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Land rules making houses unaffordable

Published: 12:45PM Friday March 03, 2006 Source: TVNZ Interactive

Misconceived restrictions on the development of land have led to unaffordable housing, according to the New Zealand Business Roundtable.

It has responded to a report called Regional Housing Markets in New Zealand: House Price, Sales and Supply Responses, by Arthur Grimes and Andrew Aitken of Motu Economic and Public Policy Research.

The report was prepared for the Centre for Housing Research, Aotearoa New Zealand, the Department of Building and Housing, and Housing New Zealand Corporation.

The Motu report shows that land prices have increased much more rapidly than house construction costs, which have remained static or fallen slightly in real terms. The rates of increase in land prices differ among local authority districts and regions.

Between 1981 and 2004, the price of land, after adjusting for inflation, increased on average by 105%. However, it increased by almost 700% in Auckland City but fell in four areas.

Land prices were found to have increased more rapidly where the supply of land responded slowly to changes in the demand for housing.

Business Roundtable executive director Roger Kerr says restrictions on the development of land, sometimes called "smart growth" policies, are impeding the supply of sections and have pushed land and house prices to levels that are unaffordable for many people, particularly those on low incomes. They also push up the cost of renting homes, he says.

Motu's findings reinforce the Demographia International Housing Affordability Survey which ranked the three New Zealand housing markets that were examined - Auckland, Christchurch and Wellington - as "severely unaffordable", Kerr says.

"The Motu report correctly states that its implications for policy are "unambiguous". Policy must focus on keeping construction costs and land costs to a minimum, and regulatory and planning processes need to be closely scrutinised."

New Zealand does not have a shortage of land, Kerr says, with only 1.4% of our land area urbanised.

Kerr backs Mayors Sir Barry Curtis of Manukau and Bob Harvey of Waitakere who have recently said for more land needs to be freed up urgently.

"The business community has been highlighting the economic harm inflicted by the Resource Management Act and other unwarranted constraints on the development of land and buildings for many years," Kerr says.

"If central and local government are genuinely concerned about the affordability of housing they should act on the findings of the Motu report."