Housing price increases have been outpacing wages for 20 years:
If nothing significant changes now that will get worse:
If New Zealand politicians thought the housing crisis in 2020 was bad, the worst is yet to come, warns a new report by The New Zealand Initiative.
In The Need to Build: The demographic drivers of housing demand, Research Assistant Leonard Hong modelled 36 scenarios and found that New Zealand’s population gets older and larger by 2038.
Hong calculated that the number of additional dwellings needed would reach between 26,246 and 34,556 annually under the most plausible scenarios. This excludes the annual housing replacement and demolition rate, and the current 40,000 undersupply calculated by Informetrics.
“Historical data tells us that only 21,445 new houses have been built in New Zealand annually since 1992. This is nowhere near enough to accommodate our growing population,” says Hong.
For the next 20 years, even with zero net migration, we still need to build close to 20,000 dwellings annually to keep up with population changes.
“Policymakers should stop blaming the housing crisis on land banking investment and speculation and find policy solutions to drastically expand housing supply to keep up with demographic changes.”
Demographic changes will also have adverse effects on our prospects for fiscal prudence. The report demonstrates that the number of those over 65 years will be up by at least 23% in 2060.
This means fewer future taxpayers and more pressure on working-age New Zealanders to fund public services such as health care and education.
“Our future is an older and larger New Zealand and we must start preparing for it,” says Leonard Hong.
“We need to make a growing and ageing New Zealand a liveable place for New Zealanders, and this starts by building more houses now. Otherwise, future generations will have to deal with terrible housing affordability prospects.”
“This report should be a wake-up call for the government,” concludes Leonard Hong.
The full report is here.
It is no use tinkering with policies that attempt to reduce demand. The shortfall in supply is too great for that to make any significant difference.
The only solution is to build a lot more houses and start doing that now.
The government is frightened of the fallout should house prices decrease. It won’t have the courage to say that building more houses is a much higher priority than safeguarding the equity of existing home owners with big mortgages.
But the demand for housing is such to mitigate a lot of that risk.
Even if it didn’t, the financial and social costs of not addressing the housing crisis are a much greater problem that needs urgent action to enable a lot more houses to be built much sooner than any existing policies will do.