Incentives For Building ‘Affordable Housing’

19 October 2007

Incentives For Building ‘Affordable Housing’ Preferable To Compulsion - REINZ

The Real Estate Institute of New Zealand (REINZ) today welcomed suggestions that the Government would enable councils to reward developers who provide ‘affordable housing’.

Housing Minister, Hon Chris Carter had said in a speech at the launch of Architecture Week that he was preparing an Affordable Housing Bill to give local councils enabling powers to promote the development of affordable housing. He said that this could be achieved by councils permitting more intensive development than may otherwise be allowed and/or waiving development contributions and levies.

REINZ National President Murray Cleland said, “Providing incentives to residential property developers to build affordable housing is likely to be more productive than attempting to compel them to include such housing within planned developments.

“It’s also encouraging to see the Minister acknowledge that ‘it is important to balance the need to increase the supply of affordable housing without deterring private development’. That signals a significant departure from earlier suggestions that the Government intended to compel property developers to include affordable housing components within residential developments.”

REINZ argues that compulsion could well make the problem worse by deterring developers from undertaking residential property market, thereby limiting supply and further fuelling house prices. It favours introducing policies that enable trade-offs for building affordable housing by waiving development contributions or urban density limits.

REINZ also opposes the suggestion that low cost and low income occupant housing be located in amongst new residential developments. Mr Cleland says, “Firstly because it would force socialisation between economic and social groups who probably have no interest in living next to each other; and secondly the long term effect will be for the ‘affordable housing’ component to depress resale values and the secondary market demand for these 'mixed' developments will reduce.

”Compulsion would not only constitute a fundamental interference in Private Property Rights but legislating to enable local authorities to insist developers include affordable housing would also add another layer of bureaucracy and cost when what was needed was to reduce the cost structure of subdivisions for affordable homes.

“Local authorities are currently part of the problem, not the solution. The major obstacle to low cost housing is local authority-imposed costs in the form of high rates and building consent and approval costs. The other key factor is local authorities’ reluctance to re-zone land for housing, which inflates land values and creates a barrier to entry for low cost housing for both purchasers and developers alike,” Mr Cleland said.

ENDS

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