The housing market hasn’t failed; the problem is land-use regulation

ACT leader David Seymour has said that New Zealanders deserve better than Phil Twyford’s ideological comments about a ‘market failure’ in housing. He pointed out that the government’s own officials have said that, in Auckland, land-use regulation could be responsible for up to 56 percent, or $530,000, of the cost of an average home.

Clearly, land cost is the main problem. These days prefabricated homes can be inexpensively made and quickly assembled on site or assembled in part inside a warehouse and then transported to the site. There are plenty of affordable housing options these days; the problem is finding affordable land.

After 150 days in power, the government hasn’t even decided yet whether to review the Resource Management Act. The act contains the rules that determine what can be built where. For a government that claims to be so concerned about affordable housing, they have taken no action to tackle the root of the problem.

Our housing market isn’t a case of market failure but is an example of regulatory failure. It is New Zealand’s planning rules that prevent the market from increasing the supply of houses in response to the increased demand.

This means that New Zealand does not have a free market in housing. It has a market created and manipulated by the government.

In David Seymour’s book ‘Own Your Future’ he discussed this problem in the chapter on housing. 

His solution was to scrap the planning laws that hold home buyers to ransom.

“ACT want to take development of housing in our big cities out of the Resource Management Act (RMA).”

And to provide incentives for councils to grant consents.

”By sharing revenue from GST that is collected from construction activities with local councils. If councils have more building activity in their area they will get a bigger cash top up from central government.”


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