Kiwi minister shows the world how to solve housing crisis

Dr Oliver Hartwich
The Australian
10 April, 2024

If you are an Australian struggling to afford a home, I have good news from across the ditch: New Zealand is building its way out of its housing crisis. And the solutions being pioneered here also offer a roadmap for solving Australia’s housing woes.

Rewind a few years. New Zealand’s housing market was synonymous with unaffordability. Auckland, our largest city, routinely ranked among the most expensive in the world. Kiwi families found themselves locked out of the housing market. Homeownership plummeted. Homelessness soared. The dream of owning a quarter-acre paradise had long slipped away.

Today, something remarkable is happening. New housing consents recently hit 45-year highs. Apartment construction is booming. In Auckland, rents are falling in real terms, even though they are still soaring elsewhere. Our cities are being reshaped before our eyes by a surge of new housing.

So, what has changed? In short, New Zealand’s government has finally started treating the housing crisis like an actual crisis.

The shift began with Auckland’s Unitary Plan, then accelerated under the previous Labour-led government of Jacinda Ardern. Yes, that Jacinda Ardern – the Prime Minister who left New Zealand with a long list of economic and social problems. But at least the housing part of her legacy is mostly a positive one.

New Zealand’s housing reforms kicked off in 2016, when Auckland, a city of 1.7 million, upzoned a staggering three-quarters of its urban land. Sweeping regulatory changes authorised apartments and townhouses in areas that previously only allowed single-family homes. Density restrictions were dramatically eased. Height limits were raised.

The impact took time to materialise, but by the end of Labour’s term it was undeniable. Auckland began consenting more homes each year than the entire state of Queensland. ‘Missing middle’ housing became the city’s dominant source of new supply. According to some estimates, Auckland's apartment rents today are between 26-33 percent lower than they would have been without these reforms.

The Auckland model was soon replicated around the country. A bipartisan group of national legislators upzoned areas around transit stations and job centres. Several councils fully embraced the opportunity to densify their neighbourhoods.

Now, with a new centre-right government in charge, new Housing Minister Chris Bishop is not just cementing that progress – he’s doubling down on it, with gusto.

In a recent landmark speech to town planners, Bishop laid out the most comprehensive housing affordability agenda New Zealand has seen in a generation. His proposed reforms are almost too numerous to list: Abolishing rural-urban boundaries constraining greenfield development; stripping away remaining limits on density and building height; introducing a presumption in favour of development into planning law; and allowing street-level medium-density housing across the country.

But the change that could prove most transformative is Bishop’s pledge to financially reward councils that consent more housing, by sharing GST revenue from new builds with them. At a single stroke, he aims to end the incentives that have encouraged local government to entrench NIMBYism for decades.

As the head of The New Zealand Initiative, the think tank that first promoted many of these policies, Bishop’s speech was music to my ears. For over a decade, our research has highlighted how the country’s prescriptive land use regulations stifle housing supply and inflate costs. Our work shone a spotlight on the problems caused by urban growth boundaries and density limits. We exposed the infrastructure funding challenges facing councils and proposed innovative solutions. These solutions included the incentives-based approach that Minister Bishop has proposed.

To their credit, successive governments have increasingly embraced our ideas. The abolition of urban growth boundaries, the removal of blanket density restrictions, and even the proposal for street-level medium-density zoning, all have their roots in our work. If Minister Bishop delivers his reforms in full, he will turbocharge an already impressive building boom.

At this point, a sceptical Australian reader might reasonably ask: why should we care about some Kiwi housing reforms? How will a construction boom in Auckland or Wellington help an Aussie battler struggling to afford a home in Sydney or Melbourne?

The answer lies in the striking similarity of the housing challenges facing our two nations.

According to the latest data, Australia’s five largest capitals have a median home price to median income ratio of 8.5. For Sydney, it is a staggering 11.3. The figures are all but identical to New Zealand’s pre-reform numbers. Both countries shared the same drivers of unaffordability: strict zoning rules, NIMBY opposition to density, and infrastructure funding models that leave councils on the hook for the costs of growth.

What the Kiwi experience demonstrates is how rapidly the supply side of a broken housing market can be fixed with the right political leadership. When our government upzoned Auckland, new housing starts tripled in half a decade. As Minister Bishop enacts his suite of reforms, that progress will only accelerate. The emerging academic consensus is that these changes will dramatically improve affordability in coming years.

From my time working in Sydney, I know that the same approach could work in Australia. Specific policies and mechanisms might need to be adapted to local conditions, but the core principle remains the same: Reform the underlying rules that govern urban development to allow a lot more housing in the places people most want to live.

If Australia’s state and federal governments mustered the political will, they could implement a comprehensive housing reform agenda that draws from New Zealand’s successful template.

The payoff would be immense: a historic surge in new housing construction; a stabilisation of rents and prices; and a return to the egalitarian ideal of broad-based homeownership. And for politicians bold enough to champion such an agenda, the electoral rewards could be substantial.

Building more housing is a moral imperative. Locking an entire generation out of homeownership is not just an economic problem – it is a threat to the social contract underpinning our egalitarian society. Minister Bishop clearly understands the need to act swiftly and decisively. His Australian counterparts would be wise to heed his example.

Australian politicians, both federal and state, should pay attention to the Kiwi housing boom taking shape – and then start one of their own. They could do worse than book a fact-finding trip to Auckland and Wellington, take copious notes, and then pass the necessary laws to let a million ‘missing middle’ homes bloom.

The alternative is continued failure and a generation locked out of the housing market. At least it looks as if that will not happen in New Zealand under Minister Bishop’s watch.

To read the full article on The Australian website, click here.

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