Housing crisis: Change the way Kiwis live
How can we get more Kiwis into their own homes? Mark Thode says it's all about supply and demand.
The current response to the housing affordability crisis is to increase the supply of housing within the market. The logic being that this will reduce the demand and make housing more affordable to first home buyers. Combined with some trick government incentives to developers, new homes will be able to be priced within the magical 'affordable' bracket.
I challenge anyone to suggest to me that a house of $400k is affordable to the average Kiwi. I also challenge anyone to tell me how buying a house in a 'special housing area', constructed on the periphery of Auckland's urban limit and miles from typical employment centres, will be affordable - commuting will take a long time and the infrastructure to service these residential areas does not exist (schools, retail amenities etc (more driving).
It is also interesting that the Government has reduced the development contribution levy on developers in order make these 'special housing area' developments more palpable. What that means is that the monies usually relied upon by local councils to fund the very infrastructure needed to service these developments (stormwater, wastewater, roads etc) is reduced. Therefore there is a well-known group who will, inevitably, foot the bill for this: the ratepayer.
How is this affordable? It is not.
The current crisis is a result of lax lending practices, low equity homeloans, extremely low interest rates and foreign investment. This has created the demand for housing as more people can 'afford' a house. Naturally, the market responds by house prices increasing.
How can we fix the issues?
Tightening of lending criteria is a start but I feel this is a step too far as it excludes the very people who are suffering, making it impossible for them to even get a loan in the first place. Serious thought needs to be given to interest rates as this is what dictates whether someone can afford to service a loan or not. That would have the flow on effect of reducing (particularly at auction) the bargaining power of many buyers and eventually bring the market back to some semblance of order.
We also need to ask ourselves whether expanding our largest city ever-outwards is sustainable and 'smart'. Low density development on the periphery of the city miles from nowhere is perhaps the most outdated and archaic form of urban planning.
I think Auckland's Unitary Plan, with a focus on intensification, strikes a good balance. Many are opposed to it because they still live in the idealised 1950s quarter-acre paradise dream state. I am sorry but times are changing and if you want affordable housing it is not just about supply. It is the whole package - being close to urban centres, reduced transport costs, higher density living, and fundamentally, a change in the way New Zealanders are accustomed to living.