Housing and cities

A suburb of detached houses seen from above
Points of viewHousing is expensive because planning rules keep land scarce, and governments can change those rules.

I have worked on housing since my first think-tank job in London in 2005. Twenty years and three countries later, the economics still looks simple to me. The politics is the hard part.

Core beliefs

Unaffordable housing is a policy failure, not a law of nature

Adjusted for inflation, New Zealanders pay about five times as much for a house as they did in 1970. Germans pay roughly what they paid then. Both countries have strong economies, growing demand and plenty of regulation.

The difference lies in what their planning systems allow to be built, and in whether anyone has a reason to build it.

Read: An open letter to Mike Hosking on housing (The New Zealand Herald, 2020)

Planning rules ration land

The evidence sits at the edge of every city. When Alan Evans and I studied England, a hectare without planning permission sold for about £10,000, while residential land fetched more than £2.6 million. That gap is the price of scarcity created by planners. New Zealand’s land market shows the same pattern.

Read: Town planners will finally have to answer for land prices (The New Zealand Herald, 2026)

Councils need a reason to say yes

German cities compete for residents and businesses because their budgets grow when the town grows. New Zealand councils, like English ones, pay for the roads and pipes that growth needs while the tax revenue goes to Wellington. So they use every planning tool to slow it down.

Sharing the GST from new homes with the councils that consent them would turn growth from a burden into a windfall.

Read: From localism towards localism: A personal journey of policy discovery (Policy Quarterly, 2019)

Rising house prices do not make a country richer

A house gives the same shelter whatever its price. Adam Smith made the point in 1776. When a British banker once showed a Bundesbank president a headline celebrating another rise in house prices, the German replied that over there it would be bad news.

Houses are not productive assets, and New Zealand cannot get richer by bidding up their price.

Read: Germany may hold the key to solving New Zealand’s housing woes (Stuff, 2017)

Reform lasts when both sides own it

Auckland upzoned three-quarters of its urban land in 2016. Labour and National then legislated together for medium-density housing, and in 2026 Parliament voted to create an independent officer to watch urban land prices. Housing is now one of the few areas where each government builds on the last one’s work.

Read: Jacinda Ardern did one thing right – and Australia could learn from it (The Australian, 2024)

How I came to this

I grew up in Essen, in the Ruhr, where 53 neighbouring towns compete for residents and jobs. Mayors cut ribbons for new developments because growth paid for their budgets. I took that for granted until I moved to London.

In 2005, Policy Exchange hired me for a project on Britain’s housing crisis, working with the late Alan Evans, a professor of urban economics at the University of Reading. On paper, Germany’s planning system looked even more daunting than Britain’s. Yet German house prices had barely moved in decades.

The answer, we concluded, was localism. German councils gained from development and English councils lost from it. I took the argument to Australia in 2008 and to New Zealand in 2012. When I told Bill English in 2012 that I wanted to replace rates with local taxes that reward councils for growth, he looked at me as if I was from Mars. He has since warmed to the idea.

  1. 2005Unaffordable Housing: Fables and Myths, the first of four Policy Exchange reports with Alan Evans.
  2. 2006Better Homes, Greener Cities proposes a presumption in favour of development. George Osborne launches it.
  3. 2007The Best Laid Plans shows how planning holds back Britain’s economy.
  4. 2008I move to Sydney and the Centre for Independent Studies.
  5. 2011The British government announces the presumption in favour of development.
  6. 2012I join The New Zealand Initiative as its first executive director.
  7. 2016Auckland’s Unitary Plan upzones three-quarters of the city’s urban land.
  8. 2021Labour and National legislate together for medium-density housing.
  9. 2024Housing Minister Chris Bishop pledges to share GST from new homes with councils.
  10. 2026The Budget creates a $400 million fund to encourage councils to permit more development. The new planning law creates an independent officer to watch urban land prices.

What happened next

In England, the British government announced in 2011 that it would adopt the presumption in favour of development that Alan Evans and I had proposed in 2006. George Osborne had launched our report as shadow chancellor and introduced the policy as chancellor. Britain left out the other half of our proposal, a fiscal reward for councils that allow growth.

New Zealand went further. The abolition of urban growth boundaries, the removal of blanket density limits and street-level medium-density zoning all have their roots in The New Zealand Initiative’s research. By 2024, consents had reached 45-year highs and Auckland rents were falling in real terms.

The missing piece is the money. The 2023 coalition agreement promised to consider sharing GST from new homes with councils. The May 2026 Budget did not do that, but it created a $400 million fund to encourage councils to permit more development.

Reports

Unaffordable Housing: Fables and Myths2005 Bigger Better Faster More2005 Better Homes, Greener Cities2006 The Best Laid Plans2007

In my own words

“There is no law of nature that says house prices must go up and up.”

An open letter to Mike Hosking, The New Zealand Herald, 25 November 2020

“At its core, planning had always been about restricting land supply.”

The New Zealand Herald, 3 September 2026

“Building more housing is a moral imperative.”

The Australian, 10 April 2024

Start here

Business Spectator · 21 September 2011

Housing sense in short supply

While the rest of the world wonders what the next phase of the GFC will bring; and while the rest of Europe discusses the future of their common currency; the …

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