Government fiddles whilst New Zealand housing burns

National is in denial. The denial is not about climate change (although that could be next).

The denial is that there is an acute housing crisis in New Zealand that is getting worse by the day. From Prime Minister John Key down, the National Party caucus and its allies are insisting that this is just the market at work and that if there is any blame at all to be laid it should be the at the feet of the ever suffering Resource Management Act 1991.

But there are huge problems with that idea. First off the market has some variables that can be completely distorted by Government policy. In the case of New Zealand the major factor distorting the market is unchecked immigration. A nation of 270,000km² simply cannot sustain 40,000 new people arriving in Auckland every year to live and work. The problem is made worse by Auckland’s geography on a narrow isthmus bordered by salt water on all sides. Coupled with the following factors that go with the process of constructing a house it has the potential to cripple Aucklands economy by making it too pricey to live and work in:

  • All houses in New Zealand have statutory requirements in terms of services – they all need vehicle access; power; running water; sewerage disposal. A significant part of the cost of a new subdivision is connecting all of this to the existing infrastructure
  • The relatively small population means there are not sufficient qualified trades people to build the houses and the associated infrastructure, which can drive up the fees asked by those that are available
  • The diversion of many to Christchurch for the rebuild means said shortage is exacerbated

It is not just Auckland though, that is suffering. In Christchurch the lingering effects of a post-earthquake housing shortage are being acutely felt. Although most households have now settled with the Earthquake Commission and their insurance companies, there are a significant number where a settlement is as far off as it was on the days of the individual earthquakes. Some households still live with damage from the 2010 earthquake. All have cumulative damage issues from successive earthquake events.

However there are socio-economic factors at work as well, which need to be examined. The key factor, without a doubt is the minimal change in incomes for the average New Zealander, whilst living expenses have risen considerably, thereby considerably reducing the ability of people to save to buy a house. Another problem has been the failure to address a known issue with numerous Housing New Zealand stock standing empty despite heavy demand for it, though on its own solving this will not solve a significant crisis that could damage New Zealand’s economy substantially.

Until National comes out of denial (which is highly improbable based on its current attitude to housing)this problem will get worse. The fact that commentators who are normally quiet on this are starting to come strongly tells me that not only is there a crisis, but that it could turn into an emergency.

And cost National the election.

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