Can Chris Bishop pull a housing rabbit out of his hat?
The housing minister says he wants tens of thousands more homes built to fix our housing crisis. But this will mean taking on councils, his coalition partners and the entrenched interests of homeowners. Henry Cooke takes a look at the potentially impossible task.
Chris Bishop is a very busy man. He’s a newish father, a local MP in a marginal seat, the coalition Government’s main legislative planner, and also the minister for infrastructure, sport, RMA reform and, most importantly of all: housing.
Housing was the issue most responsible for sending National to the Opposition benches in 2017, and had a big part to play in the shine coming off Labour, too.
It is a gaping sore in New Zealand’s body politic, one that creates sick kids and poor families, and holds back our economy. Bishop knows this and professes a deep desire to enable tens of thousands of homes to be built – so many that we stop showing up on the top of international comparisons lists for “least affordable housing”.
And yet the only actual policy Bishop has committed to so far is a reversal of a widely praised bipartisan move from the last government – one which forced councils to allow for densely-packed townhouses in every major city in the country.
Independent analysis suggested the policy would add up to 105,000 dwellings to our housing stock.
This reversal was made under serious political pressure from existing homeowners and the Government’s coalition partner, ACT.
He’s currently very busy at work with a replacement. Indeed, an OIA request
Stuff made revealed there had been 2100 emails between his office and the Housing and Urban Development Ministry on this specific replacement in his first three months of power – 24 emails a day.
If this replacement manages to make housing affordable while keeping the coalition and wary councils onside it will be one of the great political tightrope walks of our time. If it fails it could be his very own KiwiBuild.
In other words, he doesn’t just need luck or political nous. He needs what spammy headline writers have been promising us for decades: One weird trick. Or maybe quite a few.
Stuff spoke to economists, local government and campaigners to get an idea of how he might try to wriggle out of this bind. But first, we need to understand how he got here.
New Zealand’s housing crisis didn’t happen overnight, but it did happen over about one generation.
From the 50s through the late-80s we had reasonably abundant and affordable housing, with a median house usually costing under three times the median annual income. But prices then started rocketing up, particularly from the turn of the century: Between 2000 and 2021 New Zealand house prices rose by about 256% after inflation – faster than in any other country in the OECD. Rents rose significantly, too.
In 2021, 60% of low-income renters in New Zealand spent more than 40% of their income on rent – the highest rate in the entire OECD – and 45% of all renting households spent more than 25% of their income on rent.
There has been some cooling as interest rates have risen, and it is clear that part of that story of high growth has been low interest rates, which have allowed people to borrow astronomical sums to buy damp villas in nice streets.
But another huge part of the story has been New Zealand’s restrictive planning laws, which make it illegal or extremely hard to build housing where people actually want it.
One usually blamed 1991’s Resource Management Act (RMA) at this point but research from the Infrastructure Commission shows the problem actually started a few decades earlier, when councils stopped actively encouraging population growth and started trying to limit it.
“Planning began to focus less on facilitating growth and planning infrastructure, and more on maintaining the character of existing neighbourhoods by stopping the construction of blocks of flats and apartments,” the commission wrote.
Councils did this through a thing called “zoning” – the methods they use to decide what you can legally do on different bits of land.
“Zoned” land isn’t the same as an actual house. It’s just a place where a house can legally be built. This makes it hard to be exact about how much zoned land one should have. You could technically zone just enough land for the number of houses you think the city needs – but people might not want to build or buy houses on that land.
It would be like if you went to the supermarket and it said it had exactly enough food for everyone to go home with a meal – but no more. The desirable food would immediately be bought and you would be left trying to make a nice meal out of a turnip.
This is essentially what happened as we started to zone for less housing in the 1970s.
We can see this by looking at Auckland: In 1961, the council had zoned enough land for new housing for the population to treble. Obviously, people wouldn’t actually build on every bit of that zoned land, but there was enough of it that the market could respond when populations did grow – there were a lot of options at the supermarket.
In the 1970 district scheme, the volume of zoned land roughly halved, even as the population grew, and it stayed very low for decades, while house prices and rents took off. Councils did this for a variety of reasons. New housing is typically unpopular with existing homeowners, who view it as a threat to their way of life – whether by removing sunshine, adding cars to their streets, or from the dampening effect on their home’s skyrocketing price.
The RMA made extensive consultation with existing communities mandatory, and councils generally listened to those residents, who were also their most reliable vote. It didn’t help that councils themselves were generally strapped for cash and thus incentivised to stop new housing – which came with big costs for them in terms of new infrastructure.
Central governments became increasingly aware of this issue. Voters started to complain about being locked out of home ownership. Schemes like the Accommodation Supplement and temporary motel stays started to cost billions every year.
At first, government measures focused on what economists call the “demand” side – basically trying to help those who wanted to buy or rent with the money to do so. But eventually there started to be serious talk about addressing “supply” too – the overall
number of houses. This happened both nationally and locally. Over three years from 2013 to 2016 Auckland developed a new “unitary plan” which enabled a lot more housing. Research suggests this lowered rents by about 22% from the baseline growth you would see without it.
But central government wanted to do more – not just in Auckland but across all urban areas. National’s Nick Smith tried and failed to seriously reform the RMA. His successor as housing minister, Labour’s Phil Twyford, failed with “KiwiBuild” but developed a new policy that forced councils to enable a lot more housing, particularly high-density housing around transport links.
At first this took the shape of a 2020 directive to councils under the RMA, mandating that they could not set ‘‘height limits” lower than six storeys in innercity areas or near rapid-transit stops, and could not force new developments to require car parks.
The response to this initial salvo was politically interesting. Stuff broke the story of this policy change and contacted National’s then-housing spokesperson Jacqui Dean, who said the policy was “madness”. But very soon the infrastructure spokesman – a guy named Chris Bishop – got in touch to say the party actually supported the policy.
This confusing response foreshadowed serious issues with the political support for what is called “upzoning” – the active push for more land to be made available for housing and especially dense housing.
It scrambles normal left/right divides. On the one hand, upzoning is everything the political right usually likes and the political left usually hates – it’s the government deregulating housing supply, allowing the market itself to pick where it makes the most sense to build houses, rather than a Government planner.
On the other hand, it goes against a kind of small-c conservatism, where you try to protect existing neighbourhoods, and hurts people more likely to vote right (existing homeowners) while helping people more likely to vote left (renters).
Furthering this scramble is the fact that several councillors who would generally describe themselves as left wing see upzoning as a private sector plot to increase profits for developers, not actually help people.
This scramble would become incredibly important in the next part of our story.
The story so far: National betrays Labour
Twyford’s new response earned praise from those who wanted to see New Zealand allow more housing, but it was happening at a snail’s pace. Councils had years to implement the new direction into their district plans, and during those years prices were going through the roof, as the Reserve Bank bottomed out interest rates to keep the economy pumping through the pandemic.
In 2021, National started to talk seriously about the government going even further, saying it should introduce emergency measures to allow far more housing to be built, as the former National government had done in Christchurch after the earthquakes.
That didn’t happen – but eventually a deal was hammered out between thenhousing spokesman Nicola Willis and the Labour government which caught the eyes of upzoning advocates around the world – the Medium Density Residential Standards, or MDRS.
This tool was far more radical than anything in the Auckland Unitary Plan or even Twyford’s earlier direction. It forced most larger city councils to zone all of their residential land for medium density – specifically for every parcel of land to allow for three dwellings instead of one, and to three storeys, as the default. There were small carveouts a council could get away with, but the default was shifting in a very big way. And what’s more, since it was bipartisan, developers could rely on it not being ripped up from under them a few years down the track.
This was a certified big deal. Sense Partners/PwC analysis suggested the new law could add 105,500 new dwellings in five to eight years, a number KiwiBuild didn’t even aim for.
The prestigious Brookings Institute in the US said this move provided a “model to other countries”. The Centre for Cities said the UK needed to copy it to end its own housing crisis.
The Infrastructure Commission noted that, since building infrastructure for medium-density housing on existing residential land was so much cheaper than it would be for building at the edge of cities, the bill could go further and allow five houses on each section.
National’s leading lights, particularly among the “urban liberal” wing that counts Bishop as a member, were among the biggest supporters. Willis called it “a win-win” which “enhances the rights of property owners today” and “cuts red tape” by “creating a default right to build”. Erica Stanford spoke effusively about how it got the government out of the way and allowed people to build more homes.
But among this cavalcade of praise was a large note of dissent from ACT. Leader David Seymour has given a speech about “why property rights matter” and the party has a stated desire to “build like the boomers” – but he thought the MDRS gave individual property owners too much power to build things that interfered with their neighbours’ enjoyment of their party.
He said this would create “division and resentment in the community” and not solve the actual issue of infrastructure funding for new housing.
ACT obviously didn’t have the votes to stop the bill going forward, but it campaigned very hard on the issue, and National MPs started hearing a lot about it from their voters.
Half a century ago, before MMP, if the major two parties agreed on something then debate was essentially finished. But that simply wasn’t the world of the early 2020s, and the pushback from councils and residents’ associations keen to protect their local areas was very strong.
Years went by. ACT continued to build pressure. National changed leaders. Bishop became housing spokesman and wedded himself to the bipartisan deal on live TV, saying it represented, “The government coming around to National’s point of view” and that the deal “enhanced property rights”.
Then, just a month later, National’s leader, Christopher Luxon, told a group of residents in Birkenhead he was going to kill the policy. He said the party had “got it wrong” but didn’t provide any more detail, prompting days of media speculation.
Bishop, until this point a proponent of the MDRS and of upzoning, went on Q+A that weekend to eat humble pie and explain the new policy. Councils would be able to opt out of the MDRS – provided they zoned for 30 years of growth immediately. ACT naturally celebrated – and when the two parties made it into power, they wrote making the MDRS “opt in” rather than opt out into the coalition agreement. Which brings us, finally, to the present day.
The big choices for Bishop: What does 30 years of growth mean?
Bishop has talked a big talk on enabling more housing since coming to power.
“Our collective failure to build enough houses has trapped people in poverty, it has increased inequality, it has made us poorer rather than wealthier, and it has shattered the Kiwi dream of a propertyowning democracy,” he said in a February speech.
“Most of my friends live offshore. The lure of London, New York and Sydney will always be attractive to young Kiwis. But our housing market is practically standing at the departure lounge at Auckland Airport and in big neon writing telling them to just get on the plane.”
But the Cabinet paper he put out on the same day as the speech did nothing to enable more housing, it simply confirmed the reversal on the MDRS and promised more detail in the coming months.
Stuff asked Bishop a series of questions about his replacement policy, including whether he could guarantee that it would allow as much housing as the MDRS did. He declined to comment while the policy design process was under way.
One of the first problems he faces will be what exactly “30 years of growth” means. Remember, Bishop said councils would be able to get out of the MDRS only if they could show they were zoning for 30 years of growth. And yet Auckland and Christchurch councils believe they have already managed this.
Housing advocates Marko Garlick and Eleanor West, who organised a proupzoning campaign in Wellington, argued that this target would be incredibly difficult to nail down.
“The target of ‘30 years of growth’ will be fiendishly difficult to define and enforce. Forecasting demand and modelling uptake of new zoning is tricky and the inputs used for these assessments will always be contestable,” they said.
Projections are just informed guesses, and Bishop could introduce a higher standard than is currently being used by those councils.
The Infrastructure Commission, whom Bishop loves to quote, has noted that historic projections have been deeply wrong quite often. Our actual population has already reached a point that the projections from 2004-2006 did not think would come until close to 2030.
And even if we could perfectly predict 30 years of growth, zoning for that much might not be enough – because the areas zoned might not be the right fit for housing.
The next problem: Councils gaming the system
Setting a number doesn’t solve another problem raised by some people Stuff talked to – councils gaming the system by zoning for 30 years of growth in places people don’t actually want to live.
Eric Crampton from the New Zealand Initiative presented the idea of a “cube”.
“In principle, the world’s entire population could fit into a cubic kilometre– though none of us would have much spare room around us. If a city zoned The Cube, it could claim that it had made room for centuries of growth while disclaiming responsibility if no developer actually wanted to build The Cube,” he said.
“They could do other silly things – like zone to high density under the governorgeneral’s residence and claim that it represents a lot of potential capacity.”
Motu senior fellow Stuart Donovan said one option for designing the 30-year target to make sure councils did not wriggle out of it would be setting it at a ward-by-ward level, not citywide.
That meant councils couldn’t just pretend that everyone wanted to live in “greenfield” areas with low demand, well away from the central city.
“The key challenge will be where is the supply enabled. If the councils try to zone for all of the growth in greenfields it’s just not going to meet demand,” Donovan said.
Bishop has been talking up greenfield growth a lot since his backdown. It is generally seen as more politically acceptable than intensification of existing neighbourhoods, because the new suburbs don’t change anything other than farmland.
But it is also far more expensive to develop as you need to build new infrastructure, not just upgrade what already is there – and it embeds carbon emissions from people having to drive a long way to work.
Donovan argues that most of the demand is for inner-city or close to inner-city living anyway, and whatever Bishop creates will have to recognise that. “There is genuine demand for greenfields land, it’s just for most people it’s not an attractive substitute for being in the city.”
One solution: A price mechanism
Economists like prices. In an idealised market, they are the pure signals that actually show how the world works, not how a government or politician would like it to work.
Crampton suggests that building prices into the MDRS replacement would be a good mechanism to make sure councils enact upzoning that works. After all, if they do so, the price of land should drop.
He points to work from the Infrastructure Commission showing land on the “rural/urban boundary” zoned for housing is currently worth three to four times what land just outside the boundary is.
“If zoned land were not very scarce, it would not sell for three to four times as much as the adjacent paddock,’’ Crampton says. ‘‘Similarly, if land where a developer is allowed to build to at least six storeys sells at a substantial premium as compared to land where only lowerrise buildings are allowed, council ought to zone more land for taller buildings.
“Prices tell you more about actual scarcity than any council planner’s projections.”
He suggests you could fix this by setting a threshold so that if, say, housing land was two times as expensive as similar non-zoned land, councils would have to zone for more houses.
“Requiring councils to authorise private plan changes at zoning boundaries when price discrepancies get too high provides an escape valve or a failsafe. It only happens if councils have zoned too little capacity, and they’d generally prefer to avoid development going that way so might try to zone enough land to avoid that happening.”
Paying for infrastructure
Everyone Stuff spoke to agreed that councils had something of a point around needing more funding to pay for the infrastructure of new development.
Local Government NZ chief executive Susan Freeman-Greene said it was essential to get anything good out of planning reform.
“Delivering more houses is complex and removing planning constraints on development, without addressing things like the unaffordability of essential infrastructure, will not deliver the right outcomes,” she said.
Bishop has delighted LGNZ by openly discussing the possibility of taking up ACT’s idea of sharing the GST revenue from new houses with councils, giving those councils another reason to back housing.
Crampton said that ultimately central government should not have to “bludgeon” councils into wanting new housing. And Donovan thought the GST idea had merit, but perhaps a simpler payment for every new dwelling would be even easier.
But central government money is quite scarce now, with much talk of fiscal holes in the billions. It is unlikely Bishop will have serious fiscal firepower to play with – at least any time soon.
And Garlick argues that the funding issue is often used as a smokescreen to hide political motives for stopping new housing.
“Councils already have tools to raise revenue that they’ve been under-utilising for decades. Local politicians say funding shortfalls are the reason they’re blocking new housing, but I think it is often a convenient excuse. Who’s to say they wouldn’t find another?”
Councils are at the mercy of homeowners, who are more likely to vote in local elections and who appear to be motivated by aesthetic reasons to block new housing, rather than financial reasons.
Which brings us to Bishop’s hardest challenge: Politics.
Getting the politics right
Politics killed the MDRS. Blindsided councils and residents used their political power, in alliance with ACT, to stop a measure that would force new housing on them.
If Bishop’s new tool feels like another imposition from on high, will it just die again? Even if he sorts out the funding mechanism, will councils just find another way to obey their existing voters and frustrate plans for new housing?
This might seem unsolveable – but Wellington just managed it. The council voted to upzone the city to a massive degree in recent weeks, a result achieved after years of campaigning by so-called “Yimbys” – those who say “Yes In My Backyard”. Wellington has particularly bad housing prices – and it seemed that eventually the population started to back radical change over the protection of existing streetscapes.
But it is hard to see this result being copied around the country, particularly as Wellington’s council sits dramatically to the left of most others.
Garlick said the political pressure of angry existing homeowners needed some release valve smaller than city-wide and nation-wide politics.
“Rather than making the entire MDRS optional, National could copy Houston, which implemented something similar to the MDRS but avoided homeowner backlash by allowing small street-level areas to vote to ‘opt out’ of the new medium density rules,” he suggests.
“That way, the small pockets of people who strongly prefer things to stay the same can have their wish (missing out on possible property value uplift that comes with upzoning) without forcing their preference on everyone.”
Crampton saw that new funding for councils as key to getting the politics right. “If you get the incentives right, so growing population and thriving businesses are strongly to the benefit of a council’s budget, councils will want that outcome without having to be strongarmed.”
Donovan said the Government should work with councils, but might ultimately still have to force action if they continued to make attempts to avoid more housing.
“We need to keep turning the screws a little bit.”
But that’s just the councils. Before Bishop can get any plan through Parliament he will need to convince his coalition colleagues in ACT and NZ First, as well as his own party. He’s going to need one hell of a trick.
“Delivering more houses is complex and removing planning constraints on development, without addressing things like the unaffordability of essential infrastructure, will not deliver the right outcomes.”
LGNZ chief executive Susan Freeman-Greene