Smith NickHon Dr NICK SMITH (Minister for Building and Housing): I do want to respond on three important points. The first is that members have claimed that you need to get the house price to income ratio back to 4 as is proposed in the Supplementary Order Paper (SOP). I challenge members to reflect on the history. There is actually only one period in New Zealand in which that ratio was less than 4 and that was when interest rates were at 15 percent.Jono Naylor: How high?Hon Dr NICK SMITH: Fifteen percent. That is the only time. So the point is this: actually you need to include interest rates in your measures of housing affordability because actually whether it be the interest.co.nz index or whether it be Massey University's index it is absolutely proper to look at the proportion of a person's income in that criteria for affordability.The second thing is that there is a belief from Opposition members that putting an affordability criterion into each of the special housing areas (SHAs) will help. Let me tell you why that is incorrect. The experience that the Auckland Council has had and the reason that the Auckland Council decided not to include affordability requirements in their plans—Andrew Little: They got it wrong.Hon Dr NICK SMITH: I will explain why. It is important. It is because the developer has a choice as to whether they use the SHA mechanism or the normal planning process. If you put a whole lot of barriers in the way of the special housing area the developer will simply choose to use the normal planning process and you will defeat exactly what you need—more houses being built. Phil Twyford: So apply it to all developments then.Hon Dr NICK SMITH: Then Mr Twyford says: Well let's just apply it to all developments." I draw his attention to the evidence and the decision of the independent hearings panel and I think every member in this Committee would accept the judge in that panel as an expert. Equally so I would refer to the reports of both the OECD and the Productivity Commission that say those measures do not work are counter-productive and actually make houses less affordable and the evidence is absolutely strong on that—Phil Twyford: Rubbish! There is no consensus on that.Hon Dr NICK SMITH: Effectively what Mr Twyford and Mr Little are saying is "No the Productivity Commission got it wrong. No the independent hearings panel got it wrong and no the Auckland Council got it wrong." whereas the Government is saying: "Actually the research shows it does not work."Let me give a very practical dimension. The original Auckland Council proposal was that if a housing development was more than 20 houses it required a block of affordable houses. What the developers who were doing an 80 section block did was divide it into 19 section lots to be able to avoid that provision. Phil Twyford: There are ways of dealing with that.Hon Dr NICK SMITH: And he says: "There's ways of dealing with that." Actually when you come to do a housing project it is often the case that you will slice it up because of the capital costs of doing the investment.I will respond to one last point. The members have said: "Why is it that the Government insists on price points and affordability on the Government's Crown land programme but not in the special housing areas?". There is a very good reason for that. When the Government owns the land it can set the conditions about what occurs on the development but if the land is privately owned actually you cannot force people to invest. If you have got a block of land for instance that is typically worth $10 million and it is going to cost $30 million to build the infrastructure and to convert that into sections I challenge Labour members to say how you will force people to invest that $30 million. That question they cannot answer. That is why those provisions do not work. That is why actually increasing housing supply is the key. This provision will do that and Labour's opposition to these provisions shows that it is more interested in playing politics than actually getting roofs over the heads of Kiwi families."