House prices are ridiculously high and the fact that none are being built for people on low incomes is unsustainable, says Finance Minister Bill English.
Speaking at the launch of the Herald's Mood of the Boardroom survey yesterday, English said housing affordability was "quite a turn-off for young Kiwis".
"The prices you pay for a house are ridiculous and they look that way to 24-year-olds with lots of student debt and the prospect of better pay in Australia," he said.
"The most unfair aspect of it is that there's no housing being built for people in the lowest quartile of income. Like none. That is clearly unsustainable."
It's also a problem for a Minister of Finance trying to return the Government's accounts to surplus.
"If we want to get back to surplus and keep it there, we cannot afford to have the Government providing growing subsidies to a housing market that then flow into higher levels of debt," he said.
"That cycle does not make sense and we intend to break it."
Asked later how, English was noncommittal but said any changes to the accommodation supplement or income-related rents would have to be made carefully.
The Government has yet to respond to the Productivity Commission's report on housing affordability, a key recommendation of which was that local bodies free up more land for housing.
English indicated the Government was considering changes to planning processes and they would have to go beyond the issue of urban limits.
"It's about an attitude," he said. "We need local government committed to providing the housing that is needed, not to producing perfect plans."
Labour's finance spokesman, David Parker, said one factor making building more costly and frustrating than it need be was that too much legal risk had been imposed on councils.
"In my opinion there is need for a fundamental rethink," Parker said.
"It is a nonsense that ratepayers are in effect the insurers of last resort in cases of faulty building," he said.
"Until we unwind the effects of some court decisions in the 1970s we'll be stuck with this over-bureaucratic approach, driving a lot of cost."
The tax system also sent a signal to invest in property speculation, Parker said.
"We need a neutral investment signal, rather than a tax bias that directs too much money into property and speculative activity. A capital gains tax is essential."