New Zealand housing affordability – a response
New Zealand housing affordability – a response from the Intellectual Property forum
The Intellectual Property forum believes the Government’s proposed solutions to housing affordability are on the right track, but only scratch the surface of what is required to fix a growing problem. The forum thinks the Government is looking in some of the right areas but has also omitted some other potential key solutions from the list.
Increasing land supply, while it seems the easiest way to improve affordability by improving the imbalance between demand and supply, is considered by the Intellectual Property forum to be ineffective on its own.
Those outside of major metropolitan areas believe that the release of land for residential development should be finely balanced and carefully considered as it creates tension with regards to the lands current use.
Furthermore, in the city where the housing affordability crisis is at its highest level, Auckland, the release of more residential land would be ineffectual within the next five years, according to the Intellectual Property forum, as there is currently undeveloped residential land within the existing rural-urban boundary which could account for growth in the short-term.
General consensus of the Intellectual Property forum is that intensification of existing residential areas, in conjunction with development of existing peripheral residential land, is the best way to future-proof New Zealand’s housing needs.
While there will always be demand for ‘family communities’, where people want large houses with sizable sections, these would be better situated at satellite centres. The more valuable central-city land should be reserved for intensive apartment and terraced housing developments, where there already exists a high level of amenity and social infrastructure in place.
Reducing delays and costs of the Resource Management Act (RMA) process is a “red herring”, according to the Intellectual Property forum. The delay and cost reductions should be completed as a matter of course, regardless of New Zealand’s housing affordability issues.
The forum believes that the reductions alone would go a long way to improving the nation’s housing and development issues. In the context of housing affordability, it is generally considered that RMA delays have created an especially moribund residential development industry over the last decade, by making New Zealand uncompetitive on a global scale.
Improving the timely provision of infrastructure to support new housing, again, is seen as a positive step towards improving housing affordability. The Intellectual Property forum believes that this should go a step further though and that council’s focus should move from minimising rate collection and towards future-proofing infrastructure for development.
This would ultimately reduce required development contributions and encourage development, from which existing and future communities would benefit. Development of infrastructure, particularly public transport, needs to come first, in order to spur growth.
Finally, improving the productivity of the construction sector is important, but somewhat constrained by the huge amount of capital and labour required for the Christchurch rebuild. However, it was noted by the Intellectual Property forum that a well considered and managed apprenticeship scheme, such as those run in the past, would go a long way to increasing the availability of qualified trades people.
While this work programme is considered to be a good step in the direction of improving housing affordability, each element must be addressed concurrently with the next in order for it to have an impact. In Auckland particularly, the issue of housing affordability has “rapidly reached a size where piecemeal lip service will only further exacerbate the issue”, says the Intellectual Property forum.
Ultimately though, the key to improving housing affordability would be to improve the incomes of New Zealanders. One of the underlying catalysts of the housing affordability issue in New Zealand is the nation’s fixation on property as a sole investment strategy, partly borne from the success investors have found in the market to date, but also due to a lack of understanding or desire (or both) to channel funds into other investments.
While diversification of New Zealander’s investment funds would not solve the housing supply issue – as there will still be a growing population needing somewhere to live – it could create an opportunity for large scale residential developers and investors to move into the New Zealand market, build dwellings and hold them. This is something that hasn’t happened yet, and is unlikely to for as long as New Zealanders see residential property as their premier investment option.