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Dr Muriel Newman

Policy Failures Make Housing Less Affordable

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Housing crisisNew Zealand is not immune to policy failure. Public policies that might have worked yesterday can become problematic tomorrow. While the consequences of some policy failures may be marginal, the impact of others is not.

‘Green’ ideology is responsible for many of the public policy failures that are evident in New Zealand today. The green way is to create a moral panic to put public pressure on decision-makers to force change. While many green policies are irrational and illogical, most media these days no longer question the foundation of their extremist environmental claims. As a result, through green pressure and soft public opinion, politicians will often implement policies that do more harm than good.

Our housing shortage is a case in point. The United Nations commitment to ‘sustainable development’, long supported by successive New Zealand governments, spawned a planning ideology that favoured housing intensification – to prevent urban sprawl from destroying the environment.

While it could be argued that there may be some justification for preventing urban expansion in countries where there is a chronic shortage of land suitable for housing that is not the case here. New Zealand has an abundance of suitable land – the area occupied by human habitation (housing, business developments, and roading) is less than one percent of our total land area!

Nevertheless, a ‘diaspora’ of planning graduates, glowing green with the socialist smart growth ideology, went on a mission to constrain greenfields development in New Zealand. Most local government politicians failed to recognise this and have now become part of the problem, as their staff – supported by advocates, such as those within the Department of Conservation and in groups like the Environmental Defence Society – have tied up local land usage in green tape and compliance costs. The effect has been to constrain the supply of land suitable for housing, preventing the free market from delivering affordable housing in many parts of the country.

On the other side of the market equation, the demand for housing has been elevated by record levels of immigration – 67,600 over the last twelve months, due largely to fewer Kiwis leaving, and more returning home.

Most new migrants move to Auckland, putting pressure on that city. But housing demand is now growing in many other centres, as returning Kiwis move back to their home towns, as more and more Aucklanders cash up for life in the provinces, and as property investors look elsewhere for bargains the City of Sails is no longer providing.

With the housing shortage particularly evident in Auckland, this week’s NZCPR Guest Commentator, Dr Phil McDermott, a consultant in development planning for over 30 years and a former Professor of Resource and Environmental Planning at Massey University, highlights the failings of urban intensification – and bigger councils:

“In 2010 the eight Auckland councils were amalgamated into one.  I’m not sure why and my early prognosis gave the experiment five years before failing.  This was based on the unwieldy nature of the proposed council – multiple layers of management were bound to complicate and slow down decision-making and further remove policy-makers from the places and people for whom they are actually making policy. More managers also means much higher wage costs, more internal meetings, and a reduced capacity to respond on the ground to the needs and wants of different communities and places.

“Most people are beginning to understand that the approach promoted in the Auckland Plan of using less land to absorb more development is pushing up prices for housing, costs for businesses, and congestion for commuters.  And these inevitable outcomes of rationing urban land can be compounded by inadequate infrastructure provision. It’s certainly time for the council to have a rethink.  But I’m not holding my breath.  The last time planners recognised their plan for a compact city was not working, they simply argued for more regulation.”

As Dr McDermott has indicated, the new Auckland Council’s planners embraced metropolitan limits to prevent urban sprawl, creating an artificial scarcity of land that is driving up prices to record levels. Land inside Auckland’s urban boundary is now costing around 10 times more than land outside. As a result, the average price of a new section in Auckland is 60 percent of the cost of a new home, compared to 40 percent around the rest of the country.

Through their Proposed Unitary Plan, the Auckland Council’s smart growth planners – and clearly a majority of the Councillors – want Auckland to have the sort of urban intensification found in Melbourne, Vancouver, London and New York. The Plan contains a proliferation of terraced housing and apartment buildings to cater for up to a million new residents over the next 30 years.

But is higher density living, what Kiwis really want?

Instead of urban intensification, many think the answer lies in relaxing the metropolitan boundaries and freeing up land on the city’s fringe to help meet demand. They cite Houston Texas as a case study for Auckland.

Houston has a buoyant economy, a population of 6.5 million and affordable house prices. The current median house price is just under NZ$300,000 and the median household income is around NZ$85,000.

In comparison, Auckland’s median house price is $820,000 and the median household income is over $88,000.

Houston’s low cost of housing is mainly attributed to a lack of zoning for land outside the city. This means private property owners are free to develop housing on the city’s outskirts – provided they meet the environmental regulations. This enables a proper housing market to operate, with housing supply meeting demand.

With the demand for property in New Zealand being exacerbated by mortgage interest rates at a 60-year low, a number of measures have been introduced to try to curb the escalating demand for Auckland housing.

The Reserve Bank now requires trading banks to ring fence housing investor loans and to collect bigger deposits for property sales in Auckland.

Central government has introduced a bright line test to ensure that any property bought and sold within two years is subject to a capital gains tax. A requirement for foreign buyers to have a New Zealand IRD number and bank account has also been introduced, to discourage speculative investment.

More recently, in response to the on-going claims that it is largely foreigner buyers who are forcing up the demand for Auckland housing, the Prime Minister has threatened to impose a land tax on foreign-based buyers – and also on non-resident Kiwis who have been living abroad for three years or more. He has cited the example of the Australian state of Victoria, which imposes a 0.5 percent land tax on offshore owners – with an exemption for New Zealand citizens. He says the tax is applied annually, with land values recalculated every two years.

Mr Key says that if the results of their research, which is expected shortly, shows that foreign buyers are a key driver of house price inflation in Auckland, the Government will seriously consider introducing a land tax.

But the problem with a land tax, of course, is that once such a mechanism is in place, it can easily be extended to all properties as a convenient way for any future government to collect billions of dollars of additional revenue. Given that risk, a land tax should be strenuously opposed.

While local government must shoulder the responsibility for the chronic shortage of land for building new homes, central government has contributed significantly to the escalating cost of housing.

The nature of politics is that politicians must be seen to be dealing with problems – often, actually resolving the problem is secondary! That typically creates knee-jerk policy responses with loads of unintended consequences.

That is precisely what happened in the aftermath of the leaky buildings saga and the Christchurch earthquakes. Many of the changes imposed on the building industry were excessive and have significantly forced up the cost of housing. In addition the regulation of builders has resulted in massive increases in the cost of labour, as some builders increasing their charge-out rate by tens of thousands of dollars a year, straight after becoming registered.

One of the biggest cost burdens on housing development, however, was introduced by the Labour Government in their 2002 Local Government Act reforms, when they allowed councils to impose a new tax on developers. Ostensibly designed to recover the cost of providing water, sewerage, footpaths, roading and other infrastructure services to new subdivisions, councils were meant to reduce rates to offset these development impact fees.

However, the charges were seen by councils as an easy way to extract extra income from developers – although in reality it was new home buyers who paid the price through higher mortgages, as developers added the fees onto the cost of a new home.

Surely a better solution would be for councils to simply charge those new home owners a special rate to cover the cost of infrastructure. That way, the home owners would contribute – but not through higher house prices.

To date, central government has largely focussed on peripheral solutions to the housing affordability problem.

One such ‘solution’ was to introduce Special Housing Areas, to bring more homes onto the market at a faster pace, through fast-tracking the consenting process – three months for ‘brownfield’ and six months for ‘greenfield’ developments. However, we are hearing of cases where the bureaucracy is again getting in the way, with developers turning up to meet councils, only to find that iwi are there as well – even though there is no requirement for iwi consultation. The response of council staff is to say, “Well, iwi want to be involved, so we’d better let them” – or words to that effect! The end result is that instead of being fast tracked in three to six months, some approved housing projects are taking two or more years before they can begin. The fast track has been well and truly derailed!

The fact that the Finance Minister Bill English is now suggesting that the Government could considering setting a house price-to-income ratio for local bodies to ensure that councils release sufficient land to keep their housing affordable, merely demonstrates how desperate National has become and how ineffective their attempts to address the problem have been to date.

The reality is that if the Government is really serious about cooling the over-heated housing market, they should be focussing on properly overhauling the resource consent process.

The on-going problem of excessive delays and costs associated with the resource consenting is something National had promised to address during this term of Parliament. In fact when Minister Nick Smith announced his plans for Resource Management Act reform early last year, he explained that fundamental changes were urgently needed.

However, when their reform Bill was finally tabled in Parliament late last year, it turned out that their plans had been severely compromised by the Maori Party, which had agreed to support the bill to a Select Committee as long as the major reforms – to give economic considerations the same weight in law as environmental concerns – were dropped and special rights for Maori were included.

With Winston Peters now offering to support a comprehensive reform of the RMA – as long as National removes all separate rights based on race from the Bill – it is clear from the present escalation in house prices around the country, that these reforms have become urgent.

It will be a real test of National’s commitment to genuine RMA reform, to see how they react – whether they will accept New Zealand First’s offer to reduce the disastrous delays in housing development at this critical time, or whether instead they decide to implement the Maori Party’s racist measures, that will impose new layers of iwi consultation, costs and delays on applicants and councils, that will make the housing crisis a whole lot worse.


Do you believe over-regulation is preventing the market from delivering affordable housing?

*Poll comments are posted below.


*All NZCPR poll results can be seen in the Archive.

Click to view x 120


Definitely, to many unproductive pricks making decissions to justify their exsistance. Clark
The compliance costs are simply ridiculous and contributing to high house costs — amongst other things. Alan
Always has. Barry
Lets get on with getting houses built. They are needed now not tomorrow and if iwi are contrubuting to these delays keep them out of the process. They do not have special rights to be there in the first place. John
Coupled with some contentious socialist ideas, like high-density, high-rise living, advocacy of Dangerous Anthropogenic Global Warming, & bureaucracy in general! Dave
Absolutely!! Brian
I am working on a house in Pukekohe. Getting towards 3 years without the first sod lifted. Rodney
Of course it is, not only with housing but with just about all other small business operations. Ralph
Having personal experience in the subdivision & development of land, I consider that the cost placed on developers is the PRIME factor in increasing section prices. nothing will change until these local body charges are reduced. Brian
Past experience shows it does. Lance
Add to that the ‘chain-dragging’ by Auckand’s Council in granting consents to make more surrounding rural land available for development and housing. JOHN
Asides the over regulation; there is also a dire need to change the way we look at housing. Contrary to the commentator – we do not have abundant land for housing. We have wasteful sprawl. It is time to thing small and tall. The quarter acre section is long gone but the ideal of a big green space is still with us. This is counter productive and unnecessary. Time to ‘grow up, less green and nice and lean’!!! Peter
The open door policy for foreigners to buy houses. For at least 3 years ban, all but Kiwi residents from house/land purchases. Limit annual immigration to 10,000 until house building catches up! David
It is foreign house buyers and landlords buying the houses causing all the problems. Lorna
A contributing factor – but the MAIN cause is houses bought as investement rather than a place to live – then sold for massive profit. Jack
Ridiculous green policies in vogue ensure more regulation, no point in more talking about it. Monica
As well as excessive Council fees, high cost of building materials, high cost of land, poor decision making by planners. Robert
It is taking far too long to get approval for building a simple house or do major alterations to an existing house. Keith
Who created this bureaucratic nightmare ? There are way too many “fat cats” (pigs) gorging themselves at the trough these days. Why do Key, Smith and the Maori Party think it’s a good idea to invite more of these useless parasites to trough ? If National is serious about streamlining the RMA then they should be getting rid of the barriers and the idiots who created them. Steve
You would have to be an absolute moron to think other wise. John
Too much “red tape”. Edward
Yes, of course it is our disastrously cumbersome and overly complex planning regulations that are causing the housing shortage. It is abundantly obvious to anyone with a whit of common sense, that local government incompetence and unaccountability is at the heart of the problem. Add to that the silly environment restrictions and now all this iwi nonsense. The very idea that Maori should have special input is absurd. I thought Maori were normal human beings, not some two headed monster that required special treatment in every circumstance. Dianna
The RMA is a dog. As a Nat MP in the 1990 I refrained from voting on the Bill. Genuine reform urgently required. Jeff
Go Winston! Alan
The present Government policy of fostering a supply and demand process for everything possible is not helping the average persons to establish an own home for themselves,the speculators are laughing all the way to their bank! It is like the wild west. Theodorus
Once again we see the Government letting Maori and their own inept Governing style get in the way of good and more speedy legislation. Wake up National. Laurel
Yes, most definately. Eric
Rewrite the RMA and get rid of Maori interference. Chris
I thought the review of the RMA was to reduce compliance costs and streamline bureaucracy. but the drafts I have read seem to be doing the opposite, particularly with regard to the requirement for iwi consultation. Michael
NZS 3904 gets bigger over time with more design constraints = higher costs Branz have phD’s constantly tweaking NZS 3604. Material suppliers that sit on NZS 3604 committee have their materials written into the code !!! Stj
More rules and regulations needing moore committees means more rules and regulation needing more committees, but we have to somehow keep those committees going. They are no good for anything else. Most committee members do not know what they are talking about. Johan
We must take basic housing away from market forces and fix the prices of houses at what they cost to build at the time they were built with inflation being ignored plus the cost of improvements and less the cost of any repairs needed all costed at the time they were done with inflation being ignored. K
No question. Stewart
While over regulation may be part of the problem, the main problem is the huge influx of immigrants. Auckland can never build enough houses quickly enough no matter the regulations to cope with the numbers pouring into the city. With no infrastructure to cope and many years of road works and difficult access around the city which also affects ability to build due to delivery difficulties, shortage of enough GOOD builders etc no amount of decreased regulation will help. The most effective thing is to limit immigration immediately and stop any purchase of non New Zealand citizens buying property. No residential property should be bought by overseas investors which is quite standard in most countries. They show common sense and are looking after their citizens. There should also be considerably more checks on immigrant builders who are building using very dodgy practices. We are in fact creating a scary disaster much like leaky homes. Any sensible person knows it is just not possible to build enough hpuses to accommodate the numkbers JOhn Key is allowing to pour in. About time he pulled his head out of the sand and did his job….looking after the best interests of New Zealanders. Gail
Of course, everyone wants to get a little slice of the fees, never mind the poor home buyer. Brent
We have too much over regulation here in NZ, it is time the National Party told the other parties to go stick it & get on with the job, of fixing the RMA.  Too many egos in parliament. Geoff
National must bring NZ first into the mix and bring in REAL changes to the RMA. Ronmac
National (as usual ) fiddles while the Auckland housing crisis escalates. Colleen
Absolutely it is, together with RMA (Right Mess Authority), MMP (More Maori Power), and IWI (I Want It). Bruce
Making Auckland a super city was the worst thing that could be done as it has now proved. Iwi should not have special rights to have unelected people on councils. They should stand like every other candidate has to do. We are one country. The country has gone over the top with over regulation that ends up costing the house purchaser. Frank
Although not too sure. David
The problem started in the sixties when it was deemed that medium density housing was third world. We now have vast areas of low density housing with no provision of medium density. Peter
New Zealand is one of the most over-regulated countries, it is abslutely ridiculous., and all these regulations simply serve to devoid the individual of any sense of self-responsibility. Michelle
Scaffolding is a point in question, cost to paint roof $10k cost of scaffolding to same roof $10k total cost $20K????? Sue
Much more land must be made available ! Andrew
Between bad planning and RMA it’s bad news, unless you’re an investor. Then it’s good news. Andrew
Local council staff appear to take every opportunity to place additional steps into the process to allow for more fees,and the IWI are taking full advantage of the opertunaty to hold out their hands as well. Bryan
‘Im all for accepting New Zealand First’s offer to reduce the terrible delays in housing development at this time, or and stop the Maori Party’s racist measures that will impose new layers of iwi consultation, costs and delays on applicants and councils, that will make the housing crisis a whole lot worse. Kerin
Clearly, the regulations created by the overwhelming numbers of bureaucrats has caused havoc with their unbelievable charges,ask any builder. This inflates the cost of building to proportions that prevent people getting their first home, this has been initiated by politicians with the introduction of the RMA, and councils fleecing home owners via rates, Auckland a prime example. The country is over governed and over regulated by inept politicians and city/town councillors, the country is polluted with these individuals and their bloated ego’s. David
We decided to build a new home but the council in its wisdom kept changing the rules and it took 3 months for the plans to gets to council and then 52 working days for it to be improved. They told me they do not have to answer to anyone. Cherryl
Through out New Zealand the ratio of administrators to those at the coal face is steadily increasing. Statistics for this field would be very enlightening – hard facts are superior to pipe dreams. Hopefully reality will triumph over conjecture. Barry
Over-regulation contributes to the problem, but it is not the only problem. We as a nation should not allow foreign ownership of ANY of our land, and we should not accept so many new immigrants as we do. We have no jobs or housing for our own people, let alone thousands of new ones. And we should not let one small group, the Maori iwi, dictate to our ELECTED officials about every single decision that is made. What has happened to our Democracy, where we are all equal before the law? Joyce
Too late to remedy the situation. Anon
Yes the resoure management act. Colin
I agree that more land should be made available, but the houses will remain just as unaffordable due to speculation. Nicola
There is too much cost in compliance and not enough genuine assistance in planning procedures. Many public servants fail to see they should assist development not hinder it. Graeme
The cities around the world with town planning controlled ‘ring fenced’ land have without exception the most expensive land cost component of building. Rex
A very long standing story Hylton
Consents, inspections, bonds…government gone nuts….thousands of public UNservants only interested in making sure they have a job today, tomorrow, the day after… Mark
The whole country is over-regulated and it is causing unacceptable delays. Also “giving” the “greedy maoris” an unelected seat at the table, which I had no say in, is clearly unconstitutional and fraudulent. Neil
…also excessive ‘land banking’ that has and continues to increase the cost of the land component of any reasonable human shelter’…… Christopher
We built our 1st home in the sixties on the North Shore of Auckland. It was a piece of cake compared with today’s builds. Dennis
My own experience has proved it to me. Council fees and mandated reports were over 15% of the cost of a renovation project Frank
OSH is also contributing, I imagine. Martin
What a mess. Tim
The escalation in costs and waiting time for approvals requires a revised bureaucratic approach. The compliance costs being shouldered by the public house buyers are hugely out of proportion to the services actually needed. Ian
It is unbelievable how this country has finished up being run by a pack of incompetent twits and racist Maori leaders. Get together a small group of sensible businessmen and get rid of racist legislation and the housing problems amongst others would eventually disappear. John Key and co have lost the plot. Mike
Over regulation is driving up the cost per Square Metre. Ross
Councils are RESTRICTING expansion of urban areas. John
The elephant in the room which the Government refuses to recognise is uncontrolled immigration. Returning Kiwis are only a small part of the number. I have no doubt whatsoever that an unwritten deal was done behind closed doors as part of the China FTA. Brian
Remove the Urban line “MUL” Change the councillors. Paul
Over-regulation per se is not the cause. The real cause is bad policy. Over-regulation merely exacerbates bad policy. Peter
Nanny State Shonkey and his left leaning undemocratic. Greg
A simple extension and renovation to our house is costing a massive $4500 per square metre. In places there are up to 7 layers of waterproofing over treated timber – complete overkill. Alan
Reality usually succeeds over regulation – massive immigration, numbers, minimal interest rates and broken marriages (two houses when there was one), more secure financial prospects investing in rentable homes than many highly leveraged alternatives. Then throw in “who can you trust to manage your money?” Stuart
No doubt about it and, apart from being a direct issue it provides an excuse for indirect opportunities to crank the price up. Mike
Yes, but over-regulation is only part of the problem. N.Z. has always been a food producing nation, but with money being the new number one industry, expansion of cities at any cost seems to be the order of the day. There is no shortage of land area in this country, but there is only a limited amount of really productive land. Why then is Auckland gobbling up so much once highly productive food producing land around Pukekohe etc., when thousands of hectares of less productive land in the North are yet to be developed.? Hamiltons expansion is even worse, with the Waikatos most fertile land now built on. As for the iwi input, well this government is so determined to implement APARTHEID, only a change in government make up will stop them. A.G.R.
Absolutely – 15 months for a building permit submitted by an architect?? Andrew
There are other places to live if house prices are too high for people. Peter
Without a doubt the hassle just to get a consent and the costs involved its crazy. Peter
Yes, over-regulation is a huge problem nowadays. For all their talk about sorting the problems out, National is just tinkering. John
The overheated housing market is just supply and demand. If councils had plenty of land already zoned for housing, prices would not have escalated to the present levels. So that comes back to incompetence in local government. Norman
If successive governments have supported smart growth, it is no wonder that planners have imposed these restrictions on council plans. It’s a great example of the left hand of government not knowing what the right hand is doing. Jesse
Over-regulation in the building industry os now chronic. Mike
Smart growth as an ideology should be banned in NZ and we should get out of these ridiculous UN agreements. Pete