Expert insight on how the new zoning rules will impact housing
If you don’t know by now that there is a housing crisis in this country, or you’ve just been living with mum. In December 2021, in response to the rising prices of homeownership, as well as rent costs, the government implemented some amendments to the Resource Management Act, enabling housing supply and intensification. Essentially, this means that developers can now build more houses on the same piece of land, due to fewer zoning restrictions.
What does this mean for students? To get some expert information and opinion on this topic, I interviewed UoA’s human geographer, Dr Larry Murphy, who specialises in housing issues, and
Martin Jo, a UoA doctoral candidate in human geography. Here’s what they had to say about these changes and how the amendments will impact housing affordability and its implications for students.
You’ve outlined that you don’t believe the changes made to the RMA (which will lead to more intensified housing) is a good idea. Can you elaborate on your reasons for that?
Dr Murphy: The logic for intensification and the reason for why the government introduced the act was based on the simple idea that if you build more houses, the prices of houses will drop and become more affordable. But in practice, the intensification that the government is proposing will not necessarily produce affordable housing.
For example, if you take a house that is sitting on a site worth $1 million, you now have the option to put three houses on that same site. To do so, you have to cover the cost of buying the property, knocking the house down, building new houses, adding stuff on to it, and making profit. That means you’re going to sell each house for maybe $700,000. They are slightly cheaper, but just because they’re cheaper, it doesn’t mean that they are affordable. Affordability is not based on price, but on your income. And the price that the house sells for is not based on your income, but is based on what the going market price is.
What factors do you feel we need to focus on in terms of making housing more affordable?
Dr Murphy: First of all, we need to recognise that house prices are subject to credit booms. Post-Covid, we had a massive increase in house prices and that was simply because interest rates dropped. That wasn’t to do with people needing more houses, there weren’t more people because immigration stopped. It was because for any given amount of money or any given income, with a lower interest rate, you can borrow more money and you can spend more money. So if we are looking at going forward and considering things that affect house prices, we need to look at how the credit and banking system works. We need to figure out how we can operate a banking system that is supportive of affordable housing, rather than a banking system that is predicated on rapid house price increases.
What do you think these changes will mean for students looking for housing, both immediately and in the long-term?
Dr Murphy: The immediate impact of this policy is that houses that are available are likely to go up in price. The new supply that comes in the market may be cheaper than existing houses, but they may not be affordable. In the medium to long-term, there is no guarantee that the people who buy those houses will sell them at an affordable price because they will want to generate profit. There is also no guarantee that they will be affordable for the next generation. The evidence that is the best predictor of homeownership is if your parents are homeowners or not.
Martin: If you’re a student not living at home, you might spend most of your time in university not having a well-off lifestyle. You’re living paycheck to paycheck, so you won’t be able to accumulate much savings. If we’re speaking long-term, it’s going to be very difficult to save and buy a house. You’re not going to get there as easily as others did decades ago, so your lifestyle will definitely be more constrained.
In terms of long-term ownership of housing, I see it as being more consolidated to those who already have the wealth, given how things are going at the moment. There will likely be more construction of high density housing as well, even encroaching into the suburbs. We’ll see changes in lifestyles and typical ideas of what house ownership looks like. Instead of having a backyard, small-scale living and communal gardens may be the new normal.
What advice do you have for the next generation, in term homeownership or even just surviving the housing market?
Dr Murphy: So as an academic, I think generationally we need to consider restructuring our housing markets. There was a time globally, and in New Zealand, where the provision of affordable housing did occur. And that happened because government had specific policies that controlled the nature and flow of money to the markets, mortgages, and so on. It wasn’t just about making profit.
Generationally, we need to change the political motivation, so it’s not just about how we make money out of housing. That’s the key issue. Then we need a political shift and a change in the nature of the types of houses we buy. And also we need to consider, is housing something that is a right, something we consume, or something that is an investment strategy? If we think of it as an investment strategy we are buying into a future of unaffordable housing. As a parent, I have nothing against home ownership. It has positive benefits, but I would encourage people to see it as a home, rather than an investment strategy.
Martin: It’s good to save, but don’t save with the expectation of a house. You might get a house, you might not get a house. For many, it will still be true that eventually you can purchase a house, but that won’t be in the next few years—and likely will be in your 30s, or maybe 40s. As students, especially considering that everything is so expensive at the moment, the little money you save now will make a difference, but it won’t make as big of a splash as when you have a full time job. I would say take advantage of things like Kiwisaver. It might be a lot in the long run and maybe even you could just contribute 3% of your pay, but it’s wise to contribute as much as you are able to.
To an extent it is okay to spend on luxuries, but also be mindful about what’s important. Think about whether you actually need to buy something and how much of a benefit you’ll really be gaining from that purchase. It’s also important to remember that you yourself are very valuable in terms of labour, so when it comes to finding a job, be confident, know your skills, and negotiate.
