Addressing New Zealand’s housing supply issues – Expert Q&A

As key players in the housing sector gather in Wellington this week, we asked independent experts to weigh in on the biggest issues preventing Kiwis from affording homes.

So how do we overcome skyrocketing house prices, poor supply and vested interests?

The Shift Conference, which runs from June 5-7, is hosted by Community Housing Aotearoa and the Building Better Homes, Towns, and Cities National Science Challenge. It brings together people from the housing sector for “learning, networking, and solution creation for fixing Aotearoa New Zealand’s housing delivery system”.

The SMC asked experts to outline some sticking points and what they think is the best way forward. 

Mark Southcombe
Kay Saville-Smith
Ruth Berry
Morten Gjerde

Mark Southcombe, Senior Lecturer, School of Architecture, Victoria University of Wellington comments:

Based on your expertise, how bad is New Zealand’s housing problem and how did it get this way?

“New Zealand’s current housing crisis is reminiscent of the housing problems that occurred at the end of the Industrial Revolution. At that time, urban population growth created a huge housing deficit, which resulted in overcrowding and housing quality issues that endured long into the 20th century.

“While the number of state houses is about the same as it was in 1991, the number of households in New Zealand has increased by about a third, resulting in proportionately less state housing provision. So, today, New Zealand social housing provision is necessarily targeted to those Housing New Zealand classifies as having ‘urgent’ or ‘serious’ housing needs. Social housing in New Zealand is also increasingly associated with social problems because of the grouping of the urgent and serious needs of those eligible. What is missing in this picture is the large lower-middle income demographic who are also unable to access affordable housing.

“Private property developers acting alone are not attracted to building affordable housing, nor has there been financial backing for them to do so. Today, only 5 per cent of ‘new homes’ are priced in the lowest quartile and 60 per cent of new homes are priced in the upper quartile. New housing supply in New Zealand is dominated by speculators and developers, particularly the large design-and-build companies that monopolise land supply for larger housing developments and associated profits.

“Land cost has been the major component of the increase in housing costs since 1997. This is a major cause of the problem.

“The housing problem is now well recognised but is way worse than it looks when you dig deeper. An emerging example of the problem is the many mostly unregulated tiny house subdivisions and communities springing up as a bottom up, community response to address housing access and affordability. Sadly these are also increasingly being exploited by well-funded developers as a way to make even more profits from building even less and meaner and to circumvent current building standards. There are also 50,000 people (more people than the size of a provincial NZ city) living in RV’s in NZ. A great many of these people are not doing it for lifestyle, it’s their house of last resort. They are increasingly being moved on wherever they settle with cities like Tauranga recently passing a bylaw that prevents RV’s from staying for more than two consecutive days anywhere in the city except in a designated camping area. This bylaw was designed to prevent clusters of tiny houses and RV’s on vacant residential land without building consent and connection to services even though RV’s are self-contained. So we have homeless not only on our streets but also increasingly with tiny houses and RV’s like a personal snail shell home but landless and being regularly moved on.”

Is the housing sector well-informed to address these problems and why/why not?

“The sector is attracting a huge amount of attention and research, but the key problem is funding and the profit driven, short term developer provision of housing. What is needed is to educate the wider community about the societal shifts and changes necessary to address the problems and the funding of applied research as a means to test alternatives. There are necessary changes in the recognition of and support for diversity of our land tenure, housing delivery and housing procurement practices here. Housing is a human right like education and health, and to support a more balanced housing provision we require housing sector public funding in a similar enduring ongoing way. This needs to be as long term public asset ownership and include some shared ownership and partnership models.”

What solutions does collective urban housing have to offer?

“The key advantages are diversity, social and ecological sustainability. Individual housing can be more efficient if some spaces are shared. This also helps address social problems arising from increasing isolation associated with individualism. There are many different forms of collective urban housing, co-housing, and co-living. They are not for everyone, but often have a much better fit to our diverse contemporary housing demands than the nuclear family house.”

What do you think is the best way forward?

“Education is crucial. There is lots of grass roots events happening, but ideally we also need a community and collective housing cross-industry body that is funded to engage in diversifying understandings of housing and tactics for its long term sustainable delivery.  

The key shift needed is to recognise the necessity for more public support for alternative land tenure to the private land-as-investment model, and for partnerships with the many genuine community based housing groups to achieve some prototype diverse housing models. Once people can see real New Zealand examples they will readily recognise their value and that there are many viable ways to solve this problem.  

I have suggested previously there are seven major tactics available to address the housing delivery crisis:

1. Redevelop public land, retaining public land ownership,
2. Community land trusts and various forms of not-for-profit long term land tenure.
Build at scale through major housing delivery agreements,
Mandatory provision of affordable housing based on need as occurs in the UK,
Higher housing densities in key locations combined with good design and smart prefabrication,
6. Direct collective urban housing procurement, Diversified multiple small-medium provider housing procurement.”

What can be done to encourage greater uptake of technologies?

“The social housing ambitions of the modern period proved that we can industrialise large-scale building processes and deliver quantities of high-density housing. Updating and upskilling the NZ construction industry via prefabrication and education has been done exceptionally well over the last 8 years. We will however always have a globally small construction industry so it’s difficult to achieve economies of scale on a long term sustainable basis, and gains made are vulnerable to future changes in housing demand. So we need to keep supporting innovation in the manner we have in the last 8 years.”

Is enough being done at a funding or legislative level to support innovation in the building industry?

“No doubt there is a lot being done and considerable political and funding focused on this! It’s hard to see the results delivering the level of innovation and disruption needed at this stage without targeted funding for applied research into alternative housing prototypes. My hope is in the great innovation happening at grass roots with communities like Closer in Tauranga or in the many emerging community led housing projects throughout the country despite the lack of research and external support. Collectively they show there are many solutions are they are not all dependent on central government funding or political support.”

No conflict of interest declared.

Dr Kay Saville-Smith, Director, Centre for Research, Evaluation and Social Assessment (Cresa), comments: 

What do you think are the biggest issues facing the New Zealand housing sector?

“The biggest issues are will and skills. There is sense that housing is a wicked problem that is impossible to solve. Yes we need to be realistic. There are lots of problems, some small, some large, but with knowledge, commitment and will they can be solved. Part of the will means recognising that capital investment needs to be made. Part of the skill is recognising how to make those investments and how to generate a housing system that is robust, adaptable and effective.”

How did we get here?

“The current housing crisis has come from a long period of relying on market forces to deliver affordable housing after the 1990/91 housing reforms. Those reforms dismantled a housing system which supported low and modest income households to buy or rent affordable housing, supported the building industry to build affordable housing for low and modest income households both for rent and for owner occupation, and supported the community sector to provide housing to the most vulnerable who needed special support including older people, people with severe disabilities, people struggling with mental health problems and people seeking to re-enter communities after they served prison sentences.”

Is it enough to just build homes cheaply? What are the other considerations?

“Research here and overseas in the Building Better Homes, Towns and Cities National Science Challenge and elsewhere demonstrates that low build costs do not lead to low house prices unless house prices are already low and affordable. Where there are high house price expectations, low build costs typically mean either (1) developer/builders bid up the price they are prepared to pay for land and/or (2) increased profit/margin.”

No conflict of interest declared.

Ruth Berry, Director of the Building Better Homes, Towns and Cities National Science Challenge:

Is it enough to just build homes cheaply? What are the other considerations?

“No, it’s not OK. We know that there are lots of factors beyond being warm and roofed that impact community, whānau and indivisible well-being. Some of it is about how we consider the right to adequate housing, and how we define adequate. For instance, there is evidence that place attachment, a sense of home and community is vital for wellbeing and setting people and society up for success, social, economic, cultural, educational.  On another level, infrastructure like the cost of and access to transport and the provision of good quality public facilities and amenities provision (the cost of day-to-day living) is also important.”

Is the housing sector well informed to address these problems. Why/why not?

“The housing and urban sector , including the housing and urban research sector, has a wealth of knowledge. But no one part of the system holds currently has access to all of that knowledge. We also know that there are a number of gaps in our knowledge. Efforts like The Shift Aotearoa Conference are strengthening the connections  and relationships between the community and community housing sector, the practitioners, and the research community.

“This is critical because we need to ensure that decisions that affect community give voice to those communities. Evidence from research is one side, but we also need the knowledge from the community at a national and local level.”

The Building Better Homes, Towns and Cities National Science Challenge co-hosted the Shift Conference. 

Morten Gjerde, Associate Professor, School of Architecture, Victoria University of Wellington, comments:

Based on your expertise, how bad is New Zealand’s housing problem and how did it get this way?

“The issues are several and not easy to apportion blame to. They have to do with expectations of developers, cost of converting land to being able to support residential uses and shortfall in construction industry capacity.

“As it has in many other places in the world, housing has moved from meeting a basic human need to being an economic investment and a vehicle for financial gain. I acknowledge that I am not an economist but have an understanding of how financial markets work. Moreover, through our research* we have come to understand from developers the formulae they use to determine whether a project can proceed and be profitable or not. At the same time, local and central governments, who have in the past supplemented private development through their own direct involvement in developing housing, particularly for those who would otherwise have difficulty gaining appropriate housing.

“Governments and the general population have come to understand that housing can only be provided by the market. Demand for land in a free market context has seen prices skyrocket, in places where people want to live and should be living. It becomes prohibitive to acquire land in already serviced and desirable locations as the price is largely a reflection of the potential of the land for development and redevelopment. Acquiring land in less desirable, outlying areas and making it ready for development is also prohibitive, not only in terms of extending infrastructure but also in navigating RMA processes and gaining planning approval.

“The crisis is not just in the supply of overall numbers but also in supplying housing that will meet the diverse needs of people. Societies change and NZ continues to become more diverse. And yet developers will largely continue to build the types of housing they have been building for years. There is a disconnect between what the market wants and what the market provides. Insufficient research is being undertaken by developers to understand their markets (beyond the notion that if it sells, that is a good indication that people want it) and because most developer housing is undertaken on a speculative basis, the end users aren’t represented.

“Standards of housing will continue to slide down as developers squeeze plans, squeeze outdoor living spaces and build in the wrong places. The underlying driver to all of these is to turn a profit. This is certainly not to lay the blame for the crisis at the feet of developers or any individual stakeholder group.

“The funders of housing development – which generally is not the developers themselves – appear to be more conservative in their approaches than the individual developers would be. This is a key factor in why we see developers turn out the same housing as they have done for many years – i.e. it has a track record.”

Is the housing sector well-informed to address these problems and why/why not?

“The housing sector is very broad, of course. There is a lot of good information around, about how to build more efficiently, how to build to be more energy efficient and comfortable, and how to meet diverse needs of the NZ population. Perhaps what is missing is a way of connecting the knowledge we have together and applying effectively and purposefully to what we do. As much knowledge as there is in the sector, there are also a number of self-interests that limit the different parts of the industry working more effectively.

Is it enough to just build homes cheaply? What are the other considerations?

“I don’t know that building homes cheaply should ever be a motivation, certainly not if we see housing as meeting a basic human right and as something being created to last beyond the current owners. To make our housing more affordable we should look at factors outside the fabric of the building as well. I think the cost of the land asset is too big a factor to ignore. But I also can’t see how we could do anything about it in the current economic paradigm.

If we think about the material fabric of housing, I believe we should be putting more weight on the life-cycle costs and benefits. It has been too easy to lower the priority for lifecycle considerations in the era of cheap energy and material abundance. But as we come to understand the true costs of building in terms of sourcing raw materials, creating building materials, operating the buildings and disposing of waste when they no longer meet expectations, we can also recognise opportunities to reduce these costs. This would include working with locally sourced materials, materials from renewable sources, building to reduce the need for applied energy and to reduce waste in the process of making the housing. There are a lot of technologies – such as prefabrication – that just aren’t making much of an impact on the construction industry here yet.”

What do you think is the best way forward?

“The best way forward is to find ways of privileging the long term views of housing, on the part of regulators, developers, investors and users. This is going to require more government intervention, I’m afraid. And of course that is relatively unpalatable here in New Zealand. Consider how the current government veered away from a capital gains tax largely because of pragmatic reasons (wanting to retain the chances of staying in power).”

What can be done to encourage greater uptake of technologies?

“I’m a great believer in the value of demonstration projects. It must also be acknowledged that there are many barriers to the uptake of new technologies in the building industry. These include the modest size of the country, the highly fragmented nature of the industry, and people being just as happy to keep doing what they’ve been doing relatively successfully for many years. Clearly there are innovators in all sectors, including education.”But overall, there is a momentum to keep doing what we’ve been doing.

“If we don’t have the patience to see new technologies infuse the industry slowly then we think it would take a disruption, natural or manmade (like the energy crisis in the 1970s).”

Is enough being done at a funding or legislative level to support innovation in the building industry?

“I continue to be disappointed by the failure of governments to intervene, either in terms of incentivising better housing or requiring it. There are plenty of examples of government incentives to enhance performance in other countries. The most obvious and enduring comparison is with California, where the state government has for many, many years incentivised solar energy systems to be installed on dwellings through subsides and tax relief. Why don’t we incentivise good behaviour in ways like this? In my mind, offering incentives would be a preferred way to get better housing against the other option, which would be to require it through legislation and regulation.

“Another way for government to become involved would be to effectively underwrite investment in new technologies by agreeing to purchase housing across a longer timeframe. The Kiwibuild programme could have been this but it has failed to get off the ground in any meaningful way. Developing the infrastructure for more efficient, prefabricated housing systems requires considerable investment which in turn would need to see demand for the systems over a longer timeframe. In a competitive environment, where adopters of new technologies would still have to compete with those building in current ways, I imagine it would take a brave business owner to tool up. Why doesn’t government agree to contract for housing constructed with new and emerging technologies over a longer timeframe?”

Conflict of interest statement: The above statements reflect my own opinions, which have been arrived at through research and reflection. That said, I also acknowledge that I often provide advice to local government bodies on housing quality through Resource Management Act (RMA) processes. 

*Dr Rebecca Kiddle and I have been working on two funded research projects looking first at the gaps between what the market provides and what potential consumers of new housing want. The second project has studied the effect of the Resource Management Act and the ways it is administered through the planning approval process in five cities in New Zealand on the way medium density housing is configured and provided. Both are in the process of being written up in a report and into academic papers.