OPINIONPoliticsJuly 5, 2024

The problem with Chris Bishop’s plan to flood the housing market


The thing about floods is the water doesn’t tend to go to the right places.

Housing minister Chris Bishop says he wants to flood the housing market. On Thursday, he unveiled a list of policies to deregulate the market and make it easier to build homes. His description of a “flood” evokes an image of the government turning a hose on full bore, spraying new developments all over the country.

A more accurate metaphor would be a stream. The government can’t make people build houses any more than it can legislate the price of them. The amount of water (investment in new housing) depends on many factors: interest rates, labour markets, supply chains. The government can’t control the flow, but can remove some blockages to help the water flow more easily. It can’t point it like a hose, but it can build stopbanks or eddies to guide the water in the direction where it has the greatest potential benefit. 

For the last century or so, the stream has been diverted away from density and towards greenfield sprawl. This is not an accident, it’s the result of specific policy decisions.

View of the backyards of houses in Martin Square, Wellington, in 1939, and a newspaper article from 1937 about new government housing regulations (Photo: Bruce Orchiston, Ref: PAColl-6013-5-01, Alexander Turnbull Library, /records/22731757; Wairarapa Times-Age, April 8, 1937, Papers Past)

In the late 1800s and early 1900s, New Zealand’s inner cities started to look like slums. People lived in cramped tenements with poor health conditions. There were epidemics of tuberculosis and cholera. In response, the government and councils introduced height limits, setback requirements, minimum dwelling sizes and a host of other regulations intended to reduce density.

For a while, it helped. New suburbs and state homes raised living standards. But eventually, problems emerged. The restrictions on dense housing meant people who needed to be near the city centre for work or personal reasons were limited to poor-quality, overpriced housing. Finding an affordable home meant being way out of town, with a long commute and less access to services.

For councils, sprawl means significantly higher infrastructure costs. For the nation, it means worse productivity, making us all poorer

Higher-density areas have a lower cost of infrastructure per household (Source: Sense Partners)

In recent years, New Zealand has taken a world-leading approach to divert the stream back towards density. The Auckland Unitary Plan, NPS-UD, MDRS, Wellington District Plan and other boring-sounding documents overturned old restrictions and let the water flow. It is working; New Zealand is building more apartments and townhouses than ever before

Most of Chris Bishop’s Going for Housing Growth package supports that new direction. It encourages more intensification around rapid transit lines (“The interminable and frankly boring debate in Wellington over whether the Johnsonville train line was “rapid transit” was time-consuming, expensive and frustrating,” he said), enables more mixed-use developments, and removes minimum floor areas and balcony requirements for apartments. That last point is controversial – shoebox apartments can be cramped and uncomfortable, but are still an important piece of the housing mix, especially for single people who need short- to medium-term accommodation. 

However, Bishop doesn’t just want cities to grow upwards, also wants them to grow outwards. This means eliminating the rural-urban boundary in Auckland and other similar urban growth boundaries in other cities. It is true these boundaries restrict potential housing, but they also provide certainty for urban development, aligning housing growth with new roads, railways lines and pipes, and minimising environmental impacts. 

Bishop sees his plan as a “more of everything” approach. In reality, it could mean less of what we need. Rather than diverting the stream to irrigate one field or another, the water spills limply outwards in no particular direction. 

This approach is based on Treasury analysis that blames land prices for the cost of housing. It therefore assumes that more developable land will drive that cost down. It probably will, to a limited extent. A few land bankers will cash in, a few more homes will be built, and they will be relatively cheap. That might make house price stats look good in the aggregate, but it doesn’t really address the problem. Even amid our housing crisis, homes are still cheap way out in the wops. It’s just that no one wants to live there, because it’s an undesirable location, a long way from jobs and amenities, with high infrastructure costs. Building a few detached homes an hour away from the city centre isn’t going to solve the housing crisis. Properly executed and incentivised density will.

Housing minister Chris Bishop and prime minister Christopher Luxon at parliament in March (Photo: Hagen Hopkins/Getty Images)

The risk with scrapping the rural-urban boundaries and encouraging distant sprawl is it shifts focus away from density. More money and time spent building homes on the urban fringe means less spent building upwards. Meanwhile, better density should (hopefully) make homes on the urban fringe less desirable. 

We only have so many builders and investors. Bishop should incentivise them to focus their efforts on the homes that will make the most difference. We should make sure the stream is pointed where the water is needed most. 

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