What Budget 2017 needs to deliver for housing

11:20 am on 25 May 2017

What Budget 2017 needs to deliver for housing

Opinion - After three decades of dismal leadership on housing, Budget 2017 is an opportunity to start addressing some long accumulated failures, Shamubeel Eaqub writes.

Auckland housing and Steven Joyce.

Steven Joyce, inset, should tackle the housing crisis in today's Budget. Photo: RNZ / Rebekah Parsons-King / 123RF

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The New Zealand housing market is in crisis. Its unaffordable and much of it is poor quality.

Leadership from various political parties over the past three decades has been dismal. Since the 1980s, house building in New Zealand has been pathetic.

Not building enough houses, combined with other problems, has led to increased homelessness, increased housing stress and more precarious rentals.

Budget 2017, which Finance Minister Steven Joyce will deliver this afternoon, is an opportunity to start addressing long accumulated failures in housing. But we should not expect fundamental policy reforms - rather areas where more spending would help: social housing, accommodation supplements, infrastructure funding for transport and local government.

Many of the long-term solutions to the housing crisis are structural. They will not be addressed in the Budget - it is not the right platform. Rather, the focus has to be on areas that will make an impact by changing the way government spending is allocated.

The priority has to be the poor. Social housing is seriously under-resourced. On a per capita basis, we now have the fewest number of state houses since the 1940s.

There are not enough and the government's current plans do not go far enough. The reality is that the market will never supply enough houses of the right size and quality for the poor - there is just not enough money to be made from them.

Building consents graphic

Photo: Supplied / To Sense Partners

Housing New Zealand Corporation (HNZC) has a significant land-bank. But plans already announced to develop and sell off land and houses are short-sighted. The experience of the last 30 years shows that land is a very valuable resource - having some control over it through HNZC ownership gives flexibility for the future.

The immense and growing need for quality and affordable housing should be met with a massively increased supply of social housing and rental housing stock.

We need to put additional capital into HNZC to increase supply. Further we need a plan to increase building, in a Keynesian fiscal stimulus style, when the economic cycle eventually turns. I do not expect this in the 2017 Budget - but hope for more enlightened thinking in future years.

Rising rental costs means that low income households in private rentals are under increasing financial stress. We need to have a very serious look at increasing the Accommodation Supplement.

Longer term, we need a careful review of whether the Accommodation Supplement has been a successful policy or if it has dampened the price signals to supply more housing. I do not expect much movement here.

A winning policy would be to significantly increase funding for infrastructure. And although the government has already announced welcome increases in this area, after nearly two decades of under investment in the 1980s and 1990s, catching up now is a massive task.

I would like to see more infrastructure funding in urban centres like Auckland, Tauranga, Hamilton and Queenstown that cannot cope with their growth. The investments should not be just on roads - we cannot build our way out of it - but mainly on long term infrastructure corridors and investment in mass transit.

History suggests a fetish for roads, but I live in hope.

There are many opportunities to make real changes to the housing crisis in this budget. All it requires is the will to do the right thing.

* Shamubeel Eaqub is an economist and partner at Sense Partners, a boutique economic consultancy.

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