The housing market in New Zealand is in crisis mode. The obvious problem is that the cost of housing is at record highs by many measures, and this is such common knowledge that talking about it is both unremarkable and yet frustrating, because there appears to be no good way out. And we need a way out as the UN has declared New Zealand in breach of our Human RIghts obligations - UN Declares New Zealand’s Housing Crisis A Breach Of Human Rights .

One of the frustrations is that it is hard to determine whom to blame. Is it central government? After all they set policy surely. Is it local government that sets zoning? Or are there structural problems more generally? The Anglo-Saxon world has diverged from the rest of the rich world in having extreme house prices. So it might be that there are structural problems shared by all of them? This is effectively what the recent central government policies have addressed, and many of the measures have been to force local government out of their Nimbyism.

Are any of the 'solutions' to the housing crisis working? - asks the question bluntly, and goes through the headline actions.

Kiwibuild - high income caps are touted, but equally likely is that the private sector was never really that interested in building for this programme. Why would developers forego returns when they can make more in the open market. I'm doubtful this will make an impact long term. It is a laudable idea to involve the private sector to solve the problem but there are structural reasons why this will never give us the housing we need. I'll address this later.

NPS-UD and MDRS - changes in planning and zoning. This is likely to have the biggest success long term - but short term there will be little impact. Christchurch has shown that cheap land can keep house prices lower, but these changes are not about land prices. Instead it makes land more valuable because instead of one house developers can build three - but the increase in the price of land is likely to be less proportionally. So land that might cost $350,000 for one house, might now cost $500,000 for three - the per house price will be lower and so the overall house price might be lower. But it is hard to say - increased focus on denser cities will be good for other reasons.

Shared Ownership Schemes - a way to ease people into homes through rent-to-own is a very good idea. It will take time to grow as it is an unfamiliar route to home ownership. There has been little publicity about this and so little uptake.

Prefab Home Building - this has the potential to change pricing as it is not only land availability that increases house costs, but the cost of construction. If it were possible to build a new warm home cheaper than older houses on the market then that would put a cap on prices. But in a free market the new homes will never be priced in this manner. The secondary market instead is a floor for the price of new homes. I am a fan of off-site construction... and New Zealand does more than some markets such as the US. There most homes have framing built in factories for instance whereas the US even getting ready cut framing is an innovation... and yet house prices in the US are relatively cheaper than in New Zealand. Prefab / Off-Site is part of the picture for sure.

Built-to Rent - and this is where a lot of developers are focussing on. Because now we are touching on the structural problem that is shared throughout the Anglo-Saxon world... the generational wealth disparity caused by the structure of the population. A lot of wealthy boomers, a smaller cohort of Gen-X, and then a larger millennial population reaching home buying age. So you get boomers retiring and investing in rentals and renting to millennials who can not afford to purchase. More rentals will help in the short term, but the structural problem persists. There needs to be mechanisms that work better to transfer wealth from older generations to the younger future generations, and ones that do not impoverish any.

Rather than make this article longer, I will continue in a future post, and will link back to it here - How to House a Nation. But suffice to say that there are better models for setting things right, and none of the headings really get to the crux - it is in the sitting government's interest to have rising house prices. When house prices go down, everyone feels poorer, and the government is blamed.

We need mechanisms that do not result in falling house prices, but enable an increasing housing stock, of warmer homes, and a pathway to housing security for everyone. How to square this is hard. But I believe there are ways to do so.