Housing consents at highest level since 1974

Written By: - Date published: 9:03 am, January 15th, 2020 - 20 comments
Categories: housing, labour, national, phil twyford, Social issues - Tags:

Statistics New Zealand recently tweeted this graph.  It laid out for all to see the cause of the housing crisis.  There was a calamitous lack of new homes being built from 2009 to 2013 but clearly figures have now improved dramatically.  For the last year the numbers of new construction consents were the highest since 1974, during the term of the third Labour Government.

This was the time of the John Key government.  But rather than acknowledge what was happening and debate the causes it chose to continuously say there was no crisis.

After Labour gained power the incoming briefings laid out the extent of the problem. 

This was from Henry Cooke at Stuff shortly after the change in Government:

Official figures prepared for the new housing minister estimate a shortfall of 45,000 houses in Auckland, with supply of new homes well behind increased demand.

They also show serious shortfalls in Hamilton and Wellington leading to a nationwide shortage of 71,000, with new minister Phil Twyford saying his government have “inherited a disaster.”

The estimates, never publicly released, were included in a briefing for Twyford from his new ministry partially released to Stuff. It compares population increase with new houses actually built – not just consented.

In Auckland as of 1 June 2017 the Ministry of Business Innovation and Employment (MBIE) put the shortfall at 44,738 homes, following a huge growth in demand through 2013 to 2015 which a more gradual increase in completed new homes did not keep pace with.

Labour’s Kiwibuild has not gone as smoothly as it could.  The problem was announcing bold headline grabbing figures that suggested there would be an immediate improvement.

Across the road from me there are two apartment towers being constructed.  They will contain 160 apartments, many of which will be social housing.  The construction is being undertaken by reputable experienced developers.  The resource consent process was conducted very efficiently and went through without problems.  Completion is six months away.  From start to finish it will be five years and the way I see it this is an optimal well processed development.  The suggestion that a large number of apartments and houses would be built within the first term or even within a decade was always heroic.

But this is not the only policy that has been enacted. There was the supported living apartment announcement, 1,500 additional places for homeless in 2018, tenancy law reform, resourcing infrastructure needed for growth including the forthcoming infrastructure announcement, and 6,400 new public housing places to be completed by 2022.  And removing the need for Housing Corp to pay the Government a dividend has freed up much needed resources.  To name a few.

On the other hand the housing corporation wait list has ballooned. Expectations are higher.  And Labour has stopped polices National implemented to reduce the lists such as tenancy reviews and excluding from the list those in houses in which traces of methamphetamine was found, even if there was no risk or no proof of who was responsible.

From Radio New Zealand:

The waiting list for public housing has hit a new high – reaching nearly 14,500 households.

The recently released figure – recorded at the end of November – has more than doubled from the roughly 6000 individuals or families on the list shortly after the 2017 election.

National is blaming Labour’s housing policies and says the government has meddled in the rental market instead of building houses.

But the minister responsible, Kris Faafoi, said the government had already delivered some 3300 public housing places, with another 2500 under construction.

They were due to be completed by June, he said.

The increase in demand was due in part to a culture change which meant people knew they would receive the help they need, he said.

Faafoi added that Budget 2019 had included $197 million to strengthen and expand the Housing First programme.

That funding would be able to support up to 2700 homeless whānau across New Zealand, he said.

The construction trend has now corrected and is heading in the right direction.  The Government is putting in the resources to make sure that this continues.  And housing prices have stabilised, particularly in Auckland and have been declining albeit modestly.  I don’t think that a greater decline is politically sustainable.  There are too many young home buyers who would be wiped out by a strong correction.

So things are improving.  The political imperative for the Government is that they improve quickly enough by the time of the next election so that they will be trusted for a second term.  Which is when the real change should occur.

20 comments on “Housing consents at highest level since 1974 ”

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  1. Gosman 1
    15 January 2020 at 9:18 am

    Ummm… the Graph seems to illustrate that there was a steady decline in consents from 2004 till 2009. The political party in power during the majority of that time was Labour not National. The fact that the pick up has been relatively steady since 2011 suggests it was changes around this time that had the biggest impact. It certainly doesn't support you theory that National did nothing while Labour has made all the differences.

    • mickysavage 1.1
      15 January 2020 at 9:31 am

      There was a surge in 2004 and 2005 and then a decline and it fell off a cliff in 2008 because of the GFC. But National did nothing and it did not take off again until 2013. The other nuance is that immigration surged so there should have been an increase anyway.

      Auckland's surged from then, presumably through immigration. But Wellington Canterbury and Waikato held still or declined until the change in government.

      • Gosman 1.1.1
        15 January 2020 at 10:55 am

        No, it fell steadily from 2004. It didn't just fall off a cliff in 2008 as you state.

        • Phil 1.1.1.1
          15 January 2020 at 1:04 pm

          Lots of different stuff going on in this chart, but some historical context might be helpful.

          The elevated level of consents in Auckland over 02-04 is largely a story of mezzanine/2nd-tier finance companies funding a huge glut of property development. All that housing supply came online in quick succession and there were not enough buyers in the market, so virtually all of the entire finance company sector fell apart, taking Mom & Pop savings with it from 06-07 onward (e.g. Bridgecorp, Nathans, Capital+Merchant, Dominion, Hanover….)

          The property development industry had gotten so used to sourcing investment from finance companies that it took a while to figure out what the new funding model would be. The major banks were gun shy of increasing their exposure, then on top of that the GFC comes barreling at us, so the development industry basically dried up.

        • McFlock 1.1.1.2
          15 January 2020 at 1:28 pm

          I think you need to look up the word "steadily".

          2005 was a bad year for Auckland consents, down 4000. The other regions were almost flat. but everywhere took a hit from the GFC.

  2. weka 2
    15 January 2020 at 9:51 am

    I know part of the solution to the housing crisis is more houses, but won't lots more private housing and development housing drive further market increases? Because housing is a financial investment with many people now locked into needing or wanting increasing capital gains and a society largely unwilling to intefer with that.

    At some point when we catch up on the population to housing ratio that will flatten out, but it's still going to be a increase with little hope of any meaningful decrease. So low income people will be worse off, again, with little on the horizon in the way of relief.

    The point being that building lots of houses without other interventions will ease things but won't solve the problem for the people that are worst off.

    Or am I missing something here?

    (will just mention the population increase elephant in the living room as well).

    • Sacha 2.1
      15 January 2020 at 12:02 pm

      Yes. Reducing the financialised demand for housing as an investment class is the only full solution. Otherwise all the extra stock we build gets hoovered up by agents of cheap foreign money. Poor people are screwed.

    • Gosman 2.2
      15 January 2020 at 2:15 pm

      Yes. You are missing the law of supply and demand. Increasing supply generally leads to lower not higher prices.

      • weka 2.2.1
        15 January 2020 at 2:51 pm

        Once we have enough houses for everyone, how far do you think property prices will drop? Rents?

      • Graeme 2.2.2
        15 January 2020 at 2:51 pm

        Fine in theory and a stable market. But in a supply constricted market increasing supply will stimulate demand.

        Queenstown over the last five years has been an example of that. Prior to the SHAs we had a tight market where demand was stable to dropping because there was nothing to buy. Agents were twiddling thumbs. Along came Nick Smith with his SHA bandwagon and it was off, a hint of supply and demand took off, along with prices. $400K houses in Shotover Country were all of a sudden $1M.

        It's going to take a gross overshoot of supply, and corresponding market correction to see an excess supply. And this won't necessarily mean a price drop, more a plateau with reduced demand also reducing supply as properties are taken off the market.

        In our situation a more managed market could provide a better result, where housing supply is tightly managed and matched to employment growth and demand. Kind of like Kiwi Build, maybe with a few tweaks, to get the supply better matched to demand rather than speced, and priced, 20% over demand

        As for the KB units in Wanaka, any development is going to find it hard when the Real Estate trade is doing all it can to not match buyers with those properties. First hand evidence there.

        • weka 2.2.2.1
          15 January 2020 at 3:07 pm

          Are the SHA houses built? What are they worth now? Or if no built, have the land prices in the SHA gone up?

          Why did hint of the SHA lead to market price increases?

          • Graeme 2.2.2.1.1
            15 January 2020 at 3:33 pm

            What are SHA houses going for, $925K That's in Bridesdale, a SHA development that made a complete ass of the district plan and preceding decisions. This is another one, sit down and breathe out before opening the link.

            The hint of the SHA's got thing going because it brought a huge influx of people to build them, and all the other developments that spawned off the boom created. The objective of the SHAs was to create a property and development boom. It succeeded. How they are going to pan out for buyers and communities is to be seen.

        • Nic the NZer 2.2.2.2
          16 January 2020 at 12:59 pm

          Not even fine in theory. Economic theory concludes that at the macro-economic level market supply and demand curves don't take the shape of the individual supply and demand curves of the market participants. This is due to payments in the market producing income for other participants.

          As you identified examples of, we don't know what will happen to market prices based on an increased supply. Sometimes they will move up in response and sometimes not/down. At minimum in practice this appears to apply to all asset markets due to the change in asset values producing income for sellers.

      • Nic the NZer 2.2.3
        16 January 2020 at 1:04 pm

        In English the better term for such a finding is not the word 'Law', but 'Nebulous Guideline'.

  3. Sacha 3
    15 January 2020 at 11:54 am

    I'd like to see that graph as a proportion of population.

    • bwaghorn 4.1
      15 January 2020 at 6:33 pm

      Having people live in tents etc is the nat / act policy since 08 . Maybe they were on to something.