International expert says land supply is the reason for house inflation

David Killick at The Press reports:

Former World Bank principal planner Alain Bertaud, who visited Christchurch this month, has more than 30 years’ experience in urban planning. Now based in New York City, he has worked in places as diverse as France, the United States, Central America, Yemen, and Thailand. …

Providing affordable accommodation, according to Bertaud, is not that hard.

“The solution is to increase the supply of land. I would not bother so much on the construction of the housing itself, I think that can be taken care of fairly easily by the private sector.”

The opposite of what Labour is proposing. Labour has been against increasing the urban boundary in Auckland to allow more land to be used for housing.

Let’s figure it out. Look at your latest property valuation, or that of someone you know. Compare land value and “improvements” (the house). I bet land value accounts for over 30 per cent of your total property value. In some desirable areas, like coastal areas, land value may be over 50 per cent.

That is crazy. Bertaud says the rule of thumb is that land should be no more than 30 per cent.

In Houston, Texas, it would be only 15 per cent. “It’s strange because normally when the land prices are very high it’s a very dense country like Japan or Holland. This is not a dense country.”

Exactly. Unless we expect farms to take over the whole countryside, New Zealand has plenty of space for houses. “It’s a self-inflicted problem, frankly.”

It is, primarily by local government. From the point of view of local government, they like to restrict land, as it makes life easier for their planning departments. So land supply restrictions work well for the entity which decides them, but punish those seeking to buy a home.

Restricting land supply and imposing too many controls also stifles business growth, especially in the central city, Bertaud warns.

“I think it’s so inconsistent to put restrictions on height and say at the same time we want a compact city, we don’t want sprawl. If you put a restriction on height, it means you want people to use more land but you don’t provide this land.”

You need to allow growth to be both vertical and horizontal.