5 November 2014

Land for housing review welcomed

The New Zealand Initiative has welcomed the launch of the Productivity Commission’s issues paper on land supply for housing, saying it was well past time for a review of the effect of local government rules on house prices.

The think tank’s own research, Priced Out and Up or Out?, has shown how artificial planning restrictions on building heights i n inner-city areas and land supply at the urban fringe were major drivers of house price inflation.

As it stands, land cost accounts for 60% of the end price of a newly built home in places like Auckland, whereas in Germany and Switzerland – jurisdictions that have kept home prices largely stable in real terms for decades – that figure is closer to 30%.

“In New Zealand, the supply of land has simply not kept up with population growth, which is absurd when you consider that urban areas account for less than 1% of the country’s total land use,” said Dr Oliver Hartwich, Executive Director of the Initiative.

“The planning misconception that demand is the real issue only makes the problem worse. The Kiwi dream of the quarter acre is long gone in our major cities. What people really want is quality housing within commuting distance of work that they can afford – something the market has been hard pressed to deliver under the current framework.”

Hartwich said, however, that it was overly simplistic to lay all the blame for the lack of housing affordability at the feet of local councils, since many of their decisions are steered by central government regulation and funding constraints.

“We are encouraged to see that the Productivity Commission will take a holistic view of the regulatory settings that govern how councils make land available for development,” he said.

ENDS

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