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Making housing affordable – let’s crack it.

Welcome to our second interactive HiveMind exploration on the topic of housing affordability. This is an opportunity for you to think about and share your perspectives on this issue and what, if anything, needs to be done.

A warm, dry, safe home is a fundamental human need. The trouble is a significant number of people in New Zealand are currently unable to access or afford these most basic needs .

In Auckland and other urban centres, house prices have increased rapidly for a long time at rates well above wage growth and overall inflation. This has pushed up rents and made private ownership all but impossible for many people.

Ten years ago, before the Global Financial Crisis, the median house price across all of New Zealand was $349,000. Today, the median is $540,000, an increase of 55%.

Internationally, houses are considered affordable if the house price-to-income multiple is 3 or less, as it is in Wanganui and Invercargill. However, even places like Whangarei and Dunedin now have multiples approaching 4 and then we have Auckland and Queenstown with multiples over 8.

Housing affordability affects low-income households most. Many of these households spend more than 40% of their income on housing. That doesn’t leave much for other necessities!

House price inflation isn’t bad for everyone. Consistent price increases and favourable tax breaks have encouraged many people to buy investment properties. The high demand for investment properties has put significant pressure on house prices and rents.

You can have your say on what you think about the affordability issue by agreeing, disagreeing or passing on each statement presented to you in the Polis window below. You can also suggest new statements that might help us to expand the debate and work towards potential solutions we can all agree on. You don’t need to vote on all the statements in one go; HiveMind will present statements you haven’t voted on when you return. Statements are presented one at a time in a random order.

We recommend returning regularly to this HiveMind before it closes on Friday 9 July at 9.00 pm.

We strongly encourage you to read more about what is being done or could be done to address affordability in the detailed text below the Polis window.

We have assembled further references and resources as a mindmap for you here to explore our approach and the resource base of research and articles we are using.

If the Voting pane is not displaying you can click this link to open in a new window
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What’s currently being done?

What’s currently being done to make private-sector housing affordable?

Through initiatives such as the Housing Accords and Special Housing Areas, the government is focused on making it easier for the construction industry and developers to build more houses, more quickly by:
increasing the supply of land for development;
addressing the cost of building materials;
issues to do with the provision of infrastructure (e.g. power and drainage);
streamlining the regulatory regime; and
increasing skills and the level of innovation in the construction sector.

The government has also tightened rules to ensure people buying and selling property for profit pay their fair share of tax.

While a significant number of special housing areas have been designated over the last 3 years, the number of new houses is relatively small and only a small percentage of these could be called affordable as most developers seek to maximise profit.

What should be done? Different Perspectives

Not everyone agrees with current government policy and many other solutions have been suggested by a range of experts and non-experts alike.

Proposed solutions generally draw from the following simplified perspectives:

Perspective 1: State built, State owned

This perspective maintains that there are a number of reasons why the current ‘market-based’ approach to affordability won’t work.

Property speculation is artificially driving up the price of houses since housing offers investors some of the best passive returns on offer. This means housing is not priced according to the cost of production. Limiting immigration and foreign ownership won’t make housing affordable as there are more than enough domestic buyers eager to make a profit or just get on the property ladder to keep prices up.

Simply opening up more land and cutting regulations won’t make housing affordable. There are lots of reasons for this, including that we Kiwis tend to prefer big houses on big lots. If it’s left to the market, builders and developers won’t build smaller cheaper houses (when in reality they would be sufficient for many families’ needs).

Houses will not necessarily be cheaper if we improve the productivity in the construction sector! Productivity is an input that helps builders and developers with their margins (as is land), but it doesn’t necessarily affect affordability.

This means it’s just plain wrong to think house prices =the cost of the land +the cost of building the house. Therefore solutions based on this logic simply won’t work.

What should be done
Tax incentives to build affordable housing (eg Tiny and small houses)
Tax disincentives against the use of housing as a profit-making investment opportunity
State housing: Develop a sizable State-built and State-owned housing stock that is outside of the free-market
Ignore the ‘Nimby’s’ who love the idea of state housing and affordable housing so long as doesn’t affect them and their property values.

Perspective 2: Incentivise councils to embrace growth

New Zealand’s housing market needs urgent reform. For too long, the rate of
building has fallen below what is needed to keep up with household formation and demographics. It is difficult, costly, and time consuming to build a new house or dwelling. Long-term supply-side solutions are needed to fix New Zealand’s housing crisis.

Regional and territorial authorities are incentivised to adopt anti-developer attitudes. In practice this means limiting the expansion of cities with Metropolitan Urban Limits, increasing the costs and duration of the planning process and passing infrastructure costs onto developers.

What should be done
The key to solving the housing affordability crisis will be to incentivise councils to embrace growth
Infrastructure could be funded by allowing owners and developers to access private capital by issuing bonds and charging residents a property tax
Councils could be eligible for Housing Encouragement Grants based on the delivery of agreed numbers of new houses. Proponents say this would reduce the process of planning and release land for construction, dull the NIMBY effect and make the relationship between new infrastructure and rates clearer and more transparent.

Perspective 3: Long-term leadership and vision

When faced with a crisis, we often look for the elusive silver bullet. The problem is complex and complex problems don’t usually respond to simple solutions. There’s no shortage of opinion: ‘It’s the demand side. No, it’s about supply. Immigration is at the root of the crisis. No, it’s the investors. It’s the banks. It’s the planning limits placed on city growth …’

One of the big challenges is that when you overlay the long-term nature of development on the short-term nature of local and central government, it’s difficult to achieve the consistency, commitment and direction required for everyone to ‘scale up’.

What should be done
To solve the problem requires real leadership with a long-term focus and commitment. Policy influencers that stop, start or change their minds have a negative impact.
Set up new independent organisations in areas of high housing demand with representatives from across the housing system to provide leadership through collaborative governance. The Auckland 100 initiative provides a model to build on.
Develop a non-partisan housing strategy that all political parties can sign-up to and which aims to address affordability issue with long-term solutions.

Opening The Election

An Open News Project
Scoop’s Community Engagement Team is running this HiveMind project as part of our work to open the news this election cycle through a participatory, citizen powered and open licensed news project in collaboration with expert freelance journalists and editors. We are building a groundswell of readers and citizens to help Scoop implement this more open approach to independent media in 2017.
Contact the team
For more information you can contact Scoop’s Community Engagement Team Email HiveMind@Scoop.co.nz

If you would like to see more of this kind of innovative work in Scoop’s journalism, including approaches like this that support a broad based approach to problem solving you might like to support the Scoop Foundation for Public Interest Journalism.

We have developed our approach to HiveMind with support from our partnership with John Pennington and Simon Wright at Public Engagement Projects. If you want to work with two of New Zealand’s leading public engagement professionals contact John and Simon at Public Engagement Projects www.pep.org.nz.

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