Housing policy changes nothing - economist

Nick Smith (file)
Nick Smith (file)

The Government's latest move to fix the Auckland housing crisis is so far from being a silver bullet it's not even a blank, says policy thinktank the NZ Initiative.

Housing Minister Nick Smith on Thursday unveiled a national policy statement (NPS) aimed at cooling the city's skyrocketing housing market. The average price of a house in the city is just under $1 million, ownership rates are falling and many young people are resigning themselves to forever paying increasing rents.

The NZ Initiative, which represents business interests from a right-leaning perspective, says Auckland Council would have breathed a sigh of relief on hearing what the Government had in store.

"On its own the NPS is really just business as usual for Auckland Council," executive director Oliver Hartwich told Paul Henry on Friday.

"It forces the council to pay some attention to housing affordability -- fair enough. What it should have done is actually considered abolishing the rural urban boundary, as Labour said in Parliament yesterday."

Labour housing spokesperson Phil Twyford said on Thursday the plan doesn't remove the urban growth boundary or address who will pay for infrastructure.

The NPS says Government agencies, councils and infrastructure providers will have to work together to make consenting "customer-friendly".

But Dr Hartwich agrees with Mr Twyford, saying it doesn't have a good plan on how the city will fund new infrastructure.

"Municipal bonds for financing infrastructure are a way better measure… than putting it on the council, as the minister suggested yesterday, or requiring developers to upfront infrastructure payments with developer contributions."

Another measure being considered is debt-to-income ratios, where banks will be restricted on how much they can lend to people, depending on their income. Criticised by Labour as locking first-home buyers out of the market completely, Dr Hartwich says all they do is treat the symptom -- people having to borrow more than they can afford -- and ignore the system.

"If you're just dealing with the demand side, you're not curing the disease -- you're just encouraging the speculators to speculate even harder."

Though the Auckland housing market sure looks like a bubble, Dr Hartwich says it's hard to tell what will happen but the current rules do encourage it.

"You can't really say it's a bubble until it's burst."