The government wants to “inject money into the market” to lower house prices, how will this be achieved?

Housing Minister Chris Bishop told real estate agents the government wanted ‘Flooding the market’ Housing development opportunities.

The government has agreed to a series of reforms to free up land for residential construction and, it hopes, make housing cheaper.

Here’s what the plan is and how it might work.

Housing growth targets for first and second tier councils

Councils in tier one (Auckland, Wellington, Christchurch and Tauranga) and tier two (Whangarei, Rotorua, New Plymouth, Dunedin) must “zone” to find land with enough viable development capacity to meet a one-off 30-year housing need.

Live zoning means the land can be used in accordance with a plan already in force, rather than a plan for future use – Viable development means it is commercially viable for a developer to undertake the work.

A wider range of funding sources will be available to meet medium-term infrastructure needs. Prescriptive rules will be introduced for local councils to determine how much capacity they need, for example requiring them to use “high” demand forecasts rather than more cautious estimates.

Brad Olsen, chief executive of Infometrics, said it would be difficult for local councils to deliver on 30 years of development without adequate infrastructure.

“But equally, there wasn’t that infrastructure before, so at least under the more relaxed option, it will force a greater need to develop infrastructure at a faster pace over time.”

New rules require cities to expand

Local councils will not be able to impose urban-rural boundaries in their planning documents, but they will still be able to own rural zoned land.

Ministry officials are also looking at options for improving local councils’ future development strategies, possibly requiring them to draw up 50-year rather than 30-year development plans.

Strengthening the enhanced provisions in the National Policy Statement on Urban Development (NPS-UD)

Tier 1 councils must achieve “appropriate” levels of density within their city areas and must intensify housing along “strategic” transport corridors such as major bus routes.

They must also offset any losses resulting from deciding that certain areas are of a “special nature” and should not be intensified by carrying out more development elsewhere.

New rules require local councils to allow mixed-use developments

First and second tier councils will need to allow cafes, dairies and other retail outlets to open in urban areas. Industrial activities will still be separated from residential areas.

No minimum floor area and balcony requirements

The size of apartments and whether they have balconies will be decided by developers rather than the council.

Ms Bishop said the requirements could significantly increase the cost of new apartments and reduce the supply of low-cost units.

He said evidence from 2015 showed balcony size requirements in Auckland added between $40,000 and $70,000 to the cost of each apartment.

Ms Bishop told the Real Estate Institute there had been complaints about shoebox apartments.

“I agree they’re not a housing solution for everyone. But you know what’s smaller than a shoebox apartment? A car or an emergency housing motel room.”

Auckland University of Technology professor John Tookey said people would question how far the rules could be relaxed. “We may have to draw a line, such as requiring toilet facilities to be separate.”

“What are we going to sacrifice for the lowest cost?”

MDRS becomes optional

The MDRS is a bi-party agreement between National and Labour to increase housing density, allowing homes up to three storeys to be built without resource consent.

All committees currently required to implement MDRS must vote on whether to retain, modify or cancel the standard in their region.

If they remove or change the MDRS, they will need to meet their housing growth goals, the strengthening changes to the NPS-UD, and the mixed-use provisions.

What does this mean for house prices?

Olson said the plan will make a difference.

“We spend a lot of time talking about how bad the housing market is and how bad housing affordability is, and I don’t know if that’s going to change immediately, but I do feel more optimistic about the outlook going forward, and that feels like a big thing.”

He said New Zealand had failed miserably in trying to control its housing market, to the country’s “huge detriment”.

“Anything that creates more housing is a good thing, period.”

Tuckey said if the new rules allowed builders to make more profit, more apartments would likely be built.

But he said the increase in affordable apartments did not necessarily mean other types of housing were becoming cheaper.

“We assume they’re all competing in the same market, but that’s not the case. Someone who wants to buy a freestanding property on a quarter-acre lot isn’t competing in that space anyway.”

Olson said if what people wanted were apartments, more apartments would be built.

“It’s not for us to decide whether this is good or bad.”

For house prices to fall, the number of available homes would have to exceed demand, and builders and developers would not necessarily rush to buy homes before there were enough buyers because that would reduce their profits, Tuckey said.

“The way the government can ultimately make a difference is by using the power of the public finance to procure and build the right homes in the right places … even if you build 10,000 homes somewhere, you can actually build homes ahead of the market.”

Nick Goosall, head of research at Corelogic, said the changes were welcome.

“It’s the right thing to do.”

He agreed that any development would still need to take advantage of the new rules for builders and developers.

“It’s going to take a while for them to have a significant impact on the market. Building in more places, making it more available and more popular, is absolutely the right thing to do. As demand increases and prices get more affordable, we’ll start to see them take advantage of that opportunity to build.”