We believe that the high cost of housing in New Zealand is a social and economic disaster of the highest order.
According to Demographia, the acknowledged experts in housing data our median house price is $525,000 or 6.5 times median family income – the highest multiple in the world. Up until the early 1980’s the average price to income ratio in New Zealand was about 3. The high prices mean that we have people in South Auckland living in sheds and inequality is rapidly rising.
We think that the problem has been caused by town planners restricting the supply of land and drawing “urban boundaries” around our major cities and refusing to release land outside these boundaries for housing. This “ring fencing” and strangulation of supply in a time of rising population and demand has caused a permanent rise in house prices. The problem is in fact world wide and multiple economic studies by the world’s leading urban economists have statistically proven that ring fencing and excessive land supply regulation have caused high prices in cities such as London, San Francisco, Los Angeles, Melbourne, Sydney, Vancouver and Seoul. All these cities have ring fenced their cities for
over thirty years and have had price to income multiples above five for most of the last 20 years.
These experts believe that the high prices are NOT caused by demand factors such as immigration or a lack of a capital gains tax (or “CGT”). For example the population of Houston, an American city which has no ring fencing and lightly regulates land supply is growing faster than Auckland but the average house still only costs about NZ$280k. In Australia, which ring fences all it’s major cities, a CGT has not prevented price to income multiples above 6 in the major cities. High house prices and inequality in the western world are caused by one thing only – the cutting off of land supply by bureaucrats.
We think the solution is simple. The monopolistic abuse of land supply by councils drawing lines around cities must become unlawful. The Resource Management Act must be scrapped and rewritten. Affordable housing must be listed as a key goal of new legislation.