Phil Heatley is right. Housing affordability is a big issue, and it is one that government has a role in resolving in the interests of people of my generation.
Phil Heatley is mendacious and wrong, however, to argue that high prices are caused by a lack of land for development. That is not the case.
The affordability of housing can be considered through looking at the drivers of price increases. These have come about through the demand side and the supply side of the market.
On the demand side, the lack of a capital gains tax means that there is a massive, chronic and awful overinvestment in housing. People buy it because it is tax free, and because over time it has been a reliable and save investment in terms of capital gains. This ties into the totally deregulated financial market, where people can borrow up to 100% of a house's value, and where overseas capital is easily accessed through the banks to buy (economically useless) housing assets.
On the supply side, there has been a dearth of affordable housing built. Much new housing has been either un-livable small pokey apartments, or expensive and extensive new suburban developments. Quality affordable housing in key transport routes has been absent, due to various planning policies and an unwillingness to confront developers with the full costs of their choices to do greenfield rather than brownfield development.
Now, one aspect -- only one aspect -- is land supply. If you suddenly, say in Auckland, deserted the metropolitan limit, then prices at the margin might go down. But the cost to the community would go up. New roads, ever more crowded motorways, more traffic, more energy use - it would all contribute to a worse standard of living. And besides, the housing built would not be affordable. It is not first time buyers who tend to buy such places.
Hitting on land supply is wrong. The issues are all interlinked. The only way to make housing more affordable in the long run is to have house prices on average growing less quickly than wages, and to ensure -- through a range of policies that includes mandatory affordable-housing requirements of developers -- that a good proportion of new build is both making good use of existing infrastructure, and is also affordable.
There are supply and demand side measures. In terms of demand, New Zealand needs a general capital gains tax that covers residential housing. That is a key mechanism that could help us make income taxes lower, and also lead to a better balance of investment between productive assets and housing. The government could also consider regulating mortgage lenders to make the upward pressure of capital sloshing around after housing a less inflationary force.
On supply, a whole heap of policies are under investigation and under way. None have gone far enough, but they are moving.
In both demand and supply issues, though, there is a major political problem. It is this. For generations Kiwis have relied on risk free returns in housing to sustain retirement savings. Part of the consumer boom of the past ten years has been based on people drawing equity out of their houses and spending it on consumer goods.
If one takes substantive steps to change the housing market, what one is essentially saying is, "we are going to redistribute housing equity from home owners to home buyers." And one can immediately see where the political problem is in that.
Can you imagine the reaction of home owners who suddenly see their housing property price inflation stop?
Or even "Worse", if housing prices began to fall?
Add into that a whole layer of concern around this: our population is forecast to peak. Just when the babyboomers are really into their retirement and later, and wanting to draw on housing equity, house prices will be biasing downwards anyway cos of the heaps who want to sell out and move into retirement facilities etc. Add to that the impact of major policy changes, which would accelerate that bias...
So the politics of this, while superficially easy, are not actually so easy at all. If one could design a policy that made lots of new housing available at affordable prices but simultaneously didn't erode property prices, then one has sort of defeated the laws of economics.