GROWTH IS NOT SYNONYMOUS WITH IMPROVED HOUSING AFFORDABILITY & IS MORE ABOUT WINNERS & LOSERS.

Growth and improvement are two quite different concepts. At its most basic level ‘growth’ can be defined as ‘the process of increasing in size, value, amount, degree, volume, weight, height, complexity’ etc. It is very much weighted toward ‘quantum’. In a business sense it relates to market metrics such as penetration, development and diversification. In economics at a country level growth is most closely associated with the production of goods and services as measured by GDP. But getting bigger in say housing supply or GDP does not necessarily mean getting better or that the country as a whole is better off, especially if the benefits are not socially-diffuse. In this sense growth is more synonymous with social inequality, or to put it more simply, winners and losers.

Improvement on the other hand can be defined as ‘the process of making something better whether in quality, value, condition, or the state of getting better’. The difference between the two concepts is starkly evident in policy approaches taken by countries aimed at addressing housing access, affordability and quality. Here in New Zealand almost all policy over the last 25 or so years has been focused on increasing the supply of land on which to build more market-priced housing. The policies have been founded on the somewhat dodgy neo-liberal thinking that simply increasing supply will somehow magically improve housing affordability. The policy approach has been a complete failure and New Zealand has recorded some of the worst housing price inflation and overburden costs in the OECD. It is frankly unsurprising given that ~96% of all housing stock in New Zealand is ‘market-priced’ and where the key market actors are in it for one thing only — making as much money as possible.

In his book Capital economist Thomas Piketty calls these market actors the rentier society and sums up the inequality implicit in the ‘free market’ as “r>g”. Essentially the rate of return on private capital (r) sought by such rentiers is greater than growth in the economy (g), which he contests “has nothing to do with market imperfections and will not disappear as markets become freer and more competitive”, an economic idea he dismisses as an “illusion”. So no, increased supply does not lead directly to improvements in housing access or affordability. Market actors will always seek the highest return.

In contrast, policy approaches in Denmark, Austria, Norway and Sweden have focused on addressing the actual problem, housing affordability, by diversifying the housing ecosystem through expanding the stock of not-for-profit housing (e.g. equity and rental cooperatives, municipal rental housing, community trusts and public social and emergency housing). Good quality housing that is delivered at the lowest possible cost for the widest number of people and that is retained outside of the market.

At the heart of much policy failure here is its disconnect with the actual problem — which for housing is affordability not housing supply. The same kind of policy disconnect captured the attention of the New Zealand Productivity Commission (NZPC) where in a 2022 report ‘Immigration — Fit for the Future’ it noted that much of “…New Zealand’s economic policy and strategy — including immigration policy — has been focused on GDP growth rather than improvements in productivity. Yet it is productivity growth that matters most for improvements in living standards and wellbeing more generally.” Specifically in relation to housing and related infrastructure the NZPC also found that investment in public-funded infrastructure had not matched growth in population — especially post GFC — and this is manifested in the infrastructure ‘gap’ we see today.

The NZPC called for a government policy statement (GPS) on migration to improve the transparency and quality of decision-making. In relation to planning for population growth, the NZPC says “A GPS would promote longer-term credibility about population projections and planning ranges for migrant volumes. It would increase certainty for the general public, businesses, communities and other stakeholders such as local government. This in turn would help these parties to plan and implement long-term investments” and that “By requiring Ministers to make clear policy choices about migration (including fiscal and regulatory choices) a GPS would inform the public about how the Government will adjust migration and/or absorptive capacity should net population growth threaten to put damaging pressure on the latter.”

The absorptive capacity noted by the NZPC encompasses transport, communications, land supply, housing infrastructure and associated health, education and community infrastructure and is “not a fixed constraint” but rather something that needs to be planned for in the context of population. Currently there is no policy or plan.

Like migration, population growth is a touchy subject influenced by many factors, including socio-demographic mix, ageing trends, economic trends, global threats, migration inflows and outflows, personal fundamental beliefs (e.g. religion or what’s sustainable for the planet), human DNA (natural selection) and of course state policy. New Zealand also has no national population strategy defining what is socio-economically beneficial or sustainable and given the potential for reputational self-implosion it is unsurprising that politicians have studiously avoided the topic. But population strategy need not only focus on population at the national level. It can be more nuanced, for example, targeting ‘talent’ to diversify our economy, or proactively directing where population additions might best occur sustainably so as to utilise scarce resources more efficiently and ensure any benefits flowing from population clusters are more socially-diffuse.

The suite of national policy statements and ministerial directives on urban development between 2017 and 2025 more closely resemble ‘picking winners’ type policy weighted toward urban areas already enjoying a large share of economic activity. For example, the Auckland Region accounts for ~38% of national GDP and the “Golden Triangle” of Auckland, Hamilton and Tauranga ~50% of both national GDP and population. There is no evidence-based linkage in the entire suite of urban development and housing policy statements and ministerial directives with socio-demographic trends, including net migration inflows and nothing that examines the sustainability of the choices made in relation to economic and social infrastructure availability and funding, or our natural environment. It’s all about growth.

But growth will not alleviate the inequality in housing outcomes. Growth will not result in lower land or housing prices and will not widen access to good quality and affordable housing for those sections of society who do not qualify for income-tested social housing or a bank mortgage. Growth will not ameliorate the high cost of building, skilled labour shortages, building material supply chain oligopolies, and our infrastructure quality, capacity and funding deficits. Growth will not facilitate innovation in new off-site and on-site building systems or result in improved environmental outcomes. All of these dimensions, both within and impacting on our housing ecosystem, need to be specifically addressed if we are serious about achieving long-term improvements — especially housing affordability. What nobody needs is more unaffordable housing at market prices.

Growth will very likely result in inefficient land use, overloading of under-capacity and under-funded technical and social infrastructure, poor spatial and ecological outcomes, and more development opportunities for private actors who will seek the highest possible price. Hope that social equality will emerge from the market is just that.