Housing Minister addresses REINZ on affordability crisis

“It has got far harder for our kids to get on the same property ladder we have benefited from so spectacularly,” he said.

With median house prices rising to eight times the average household income in Auckland, growing numbers of 25-44 year-olds on moderate incomes are simply unable to buy a house, and this is fuelling what the Minister described as “a significant decline in our national home ownership rate”.

Estimates suggest New Zealand’s home ownership rate could have dropped to possibly as low as 61% in Auckland, meaning New Zealand has a lower home ownership rate than Australia, the US, the UK and Canada. “All of those countries are already trying to boost their rates in recognition of the platform home ownership provides for settled family life and improved wealth,” Carter said.

In exploring what has caused this increase in land values, Carter referred to “evidence that in some areas constraints on land supply have been a factor”.

“This is particularly so in districts like Nelson, Tasman and Marlborough, where a real conflict exists between the need to retain green spaces and agricultural areas and the need to free up land for new housing.”

Rather than painting this as a Resource Management Act issue, he said constraints on land supply have often been an unintended consequence of community choices. As well, he said even where there is land supplied for development, affordable housing is not getting built.

“In Nelson, Tasman and Marlborough, research indicates zoning is encouraging big, expensive homes on larger sections, and similar things are happening in cities. We need to get a better understanding of these dynamics, and two studies due this summer on the Auckland property market should help a lot.”

“In the meantime, we are left with an interesting conundrum – how to ensure land is consistently freed up for development, and a proportion of it is actually used for affordable housing?”

Local councils have organised a summit next month on these issues, and Carter said many are beginning to engage Housing New Zealand in a discussion about what can be done.

“In Nelson, Tasman and Marlborough, we have already agreed to provide some funding for an affordable housing coordinator to work across councils, central Government, business groups and community agencies.”

Other assistance measures under way Carter referred to included the recently expanded Welcome Home Loan scheme, “targeted at modest income families looking for homes in the lower quartile of the housing market in rural and provincial areas and on urban fringes”. However he acknowledged the scheme’s shortfalls, noting, “Because the scheme is naturally capped by the amount participants can afford to borrow, it is of little use in the major metropolitan areas where prices are so much higher than incomes, and affordability issues are correspondingly that much greater”.

“For this reason, the government is considering introducing a New Zealand version of a shared-equity scheme in next year’s budget.”

“Shared-equity schemes are used overseas, particularly in the UK. They involve either a government or a private entity taking a share in a house of, say, 30%, at no cost to the homebuyer. The homebuyer then seeks a conventional mortgage on the remainder of the property, and when the property is later sold, 30% of the sale price, complete with capital gain, is returned to the equity provider.”

“Such a scheme will require a shift in thinking by people working in the property market,” Carter told conference attendees. “For instance, overseas, property developers are sometimes those holding equity shares.”

He also noted schemes proposed by Housing New Zealand, including a plan to develop 111ha of Crown land at Hobsonville. He said a “cutting-edge” community comprising 3000 houses is planned, containing luxury and middle-market housing mixed with 15% state housing and 15% affordable housing; a proportion of which may be sold through equity-sharing arrangements. “Land will be parcelled up and developed by private operators, with Housing New Zealand retaining overall direction.”

“We are considering a similar development in Papakura, and officials are working with the Auckland Regional Council to identify other patches of surplus public land that could be used for the same purpose.”

“But the possibilities of what the government can achieve in partnership with the private sector do not end with just building on unused Crown land,” Carter said, signalling the possibility of linking urban renewal together with provision of more affordable housing in what are presently some of Auckland’s poorest areas.

“There are at least three areas in Auckland where Housing New Zealand owns an unusually high density of properties –Tamaki, Mangere and Otara. In all of these areas, there are entrenched social problems, which would be best eliminated by changing the make-up of these communities and renewing their environments.”

“Because many of the state properties owned in these areas consist of small houses on big sections, it is technically possible to completely redevelop the areas, increase the overall number of state houses, build a whole variety of new, affordable and middle-market housing, enhance community services, and in doing so, actually reduce the overall proportion of state housing in the area.”

“Take Tamaki as an example. There are 5,000 properties in Tamaki, 2,500 of which are state housing properties; a density of 50%. Modelling has established that under likely planning rules for the area, an extra 3,000 homes could be provided on the land already owned by Housing New Zealand. These 3,000 new homes could comprise 600 additional state homes, 500 homes for first-home buyers, 500 affordable homes for modest-income families, 400 homes for the third sector and 1,000 homes for the open market.”

“Just by using public land, you could, over time, reduce the concentration of state housing in Tamaki to 39%, and enhance affordable housing supply in the area. You could significantly expand this impact if private land was redeveloped alongside Housing New Zealand’s community renewal project.”