Danyl McLauchlan: Chris Bishop’s housing policy is a genuine change in economic direction
Chris Bishop has declared the house prices need to keep coming down. Photo / Getty Images
In 2016, Green Party co-leader Metiria Turei argued that Auckland residential property prices needed to drop 50%, returning housing affordability back to the early 2000s. Condemnation from National and Labour came swift and fast. Turei had breached one of the unspoken taboos of New Zealand politics.
For nearly 20 years, the Helen Clark and John Key governments maintained a sustained property bubble to generate the illusion of prosperity in an economy that was stagnating relative to the rest of the OECD. This made them popular with middle-class property owners: both governments won three terms. But it was wrecking the social and economic fabric of the nation, and mentioning this was the height of rudeness.
Our long residential housing boom was engineered via a combination of market regulation to restrict supply and high immigration to boost demand.
It was funded via heavy private borrowing from the Australian banks as we paid ever higher prices for the same properties. The madness reached its peak under Jacinda Ardern and Grant Robertson, with Ardern indicating a desired target of 4% price growth a year. But in 2021, the combination of Covid stimulus and 0.25% interest rates fuelled a 30% increase in a single year.
Prices have declined since then, and now Housing Minister Chris Bishop has declared they need to keep coming down. He’ll achieve this by deregulating the residential construction sector, making it easier to build, and thus “flood the market with opportunities for development”.
Some of Bishop’s arguments follow the same line as Turei’s: the supply constraint inflicts enormous suffering by forcing families to live in overcrowded homes, cars, garages, emergency housing and, increasingly, the streets. It also entrenches poverty: renting households pay the highest rents in the OECD.
He also points out the economic gains from bursting the bubble – high-productivity economies have large, dense cities – and the enormous cost of the status quo: the government spends $5 billion a year in housing assistance, $20b over the four-year fiscal window – which Bishop protests “equals 15 Transmission Gullies”. (You can imagine him being overcharged for coffee at an airport: “Eight dollars for a long black? That’s one hundred and sixty-two thousandths of a Transmission Gully!)
Christopher Luxon likes to refer to his government as a “turnaround job”, taking a plucky but dysfunctional South Pacific nation and chunking its big rocks to maximise vertically integrated value propositions and set it back on its feet. Bishop’s housing policy is the best evidence we’ve seen of a genuine change in economic direction – but it faces many challenges.
VESTED INTERESTS
The fast-track legislation and now housing deregulation are mechanisms for the government to impose its will on local and regional councils. There are valid reasons for this – councils are prone to capture by vested interests who prefer not to build – but it conflicts with Luxon’s endlessly repeated belief in “localism”: the conservative doctrine that communities are better placed than central planners to make decisions.