Wellington (Wednesday, 9 November 2022) – There are no silver bullets for ending the regulatory mess that makes housing hard to build, but there may be silver buckshot.

A Member’s Bill from ACT’s Brooke van Velden proposes sharing half of the GST on new housing with councils where new housing is built. It is a promising piece of buckshot.

New Zealand Initiative Chief Economist Dr Eric Crampton said, “When cities grow, central government gets the benefits through higher income tax, higher company tax, and higher GST revenues. And local councils are left with the cost. So councils have used their balance sheets to protect themselves against the costs they perceive from urban growth.”

He continued, “Paying local councils whenever new houses are built helps to ease the imbalance built into the system. It isn’t a silver bullet. Councils still need better ways of funding and financing the infrastructure needed to support growth. Resource management reform needs to prioritise housing over other objectives. And it needs to be easier to use imported building materials. But revenue sharing, like ACT’s proposal, will help to make it easier for councils to support urban growth.”

The Initiative’s Executive Director Dr Oliver Hartwich added, “The Initiative first proposed Housing Encouragement Grants in 2013, using GST on new housing to benchmark grants to Councils to help them say yes to housing. We hope that Brooke van Velden’s Member’s Bill draws the cross-party support it deserves. Labour has recognised that poor incentives facing councils are part of the problem. Housing Encouragement Grants are part of the solution.”

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