Bernard Hickey: Housing promise without a plan

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Building 39,000 affordable homes would be wonderful, but right now it's a promise in search of a solution. Photo / Thinkstock
Building 39,000 affordable homes would be wonderful, but right now it's a promise in search of a solution. Photo / Thinkstock

The Auckland Housing Accord at the centre of this week's Budget is what the Americans would call a "Hail Mary pass".

Bill English and Len Brown have committed to issue 39,000 building consents over the next three years in a belated attempt to deal with Auckland's housing shortage.

They hope new supply will cap the latest 10 per cent-plus surge in house prices that the Reserve Bank warned could derail low inflation from its 1 to 3 per cent track and trigger interest-rate hikes. The Government and Brown know their re-election hangs on the perception they are "doing something" about the housing crisis. But this forecast of 39,000 consents is barely believable. Issuing 9,000 consents next year will more than double what we've seen in the past five years.

The 44 per cent jump in 2015 to 13,000 consents will see more consents than at the peak of the building boom in 2003/04, before the doubling of land and house prices.

The explosion in 2016 to 17,000 consents is just not credible, given neither central government nor the Auckland Council plan to build those houses. The assumption is that once it is easier to get consent, the buyers and developers will be there with cash in hand, and the tradespeople will be there with tools in hand. This cannot happen given the lack of skilled workers in Auckland, the land and construction costs, and the lack of development finance.

The real problem is the 25 per cent over-valuation of land and buildings. This will be magnified by the interest-rate hikes expected over the next two years. Until there is a reduction in land and building costs, and a plan for new home-building companies and infrastructure to support new houses, the consent forecasts are an empty promise.

Building 39,000 affordable homes would be wonderful, but right now it's a promise in search of a solution.

Debate on this article is now closed.

- Herald on Sunday

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