Thursday 2 October 2014

After Housing Costs...

I suggest, in this week's NZ Initiative column at, that addressing housing affordability could be part of John Key's recently announced policy focus on child poverty. When housing costs take up over forty or fifty percent of many poor households' incomes, what's left for other needs?

A teaser:
When land supply, both expansion at the city fringes and land zoned for increased density, is constrained by regulation, the price of zoned land rises. When sections cost hundreds of thousands of dollars, developers earn margin by building houses for the top end of the market. A developer would be throwing money away by putting lower cost houses on expensive land when plenty of high income households are willing to pay a higher premium. Regulatory constraints disproportionally reduce the supply of affordable housing.

RMA reform, then, is an important part of addressing our real problems with child poverty. It is hardly a silver-bullet, but unless housing is fixed, other solutions simply do not work as well. If there are fewer houses than there are households, enhancing income transfers or accommodation supplements results in households competing more strenuously for existing rental properties, bidding prices up. Landlords may like it, but it doesn’t do as much to help the poor as we might like.
All data cited comes from this MSD report.

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