This bureaucratic beast won’t solve our housing troubles

If you’ve purchased a home in the past 18 months and are facing the terrifying trifecta of rising interest rates, lower home values and, in some cases, negative equity, what caused your predicament can be blamed on another triumvirate. Politicians, the Reserve Bank and the Nimbys who, up until now, have been able to oppose new housing while their property prices skyrocketed.

Several headlines this week inventoried recent homeowners’ pain; take CoreLogic’s figures, which show that more than 5% of Auckland homes sold for a loss in the three months to September, the most since 2019. Or The Real Estate

Institute of New Zealand’s House Price Index (HPI), which measures residential property nationwide. It recorded an annual decrease of 10.9% - down 12.4% from its peak in November 2021, the biggest fall since REINZ started recording data in the early 90s.

Or what about Westpac’s estimate of a revised fall from last year’s peak of a further 10%, creating a 20% drop in house values by the end of 2024, which, when inflation is considered, equals a 30% drop, neatly taking prices back to where they were before the pandemic began.

In other words, the party is over. If you’re busy castigating yourself for buying when you did and falling prey to the FOMO effects that fear and greed exert, take a moment to consider that you were being fed cheap cash at historically low interest rates. Which is where the politicians and the Reserve Bank come in. Because both ignored the fact that REINZ’s house price index had shot up by 24% annually in the year to the end of March 2021, even though the Reserve Bank’s Large Scale Asset Purchase Programme had been up and running for a year.

So why did the Reserve Bank ignore the warning signals of an overheated housing market?

In its own controversial review of monetary policy, released last week, one of its peer reviewers said a ‘‘potential indicator of loose monetary policy was the surge in house prices in 2021’’.

The review, which opposition parties have strongly criticised, concluded that it should have stopped its quantitative easing (another word for printing money) sooner and started lifting interest rates sooner.

Hindsight can be an academic wood-for-the-trees exercise and this self-serving review, which, as National’s finance spokesperson Nicola Willis points out, hints at mistakes but fails to say if they were avoidable, is no different. But it’s not just the sugar rush of too much cash driving a market bubble which has led the recent home buyer to the dire circumstances they find themselves in.

There has been a legion of politicians down the generations not investing in infrastructure while at the same time imposing increasing regulation.

An Infrastructure Commission analysis, released in April, says house price inflation would be 69% less today if those issues had been better dealt with.

The analysis showed that in 1961 enough land was zoned in central Auckland to triple the city’s population, only to have that zoning cut by 50% when new planning regulations were installed.

Then there’s the rise of the Nimbys – the not-in-mybackyarders – who were able to get onto the property ladder, then kick the ladder out for others wishing to get onto it, thanks to the 1991 Resource Management Act.

When that Infrastructure NZ analysis was released, its economics director, Peter Nunns, blamed the pullback in land being zoned for new housing, along with ‘downzoning’, which meant fewer apartments and townhouses being built, for causing a four-fold increase in house prices relative to population growth.

Which in the past 20 years has seen New Zealand earn the dubious honour of being number one in the OECD for house price jumps. Which brings us, dear recent homeowner – and prospective buyer - to the fact that the Government is aware of your plight and is here to help.

This week it released its answer to the 31-year-old RMA, replacing it with not one, not two, but three Acts which will significantly change the regulatory structure of land ownership. Environment Minister David Parker says the consent process will be significantly sped up and cheaper, promising a 19% cost reduction a year, adding up to about $10 billion over 30 years.

It assured voters that the new rules will deal to those pesky Nimbys, while providing for a housing supply that exceeds demand, that any regulations don’t lead to inflated prices, while the plan contributes to more housing, including affordable housing. If that sounds too good to be true, it is. For a start, the new regime will take 10 years to implement.

Because once again this isn’t about making a process simpler, but instead centralising it while adding another layer of bureaucracy.

And, as Stuff’s political editor, Luke Malpass, points out, the overview of the Act didn’t mention ‘property rights’ once. That’s your rights, dear homeowner.

Don’t forget the RMA started with the same intentions – a simplified, more liberal use of land. And look what happened to that.