Labour yesterday announced an excellent policy on housing affordability. The reforms proposed by Labour stress increasing the supply of land and improvements to local government finances surrounding infrastructure investments for new housing:
Labour will free up density and height controls to allow more medium density housing and reform the use of urban growth boundaries so they don’t drive up section costs. This will curb land bankers and speculators.
Labour has struck at the heart of two major constraints on urban land supply New Zealand: restrictions on density and height of new developments, and much more importantly, the use of urban growth boundaries to drive up land prices. These proposed regulatory reforms could not be more welcome.
The other shoe of Labour’s housing affordability reform proposals is improving the incentives for local councils to support new housing developments:
The other new element is changing the way we fund infrastructure for new developments. Currently those costs are either subsidised by the ratepayer or passed by the developer onto the price tag of a new home. That makes houses much more expensive. It also means they are paid off through mortgages at expensive bank interest rates.
Our new policy will see infrastructure funded by local government bonds, paid off over the lifetime of the asset through a targeted rate on the properties in the new development. This will substantially reduce the cost of new housing.
The reforms proposed by Labour to local government financing will reduce the financial burden on existing ratepayers of the local government funded infrastructure necessary to support new land developments.
Source and notes: International House Price Database – Dallas Fed June 2015; nominal housing prices for each country is deflated by the personal consumption deflator for that country.
These Labour Party reforms are fantastic because the main party on the left-wing of New Zealand politics has faced up to restricted land supply as a key reason behind housing unaffordability. I wonder what the New Zealand Greens will think of these major new reforms.
Of course, nothing is perfect in the art of policy development. New Zealand Labour continue to want government to build 100,000 affordable houses and scapegoat foreigners for high housing prices.
A few more sensible economic and fiscal policy announcements such as those today by the New Zealand Labour Party and it will start looking like a credible alternative government.