Just How Big is the Housing Problem

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:

  1. There 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].

  2. In 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.

  3. 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 purchase.

  4. 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]

  5. Recent 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.

  6. A 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 $300.

  7. 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.

  8. 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 housing.

  9. The 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.

  10. Ian 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 ownership.

  11. The 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.

  12. 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.

  13. Whilst 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.

  14. 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.

  15. In 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.

  16. In 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

  17. Economic 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.

  18. A 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 available.

  19. Addressing 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 public subsidisation.

  20. Few 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.

[i] Kennerley, T; (2019) ‘LGNZ Social Housing Toolkit, Phase 3 Web content’ published 15 May 2019 by Planalytics

[ii] World Economic Forum (2019), Insight Report, ‘Making Affordable Housing a Reality in Cities’, Cities, Urban Development & Urban Services Platform In Collaboration with PwC, Published June 2019, Introduction page 7

[iii] Kallergis, A; Angl, S; Liu. Y; Blei, A.M; Galarza Sanchez, N; Lamson-Hall, P. (2018) ‘Housing Affordability in a Global Perspective’ Working Paper WP18AK1, Published in November 2018 by Lincoln Institute of Land Policy, USA. Summary of Findings.

[iv] Demographia (2019) ‘15th Annual Demographia International Housing Affordability Survey: 2019 – Rating Middle Income Housing Affordability, Data for Third Quarter 2018 page 21

[v] 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 Zealand’.

Various academics and organisations have also identified the ‘active management’ of waiting lists, which excludes some people in housing need from the list.

[vi] Sense Partners (2018) ‘Wellington Rental History, Assessing likely long-term Inflation risk’ Executive Summary

[vii] Welfare Expert Advisory Group (2019) ‘Whakamana Tāngata – Restoring Dignity to Social Security in New Zealand’,

[viii] McAlister, J; St. John, S. & Johnson, A. (2019) ‘Accommodation Supplement: The wrong tool to fix the house’, Child Poverty Action Group

[ix] Affordability in the report is defined as housing costs taking less than 30% of gross household income.

[x] Calculations have assumed that beneficiaries also receive the maximum rate of Accommodation Supplement and Temporary Additional Support payments.

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