By Pattrick Smellie
New Zealand's high cost of houses is driven mostly by a lack of new land being released for development in fast-growing areas, says the Productivity Commission.
With the dream of home ownership slipping out of many young New Zealanders' grasp, it calls for better co-ordinated release of new land for subdivision, more large-scale home construction projects, and better performance from local body regulators, who often took too long, charged too much, or were not clear about their expectations in granting building consents.
Issuing its first draft report for public submissions, the commission dismisses much of the concern that tax advantages have driven house prices.
"Housing is less tax-advantaged than is often suggested," says the report.
"The present tax position is long-standing and can be expected to have been subsumed into house prices long ago."
The report highlights that during the house price boom of 2001 to 2006, there was a 150 percent increase in the number of households renting, who might in earlier times be expected to become first home owners.
"In some parts of the country, the `starter' house that once eased New Zealanders into property ownership seems to be a thing of the past," the report says.
The report challenges the current preference for urban development to be ring-fenced because of fears of urban sprawl.
"Probably the single biggest source of adverse impact on housing affordability is insufficient release of new land for housing," the commission says, with land purchase accounting for an average 60 percent of the cost of a new house in Auckland, and 40 percent in the rest of the country.
While intensified land use would be part of the answer to New Zealand's housing costs, the reality remained that "conventional homes on greenfield sites are generally cheaper to build than infill, multi-storey or brownfield (underused or abandoned) development", the commission says.
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NZN