New Zealand Housing Shortage: Problems, Solutions, And Recommendations

Discuss about the MGT 202 Organizational Behavior. As the country is witnessing a surge in population as a result of increasing migration, New Zealand is failing to cope up with the increasing demands for new and suitable accommodations. 

Housing shortage in New Zealand

In terms of building construction and accommodation markets, New Zealand is one of the most expensive places of the developed countries. According to surveys, it has been found that the people of the country are facing significant problems regarding the scarcity of houses. According to studies done in 2017, almost 9,000 New Zealanders are in need of new houses (Norman, 2014, p.20). As a result, scarcity of housing is a major issue amongst the citizens of the country. Moreover, the places that are available, are beyond the level if affordability for the most the common people. As a result of this, people are being forced to opt for the accommodation that are unsuitable and are of poor quality. However, it is known that every year the government spends a huge budget of $129 million to resolve the problem (Inland Revenue, 2014). Still the issues regarding housing and accommodation cannot be solved. This report aims to highlight the problems related to proper and quality accommodation. In addition to this, the report also includes few recommendations as well as possible solutions.

As the country is witnessing a surge in population as a result of increasing migration, New Zealand is failing to cope up with the increasing demands for new and suitable accommodations. According to the report, the rate of accommodation scarcity has risen to 9% approximately within a timespan of 6vyears, starting from the year 2001 (Statistics New Zealand, 2017). Moreover, the Official Statistics Researches has shown that the number of people having no proper accommodation has increased significantly in Auckland. According to the reports, in the year 2006 the number of homeless people have risen alarmingly around 44% (the University of Auckland, 2015, p. 8).

As a result of the ever-increasing demand for new accommodations, buying new houses in the country is becoming more expensive. Along with the scarcity of the accommodations, the prices of the new houses are also increasing around 12% each year (Bassett & Malpass, 2013). Moreover, the immigrants are flooding the country. Hence, it is obvious that these immigrants have lo buying capacities. Hence, housing and their increasing prices are big problems to these people. In addition to that, the New Zealand Productivity Commission has pointed out that due to the scarcity and the unaffordability, more number of people are becoming tenants. As a result of this, over the year the number of tenants has increased to 35% (Bassett & Malpass, 2013).

The next issue that should be highlighted in this regard is the poor quality of the houses. As the cost of construction has also increased along with the rising demand, the quality of the constructions have started to decrease. During the years of 2002 to 2005, the cost of construction has heightened to 30% (the New Zealand Productivity Commission, 2012, p. 174). Monitoring the market strength and its incapability to opt for costly options, the builders are not willing to spend more on the construction cost. In order to sale the accommodations in a comparatively cheaper price, they are opting for low cost and hence substandard materials. In addition to this, the Ministry of Business, Innovation and Employment have pointed out that the households are dealing with higher electricity bills as a result of improper insulation set up.

The increasing rate of population and homelessness

In order to solve the issues of improper housing, the report points out few possible solutions to consider. They are as follows:

In order to cope up with the dearth of accommodations, the government should revise the non-residential house taxation policy. It will curb foreign ownership of the housing in New Zealand. For the non-resident owners, the tax should be increased from 3% to 15% (Gordon, 2016, p. 34, p. 38). Example of Canada’s success can be taken as an example in this regard. This strategy will have its two-way benefits, as it will generate more revenue to the government as well as discourage non-residential foreign buyers.

To address the issues of increasing homelessness, the government should play a supportive role. To control the problems, the government should incorporate the tax incentive laws to encourage purchasing for the weaker section of the country. A similar program has been incorporated in the United States from the year 1986, where the residential owner can claim credits of the tax return (Office of the Comptroller of the Currency, 2014, p. 1, p. 2). This law has been successfully implemented in the USA hence, can be followed by the New Zealand government as well.

To solve the problem of poor quality building construction, the government should incorporate policies of subsidies to the builders. In this regard, tax exemptions for building materials and lower taxation for land acquisitions can be introduced (Greenaway-McGrevy & Phillips, 2016). Moreover, a powerful collaboration between the National Housing Construction Policies and the state budget can help to solve the issue largely.

Limiting the price of the accommodations for the first time buyers can boost their ability to purchase new houses. A reference of Australian government can be taken in this regard. In the 2004, the Australian government has done a survey in order to calculate the median incomes of families and the median of the prices of the houses in a certain point of time. This has helped the government to limit the upper ceiling of the price to be limited (Calza,  Monacelli & Stracca, 2013). By applying similar strategy, the New Zealand government can also boost their buying capability.

In order to address the issue of low infrastructure of the government can come up the mandatory energy efficiency design for the houses. The builders are providing the customers with substandard and low quality of insulation set up, which in turn is increasing the cost of electricity. Moreover, coming up with strategies of energy saving and reduction of greenhouse gases. Since 2006, the German government is applying the same solution to reduce their energy consumption issues (Nem?, & Kasperski, 2014, p. 2314). It has helped the government to save 40% of the total energy consumptions in Kiwi households (United Nations ESCAP, 2012, p.1-4).

In context of this discussion, five practicable way-outs can be found in order to combat with the housing problems. The residency tax change can uplift the interest of purchasing house. According to Gordon (2016, p.44), implementing this tax residency policy will eventually decrease the demand of housing amongst the foreign non-residential buyers for at least 25%. Hence, the solution can be helpful in order to solve the problems.

The poor quality of housing constructions

The low income tax credits strategy is another effective way of encouraging people to buy homes. In addition to this, it will eventually boost the purchasing power of the citizens. According to studies, it has been understood that relief in taxation procedures can increase the buying capabilities of the people to an extent of 30% (Office of the Comptroller of the Currency, 2014, p. 2, p. 30). However, it is also argued that this tax credit policy can affect the generation of revenue of the government, in spite of attracting people in construction business.

Regarding giving subsidies that are to be provided to the builders, it can easily be understandable that the government will incur a loss in revenue, as it will work as an added burden. However, giving subsidies to the builders will eventually cut down the construction cost for them. This will be an effective procedure to allure the builders to invest more in the housing sectors and will help them to sell the housing properties in a cost effective way (the New Zealand Productivity Commission, 2012, p. 176). It can be beneficial for the country, as the present cost of the building materials are very high, compared to other countries.

With regards to the policy of limiting the upper ceiling of the buying cost for the first time buyers, it is to be said that the buyers will be encouraged hugely. However, according to some findings it has been noticed that incorporation of this policy does not include a vigilance on the quality and infrastructure of these houses. In addition to this, by limiting the upper ceiling of the price, the policy also assumes that all the buyers have similar capacity. Moreover, it does not consider the non-housing costs. Hence, situation can arise where a builder can neglect the requirement of providing proper infrastructure and insulation set up to the building (Greenaway-McGrevy & Phillips, 2016). This hypothesis hence points towards the determination of discrepancies in deciding the maximum limit of the buildings.

While considering the requirements of the energy consumption, insulation standard and reduction of the electricity bills, the government should include stringent laws in employing efficient and skilled employees by the builders (United Nations ESCAP, 2012). Moreover, determination of the energy standard maintenance and incorporation of proper insulation is likely to be helpful in this regard. Along with that, cost reduction strategies in non-housing costs will also be beneficial (the University of Auckland, 2015, p. 8). However, it can be suggested that New Zealand government should enforce these rules in a more stringent manner, as the government does not have policies that are well framed.

Conclusion

After analyzing the problems and the possible solutions regarding accommodation in New Zealand, the methods that involve establishing tax credits for the low-income housing, as well as the restricting the price limit for the first bought houses are definitely to be dismissed. Hence, to enforce changes in tax residency, subside contraction procedures, revising insulation and energy consumption standards.

To solve the problems that the citizens of New Zealand are facing regarding the housing and accommodation issues, the Ministry of Business, innovation and Employment (MBIE) should take the subsequent steps:

Solutions and recommendations to address the problems

In order to implement this solution, it is very crucial for the MBIE to regulate the policies regarding tax residency rates. A 15% hike in the non-resident owner task will decrease the inclination of the foreign buyers in buying houses in New Zealand (Inland Revenue, 2017, p. 4). Secondly, the MBIE should incorporate the nationality of the buyers and limit their occupancy timeline to eliminate chances of nomination in purchasing housing properties (Gordon, 2016, p. 44). Lastly, the organization collaborate with the Inland Revenue in order to ensure suitable residency rate in tax payment. Ensuring this implementation, can resolve the issues of suitable accommodation.

In order to lessen the problems of housing accommodation in the country, the government should incorporate the policy of giving subsidies to the builders and the construction companies. Moreover, the existing policies should also be revised in this regard, to make the rule more effective. In addition to that, the government must include stringent rules and keep vigil on the fact that the quality of the subsidized constructions are maintained at per (Calza, Monacelli & Stracca, 2013). The infrastructure and proper insulation requirements are to be monitored also. In this regard, it can also be added that the MBIE should keep a check not only on the construction quality butt lo the quality of the materials and the efficiency of the employees hired. The quality of the buildings should be tallied with the selling price of it (Greenaway-McGrevy & Phillips, 2016). By maintaining these parameters, the government can ensure better qualities of the accommodations, as well as it will be able to seize the problems related to the scarcity of the accommodations.

Upgrading the standards of the energy consumption and decreasing the remittance of greenhouse gases. To ensure this solution, the primary step that is to be taken by the government and MBIE is the enforcement of the rules related to the energy standards (Nem? & Kasperski, 2014, p. 2314). Moreover, the MBIE should collaborate with the state authorities to ensure proper enforcement of the rules related to the quality and infrastructure (United Nations ESCAP, 2012, p.1-4). Finally, heavy penalties should be charge if these guidelines are not being followed.

Reference

Bassett, M., & Malpass, L. (2013) Priced Out: How New Zealand Lost Its Housing Affordability. Retrieved from https://nzinitiative.org.nz/reports-and-media/reports/priced-out/ 

Calza, A., Monacelli, T., & Stracca, L. (2013). Housing finance and monetary policy. Journal of the European Economic Association, 11(suppl_1), 101-122.

Gordon, J. (2016, March 30). Vancouver’s Housing Affordability Crisis: Causes, Consequences and Solutions. Retrieved from https://fraseropolis.files.wordpress.com/2016/03/2016-housing-affordability-crisis-report-sfu.pdf.

Greenaway-McGrevy, R., & Phillips, P. C. (2016). Hot property in New Zealand: Empirical evidence of housing bubbles in the metropolitan centres. New Zealand Economic Papers, 50(1), 88-113.

https://m.stats.govt.nz/browse_for_stats/people_and_communities/housing/housing-supply-demand-mr.aspx.

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Nem?, M. & Kasperski, J. (2014). A Set-up for an Experimental Verification of a New Conception of Solar Powered House. Energy Procedia, 57, 2305-2314.

New Zealand Productivity Commission. (2012). Housing Affordability inquiry. Retrieved from https://productivity.govt.nz/sites/default/files/Final%20Housing%20Affordability%20Report_0_0.pdf

Norman, G. (2014) The Prices of Goods and Services in New Zealand: An International Comparison. Retrieved from https://www.productivity.govt.nz/sites/default/files/nzpc-wp2014-2-prices-of-goods-and-services-in-nz.pdf

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Official Statistics Research. (2013). Severe Housing Deprivation:The problem and its measurement. Retrieved from https://www.statisphere.govt.nz/~/media/Statistics/about-us/statisphere/Files/severe-housing-deprivation/severe-housing-deprivation.pdf

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United Nations ESCAP. (2012). Low Carbon Green Growth Roadmap for Asia and the Pacific Fact Sheet - Building energy standards and codes. Retrieved from https://www.unescap.org/resources/low-carbon-green-growth-roadmap-asia-and-pacific

University of Auckland. (2015). Meeting the housing needs of vulnerable populations in New Zealand. Retrieved from https://cdn.auckland.ac.nz/assets/creative/about/our-faculty/School%20programmes%20and%20centres/Transforming%20Cities/Housing-Vulnerable-Groups.pdf