Tauranga and Auckland among world's least affordable cities, but Govt is fixing it: study

Tauranga was ranked the as the eighth least affordable housing market in the world. Photo / File

Tauranga and Auckland might be among the world's 10 most expensive housing markets when measured against income, but the Government is taking the right steps to ease the crisis, a global study's author says.

The 15th annual Demographia International Housing Affordability Study ranked Tauranga the eighth most "unaffordable" city and Auckland the ninth after comparing data from nine developed countries.

Only Hong Kong, Vancouver, Sydney, Melbourne, Santa Cruz, San Jose and Los Angeles were ranked ahead of the Kiwi cities.

It meant Tauranga and Auckland residents earning median salaries would need about nine years to buy a median-priced home - even when pouring every cent into the payments.

Despite this, New York University researcher Alain Bertraud, who wrote the introduction to this year's Demographia study, commended the current Government for taking the "best approach" to fixing Auckland's housing crisis.

This included its plans to remove the Auckland urban growth boundary, allow greater housing density and use innovative measures to fund new infrastructure.

"After the Government has successfully passed these reforms, the international community will watch with great interest the impact it will have," Bertraud said.

"It is hoped that the example of Auckland will create a blueprint that could be used in other high price-income ratio cities."

The measures come as Auckland houses have become increasingly expensive compared to incomes over the past 15 years.

The city's house prices are now nine times higher than a resident's typical wage. In 2004, they had been just 5.4 times higher.

That prices had become so out-of-whack with wages in an otherwise "exceptionally well-managed country" like New Zealand showed how resistant Governments and interest groups could be to tackling the problem, Bertraud said.

He said the solution lay in ensuring there was enough land available to build on that had adequate road, sewerage and transport infrastructure.

This, in turn, ensured enough houses were available and allowed the market to determine a healthy balance between cheaper and more expensive homes.

By contrast, he warned Governments and policy makers around the world to avoid using "clever regulatory gimmicks" to tackle the problem.

This included subsidising housing for low-income earners and using zoning regulations to force developers to build cheaper or smaller homes, Bertraud said.

"The trade-off between housing standards, like housing sizes, densities, lot sizes and location are always better left to the decision of the consumer, and not the whim of the regulator," he said.

National's Housing spokeswoman Judith Collins said the Government's attempt to artificially interfere in the market by construction of cheaper KiwiBuild homes had failed.

"It's about supply and demand – this Government has promised to build 100,000 houses, so far it's only built 33," she said.

She also said the Government had not done enough to free up new land.

"Right now it takes too long to free up land, and the Resource Management Act is key to this," she said.

"We're working on a wholesale reform of the RMA, and we are committed to having a proposal by 2020.

"New Zealand needs a bold solution to a law that has proven to be a planning nightmare."

Collins also accused the Labour Party of scuppering attempts to reform the Act when it was in opposition.

"For nine years in opposition, Labour railed against sensible RMA reforms that National put forward," she said.

However, the Government's Duty Minister backed the comments by the Demographia's Bertraud.

The Minister said the Government had made progress on new ways to finance infrastructure and was pressing ahead with plans replace Auckland's urban growth boundary and "free up the rules on intensification".

"These policies are all designed to allow our cities to grow, while protecting the environment, instead of suppressing growth and driving up house prices," the minister said.