Building and Construction Minister Smith says getting better estimates of NZ housing shortage is tough without becoming Soviet-style economy

There is little chance of the government getting clearer estimates on New Zealand’s housing shortage, bar becoming a Soviet-style planned economy, Building and Construction Minister Nick Smith has claimed.

Meanwhile, Prime Minister Bill English said he was sceptical about the value of official estimates on the housing shortage. The government was not trying to run policy based on estimates of what the shortage might be, he said. 

English yesterday said estimates on the national shortage were likely in the 10,000 to 20,000 range when presented with figures from the Labour Party that it could be as high as 60,000.

Speaking to media in Parliament Tuesday morning, Building and Construction Minister Smith said any estimates of the shortfall were highly speculative. Officials have advised that the numbers can vary by plus or minus 25,000, Smith said, adding the range is up to a potential shortage of about 50,000 houses in the country.

The speculative nature of the estimates is due to the number officials could use for the average number of residents per house, he said.

“The average in New Zealand is about two-and-a-half people per house. If you choose a number of 2.55 or 2.45, that can have a tremendous difference on the number of houses [required],” he said.

Put to him that the government carries out a census every five years, Smith said these numbers change over time. Nationally, the figure has been dropping historically, he said. Although, “in places like Auckland that number has not been dropping and that is one of the factors. The issue is that both house prices and rents impact on the number of people living per house.”

“If the housing market is tight, no surprise, rents are tight, and so you may get the teenage children staying home for a longer period than before they go flatting and living independently,” Smith said. “That is why any of these estimates around the housing shortage are going to be crude.” asked the Minister what work was being done by the government to improve the estimates from such a large range of outcomes.

“Unless you live in a Soviet-style economy where the government tells people where to live and controls every aspect of peoples’ lives, you’ll never have a perfect estimate on the numbers that are required for a housing shortage,” Smith replied.

In Christchurch following the city’s earthquakes, officials were out by about two years, or 4,000 homes, at the point where the market stabilised, he said. “I.e. the best measure of when supply and demand is in balance is when house prices stabilise.”

Smith raised Tuesday’s REINZ figures, “actually showing in January, and in particularly over the last six months, house prices across the country are stabilising.

“That suggests we’re getting supply and demand better into balance,” he said.

English a sceptic

Prime Minister Bill English said Tuesday that he was sceptical about the value of official estimates on the housing shortage.

“What matters is not our opinion, it is the opinion of the buyers and sellers because that’s what’s setting the price,” he told media on his way into the National Party’s weekly caucus.

“We’re not trying to run policy on the basis of an estimate of a shortage. We’re just looking at the prices, because that tells you about the balance between supply and demand,” English said.

Prices have been flattening out a bit but were still high. “The answer in any case is to build more houses. That’s what’s going on right now,” he said. “The pipeline’s building up quite strongly. In the longer run that’s going to have an effect on prices.”

Update adds comments from PM English, videos