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New Zealand Centre for Political Research
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The Productivity Commission Report on Affordable Housing
Straight Thinking NBR Column 16th December
Entertainment: The Hobbit – the Unexpected Journey
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The New Zealand Productivity Commission has published its Draft Report on Affordable Housing. The Press release reads:

Have your say on the Commission's draft report findings by 10 February. You can find details on making a submission here. 

See Productivity Commission Chair Murray Sherwin talking about the draft report findings.

Posted 16 December 2011

Home ownership will continue to elude many New Zealanders unless bold changes are made to New Zealand’s housing market, the Productivity Commission says.

In its draft housing affordability report released today, the recently established Commission has made a number of recommendations aimed at improving housing affordability following extensive research, analysis and engagement.

Commission Chair Murray Sherwin says, “The 2001-2007 housing boom was unprecedented with house prices almost doubling over that period.”

“Affordable quality housing is fundamental to successful communities. And it’s abundantly clear that for younger people and those on lower incomes there is a missing step on the property ladder, particularly in Auckland. The chances of them ever purchasing their first home are decreasing.”

The Commission’s key recommendations include:

·        The urgent need for more land to be opened up for housing, especially in urban areas, because sections now average about 40% to 60% of the cost of a house.

·        Reconsideration of Auckland’s draft spatial plan. Auckland faces significant housing affordability challenges and the Commission found its current plan, with a target of accommodating 75% of new homes within existing urban boundaries, will be difficult to reconcile with affordable housing.

·        Improved processes for consenting, to speed up the service and lower costs.

·        Improving how local council development charges for infrastructure are calculated and applied, including making them reviewable. The Commission found the current model has too much regional variation and is not transparent.

·        The Commission considers that there is scope to improve productivity in the home construction sector and endorses the work of the Building and Construction Sector Productivity Partnership, established in 2010 as a joint industry-government initiative.

·        The Commission found that land prices now account for up to 60% of the cost of a house in Auckland.

“That means new homes tend to be at the top-end of the market. No one is going to put a $150,000 home on a $300,000 section,” Mr Sherwin said.

The cost of building materials and house construction is also high in New Zealand compared to Australia, and the home construction sector’s productivity is flat-lining.

The high costs of building and land are constraining the supply of affordable new houses available for purchase. Yet, New Zealand faces a growing population.

Projections are for around 400,000 new households over the next 20 years, with half of these in Auckland.

“We think it’s important to make urgent changes to accommodate what’s coming down the line,” Mr Sherwin said.

The Commission has found that taxation was not a key driver of the recent housing boom.

The Commission carefully considered the claims that housing is tax advantaged, but concluded that any tax-advantage is much smaller than often suggested.

GST already applies to both rental and owner-occupied housing purchases; local body rates are also a tax; and capital gains on housing are already taxed when those buying and selling houses are ‘in trade’.

The Commission invites further feedback on its findings in the draft report until 10 February. For a copy of the Draft Report, including information on making a submission, visit

The final report will be presented to the Government on 16 March 2012.

There are no surprises in the report’s findings and recommendations – except for those with no understanding of property markets and urban economics, and of course those who are firmly committed to the ideologies behind Smart Growth and believe Compact Development is the Silver Bullet that will Save the Planet and create Nirvana in the South Pacific.

Naturally, Councillor Mike Lee voiced his horror at the prospect of peripheral development – from his house on Waiheke Island. Gary Taylor, of the Environmental Defense Society, voiced the same sentiments – from his house at Bethels Beach.

So it has always been since the Roman Aristocracy, from their country villas, insisted that the Plebs stay locked behind the city walls.

Many supporters of the Compact City concept trotted out the old canard that while the land and buildings may be cheaper on the periphery, this apparent saving was overwhelmed by the cost of infrastructure, which for some reason has to be built to connect back into the central city.

Hence, the argument for development contributions that are a fine on new house buyers and lead to a drastic shortfall in supply.

Unfortunately, the Commission compared New Zealand housing markets only to the Australian markets and failed to explore the solutions and outcomes in the bubble-free States of America such as Texas and Georgia. There is no reason peripheral infrastructure should not be funded by the long term financing provided by the MUD schemes. Houston is famous for having no zoning other than private residents associations (rather like the Body Corporates that manage high rise apartments). But the infrastructure financing makes a large contribution to the fact that Houston residents can buy a section for about US$40,000 and a whole housing package for about US$150,000. The result is that Houston is now the best performing city in the US in terms of employment and economic growth. Californians are migrating to Houston in their thousands.

The Mayor of Auckland Council would learn more about how to create a liveable city by visiting Houston rather than peering down tunnels in China.

The battle between the Romantics and the Rationalists is about to begin in earnest.

Last Updated ( Thursday, 22 December 2011 20:11 )

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