Tackle restrictions on development - report

Monday 3 April 2017

Ensuring freedom to build is the best way to deal with New Zealand’s over-inflated housing market, the New Zealand Initiative declares in an election year “manifesto”.

By Miriam Bell

The think tank has just released an election policy manifesto of suggestions for the next government and it identifies housing as the biggest wedge between economic performance and living standards.

Unaffordable housing has ripple effects across the economy and unduly ties the country’s fortunes to the property market, the report warns.

“The worst outcome of escalating home prices is they split society into property owners and those permanently locked out of the market.

“The property ladder, which once allowed New Zealanders in their 20s to own a home, has lost its bottom rungs.”

But the report, which draws on five years of work, said that New Zealand’s housing market is like Economics 101 - demand has outstripped supply and prices have skyrocketed.

This means that housing supply and its associated mechanisms need urgent reform.

To this end, the report recommends tackling planning restrictions head on by abolishing all rural-urban boundaries and all height and density controls, as well as strengthening property rights.

It also recommends incentivising councils for development by letting them capture the GST component of new buildings.

The recommendations are simple but require political courage as they go against decades of development direction, the report said.

“After a decade of rampant house price inflation, restoring housing affordability must be a top priority for the government. New Zealand must build the homes its people need.”

New Zealand Initiative executive director Oliver Hartwich said they were prompted to produce the report because politics is far too important to be left to politicians.

“The manifesto is a challenge to both the current government and the opposition.

“It allows voters to understand the challenges New Zealand faces and it makes practical recommendations to improve our country.”

Housing is gearing up to be one of the major issues of this year’s election.

In connection to this, it is the unlikely topic of urban planning reform to address the country’s housing supply issues which is running hot at the moment.

Developers have long said that planning restrictions and infrastructure funding problems are holding up the building of more housing.

But last week, the Productivity Commission released its final report into the urban planning system and it said that a radical shakeup of the existing system would make housing development easier and less costly.

On top of this, the OECD recently released a report which highlighted New Zealand’s lack of a comprehensive urban development strategy as a problem.

Read more:

Election 2017: what investors need to know 

Revamp planning system, end crisis 

Improve urban development in NZ – OECD 

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