Decisive action on red tape – not KiwiBuild – is the answer to New Zealand’s housing affordability problem

Wellington (22 January 2019): Decisive government action to free up the supply of land for housing and to reduce construction costs across the board is the only viable remedy for New Zealand’s housing affordability problem.

KiwiBuild – the government programme to build or deliver 100,000 homes in 10 years ¬– is a massive distraction from fixing the housing problem, according to a new research report,KiwiBuild: Twyford’s Tar Baby, released today by The New Zealand Initiative.

“The simple fact is that government does not need to commission new houses to increase the supply of land for housing or to reduce regulatory constructions costs”, said Dr Bryce Wilkinson, senior research fellow and author of the report.

The report explains why it makes no sense for taxpayers to subsidise KiwiBuild homes, but neither does it make sense for government to commission houses on an unsubsidised basis. The former is embarrassing on equity grounds, as was seen with KiwiBuild in Papakura. The latter risks the embarrassment of unsold homes, as with KiwiBuild in Wanaka.

Regulatory red tape is behind the astronomical property price inflation in Auckland.

Median section prices in Auckland reportedly rose 903% between 1993 and 2018. Artificial constraints on land supply are a major factor. Research has found that land inside the artificial Auckland City boundary was around 10 times more expensive than land just outside it.

Adding insult to injury, construction costs per square metre rose by 212% between 1993 and 2018 in Auckland, more than twice as fast as the consumer price index. Council regulations have reportedly added between $32,000 and $60,000 to the cost of constructing a dwelling in a subdivision.

“Government can and should take action to reduce such cost excesses across the board, independently of KiwiBuild”, said Dr Wilkinson.

The report also explains why KiwiBuild cannot be expected to increase the proportion of home ownership in New Zealand materially, or the long-run housing stock.

Lacking a coherent rationale, KiwiBuild is a floundering policy.

Read more:
KiwiBuild – Twyford’s Tar Baby is now available on our website.

ENDS

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