Watchdog's first job: Find out why houses are so unaffordable

Photo / Paul Estcourt

Auckland's notoriously unaffordable house prices will be a key area of research for the Government's newly formed Productivity Commission, which is already under fire for advancing the interests of developers and the political right.

Finance Minister Bill English and Regulatory Reform Minister Rodney Hide said yesterday that the commission's first inquiries would be into housing affordability and international freight services.

The commission is one of the fruits of Act's confidence and supply agreement with National.

Mr English said housing affordability was selected as an initial area of focus because New Zealand was "paying the price now for a housing boom that got out of control".

"We need to learn some lessons from that and to take the opportunity to lock in more affordable housing."

It was critical to efficient allocation of capital in the economy, he said.

"If we want to have more investment into the export part of the economy we need the right kind of rules that don't drag that capital back into housing."

The commission's terms of reference require it to identify and analyse all components of the cost and price of housing, giving particular attention to "factors influencing the supply of land and basic infrastructure for residential construction" and the effect of regulations on productivity in land development and construction industries.

This year the Demographia International Housing Affordability Survey found New Zealand houses were among the world's most expensive and Auckland homes were less affordable than those in New York.

The co-author of the survey Hugh Pavletich, a Christchurch-based property developer, argues that urban planning restrictions have driven up house prices by starving the market of land available for residential development.

Yesterday, Mr English said the supply of land for housing in Auckland was "certainly part of the discussion" the commission would undertake.

"On the international rankings, Auckland housing is pretty expensive and it would be good to understand why that is.

"I would hope the commission would produce analysis that is useful to local councils."

The commission is modelled on the Australian Productivity Commission whose head, Gary Banks, has been advising on the set-up of the New Zealand version, said Mr Hide, who believed the structure meant productivity issues could be discussed in a non-political way.

But Auckland councillor Mike Lee said the commission's terms of reference implied "politics as usual".

"This would be about placating vested interests who happen to be party donors [who are] especially important to Act. The Government is, of course, incessantly lobbied by its supporters and donors to step in and override council ordinances designed to contain urban sprawl - the current pretext being housing affordability."

National Distribution Union general secretary Robert Reid said any discussion about housing affordability should consider implementation of a capital gains tax "on all properties except the family home".

Meanwhile, Mr Lee was also concerned that the commission's work on international freight services "will inevitably be about privatisation of our ports, especially our publicly owned port which is 100 per cent owned by the people of Auckland".

Mr English said the Government believed international freight services was "an area that needs to be tested and it's a long time since we deregulated ports and transport - 25 years or so - and no one's really looked at it that hard".

HOUSING STUDY

MODERATELY UNAFFORDABLE

United States

SERIOUSLY UNAFFORDABLE

Canada, Ireland, United Kingdom

SEVERELY UNAFFORDABLE

New Zealand, Australia, China

Source: Demographia study 2011