The annual Demographia Housing Affordability report is out – this time with its forward written by Bill English – and just like every other Demographia study it suggests that more land needs to be opened up for urban sprawl in order to bring down housing prices. There are a number of different flaws in Demographia’s analysis (for example it’s based on pre-tax income, it ignores the infrastructure costs of servicing sprawl and it ignores the additional transport costs of living on the urban edge) but I’ll ignore those for now, instead focusing on a pretty simple question – does Auckland really have a land supply shortage?
I think it’s fairly widely agreed that an important factor in Auckland’s rising house prices is a lack of housing supply: simply not enough dwellings are being built. The Auckland Plan talks about the need to build around 13,000 houses a year, every year, over the next 30 years and the fact that we’ve only been building around 3,000 dwellings a year in recent times:What you can also see in the graph above is that Auckland was able to build its required amount of housing during the middle of last decade (the very years when housing prices increased the fastest from memory) and that the number of detached dwellings as well as the number of apartments built per year has fallen dramatically since about 2004. As large greenfield areas such as Silverdale North, Flat Bush, Hingaia, Hobsonville and parts of Takanini have become available for development over the past six or seven years, it’s interesting that we have actually seen a decline in detached structures built rather than a further increase.
Furthermore, Auckland has a lot of areas for future greenfield development working their way through the planning process at the moment or already operative. This is shown in the Auckland Plan’s development strategy map – with yellow indicating “pipeline” (which I assume means that it’s in the process of becoming operative) and “operative” (ready to go I assume) greenfield land. Operative is shown in red and pipeline land in yellow: In fact, the Auckland Plan states that the biggest chunk of growth in the first 10 years of the Plan will take place in these areas:
Personally I think it’s likely that Auckland won’t see anywhere near that amount of greenfield development over the next 10 years – not because there won’t be enough land available (as I said the process for opening up that land is underway already) but rather because there’s unlikely to be the market demand for houses in these peripheral locations.
But in any case, I don’t think that supply new houses in these areas is likely to do much about housing affordability because there’s actually not a housing affordability problem in peripheral parts of Auckland. For example searching Papakura area properties under $400,000 returns not far off half the houses for sale (224 out of 569) in that area:
Auckland’s average house prices are dragged up by the extraordinary prices paid for places in the inner suburbs because that’s seemingly where people really want to live. If there’s heaps of available greenfield land on the urban edge, a significant number of relatively affordable houses already available on the urban edge and the planning in place for a huge amount more greenfield land on the urban edge, I just can’t buy into the hypothesis of Auckland having a land supply shortage.
What we have is a housing supply shortage, particularly in the inner suburbs where people want to live. And the way to fix that is by making intensification easier through getting rid of minimum parking requirements and getting rid of density controls. It’ll be interesting to see whether the Unitary Plan tackles this real issue rather than the non-existent land supply shortage spun by property developers who want to make a pile of money by bringing their land inside the urban limits.