Finance Minister Bill English said calls by the Reserve Bank Governor for more densification in Auckland's housing were "about as popular in parts of Auckland as Ebola" would be.
Graeme Wheeler told Parliament's finance and expenditure select committee this week that building height restrictions and NIMBY attitudes in inner Auckland were standing in the way of an adequate supply-side response to the region's housing shortage. He estimated the backlog of unsatisfied demand at between 15,000 and 20,000 houses.
English, who spoke today for the 7th year in a row at the annual Auckland Chamber of Commerce and Massey University lunch in Auckland, said the city's local government had said you can't build up, but have now recognised that meant there has to be a build out.
There was broad agreement that the growing lack of housing affordability, particularly in Auckland, was a supply problem, he said.
He pointed out that central government and the city council were two of the city's biggest landowners and the biggest landbankers. "It's not just dirty developers who are doing that".
The potential for Auckland house prices continuing to rise above the norm and then having a sharp correction was also a risk to the government given it has $18.7 billion worth of houses on its books and 7 percent of Auckland's housing, English said.
The government is narrowing its focus on housing this term, having already signalled an overhaul of social housing, as it seeks to mitigate some of the financial stability risks posed by artificially high house prices, and the inequity that follows.
The government will confirm details in the new few weeks about further decisions on the Tamaki Redevelopment Co, a joint venture between central government and Auckland Council in 2012 to rejuvenate the suburb. The entity is expected to build about 7,500 new houses over the next decade. Once old properties have been removed or demolished, that will increase the area's housing stock by 5,000, of which 2,800 will be Housing New Zealand-owned.
"We want to accelerate this type of activity, so small and large redevelopments of Housing New Zealand land and properties are completed with more urgency," English said.
In terms of whether foreign buyers were responsible for the rapid growth in house prices, English also said although Australia was going down the track of a register on foreign buyers, it was difficult to prove just who was a foreigner in New Zealand.
"As we found with the Dotcom case, you can be a New Zealander under one case and not in another. It [a register] is a swamp that you have to know exactly how you're going to get through before you go into it."
The minister said the government had learnt a lot over Auckland's housing issues and that should lead to a more constructive process than previously about the region's infrastructure needs, including a second harbour crossing.
'We could do with a common understanding of the strategy. To government, it has looked like a series of projects arriving for political reasons as well as economic ones and we have to have that common view."
He also said Auckland's congestion problems were a problem " we'd love to have in Invercargill."