New Zealand’s housing crisis

October 2022

This article was written by DCM's Matthew Mawkes (Kaiarataki Pūrongo/Comms Lead). Special thanks to Lee-Anne Duncan for the newswriting tips.

Parties agree on supply, differ on other solutions

New Zealand’s main political parties are continuing to debate solutions to the country’s housing crisis as new research shows that bipartisan housing intensification law changes are long overdue.

Research by the New Zealand Infrastructure Commission, Te Waihanga, reveals that house prices have accelerated since 1980 because New Zealand cities stopped expanding and didn’t develop enough infill housing.

Both Labour and National supported legislation in December 2021 allowing buildings of up to three storeys in cities without any need for resource consent.

But the parties disagree on other solutions to the housing crisis, and National plan to reduce the bright-line test from 10 years to two, and revisit interest deductibility rule changes for property investors, should they be elected in 2023.

National Party Housing Spokesperson Chris Bishop says advice from officials is that the bright-line and interest deductibility changes put pressure on the private rental market.

Housing Minister Megan Woods disputes this.

“There is no evidence that those measures are putting pressure on the market,” says Woods. “We know that rather than leaving the rental market, multiple property owners account for 36.2% of activity (Q3 2022), close to the long-term average since 2017 of 36.5%.

“It’s important to note the changes were made to discourage speculators and even the playing field for first home buyers.”

In early 2018, the Labour-led government also banned foreign speculators from buying housing in New Zealand, but Bishop says they were never a big part of the market.

“Labour for quite a long time didn’t want to deal with the underlying issue, which is supply. They have this thing around foreign buyers, and they have this thing around landlords – who they call speculators – when the actual issue is just supply,” Bishop says.

Supply is where the parties agree, though the bipartisan housing intensification law changes are facing opposition from local councils, and National leader Christopher Luxon has also hinted at revisiting the rules.

Bishop says National is committed to housing intensification.

“The importance of this is that it gives certainty to the market. To developers, and people doing housing, that there’s now a shared commitment across the two main political parties that housing supply is really important.”

Woods agrees.

“That’s why this Government brought in the National Policy Statement on Urban Development (NPS-UD) to allow more housing in areas where people want to live. In urban centres close to work, schools, public transport, and other amenities.

“Similarly, the legislation that Parliament passed last year with near-unanimity, and acceleration of the NPS-UD, allows for more housing types and density to be built to meet the needs of New Zealanders.”

Despite the progress made with private builds, public housing has lagged, with emergency housing a dire prospect for some, as revealed in Rotorua after an investigation by TVNZ’s Sunday programme.

Labour has built 10,328 additional public homes since coming into office to date, but with 26,664 applicants on the housing register as of 30 June 2022, permanent housing remains out of reach for many.

Bishop says he plans to eliminate housing waitlists altogether, but that it must be done through supply.

“The ultimate answer to everything related to housing in New Zealand is more houses. Everything comes back to that,” says Bishop.

“You don’t have enough houses for people to buy, they end up renting. When you have more people renting – and less rental properties – rents go up. Some people can’t afford those rents, they end up on the waitlist. The waitlist goes up – there’s not enough social housing – people end up in motels.”

Kiwibank has predicted that New Zealand will have a housing surplus at some stage over the next 12 months while building activity outstrips demand.

Bishop says he laughed out loud when he heard the Kiwibank prediction.

“My response is we will have a surplus when no one lives in a car and no one lives in a motel. And everyone who needs a social house can get one.”

Woods looks to the record level of consents made – 50,736 dwellings consented in the year to June 2022, compared to 30,453 in the year to June 2017 – as significant progress.

“We’re also mindful that a consent is not a house until it is completed. We’re closely monitoring building activity, particularly as there are headwinds due to global supply issues and other economic factors,” says Woods.

“There is more work still to be done to ensure that the right types of dwellings are built where they are needed, and that they are affordable – whether for homeowners or renters.”

2024 Update:

1 in 11 houses in Aotearoa were built under the sixth Labour government of 2017-2023. Will the new National-led government continue the work needed to end the housing crisis? We will do a follow-up story to track the progress that has been made.