 25 years, the trap sat unsprung. Restrictive rules determine how prices respond to demand, and through the 1980s and 1990s, there was little demand to respond to: more New Zealanders leaving than arriving in many years, mortgage rates near 20 per cent and an economy in its reform-era shakeout. The Resource Management Act 1991 quietly tightened the mechanism, sweeping away the old common-law limits on who could object. Then, after 2000, migration returned and interest rates fell. Demand arrived at a market that had spent two decades losing the ability to answer it.

In January 2002 the median New Zealand house still cost just over three times the median household income. By 2017 it cost more than six times, and in Auckland nearly ten – on its way to more than eleven at the 2021 peak, when the Covid pandemic’s near-zero interest rates poured fuel on the scarcity.

When I was around thirty, working in London in the 1980s, I was itching to get home. Part of the reason was arithmetic. My wife and I swapped a one-bedroom London shoebox for a three-bedroom house close to the centre of Auckland. We paid less than three times my own salary for it. One salary was enough – even though we had two.

A young couple looking at the same house today would pay eight or nine times what they earn together. None of the machinery is unique to New Zealand. Versions of the same arrangement operate across the English-speaking world.

The fallout

The bill for what the machine does to those who never reach the ladder is hard to over-estimate.

In 2025 the New Zealand government spent $5.5 billion on housing supports – subsidised rents, accommodation supplements, emergency motels and programmes for the homeless. Housing minister Chris Bishop calls the sum unsustainable. Housing support now extends to a quarter of all households.

Britain runs the same machine at imperial scale: English councils spent £2.8 billion on temporary accommodation last year, with a record 132,000 households living in it.

Beneath the fiscal cost sits the human one. At the 2023 Census, 112,496 New Zealanders were severely housing-deprived, up from 99,462 five years earlier. Crowding follows unaffordability, and illness follows crowding. New Zealand children are still hospitalised with acute rheumatic fever, a disease of crowded households now rare in most rich countries.

The official poverty statistics record the same machine from another angle.

Child poverty measured before housing costs has fallen meaningfully since 2018. Material hardship has barely moved. Housing sits between the two measures and eats the difference, with the average household now sending $22.20 of every $100 of income to its landlord or its bank, up from $20.80 six years ago.

But the most serious damage is neither fiscal nor medical. Home ownership in New Zealand peaked at 73.8 per cent of households in 1991. It then fell at every census for three decades, reaching its lowest point since 1951 in 2018. Even that understates what happened, because the headline rate hides the generational fracture beneath it.

In 1991, 61 per cent of New Zealanders aged 25 to 29 lived in a home their household owned. By 2018 the figure was 44 per cent. For people in their late thirties, it fell from 79 to 59. For Māori in their thirties, it stood at 32 per cent, compared with 55 per cent for the country as a whole.

Suburb by suburb, objection by objection, the generation that climbed the ladder had voted to pull it up behind itself.

Little wonder so many feel the country has grown less equal while the measured statistics on income inequality have barely moved. But the inequality that stings does not show up in those figures. It runs between those who own a home and those still trying to buy one.

Political scientists have started measuring what this fracture does to a democracy. Ben Ansell and his Oxford colleagues find that rising unaffordability drives a wedge between owners and renters and feeds the polarisation usually blamed on age. Their latest work, drawing on a survey of more than ten thousand Britons, finds that owning a home shapes whether people believe political institutions answer to people like them. They warn that a generation of permanent renters may prove receptive to populist appeals.

This is where expensive houses stop being an economic problem and start being a liberal one. A liberal society asks its citizens to tolerate unequal outcomes. It earns that tolerance with three assurances: that the rules apply to everyone, that effort has a fair chance of reward and that the future is open. A housing market rigged by regulation in favour of those who arrived first teaches the excluded to doubt all three. And because the shortage arrives wearing the market’s clothes – private builders, private landlords, market prices – those excluded blame capitalism itself for what central and local government planners did.

Young renters saving for a deposit that recedes faster than their savings grow are not merely poorer than their parents were at the same age. They are learning that the game was settled before they started to play. Only 17 per cent of New Zealanders believe the next generation will be better off.

The Helen Clark Foundation’s cohesion survey finds homeowners participate more in civic life and belong more to their neighbourhoods than renters do. Its authors conclude that housing policy is social cohesion policy.

Unsurprisingly, the young are doing what people do when a country stops offering them a stake. In the year to September 2025, a record 72,700 New Zealand citizens left, a net loss of 46,400. Almost two-fifths of the leavers were aged 18 to 30.

And for those already exploring the world, affordable housing no longer pulls them back. When I finished my London years, a big part of the bargain that brought me home was a house. My children’s generation, enjoying the same overseas apprenticeships in the same cities, runs the same arithmetic and stays overseas.

International evidence suggests that those still here may be putting off children. Across twenty-five American cities, first births in the expensive ones arrive three to four years later than in the cheap ones, after controls for education, ethnicity and employment, though completed family size is not clearly different. Dutch register data covering an entire population find renters conceiving less often as regional prices rise, as do buyers in their first year of a mortgage, while owners of longer standing conceive more. Not every study finds that renter effect. Fertility has fallen in countries where houses are cheap too, so housing cannot carry all of it. Since 2015 the birth rate among New Zealand women aged 20 to 24 has fallen by more than a third, from 64.7 births per thousand to 42.1. For women in their early forties it has gone from 14.6 to 13.7. The median age of a New Zealand mother is now 31.7 years, the highest on record.

Liberalism’s defenders mostly look elsewhere for answers to its discontents. The seminars and podcasts devoted to the open society’s troubles talk of migration and the culture wars. When I have suggested that the biggest threats to liberal democracy are housing, education and welfare settings, the surprise is audible. There are exceptions. Three British writers have argued that expensive housing sits behind almost every Western ailment – the housing theory of everything – and Matthew Yglesias argued recently that young Americans reject capitalism because its least capitalist sector – housing – dominates their lives. But the exceptions are few.

Of all the forces corroding liberal democracy, this one is the most prosaic. It needs no theory of civilisational decline. And it has a known fix.

The Auckland experiment

A decade ago, New Zealand began to run the counter-experiment. It was not an accident. My colleagues and others had spent years arguing for it in research reports, in the media and with politicians and other thought leaders.

Then, in 2016, obliged to write one planning rulebook after its councils amalgamated, the city of Auckland adopted a Unitary Plan that upzoned roughly three-quarters of its residential land and trebled the number of homes that could legally be built on it.

No English-speaking city had done anything like it. Economists around the world now study a mid-sized city in the South Pacific the way medical researchers study a rare natural immunity.

Compared with New Zealand cities that did not upzone, cities facing the same interest rates, the same recession and the same migration cycle, Auckland gained more than 20,000 additional dwelling consents within five years. A later estimate against comparable cities put the six-year figure at about 43,500, roughly nine per cent of the housing stock, with building permits per head doubling against the counterfactual. Rents six years after the plan were 28 per cent lower than they would otherwise have been.

The findings have been disputed, with economists Cameron Murray and Tim Helm arguing the counterfactuals flatter the reform. But researchers at Motu who reviewed the dispute concluded the evidence of more housing and lower rents is robust.

Longer-run modelling suggests that, if the new capacity keeps being used, the upzoning could eventually lower house prices by 15 to 27 per cent against the path they would otherwise have taken.

The national median peaked at $925,000 in November 2021 and stood at around $753,000 by January 2026, almost a fifth lower. Much of that fall was monetary. The Reserve Bank took its cash rate from 0.25 to 5.5 per cent and the economy shrank a full one per cent in the September 2024 quarter alone. Net migration collapsed at the same time.

The conventional wisdom is entitled to point this out. Falls produced by high interest rates reverse when rates fall again. What will not reverse is the building.

Rents tell the story that prices cannot. The national median rent for a newly tenanted property was $600 a week in March 2024, $600 in March 2025 and $600 again in March 2026, while a record 48,645 new bonds were lodged in the last of those quarters. By June this year, the stock of existing rents was rising again, at half a per cent a year, the slowest annual rate Statistics New Zealand has recorded in twenty-five years.

Record numbers of tenancies at broadly unchanged rents is what easing scarcity looks like from a tenant’s side of the ledger. And when the largest migration boom in the country’s history arrived, a record net gain of 135,500 people in the year to October 2023, prices did not reignite. High interest rates helped. So did the newly built townhouses.

The 2023 Census recorded the first rise in home ownership since 1991. Parliament is now replacing the planning laws that manufactured the scarcity in the first place. The replacement carries a test my colleagues had argued for: councils must keep urban land supply responsive enough to demand that prices do not persistently carry a scarcity premium, with an independent officer to judge whether they have. Whether the new statutes make land for housing genuinely abundant will decide whether any of these gains survive the next boom.

Two kinds of cheap

The conventional wisdom deserves a fair account of what it gets right. A credit-driven crash really is destructive, and the pain in New Zealand’s shops and building yards over the past three years has been real. Households that borrowed at the peak are hurting. Retirements built on the family home have shrunk. Nobody who watched the last three years would prescribe them as housing policy.

But there are two ways for houses to become cheaper, and the conventional wisdom refuses to tell them apart. Prices can fall because money is expensive, credit is rationed and the economy is sick. That kind of cheapness arrives through ruin and departs with the recovery. Or prices can hold while a country builds and incomes grow, so that the ratio between a house and a wage quietly sinks year after year. The second is the difference between a famine ending because people starved and a famine ending because the harvest came in.

New Zealand has now experienced both kinds. The country that pushed the conventional wisdom furthest can report from the far end of the experiment: the wealth was a transfer, the bill arrived in hospital wards and welfare budgets and departure lounges.

It can also report the beginning of the way back, because the city that liberalised most got more homes, rents far below where they were headed and its first-home buyers returning, through the worst downturn in a generation.

The house my wife and I bought when we came to New Zealand in 1990 from London still stands, ten minutes from the centre of Auckland. A country able to offer that bargain again would not need to argue with its young about the blessings of the property ladder. They would come home and climb it.

Roger Partridge is chairman and a co-founder of The New Zealand Initiative and is a senior member of its research team. He led law firm Bell Gully as executive chairman from 2007 to 2014. This article was sourced HERE