House prices in NZ and UK

James Weir at Stuff reports:

An upmarket, spacious McMansion in Austin, Texas, or a pokey one-bedroom flat in a Soviet-style apartment block in London.

The homes may cost the same as a median-priced home on the fringes of Wellington at about NZ$390,000, but what you get for your money is worlds apart.

And a report by “think tank” The New Zealand Initiative suggests a lack of supply and difficult planning processes are behind rapidly rising house prices in New Zealand and Britain.

Britain was a “housing quagmire” and a telling study of what not to do in housing policy, the NZ Initiative report says.

More specifically:

Britain suffered from a strong lobby group of Nimbys (not in my back yard) led by the Campaign to Protect Rural England. Its housing market had many of the hallmarks of a Soviet planning system, the report says, with planners deciding where people could live.

The Town and Country Planning Act essentially nationalised the right of the British to develop and vested the right in the state.

That made it difficult to develop in Britain, especially in new “greenfields” sites which, as in New Zealand, meant a lack of housing supply.

“A new housing market scarcely exists in Britain,” with most of the cards left in the hands of people who already own the land and a wall of regulations set up by councils and planners that favour those who control the green spaces.

The British Planning Act was similar to New Zealand’s Resource Management Act, the New Zealand Initiative report says.

But is there a model that works to get affordable housing:

But in other places, such as Texas, houses are cheap and prices steady, which has been a factor in that state’s economic success. …

One of the report’s authors, Luke Malpass, said Texas was a good example for New Zealand to consider, especially in the way it funded infrastructure for new housing.

The state has statutory taxing authorities and the residents are the voters – essentially mini-local governments which could raise debt to pay for new infrastructure, with a maximum tax level for a defined set of services.

“It encourages master planning and mixed use,” Malpass said.

Without such a system Houston, for example, would not have been able to grow as fast as it had, because the city itself would not have had the money to pay for expansion.

That sounds a good model. The city itself should not have to pay for the infrastructure of new subdivisions – that should be borne by the new residents.

Average Texas house prices are typically about three times the average income, about half the relative levels in New Zealand.

And hundreds of thousands of people move to Texas from other states, because they can get a decent affordable family home there.