Housing: what can be done

In the seemingly-endless housing supply debate, there is often a divide between those favouring greater intensification, and those favouring a larger physical footprint for growing cities.  My own policy view is squarely in the “it should be a matter of individual choice, provided the infrastructure etc costs of development are appropriately internalized, and the rights of existing property owners are protected” camp (and yes, I recognize that the definition of almost every word in that statement could be extensively debated). My practical prediction is that New Zealand is a society where most people –  people in their child-raising years –  will prefer to have a decent backyard (those living in Hastings or Timaru don’t flock to high rise apartment buildings or town houses with tiny sections), so long as regulatory restrictions don’t make that infeasible.  It was quite possible 50 years ago, when New Zealand incomes were much lower.  There is simply no reason, in a country with this much land, why it shouldn’t be now.

Apologists for the current disgraceful situation constantly cite Sydney, or Vancouver, or San Francisco or London, as if absurd regulatory restrictions in other places make it okay for us to mess up our housing/land supply market this badly.  Others look to the experience across the huge range of US cities.

Someone drew my attention to the chart below, drawn from the Wall Street Journal’s economics blog, and on a day when the house is over-run with builders (and holidaying children), it seemed worth reproducing.

scale of cities and house prices

Cities with rapidly growing populations (those big blue circles in the bottom right) have seen little or no increase in real house prices over the period 1980 to 2010.  They made it possible to build, relatively easily, and in turn made themselves attractive places for people to live.

I don’t know how large the increase in Auckland’s “developed residential area” has been over 1980 to 2010, or even how to go about trying to measure it, but I’d be astonished if it was anything close to even 100 per cent.

It is quite possible to accommodate rapid population growth without anything like the scandalous increases in real house prices we’ve seen in Auckland (or even, to a much lesser extent in many other urban areas in New Zealand).   Political leaders, of both main parties, who have failed to make it possible, posing a near-impossible burden on younger people in Auckland who don’t come from advantaged backgrounds, should really be held to account.  High house prices aren’t something to celebrate (NB Prime Minister)  –  and not even most existing home owners are better off, as they aren’t going anywhere –  but should really be a source of shame to those who rigged the market (or let the market stay rigged) and made it happen.