15 July 2019
By Allison Tindale, MNZPI
NZPI member Allison Tindale has recently prepared a paper titled
‘Just How Big is the Housing Problem’
which summarises information from
over 80 sources on housing affordability problems experienced by beneficiaries,
low-wage workers, single person households and middle-income households.
Understanding the size of the housing affordability crisis
is important for planners and other associated professionals, because it is a
key driver of previous and anticipated planning reforms. The National Policy Statement on Urban
Development Capacity places considerable obligations on Councils to understand
and respond to housing demand and supply issues. The majority of Territorial Authorities
provide social housing [i] and several councils have
also developed or are developing Homelessness Strategies. Furthermore, issues associated with poverty,
particularly child poverty, are a hot topic.
Society and government face a mammoth task in addressing the
housing affordability crisis facing New Zealanders. This is due to the size of the problem, the
length of time that problems have been escalating and that housing unaffordability
is far more ‘normal’ than housing affordability across the globe. According to
UN figures from 2016, only 13% of the world’s cities have affordable housing [ii]. A recent survey of 200 global cities found
the average median housing price to household income ratio is 6.2 [iii], a figure just below the
NZ average of 6.5 [iv],
and described by Demographia as severely unaffordable.
Focusing on the situation in New Zealand the report titled
‘Just how big is the Housing Problem’ found:
is no single reliable measure of housing need in New Zealand. The purpose of the social housing waitlist is
to prioritise access to a limited supply of social housing, rather than act as
a measure of general housing need. Housing
need extends far beyond the 11,067 households on the official housing wait list
in March 2019 [v].
2016, 140,000 recipients of the Accommodation Supplement (AS) were identified
as in ‘severe housing stress’. The AS is a housing subsidy provided by MSD to
eligible beneficiaries and low-income workers.
In June 2016 half of all renters receiving the AS spent 50% or more of their
income on housing costs.
- In March
2019, there were over 295,000 recipients of the AS. The number of persons reliant on this
supplement is anticipated to be over 500,000 when including couples and
dependent children. In 2016, 88% of
recipients of the AS were renters or boarders.
To qualify, all recipients have to have cash assets at or below $8,100
per adult, which means that they are unable to afford any type of house
- The AS
has not kept pace with housing inflation and is not sufficient to keep
recipients out of housing stress. For
example, the AS for a single person in the Wellington Metropolitan area has
risen by $5 (5%) between 2005 and 2019. In
contrast, Sense Partners have reported an 80% increase in cumulative rental
prices in the Wellington region over 15 years [vi]
reports by the Welfare Expert Advisory Group[vii] and the Child Poverty
Action Group [viii]
concluded that incomes for beneficiaries need to be raised, in order to lift
recipients and their dependent children out of poverty. The precarious state of
many beneficiaries is highlighted by the number of hardship grants issued by
MSD between January and March 2019 of 472,217.
weekly rental price of $300 per week is considered unaffordable [ix] for a single person or
couple on the Jobseeker Benefit [x], as well as a single
person employed full-time earning the minimum or living wage. A search of
rental properties in the Wellington region on Trade Me on 5 May 2019, found
less than 7% of listings had a rental price of $300 or less. Statistics from
MBIE show the lower quartile rental price for the Wellington region is above
- It is
extremely difficult for beneficiaries and low-waged single persons to find an
affordable rental property. Anglicare
Australia’s ‘Rental Affordability Snapshot’ provides a model for
evaluating affordability. Even residents of boarding houses can face very
high housing costs relative to incomes, with one-third of boarders spending
more than half their income on rent in 2013.
- In 2018
over one third of households in rented dwellings (200,800 households) had
housing costs of 30% or more of gross household income. In 2019 The Welfare Expert Group identified
the lowest 20% of income earners as spending on average 45% of their incomes on
lowest income earners have faced problems with housing affordability for
decades. However, middle-income groups
have entered the rental market in higher numbers over the past decade, as
barriers to private homeownership has risen.
Mitchell in 2015 estimated that the size of the ‘intermediate housing market’
in New Zealand at 181,500 households.
This measure is intended to capture the number of private rental
households where at least one person works, who can-not afford private home
median house price in NZ as of October 2018 was $562,000 according to the Real
Estate Institute of New Zealand (REINZ).
One out of four properties in April 2019 had a price at or below $402,500
according to Interest.co.nz. The NZ Treasury has precited that house prices
will rise by an average of 18.3% by 2023.
- Even for
a household earning the median household income of $83,000 for the year to 30
June 2018, a relatively modest house price of $350,000 would be considered
seriously unaffordable using the Demographia housing affordability criteria,
that house values should be no more than three times household income.
the price of land has risen significantly over the past ten years, there has
also been a significant rise in construction prices. Quotable Value identified that the average
cost of building a standard 140m2 three-bedroom, one-bathroom home
in the year to April 2018 was approximately $265,000 in Wellington and $280,000
for Auckland. This indicates it would be
difficult to keep new house prices below $350,000 when adding other applicable
costs, such as land acquisition.
- REINZ has
identified a national housing deficit of 104,000 houses. This number of homes has been described by
MBIE as equivalent to building two cities the size of Hamilton.
October 2018 the average first-home buyer took out a home loan of $389,006. Home-loan deposits of 10 to 20% of house
values are needed to secure a loan. It is likely that house mortgages would
require a minimum deposit of $50,000.
2017 it was found that just over half (51%) of potential first home buyer
households in NZ would spend over 30% of their income on housing costs if they
were to purchase a modestly priced house, with this figure rising to over
two-thirds (68%) of potential first home buyer households in Auckland
modelling indicates that first-home buyers need to have annual household incomes
above $100,000 to purchase a property valued at $500,000, without housing costs
exceeding 30% of gross income.
significant proportion of households renting or boarding in New Zealand do not
have sufficient financial resources to purchase a house at the median or lower
quartile value. This limits the ability of housing supply to increase through
higher rates of home ownership, unless some form of public subsidisation is
the housing crisis must involve an increase in the supply of affordable rental
properties. Due to the low incomes of
persons at risk of housing related poverty, this may also require some form of
options are available that will help struggling individuals and households
access affordable housing within the next two years. Any new building projects by either the
public or private sector will take time to complete and downward pressure on
the price of existing housing stock from increases in housing supply could take
many years to emerge. In the absence of
additional income support for beneficiaries and low-income workers to access
private rental properties, it is likely that homeless numbers will increase and
there will be more demand for emergency housing, special needs grants and local
support services, such as foodbanks.
This information has been provided at no charge
to assist understanding of the size of the housing affordability challenge and
the discussion of possible solutions.
Whilst considerable care was taken in the
preparation of the above statement and accompanying report, no responsibility
is accepted for reliance on this information.
Demographia (2019) ‘15th Annual
Demographia International Housing Affordability Survey: 2019 – Rating Middle
Income Housing Affordability, Data for Third Quarter 2018 page 21
Johnson, A. of the Salvation Army Social Policy and Parliamentary Unit
estimated the future demand for social housing and the size of the NZ
population at significant risk of housing related poverty in the 2017
publication ‘Taking Stock, The demand for social housing in New
Various academics and organisations have also
identified the ‘active management’ of waiting lists, which excludes some people
in housing need from the list.
Affordability in the report is defined as housing costs taking less than 30% of
gross household income.
Calculations have assumed that beneficiaries also receive the maximum rate of
Accommodation Supplement and Temporary Additional Support payments.
All views, thoughts, comments and
opinions expressed in this post belong solely to the author, and should
not be construed as representing either the author's employer, the New
Zealand Planning Institute, or any other organization, committee, group
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