I don’t believe that there is a shortage of homes. The demand we are seeing is driven by investment. There are many more empty and low-use properties out there than most would suspect.

Hear me out.

Reported vacancy rates (the ones you’ll hear quoted in the media) are usually discovered by asking real estate agencies how many of the properties on their books are currently available to rent.

Actual empty residences are harder to quantify. There are two studies I’m aware of that attempt to do this. In Melbourne, Australia (one of the ‘anglo’ places that suffers from this rampant property investment problem) there is the Speculative Vacancies Report[0] published each year by Prosper Australia. They determine which properties are empty using data from the water utilities companies. In the UK there is this study[1] where council data is used to determine the number of ‘Low Use Properties’ (LUP’s) in various jurisdictions.

From the first study (Melbourne), I remember one interesting finding was that the higher the capital gains in an area, the higher the vacancy rate tended to be. And the vacancy rates were sometimes very high. I remember them being over 25% in Docklands (Melbourne’s Canary Wharf) and around 10% in many other areas maybe five years ago. Completely unintuitive. Surely those places should have a relatively low rate of empty properties if they are such desirable places to live (as the rapidly rising prices suggest).

From the second study (UK), it’s clear that the higher the value of properties in an area, the higher the number of LUP’s.

Curious about what the case might be in New Zealand (where the property market is similar - if not worse - than places like Canada, the UK, and Australia) I went looking for statistics. I found two that are relevant. The number of households and the number of private dwellings. Obviously every household must have a dwelling, so the difference should give an indication of the situation. This data goes back to the mid 90s. Turns out that back then (when house prices were sane) the difference was around 3.5%. Today it is more like 7%. Those are national averages. From the studies mentioned above I expect that the percentage of empty and low use properties would be highest in the major cities (where prices and capital gains are highest). I wouldn’t be surprised if 10% of properties in the cities are empty or getting very little use.

I used to work as a postie (mailman). I saw firsthand how many houses were empty. The wealthiest streets always had the most (owners were away on holiday for 6 months or a year at a time, living elsewhere while renovating or planning to ‘flip’, the property was on the market, it was a second home, etc). In one particularly nice street, over 25% of the houses didn’t have residents at any one time.

This housing affordability issue doesn’t need a supply side solution. A speculative boom creates extra demand. The solution is to make property a less attractive investment.

[0] https://www.prosper.org.au/wp-content/uploads/2019/04/Specul...
[1] https://theodi.org/event/friday-lunchtime-lecture-empty-home...

Edit: A holiday home used to be an expense. Now it's an investment. That's a problem.