Council woes blamed for housing shortage
House prices are high because councils are not sufficiently funded to release the land needed for extra housing, an infrastructure group claims.
The latest housing affordability report by think tank Demographia shows that New Zealand scored internationally high on the unaffordable housing front.
Tauranga is now the fifth most expensive housing market among more than 300 cities in eight countries, with Auckland close behind.
Nationally, housing costs seven times the median household income.
Demographia co-author Hugh Pavletich said cities needed to release more land, so the housing supply increased. But councils were afraid to go into debt to fund the roading, water and sewerage needed for that extra land, he said.
However, Infrastructure New Zealand lays the blame with the way councils are funded.
‘‘The challenge of building enough homes is an enormous problem, and it’s primarily because councils are unable to pay for the infrastructure needed to bring down land prices,’’ chief executive Paul Blair said.
Local councils built and maintained almost 40 per cent of the country’s infrastructure, about the same amount as the central government looked after but on one-tenth of the income, he said.
They were required by law to provide the necessary infrastructure. However, legally they were unable to recover anything but their costs, and politically they had to stay in line with inflation. So in fast-growing cities, the benefits went to central government.
‘‘If the economy grows 2.5 per cent, as it did last year . . . $9 out of $10 in tax revenue flows to [the Government]. So they have a massive incentive to grow the economy.’’
Blair said other countries gave their local authorities much more financial muscle.
The ACT Party had a different solution to the regional housing shortage. Leader David Seymour agreed that land restrictions were driving house prices up, but called for the local councils of large cities to lose much of their planning power.
‘‘ACT would remove large cities from the Resource Management Act, and create separate urban development legislation, prioritising land supply and reducing red tape on developers,’’ he said.
Freeing up land supply is still high on the agenda for the Labour-led coalition Government, which has introduced two bills – one to create an urban development authority to progress state housing, and another to develop new forms of infrastructure funding.
In the meantime, some examples of local and central government cooperation are under way, such as the 4000-dwelling Milldale residential property development 40 kilometres north of Auckland.
The $91 million project is being built by a ‘‘special purpose vehicle’’ headed by the Auckland Council, Crown Infrastructure Partners and Fulton Hogan Land Development.
Its funding will be repaid partly by Fulton Hogan Land Development and partly by section owners, who will pay an ‘‘infrastructure payment’’ along with council rates.