Commission renews call for lower-cost housing

Productivity Commission chairman Murray Sherwin says the biggest pressure is in Auckland, which has 15,000 fewer houses than it needs. Photo / Mark Mitchell

The Productivity Commission has renewed its call for more land to be freed up for lower-cost housing.

The commission in April released a report into housing affordability which found house prices doubled in the last decade.

Among its recommendations was for more land to made available to ease housing affordability pressures, particularly in Auckland where the pressure was most acute.

Productivity Commission chairman Murray Sherwin today renewed his call for lower-cost land to be made available.

He told TVNZ's Q+A programme the big pressure was in Auckland, which had up to 15,000 houses fewer than it needed.

"It's building at a small fraction of the rate that it needs to build in order to accommodate these people. So leave aside the issues about whether you have urban sprawl or intensification and all the rest of it - we just don't have enough houses, and what we are building these days are very expensive.

"We're building into the top end of the market. We no longer build the starter homes that allow young couples or young families to get started in a decent home."

Mr Sherwin said councils and developers needed to work together to bring section prices down.

"In Auckland now the analysis we did suggested that around 60 per cent of the value of the property is represented by the land alone, and the rest of the country it's around 40 per cent. We need to get that back down."

He said that could come about through more green fields development or more intensification within existing urban limits.

"I'm perfectly relaxed about which way it goes, but whatever we do, we need to be able to provide affordable houses, so that means lower-cost houses than we're doing now - and attractive lower-cost housing - and I think that's perfectly possible."

Mr Sherwin said few builders in New Zealand worked to scale, with only five companies building more than 100 houses a year, compared with about 4600 companies building about one house a year.

"So we just don't get the economies of scale and we don't do large developments."

Mr Sherwin said the Government spent more than $3 billion a year to provide social housing and rental subsidies.

"That's an awful lot of money and I'm not sure that we're getting anything like that sort of value out of that spend. So there's a place for the government to look really hard at how it's delivering support to low-income New Zealanders who will need support."

Mr Sherwin said delivering only expensive houses would put pressure on the Government balance sheets.

"So the risks to the government fiscal policy are very strong right now."

A house price crash was not what was needed, he said.

"I think what we need right now is a supply response. We need houses to be constructed to meet the demand.

"We have one of the fastest growing populations in the OECD, and a lot of it is concentrated around Auckland, and we just need to recognise that and recognise that the status quo won't stand."