There are many facets to New Zealand’s housing affordability conundrum, but the bottom line is there is a shortage of houses, and there is a shortage of new houses (dwellings) being built.

Supply is not meeting demand as in other markets and prices are absorbing the difference.

Despite a richer and larger population, New Zealand’s rate of building since the 1980s has not reached the levels of the 1960s and 1970s. As a result, New Zealand’s new house building is lagging with a growing shortfall.

The number of new houses built dropped from a record 34,400 in 1974 to about 15,000 in 2012. Although New Zealand’s economy improved in the 1990s and early 2000s, housing completions have seldom reached the rate of new household formation.

The trend can be explained by several key changes to New Zealand’s economy, culture, and legislative arrangements in the past half century.

New Zealand’s historically high rates of home ownership were due, at least in part, to subsidised house building. This was a key plank of the post-War welfare state.

Capitalisation of the family benefit and 3% State Advance Corporations loans for new house building were extended to 7,500 applicants annually from the early 1960s to the mid-1970s.

However, along with withdrawal of the unaffordable building subsidies and a corporatist approach to building, there was a change in social norms.

This fear of ‘urban sprawl’ grew, and has resulted in urban limits and restrictive and prescriptive zoning. It has conferred a virtual monopoly market power on landowners at the city fringes.

As New Zealand has become more prosperous, green agendas of more affluent New Zealanders have trumped traditional egalitarian social aspirations, such as suburban homeownership.

Given that less than 1% of New Zealand is built upon even after including landfill and roads, fears of ‘using up all our farmland’ are grossly exaggerated.

Expectations have also changed.

Since the 1980s, houses in New Zealand have not only become more expensive but also bigger with better fit-outs. Many first-home buyers now have an unrealistic expectation of what standard of house is available at what price.

Although a slim majority of New Zealanders now think rising house prices are undesirable, the current policy quagmire has created a situation where the interests of those who are lucky enough to own property are often opposed to the interests of non-owners.

Priced Out; How New Zealand lost its Housing Affordability by Hon Dr Michael Bassett and Luke Malpass is being launched in Wellington on Tuesday 11 June.