Housing and immigration: is the tail wagging the dog?

Published in The Asia New Zealand Foundation (Wellington), 19 June 2014

As the election gets closer, there is no doubt that immigration remains a potent campaign issue. Few other topics elicit such an emotional response as the questions of who should come to New Zealand or, indeed, how many should come.

Immigration touches on many different issues, ranging from culture, religious affiliation and national identity to labour supply and the housing market. Yet, of all these, immigration’s implications for housing seem to trigger the fiercest responses.

This focus on housing is unsurprising for a number of reasons. First, New Zealand house prices have increased significantly over the past decades – with a corresponding decrease in affordability. Second, housing affordability is an issue that affects everyone. Third, any migrant has housing needs, so a house occupied by a migrant will be unavailable to everybody else.

Though there seems to be a direct link between migration and New Zealand’s housing crisis, this thinking ignores some important aspects of the market – not least our house-building record.

If the housing market is to determine our immigration policy, then the tail is wagging the dog.

In a country the size of New Zealand, house building should not be difficult. New Zealand is about 10 percent larger than the United Kingdom, but has a population 14 times smaller. With only 0.8 percent of New Zealand currently developed, we are nowhere near the point where we would be running out of land – even if we exclude areas of scenic beauty that should be off limits.

If New Zealand was settled at a population density like that of, say, the Netherlands, it would be home to 130 million people. If we went for a Singapore-style density, we could house about 2 billion people.

Of course, nobody is suggesting that New Zealand should go for such a crazy population increase. However, this thought experiment shows that even a doubling of our population to 9 million would not leave us overcrowded.

The truth is, New Zealand is not very good at supplying houses. Over the past five years, our housing stock increased by fewer than 14,000 units a year, on average. The net building rate of just over three buildings per 1,000 people is low both by historical and international standards.

At such a building rate, even without population growth, houses built in New Zealand today would have to last well over 120 years until they could be replaced.

No matter which angle you look at it, New Zealand’s housing market is in crisis. New Zealand houses are way more expensive than they would be under a system that provided a better housing supply.

The poor state of our house market is not migrants’ fault, it is our own for having let the market get to this point.

And it is our responsibility to correct this problem. If we care for better and more affordable housing for both Kiwis and migrants, the housing market needs bold and courageous reforms. The New Zealand Initiative has produced research and policy recommendations that outline how this could be achieved.

In summary, we believe that we need better ways of financing infrastructure. Councils planning for growth should see their budgets improve as a result, rather than be left alone to cover the costs of infrastructure upgrades.

Fixing the housing market is something New Zealand needs to do irrespective of migration. But while we are fixing our housing market, we would be ill-advised to curb migration.

Migrants who bring their skills to this country, who are willing to make a contribution and ready to become a part of the community, are an asset. They will add strength and diversity to the country, and make it a better place – as generations of migrants have done before them.

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