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Lessons from across the Tasman: a model to boost housing supply

by Sophie Black (Blueprint Institute Researcher)

We may argue over the true origins of the mighty pavlova or whether Rugby Union or Aussie Rules is the superior sport, but there’s one aspect in which New Zealand has an edge over us: affordable housing.

It is no secret that along with many of our OECD cousins, both Australia and New Zealand have been struck with a bout of post-COVID inflation, pushing up the price of everything from groceries to insurance. By the end of 2022, inflation in New Zealand peaked at 7.3%. Similarly, Australia’s inflation was around 7.8% at this point—a far cry from the 2-3% band that’s considered healthy.  

And just like us, our Kiwi cousins have seen homeownership drift out of reach for the average earner, with house prices having steadily outpaced wage growth in both countries since the early 2000s. 

At its peak in November 2022, the median house in New Zealand cost around 14 times the country’s median income. Thanks to some forward-thinking policy, however, this ratio has been brought down to 11 times as of July 2024. Still not great, but a clear improvement, at a time when Australia’s house-price-to-wage ratios are stuck in a rut.

With our relative abundance of land and better-paid builders (Aussie construction workers earned 21% more than their Kiwi counterparts in 2023), Australia should be leaving New Zealand in the dust in the race to curb house price inflation. But the facts don’t lie—we’ve been treading water, whilst the Kiwis have swum ahead.

Is there something that—heaven forbid—we could learn from them?

As lead researcher for Blueprint Institute’s report Wicked Solutions, it quickly became apparent to me that for all the talk on improving access to housing, some pretty broad areas for policy reform are being left untouched in favour of smaller but sexier wins. But if we look at the experience of countries like New Zealand which have been successful in improving housing affordability across the board, we may learn a trick or two.

Specifically, the Federal Government should be brave on property tax reform, and rein in some of the outsized concessions fuelling speculation in the housing market. A gradual approach will be essential to successfully implementing these reforms as to not unfairly penalise existing property owners. It’s also time to follow New Zealand’s lead in getting rid of stamp duty—a tax that effectively deters people from moving houses. This wouldn’t be entirely novel to Australia, as has been demonstrated by the ACT. We suggest replacing it with a broad-based tax on the unimproved value of land to enhance market mobility.

Decision-making processes around planning and land use are also in desperate need of an overhaul, to enable development to progress whilst protecting the qualities that people like about their neighbourhoods. Contrary to fears of creating a high-rise hell, international experience shows that upzoning programmes can add to housing density without sacrificing residents’ quality of life or overwhelming existing infrastructure. Local voices should, however, be engaged early on in any streamlined planning processes to ensure that community needs are appropriately balanced with the broader need for additional housing stock.

In tandem with policies to bolster the construction workforce and to speed up the way we build, the above policies could be critical to rebalancing our housing market and increasing access to homeownership. The path out of our housing woes lies not in any one policy, but in a concerted and multifaceted effort—a policy framework to boost housing supply without unfairly penalising existing property owners.

I won’t be conceding on the pavlova debate anytime soon, but it might be time to take a few pointers from the Kiwis on getting serious about boosting housing supply. If we do it well, we might be able to beat them at their own game.

Sophie is a researcher at Blueprint Institute, an independent think tank, and lead author of ‘Wicked Solutions: a long-term approach to housing affordability’. Contact Sophie at: [email protected]

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