Lower standards to boost affordability: Alexander

He said a housing shortage was a serious social problem and could result in overcrowding and people forced to live in substandard conditions. "The bigger issue is the worsening problem for people at the lower end of the socio-economic spectrum who will not just be 'priced ' out of the market like middle-income families not wanting to move to the city fringes but will also find the physical unavailability of accommodation means they don't have a house at all."

In his latest market update, he says housing affordability solutions need to increase supply. Options such as making lending easier or cheaper are likely to simply fire demand.

“We need to seriously start giving thought to reducing building costs by cutting standards of construction for cheap housing. Rock-solid well-insulated houses are wonderful. But if for the same price you can build twice as many less sturdy houses, then go for it.”

Alexander said if the Government were to widen the Reserve Bank mandate to things such as the exchange rate, not just keeping inflation between 1% and 3%, that would also boost investment in property – pushing up prices.

He said migration stats showed that house prices had risen over the past year, despite a net migration loss of 3000 people. “Now imagine what will happen when those flows turn, as I believe we are on the cusp of seeing?”

He recommended borrowers look out for low long-term rates as banks fought for customers.

Comments from our readers

On 26 October 2012 at 10:43 am Zulf Khan said:

Yes I agree with Tony,Govt should take steps immediately to have price of houses reduced or relax requirements so that cheaper houses could be built.
Also for elderleys if they want to stay with their sons who own a house then they should be allowed to have a self contained 1 bedroom with lounge and kitchen built attached to their house.This will solve problems for the parents and they will be leaving close to their family saving money for the govt.The Govt should seriously look into this.
I can be contacted if someone wants to discuss this.

On 29 October 2012 at 12:27 pm Leigh Featherstone said:

Tony summarised well re the number of houses required. However I emphatically disagree that the solution is to build cheap (and presumably nasty) housing. Two reasons - one is that we already have proportionately the worst performing housing in the OECD with proven negative impacts on health, GDP and productivity. The second is that actually building warm dry well ventilated homes costs only marginally more - you can't build for half the price, unless of course you're thinking about sheds for poor people and their children. The solution is to reduce compliance costs as Bill English announced today,reduce infrastructure costs by opening up more brownfield and encourage medium density solutions such as terraces and low rise apartments.

Lower standards to boost affordability: Alexander

It needs to become cheaper to build houses if New Zealand is to avoid a situation where lower income families have nowhere to live, says BNZ chief economist Tony Alexander.

Thursday, October 25th 2012, 12:00AM 2 Comments

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