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New housing strategy needed

Published in The New Zealand Herald (Auckland), 14 December 2016

There is no doubt that Aucklanders want to live in a world-class city. There is less agreement on what that means.

There are people who believe that the hallmark of a great city is that it is extremely expensive. Their argument goes something like this: If we want Auckland to be a significant global city, it will attract immigrants and they will drive up the prices of the houses we live in. In the end, Auckland should be a global city like New York, London, Paris. None of them are cheap to live in.

But this line of thought contains a non sequitur: The world’s great cities are not great because they are expensive. And cities can be great even if they are not expensive.

In fact, we should not accept a trade-off between greatness and affordability.

To put it another way, imagine a city well connected to the rest of the world, with a vibrant cultural scene, great job opportunities, good schools, universities and transport links.

Would such a city not be better if it also provided its residents with decent accommodation?

Or, aren’t all the other great amenities that cities provide diminished by a lack of affordable housing?

The ambition to make Auckland a world-class city is admirable. But this ambition should not stop short of making Auckland a liveable and affordable city also.

To counter the most expected objection first, a globally attractive city is of course likely to grow. Being attractive literally means attracting people — that is a sign of its success. It is a challenge, then, to accommodate such growth. If we do not, prices will necessarily increase. That is the basic law of supply and demand.

So what Auckland needs is a housing strategy that ensures supply keeping up with demand.

There are no silver bullets that will solve all our problems. We need a combination of the following:

  • A relaxation on height and density restrictions.
  • The abolition of the Rural Urban Boundary.
  • Alternative ways of funding urban infrastructure such as Municipal Utility Districts.
  • Financial incentives for councils to increase the housing supply, such as keeping the GST component of every new development project.

At The New Zealand Initiative, we have produced a series of reports which explain how these mechanisms would work to make housing affordable once again.

Suffice to say, there are ways to increase the supply of housing — even though New Zealand has not applied them yet.

What is clear, however, is the fact that ever-rising house prices are not a law of nature. On the contrary, they are only the result of bad policy choices. Empirical evidence from around the world shows how cities that artificially restrict the supply of land for development have seen prices shoot up, whereas other cities with more accommodative planning policies have kept their housing markets more affordable.

There is a social imperative for making housing more affordable, too. If we do not solve Auckland’s housing crisis, or if we actually believe that extreme price levels are a sign of success, we are ignoring the needs of ordinary Aucklanders on average incomes.

Sure, if you are an investment banker, a media personality or a sports star, you will always be able to live a decent life, no matter how expensive the city is. And if you are within this group, you will also benefit most from the amenities that global cities provide.

If, however, you are teacher, a nurse, or shop assistant your experience of city life would be very different. You would then have to put up with all the downsides of extreme price levels without being able to participate in metropolitan life.

Is this the kind of society we want to live in? And isn’t this kind of social polarisation exactly the breeding ground for populism and resentment we are witnessing overseas?

Unaffordable housing does not have to be the price we have to pay for living in a globally connected city. And telling people on average incomes to just put up with it is the modern equivalent of Marie Antoinette’s “Let them eat cake”.

Yes, let’s make Auckland a world-class city. But let’s also make it the world’s most affordable world-class city.

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