After Housing Costs…

By Eric Crampton 02/10/2014 5


I suggest, in this week’s NZ Initiative column at interest.co.nz, that addressing housing affordability could be part of John Key’s recently announced policy focus on child poverty. When housing costs take up over forty or fifty percent of many poor households’ incomes, what’s left for other needs?

A teaser:

When land supply, both expansion at the city fringes and land zoned for increased density, is constrained by regulation, the price of zoned land rises. When sections cost hundreds of thousands of dollars, developers earn margin by building houses for the top end of the market. A developer would be throwing money away by putting lower cost houses on expensive land when plenty of high income households are willing to pay a higher premium. Regulatory constraints disproportionally reduce the supply of affordable housing.

RMA reform, then, is an important part of addressing our real problems with child poverty. It is hardly a silver-bullet, but unless housing is fixed, other solutions simply do not work as well. If there are fewer houses than there are households, enhancing income transfers or accommodation supplements results in households competing more strenuously for existing rental properties, bidding prices up. Landlords may like it, but it doesn’t do as much to help the poor as we might like.

All data cited comes from this MSD report.


5 Responses to “After Housing Costs…”

  • There is going to be a whole generation of renters, I wonder what that will do to our national psyche ?
    Good for real estate agents, property developers lining their nests with so much money, whilst the tragedy is by making property investments we are ripping off the next generation and enslaving them, for at the end of their working lives they have nothing to show for it.

  • Sorry? How does it follow that RMA reform is required (my interpretation of “an important part”)? What evidence is there that regulatory constraints “disproportionately” reduce supply of affordable housing? Disproportionate to what other constraints? Disproportionate to what other aims and outcomes of the RMA?

    • Minimum lot sizes; minimum parking areas; maximum height limits; maximum proportions of site coverage; regs on how much front lawn must be available. I could go on. Tons and tons of regs exist that push up the cost of the cheapest possible house. These regulations don’t do nearly as much to increase the cost of a really really expensive house, where they’d be wanting to do much of this stuff anyway. And where the regs work to increase the cost of the bare land, it twists the cost curve for developers so that they have incentive to focus on higher-valued homes.

  • I thought those things are all in the district plan. The RMA sits over the district plan. So the issue is not the RMA as such, but the councils interpretation and application of it. Since the council does this through a democratic (cough cough) process, we must surely accept that the community has balanced the cost/benefit implications of these planning restrictions and gone forward from there.