Demand-Side Measures Won't Solve a Supply-Side Problem
Press Release by ACT Leader John Banks
Wednesday, August 14 2013

ACT Leader John Banks today expressed concern about the conflicting moves by National and the Reserve Bank to both increase demand for housing and reduce it.

“The Reserve Bank’s announcement that it’s a step closer to curbing low-equity housing loans by banks is at odds with National's announcement that they will introduce a range of measures to make it easier for first home buyers to get into the market,” Mr Banks said.

“National’s policy will increase demand from first home buyers which will drive prices up. The Reserve Bank’s measures will restrict demand by making it harder to get a loan.

“One policy increases demand, the other policy restricts it, yet not enough is being done to tackle the real issue – supply.

“ACT, National, the New Zealand Productivity Commission and the Reserve Bank all agree that the prime cause of the housing affordability problem is the artificial restriction of land.

“Introducing measures that increase the demand for land without easing the supply problem will make the affordability problem worse.

“In its latest Financial Stability Report, the Reserve Bank accurately described the supply problem in Auckland and Christchurch as ‘acute’.

“The solution is, of course, to relax the artificial restrictions on land. ACT's ‘Freedom to Build’ policy announced in February would significantly increase supply.

“It would increase the amount of land available to build on and make subdivisions easier. National’s proposed changes to the Resource Management Act take some steps to address this, but don’t go far enough.

“Tackling supply is the only policy which will genuinely get more New Zealanders into homes. Mixed policy messages are unhelpful,” Mr Banks said.

ENDS

© Scoop Media