CTU says wages key part of the solution to unaffordable houses

 Houses along Marine Parade“Home affordability is not just about house prices – it is also about incomes, and low wages means home ownership is now increasingly out of reach for low and middle income New Zealanders,” CTU president, Ross Wilson, told a select committee this week.

The Council of Trade Unions presented to the Commerce select committee on their inquiry into housing affordability in New Zealand.

“House prices are still outstripping wages by 4 to 1. In the year to June for example, wages rose by 3.1% while house prices were up 12.2%. The significant gap between wages and house prices is worrying for many workers, in particular those trying to enter the home market for the first time.”

The internationally accepted standard for housing affordability is that median house prices should not exceed three times median household incomes. The 2007 Demographia Survey found that the median house price in Australia and New Zealand was 6.6 times the median household income, compared with 5.7 times in Ireland, 5.5 in the United Kingdom, 3.7 in the United States and 3.2 in Canada

The CTU is extremely concerned by the levels of debt New Zealanders are having to manage, and the wide ranging ramifications of this. By mid-2006 the outstanding debt of households had increased around 5 times in dollar terms since 1990 and household debt as a proportion of annual disposable income has gone from around 74 per cent in 1992 to 100 per cent in 2000 to 160 per cent by 2006.

Housing affordability is about more than the ability to purchase a house. There is a clear relationship between poverty and housing costs. Households facing insufficient incomes are likely to move into inadequate housing that is overcrowded, or substandard, or in a remote location. This has been proven to be bad for people’s health, education and social outcomes. The financial stress can also contribute can contribute to family breakdown, neighbourhood instability and social exclusion.

In general, wages in New Zealand are low. New Zealand wages between 1980 to 2001 fell in real terms by 6.5 per cent, compared with a range of other countries where there were significant increases (e.g. Australia 28.8 per cent, Canada 39.5 per cent, UK 46.9 per cent and Finland 68.2 per cent).

The CTU told the committee it cannot simply confine itself to considering the price of houses. It must also consider the other factor – which is incomes. And for most people it is the level of wages that determines their income.

(thanks to Brenda Anderson for the photo)

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