Social impact of unaffordable housing

22:19, Jan 28 2014

LIZ McDONALD reports on an international property conference where housing affordability was called a social and political issue.

Housing affordability, or the lack of it, has been very much a topic of conversation in Christchurch recently.

At the same time that a study ranked the city's housing as severely unaffordable, academics discussed the issue at an international conference at Lincoln University.

Delegates attended the Pacific Rim Real Estate annual conference from not just around the Pacific, but also from Europe and North America.

Opening the forum Harvey Perkins, professor of human geography at Auckland University, said unaffordable housing not only affected homebuyers but had significant social impact.

For example, New Zealand superannuation was calculated on the assumption that the elderly owned their own homes, which was becoming less the case.


John McDonagh, a property lecturer at Lincoln, said while loss of housing in the earthquakes had added to existing affordability problems, the red-zoning of cheaper suburbs in east Christchurch had made things worse.

The city had lost large stocks of affordable older houses, inexpensive ownership flats, and rental homes.

"There are all these areas in the east dominated by 1950s and 60s housing. There is no more supply like that being built now".

While cheaper smaller homes with three bedrooms and a bathroom had been lost, new homes being built tended to be bigger and pricier homes, McDonagh said. "A lot of those [red- zoned] people have not been able to afford to buy in the west.

"Low-value houses have been removed from the market".

Larry Murphy, property professor at Auckland University, said some issues around affordability were political. Local government planning rules aimed at compact cities and more efficient use of infrastructure pushed up land prices, while central government was more likely to want freer zoning due to public concern at rising house prices. Conflicts also arose between conservative market-led ideals and liberal planning-led ideals, he said.

When central and local governments co-operated, it could lead to outcomes such as last year's Auckland housing accord. Murphy also said that when news media warned of a housing crisis, this could become a self- fulfilling prophesy as owners and landlords wanted more money to sell or rent out homes, pushing up costs.

Such headlines could also trigger Opposition politicians into speaking out, leading to Government action in response.

Gary Garner, senior property lecturer at Lincoln, outlined his research showing how red tape pushed up home prices. Holding costs incurred by land developers going through rezoning, subdivision, and consent processes added tens of thousands of dollars to section prices, he said.

The longer the process took, the more the sections would cost.

Holding costs got little attention because they were "not so visible" as other cost inputs, but had a "significant impact" on the cost of homes, Garner said.

Meanwhile, the annual Demographia International Housing Affordability Report released last week ranked Christchurch housing as severely unaffordable. The report, co-authored by Christchurch former property developer and land-use lobbyist Hugh Pavletich, compared incomes with house prices in 85 cities in mostly English-speaking countries.

Christchurch, Wellington and Auckland all ranked in the bottom third of affordability. Buying a median-priced home in Christchurch was calculated to cost 5.8 years' median household income. The report considers house prices of more than three times three year's household income unaffordable, and those above five year's income severely unaffordable.

It said that while New Zealand incomes had stagnated, the county's house prices had risen quickly.

Dearest in the survey was Hong Kong, where the median home price was almost 15 times the median income. Other pricey cities were Vancouver, Honolulu, and Sydney.

The cheapest were mostly smaller cities in the United States, where homes in some cases cost less than two years' income.


Years of household income needed to buy a house:

Hong Kong 14.9

Vancouver, Canada 10.4

Honolulu, USA 9.6

Santa Barbara, USA 9.3

Sydney, Aust 9

Melbourne, Aust 8.4

Auckland, NZ 8

Gold Coast, Aust 7.7

London, UK 7.3

Adelaide, Aust 6.3

Toronto, Canada 6.2

Perth, Aust 6

Christchurch, NZ 5.8

Brisbane, Aust 5.8

Wellington, NZ 5.5

Miami, USA 5.3

Dunedin, NZ 5.2

Singapore, 5.1

Perth, Aust 4.9

Montreal, Canada 4.7

Tokyo-Yokohama, Japan 4.4

Dublin, Ireland 3.7

Detroit, USA 2.5

Utica, USA 1.7

Rockford, USA 1.7

Source: Demographia

The Press