Bishop’s pledge to end the housing shortage

Dr Oliver Hartwich
Insights Newsletter
1 March, 2024

Housing policy made significant progress this week. The housing minister, Chris Bishop, addressed the Wellington Chamber of Commerce and released a cabinet paper outlining his plan for solving the housing crisis.

Taken together, we can now see the Government’s comprehensive strategy to increase land availability, incentivise councils through GST revenue sharing, and reform the planning process.

Minister Bishop’s explicit long-term target that the median house should not cost more than five times median household income is particularly welcome.

Bishop’s proposal to liberalise planning and encourage infrastructure development echoes our calls for enabling better local decision-making.

Like Minister Twyford before him, Minister Bishop recognises that supply constraints, driven by inadequate incentives for councils, are at the heart of New Zealand’s housing affordability issues.

In the previous government, Minister Twyford did make progress with important initiatives like the National Policy Statement on Urban Development. But easing the barriers preventing councils from embracing growth would have required greater buy-in from Twyford’s cabinet colleagues.

By contrast, Minister Bishop seems to have stronger backing from the Prime Minister and the Minister of Finance. Thus, Bishop’s speech announced that he will be the final arbiter of disputes between independent hearings panels and councils.

Furthermore, sharing GST revenue with councils from new housing construction would encourage councils to enable more building, more closely aligning the financial interests of councils with national housing supply goals.

Broadening GST sharing to encompass construction more generally would encourage councils to welcome more forms of development, encouraging a virtuous cycle of growth.

Getting those incentives right is tricky. Until they are right, councils will game targets that central government sets around housing.

National will allow councils to opt out of medium density requirements if they immediately release thirty years’ worth of zoned land. But remember that Wellington’s Independent Hearings Panel believed that a rather restrictive district plan had plenty of supply.

The government will need to set better measures to prevent such gaming.

Rather than relying on council forecasts of housing demand and feasible supply, it could instead look to prices. If land zoned for apartments carries a massive price premium over land zoned only for townhouses, and if land zoned for housing is worth hundreds of dollars per square meter more than paddocks, more upzoning is obviously needed.

We commend the Government and Minister Bishop for their proposals. And we are thrilled to see the Initiative’s long-standing positions on land-use planning and local government finance reflected in them.

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