Housing booms and changes to New Zealand housing affordability: the policy challenge

Abstract

This paper examines the housing booms and changes to the levels of affordability within New Zealand over the period from 1991 to 2008. This has been a period of both booms and slumps in the housing market. In addition it has been a time of restructuring of housing support and macro-economic policy settings. The most recent has been one of the longest boom periods and has generated increasing concern for housing affordability given that the rate of home ownership is now declining. The paper is in four parts. The first examines house prices changes and measures of affordability, the second homeownership rates and impact of declining affordability, the third land development costs and planning regulations and finally the policy challenges that are emerging. A renewed policy debate has emerged about the causes of affordability and the solutions including the merits of demand- and supply-side intervention. The reliance that was previously placed upon housing allowances is thus being questioned. The paper draws upon recent research into housing allowances, one of the major instruments to reduce housing costs, which shows they have become increasingly complex and targeted and have had limited effect. The paper argues for the need for a better integration of housing, with broader economic and fiscal policies and the increasing concern with the creation of a more liveable and sustainable urban environment.