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Making Homes Affordable Again

Gordon Copeland Op ed
For Immediate Release
Thursday, 6th December 2007

Making Homes Affordable Again

During the 1960s and 1970s the Government allowed couples to capitalise the family benefit on up to two children for the construction of a new home. In addition the State Advances Corporation loaned mortgage money to young families for thirty years at a 3% fixed rate interest. Hundreds of thousands of young families were provided with a new home!

Private home ownership rates soared. They peaked in 1986 when 73% of all New Zealand homes were privately owned – one of the highest rates in the world.

The situation for today’s young families could hardly be more different. Now houses in the major urban markets of New Zealand are “severely unaffordable” at around 6 times annual gross household earnings.

By 2006 less than 50% of homes were privately owned, a huge drop from the 1986 figure. There is therefore an urgent need to bring housing affordability, and home ownership, back within the reach of young families.

For that reason the Commerce Committee, with my strong support, is undertaking an Inquiry into housing affordability. Based on the evidence already presented, it is abundantly clear to me that three principle issues need to be addressed as a matter of urgency.

Firstly we need to remove arbitrary interventions in the supply of land through restrictive zoning and, in the case of Auckland, the Metropolitan Urban Limit (MUL). Evidence presented by Motu Economic and Public Policy Research is that land just inside Auckland’s MUL is worth between 8 and 13 times more than land just outside! Much of this land is held by “land bankers”, i.e. people who have purchased the land just to make a fast buck. As a result section prices are greatly inflated.

Such zoning restrictions need to be outlawed if section prices are to come back to affordable levels. We should aim for a price of about $50,000 for a 500sq metre section, not the $175,000 and more we are currently seeing.

Secondly, as pointed out by Demographia, the new “development levies” now charged by local councils are, in reality, a “new house purchaser infrastructure charge”. They add thousands of dollars to the cost of a new home and should go. Infrastructure should be financed through debt repayments spread over 30 or 40 years.

Thirdly, new requirements imposed by the Building Act, in response to the leaky homes syndrome inquiry, have gone way, way over the top. The Master Builders Federation informed the Committee that, while they need just 4 or 5 pages of plans to build a new home, they now need 12 or 13 pages of plans to obtain the Building Consent! That is absurd.

These three bedrock issues, taken together, essentially explain why housing has become so expensive. The current severe housing unaffordability crisis is the result of poor law and regulation and can be fixed if the Government has the political will to do so.

Gordon Copeland is an Independent Member of Parliament and Deputy Chair of the Commerce Committee.

ENDS

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