For over a decade, the state of the New Zealand housing market has been a central concern for policymakers and commentators. Housing has become increasingly unaffordable, consuming many of the economic gains that have otherwise been achieved. While the effects on individual financial stability are relatively straightforward, there is a deeper and more pressing question as well: How do the houses we live in affect the kinds of communities we can form?

This paper takes up that question.

The paper begins by surveying some “first principles” of housing policy: the purposes of housing, the challenges of analysing housing markets and recent developments in New Zealand housing policy. Then, housing markets are examined through the lens of social capital, drawing on the work of Pierre Bourdieu, Robert Putnam, and Edward Glaeser.

Analysing housing markets through the lens of social capital provides a strong foundation for understanding housing policy goals. What comes through clearly is that there are two priorities of crucial importance, affordability and stability. Policy preferences for and against density are a distraction. Achieving greater homeownership rates through improving affordability is important, but greater protections for renters offer valuable improvements that can be achieved much more quickly. People have a remarkable capacity to build homes and communities wherever they are situated, and therefore, creating greater opportunities to do so is what counts.

With this in mind, the paper concludes with several recommendations:

Significantly increase the available land for development, including the right to build upwards. A primary driver of New Zealand’s housing affordability problem is high land prices due to artificially zoned scarcity.

Housing policy should be density-agnostic. Contrary to much that is written in the public conversation, local councils and central government should not prefer either intensification or urban expansion. Neither building up nor building out has any strong claim to offering better community. Other policy goals, such as infrastructure delivery and climate targets are better managed by other policy levers, such as development charges for infrastructure, and the Emissions Trading Scheme (ETS) for carbon emissions.

Devolve decision-making and pair it with appropriate incentives and targets. Contrary to the advocacy of many pro-development groups, devolving decision-making further down, rather than unifying them at the central government level, offers a much more durable political consensus on pro-growth policies.

Devolved decision-making can be bolstered by strong carrot-and-stick incentives, such as growth targets, and revenue sharing, while still maintaining local agency over how growth occurs. The first step is returning zoning decisions to local councils, however local councils themselves should investigate further devolution, looking to models such as Houston as a model of hyperlocal zoning.

“No-cause evictions” should be abolished. While the increase in rental costs has been less acute than house prices, renters face the additional challenge of instability of tenure. Without long-term stability, renters have fewer incentives incentives to invest in forming deep community ties and the ties they do form are disrupted if they are forced to move. Restoring renters’ rights to long-term dwelling, while not a substitute for broad home ownership, offers an important approximation of its benefits, with immediate effect.

Councils should charge rates on the value of land, not property. Rates charged on the total capital value of property functions as a tax disincentive on development.

The New Zealand Living Standards framework should return to using social capital, rather than social cohesion, as its measure of well-being.