What is a reasonable price for a home? This is the question around which much debate over housing has evolved. What is reasonable, who should provide it and how should it be paid for?

Throughout New Zealand's history, there have been different answers to this at different times. But over the past 30 years, a series of policy decisions have resulted in housing being more expensive than it once was. Further, the attitudes of authorities and society toward housing and development more generally, have also changed.

The basic problem as identified by the government and Auckland Council's recent Housing Accord, is a shortage of housing. The key conceptual point isn't a shortage against a set number of houses that “the people" require but against demand for housing, whether that demand is for investment or purchase.

It is a supply side problem. For this reason alone, a capital gains tax, a notion that is often put forward as an answer to house price problems, will only exacerbate the situation.
 So how is it that the New Zealand housing market which once responded quite well to demand, no longer seems to do so?

In the post-World war II period, building houses for first time home buyers at a reasonable cost was a key plank of not only government policy but of the welfare state. The better known part of the welfare state of housing is state houses but, arguably, a more important component was  actually a government subsidised private housing and development from the post WWII period through to the 1980s. (It is also important to note that although state houses were a big part of the New Zealand market - as much as one third of new builds in the 1940s -these were being sold to the public as early as 1951.)

The subsidised housing was implemented by means of two methods: a corporatist approach to land development and the capitalisation of family benefits as well as 3% loans provided by the State Advances Corporation.

Here alone the figures are staggering. From 1960 through to the mid-1970s, an average of 7500 of these were uplifted a year, and crucially for most of this regime, the loans were only available for those building new houses. This created a market for low-cost, new housing with tax payer subsidised finance.

The period for which this finance was available also coincided with the highest rates of building in New Zealand. Of course, such an avenue is not available to government today as those sorts of messy cross subsidies were essentially made available by the government operating a Keynesian pump priming economy.

The other side of this policy was a very different social view of progress. Whereas until the 1980s, expanding cities, house building and growing communities were a sign of progress, today this is quite different.

The working and middle class egalitarian aspirations of ordinary New Zealanders for a bigger, brighter and better house have given way to abstract environmental concerns about urban sprawl, carbon footprints and sustainability.
 There has always been opposition to urban sprawl but for different reasons: before 1939, it was because the government felt people couldn't just build where they wanted!

This was not due to environmental concerns. On the practical side, central government held the whip hand when it came to opening up tracts of land for development. One minister in the 1960s when threatened New Zealand home building companies that he would invite in Australian companies to compete if New Zealand builders couldn't lift the rates of construction.

In essence, while the 1980s and 1990 saw many sorts of liberalisation, town planning was not one of those areas. Over time it is a profession that has become less about the technical side of how to provide infrastructure, layout roads and make provision for a bigger population. Instead, it has become a method of designing ideal communities, whereby people will escape the supposed social atomisation of life in the suburbs. It's as if the much of the planning profession thinks that life in the suburbs is sort of like a Coen brother's movie: a dystopian place where people live desperate lives of hopeless ordinariness.

As an upshot of these views, many councils have had policies of effectively creating a land shortage through zoning and town boundaries, artificially pushing up the price of land for development. In addition, great difficulty arises in that councils are monopoly consenters and providers of infrastructure.

There are also daft ideas surfacing, such as those in the Auckland plan that emanate from the UK, such as affordable housing quotas in new developments and planning gain uplift.

Rather more justifiably, many councils in their role as consenting authorities have been spooked by the leaky homes liability that they (and by extension ratepayers) have been compelled to bear.

Homebuyers have to also look in the mirror to see where some level of cost of inflation is coming from. The sorts of houses the average consumer expects today has a much larger square footage and sophisticated fit out than in the 1960s or 1970s. Bigger houses with bigger bedrooms and more bathrooms and flashy kitchens cost more money. Some of these changes are mandated by government and are particularly applicable further south.

Of course, some of this increase is also down to ever more restrictive and prescriptive covenants- driven in part by an artificial scarcity of land.

The notion that there is some sort of scarcity seems odd to say the least, given that less than 1% of New Zealand is built on.

Ultimately the facts remain these: New Zealand needs more houses and this means going up as well as out. This part of the Auckland Unitary plan should not only be applauded but encouraged as not radical enough. More zoning for easier conversion of land and current building to higher density buildings is just as crucial as freeing the shackles of land supply at the city limits.

In general, pro-development, pro-growth policies must be the aim of any housing policy: as long as a grave under-supply remains, prices will continue to rise.