ia. MINISTRY OF BUSINESS, INNOVATION & EMPLOYMENT HIKINA WHAKATUTUKL File No. 1617-0942 18 APR 2017 Mr Henry Cooke Journalist Fairfax Media henry.cooke.@fairfaxmedia.co.nz Dear Mr Cooke Thank you for your email of 13 February 2017, requesting the following information under the Official Information Act 1982 (the Act) A list of documents concerning the Housing Affordability Measure (HAM) project, including ministerial briefings, aide memoires, research summaries and terms of reference. In response to your request, 10 documents have been identified as within the scope, all of which are being released to you. As outlined in the attached document schedule, some information within these documents has been withheld under the following sections of the Act: 9(2)(a) to protect the privacy of natural persons. 9(2)(F{iv) to maintain the constitutional conventions for the time being which protect the confidentiality of advice tendered by Ministers of the Crown and officials. 9(2\(gX) to maintain the effective conduct of public affairs through the free and frank expression of opinions by or between or to Ministers of the Crown or members of an organisation or officers and employees of any department or organisation in the course of their duty. 18(d)__ the information requested will soon be publicly available. As you may be aware, announcement of the HAM was planned for the end of 2016. Delays experienced during 2016, which are detailed in the attached release documents, were primarily due to the complexity and limited compatibility of the data sources that have been used to create the Housing Affordability Measure. Further delays were experienced due to the damage that Statistics House sustained in the 14 November 2016 Kaikoura earthquake, a number of crucial systems were inoperable, and were only made available in mid-December 2016. This, coupled with the Christmas and New Year break, caused unforeseen delays to the finalising of the HAM. In terms of section 9(1) of the Act, | am satisfied that, in the circumstances, the decision to withhold this information is not outweighed by other considerations that render it desirable to make the information available in the public interest. Building, Resources and Markets 15 Stout Street, PO Box 1473, Wellington 6140 New Zealand E info@mbie,covt.nz T +64 4.472 0030 W avon mbie.covt.ngYou have the right under section 28(3) of the Act to request a review of my decision to withhold this information by the Ombudsman. The relevant details are: ‘The Ombudsman Office of the Ombudsman P.O Box 10162 WELLINGTON 6143 0800 802 602 www.ombudsman.parliament.nz Yours sincerely Jo Hoyle Actihg General Manager Construction and Housing Markets Building, Resources and Markets1617-0942 - Documents Released Ref. Date Document Title natok status Briefing: 0959 15-16 — Update on the Housing 4 | 6 October 2035 | aFordability Measure Project s9(2fa) 9 February 2016 |. ef 2 ize Email: HAM project update --9 Feb 2016 59(2\{a) 23 February 2016 3 ebrUary 2036 | call: RE: HAM project update s9(2)(a) 9:22am 4 22 April 2016 £9(2)(a) 9:19am 5 | 71une 2026 | emai: RE: HAM project update s9(2}a) 11:21am 23 June 2016 s9(2){a) and 6 o:aaam Email: RE: HAM project update 9(2)(@)(i) ‘Memo: Housing Affordability Measure — Experimental 7 | a3 0ctober 2016 | ee one s9(2}(a) 8 | 6 December 2016 | Memo to SLT: Update on Housing affordability Measure | 5/4) Project 9 15 December Memo: Update on Housing Affordability Measure s18(d) 2016 Project 10 3 February 2017 Memo: Approval for release of MBIE's new Housing s9{2)(a), s9(2)(F{iv) Affordability Measure and s18(d)MINISTRY OF BUSINESS, INNOVATION & EMPLOYMENT HIKINA WHAKATUTUKI BRIEFING Update on the Housing Affordability Measure Project Date: 6 October 2015 Priority: Low Security In Confidence Tracking 0959 15-16 classification: number: Action sought Action sought Deadii Hon Dr Nick Smith Forward the attached ta 16 Octobe AQIS Minister of Building and Housing —_| Minister of Finance, Ministel Social Housing and K€ Minister for Economic Develo} Contact for telephone discussion (if required) Name Position ‘st contact Jo Doyle ‘Acting General Manage! v ‘Construction and Housing Markets Bryan Field O Treasury OOMraT Omer Minister's office’ a ODeclined @ ted Lineeds change XQ ‘Seen 1 Overtaken by Events N (See Minister's Notes O withdrawn ee ©MINISTRY OF BUSINESS, INNOVATION & EMPLOYMENT BRIEFING IKINA WHAKATUTUKI Update on the Housing Affordability Measure Project Di 6 October 2015 Priority: Low Security In Confidence Tracker number: 0959 15-16 Classification: Purpose ‘This paper + informs you of the Ministry of Business, Innovation andgé progress in developing a suite of Housing Affordability Me foRwew Zeala ‘+ seeks your agreement to forward this briefing to the Mini inance, the Minister for Economic Development and the Minister for Social Hgusing @6 they h&}@ all requested updates on this work. Recommended action we ‘The Ministry of Business, Innovation and Employm: Ynends that yol @ note that the suite of Housing Affordability afeaSMes is on “~ released by the end of 2015, b Agree to forward copies of this brie ‘your tog te Minister of Finance, the Minister for Social Housing and tffyMinistePfor E lopment. ~«S Agree / Disagree @ oS. Jo Doyle Hon Dr Nick Smith ‘Acting General ap Minister of Building and Housing He Saige faces Da (MBIE-MAKO-28798569 Brefing number 0858 15-16 Prepared by: Bryan Feld In Genfidence 1Background 1. In August 2012 Cabinet approved a revised list of Tier 1 official statistics’ which included housing affordability and housing quality. MBIE was tasked with researching and producing the housing affordability and quality measures. 2. _ In view of the findings of a Productivity Commission report on housing affordability?, the Official Statistics System (OSS) Chief Executive Group decided to increase the prio housing affordability so it would enter Tier 1 in 2014/15. Funding was allocated to Mi production of housing affordability statistics through the Oy urchass process. 3. The Ministry provided you with an overview of the process, a Tier 4 Ur inital thinking on how the measure would be shaped in The Housing Affordability Suite of Measuré affordability index. These measures focus on th in the property market) rather than the afforg ‘assets (\.e. investing (ie. shelter), While only part of the story, 5. The Housing Affordability > suite of GEA thet mecsure both the affordability of housing as a servitg, and ofising assets (focussing on first currently renting affor faffordath are: i.e. can a household that is b. Housing service household that rer ns afford, in their current accommodation?) 6. Both measures at structed wit Statistics New Zealand data lab using administrative Ci me (Fron @x return data), rent (from MBIE’s Tenancy Bond home buyers). The two core mei a. First home buyer hou: @ costs (calculated by MBIE from Core Logic’s isactions data, such as average mortgage interest rate data Database) gnq{ database of ‘from the ank of Ns 1nd). To construct the measures we match the data on the add the praper by creating a comprehensive data set on the living sityffiops Zt olds, at the household level. for th 7. SegricaPime-ser ¢ data has also been compiled back to 2002. This data set has Wy potential tga a wide range of socio-economic, demographic and geographic analyses. 8. The Housing ity Measures will be constructed within the Statistics New Zealand data lab. of this it will be possible for researchers to match data on housing afford: jer data sets within the data lab (for example, education data and Statistics are the most important and high quality statistics produced in New Zealand. A full tistics can be found own. statisphere, statis F Commission (2012), Housing Affordability Inquiry. A holistic approach to housing affordability is proposed in section 1.5 (925). The full report is available at: vow productivity. qovi nz/sites/defaultfil H20Afordabilty%20Report O_O. MBIE-MAKO-28798560 Briefing number 0959 16-16 Prepares by: ryan Feld InGonfidence 2immigration data, among others’). Matching data in this way could lead to more precisely designed policies that better target the intended households. 9. Specifically, the new measures will enable analysis of housing affordability at a much greater level of detail than is possible with current measures such as Roost, Massey or Demographia. For example, affordability — both current and historical — will be measurable by locality, household income level, mortgage status, housing tenure, and a range of house characteristics (size, age, etc.) Design of Housing Affordability Measures Housing Service Affordability Measure % 10. In June 2014 we outlined the proposed design of the housing ser GPpeoan for renters and home owner-occupiers (Aide Memoire 3392 3). Sige t ructed Ministry has made significant progress on developing the: eS, and has a time-series of these data for each quarter since March qual 11, The only change in the design of these measures outlinefin Aide Memoire 13-14 is the ‘equivalisation of household income (i.e. household now takes josition of households into account, instead of simply the leyel ‘old ingome| First-home buyer Housing Affordability Meas 12. In addition to housing ser lise the need to roduce a measure of affordability, housing asset affordability for first-home yer since thig established concept of “affordability” for the public. The aaa r Housing AfydaBllity Measure is designed to answer the question: "Can a houggpolghthat is. cur ting afford to service the mortgage payments on a home within theme terry jority?” This measure will also be constructed within the StatisyatNew Zealar ing similar data sets as the Housing Service Affordability Mi 43. Specifically, this measure he proport juseholds that are currently renting whereby the mortgage oy associatgptyitftydurchasing @ home within their current e territorial authority* mak 14, This measure will ing ase at hotiseholds that are currently renting can move to owning their own! - As with thé®goushhg Service Affordability Measures, data for this measure will be, ‘quarterly 2. 45. The initial ie measi sr reviewed by Dr Arthur Grimes and his feedback has been j fed into the res. Noxt gley S&S 46. The égxt steps in Dee are: 2 Complete & fersion (0.7) of the Housing Service Affordability Measure, and construct ‘home Buyer Housing Affordability Measure. This will be complete by mic, 015. o nary, see: hitp:/www.stats.govinzibrowse for ni oF ° ming @ 20 year mortgage term, and the prevailing average mortgage interest rate for the televant¥W@rier (sourced from the Reserve Bank). The mortgage payments will consider borrowing the full value of the property, since this corrects for the opportunity cost of capital on any assumed deposit amount. * The home to be purchased is assumed to be at the lower quartile in market value (as indicated by Core Logi's e-valuer model. tale Mako.28ra0see Bring nomber 0958 1510 Propared by. Sryen Fels inonfidence 3b. Consult with internal MBIE stakeholders, other agencies (particularly The Treasury, Reserve Bank of NZ, Statistics New Zealand and Ministry of Social Development) and expert stakeholders (including Dr Arthur Grimes) on our method, the results of the measures, and our presentation of them. We will incorporate feedback from these stakeholders into the measure by mid-November 2015. c. Provide an updated set of measures to you by the end of November 2015. d, Complete an assessment of how our measures perform relative to the Principles and Protocols of the OSS*. This report will be submitted to Statistics New Zealand. Whe! MBIE and Statistics New Zealand agree that the Measures are of sufficient quality, the will be able to be released as Tier 1 Official Statistics. We expect this to be comy by the beginning of December. MBIE expects to make the first release of the Housing Affor Measu 2015 / early 2016, and will plan a forward schedule gf leasgs. update you on the data, expected release dates and Si ive roles. i Sialistics New Zealand in November. SS 17. As there has been significant interest in this project fr youmMinisteri lleagues, we recommend you forward this briefing to the e Minister offQinance, the Mi Economic Development and the Minister for Social Housing. @ Annexes S Annex 4: Technical notes on the method to cal ousing oat Annex 2: Tier 1 Statistics Explained 2 oO as oS eK o rinciples MBIE-MAKO-26708569, Bring number: 0959 15-16 Propared by: Bryan Fé InConfidence 4Annex 1: Technical notes on the method to calculate housing costs ‘One of the key parts of MBIE’s Housing Affordability Measures is the method by which we estimate housing costs for households within the measures. This Annex provides details on these methods. Rental housing costs The housing costs for rental households are simply the weekly rent on the property from MBIE’s Tenancy Bond Database. To prevent unclaimed bonds from biasing the data, active bonds ay than five years are excluded from the analysis. ty, the rice (adayminggghe ere is age costs, are zero. Home owner-occupier housing service costs The housing service costs for owner-occupiers are calculated as follows: + Mortgage component: If there is a morigage registered on, mortgage payments are calculated using the property's average mortgage equily for home owners in that quayer registered on the property, the -—-mortg ended that pyaaiptkgepayments housing Gervige affordability In his review of the measures, Dr Arthur Grimes reco! should not be included in the housing costs calcul measure because this is a form of househot J (12. no cost per se). MBIE will be seeking feedback on this decisior ‘our cons ‘ith stakeholders and will produce the housing service costs nt including, excluding principal repayments. SS + Insurance, rates and maintenance col rent: Allowg: for the costs of insurance, rates and maintenance on the propéy igtalculated data from Statistics New Zealand's Household Economit is ‘examining the ratio of each ‘expense category to rateable (Capital Val Sess. of Rates and Improvement Value in the case of Insurance ji The mortgage costs are by far Cyr conn oe home-ownership housing service costs. First-home buyer housing of [culled as follows: + Mortgage co! f Moriga Mnts for this measure are caloulated assuming the i on the market value of the lower quartile valued 's e-valuer model) in the same territorial authority’. terest rates for each Mortgas nts are cgf{Byew assuming a 20 year term, wit q rv Bank. The mortgaged amount will be assumed to be the riy%yg Yo deposit amount is assumed). This appropriate because it Tayfaes ity cos InsWignce, capital on any assumed deposit amount. waintenance component: These are not included in the housing because the measure is designed using a similar method to how a bank woul e lending criteria, Note that only ho in rental tenure are considered for this measure. ~ O 7 Or the same Ward within Auckland Super City. LMBIE-MAKO-28766560 Bring number 0959 15-16 Prepared by: Bryan Fislé InConfidence 5Annex one: Tier 4 Statistics Explained® What is a Tier 1 statistic? Tier 1 statistics are the highest priority statistics produced by New Zealand. They are the statistics that are the most important performance measures of New Zealand — for the economy, the environment, and social and cultural issues. Tier 1 statistics are produced to a high standard to ensure trust and confidence - see Prin 21s for producers of Tier 1 Statistics. Tier 1 statistics: ‘+ Are essential to government decision making (e.g. financial decision making). + Are of high public interest. ‘+ Should be authoritative and trustworthy, meeting public expectatl Bosra statistical quality. + Are enduring, requiring long term continuity of the data. hae * Provide international comparability in a global omg fei eon obligations. © Q The Principles and Protocols for producer ‘ill ensure Nyfhese statistics are produced to a high standard and should be applied, tely to your TiN statistic. ‘The practical implications of having your statistic das a Tie, istic will vary greatly from agency to agency, depending on how develope! statistic is arfgow Your statistic is produced. This section does not address ae implicat ¥y) of developing or maintaining a Tier 1 statistic. These protocols are essential to majfit@Mying the ited Ne quality of your statistic. In the relation to release of your st tocol 5), gMeNwPactices are critical in protecting your agency and your Minister ff legations of F influence over the statistic (such allegations are not un Some of the practical impli Orn ay + Release of the staflsy6 Paby the CE oNge SRducing agency. Tier 1 statistics are not released by Mj incioles cols, Principle 2 and Protocol 5, Element 3) + Setting a and at . Ensuring any alteration to a pre-announced release ade public. as possible, and is accompanied by an explanation for the cha Mncipleg a is, Protocol 6, Element 3) cs release st adhered to (Principles and Protocols, Protocol 6, element + Enstag that d , collection end storage satisfy the requirements of the Principles and Protocole ( "1 & 6). + Publishing t aha ina way thet is relevant and interpretable (Principles and Protocols, Princigte 1(Protg®! 1). + Regis fanned changes to the way a Tier 1 statistic is produced or reported to the G statistician. ® This material is provided by SNZ for officials to use for briefings on Tier 1 Statistics. !MBIE-MAKO-28708560, Being nurber 0859 15-16 Prepared by: Bryan Fed incontisence 6