Housing causing ‘stark’ inequality
The failing housing market is leading to stark inequality between the old and young and the rich and the poor, officials have told the new Government.
This inequality was harming the health of Kiwis, productivity, and the Government’s books.
As previously reported, the briefings for incoming Housing Minister Phil Twyford also showed a 45,000-home gap in Auckland.
Officials did not mince words, blaming high house prices for widening inequality. ‘‘High levels of immigration and fewer departing New Zealanders, along with natural population growth has seen demand for housing outstrip supply,’’ they wrote, pinpointing the start of this trend to 2003.
Both rents and house prices had risen far faster than incomes.
‘‘High house prices have stark distributional impacts: they transfer wealth from younger and less wealthy people to existing landowners, who are generally richer and older. The substantial increase in house prices over past decades appears to be the major cause of the observed increase in wealth inequality in developed economies, and the ongoing effect is one of restricting access to opportunity for the young and less well off.
‘‘This flows into wider social costs, including overcrowding and homelessness, health problems, and poor educational and labour market outcomes,’’ they explained.
Even though the market in Auckland was flat to falling, this didn’t necessarily mean things were getting better.
‘‘Although affordability improves, falling house prices reduce the supply of new homes. They undermine the commercial viability of residential development, because developers and their financiers can have less confidence of recouping their investment,’’ officials noted.
Just over half of potential first-home buyers would have to spend more than 30 per cent of their income on servicing the mortgage of a modestly priced home, a rough barometer for housing unaffordability.
Home ownership rates had fallen from a high of 74 per cent in 1991 to 63 per cent in 2013.
Officials blamed the planning system, availability of land, infrastructure provisioning, a lack of finance, and a too-small construction sector for the ‘‘fundamental challenge’’.
They recommended a suite of long-term changes to the urban planning systems, a ramp up of land acquisitions, and endorsed Labour’s ‘‘KiwiBuild Visa’’ policy to get more construction workers into New Zealand.
It is noted getting workers into Auckland may be hard due to ‘‘regional market stickiness’’ and, ironically, high housing costs.
Officials were less enamoured with side measures such as tax changes and banning overseas buyers.