The housing crisis has become a never-ending story, but experts say some solutions put in place will have an impact.
Inflation and the rising cost of living have pushed it away from the top spot, but housing remains the second most important issue for New Zealanders, according to the latest IPSOS issues monitor.
The market may be in the midst of a downturn, but house prices remain high and affordability tight, while interest rates have risen and the lending environment has become more difficult for many.
At the same time, rents are at record highs and, although supply is increasing, there is still a shortage of housing, especially on the affordable side of the market.
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But a range of solutions have been offered to fix the problems. Do they work?
Kiwibuild, a program to build 100,000 new homes over 10 years to increase housing affordability, was one of the Labor Party’s flagship policies when it was in opposition.
In the 2017 election, Labor set it in motion. But the difficulties quickly appeared and Kiwibuild did not reach its first objective of 1000 housing units in the first year. In 2019, the policy was reset and the goals removed.
The first target of 1,000 homes was not reached until 2021. As of May this year, 1,366 Kiwibuild homes had been built, with another 1,237 under construction, according to the government’s housing scoreboard.
The government supports Kiwibuild and Housing Minister Megan Woods recently said the scheme is very much alive and will continue to help people find their first affordable home.
But AUT construction professor John Tookey says Kiwibuild has never been realistic as a purchase option for low-income first-time home buyers because the original income caps were too high.
“If you could afford a Kiwibuild home, you could afford a home in the traditional market, so the right market sector wasn’t targeted, and it never flew.”
The government is delivering new housing, but it is focusing more on public housing space than Kiwibuild, he says.
Since 2017, 7,698 new units have been built for social housing, and there are currently 2,776 more under construction.
Infometrics chief forecaster Gareth Kiernan says this is a more efficient use of time and resources, especially given the increased number of people on the waiting list for a social housing.
2) Changes to town planning rules
The new planning and housing density rules will have more impact than Kiwibuild in addressing affordability issues, he says.
Increasing supply is seen as key to addressing housing problems, which has led to policies being put in place that allow for greater intensification of settlement.
First there was the National Policy Statement on Urban Development, which prevents councils from hindering development by prohibiting height limits below six storeys and parking requirements in urban areas.
And last year the Labor and National Party unveiled legislation requiring councils to allow buildings of up to three storeys on most city sites without resource permits from August 2022.
PWC analysis estimates this could add between 48,200 and 105,500 new homes to the housing stock over the next five to eight years.
Experts say it could be a turning point for the market, but the new rules have met with resistance at local level, with councils trying to extend exclusions from stepping up.
Kiernan says that while it’s important to make sure the density is done right, the resistance to the new rules embodies “part of how we got to where we are now on the housing front.”
“There needs to be a hard test on people’s thoughts about rights to sight and sunlight, or we’re not going to get anywhere close to solving the problem.”
But another problem in the move towards scaling up is infrastructure funding.
While the government has set up a $3.8 billion infrastructure fund to support residential development, Kiernan and Tookey say more is needed to meet demand, and where it will come from is uncertain .
3) Co-ownership regimes
Another popular option overseas but slow to take hold in New Zealand is co-ownership, or hire-purchase.
These help low-income families gain access to homeownership through equity participation arrangements where the government, or an organization, owns part of the house, and it is gradually paid for by the owners. This allows deposits and interest rates below the market rate.
Tookey says they are a better option for people struggling to enter the market than Kiwibuild, and there are proven models, such as the UK Housing Association’s rent-to-own scheme, to work from.
The government has launched a $400 million progressive home ownership program in 2020, and it hopes the program will be able to accommodate between 1,500 and 4,000 people when fully rolled out.
But only 78 houses had been moved in by May this year.
There are also non-governmental programs run by charities, such as the Housing Foundation, Habitat for Humanity and the Queenstown Lakes Community Housing Trust, but the sector is small.
Tookey says the problem is that people aren’t aware of these schemes.
4) Construction of prefabricated houses
Increasing the use of pre-engineered housing and off-site fabrication methods is one way to increase housing supply, as it makes the construction process faster and cheaper.
To facilitate this, amendments were made to the Building Act last year. They allow prefab manufacturers to be certified to manufacture their products, and once certified, they have a simplified consent process and fewer inspection requirements.
Amy Moorhead, MBIE’s construction policy manager, says this will enable faster consent for innovative and efficient construction methods and increase the use of off-site manufacturing and products.
This represents a big step forward for offsite construction and comes at a time when its methods and products are gaining wider mainstream acceptance, said OffsiteNZ chief executive Scott Fisher.
“Offsite manufacturing can lower the cost of a build, allows for greater efficiency and productivity, and is more sustainable because the carbon footprint of factory build is 45% lower than traditional build. “
But progress toward widespread adoption could be faster, and government mandates and incentives would help increase its use, he says.
5) Construction options for rent
Building-to-rent, which involves developing multi-unit residential buildings for long-term rental rather than sale to individual owners, has been touted as another way to ease the housing shortage.
According to Property Council advocacy consultant Denise Lee, a third of Kiwis are currently renting, with that number rising to 50% in the Auckland region, and the market is ripe for revolution.
“Creating a class of build-to-let assets, similar to retirement villages or student housing, could unlock thousands of secure homes for Kiwis at no cost to the government.”
But the outlook is entirely up to politicians because without legislative change the sector will remain inhibited, she says.
“If there was legislation to create an asset class, introduce depreciation, and make some changes to the Residential Tenancies Act, we would see a lot more homes to be built planned and delivered.”
Bold government thinking would allow the private sector to deliver more than 25,000 new homes over the next decade, Lee said.
Woods has expressed interest in building for rent, and there is a Ministry of Housing and Urban Development task force on this. But, to date, there has been no government announcement on this subject.
Despite this, a growing number of rental construction projects are underway.