Government ministers seldom lose an opportunity to lambast Auckland Council, as Housing Minister Nick Smith did again at the weekend, for inhibiting residential development in and around the city. It is convenient for the Government to attribute the price of houses entirely to a lack of supply because it enables it to avoid taking effective action to reduce demand for investment homes. It is an argument that makes the Government popular with home owners who have already invested heavily in multiple houses, for it not only relieves them of effective taxation but promises to supply Auckland with many more potential investment properties.

It is also convenient for Auckland Council to receive repeated public lashings from the Government on the issue, because the council is under even greater pressure from its residents and ratepayers over higher density housing in its proposed Unitary Plan. The plan, which will guide the city's zoning and building for the next 20 years, has a deadline of October 8, just before local body elections. Two years of public hearings have just been completed and the hearings commissioners will probably need to recommend much greater density allowances than the council has proposed if Auckland is to have any hope of accommodating its projected population.

Increased density is bound to bring another outcry of the scale already seen this year when the council tried to provide commissioners a higher-density proposal than the one it had published. When it comes to the crunch, council members will be able to blame the Government for the suburban density levels they know they should approve. Finance Minister Bill English does not dismiss the possibility of replacing them with commissioners, "because it's pretty important that plan enables enough supply to meet demand". But it is Mr English's job to tackle demand, too. The pace of house price rises cannot be slowed just by building more houses, particularly more "affordable" houses. Those are exactly the stock investors are looking for. The cheaper the house for its location, the better the likely capital gain. There is no limit to the demand for speculative property in and around Auckland, and making more land and housing available will only add more fuel to the fire.

Obviously Auckland's projected population growth requires a much greater rate of house building than we have yet seen. The council now accepts the city has to expand outwards as well as upwards, and the Government accepts that permissive zoning is being nullified by speculative "land banking". Mr Smith acknowledged that fact at the weekend. But neither he nor Mr English have an answer to it. A land tax mooted by the Prime Minister a few weeks ago is said to be no longer under Budget consideration because it was an answer to foreign investment in the housing market which, on the first figure available, appears insignificant. But the problem does require a multi-pronged solution. Whatever the source of the demand for Auckland houses, it will remain insatiable if the Government pretends it is purely a problem of supply.


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