Limp list of what's wrong - but no rates relief in sight

A Productivity Commission issues paper on housing affordability runs the gamut from taxation to building controls, but offers no answers (although there are some fascinating factoids. Sample: in a typical year, 24,000 new homes were built and 32,000 renovated).

Metropolitan urban limits and development contributions were two burning issues mentioned in the tome.

The Property Council took a dim view on local councils' liberal application of development contributions and chief executive Connal Townsend said he welcomed the issues paper.

“The Property Council has been a long-time advocate for changes to the Building Act 2004, the Local Government Act 2002 and local government sector policies to reduce barriers to property ownership in New Zealand and remove complexity, red tape and disincentives for development.

“Young New Zealanders do not have access to a supply of affordable housing, due to both constrained land supply and compounding compliance costs.”

The paper said infrastructure charges could discourage worthwhile development if they were set too high.

An earlier report by David Shand into local government rating concluded development contributions were expected to increase from an aggregate of $224 million in 2006/07 to $447 million in 2015/16.

“The impact of developer charges on housing affordability has long been the subject of debate," the commission's issues paper said.

“There is also a view that these charges have been rising in recent years as councils increasingly charge developers for general infrastructure services rather than funding them from local authority rates or central government funding from general taxation.”

The paper said local authorities varied on when charges apply and how much they should be.

Metropolitan urban limit a timely topic
The issues paper highlighted the issue of metropolitan urban limits (MULs), a topic that is particularly timely for Auckland given the impending release of its district plan.

Roughly 86% of the New Zealand population lived in an urban centre and a third lived in Auckland.

Since 1999, the Auckland MUL was extended by 2000ha with five areas rezoned around the city fringe.

“There is evidence that MULs have driven up land and housing prices within (and just beyond) the containment area and that they have become an increasingly binding constraint on land supply over time,” the paper said.

“Research in spatial and urban economics suggests that if our cities or towns are larger or smaller than optimal, in the wrong place, or poorly designed, productivity, employment and wages will be lower than they might otherwise be.”

There were big differences in the development strategies adopted by major cities such as Auckland, Christchurch and Wellington, and regional cities like Napier and Tauranga.

Housing prices still up in spite of market falls
Productivity Commission chairman Murray Sherwin said housing prices remained significantly higher than they were a decade ago despite some recent market falls.

“Overall, there is concern that this trend has been associated with declines in housing affordability,” Mr Sherwin said.

“This underpinned the government asking the commission to evaluate factors influencing housing affordability and to find ways to improve it.

“Our first task is to better understand the key drivers of housing affordability and to what extent there are distortions in the housing market.

“The commission wants to maximise quality housing options for all New Zealanders, regardless of their income or whether they rent or own.”

The commission will release its draft recommendations for improving housing affordability in October.

It will deliver its final report and recommendations to the government by February 2012.