House price growth is slowly declining – around 4% down from its peak – but prices have grown some 40% over the past two years. Te Waihanga’s recent report The decline of housing supply in New Zealand: Why it happened and how to reverse it highlights that the issue at the centre of this growth is unresponsive housing supply, not just increasing demand.

The solution? Restoring the link between planning and infrastructure and fixing our congestion and infrastructure provision problems.

Real house prices here have risen faster than in any other OECD country over the past 20 years. Populations and income – expected drivers of demand-side price increases – however, grew more rapidly in the middle of the 20th century than in recent decades. The report highlights that prices are rising more rapidly now because housing supply is slower to respond to rising demand. In the period between the late 1930s and 1970s, a 1% rise in population caused housing prices to increase by around 0.5%, we can expect a 2% increase today.

Increases in urban travel time and congestion are key contributors to our housing supply problem. Congestion has eroded around a third of the time gained by the introduction of cars. This limits the area where homes are likely to be built and is a trend that is expected to continue, regardless of roading investment. Like Infrastructure New Zealand, Te Waihanga also recommends congestion pricing and faster deployment of new transport options.

Planning has also played a leading role. The complication of an urban planning approach that prioritises existing amenity value over infrastructure planning to meet expected growth has contributed to unaffordable prices. Plans have become increasingly complex and lengthy, whilst the Resource Management Act 1991 saw infrastructure planning deprioritised.

Te Waihanga suggests that we need to standardise and liberalise urban planning rule books to make room for population growth. To meet the needs of our growing cities, and a renewed focus on intensification, we will also need to increase the efficiency of our infrastructure provision – where despite on-par spending, our assets are some of the worst performing amongst high-income countries.