Government collaboration on housing highlights how serious the problem is as red tape is slashed to release land in our major cities.

The great intensification is underway, and the NIMBY crew will not be happy!

It is not often that you see ministers from opposite sides of the political spectrum do a joint press conference and collaborate on policy. The last time we can remember this happening was when then opposition leader John Key worked with then Prime Minister Helen Clarke to pass the highly contentious “anti-smacking” bill.

However, when there is a crisis, and there is with housing, it highlights that when working collectively, positive things can happen in politics. Modelling by the Government shows that Wellington will get an estimated 6,500 to 14,000 additional dwellings over the next 5 to 8 years. Red tape has been cut allowing homeowners and developers to build up to three homes at three storeys high without needing resource consent. We are already seeing increased development across the region.

The city has recently seen a significant number of new apartments come to the market whilst in our suburbs, we are starting to see new subdivisions and developments being built. Now, homeowners will have the opportunity to develop their own sections. Many may see the opportunity to invest in their own sections by subdividing their land and building an extra dwelling. Your neighbours will not be able to object meaning that the ‘not in my backyard’ gang, or NIMBY’s as they have been affectionately known, can do nothing about it other than to grumble to each other.

If you are a homeowner with land that is subdividable, you may want to consider building an extra property on your land and essentially rent it out. Housing Minister, Megan Woods, and National Leader, Judith Collins, stood on a podium announcing a joint policy on housing that could change the face of our country. The significance of this is that no matter who is in power, this policy is here to stay. The Resource Management Act or RMA, has been a major issue for some time now and is probably the biggest culprit in our housing crisis. It not only slows down development but also adds unnecessary costs. This has led to our shortage of housing which in turn contributes to increasing house prices and also increasing rents.

Since this Government has been in power, we have seen both rents and house prices rise significantly. Regarding house prices, inflationary pressures have pushed many first home buyers out of the market. Back in September 2017, the median house price in Wellington was $531,000. It is now $845,000. That is an increase of $78,500 per year.
All of this has led to a greater strain on rents. Rents in Wellington have increased by 27% since Labour have been in power. This is at a rate of 6.75% per annum which is at a much higher rate than inflation.

The only problem with the recent joint announcement by Government is that somebody didn’t bother to warn Wellington Mayor, Andy Foster. The day preceding the announcement the Wellington City Council was set to release its new draft plan for the city. That now has to be put on hold. You can sympathize with Foster somewhat as he was blindsided by the announcement. ‘How do we plan a city when changes come at you essentially from left field?” Foster was quoted as saying.

However, the action by the central Government probably highlights the inaction of Local Governments across the country. Resource consent, NIMBYism, poor infrastructure as well as the low availability of land have all contributed to the situation in which now we find ourselves.

It will take time for the Government’s plan to take effect, but we are in no doubt it will have a positive effect on rent and house price inflation.

At Tommy’s Property Management, we keep ourselves abreast of the latest developments from the Beehive so we can help our investors strategise to make better decisions.

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