Gareth’s Five Point Affordable Housing Plan for New Zealand

Gareth MorganEconomics, Tax and Welfare

You don’t need a fancy Commission, costing over $4 million a year, to tell you what to do about house prices and worsening housing affordability, especially Auckland housing affordability.

It’s blindingly obvious.

There are four significant forces behind the housing affordability problem.

These forces affect all of New Zealand and are particularly obvious in Auckland;


  1. A tax policy which favours housing over every other type of investment.
  2. Reserve Bank rules which encourage banks to lend to housing at the expense of other borrowers.
  3. The local government practice of subsidising the housing costs of people who buy into new subdivisions and.
  4. Pressures for businesses and people to locate in key business hubs such as Auckland in preference to other areas in New Zealand.


Of these four forces, only the fourth – agglomeration – is inevitable and something we need to accept and work with. The rest is unacceptable and fixable, but leadership is lacking.

The government certainly needs a plan, but the one it has come up with is poor, looking more like an attempt to appease public concerns rather than actually address the problem.

This is what should be done:

1.         introduce a wealth tax which includes all housing, including the family home, and integrate it with the income tax regime, so the combined tax take is no higher except to the extent that tax loopholes on wealth accretion are closed.

This would remove the tax advantages housing currently enjoys compared to bank deposits, shares, buying into a business and so on. Because they can enjoy tax free capital gains on their property, people are incentivised to buy into housing rather than these other investments, boosting house prices unnecessarily (and holding back investment in business). Remove the tax breaks, and you take the heat out of housing. A wealth tax has many advantages over a capital gains tax – for a start, it is low cost to administer. For the differences between a wealth tax and a capital gains tax click here. For a full explanation of the sort of wealth tax we need click here.

2.         incorporate the clear macroeconomic risks of bank lending to housing into the risk weights applied by banks to their home loan books.

This would make lending to housing less profitable to banks and lending to businesses more attractive.

3.         Local government should stop the practice of loading the costs of supplying services to new subdivisions on to all rate payers.

People who want to live in newly developed subdivisions should face the full cost of their choice, not a lesser amount. If they faced the full cost they might think differently about moving out and developers would pick up on their preferences for inner city living. In addition urban sprawl imposes social costs from isolation and higher costs of connectivity.

4.         We need to get imaginative and flexible about inner city living, and our design community needs to get on the ball.

We have to abandon the idea that the only decent home is one sitting alone on a plot of land. People all over the world have found ways to raise happy, healthy families and form strong, rewarding communities in apartment-style homes. It may mean combining dense housing with community gardens on a large scale, like the heavily subscribed allotment schemes in the UK. It certainly means incorporating quality community spaces among the developments.

5.         Stop politicking and form a cross-party accord

Agglomeration is with us to stay. We have to adapt as quickly as possible and be as smart as we can. Like the Superannuation debate, housing is too important an issue to be fiddled with around the edges. Political parties should be getting together and finding a way forward. John Key is wrong, we don’t have the luxury of waiting.

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The four key priorities for the government include:

  • Increasing land supply. This will include more greenfields and brownfields developments, and allow further densification of cities, where appropriate.
  • Reducing delays and costs of RMA processes associated with housing. This includes introducing a six-month time limit on council processing of medium-sized consents.
  • Improving the timely provision of infrastructure to support new housing. This will include considering new ways to co-ordinate and manage infrastructure for subdivisions.
  • Improving productivity in the construction sector. This includes an evaluation of the Productivity Partnership’s progress in achieving a 20% increase in productivity by 2020

Prime Minister John Key has warned this will not be a quick fix, as existing home owners may become understandably annoyed if their homes have been devalued overnight.



What do you think about the above plans?

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Gareth’s Five Point Affordable Housing Plan for New Zealand was last modified: December 15th, 2015 by Gareth Morgan
About the Author

Gareth Morgan

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Gareth Morgan is a New Zealand economist and commentator on public policy who in previous lives has been in business as an economic consultant, funds manager, and professional company director. He is also a motorcycle adventurer and philanthropist. Gareth and his wife Joanne have a charitable foundation, the Morgan Foundation, which has three main stands of philanthropic endeavour – public interest research, conservation and social investment.