Housing affordability is most definitely a ‘hot topic issue’ at the moment, with today’s NZ Herald running a fairly extensive article and opinion piece looking at the issue and its political implications. A lot of the impetus of housing affordability becoming such a big political issue was the government’s rather lackluster response to the Productivity Commission’s report – which in my opinion was a pretty lackluster and extremely narrow-minded and ideological approach to what is a very complex issue. Then a couple of weeks back the Labour Party announced a policy to try and build 100,000 affordable houses over the next 10 years – most of them in Auckland during the first five years after the next election, should they win it.
While the boldness of Labour’s scheme has been supported by many, its workability has been questioned in some areas – particularly in relation to where the land is going to come from, what type of houses will be built and whether the stated price of around $300,000 is realistic or not. For example, in today’s Herald:
Alan McMahon, Colliers International’s Queen St-based national research and consulting director, said though Labour’s scheme was commendable, it was also probably totally unworkable because of tight land supply.
“Unless we build to medium or high density (five storeys or more), we don’t have nearly enough land in Auckland to accommodate tens of thousands of new homes. And if we zoned currently rural land, it would cost a fortune to service, and transport to schools, workplaces, shops etc would render them unaffordable except to a minority anyway.
“Limiting house prices to say $300,000 will severely limit the developer’s ability to buy land, whether it is Housing New Zealand or a private developer. Private owners will be unlikely to sell land for the provision of such homes when they could get more for selling to a private developer to build a more expensive house, hence justifying a higher land price.”
It’s good to see further recognition that building through sprawl is not the easy option, but rather the enormously expensive option – for councils and government in providing infrastructure and services but also for the future residents themselves as they find out they’re absolutely miles away from their place of employment and need to spend a huge amount of time and money on transportation.
If the government needed to find a way to purchase new land upon which to build the vast bulk of these new houses then I’d probably agree with many other commentators that the task of constructing so many houses while getting their price down below $300,000 was just too hard. However, the government is actually the largest owner in Auckland of low-density housing on land which is pretty prime for redevelopment – through Housing New Zealand. Within Auckland, Housing New Zealand owns vast swathes of land across what might be termed the “middle rung” of suburbs – towards the edge of the isthmus and built from the 1930s through to the 1960s, typically at very low densities. These areas are broadly shown below:
There are obviously large further clusters of Housing New Zealand property in places like Otara, Mangere and Manurewa, but an important part of making Labour’s scheme work will involve being able to sell fairly high density terraced housing easily so the proceeds can be reinvested in the scheme. As demand for housing on the isthmus is much higher than further south, it seems that redevelopment of housing stock on the isthmus would be most likely to succeed in a market sense.
Looking closer at these parts of Auckland, one thing that really stands out is how low the ratio of improvement value to land value is – using the Council’s mapping system we can figure this out. A typical example in Mt Roskill shows that an 895 square metre site with a single house on it has a total value of $520,000, with $420,000 of that value being in the land (over 80%).
This ratio of land value to capital value just screams out redevelopment opportunity. And this site is pretty common. If we look over in Glen Innes there are large areas of extremely low density housing with massive potential for redevelopment. Take the area shown below which is over 32,000 square metres with about 35 houses on it:
If you were to split the block in half with a connecting street then redevelop most of the sites into terraced housing of about one unit per 200 square metres you’d be able to have around 150 units – over four times the current amount. And this is just one of hundreds of redevelopment opportunities across the middle rung suburbs, generally areas with pretty good public transport service and in areas (perhaps more Mt Roskill than Glen Innes at first) with likely good market demand for medium density developments.
Clearly you’d need to do this well, with good urban design to ensure that the intensification didn’t lead to poor amenity and eventually adverse social outcomes. But one other big advantage of using Housing New Zealand land for the redevelopments is that you will start to ‘dilute’ the concentration of state housing in these areas. If, for example, the area above was redeveloped then Housing New Zealand could keep 35 or so units with the rest of the new places being made available for private buyers.
I really hope that this is how Labour see their KiwiBuild policy happening, rather than on the urban edge through sprawl that will just lump the supposedly cheaper housing costs onto the public to provide the infrastructure and onto the owners themselves in terms of their future transport costs. There’s just such a great opportunity in these middle rung suburbs that it’d be stupid to ignore it.