COMMENT: Over the past few years it has been impossible not to hear and read about the shortage of housing in New Zealand, and the pressing need to build as many houses as possible to urgently increase our stock.
There are variations of the view but the most popular version claims that we’ve been building fewer homes than we actually need, for decades, and that we now have a shortage of around 100,000 dwellings.
This claim was first popularised by the opposition Labour Party in 2012 and became the central plank of their KiwiBuild policy, which was essentially a promise to build 100,000 homes over 10 years if they were elected to office in 2014.
Over the next few years, the claim gathered momentum and by 2016 belief in a shortage of houses had taken absolute hold and attained the status of unchallengeable dogma. Even the National Government bought into it and came up with its own initiatives to address the problem.
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But here’s the thing – if anybody had actually bothered to check the most simple indicators of housing numbers, back when the claim was gaining traction, they would have seen the whole thing for the nonsense that it was and could have nipped it in the bud early on.
Instead, we blindly accepted the mantra, and persevered with policies to (supposedly) dramatically increase our housing stock, culminating in Labour getting their chance to implement the disastrous KiwiBuild programme after the 2017 election. Spurred on by inexperience and naivete, the new Government pressed on with the rhetoric around building 100,000 homes – only to have the entire project crash and burn just a couple of years later, having produced just a handful of new houses.
But perhaps, in hindsight, that was a blessing?
Here’s why: there are two very simple and widely available indicators which tell us whether we’re building enough homes to keep up with demand. The first is the population count and the second is a census measure which tells us the average number of people occupying a Kiwi home on a particular date. By dividing one by the other we can get a very accurate read on how many houses we have in New Zealand at any given time.
Let me demonstrate.
In 1986, the population of the country was 3.24 million – and we know from the census that year that, on average, there were 3.29 people per dwelling/household in New Zealand. So by simply dividing the population figure by the average household figure, we know that there were almost 985,000 occupied houses in New Zealand in that year. You can do the math, yourself, on a calculator.
Ashley Church: “While public and media attention was focused on government initiatives to build more homes, the private sector had been simply getting on with it.” Photo / Ted Baghurst
By 2013 (the year after Labour announced their original policy) the population of the country had increased to 4.45 million and the average household occupancy number had actually dropped to 2.87 people per household. If we divide this new population figure by the new average household figure, we now find that the number of occupied dwellings had grown to 1,550,000 – an increase of 565,000 dwellings over 27 years (or an average of 21,000 new dwellings being built per year).
Why does this matter? Because the household occupancy number could only have dropped if we had built more homes than we needed. If we had maintained the 1986 average of 3.29 people per household, we would only have needed 1,352,000 homes by 2013 – so we built almost 200,000 more homes, over that 27-year period, than we needed just to stand still.
In hindsight, it’s easy to understand what happened. While public and media attention was focused on government initiatives to build more homes, the private sector had been simply getting on with it and quietly building them, doing so in the numbers required to meet market demand at any given time.
This stood us in good stead over nearly 30 years, producing the homes that we needed and increasing stock in the quantities required to accommodate the demographic changes brought about by the end of the Baby Boom and changing tastes and requirements.
So why did we think we had a shortage? Because we have confused short-term accommodation needs with long-term housing numbers – and they’re not the same thing. Homelessness and a demand for emergency housing have spiked in recent years, but this isn’t because we don’t have enough homes. It’s because government policy, most particularly under the current government, has made it increasingly difficult for the private sector to provide rental housing for a section of society.
Of course, this shortage doesn’t entirely explain the mythical figure of ‘100,000 homes’ proposed by Labour in 2012. To understand this figure you need to go all the way back to the Labour election manifesto from the early 1980s where they were proposing that we were short of – you guessed it – 100,000 houses.
In other words, in the absence of meaningful data, they’d simply dusted off a decade’s old election promise.
The upshot of all this is that the frantic drive to build tens of thousands more homes wasn’t only unnecessary – but, if we’re not careful, the legacy of it may be a glut in supply in the coming years – which is the last thing we need in a market where prices are already under pressure.
Let’s hope sanity prevails.
- Ashley Church is a property commentator for OneRoof.co.nz and a real estate business owner. Email him at [email protected]
