No fix for housing crisis until young and renters vote - economist

Compared to 2010, housing in New Zealand is 30 percent less affordable now (Getty)
Compared to 2010, housing in New Zealand is 30 percent less affordable now (Getty)

An economist says unless renters and young people start voting in greater numbers, Auckland's housing unaffordability crisis is only going to get worse.

The International Monetary Fund on Wednesday named New Zealand the most unaffordable country in the OECD when it comes to housing. We also have the second-fastest growing prices.

Compared to 2010, housing in New Zealand is 30 percent less affordable now.

Independent economist Shamubeel Eaqub says it's "crazy stuff", and the Government is letting it happen because "homeowners vote, and renters and young people don't".

"If you're renting and you're young, generally speaking your likelihood of voting is much, much lower - this is why the polling tends to favour people wanting house prices to increase," he told Paul Henry on Thursday.

The tide does appear to be turning in Auckland however, says Mr Eaqub, with the median house price more than 10 times the city's average household income.

The problem remains however that while politicians talk about making housing more affordable, they don't want to lose the votes of property owners reaping massive capital gains.

Take Housing Minister Nick Smith, for example. In an interview with The Nation at the weekend, he claimed he wanted both "house price inflation in single digits" and for house prices to be only four times the average income. Without bringing house prices down, this would require incomes three times higher than they are now.

"It's just not politically feasible to implement these things," says Mr Eaqub. "Politicians are trapped."

Home ownership rates have been falling since 1991, through both Labour and National administrations. Mr Eaqub says it's not something any single Government can fix.

"There is a tendency for us to go 'it's this Government's fault' or 'it's the last Government's fault' or whatever. But it's a whole bunch of things."

Prime Minister John Key did just that earlier this week, blaming Helen Clark's Labour Government - which ended in 2008 - for the present mess.

Unless something is done to bring in a "managed, slow decline" in house prices, like Singapore has done, Mr Eaqub says the consequences will be "chaos" - economically and socially.

"You never listen to an economist when it comes to predicting things - we never get it right. But... when things go this high, there has to be a correction at some point because the inequities we are growing in our economy, in our society, this is huge."