Anne Gibson

Property editor of the NZ Herald

Factions divided on why NZ housing so expensive

The Business Herald this week investigates New Zealand's housing affordability crisis - how bad is it, what caused it, the political response and solutions to the issues. Anne Gibson reports

Productivity Commission blames restrictive land supply for high housing prices in New Zealand. Photo / Brett Phibbs
Productivity Commission blames restrictive land supply for high housing prices in New Zealand. Photo / Brett Phibbs

Auckland developer Brady Nixon reckons his Ponsonby project for the former Soho site ticks all the boxes - high density like Auckland Council wants, 30 lots on straight-forward fee simple titles, using excess land around a proposed Countdown supermarket to bring a new urban community into the area.

But like many new Auckland housing projects, the places being offered by Progressive Enterprises are not cheap - the sites alone are priced from $275,000 to $1.4 million.

Why are Auckland and Christchurch houses so cripplingly expensive that they match New York levels?

The causes of this economic blight divide people, usually according to their politics, although no single reason is to blame.

The right-wing faction cites ring-fenced urban boundaries, environmental constraints and demands, eco-madness, red tape, the Resource Management Act, high local body costs and big development contributions.

Christchurch's Hugh Pavletich annually publishes his Demographia International Survey which pegs us as having some of the world's most expensive cities.

The left-wing cites high construction costs and Fletcher Building's role in supplying many housing materials, greedy banks dishing out too much money, tax favouring speculation and rampant motorway building leading to urban sprawl.

Gary Taylor, of the Environmental Defence Society, Auckland engineer John Scarry, Labour Auckland Issues spokesperson Phil Twyford and the Salvation Army are more in this camp.

So what is the real reason?

The Productivity Commission's Housing Affordability Inquiry studied the issues before reporting to the Government in April, although many on the left say it took too much of a free-market right-wing stance.

The commission blamed restrictive land supply but ruled out recommending tinkering with tax.

Commission chairman Murray Sherwin said he had looked at housing boom drivers and ruled out taking a state interventionist line.

"We carefully considered the claims that housing is tax advantaged, but concluded that any advantage is much smaller than often suggested."

Containment policies such as smart growth and Auckland's metropolitan urban limit were found by the commission to be the root of the problem, crippling new housing supply by limiting land availability.

"Pressure on land prices needs to be reduced and the commission has recommended that there be an immediate release of new land for residential development in high-demand areas such as Auckland and Christchurch," Sherwin said.

"Councils should also ensure they aren't putting up barriers to development and should take a less constrained approach to urban planning."

The Government is yet to respond.

- NZ Herald

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