Smith: Housing statement no silver bullet

Nick Smith (Getty)
Nick Smith (Getty)

Housing Minister Nick Smith is still refusing to call the Auckland housing situation a crisis, as he prepares to tell the council: free up more land or I'll see you in court.

The Government will today release its national policy statement on housing, aimed at getting more housing built to ease price inflation.

"We can have a big long argument as to whether it's a crisis or a challenge," Dr Smith told Paul Henry on Thursday morning. "All I know is that we need to get on and build more houses. We can't have house price inflation over 10 percent -- we need to get it down to single numbers."

Prices in Auckland and across New Zealand have increased by more than 12 percent in the last year, according to the latest figures from Quotable Value. The average price of a house in Auckland is now just shy of $1 million.

"A core of our Auckland housing problem is the fact sections are now worth $450,000 each," says Dr Smith.

"This national policy statement is going to be absolutely focused on directing councils to free up the land."

He says it won't be a silver bullet -- it's not expected to bring costs down -- but hopes it'll get house price inflation back into single figures.

In the last 25 years, Dr Smith says the cost of building a house has increased about in line with inflation, while section prices have outpaced it five times over.

"Over the last 25 years the price of a section in Auckland has gone from $100,000 to $450,000, and if a section's worth $450,000, you're not going to build an economic $200,000 house -- you're going to build a really big house on it."

Prime Minister John Key previewed the policy statement last week, saying it would use a price-to-income calculation to tell councils when they must free up land.

Economist Shamubeel Eaqub says it's a "moronic" idea that doesn't answer how the required infrastructure will be built.

"Unless we see that in the national policy statement, it's going to be yet another report that collects dust on the shelf," he told Radio New Zealand.

BERL chief economist Ganesh Nana says while it will see land freed up, there's no guarantee the homes that'll get built on it will be affordable.

Various reasons have been put forward as the cause of the housing crisis -- speculators and land bankers at the top of most people's lists.

Labour housing spokesperson Phil Twyford, who in the past has tried to place the blame on foreign investors, says speculators can't be faulted for following the money.

"You can't blame people for thinking the only way to make a buck is speculate in real estate," he says. "They're now in full-scale blame mode, trying to shovel the blame onto Auckland Council."

Bill Rosenberg, CTU policy director, says we are going the wrong way about getting a strong economy.

"We don't do well, we don't get rich by inflating house prices. We get rich by producing more things and producing them more productively. This doesn't help that at all."

Nationwide, the average house price sits at $577,000, up 12.4 percent over the past year.

The national policy statement, which has the force of law, will be released shortly before midday.