I have completed a survey today set up by a student at the University of Auckland who is doing a research assignment on affordable housing in Auckland.
As I was filling out the survey I thought some of the questions did not go into enough detail. It got me thinking about what improvements could be made to help housing affordability in Auckland and there was a final section titled What Changes Will Help Housing Affordability In Auckland?
Of course, the issue of housing affordability in Auckland has been discussed by many ‘experts’ but in my opinion they often are coming at the issue from an angle of self interest. Housing affordability has become a political football and at last years election we saw the Labour Party spouting how they had the answers to ‘fix the problem’ but after taking power they seem to be backtracking on their miracle cure… not really surprising.
As an Auckland mortgage broker I have conversations all the time about how affordable or not affordable housing is. Well in fact I am generally talking to people about the home loans and how they are going to be able to afford the repayments both now and in the future. In the future when they want to start a family, have time off work forced by health issues or redundancy or should they wish to retrain as we are seeing more and more in the current environment.
On my personal blog I can say what I want, but hopefully it makes a lot of sense too.
Here Is My Response…
Housing affordability is calculated using income and house prices.
The easiest way to increase affordability is to have a growing economy and therefore increased incomes. House prices are basically determined by supply and demand, and because we have had lack of supply we have had high demand; hence increasing house prices.
A big factor is that people want to live in Auckland and while that is a problem for housing it is a good thing for New Zealand. Increasing housing supply is an issue due to;
(a) the lack of finance available for the developers – the banks and non-bank financiers that have been funding property developers have changed the criteria which is making financing the projects harder and more expensive.
(b) the lack of builders and associated trades people – over recent decades young people have been encouraged into going to university rather than getting a trade and we not have a situation where young people are not qualified to do the trades (building, plumbing, concreting, electrical work etc…) where there is a shortage of workers available, but instead are trained for jobs that are not there. Unfortunately the Labour Government has missed the opportunity to fix this imbalance and instead are throwing $6 billion at tertiary level education including free university education. Instead we will have to get workers from overseas to fill the gaps.
(c) the inability of the Auckland Council to manage their finances and plan ahead – the Auckland Council tend to have a sense that they can keep on increasing rates and are now trying to add levies (extra targeted taxes) like the fuel levy to fund things. Having personally been involved in some community projects it astounds me the red tape that exists and therefore the unnecessary costs imposed on anyone trying to get things done. The Council need to trim the red tape and make it easier and cheaper for the people of Auckland to get things done, and at the same time the reduction in bureaucracy might help trim their costs so that constant rates increases are not needed.
Of course none of these issues can be easily fixed as this Government is finding out.
My Suggested Changes Will Help Housing Affordability
What five improvements would I like to see?
1. Find out why the Auckland Council is not using the Government’s Housing Infrastructure Fund to get developments progressed. They have been allocated $300 million in July 2017 and have not started using it.
2. Set up a similar fund that property developers can use for Special Housing Area developments – those which have a requirement for some affordable housing.
3. Provide Government and Council commercial land alongside existing rail lines to Housing NZ for public / private partnership developments of quality family sized apartments with a mix of social housing (HNZ owned) and first home ownership sold with land retained by HNZ and leased to the owners at a minimal lease cost with an option to buy.
4. Review the criteria for Welcome Home Loans so (a) it is made available to all banks and (b) to lift the income cap used.
5. The previous Government had planned tax cuts which would have increased affordability; however the current Government and Council seems to be focused on increasing taxes and introducing new taxes / levies. Both Government and Council need to manage their finances better so tax increases are not introduced.
Of course thee are just the ‘tip of the iceberg’ and as these ideas are explored they will expand.
Fixing housing affordability is not a simplistic thing to achieve and my guess is we will still be talking about this issue for years to come.