A slow road to affordable housing

00:00, Oct 31 2012

Reining in galloping house prices was always going to be a hard ask.

Even a global recession did little to dent New Zealand's residential market, particularly in Auckland where another bubble is building.

With too much debt tied up in housing at the expense of other parts of the economy and with homes priced out of reach for many middle and lower income Kiwis, the Government has good reasons to intervene.

Its long-awaited response to the Productivity Commission's housing affordability inquiry this week is the first step towards more affordable housing options. But it will not be a quick or easy journey, and it may not work at all.

That's because the price of a new house involves complex factors, such as the supply and cost of land. Part of that cost is the the infrastructure - water, roading and sewerage - needed to service it.

Councils charge fees for consents and development contributions, and then there is the actual cost of construction that is rising as materials become more expensive.


The recession has slowed the number of new homes built and put up for sale, while low interest rates have helped fuel demand, adding pressure to prices.

Depending on who you listen to, our affordability problems stem from councils' excessive fees and restrictive zoning, developers land banking or stalling, or building companies charging too much.

The Government's suite of measures to tackle the issue include freeing up more land for homes both within and on the fringes of cities; a six-month time limit on council processing of medium-sized subdivisions; improving the provision of infrastructure for new housing and improving productivity in the construction sector.

Finance Minister Bill English admits it will be years before the measures affect home affordability. He warns that councils that do not move on the Government measures could be forced to by legislation.

The Government's pace has been criticised as too slow, but intervening in the housing market carries political as well as economic risks.

Prime Minister John Key says the Government is moving cautiously because New Zealand homeowners would not "thank us if we took actions overnight which devalued their most valuable asset".

Freeing up land on city fringes, particularly in Auckland and Christchurch, also runs into sprawl territory with its associated pitfalls such as extra infrastructure costs.

Nelson city says it has plenty of residential zoned land available, and the Government measures are aimed mainly at the big cities.

Yet the latest Massey University home affordability report puts Nelson-Marlborough as the third least affordable region in the country after Central Otago-Queenstown Lakes and Auckland, despite a 5 per cent improvement in the last year.

So prospective homeowners here could benefit from any government measures to encourage the construction of more affordable housing. Just don't hold your breath.