Infrastructure Commission: Politicians and Nimbys created the housing crisis
Monday, 4 April 2022
Te Waihanga (The Infrastructure Commission) says house price inflation would be 69 per cent lower today if there had been better infrastructure investment, and politicians had not put in crippling regulations around housing.
New analysis from the commission shows how dramatically New Zealand’s pace of construction tailed off after politicians slapped on regulations that prevented developers building up or out, and the effect this had on house prices.
In 1961 Central Auckland had zoned enough land to triple the city’s population, but after new planning rules were put in place the city’s capacity for housing was cut by 50 per cent, a situation that would only be partially corrected by Auckland Council’s Unitary Plan in 2016.
“Unaffordable housing is not inevitable or inescapable. Homes are more abundant and hence affordable in many other countries,” the commission’s report says.
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Population growth was higher in the 1940s, 1950s, and 1960s, but house prices grew twice as rapidly in 20 years after 2000 than they did during the 1950s.
The commission’s report argues the big difference between then and now was the planning system had fewer rules around new houses – including apartments and townhouses – so it was simply easier for builders to respond to the demand for more housing.
The 1970s brought the Town and Country Planning Act of 1977, and later the Resource Management Act, which made it easier for Nimbys (Not In My Backyard advocates) to oppose new housing in their area.
Te Waihanga Economics Director Peter Nunns said this pullback in land being zoned for new housing, along with “downzoning” – the practice of enabling less housing to be built by preventing apartments and townhouses from being constructed – caused a four-fold increase in house prices relative to population growth.
“You go from pre-1970s district schemes being quite facilitative of new townhouses, and new growth, to quite a bit of downzoning.”
Between 1938 and 1977 every 1 per cent increase in the country’s population led to a 0.5 per cent lift in house prices.
But between 1977 and 2018 house prices jumped 2 per cent for every 1 per cent increase in the country’s population.
And in the last 20 years New Zealand has experienced the largest jump in house prices in the OECD.
Nunns says he likes to think older generations of voters would not have made choices to seal off their neighbourhoods from development had they known the true trade-offs they were making between keeping their suburb the same, and an unaffordable housing market.
Coalition for More Homes spokesman Scott Caldwell said the environmental movement, which opposed sprawl, pushed up against a group of New Zealanders who wanted to protect their quarter-acre lifestyle, and the legislation that came out the other side of that conflict stopped a lot of houses being built.
“No one pointed out that there was a contradiction there that if you can’t build in the city, and if you can’t build on the fringe of the city, and if you can’t improve the city at all, it’s actually going to stagnate.”
Renters United spokesman Geordie Rogers said the younger generations of today were paying for those decisions.
“A lot of the underlying social issues that we see are because of this constraint that has been on the construction of housing or accommodation since the 1970s, and that includes the lack of state investment in building houses for people as well.”
Compounding these problems were transportation issues. Average travel speeds increased with the invention of the motorcar, but this trend started to go in the other direction as congestion on motorways started to build up.
Because housing demand is so closely related to how far people have to travel from their home to work, this effectively reduced the amount of land that could be realistically used for housing.
If New Zealand had managed to keep travel speeds up through congestion charging, or better investment in transport infrastructure, it could have reduced house inflation by 69 per cent between 1978 and 2018, according to the commission’s analysis.
Nunns said the longer-term solution was to get councils to zone enough land to accommodate three times a city’s population, and to plan for enough infrastructure to meet this growth. The RMA removed the requirement for councils to plan for infrastructure alongside new housing.
Rogers said the housing problem was not getting much better. Several times a week he talked to families renting parts of their houses out to strangers simply to cover costs.
“This is a situation where an entire generation is actually going to have to rent for a lot of their life.
“There are multiple couples living in the same apartment because they are not able to buy a home.”
Caldwell said, in the medium-term, we might have to tolerate a bit of a mismatch between infrastructure and new housing as we caught up, but the alternative of a housing shortage was much worse.
“A couple of extra cars parked in your street versus people being locked out for a generation?
“I don't know, I think it's quite a simple trade-off there.”