Hopes rise that Auckland's children won't grow up to be renters

When Auckland's children are grown up, Auckland Council's chief economist hopes there will be affordable homes for them ...
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When Auckland's children are grown up, Auckland Council's chief economist hopes there will be affordable homes for them to buy.

Home affordability campaigners are optimistic Auckland's children will be able to afford their own places as adults.

Hugh Pavletich, Auckland Council chief economist Chris Parker, and Oliver Hartwich from the New Zealand Initiative think tank are all optimistic for kids in school today.

But they say new laws will be needed to change the scale of home-building in the country's biggest and fastest-growing city.

Affordable housing campaigner Hugh Pavletich said: “The Great Consensus is emerging."
ROBYN EDIE/SUPPLIED

Affordable housing campaigner Hugh Pavletich said: “The Great Consensus is emerging."

Pavletich believed a "Great Consensus" was emerging among politicians and the majority of the public that there was a housing affordability crisis in Auckland. Pavletich's annual Demographia survey of household affordability released earlier this week showed the median Auckland home cost 9.7 times the median household income- $748,700 on a median income of $77,500.

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"The Great Consensus is emerging. That's where we are going," Pavletich said.

Law changes were needed- including ending council's ability to limit land supply driving up land prices- but Pavletich believed the momentum of the Great Consensus would result in them being passed by Parliament.

Pavletich would love to see the end of the Metropolitan Urban paving the way for "natural urban expansion" on the fringes of the city, which would put downward pressure on land prices.

A sign of the Great Consensus was that Auckland Council was now talking in terms of multiples of household income, he said. "They weren't doing that 12 months ago," he said.

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"I believe that we are well on the road to giving these young ones the same opportunities as I had," Pavletich said.

Auckland Council now has a "Five by 2030" target, first mentioned in the Housing supply, choice and affordability report by Parker, published late last year.

Parker moved to Auckland from Wellington a year ago. He does not own a house in Auckland, and has four children. He worries about the impact on society of housing "haves and have-nots" in a city which could see around one million more people added to its population in the next 30 years.

Of the "Five by 2030", Parker said: "I think it is plausible. It would require huge changes."

"It was Five by 2025, but I thought it was going to take five years to understand the issues and change the policy environment."

These could involve allowing the creation of "Municipal Utility Districts" or MUDs. Used in Texas, these are effectively mini-taxation authorities created to provide infrastructure in an area, paid for by debt repaid over long periods of time by targeted taxes on those who end up owning homes in the area they covered. That spreads the cost of the infrastructure over multiple generations, and doesn't end up loading costs and debt on local authorities.

Hartwich too believes a consensus is forming across the political spectrum on the house affordability crisis, and the damage it is doing to the economy. But he sees a fundamental stumbling block. Central government was incentivised to work for economic growth as it lifts government income, he said. By contrast, local councils' costs rose as a result of growth because of the infrastructure they had to put in.

Hartwich said it was an issue politicians were coming to understand better, and there were international examples New Zealand could learn from on aligning the growth incentives of central governments and local authorities.

In his report, Parker noted the "Five by 2030" would be achieved by increasing the scale and breadth of housing options for the bottom half of the market, including by intensification.

"Such a target does not mean trying to sharply reduce people's wealth; intensification can potentially allow for land values to actually increase at the same time that house prices decrease," the report said.

Hartwich envisioned something different. "If we achieve what we want to achieve, it would be a soft landing."

That would be house prices staying stable, but incomes growing, reducing prices in real terms.

 - Stuff

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