This week, the Initiative scored plenty of media mentions – not just in New Zealand but worldwide. Under normal circumstances, this would be a reason to celebrate. However, the occasion is bittersweet.
I was honoured to provide the foreword to Demographia’s annual housing affordability survey. Over the past decade, the Demographia surveys have become a benchmark in international house price comparisons.
Each year, the global affordability problem is getting worse. This year was no exception. Demographia’s 2017 report is the most depressing read so far.
Traditionally, housing markets were regarded as ‘affordable’ when a median house would cost up to three times a median household’s income. Believe it or not, until two or three decades ago, many New Zealand, Australian and Canadian cities still met this benchmark.
The current study shows much of the world has lost its housing affordability. Melbourne has a ‘median multiple’ of 9.5, Auckland stands at 10, Vancouver 11.8, Sydney 12.2 and Hong Kong 18.1.
On such measures, it would be wrong to say that the housing ladder had only lost its bottom rungs. It is worse than that.
In cities like the ones mentioned, society has been divided into two disparate groups: owners and non-owners. If you are not already in the property market, the chances of you ever becoming a home-owner are slim.
As we at the Initiative have often argued in our reports, housing affordability is the single biggest social policy issue of our time.
The collective failure of many countries and cities to provide their citizens with affordable housing is a tragedy. It is a tragedy because this is a public policy disaster that would have been entirely avoidable.
As I wrote in my foreword:
“Demographia’s reports and countless other surveys and studies do not leave the slightest doubt that unaffordable housing is almost everywhere and every time caused by the same factor: housing supply restrictions. The more restrictive the market, the more prices will increase over time.
To any undergraduate student of economics, this will not come as a surprise. But it is still a relatively novel discovery for many planners and politicians.”
At least in New Zealand, there is a growing consensus across the political spectrum that housing, planning and local government finance reforms are urgently needed.
As the Demographia report makes clear, the time for action is now.
Read the 2017 Annual Demographia International Housing Affordability Survey here.