Low income Kiwi households struggling with unaffordable housing, OECD report says

Saturday, 23 January 2021

Prime Minister Jacinda Ardern said fixing the housing affordability crisis was a priority for the Government.

A housing affordability report released by the OECD organisation of developed nations has ranked New Zealand top for unaffordable housing for its poorest families.

The OECD’s Building for a Better Tomorrow report said more than half of people in the lowest-earning fifth of the workforce paid more than 40 per cent of their disposable income on housing costs in 2019.

The only other OCED countries that came close to that were Israel and Chile, followed by the United States, and the United Kingdom.

The report came in a week when the Government announced it planned to build the 8000 new public and transitional homes it promised in the last Budget.

**READ MORE:

New Zealand's lowest-earning fifth of households spent more than 40 per cent of their disposable incomes on housing, a greater proportion than in any other OECD country, the Building For a Better Tomorrow report says.

* Addressing the housing crisis: What NZ can learn from other countries

* Election 2020: Labour to bring back top 39 per cent income tax rate

* Bringing back regional passenger trains

Prime Minister Jacinda Arden said fixing the housing crisis was a key focus of the Government.

National’s housing spokeswoman Nicola Willis said the plan fell well short of fixing the country’s housing emergency.

Act housing spokesperson Brooke van Velden called on the Government to free up land for development, fix infrastructure funding to incentivise new development, and reform the “crippling system of consenting” she said stiffled the housing sector.

The OECD report said both building more state houses, and tackling overly restrictive land regulations and planning processes, were things countries could do to tackle housing affordability.

Housing affordability was a front-stage political issue across the entire OECD, the report said, with spending on housing being the single biggest budget item households faced.

Fewer than half of people living in OECD countries were satisfied with the price of housing, the report said.

The average amount spent on housing had risen for most households in real terms in the past decade and a half, it said.

A major factor behind the affordability crisis was the increasing price of houses, it said.

Only a small minority of countries had seen house prices fall in real terms between 2005 and 2019, it said.

These included Italy, Greece, and Spain.

Rents increased in all but two OECD countries during the period, the report said, with New Zealand having experienced one of the biggest rises.

“Across the OECD, many low-income households face both housing affordability and quality gaps,” the report said.

“A large share of households in the bottom quintile of the income distribution are ‘overburdened’ by housing costs, in that they spend more than 40 per cent of their disposable income on rent or mortgage payments.”

Since 1995, lower-income households across the OECD had seen their housing costs rise fastest as a proportion of their incomes, relative to middle-and high-income households, the report said.

Latvia, the Czech Republic, the Slovak Republic, Germony, Slovenia, France and Ireland were the countries with the fewest low-income people spending 40 per cent or more of their disposable incomes on housing.

Young people had worse housing opportunities than previous generations, it said.

“In many countries they increasingly struggle to become homeowners, which limits their ability to build wealth. Low-income youth face even bigger hurdles than their higher-income peers in securing good quality housing, because they are not able to rely on family resources for support,” it said.

And, it said: “Today’s youth accumulate wealth less quickly relative to their peers in the past, which may result from the rising age at labour market entry, less stable labour market prospects and slower earnings growth in the aftermath of the economic crisis.”

New Zealand was around the middle of the OECD pack when it came to “elasticity” of housing supply, which is the ability of a country to ramp up homebuilding when demand for houses increased.

Sweden and the United States had the most elastic ability to ramp up home-building, the report said.

While the Covid-19 pandemic did not create the housing crisis, it had renewed concerns over persistent housing affordability and quality gaps among households, the report said.