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We have to abandon the idea that the only decent home is one sitting alone on a plot of landGareth Morgan

Gareth’s Five Point Affordable Housing Plan for New Zealand

You don’t need a fancy Commission, costing over $4 million a year, to tell you what to do about house prices and worsening housing affordability, especially Auckland housing affordability.

It’s blindingly obvious.

There are four significant forces behind the housing affordability problem.

These forces affect all of New Zealand and are particularly obvious in Auckland;


  1. A tax policy which favours housing over every other type of investment.
  2. Reserve Bank rules which encourage banks to lend to housing at the expense of other borrowers.
  3. The local government practice of subsidising the housing costs of people who buy into new subdivisions and.
  4. Pressures for businesses and people to locate in key business hubs such as Auckland in preference to other areas in New Zealand.


Of these four forces, only the fourth – agglomeration – is inevitable and something we need to accept and work with. The rest is unacceptable and fixable, but leadership is lacking.

The government certainly needs a plan, but the one it has come up with is poor, looking more like an attempt to appease public concerns rather than actually address the problem.

This is what should be done:

1.         introduce a wealth tax which includes all housing, including the family home, and integrate it with the income tax regime, so the combined tax take is no higher except to the extent that tax loopholes on wealth accretion are closed.

This would remove the tax advantages housing currently enjoys compared to bank deposits, shares, buying into a business and so on. Because they can enjoy tax free capital gains on their property, people are incentivised to buy into housing rather than these other investments, boosting house prices unnecessarily (and holding back investment in business). Remove the tax breaks, and you take the heat out of housing. A wealth tax has many advantages over a capital gains tax – for a start, it is low cost to administer. For the differences between a wealth tax and a capital gains tax click here. For a full explanation of the sort of wealth tax we need click here.

2.         incorporate the clear macroeconomic risks of bank lending to housing into the risk weights applied by banks to their home loan books.

This would make lending to housing less profitable to banks and lending to businesses more attractive.

3.         Local government should stop the practice of loading the costs of supplying services to new subdivisions on to all rate payers.

People who want to live in newly developed subdivisions should face the full cost of their choice, not a lesser amount. If they faced the full cost they might think differently about moving out and developers would pick up on their preferences for inner city living. In addition urban sprawl imposes social costs from isolation and higher costs of connectivity.

4.         We need to get imaginative and flexible about inner city living, and our design community needs to get on the ball.

We have to abandon the idea that the only decent home is one sitting alone on a plot of land. People all over the world have found ways to raise happy, healthy families and form strong, rewarding communities in apartment-style homes. It may mean combining dense housing with community gardens on a large scale, like the heavily subscribed allotment schemes in the UK. It certainly means incorporating quality community spaces among the developments.

5.         Stop politicking and form a cross-party accord

Agglomeration is with us to stay. We have to adapt as quickly as possible and be as smart as we can. Like the Superannuation debate, housing is too important an issue to be fiddled with around the edges. Political parties should be getting together and finding a way forward. John Key is wrong, we don’t have the luxury of waiting.

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The four key priorities for the government include:

  • Increasing land supply. This will include more greenfields and brownfields developments, and allow further densification of cities, where appropriate.
  • Reducing delays and costs of RMA processes associated with housing. This includes introducing a six-month time limit on council processing of medium-sized consents.
  • Improving the timely provision of infrastructure to support new housing. This will include considering new ways to co-ordinate and manage infrastructure for subdivisions.
  • Improving productivity in the construction sector. This includes an evaluation of the Productivity Partnership’s progress in achieving a 20% increase in productivity by 2020

Prime Minister John Key has warned this will not be a quick fix, as existing home owners may become understandably annoyed if their homes have been devalued overnight.



What do you think about the above plans?

You may also like this post –  Don’t Blame Foreigners for Auckland House Prices Increasing

  • Barbara

    What we need is the village concept. These can be tailored to suit need, anything form specialist villages, elderly/disabled to residential, to industrial, They contain all amenities and utilities for that size but use less space and far less resources by limiting transport to connectivity supply and delivery and makes it much easier to put in public transport between villages

    • Hohepa

      Totally agree Barbara. A National Policy Statement on ‘Community’ should bridgehead how local TLA’s and Regional Councils in collaboration with their communities apply it locally. We get ‘community’ right we ‘fix’ a whole lot of other social and environmental dysfunction. We have NPS’s for water? air? Cant public officials see humans are also a natural resource or are we not apart of the ‘system’ we call nature.

    • Storm1

      Kiaora Barbara. Your ‘village concept’ is akin to a Maori Papakainga. We have the Marae as the hub and therein separate facilities is the kohanga reo (language nest), health centre, Kaumatua (pensioner) flats and on the surrounding perimeter of the marae, are the houses for those who wish to build.

  • Lyn

    One thing that isn’t dealt with above is addressing the absolutely criminal cost of building products. I have just done renovations to my home, the costs of the council fees were relatively low compared to the horrendous costs of timber, plumbing fittings, aluminium joinery and most other items that make up any modern day home. Now we are left with its supposedly overinflated ‘value’ being significantly lower than it’s actual ‘cost’. (A fact we were aware of and chose to accept prior to starting renovations.) The only tax free capital gain with the current law is on your own home, profit on investment properties has always been taxable. If a CGT is introduced on my home do I get a tax credit for the loss of value in my home due to a falling market? Or a deduction for the money I spend improving it?

    • Peter Quixote

      At the time of his welcome into the Labour Green manifesto, Gareth had on
      his table a letter of offer from the Laotian Government…. loosely translated it said on Laotian politburo letterhead socialist ..
      Dear Mr, Gareth,… from the Politburo of the socialist revolutionary republic of Laos , and our esteemed Comrade General Choummaly Sayasone :

      “We like your idea of concentration of the people in small spaces, and a strict progrom of taxing income, taxing expenditure, and taxing every dollar of asset that they have. We know that certain classes can avoid all
      this, but that is just the way it is …. You should see the state of
      Laos, ordinary villagers just living the way they like, even in the green fields, and in the hills thinking they can live where they like now,
      There are perfectly good shantys for them to live in the lowlands …how well we wish we had a man of vision like you here …and telling them the green fields are just for the privileged wealthy who can pay great for expensive infra structure , It is important as you know to concentrate the proletariat or I think in your language Greek, the hoi polloi, where they can easily be measured, controlled and most of all taxed.

      The politburo were in fits of laughter when you called your asset tax a wealth tax , and we think your fiend Orwell he would be delighted at this euphemism for more middle class tax. As if the wealthy are going to pay an asset tax, and in that matter we are looking for investors in our big dam here. Returns guaranteed from Vietnam and Thailand buying our electricity.
      We think you will make exemptions for your friends in stocks and bonds and investments,and export and manufacturing Mr Gareth. This way it will be just a watered down Capital Gains tax, and like 1984, they won’t know much till it hits them … so once again congratulations on your social tax. You will be the first country in the world that has tax on income, tax on expenditure and retrospective tax on everything they own.

      Your Sincere, from Prime Minister Thongsing Thammavong.”

      ends except .from there the Politburo offered Gareth a free trip to the socialist republic to see how utterly loose the people had become, and a general discussion on concentration and a thorough remodel of the countryside.
      But shame Gareth turned it down, he has decided to give his wisdom to New Zealand

  • Nathan Griffiths

    Hi Gareth, regarding your point 3 – Auckland Council introduced a new Development Contributions scheme in July this year which I believe is supposed to recover the actual costs of providing services for new developments.

  • Simon

    My problem with apartments is how shabby they are. Most of them look like giant toilet blocks. They have been done on the cheap and it shows. It feels like we have missed an opportunity here. Most of the inner city highrises have been built with no aesthetics in mind and for a transient Asian student market and some property investors. Now we are suppose to accept more eyesores on the Auckland landscape? In the suburbs? I’ve come back from NY and they have the benefit of granite and brickwork to make their inner-city living look so appealing. Our potential earthquake/eruption zone qualifies us for papier-mache buildings, or so it would seem. People might think aesthetics are not important but Auckland is an ugly city. It’s depressing and will get worse. Part of it is how much we treat property, not as a home but as an investment – just look at all the characterless grey houses with low-maintenance gardens and boring bathrooms, designed for a quick turnaround.

  • JR Murphy

    What I need is a house where I can put my art on the walls without having to ask, not be worried that I am going to be kicked out every year, where I can plant a garden for food because welfare is no longer enough to live with dignity, I need a lawnmower as mine is broken and I can’t afford another – if I don’t mow my lawns my children and I will be evicted, I need the health care ACC laws promise after you are raped so I can get better and get a job – rotting on welfare for 10 years begging for help is a living nightmare, I need a lawyer but everybody is too busy, I need back the psychiatrist, psychologist, Occupational Therapist, mental health worker and other treatment and rehabilitation services I had in 2009 that took me 7 years to get, I need ACC to reinstate this care like the two reviews said they must, I need people in the community not to hate me because I don’t work, I need people in the community to not discriminate against me because I write poetry about how bad mental health and ACC are, I need help and I don’t know where to go because when I ask for help they send the police around to bully me into shutting up – and I don’t want to be stripped naked again for being unwell? How I wish I had money like Gareth does, maybe then I wouldn’t have to worry about having enough food, having somewhere to live and I could pay for my own mental health care, rather than rely on a cruel, corrupt, right-wing, out-of-touch elitist government.

  • Donald

    I find the discussion relating to the pressures on Auckland’s infrastructure and housing interesting. I’ve lived in Dunedin for 12 years now and I’m still baffled by the stagnation that afflicts this city. There is incredible infrastructure here, plenty of room for housing and hard industries, an amazing resource in the University for R and D in soft industries, great lifestyle – the works. But this city needs people and it needs investment. I don’t know if the problem lies with central or local government, or somewhere else. But surely in the Web 2.0 world we don’t need everything located in Auckland? Is this an issue for subsidization, or is that too interventionist? It just seems extraordinary to have such a well-appointed city down here desperate for people and investment while just a short plane ride away the other city is bursting at the seams.

    • Kara-Leah Grant

      Dare I say weather? I grew up in Dunedin… and the weather drove me away. Later, in my 30s returned for a year and was pleasantly surprised at the livability of the city. Could even handle the weather somewhere… but there was still a lack of… something. Not sure how to quantify it. Not quite money. Not quite enthusiasm. Not quite energy. But… something. Vibrancy?

      • Donald

        Yes, I totally agree something is lacking and I think the elements you mention are the sum parts of the equation: a lack of money (ie investment and opportunity) equates to poor levels of energy and ethusiasm. But unlike most depressed towns in NZ that have little in the way of infrastructure and brain power resources, Dunedin is rich in both. I’m sure the relocation of a few head offices; a handful of smart startups and 20,000 extra people would go some way to easing the ‘southern malaise’.

    • Sandy Price

      Well put. We prefer the Dunedin area to Auckland, better quality of family life and much cheaper housing. Auckland should not be compulsory for anyone wanting job choice. I support Dunedin business, govt obviously doesn’t

  • Michael Alexander

    I am truly grateful that there are monied people of integrity such as Gareth and his son Sam in New Zealand. I did however think the New Zealand Herald lead story this morning encapsulated the problem we are facing – business executives who are rewarded for cutting costs, despite the performance of companies and making workers the casualty of their greed. The burning question on most ordinary people’s minds is why is it that when a company is failing its shareholders they are rewarded with performance bonuses for firing staff as part of consolidation and cost cutting. When company executives and middle management are made responsible and accountable for their decisions and are made to pay the consequences for bad decision-making only then might we see growth and genuine innovation within New Zealand. I don’t object to someone being paid a million dollars a year but when their only contributuon to the bottom line of a business is to fire staff, then, yes, i do take acception. The first rule of business should be that consumers make the world go round. Thanks Gareth for your continued enlightened points of view.

  • Kara-Leah Grant

    Not sure if “only the fourth – agglomeration – is inevitable and something we need to accept and work with.” What if it’s not? What if the ability to work via the ‘net and in other creative, innovative ways means it’s no longer necessary to flee small towns and rural backwaters for the big cities?

    But yes, “We need to get imaginative and flexible about inner city living, and our design community needs to get on the ball.”

    There are many ways to live, that don’t include a nuclear family in the ‘burbs, that can reduce living costs right now. I’ve just spent 18 months, as a single parent, living in Wellington in what looked like a flatting situation – four adults in a four bedroom house – but was a conscious community. We came together to live like “family”, knowing that we’d face difficulties, but determined to use communication and openness to work through the inevitable issues of different people with different needs & wants sharing a house. It worked. I was able to afford a much higher standard of living as a single parent, and I had support for raising my child. There’s no way I could have afforded such a beautiful home by myself.

    More on the idea of conscious community:

    The way we live is a reflection of the way we group together, and the ideas we have about what it means to be a family, or a community. A four bedroom house can house 3 or 4 adults willing to create a home together. It’s not flatting, and it takes a conscious commitment and dedication to communication, but it works.

  • Ian Gemmill

    Some good strong points there, indeed. Why Auckland? Because we need to look like an Australian state with one major business centre? The Australian supermarket model is Woolworths/Countdown but look how New World has distributed its mini-markets; that’s a NZ solution, which may work better; we need more home-grown solutions. East Asians love investing here, especially near Auckland, the playground for the rich, at present, but it’s driving up our currency and our house prices, isn’t it? But when things go south, the money is quickly withdrawn. We need to manage the FOREX, like the Chinese do, but not so severely. Housing’s appetite for rich agricultural land needs to be curbed and we need more medium density accommodation on public transport corridors.

  • Curtis Antony Nixon

    I believe the Nats program is cynical and empty. The problem is not the supply of housing. Stats are hard to find for private housing in NZ but looking at England or the USA shows that in those countries there is a massive over-supply -(see below).
    “How Many Homes Are Empty? …
    720,000 empty homes are currently empty in England according to the 2011 Empty Homes Stats!
    The latest (November 2011) empty homes statistics show that of these, 279,000 are long- term empty (meaning they have been empty for more than six months).”

    “…approximately 3.5 million people in the U.S. are homeless, many of them veterans. It is worth noting that, at the same time, there are 18.5 million vacant homes in the country.”

    So the issue is about the wealth gap, the whole of the economic system being structured so that a minority is impoverished and alienated. No job, no education, a permanent client base for the police and courts, CYFS, A&E departments, HNZ etc. Gareth’s ideas are the answer to the specific housing affordability problem but can only operate as part of a transformed, enlightened system that refuses to apply the ‘scrap heap’ method of throwing some people away like garbage, permanently marginalising them. JR Murphy below gives a detailed outline of one sad and troubling possible version, there are many more.

  • Gareth Morgan

    You can read my follow up to this post here

  • paul

    so let me get this right . Your answer is to

    1. raises taxes

    2. make it harder to get a mortgage
    3. make it harder to build a new house

    4. tell people to stop enjoying the amenities of large cities and move to places that have little or none ..

    such a good solution i would swear it came straight out of treasury …

    • Ross Carter-Brown

      Paul maybe you should read the article again…. You don’t seemed to have read it properly.

  • Storm1

    Kiaora Gareth.

    The BNZ’s monthly residential market survey has found
    continuing strong property demand from young buyers and investors, prices perceived to be rising, and sellers having the upper hand. continuing strong property demand from young buyers and investors, prices perceived to be rising, and sellers having the upper hand.

    Tony Alexander also found the government’s Housing Affordability Report Boring.

  • Daniel Robertson

    Excellent points Gareth. I especially like your point #1. Property give effectively tax-free profits to the owners, unlike bank deposits and investment in business, where taxes are paid annually. At 30% tax rates, no wonder our property prices are 30% above where they should be!

  • jh

    One killer line we are told is “New Zealand is only .07% urbanised” However (some perspective):

    What proportion of Britain do you reckon is built on? By that I mean covered by buildings, roads, car parks, railways, paths and so on – what people might call “concreted over”. Go on – have a guess.

    The urban landscape accounts for 10.6% of England, 1.9% of Scotland, 3.6% of Northern Ireland and 4.1% of Wales.
    Put another way, that means almost 93% of the UK is not urban. But even that isn’t the end of the story because urban is not the same as built on.

    In urban England, for example, the researchers found that just over half the land (54%) in our towns and cities is greenspace – parks, allotments, sports pitches and so on.

    Furthermore, domestic gardens account for another 18% of urban land use; rivers, canals, lakes and reservoirs an additional 6.6%.

    Their conclusion?

    In England, “78.6% of urban areas is designated as natural rather than built”. Since urban only covers a tenth of the country, this means that the proportion of England’s landscape which is built on is…

    … 2.27%.

    Yes. According to the most detailed analysis ever conducted, almost 98% of England is, in their word, natural.

  • Peter Quixote
  • jh
  • jh

    Government policies blamed for house prices

    “Immigration and tax breaks for investment in residential
    property are being cited as the underlying causes of steep increases
    in the cost of housing over the past decade.
    New Zealand now
    boasts one of the highest rates of home unaffordability in the world
    as a result of prices rising far faster than incomes, and the
    government’s Savings Working Group blames that squarely on the
    policies of successive governments.
    Although “the favourable tax
    treatment of property investment” accounted for about 50% of house
    price increases between 2001 and 2007, the working group said, there
    was also strong evidence that rapid swings in immigration brought
    about price-rise “shocks”.
    There was a sharp spike in
    immigration in 2001, 2002 and 2003 and, said working group committee
    member Dr Andrew Coleman, it appeared that property prices did not
    fall anywhere near as greatly when immigration fell again.
    report added that there was little evidence that immigration boosted
    local incomes. In fact, the need to build roads and schools meant
    that net migration contributed to the national deficit.

  • jh

    Agglomeration effects don’t appear to be that great?

    of Economic Growth in Auckland

    A report prepared for the Royal Commission on Auckland Governance

    “There is robust evidence to support the view that larger city/regions are
    more productive than smaller ones. In addition to international
    evidence, several local reports have recently identified these
    agglomeration benefits. In our view, the best of these reports was
    written by Motu researchers. It found evidence that “localisation”
    increases productivity but that “urbanisation” decreases it.
    Localisation refers to physical clustering by similar firms, whereas
    urbanisation is defined as the co-location of diverse firms. This is
    an internationally unusual result, and may suggest that greater
    attention to clustering is warranted in Auckland.

    Given that agglomeration economies appear to exist in Auckland, the size of
    the resulting benefits is of interest. There is a wide range of size
    estimates internationally, with most suggesting that doubling the
    size of a city will increase productivity by between 3% and 8%.
    Any productivity boost would help Auckland firms compete more effectively
    against those in other locations. However, considering the official
    projection of population growth in Auckland (43% over the next 24
    years), even elasticities at the top end of the international range
    would result in (agglomeration-sourced) productivity gains of only 3%
    in total, spread over the next two decades.

    Moreover, agglomeration also brings added costs. Large cities also contain
    forces that drive people away, and there is some Auckland evidence of
    such an effect for older working age people in our report on the
    composition and scale of Auckland’s economy. The literature
    identifies land constraints as a key source of forces pushing people
    away from cities, and show up in land rents, the cost of commuting,
    and congestion. The resulting trade-off between the costs and
    benefits of greater population densities is an issue for regional
    government, impacting primarily on land-use and transport policy.
    These are matters on which some policy coordination is clearly

    In summary, based on the available evidence, it seems clear that modest
    agglomeration economies will accrue gradually in Auckland, but they
    will not be a causative force that will transform the regional
    economy. Moreover, a larger and more dense population on which they
    rely also imposes costs, notably in the land markets.’

  • Caroline

    All sounds good. Development contributions under the local government Act 2002 is addressing the ‘growth’ issues with new subdivisions – allowing Council a better funding tool to get more equitable contributions from growth and reduce the burden on rate payers. Unfortunately developers with deep pockets are taking many of these policies to Judicial review. But the tool is there.

  • Eddie Mann

    This is a wealth problem. On a relative basis Kiwi’s wealth has been in decline for the last 20 years. The $30 to $50 per hour jobs are dissapearing and being replaced by $13 to $15 per hour jobs. Houses will not be affordable until reasonable paying jobs are available and both Labour and National do not know how to achieve this.

  • allan

    The problem is New Zealanders inbuilt view that property is an investment when it is anything but. people who invest in property are only selling the next generation of kiwis out. sure over the past 10 years if you have invested in property you would have done well for yourself but all you have done is speculated on the value of a house going up you have not built anything or developed anything increased the gdp created jobs you have done nothing.

    say you would have brought a house for 200 and 5 years later it is worth 500 the 300 k profit did not just appear out of thin air the person who brought that over priced house off you will more than likely borrow the money and will now be inslaved to a mortgage for the next 25 years, while the property investor walks away with 300 k for doing nothing. this is wrong the government need to inforce laws that make property a not attractive investment. Property should not be looked apon as an investment and it should not be somthing the average kiwi has to struggle to get a foot in the door. Im 24 and a marine engineer i had a good job in new zealand but have move overseas largely due to the fact that to buy a house in auckland i need at least 100k deposit. I am baffled at how a family can even live in nz it has become a country were the average kiwi cant even afford to buy a house were he was born. the ratio of house price to income ratio is out of control.

    one of 2 things will happen in nz 1 the shit really hits the fan like Ireland were houses that 10 years ago was worth 200k is now worth 9ok. or 2 it will stay the same for the next 40 years as the next generation pays off the extravigant lifestyle of the previous generation.

    property needs to half in value before it is back to were it should be and all these fat cat property investors need wake up to the fact that they are only selling out the next generation