Affordability measure proves more houses needed

Renewed controversy over the Government’s Housing Affordability Measure (HAM) has been dismissed by the Prime Minister who says all measures point to the need for more houses.

Tuesday, June 20th 2017, 12:00AM

by Miriam Bell

Prime Minister Bill English

It emerged yesterday that the Ministry for Business, Innovation and Employment (MBIE) went ahead with its recent release of the HAM – despite a Reserve Bank warning that it should be using a higher mortgage lending rate in its calculations.

According to sources, the Reserve Bank told MBIE that it should be using the new customer mortgage rate rather than the effective mortgage rate.

The new customer mortgage rate sits about 1% higher than the effective mortgage rate.

Using the incorrect rate means that the HAM could make housing look more affordable than it actually is.

But at the time the HAM was released MBIE was under some pressure to get the measure out because it had been in the works for five years and the lack of such a measure was being criticised.

Labour Party housing spokesperson Phil Twyford said the decision to knowingly release a flawed measure that underestimates the cost of housing was evidence of the Government’s housing crisis denial.

He said the HAM urgently needs to be re-issued with accurate numbers on the true state of housing affordability.

But Prime Minister Bill English said that any measure of housing affordability has limitations and that whatever they are they can’t measure everything.

“What we do know is that any measure points in the direction of getting more houses built, faster and more cheaply. And so, we focus on that.”

There is a lot of work to be done about the costs on the consent process and of building materials, English said.

“Another cost is just the length of time it takes to get any housing built, particularly through the statutory processes – consenting processes. The system tries to work on all three at the same time.

“Some progress is being made with the Auckland building consent process going electronic in the last month. Anecdotally, I’ve heard it’s a big step forward from where it was, and will be less costly.”

English added that the HAM index was an MBIE measure, which MBIE was responsible for, and he didn’t want to comment on it further.

An MBIE spokesman told media that the criticism was incorrect and that their analysts stand by the integrity of their work.

The HAM was an experimental series that was undergoing user testing and any feedback would be used to improve the measure, he said.

The first set of HAM results, which cover the period March 2003 to June 2015, showed that housing was more affordable for renters than for first home buyers.

They also confirmed that affordability for first home buyers in the Auckland market has worsened since 2011.

Read more:

Renting more affordable – HAM

Affordability measure problems

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