Called it, and welcome to this episode of Shared Lunch, where we're going to be looking at all things home ownership and housing and alt or. We're lucky enough to be joined by the Minister of Housing, Chris Bishop. Thanks so much for joining us.
Chris, good to be here. Thanks having me.
I mentioned to you just before we got started that huge number of the people investing on the shares his platform investing still for the purpose of home ownership, Like it's still a massive story of New Zealanders and it is starting to you know, we also know that it's feeling more and more out of reach for them. So there's lots on that, but we thought a great way to start the conversation would be just ask you how, you know, do you own a home and what your path to home ownership was.
I do.
I'm very lucky my wife and I own own a house, and you know, really conscious that that's not the experience for many people, you know, my age and but below just ten forty. So yeah, I mean, I like probably a lot of his Islanders, you know, I went to university, lived at home for a few years and then went flooding. Rented in both Wellington and Auckland for a number of years, brought an apartment that was my sort of entry point.
House prices were a lot lower back in twenty twelve, so apartment was an affordable way to get on the housing Letterer and then yeah, then moved back to Wellington, ran for parliament and brought a house and now we run another one. So we've just owned one house, I should say, so like many people went from one house to another with a very very large mortgage.
So yep, that's sort of my journey.
But yeah, very conscious that that's not the experience for many people. And part of my big drive in housing as Minister of Housing is to make home ownership more affordable for people. My agent below and in fed all his illinders. So you know, I want many more people to have the opportunities that I and other people in my very fortunate position been able to enjoy. Yeah.
Great.
I also hit a very lucky point in the housing market. Well, I think I was about two thousand and fifteen or twenty sixteen think, which I think was the end of like a ten year flat. Yeah, part for the property market, but it still felt like I was.
Bang.
Mom and Dad helped, so you know, getting that deposit together for the apartment back in twenty twelve was you know, it was a real stretch and so you know, beg Mama, dad came to the party with a industry loan and you know, and that's that's the experience for a lot of young people. And we're going to try and change that because you know, people should see housing and something that they can get into and be able to pull together a deposit.
Yeah, mine was a key re server, which was sort of the saving greast together.
That was part of it as well.
Yeah. Well, I mean you touched on the prices and the change and the affordability. But you're one of the few, if not the only, certainly in this position to say that house prices need to come down. And that's a big call, I think for any politician. But what what drove you to that point? And can you specify how much or do you have an idea on how much they should decrease?
By Yeah, I mean people sort of quite whipped up saying, you know, the housing minister wants house process to fall. But it's the natural corollary of saying that housing's two is unaffordable, which it demonstrably is and objectively is the case. So if, as some politicians say, you think housings unaffordable, but you don't want prices to fall, well they're sort of hollow words, right, because if something's.
Unaffordable, you want to be more affordable, and more affordable.
Means you've got to have you know, house process, we've got to have got to come down, and there's a you know, there's obviously two ways to make housing more affordable. One as price declines and then income growth. And the truth is we need both. So we need a much more productive economy with rising wages that were wages rise faster than inflation and were wages rise faster than house.
Price growth, so that people can catch up.
But also you know, at the at the house price level, you need them to come down, and over time we want to. That's the driving force of the government is to make housing more affordable. So to answer question around around what and where, you know, a good measure of an affordable housing market is where house prices are between three and five times average household income.
That's not the case at the moment.
You know, Queenstown is an outlier example, but you know it's eleven to one Auckland is about nine to one. Average is about seven seven and a half eight to one In New Zealand. The numbers bounce around a bit and depending on what measure you use, but you know, by any objective measure, New Zealand house prices are severely unaffordable and over the last twenty years we have had the fastest house price growth in the OECD in the Western world. And you just look at New Zealand and
you say, we're five million people, not that many. We're going to land master size of the United Kingdom, so pretty big country actually relative to our population. But we have designed a planning system and a funding system for infrastructure that makes house prices out of control and it's nuts.
And that's the driving force of our housing policy is rather than tinker around the edges with you know, things that kind of feel good but don't actually do a lot, the driving force of our housing policies to get to grips with the underlying fundamentals, which is about land supply, infrastructure funding and incentives on councils to make sure that they see housing as a benefit rather than a burden, which is what they do too much.
So at the moment.
Yeah, so many questions out of what you've just said there, but just interested out of that what your thoughts are on home ownership in New Zealand You've already touched on. You believe people should be able to own their own home, So maybe more about as an investment vehicle verse productive assets that are more likely to grow incomes and things.
Yeah, I mean home ownership in Zealand's down to sixty three percent so is a record low.
So we want to improve that.
You know, we want Zilin to be a property owning democracy where people can get a foot on the ladder. It's an issue of intergenerational equity. You know, people my age and younger. I used to be a young I think forty. I'm no longer a young MP of a middle asied as an MP. But you know, peat people my age and below. You know, they look at a housing market and it's unaffordable, as you know and as many of the listeners will know.
So we want to change that.
And there are lots of reasons for that. There's an equity issue around it, particularly a generational issue. There's also a ginormous fiscal cost to government out of the housing market. So we spend as a government five billion dollars a year on housing subsidies across accommodation supplement, income related rents, emergency housing, the whole range of other housing products. It's
a ginormous fiscal cost for government. And of course all of that money is money that we can't spend on the police, on the health system, on the education system, things like that, because the housing market dysfunctional. So government money just ends up chasing the housing market and filling in the blanks and trying to fix up regulatory errors that have been made through the planning system and the infrastructure funding system. So it's a ginormous cative effect for government.
And then and then there are just the productivity benefits of more housing. So what's really clear is cities, cities that grow are engines of productivity and engines of economic growth. And that's the big thing New Zealand needs. We need
more productivity, we need economic growth. And one of the things I constantly say, and I'm on a bit of a persuasion campaign around, you know, in public life, is to persuade people one of the single best things we can do to get the economy going and get productivity up in New Zealand is to fix our housing market.
And part of that goes to your point, which is making sure that people don't just see the housing market as this giant vehicle for capital gains where they can just shovel as much money into the housing market as possible into second properties and third properties and see massive capital gains and sit on those but you know, investing in productive New Zealand businesses, you know, in the real
economy rather than the housing market economy. And so again, fixing the underlying fundamentals of the housing market will rebalance the economy. And so there's multiple reasons to solve housing and you know it's we're very fixated on it.
Yeah, most where doesn't know the housing market with a bits tacked on.
I think I might have been just INDERI said that.
You would hear me say this very often, but you know it's not it's not. It's not the world's most unfair comedy, right.
Yeah, I'm interested to see what this sort of market dynamic with interest rates changing very quickly in another direction after a very long bullish run, boyd by lots of reasons which could continue. But I still really really am passionate about people being able to invest in their own home, sorry,
buy their own home. And I also think it's an amazing creator of wealth for people over time in a generational aspect for all sorts of communities, but probably more than anything for for for people who are making money out of housing. Is New Zealand has very default rates on mortgages and home loans, so it's just like this compulsory savings plan over and over again, which sort of leads me into my next question, which is thinking about how you sort of mentioned the economy around this, how
it's gone. You know, it's gone decades as far as a problem the housing aspect of New Zealand. Do you think there's any way we could look at this in any sort of single mandate mindset where we can see continuation over a longer longer than a sort of parliamentary term type investments like the example of read by some commentators. Is the Reserve Bank coming into control inflation or is there any way that you can see us really working together in a Biparsson manna to achieve these outcomes?
Yeah, I think the prospect of that is actually quite good. So the thrust of our housing policy picks up on the best of what labor did, so Phil Tweyford and the last government back in twenty nineteen twenty pass I think called the National Policy Statement on urven Development, which is the thing that allows for or essentially mandates councils to up zone around train stations and city centers so allow more apartments, you know, bigger buildings in city centers,
metropolitan city centers and around train stations. That, by the way, has has had world acclaim and is in the process of being implemented in Cross CHURCHUALKND well into other cities. So our housing policy picks up on that and doubles
down on that in a way. So we've announced a package which we haven't implemented yet, but announced to package where we will go further, so more mixed use zoning for example, which is essentially a zoning term for more cafes and supermarkets and boutiques and bodegas and things like that in and around apartments and places where people want
to live. So that the way planners view cities is you know, you live here, and you work over here in the commercial area, and then you know you've got industrial area over here, and then you go shopping on the weekend or at night over here, and you know, never the Twain shall meet.
Actually, it's not the way people live their lives. It's not the way people want to live their lives.
And so mixed use owning is about liberalizing our planning laws to allow people to do more with their own property and create more Liverpool cities. So we're going to make sure that we're going to mandate that in our major cities. We're going to get rid of minimum apartment sizes in our cities, which again is a liberalizing effect to mean that people who want to build departments of certain size can do. So we're going to get rid
of minimum balcony requirements, for example, balcony requirements. There's a study out a few years ago. Balcony requirements add fifty to seventy thousand bucks to the cost of an apartment in Auckland, so it has you know, if you want to have it at a balcony, that's fine, but they shouldn't be mandatory.
I've got a whole piece of work.
I'm about to kick off around urban design, for example, because one of the issues is that councils impose largely subjective design requirements on housing, and they're not a week of the economic effects of doing those mandatory where they they're they're not mandatory, but they become mandatory because what happens is the council planner says, oh, be good if you could do this to the property, or good if you could do that, and the developer you know, or
whoever's building the house essentially has to do it. Otherwise the resource concent doesn't happen, or it happens a lot more slowly. So give you an example, a classic example that I got told about a few weeks ago. There's a social housing developer in Napier who's building social housing so you know, not particularly ornate, just affordable housing for low income people. The council said, oh, we want you
to put a Juliette balcony on all of the apartments. Well, Juliette balconies are those, you know, I think they're named after Romeo and Juliette, like, you know, small little balconies.
Well, you know, look, do they look great? Yeah?
Will probably they do. But you know, that's massively raised the cost of putting the apartments in, and it means the develop the social housing developer can do fewer apartments.
So that's nuts. You know, you.
Apartments in Napier don't need Juliet balconies and you shouldn't need it. You shouldn't have to put one in to get a resource consent. So this is the thing that I think, you know, we're trying to grapple with when it comes to councils is every time you impose a requirement to do a particular thing when it comes to a new house, that imposes cost. And we are not in a position in New Zealand where we can just impose unnecessary, needless.
Costs on housing. So we're going to get to grips with all of that.
So anyway to go back to where you started, which is bipartisanship, we've picked up what labor did and done further. We've also picked up on the major thrust of where Phil Tweyford was going around land use change generally. So I want the ability for cities to grow both up in city centers and major suburban hubs, but also out at the city fringe as well. And you know, again Phil Twyft had started a bit of that stuff, and you know, you've got replaced his housing minister and the
kind of work cease. So we're picking that up again. Whether or not labor, the current interation of the Labor Party, you know, kind of supports that is kind of over to the end. But certainly I think the direction of travel is clear, which is that deregulating the housing market and liberalizing planning restrictions and planning laws and sorting out
the infrastructure system is the answer. And there's a study out by Ryan McGreevy in a University of Auckland that shows that the Auckland Unitry Plan, which has kind of started all of the stuff we've just been talking about back in twenty sixteen, rents in Auckland are appreciably lower as a result.
Of the building boom caused by the Aukland Unitry Plan.
So when you allow people to build and you actually give them the regulatory conditions where they can do it, they go and do it, and developers get involved, and you get a housing boom. But we need more of it, and we need year after year of sustained house building apartments and terraces and duplexes and covetable.
About my next three questions serce, which is no, don't be sorry, that's fantastic. We are seeing a lot about the social housing and media and things, and obviously there's a real big need for that, but we're you know, the Shares's customer base tends to be more focused on the people are feeling locked out of the buying of the house and some of the comments coming through from them sort of those tools are disappearing for them, and like, how what would your sort of response be to that
with regards to what's happening from government specifically into supporting people into.
Yeah, so look, we got rid of the first time grant. So the first time Grant.
Was actually introduced by the last National government and continued by Labor that provided for up to ten thousand dollars for the purchase of a new house. The average grant was five, but you could get up to ten. We got rid of it because it was a very expensive form of housing support and it didn't really make a difference.
And there are probably people out there watching who say, well, you know, I'd like five grand or ten grand towards a deposit, and you know, I don't blame them who wouldn't, but you know, on average, it brought forward the purchase of a property by about six months, so it didn't actually make the difference between people buying a property or being able to afford a property or not. It's just a bit of free money to help along the way,
and you know, we've got fiscally constrained times. It's a demand side measure as well, so it actually you know, on the margins economically, it pushes prices up, so it actually works counter to what you're trying to do, which
has achieved greater supply to lower prices over time. So we got rid of that and we put it into social housing provision because our viewers, when the waitlist is twenty thousand strong for social housing and you've got people living in emergency housing, it's a better use of Crown resource to fund social housing.
So we did that. There was quite a tough call.
Not everyone agreed with it, and I can appreciate that people don't necessarily like that. You know that there's lots of things you can do and lots of different you know, sort of solutions, you know, potential solutions. I just come back to the fundamental point, which is driving down land price, driving down the cost to build, freeing up planning restrictions, making it easier to build over time will reduce the cost of housing. Orklamuencry Plan as an example where that
is taking effect. But you know, over time, I'm really confident the economic evidence is on our side that we are.
Doing the right thing. Social housing.
You know, we've got a whole piece of work to get kind of oil, which is the government owned housing corporation focused on its costs.
I mean, it makes complete sense right that if you can play a house for twenty or thirty thousand dollars less or more, it's better than receiving the grants. If that can be achieved, I think there will be a fantastic outcome.
Yeah, there's a range of things we're looking at, like progressive home ownership and what's called shared equity. You know, the current government, the last government sorry set up set up a whole range of different programs there. We are we're having a good look at those. They are quite expensive and you know they don't they're not at scale, So we're having we're having a look at them and seeing what ones work and what ones don't. So not
not closing the door on those kind of options. But yeah, the absolute fundamental thrust is to is to sort out the planning system.
You know.
On the other side, we've got key we save any thoughts on how that could be used in in any way with regards to exalerating that process to home.
Yeah, so we preserved the ability to do that. We got rid of the first time grant, but preserved the ability for people to use keV sabers to withdraw and not intending to change that.
I mean not.
You know, I saved a bunch of money in my own KEP saver back in the day and withdrew it all of it basically and order to get into my first time So we're you know, we're of got an open mind and relation relation to that. Keep savers are really important savings vehicle for a lot of a lot of New Zealanders and really growing strongly. So don't have any fixed pole scene in relation to changes there, but an open mind as to what we can do.
Final question, because we've got a bunch of vestors and whilst I've touched on before that I do not see myself as a retail investor into residential property going forward, like I do like the idea of investing into funds and that type of thing, and where I think all we have spoken before about the idea of an housing fund to help people into first homes and stuff from shares is, but the economics are hard to make that
stack up. You sort of have this basically, where we find the gap is between the deposit need, which effectively most residential incomes cover your mortgage, which is normally sixty ish percent of whatever that residential property is. Hence the mass work as soon as you add that forty percent. So you've touched on the shared equat Sorry, yeah, the
shared equity and those types of things going forward. But interested in how you see the likes of you know, retail investors or shareholders and stuff, and key we see for members their part play or any part in your plans going forward.
Yeah, I mean we've sort of got an open mind and all that stuff, and you know, I'm interested in all any ideas to to do that. So we we've got a very open mind to some of these things. And once you sort of step back a bit and say, you know, we can we can create different vehicles or look at regulatory change in order to make those easier, you know, we're up for those discussions, very very keen to talk about it. You know, we've just got to
get housing under control in New Zealand. It's very important for a whole generation or two of young New Zealanders and it's and it's very important for the wider economy, which would be my take home point.
Nice Well, thanks so much for your time, Thank you work so Thanks so much again to the Minister for joining us, and thanks everyone for tuning in. You can watch Shared Lunch on YouTube or follow the podcast on Apple, Spotify or wherever you get your podcast. Leave us rating in a comment about what you'd like to hear about
next Karko. What if I told you it's easier than ever to earn interest on your spear cash and that you can invest your keV saver balance into New Zealand listened companies too, Well, now you can, right alongside your
Investment portfolio, SHARE's ease for the money you've got big plans for