BUDGET PREVIEW: Affordable housing - time for govt to roll up sleeves
It’s time for the government to roll up its sleeves and address the issues around social and affordable housing. And the Budget would be a great starting point.
Housing remains a critical issue, impacting the lives of New Zealand’s most vulnerable, especially in Auckland. The government made some good moves to address this crisis in its first term, such as speeding up the Resource Management Act (RMA) consent process for the development of brown field sites, but has much more to do.
So just how big is this problem?
It is estimated that Auckland’s population will grow to between 2.2 million and 2.5 million over the next 30 years, requiring around 400,000 additional dwellings by 2040.
This is at least 10,000 additional dwellings that need to be built each year.
The market currently delivers 4,000 new homes with a large number not meeting the demands of the market ie wrong type, size and location.
But that’s only half the problem. When you compare the median Auckland household income of $72,000 against the median residential sale price of $535,000, the widening affordability gap is obvious. The household income to house price ratio is 7.4 times – a huge increase since the 1990’s when this ratio was 3. Building houses is necessary but it needs to be done in a way that makes it possible for New Zealanders to own or rent.
Is the answer to look to the private sector for innovation and solutions or should we consider a combined public-private sector approach?
ABOVE: Annual Demographia International Housing Affordability – September quarter, 2012
In the UK and Australia private housing associations have worked with the Government. Interestingly, the UK housing association sector has performed well. However, their model requires substantial financial commitment from Government to underwrite the goal of delivering housing product where the cost is capped relative to income levels. This level of commitment requires a long term view and the right political landscape. And while these models are interesting to learn from we need to find solutions that suit the fabric of our society.
There are tools available to address this issue and a range of initiatives that should be accelerated:
1 Land availability
There is Government owned land that could be freed up for development. There is the on-going debate between those that prefer higher density housing and those that want to extend urban boundaries. The reality is we probably need both. Affordable housing is only affordable if the location doesn’t create other costs for infrastructure and transport.
2 The Auckland unitary plan
This needs to be fast tracked. Bureaucratic processes have delayed decisions which impact the demand and supply equation.
3 Local government efficiency
The local government reform process is a move in the right direction to improve efficiency however we should take a step further by streamlining systems and processes.
4 New Zealand’s supply chain
There are barriers preventing building material suppliers from entering the New Zealand market. Overseas suppliers face tariffs on their products when they’re imported to New Zealand. This prevents significant efficiencies entering the market and deters alternative suppliers. The Government has a key role to play here to develop this market.
5 Mixed community housing
If we move to more of a mixed community housing model, this would generate a range of social dividends. Mixed communities aim to provide a range of affordable housing options for rental and rent to own. Affordable houses can be bundled together through smart design with private owned residences.
6 The housing third sector
One of the fastest ways to achieve a step change is for the Government to support the development of the third sector, or non-government organisations. Third sector operators would be responsible for the development and management of social and affordable housing. Certainly setting the policy framework is a key role of the Government but the delivery should be undertaken by the third sector.
7 Building innovation
There are a number of system build innovations being deployed overseas. Let’s see a taskforce do the same for New Zealand.
The Salvation Army’s Social Policy and Parliamentary Unit has long held the opinion that one of the most effective ways of improving New Zealand’s social welfare problems is to supply affordable housing for all New Zealanders. Any investment made in social housing, by the Government or other parties, is an investment in the social welfare policies of New Zealand.
The upcoming budget is a great opportunity for the government to address this complex issue. Clear and decisive leadership is needed to drive the necessary transformative step changes to get the job done.
Jason Rogers is national director, markets, at Grant Thornton New Zealand, chartered accountants and business advisers. Email: email@example.com