Housing minister Chris Bishop has released a cabinet paper outlining his plan for solving the housing crisis. Taken together, we can now see the government’s comprehensive strategy to increase land availability, incentivise councils through GST revenue sharing, and reform the planning process. Bishop’s explicit long-term target that the median house should not cost more than five times median household income is particularly welcome. His proposal to liberalise planning and encourage infrastructure development echoes our calls for enabling better local decision-making. Like Phil Twyford before him, Bishop recognises that supply constraints, driven by inadequate incentives for councils, are at the heart of New Zealand’s housing affordability issues.

In the previous government, Twyford did make progress with important initiatives like the National Policy Statement on Urban Development. But easing the barriers preventing councils from embracing growth would have required greater buy-in from Twyford’s cabinet colleagues. By contrast, Bishop seems to have stronger backing from Prime Minister Chris Luxon and the Minister of Finance, Nicola Willis. Thus, Bishop will be the final arbiter of disputes between independent hearings panels and councils.

More building

Sharing GST revenue with councils from new housing construction will encourage councils to enable more building, more closely aligning the financial interests of councils with national housing supply goals. Broadening GST sharing to encompass construction more generally will encourage councils to welcome more forms of development, encouraging a virtuous cycle of growth. Getting those incentives right is tricky. Until they are right, councils will game targets that central government sets around housing. National will allow councils to opt out of medium density requirements if they immediately release thirty years’ worth of zoned land. But remember that Wellington’s independent hearings panel believed that a rather restrictive district plan had plenty of supply. The government will need to set better measures to prevent such gaming. Rather than relying on council forecasts of housing demand and feasible supply, it should instead look to prices. If land zoned for apartments carries a massive price premium over land zoned only for townhouses, and if land zoned for housing is worth hundreds of dollars per square metre more than paddocks, more up-zoning is obviously needed. We commend the government and Bishop for their proposals, and we are thrilled to see the initiative’s long-standing positions on land-use planning and local government finance reflected in them.