Bricks, Mortgages, and Trust: Housing Policy at the Crossroads

Exploring how taxes, zoning laws, and policy can rebuild trust in New Zealand's housing market. Housing doesn't just affect where we live, but how we live together as a society.

Housing is the cornerstone of every individual, whānau, and community, yet New Zealand’s housing market is struggling, whilst being difficult to map out, understand, and navigate.

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Rising costs and interest rates are pushing homeownership further out of reach for many, leaving us to ask how this affects how we live, trust, and cooperate as a society.

As a PhD researcher deep in housing policy, I’ve trying to understand how these trends are more than just numbers. I want to understand how they work as a system and how they’re lived realities that impact the social fabric of our Aotearoa.

In this article, we’ll start to explore the root causes of New Zealand’s housing puzzle, examine the role of government and private sector responses, and propose a centrist approach to housing policy that can foster growth and social cohesion.

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What to Expect in This Article:

• What’s Driving the Housing Crunch? We’ll unpack how population growth, rising interest rates, and fewer building consents are putting serious pressure on the housing market.

• Public vs. Private: The Role of Housing Policy: We’ll dive into Labour’s public housing efforts and contrast them with National’s focus on private sector solutions.

• Why Housing Affordability Is Harder To Understand Than We Thought: We’ll explore how to think about zoning laws, soaring labor costs, and other factors that are widening the gap between the haves and have-nots.

• The Tax Debate: From the bright-line test to capital gains, wealth, and land taxes—how are these taxes shaping the housing affordability conversation?

• A Centrist Path Forward: We’ll propose a balanced solution, combining smart government oversight with private sector innovation to tackle both supply and demand challenges.

• What Does It All Mean for Social Cohesion? Finally, We’ll connect the dots between housing policy and how it affects social cohesion—looking at how these challenges impact trust in government and cooperation within communities.

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Diving into housing policy research feels like stepping into an overwhelming library—endless theories, solutions, and ideas exist. Take a quick scan of academic databases: over 6,700 documents on social housing, 15,000 documents on housing market dynamics and 23,000 on homelessness alone. And this is just scratching the surface. From tenancy laws to zoning regulations, the layers of housing policy are complex. But housing is more than just policy—it’s about how all these elements shape our society.

So, here’s what I’ve learned so far, what I’m still figuring out, and why all of this matters for our future.

Photo by Mark Zamora on Unsplash

What’s Causing the Crunch?

Well, a few things. New Zealand's population has grown significantly over the past decade, in part due to immigration. While this has enhanced people’s quality of life and boosted the economy, it has also placed immense pressure on housing supply, particularly in cities like Auckland, where much of the population is concentrated.

Let’s start with housing policy interventions—the tools governments use to shape the housing market. These include tenancy laws, first-home buyer incentives, and zoning rules. But here’s the big question: Are these policies helping us live harmoniously, or are they driving us further apart? Who really benefits—and at what cost to our social fabric?

Here’s what I’ve found:

• Building Consents Are Down: In 2024, just over 33,900 new homes were consented, a 22% drop from last year. Why? Because people simply can’t afford to build. Interest rates are too high, making it harder for developers to get loans, and families aren’t building because mortgages feel out of reach.

• The Cost of Borrowing: Interest rates have jumped from 2% to 5%, and this makes borrowing money far more expensive. Think of interest rates as the cost of taking out a loan. When they’re low, it’s easier to build and buy homes. But when they rise, fewer people can afford to take out loans. For developers, profit margins shrink, and for families, homeownership becomes more of a distant dream. Add in rising costs for building materials and labor, and suddenly, building homes becomes a luxury few can afford.

• Public Housing Struggles: Then there’s Kāinga Ora, New Zealand’s public housing authority. Historically, they’ve provided housing for low-income families. But funding cuts have forced Kāinga Ora to pause many projects, just when more homes are needed. This has ripple effects. Community housing developers, who could step in, are seen as risky by banks and can’t get the loans they need to build affordable homes. It’s a vicious cycle, and the families who need these homes the most are left to bear the brunt.

In Aotearoa, our housing pressures aren’t just economic—they’re causing real fractures in our communities. Housing policy plays a huge role in shaping how we interact with each other and trust the government. But these days, the divisions are getting sharper. It’s not just landlords versus renters; it’s left versus right, young versus old, and urban versus rural.

To make things worse, misinformation is spreading faster than ever, driving wedges between social groups and making it harder for us to come together. With housing policy so tied up in social inequality and economic instability, keeping social cohesion intact is becoming an uphill battle.

Since 2018, New Zealand’s population has shot up by nearly 300,000 people, bringing us close to 5 million. Plus remember how the number of new homes being built has dropped by 22%? That’s a massive mismatch. In our cities, where demand is highest, this shortfall is stressing us out creating our differences to be up front and center, pushing people further apart. It’s creating real pressure, and as housing becomes even harder to access, we’re seeing these divides grow wider.

The housing rubrics cube is also all over the news in confusing and contradictory ways, shaping how people think about the government’s ability to handle it. When public trust is low, those media stories can really hit hard, further testing the fragile trust we have in the system and each other.

Housing Affordability: Worse Than We Thought

So with the puzzle of more people, higher costs that are not going to come down easily, and less housing what is the future of our housing affordability options? How do we even define and measure housing affordability, and how does it relate to the supply and demand issues? And how does all that impact our capacity to coexist?

One way to measure affordability is the price-to-income ratio. This compares the median house price to median household income. Right now, this ratio is way off. Mortgage payments are swallowing up huge portions of people’s incomes, and for those who can’t afford to buy, rents are skyrocketing.

But here’s the tricky part: we don’t even agree on what "affordable" means. For example, the Ministry of Housing and Urban Development defines affordability as balancing housing costs with other essential expenses. Treasury views affordability as a relationship between income and housing costs, but they acknowledge that affordability shifts over time depending on economic factors like interest rates and wage growth.

It’s more than just numbers. When people can’t afford to live where they work, communities start to break apart. People commute two hours to make ends meet or uproot their families altogether. When housing becomes unaffordable, it drives wedges between us—economically, socially, and geographically.

The Role of Taxes in Housing Affordability

Tax policies are one of the key tools that governments use to influence housing markets. In New Zealand, the debate around capital gains tax, wealth tax, land tax, and the bright-line test are central to the conversation about who benefits from housing investment and how to keep homeownership within reach for more people and renting a high quality option.

Capital Gains Tax and the Bright-Line Test

While New Zealand doesn’t have a formal capital gains tax, the bright-line test acts as a simplified version, taxing profits on homes sold within ten years of purchase. The idea is to discourage short-term speculative investment (or quick property flipping) that pushes prices to increase. But while this has reduced house-flipping, it doesn’t address the core issue: housing supply.

Wealth Tax

A wealth tax could help make housing fairer by targeting people with multiple properties or high-value assets. It would raise money that the government could use to build more affordable homes and discourage property investors from hoarding houses, which could help bring prices down.

However, there are some downsides. A wealth tax might stop people from investing in housing altogether, worsening the supply issue. It’s also tricky to implement or do in practice and could cause landlords to raise rents to cover the tax. Plus, wealthy property owners might move their money overseas to avoid paying it, which would make the tax less effective.

Land Tax

A land tax could help encourage better use of land by making it more expensive to hold onto empty or underused property. This could push landowners to develop or sell their land, which could lead to more homes being built. It could also raise money for the government to invest in affordable housing.

But, like any tax, there are downsides. If not handled carefully, a land tax might hurt small landowners or those in rural areas who aren’t in a position to develop their land. It could also raise the cost of housing if developers pass the tax on to buyers or renters.

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Together, these tax mechanisms are part of the broader question: How do we balance Aotearoa s long love affair with housing as an investment with the need for everyone to have a place to live?

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Housing Inequality: The Hidden Barrier

In a nutshell housing inequality is driven by many factors like zoning laws and the high cost of labor. Areas zoned for low-density housing—where single-family homes are the norm—have higher property values, making it nearly impossible for lower-income families to move in.

Then, there’s the cost of construction labor. Since COVID-19, building materials have skyrocketed in price, and skilled labor is in short supply. Wages for construction workers have surged, and while that’s great for workers, it means that developers are paying more—and passing those costs on to buyers and renters.

Market Dynamics: What’s Really Happening?

A big focus of my research is on market dynamics—how supply and demand shape housing prices. We’ve all seen housing bubbles, where prices skyrocket and then crash. But these aren’t just market fluctuations. When home prices soar, people get priced out, and inequality deepens. Even after a bubble bursts, the ripple effects stick around, leaving people locked out of homeownership for years.

One thing I found particularly interesting is how upzoning—allowing more medium-density housing like townhouses and apartments—can make a difference. In 2016, Auckland’s Unitary Plan allowed for more medium-density housing, which boosted productivity and competition among smaller developers. It’s a reminder that policy changes can help, but they need to be well thought out and sustained.

Photo by David Taffet on Unsplash

Government Intervention: Hit or Miss?

Government intervention is often a double-edged sword. Take KiwiBuild, for example, a flagship housing policy launched by New Zealand's Labour government in 2018. The program aimed to deliver 100,000 affordable homes over ten years, but it fell significantly short of its original targets.

As of 2023, only about 1,500 homes were built under the KiwiBuild program. The government scaled back its initial ambitions after it became clear that the program was not achieving the desired results, citing issues such as land availability, bureaucratic hurdles, and challenges in engaging the private sector to build homes at the required pace and price points¹.

Some people managed to buy homes at $400,000 and then watched their property values soar to $800,000. Great for them—but not so great for people who didn’t manage to get a KiwiBuild home and are still locked out of the market.

When government programs don’t deliver on promises, it erodes trust. The 2023 Census revealed that over 20,000 people refused to participate, compared to 6,000 in 2018. That’s a clear sign of growing mistrust in public institutions. And when trust breaks down, so does social cohesion.

What Is National’s Approach?

National’s solution takes a different path. They want to make it easier for private developers to build by streamlining regulations and zoning laws. Their plan is to cut red tape, make more land available, and reduce restrictions on housing density. The idea is that this will speed up construction and bring down prices over time.

But here’s where it gets tricky: critics argue that market-driven solutions often leave out low-income families. Developers tend to build high-end housing because that’s where the profit is. Who’s responsible for ensuring that affordable homes are built in the process? That remains unclear. While National’s approach could increase supply, it’s not clear how this helps those who are already struggling to afford a place to live.

What the Left and Right Get Wrong About Housing—and a Centrist Solution

Housing policy is a battleground between the Left, which focuses on government intervention, and the Right, which favors market-driven solutions. But both sides have blind spots. So, what if the answer lies somewhere in between?

• The Left’s Shortcomings: The Left often leans heavily on public housing, rent controls, and strict tenancy laws. While these measures are essential for protecting vulnerable people, they come with downsides—large-scale public projects can be slow, bureaucratic, and expensive. Strict regulations can also deter small developers who might otherwise help fill the housing gap.

• The Right’s Shortcomings: The Right, on the other hand, pushes for deregulation, lower taxes, and more market freedom. While this can spur growth, it tends to prioritize profit over accessibility. Developers focus on high-end properties, leaving affordable housing in the dust. Without oversight, speculative investment can drive up prices, making homes even less affordable for the average person.

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A Balanced Centrist Approach: Somewhere Between Taxes and Teamwork

So, what’s the middle ground? It turns out, housing policy isn’t just about slapping on taxes and calling it a day. Sure, taxes like the capital gains tax or the bright-line test can help curb those quick house flips that send prices soaring. But taxes alone won’t magically solve the housing crisis—just like putting a band-aid on a broken bone won’t fix the whole problem. We need more than that.

Think of it like this: you can’t just lower demand for houses without making sure we’re actually building more homes. You need a pipeline of affordable homes flowing into the market, especially in cities where everyone’s fighting for a place to live.

It’s like trying to fill up a bathtub with the drain open—no matter how much water (or tax revenue) you pour in, you’ve got to plug the leak (a.k.a. the housing supply shortage.

A centrist approach wouldn’t throw the market under the bus or drown it in regulation. Instead, it’s all about finding that sweet spot. How? First off, let’s talk smart regulation. Instead of micromanaging everything or letting developers run wild, we relax some zoning laws so more townhouses and apartments can be built, while still making sure they’re affordable and, you know, don’t fall apart at the first sign of rain.

Then, there’s the magic of public-private partnerships. This isn’t a political buzzword—it’s about getting the government and developers to actually work together. Think of it as a buddy cop movie: one brings the authority, the other brings the creativity, and together, they solve the case (in this case, the housing crisis). The government can offer tax breaks or streamlined approvals for developers who build affordable housing, and in return, developers get to create homes faster, without all the red tape. Win-win!

Lastly, we need balanced investment. We can’t just throw all our money at public housing or leave it to the market to sort things out. A centrist approach would invest in both—letting the private sector innovate while ensuring the government steps in where the market fails, especially for lower-income families.

In short, the centrist approach doesn’t try to pick sides. It’s not about endless taxes and asking the government to do it all, which hit cant, or free-market free-for-alls.

It’s about creating the right conditions so both the market and the government can do what they do best—without leaving anyone out in the cold (literally).

The Bigger Picture: Housing and Social Cohesion

At the heart of my PhD research is this question: How does instability in the housing market affect social cohesion?

The simple answer is: a lot.

When housing is unstable, so are communities. The economic and social divisions caused by unaffordable housing don’t just impact individuals—they affect the way we live together as a society. We need to rethink housing policies, not just in terms of supply and demand but also in terms of strengthening our communities. Building more homes is important, but so is rebuilding trust—because when communities break down, everything else follows.

See ya next Tuesday!

1. KiwiBuild reset: 'We didn't make all the right decisions' - Housing Minister | RNZ