The chancer who recently advertised a caravan as a fully-furnished one bedroom unit for $125 per week on Trade Me clearly has a good grasp of the parlous state of housing supply in Tāmaki Makaurau.
While the Mayor and Council are to be encouraged in their efforts to improve our current housing situation, the recommendations in the recently released Mayoral Housing Taskforce Report overlook a fundamental solution to our shared housing problem.
The recommendations focus too narrowly on supply and do not strongly advance options for the increased supply of affordable housing.
Increasing housing supply is a necessity as everyone knows but Auckland does not need more large and unaffordable houses, supplied by the open market in response to unconstrained stimulus. This, unfortunately, is what the task force recommends in abundance. What’s desperately needed are houses people can afford to buy, priced within reach of ordinary working families.
Affordable housing is often defined as housing that costs families around a third of their income. For prospective home owners, this means houses which cost around three times their annual income-to-purchase or a price-to-income ratio of 1:3.
If average annual income in Tāmaki Makaurau is officially just under $75k, affordable houses are homes that need to be priced at around $225k to be within reach of ordinary working people. Auckland Council’s own report, Housing supply, choice and affordability, suggested a price-to-income ratio of 1:5 as an ‘aspirational’ affordability target. In other words, houses available to purchase for five times a family’s annual income. Using the same income basis, this housing price-point is more like $450K, but still a quantum leap from current open market provision.
“The open market cannot be relied on to deliver affordable houses in Auckland.”
With the price-to-income ratio in the current market at around 1:11; home ownership remains an unrealistic scenario for low and average income earning Auckland families. Addressing the vast gap at this end of the market in conjunction with increased supply overall is essential if we are serious about solving Auckland’s housing problem.
So, what can be done?
The open market cannot be relied on to deliver affordable houses in Auckland. Other solutions must be considered, including the hugely important role public investment can and should play toward making truly affordable housing a reality.
Action and investment by Council to increase the supply of affordable housing in Tāmaki Makaurau is crucial if we are to recreate a market of reasonable opportunities for all Aucklanders and reverse declining home ownership.
Along with direct public investment in affordable housing and the community housing sector, the Crown and Council must use their legislative and regulatory powers to compel a broad mix of housing typologies to meet the housing needs that an open market has no incentive to fill.
We also need clear, strategic and collaborative planning solutions through genuinely shared problem solving and a strong civic leadership that recognises that promoting open market supply alone may only serve to entrench the current price-to-income ratio of 1:11.
With this in mind, the Independent Māori Statutory Board has commissioned a business case from KPMG on an affordable housing investment proposition for Council to be considered in the upcoming 2018-2028 Long Term Plan.
Well ahead of any decisions on funding sources, however, is the need for Council to debate what role it’s willing to play in the delivery of more affordable houses in Tāmaki Makaurau.