Media Statement

23 April 2007

Making housing affordable starts with reducing land and development costs

Reduce the cost of building homes and the retail cost of housing will fall. That is the message to the government and the local government sector from the Property Council of New Zealand.

Connal Townsend, chief executive of the Property Council said a range of measures passed by Parliament and administered by the local government sector have combined to create a crisis in housing affordability, which is destroying the ability of young New Zealanders to own their own home.

“The government has actively contributed to a number of policies, which have forced up the retail cost of new homes. The net effect of the these policies means the kiwi dream of private home ownership will remain just that for thousands of aspiring young New Zealanders, a dream. Never before has it been so difficult to own your own home. And the most frustrating thing about this is New Zealand’s housing affordability crisis was entirely predictable,” Connal Townsend said.

The Property Council has identified a number of key initiatives, which have contributed to that crisis:

1. the Resource Management Act 1991 has enabled the local government sector to pursue land containment policies, which in turn have dramatically driven up the retail price of both residential and commercial land;

2. the Local Government Act 2002 has enabled territorial authorities to charge development contributions. The net effect of this policy means new home buyers are being levied by local authorities to the tune of thousands of dollars. For example if the Auckland City Council approves a proposed five-fold increase in the development contribution for an apartment in Auckland’s Central Business District (CBD), the cost to property owners will increase from around $7,500 to over $40,000;

3. the Building Act 2004 has driven up the cost of compliance and resulted in local authorities systematically failing to meet the statutory 20-working day deadline for approving consent applications. Delays in building projects due to complicated compliance regulations contribute to the retail cost of housing.

The Property Council has been researching the cost drivers that make housing less affordable to young New Zealanders, and considers that the government is part of the problem. To make housing more affordable, fundamental policy changes are needed.

“New ways of thinking are needed if we are to reverse the scandalous drop in the level of affordable housing. The Property Council is working on a set of initiatives that will help address the housing crisis. But there are a suite of options available to government and the local government sector:

• amend District Plans to provide for more ‘greenfield’ land for residential development;

• raise height limits to provide for greater town centre intensification and the construction of apartments;

• amend the Local Government Act 2002 to tighten the rules that currently allow territorial authorities to levy development contributions; and

• reduce the cost and time allowed for the issuing of both building and resource consent applications, and code compliance certificates.

“As the Supplementary Stabilisation Instruments (SSI) report to the Governor of the Reserve Bank and the Treasury points out, over the past 25 years land prices across New Zealand have increased twice as fast as house prices. The cost of land relative to materials and labour used in construction has been an important cause of rising prices. The other major cost driver, which has artificially driven up price, is the cost of compliance, which has been systematically rolled out over the past 5 years in particular.

“Nobody wins if the government makes building and construction even more expensive and cumbersome. To reduce the cost to home buyers, the cost of the development has to be reduced in the first place. That can only be achieved through a comprehensive suite of reforms, which starts with central government,” Connal Townsend said.

End.

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