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Improving Housing Affordability - More than Planning Reform


31 October 2012


Improving Housing Affordability Needs More than Planning Refrom

The New Zealand Initiative welcome the government’s response to the Productivity Commission’s recommendations on housing and planning but believe they are not going far enough.

“It is good to see the government’s commitment to improving housing affordability,” says Dr Oliver Hartwich, Executive Director of The New Zealand Initiative.

But commitment alone will not be enough to solve our housing affordability crisis.

According to Dr Hartwich, the main problem not addressed by either the Productivity Commission or the government is the link between residential development and local government finance.

“Under the current system, councils are often financially penalised when they plan for new housing development in their area,” says Dr Hartwich.

New infrastructure needs to be financed, but local government revenue does not increase enough to cover necessary infrastructure upgrades.

“By focussing mainly on the complexities of planning, we would ignore the most crucial obstacle to the delivery of new housing: covering the costs of new infrastructure,” says Dr Hartwich.

The New Zealand Initiative is currently undertaking research on a root-and-branch reform of local government finance. The research project examines ways of reducing supply constraints in the housing market by incentivising residential development at the local level. Such schemes have kept housing markets stable in Continental European countries such as Switzerland and Germany over long periods of time.

“To make New Zealand housing more affordable, we need to learn from countries that have a better track record in keeping house prices stable,” says Dr Hartwich.

Reducing the complexity of planning is a good first step in helping New Zealanders struggling to pay for housing. But it is only a first step.


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