Conclusion Housing Despite common perceptions, population growth is not the sole driver of housing demand. Changes in living arrangements and household composition play a role, too. Assessing the number of new annual dwellings needed from just population changes severely underestimates the supply needed. For the six realistic Spectrum scenarios, the average annual number of new dwellings needed from 2019 to 2038 ranges between 26,246 (‘low’ migration and ‘low’ fertility) and 34,556 (‘medium’ migration and ‘high’ fertility). From 2019 to 2060, the number would be 15,319 (‘low’ migration and ‘low’ fertility) and 29,052 (‘medium’ migration and ‘high’ fertility), respectively. The projected demand to 2038 or 2060 does not take into account the existing shortage of dwellings, or the fact that housing does not last forever – they need demolition and replacement. In October 2019, Infometrics estimated the housing shortage to be 40,000.140 Such a shortfall accentuates the need to urgently scale up urban development and housing supply.141 Although the number of dwellings consented reached 38,624 in November 2020, it is imperative the government frees up development both up and out to build the dwellings.142 Regarding housing demand, the public needs to consider the declining average household sizes. Local government reforms need to incentivise councils to ease constraints on houses and infrastructure.143
Beyond housing: Prospects for fiscal prudence Beyond housing, the Spectrum projections show fiscal implications. More people are living longer
and becoming heathier. As Steven Pinker said in Enlightenment Now, longevity and improvements to healthcare, sustenance and wellbeing have been positive trends in human progress.144 However, these trends mean new challenges. Population ageing means proportionally fewer future workers and taxpayers. The dependency rate to 2060 rises from 0.55 to between 0.66 and 0.72 in our six most plausible scenarios. Simultaneously, the proportion of people over the age of 65 will go from 15.2% in 2018 to at least 23% in 2060. An ageing population means a higher dependency rate and more pressure on public finance. Increased workforce participation by older New Zealanders may partly offset the growing dependency ratio. Faster productivity growth would ease the fiscal problem. Curbing migration to reduce pressure on housing will not solve our housing shortage, but it would exacerbate a looming demographic fiscal problem from a rising dependency ratio. Cutting migration may also be considered as sound policy, but New Zealand would still have huge labour shortages to fill from skilled foreigners, mainly in construction, engineering and trade.145
Summary of findings • Housing crisis: The housing market is extremely unaffordable due to supply not keeping up with growing demand. Covid-19 and expansionary fiscal and monetary policies have exacerbated the problem. But New Zealand’s housing crisis is not primarily a demand problem. It is inadequate supply. Instead of directly tackling supply, the Labour government distracted itself with KiwiBuild and ineffectual demand measures – only to
THE NEW ZEALAND INITIATIVE 45
