Just Thinking

The New Zealand Government are holding an Inquiry into housing affordability in New Zealand and invited submissions from the public and interested groups. The price of houses in NZ has risen spectacularly in the last 5 years and young families trying to buy their first house must feel that they are getting further from their goal.

I have made a submission to the NZ Government, making a few small alterations to a paper that I wrote a couple of months ago and then sending that. My paper is called Benefits of a Stable Population in Housing (450 KB pdf file) and looks at wider issues than those that the Government is looking at. There would be many additional benefits including assisting in sustainability which the Government has also stated as a major goal this year. This is to assist in achieving out objectives under the Kyoto Protocol, and also reflects the delicate balance in NZ Parliament after the Fields affair, and the possible dependence on the NZ Green Party.

From the paper:

"This paper suggests that existing economic wisdom, particularly with such measures as GDP, does not recognise the huge benefits to all people living in NZ of limiting the rate at which the population grows, even apart from fixing population limits. It is suggested that large net immigration flows since 2000 is mainly responsible for the huge house price increases in the same period.

The main benefit of limiting population growth rate is the large reduction in costs of providing adequate capital intensive resources including housing, business premises, schools, hospitals and distribution systems for services such as electricity, water and sewerage. To make the case for such benefits the following matters will be addressed:

1. The disproportionate extra costs of a growing population.
2. Statistical evidence of the detrimental costs of population growth.
3. The capital drain of people reaching adulthood.
4. Past population growth bursts as the cause of depressions.
5. The inappropriateness of measures such as real GDP per capita.
6. Is a stable population bad for business?
7. Relationship to other policy areas.
8. Suggestions for practically implementing the policy."

I make the claim that if NZ had a policy of limiting nett migration to 5,000 people per year for the last 5 years this would have assisted in the Government inflation objectives and also meant that house prices would now be 40% lower.

For more information on the Government inquiry and other reactions, please see the Scoop article Inquiry into housing affordability in New Zealand.