Hous­ing caus­ing ‘stark’ inequal­ity

The Dominion Post - - Politics - HENRY COOKE

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.

Phil Twyford

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