With its increased majority, National seems likely to push through long planned reforms to the Resource Management Act (RMA). In coming weeks we will be explaining why some tweaks might be reasonable, but the wholesale changes planned are really just opening the door up to more dumb and dirty growth. The justification for the change is that it will allow us to build cheaper housing – The NZ Initiative (the reincarnation of the Business Roundtable) even had the gall to use housing to link RMA reform to child poverty. But the simple fact is that we don’t need to bowl the environment for cheaper housing. What we need is a market that shows the true cost of development.
NZ Initiative economist Eric Crampton’s argument is that the income of the poor has been rising at a reasonable rate, but that has been outstripped by the increase in housing costs. This makes housing affordability a big part of our child poverty story. This is a fair point – housing does suck up a big chunk of a poor family’s income. But the real question is why is housing so expensive, especially in Auckland? This is where Mr Crampton and many others go awry – blaming the regulations that stop more land being used for housing.
The NZ Initiative, and the Productivity Commission on who’s work its conclusions have been based, have got it horribly wrong. Their work assumes that all Kiwis should have a quarter acre section, and house prices have gone up because Auckland has run out of these. So, the logic follows, we should rezone farmland and turn it into suburbs. This is just dumb – if Auckland is to keep growing, we can’t replicate this old model. It is already one of the largest cities in the world in land terms, with only a fraction of the population of cities of comparable land coverage. Concreting over the Bombay hills – the best land in the country – is not the answer.
Opening up land on the fringes might reduce the cost of housing, but it just shifts the unaffordability problem elsewhere – on to transport and utilities. Either the Council has to cough up for money more roads and public transport, or the individual does. The net result is higher costs overall, whether those are borne by the taxpayer, ratepayer or by the poor themselves. Recent studies show that when transport costs are taken into account, denser cities are more affordable to live in, and have less impact on the environment (e.g.; lower carbon emissions). This is where the Productivity Commission’s work was poor.
The central point here is that for any market to work the price has to include the full cost of the product. So if Auckland is to sprawl, let the developers face the full cost of the extra roads, congestion, infrastructure and even piping water from the Waikato River. Then we will really see if it is cheaper to build more houses on the fringe. Instead, the NZ Initiative, like those other proponents of RMA reform Federated Farmers, favour business facing as low costs as possible, even if others have to subsidise that outcome. The real costs end up being borne by the rest of us in higher taxes and a degraded environment – which is dumb and dirty growth at its unfettered worst.
If we do reform the RMA as per the Far Right’s vision, we should take the advice of a commenter on Crampton’s article, and test the idea on the ACT seat of Epsom. Take away all the RMA constraints to more intensive land use in this leafiest of suburbs. We can see how the locals like having their trees felled and intensive housing spring up in the sought-after Grammar zones. Watch the hypocritical Far Right NIMBYs come out in force then.
Seriously, land availability and the RMA, are not Auckland’s problem. Auckland is the problem. If Auckland gets too expensive for the quarter acre dream, then the market is sending us a signal. If the market faces the true costs, it will determine the appropriate way forward. We might see more building on the fringes, but we are more likely to see Auckland become denser in its centre. We might also see people and businesses relocating to other regions in search of a better lifestyle. Now that would be a revolution!
We have talked at length about the other drivers of the Auckland house price boom. There is a speculative demand for housing in Auckland that unnecessarily boosts the demand for housing well beyond what the demand for accommodation would imply. This is driven by the toxic mix of a tax break on housing along with the Reserve Bank directive to banks to lend on mortgages as first preference. Get rid of those and the demand will fall back to a level that is commensurate with the demand for accommodation.
Calling for RMA reform is a cop out, an assault on the wellbeing of New Zealanders. Better to deal to the real issues and ensure that market prices reflect the true costs. The New Roundtable (aka NZ Initiative) has jumped aboard this recommendation, totally in disregard for the externalities that infinite urban sprawl give rise to. It’s very shallow. But there is nothing more the Roundtable and Fed Farmers would like than to see the RMA totally repealed – we’ll explore why in coming blogs. Promising that RMA reform will offer cheaper housing and solve child poverty is simply drivel.