Shedding light on ghost houses
Initial releases from the 2018 Census have highlighted the seemingly high number of unoccupied dwellings across the country, particularly the 40,000 ‘ghost houses’ in Auckland. It has been speculated that foreign-based land bankers are behind these ghost houses, having chosen to leave them unoccupied. With a housing shortage and concerning levels of homelessness, particularly in Auckland, this figure raises an obvious question of whether we could be better utilising our existing housing stock. However, once we dive into the data it becomes clear that ghost houses aren’t a big problem – and we simply need to build more houses to address the housing shortage.
How good is the data?
Amid widespread concern about low response rates to the 2018 Census and its effect on data quality, the dwelling count is one of the more reliable aspects of the Census, as field staff record dwellings regardless of whether occupants complete their Census forms. Census field staff tally dwellings as non-private (such as retirement villages or hostels) or private. We’ll focus on private dwellings, which are further categorised as occupied, empty, residents away, or under construction.
Empty houses total 94,000
Nationally, 1.87 million private dwellings were counted in the 2018 Census, with 1.67m occupied on Census night. Of those that were not occupied, 94,000 were empty, 97,000 had residents who were away, and another 16,000 were under construction. Compared with the 2013 Census, the number of empty dwellings has gone down by a third, while the number of private dwellings with residents away has more than doubled since 2013 (see Chart 1).
In Auckland, the number of empty dwellings has decreased from 22,000 to 17,000, while the number of dwellings with residents away has grown from 11,000 to 22,000. Dwellings with residents away tend to occur due to residents going on holiday, so they are unlikely to help with the housing shortage or homelessness because they are only vacant for a short period.
As a proportion of the total stock, empty dwellings have eased from 8.0% to 5.0% nationally, and from 4.4% to 3.1% in Auckland. These differentials reflect the cost of housing and the opportunity cost of leaving houses empty. Housing costs in Auckland are higher than the rest of the country, providing an incentive to avoid vacancy. Rising costs over the past five years will have provided even more of an incentive for owners to reduce vacancy, both nationally and in Auckland.
Empty houses most common in holiday hotspots
Chart 2 below highlights the extent of holiday accommodation in holiday hotspots, with 32% of dwellings in Thames-Coromandel and 15% in Queenstown-Lakes empty on Census night. In Tauranga, the proportion of empty dwellings halved since 2013, possibly reflecting increased housing costs and a transition from holiday houses to permanent occupants. Christchurch City fell by a similar margin, reflecting large-scale residential earthquake repairs coming to a close.
Why leave houses empty?
Having 3.1% of houses empty in Auckland, a city with growing homelessness seems galling. But dwellings can be empty for sensible reasons.
- Dwellings can be vacant between occupants moving out and moving in. In the year to March 2018, 4.0% of New Zealand’s houses were sold, and 42% of rental properties were re-let. Assuming a one-week vacancy between occupations, these rates would suggest that 0.9% of dwellings would be vacant at any given time due to occupants moving. If we assume a two-week vacancy, this figure doubles this to 1.8%.
- Dwellings can be vacant due to demolitions or renovations. Nationally, it’s estimated that 4,000 houses are demolished each year, and in the year to March 2018, there were 28,000 consented renovations. Assuming a two-week vacancy before demolition, and six weeks of renovation, these figures would suggest 0.2% of dwellings would be vacant due to demolition or renovation at any time. This figure may be even higher in Auckland’s busy construction market.
Allowing for these factors leaves 1.1% of dwellings in Auckland vacant for other reasons, and 3.0% nationally. Most of these are likely to be second homes or holiday houses – as shown in Chart 1 by the high proportion of empty dwellings in holiday destinations. In Auckland, data from the 2013 Census showed that outlying islands and holiday hotspots like Omaha reported the highest incidence of empty dwellings, but also the central city – potentially apartments as weekday boltholes for long-distance commuters. A small residual may be abandoned houses (the case of declining towns like Ohura) or the proverbial land banker choosing to leave them empty.
Where to from here?
Long term trends in empty houses are driven by a combination of factors. Growing prosperity enables households to acquire second or holiday houses, leading to more empty houses. This was particularly apparent in the 1950s and 1990s when incomes rose faster than house prices. However, since the GFC, income growth has been outpaced by house price growth – hence growth in second houses is less of a factor. High housing costs discourage vacancies between occupants moving out and moving in. Further growth in house prices may push down empty houses by further discouraging vacancies, however there will always be some empty house, due to the dynamics of construction and moving houses.
Growing occupancy rates a concern
What is likely to be of concern coming out of the Census is occupancy rates – our estimates show that growing housing costs and the shortage of housing in Auckland are likely to have driven up occupancy rates since 2013. Squeezing more people into houses is a natural response to rising housing costs but is also associated with poor social and health outcomes. We’ll have a fuller picture when occupancy data from the 2018 Census is released – likely by March 2020.
Empty houses won’t fix the housing shortage
Empty houses tend to be empty for good reasons, and this means that they won’t fix homelessness or the housing shortage. We need to build more houses to address the existing housing shortage, and keep building to keep pace with population growth.
