Housing affordability has been a huge issue in New Zealand for a long time, but some extra fuel has been added to the fire by a recent survey which shows housing in Auckland is less affordable than in New York, Los Angeles, or Tokyo.
The survey ranked 378 cities in nine countries and considered the cities affordable if the median house price was a maximum of three times more than the median annual household income.
Auckland’s median house price is $613,000 – 8.2 times the median income of $75,100.
There are a lot of reasons for housing being unaffordable – property speculators driving the prices to ridiculous levels, a National-led government which would love to see wages drop – and a lot of different solutions, depending on whether you listen to the people who make money flipping property (open up more land to development, relax regulations on the building industry) or the people who care about people (a living wage, more stringent taxation on speculation).
Personally I think anyone who looks at Auckland and goes “you know what this city needs to do? Sprawl more!” needs to be banned from ever commenting on Auckland issues because they clearly don’t live/have never lived there (or at least, not in the sprawl they proclaim to love).
Principally I’m concerned by the relaxed attitude Mayor Len Brown seems to have:
He defines “affordable” as under $500,000, which is still more than six times the median household income, but insists more options are being developed.
“A good number of [new apartments] are high $200,000s to low $400,000 purchase prices, and what we’re seeing with those developments is they are selling out,” says Mr Brown.
“The most recent example I’ve got is that the St James apartment development, which is being built in conjunction with the renovating of the great old St James theatre. That’s only just come on for pre-sale, and it’s already pre-sold by half – and they haven’t even started the project.”
I immediately question whether the kinds of people who can pre-buy apartments which haven’t even started construction are the kind of hardworking/struggling/middle-New-Zealand families who find it impossible to get their first home – if only because banks demand a far higher deposit on apartments. Even if you’re talking only $280k for the place, you may need to find over $80k just to get your foot in the door.
And it brings to mind what I was saying just yesterday about taking numbers out of context: what use is it knowing that unbuilt apartments are selling like hotcakes unless we ask who is buying them? What proportion are first-home-buyers? New Zealand-based investors? Overseas-based investors? Corporate interests?
But the other problem is this: Brown defines “affordable” as “under $500k”. This is a common bit of silliness in the house-price debate, with even Labour under David Shearer declaring that “affordable” covered everything from $300,000 on-average-per-house to $550,000 for a single-family home.
The problem is, the Demographia survey defines “affordable housing” as a median price of no more than three times the median household income. Across New Zealand, for the year ending 30 June 2014, that was $72,394 – giving an “affordable” median price of $217,000. For Auckland, as quoted above, it’s $75,100 – a bit higher, but we’re still talking a median of $225,000.
Building a lot of apartments in the “high 200s to low 400s” might drag the current obscenely-high median lower, but it’s still not getting us anywhere near “affordable”.
There may be many reasons for housing unaffordability, and many possible solutions, but we’re never going to make progress on the issue as long as we can’t even be realistic about what “affordability” is – and acknowledging that it’s far less than those of us lucky enough to already own our homes would assume.