A housing supply shock in exactly the wrong direction

The Kākā by Bernard Hickey

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A housing supply shock in exactly the wrong direction

Chris Bishop wants to unleash a housing supply shock to improve affordability & is revamping the rules for councils, but his actions so far have actually slashed and/or frozen new housing supply

Bernard Hickey

Jun 22, 2025

156

Transcript

Chris Bishop talks tough on the need for a surge in housing supply but the Government’s over-riding focus on cutting debt and spending has created a much bigger shock in exactly the wrong direction. Photo: Lynn Grieveson / The Kākā

Morena and glad to be back online after a couple of weeks of leave. Briefly in the news from Aotearoa’s political economy around housing, poverty and climate on Monday, June 23:

Chris Bishop says he wants to unleash a housing supply shock and last week announced the Government would force councils to allow more houses if they kept saying no, adding to a swathe of repeals and reforms he has launched. But it his Government’s own ‘no’ to council requests for funds and ‘no’ to new Kāinga Ora homes that has actually shocked new house building into reverse. See more in The Lead below the paywall fold.
The scale of the housing crisis remains intense as winter heating bills go unpaid and heaters are turned off. Reporting over the weekend detailed cases of pensioners and children sleeping in cars in Christchurch, and Tenancy Tribunal rulings revealed examples of a family being evicted from a tent in the front yard of a condemned rental and a father and his five-year-old being kicked out of a windowless storage unit days before Christmas. See more in The Sidebar below.
Pressure is mounting on retirement villages to repay the families of deceased residents much faster. It’s clear the big standoff in the housing market between buyers fearing over-paying and sellers waiting-just-a-bit-longer for prices to start rising again is causing a cash crunch for retirement villages holding onto cash until they also start seeing prices rise again. See more in Quote of the day below.
The average time for a hearing at the Tenancy Tribunal has risen to nine weeks from eight weeks in February. See more in Number of the day below.
The carbon budget to ensure climate warming stays less than 1.5 degrees above pre-industrial levels has fallen to just three years of emissions. See more in Chart of the day below.
The Must Watch of the day in my Picks ‘n’ Mixes below details the lives of people sleeping rough in Christchurch’s red zone. Via Stuff.

There’s more detail and analysis for paying subscribers below the fold and in the podcast above. If we get over 100 likes I will open it up in full for public reading, listening and sharing.

A supply shock in exactly the wrong direction

I admire Housing and Infrastructure Minister Chris Bishop’s ambition and plain talking when it comes to improving housing affordability through increasing the supply of housing. He has been one of the rare politicians in recent years to admit he’d like to cut real house prices and rents through a housing supply shock.

And he’s been a regulatory action man to back the big talk in the Government’s first 18 months, repealing the RMA, reinventing Labour’s Three Waters into Local Water Done Well to increase water infrastructure investment and pushing hard to improve housing density rules near city centres, rail lines and bus stations. He has had to fight hard against opponents of densification and more affordable new housing among those in his coalition Government’s parties, and their allies in councils.

Just last week, Bishop again talked up the need for much, much more affordable housing in our biggest cities, rattling his sabres in a speech to about the potential to remove Auckland’s calamitous ‘view-shaft’ rules stopping densification in view of the city’s volcanic cones and forcing councils to budget for 20% faster population growth than Statistics NZ currently projects. He also revealed he would soon have new powers to over-rule council decisions “if they negatively impact economic growth, development capacity, or employment”.

He is serious and is no doubt working hard on all these things, but the Government’s first priority of stopping new debt-funded Government investment and rejecting council pleas for more funding tools and capital grants, along with more public transport investment has created a much bigger shock in exactly the wrong direction.

Stopping the biggest house-builder from building doesn’t help

Last week’s long-foreshadowed announcements by Kāinga Ora of the cancellation of over 100 projects to build over 1,650 new homes is a major part of the negative supply shock, along with uncertainty caused by the freezing of funding and delays in planning for schools, hospitals and public transport projects. The upheavals, again, of rules around District Plans, the RMA and Local Water Done Well, set developers and planners further back on their heels, after two years of interest rate pain that has yet to abate.

The numbers are clear in this chart via Tony Alexander showing dwelling consents have slumped back to pre-GFC norms and the chart below that from Musical Chairs showing consents falling, just as house prices are still falling.

And therein lies one of the problems for Chris Bishop. Relying on the private sector to build homes only works when house prices are rising, because tax-free capital gains are the major incentive for developers and buyers. If a supply shock pushes prices down below profitable levels, they stop building. There is a market failure to be solved by some sort of public subsidy, which Bishop is removing. Further reading:

The sidebar: A market failure and a social catastrophe

These articles below demonstrate just how much of a market failure there is, and the scale and nature of the crisis. Further reading:

Deep-dive by Phoebe Utteridge for Stuff: ‘Heartbreaking’: Pensioners, children sleeping rough in Christchurch’s red zone.
Tara Shaskey for Open Justice via NZ Herald: 'Gut-wrenching': Father and 5yo daughter illegally living in storage unit kicked out days before Christmas

Quote of the day: ‘Why rising prices are needed.’

Retirement Village Association (RVA) president Graham Wilkinson operates six villages and argues against faster capital repayment times.
“The reality is the reason it’s become an issue is the real estate market. Have you tried to sell a house in Auckland? People are just giving up ... the real culprit in terms of causing extra angst is the slow real estate market.
“People calling for mandatory repayment are the same people who took three, four, six months, sometimes, to sell their house, to move to the village. And yet now, now they expect everyone to suddenly, miraculously, do it in days. It doesn’t really make sense.” Via The Post-$: Dying for a payout ‒ a David vs Goliath battle.

Number of the day: Nine weeks for a hearing.

Figures released to the Sunday Star-Times show the average wait time for a hearing at the Tenancy Tribunal has grown in the last six months to just over nine weeks. Via Deep-dive by Jonathan Killick for Sunday Star Times-$ :Kirsty Maree found herself living in a tent and locked in a bitter dispute with her landlord.