Housing is back in the papers again after the release of the ninth annual Demographia International Housing Affordability Survey.

House prices in Auckland have topped their 2007 peak, which sparked comment from Minister of Finance, Bill English, who said if councils didn’t approve more land for development, power to do so might be relocated closer to the Beehive.

These developments highlight just how high on the political agenda affordable housing will be over the coming year. The Demographia survey vividly demonstrates how unaffordable New Zealand housing has become. Using its median multiple measure (how many years of the median household’s income it takes to buy a median priced house), Demographia finds that New Zealand houses now cost 5.5 times the median income, whereas the ratio in the early 1980s was just above 2.

The Demographia report primarily blames the lack of responsive and competitive land supply for the house price explosion. This is the case in both New Zealand and other nations that inherited the post-World War II British planning system.

The basic problem is that New Zealand has a housing shortage. This shortage has been created and exacerbated by a lack of supply of new land and insufficient funding of infrastructure. Regulation that encourages a cottage building industry, and councils reluctant to let towns naturally grow and spread have not helped, either.

Blaming councils for this is much too easy – many rationally respond to the political and economic incentives they face: misplaced environmental concerns, NIMBYs, and pressure from home owning voters.

These home owners tend to be rent seekers by stealth. In lobbying their councils to limit supply of new houses by citing cost of infrastructure and community disruption, they bid up the price of their homes. Developer levies and fees can also be seen this way: current ratepayers are in effect often pressuring councils to make new developments subsidise the services they enjoy.

The point is that resistance to new housing is generally strongest at the local level and this is where the problem needs to be addressed. Regardless of Mr English’s rhetoric, without the encouragement of local councils, development is likely to be difficult, slow, and not keeping pace with demand. This holds regardless of where legal power lies.

This issue will keep bubbling away, so it is good to start the year by asking: why are some local councils opposed to development, and what could help incentivise their support?