MBIE unveils new housing affordability measure

A new approach to measuring housing affordability has been developed by the Ministry of Business to try to assist the government in making decisions on housing.

However, it is likely to take some time before the results are up to date due to an 18-month lag on the data.

The Housing Affordability Measure (HAM), billed by the ministry as a world first, aims to provide a more accurate picture of how much New Zealanders spend on housing, as well as tracking whether housing is becoming more or less affordable over time for renters and aspiring first home buyers.

This follows a review of the Official Statistics System in August 2012 when the government instructed the ministry to develop a statistic on housing affordability.

The measure includes data from numerous sources, including Statistics NZ, CoreLogic, Reserve Bank, housing service costs, tax data, social welfare and rent data sourced from active bond records from MBIE’s tenancy bond database, among other data sources.

HAM compares the amount of income the median New Zealand household has left after paying for their housing costs, measures that against the 2013 National Affordability Benchmark * and presents the share of households that fall below the benchmark.

An increasing proportion of households below the benchmark indicates that housing is becoming less affordable, while a shrinking number indicates it’s becoming more affordable.

The 2013 National Affordability Benchmark in 2013 was $662 per week for a one person house. That figure jumps by $331 per week for each extra adult in the house and $199 for each child.

The HAM measure accounts for both first home buyers, as well as renters.

“This robust measurement of how much income households have left after their basic household costs have been paid and will inform policies and decisions for Kiwis and their housing,” MBIE chief executive of building, resources and markets Chris Bunny, says.

Initial findings
The initial findings of this first HAM show housing is more affordable for renters than for first home buyers.

Source: MBIE Housing Affordability in New Zealand results

It also confirms the Auckland market continues to be challenging for first home buyers.

Source: MBIE Housing Affordability in New Zealand results

The results of this first measure cover the period March 2003 to June 2015. At the moment, there's an 18-month lag between the data and production of the measure.

But Mr Bunny is expecting that to narrow to six months over time.

MBIE says it is releasing the HAM today as an "experimental statistical series," which means it will continue to be refined to ensure it remains fit-for-purpose and that results are robust and meaningful.

The first regular release of HAM will occur in the next three months and subsequent releases will be quarterly.

* 2013 was chosen as the base year as it was a Census year. The national affordability benchmark will be rebased periodically.