Finance Minister Bill English
The Property Council has pointed to the Proposed Auckland Unitary Plan as crucial to dealing with Auckland’s supply shortage.
Property Council Chief Executive Connal Townsend said further restricting borrowing – as introducing debt to income ratios as suggested by the Reserve Bank would - does not change the value or shortage of land.
“This policy could stop what we need most which is building more houses in Auckland, and offering the housing choices demanded by the market.
“Auckland is one of the most unaffordable housing markets in the world. Reducing the number of people who earn enough to be able to borrow for a house will be a severe blow to the construction of more homes.”
In his view, limited land supply and speculation have caused buyers to become price-takers with demand becoming relatively inelastic.
“Monetary policy tools should be aimed at changing that, not pricing more people out of the housing market.”
That’s why the Unitary Plan, which the Council has to make a decision on by August 19, has such profound ramifications for housing in Auckland, Townsend said.
“The Auckland Unitary Plan must deliver the results Auckland needs, which is more houses.
“Anything less than that is simply not enough and like us, the government sees this as a threat to the national economy’s stability.”
Townsend’s plea comes hot on the heels of both Finance Minister Bill English and Housing Minister Nick Smith’s applying pressure to the Auckland Council over the city’s need for more building.
In a pre-Budget speech, English said the issues that make it difficult to build house come as a result of council plans that restrict development.
“We are currently building around 9,500 houses each year in Auckland – which is the highest rate of housebuilding there in eleven years.
“However, we need on average around 13,000 houses each year in Auckland for the next 30 years.”
English said the government’s very clear expectation of Auckland Council is that it will approve a plan in August that delivers this.
“It is for Auckland to decide how and where that target is achieved,” he added.
Over the weekend, Smith told media that both Auckland’s spiralling house prices and growing numbers of homeless people were symptoms of the same problem.
For a decade, Auckland has not built the number of houses that is required to meet the demand, and, the consequence of that is increasing rents and house prices getting up over $800,000, he said.
In response, government is doing what it can to increase land supply, and Smith is working on a national policy statement that will direct councils to resolve the question.
“That is that they have to make provision for cities like Auckland to either grow up or out, and they can’t have this sort of dilemma where they put it in the too-hard basket; we block housing developments at the very time that we need more coming on stream.”
It is crucial for Auckland to get the new Unitary Plan in place to deal with the problems that come with lack of affordability, he said.
Many commentators believe that it is supply side problems which are to blame for Auckland’s ever-rising prices and extreme income-to-house price ratio.
However, popular opinion tends to look to the demand-side of the equation – in particular demand from overseas buyers and investors.
Last week, the Reserve Bank indicated further macro-prudential measures are on the table, but it has also pointed to supply as an issue that needs to be addressed.
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