New Zealand has some of the most unaffordable housing in the world and Lester is right to identify this as a supply problem. However, the reason for it is primarily our regulatory environment and local government practices. Our Resource Management Act gives local government draconian powers to delay, stop and impose excessive costs on housing development and, in my experience, councils exercise these powers with great zeal, even to the point of deliberately ignoring the law where it favours developers.
No sane businessman would sit on assets that do not generate income when those assets could be put to productive use. Developers do not buy undeveloped land to admire it and every day they do not develop it costs them money in interest charges, rates, etc. They make money only when they sell the developed sections.
Blaming the market for government failure has become a tradition for politicians. The most grievous example was the Global Financial Crisis where bankers were blamed for creating the subprime mortgage market, which was actually mandated by US Government policy. The response from politicians is invariably more regulation, which then creates even worse market distortion and greater failure in a continuing vicious circle. Witness the fact that the US financial sector is even more exposed to high-risk financial instruments today (post Dodd-Frank) than it was at the time of the crash in 2007.
Lester's desire to penalise developers with 'targeted rates and levies' will undoubtedly have the exact opposite effect to that which he desires. It makes one wonder whether he has any knowledge of economics at all because a basic understanding of high school-level economics would tell him that increasing taxes on the supply side just pushes the price curve upwards, thereby increasing prices but decreasing supply.
I suspect Lester is smart enough to understand this but like most politicians of his ilk, he is wilfully ignorant because he needs a scapegoat to divert attention from the failings of his council in causing the supply-side issues in new housing development.