Businesses struggle to attract staff as road congestion and cost of property erode city’s competitiveness.

Auckland housing became even more unaffordable over the past year, as house prices rose much more than incomes.

More and more people are renting, forced into it.

There are many consequences. A small and diminishing pool of people are getting wealthier by buying houses from each other. But it is coming at a great cost to future generations and may even be putting the future success of Auckland at risk.

Until recently home ownership has been a culturally important route to adulthood, retirement savings and financing for starting businesses.


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Taking the cost of servicing an average mortgage, Auckland has the third lowest household income after housing of all the regions. Taking transport time and cost into account, Auckland has the lowest income after housing and transport of all the regions.

Many businesses are finding it difficult to attract staff to Auckland, unless they are prepared to compensate out of towners a premium to get into Auckland housing.

While larger and profitable businesses can do this, smaller firms and employees in education, health, justice and emergency services are well out of pocket. There needs to be some premium for locations with high paying jobs, like in Auckland.

This is because Auckland is a complex economy, which generates many highly skilled and many unskilled jobs. Because the highly skilled jobs are well paid and tend to drive up the cost of living, as well as increase the earning power of unskilled workers, everyone is better off.

Auckland has gone well beyond that, where the cost of living is so high that only those who bought houses early or those with very high incomes are able to buy into the market.

The very high cost of housing and congestion on roads in Auckland are eroding the city's competitiveness. Medium skill jobs are being outsourced to places like Hamilton and overseas.

Prospective businesses may decide to set up in a truly global city, rather than an aspiring global city, like Auckland.


Housing is the biggest risk to Auckland's dream to be a global city.

This path is not guaranteed by any means and unless housing and transport problems can be fixed, Auckland will be yet another big city in a small country with little global relevance.

The housing crisis is of our own making. Our planning rules are out of step. The way we fund local government and infrastructure are fundamentally unsuited to a growing city.

Planning rules are slowly being changed. But the reality is we need to house more people close to work and transport. That means adding modest amounts of density across large parts of Auckland, but most specifically around the main transport corridors.

Better planning on its own won't be enough.

Local governments do not have the right funding structure to invest in long lived infrastructure. Constant demands for more rates, to fund the growth for future residents is politically destructive.

Rather other mechanisms like targeted infrastructure bonds and borrowing prudently can be better ways of letting the true beneficiaries, future generations, benefit and pay from the investment in new infrastructure.

While there are many critics and analysts who will point to interest rates, immigration, foreign buyers and capital gains as causes for Auckland's severely unaffordable housing, they are wrong.

These only add to the cycle and are not the fundamental causes.

Shamubeel Eaqub is an independent economist.
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