Goal? To have the home price to income ratio down to 5:1 by 2030
Yesterday a report was released called Housing supply, choice and affordability with it outlining measures to get the house price to income (gross total per year) ratio down from the current 9.6:1 to 5:1 by 2030. It is important to remember that:
- 3:1 or less = affordable housing
- 4:1 = slightly unaffordable housing (but still attainable)
- 5:1 = unaffordable housing with any above that being deemed severely unaffordable.
From Auckland Council:
Action on price-to-income ratio the key issue for housing affordability, says Chief Economist
Auckland Council Chief Economist Chris Parker has called for council and the Government to continue to work together and set a goal to achieve a home buyer’s price-to-income ratio of five to one by 2030.
The recommendation is made in a new economic report, released today, called Housing supply, choice and affordability. It was commissioned by Auckland Mayor Len Brown and Deputy Mayor Penny Hulse.
The report identifies a range of levers on both the supply and demand side that could be considered, and shows that both Auckland Council and the Government have applied many levers.
However, it is clear that not all the levers can be applied as they may conflict or not fit from a cultural or social perspective.
The council’s Chief of Strategy Jim Quinn welcomed the report, as it continues to challenge our thinking and encourages all parties to continue to take a unified approach to Auckland’s housing challenges.
“What is clear is that a continued, joined-up response to Auckland’s housing challenge is absolutely necessary. We have already made huge strides in that direction with the Auckland Housing Accord and Special Housing Areas, but there is still more to be done as the report suggests,” Mr Quinn says.
“The report reinforces what has been done, and I hope that it will help inform the debate and council’s ongoing strategy for advocacy and action. This will help shape and focus our thinking on our next steps forward, so that we can make Auckland the liveable, affordable region we want it to be.”
Author of the report, and the council’s Chief Economist, Chris Parker says that the proposed strategic target in the report is ambitious, yet achievable.
“Creating a target to reduce the price-to-income ratio down to five to one will continue to focus our efforts, and that is what I hope to convey in this report,” Mr Parker says.
“To my mind, there is not one silver bullet available to fix the problems we face, but employing a multi-layered collaborative approach that uses the best mix of the available tools we have could make a real difference in reaching that five to one goal.”
- The report is independent policy analysis undertaken by the Chief Economist and is not Auckland Council policy.
The full report can be seen here:
I will read the report fully over the weekend but some key points picked out from Radio NZ’s Todd Niall’s piece (on the report):
- Mr Parker recommended the council did not push for restrictions on overseas investors buying existing homes, but should encourage them to build new housing developments.
- Mr Parker said a package of five policy areas could achieve the target, those include more efficient construction, more land supply and higher density housing. The report argued that a 25 percent improvement in construction efficiency is possible in the next 15 years, which could slice $100,000 off the price of building a 200 square metre home. The economist believed more higher density housing, especially with a 10km radius of the city centre would help lower costs.
- “At the moment it’s very suburban and I’m not arguing it should all be urbanised, but if we can try and allow more redevelopment along key transport routes, and within walking, running and cycling distance of key town centres, that’d be the key,” he said.
- The report recommended the council keep a low profile on a range of policies which are the government’s responsibility, including capital gains tax, immigration and Reserve Bank moves.
While Point Two above should happen in regards to higher density development within 10km of a City Centre (and in my belief 5km of the Manukau and Albany (Super) Metropolitan Centres) the dual problem of stiff opposition to intensification coupled by the fact most of the Single House Zoning is within 10km of the City Centre is going to make execution interesting.
But more on this after the weekend (if anything strikes me from the report)