COMMENT: How to fix the housing crisis

It seems that everyone has an opinion on how to fix the housing market. Some favour intervention, while others believe that the market will “sort it out” on its own. In the majority of cases, these solutions are based on an assumption that the introduction of their pet initiative or policy (or decision not to act, as is the position of the free marketers) will solve the problem.

In my experience such simplistic solutions are doomed to failure. Either because they lack an underlying understanding of the real nature of the housing crisis. Or because they result in unintended consequences which simply end up creating a new set of problems in place of the ones they’re trying to solve.

So what are we actually trying to achieve? What’s the nature of the “crisis” we read and hear so much about? There are multiple views on this. But, for my money, there are three ‘guiding’ objectives which should underpin housing policy:

• We need to dramatically increase supply to start making a dent in the 100k homes that we need right now (particularly in Auckland)
• For every ten people who need housing, four will live in a rental so we also need to increase the stock of rental housing
• Home ownership rates have dropped significantly over the past 20 years so we need to fix this by doing everything we can to get first home buyers into homes