Tuesday 17 July 2012

Land supply

I wonder if National will ever come up with a response to the Productivity Commission's report on housing. The Productivity Commission chalked most of our current problems up to land supply: land being released in dribs and drabs keeps underlying land prices high and helps prevent achieving any kind of economies of scale in construction; our bespoke housing production model largely comes down to developers rarely getting permission to build large subdivisions.

Don Brash weighed in over the weekend:
On TVNZ's Q+A programme yesterday, host Corin Dann asked Dr Brash if high Auckland house prices were not simply a function of the fact "people just wanna live in Grey Lynn [a trendy central Auckland suberb, where a basic two-room home can sell for close to $1 million]. They want it all right now."
People could get cheaper housing if they were willing to live on the city's outskirts.
Dr Brash replied, "That’s not true.
"I recently saw a subdevelopment just out of Pukekohe [south of Auckland] – $249,000 for a 500sqm section. I mean, that’s a ridiculous price. That’s $4 million a hectare.
"I think the Productivity Commission report had a very good chart in it which compared the price of land just 2km inside the metropolitan urban limit in Auckland with the price 2km outside that limit and the multiple was nine times.
"It’s a question of supply of land."
Local government was blocking access to land, pushing up prices, Dr Brash said.
"The market is stopped from working. It’s local government which has stopped the market from working."
I agree:
A leading economist has backed comments by Don Brash and Productivity Commission chairman Murray Sherwin that New Zealand has a land supply probelm, not a house price problem – and says it is making quake fallout worse in Christchurch.
"Getting land use policy right doesn't just help developers to provide low cost housing options for young families, it also builds in flexibility," Canterbury University senior lecturer Eric Crampton told NBR ONLINE.
"After the Christchurch earthquakes, the land use regulations that slowed development in normal times made it almost impossible for anybody to build new housing for those whose houses were destroyed. Bureaucracies just cannot move fast enough when the unexpected happens," he said.
"Seventeen months after February's earthquakes and it's still illegal for a homeowner to build a self-contained flat with a kitchen in his house to help ease the rental crisis."
There's a bit more at NBR. I really need to arrange a new stock photo with the Uni...

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