Sorting (and costing) the way out of the housing affordability crisis in Auckland, New Zealand

Abstract

PurposeThis paper aims to explore the impact of the joint operation of affordability policies and whether their impact is meaningful relative to the size of the affordability crisis. Its purpose is to construct the features of a comprehensive policy package linked to a measurable outcome: solving the affordability crisis in Auckland. This study investigates the scale and nature of an affordability package that responds to three research and policy questions: What should the rate of annual growth of affordable housing be to solve the affordability crisis? Consequently, how long would it take to solve it? And how much would that policy package cost?Design/methodology/approachIn this paper, the authors argue that the disjoint operation of affordability policies is one of the reasons why their impacts relative to the size of the affordability crisis has been small or negligible. Furthermore, this study demonstrates that affordability is as much about raising households’ incomes as it is about lowering housing prices. This study uses a modelling-based framework to simulate some of the levers that local and central governments have to affect housing prices and affordability: direct intervention on the supply-side and subsidies. Specifically, this simulates retention-and-targeting (RT) programs and subsidies to raise deposits via shared ownership (SO) schemes.FindingsThis study finds that solving the affordability crisis would take a decade if the supply of affordable housing increases by at least 45% annually. With the introduction of RT and SO programs, it could still be solved within a decade, where the required growth rate decreases to 35%. However, for growth rates between 5% and 10%, the policy goal is met in approximately 40 years, and the SO program becomes exceedingly expensive.Originality/valueHousing affordability is one of the hottest policy issues in New Zealand and the developed world. In the past decade, a number of affordability policies have been introduced with limited success due to their lack of interoperability and siloed efforts. Results in this paper should be interpreted as the boundaries of what is feasible and realistic in the realm of affordability policies. Therefore, its contribution relies on investigating the multiple effects if the financial, administrative and political barriers to RT and SO programs could be overcome. Its scope is a blueprint for the design of policies in other cities where unaffordability has become extreme.