The government’s report on land supply and housing affordability released on Wednesday is actually a really good document – I like how it’s structured as a very visual document (almost like an extended powerpoint presentation) rather than dense text. The document also contains quite a lot of very interesting information about how much greenfield land there is at various stages of the ‘ready to go’ process as well as some of the discussion about housing affordability and what’s happened in the past decade in terms of housing supply.
The first page that really captured my attention was the analysis of future household sizes – especially how it’s projected the sharpest increase in household numbers will be those households with just one or two people:
Smaller household sizes in the future should mean that most demand will be for smaller dwelling sizes – as 1 or 2 people households aren’t that likely to need places with more than two bedrooms. However over the last few years we’ve actually seen a pretty big decline in the number of smaller dwellings being built:
During this same time period most of the decline in the total of new dwellings being built hasn’t come on the urban edge, but within the existing urban area. Larger houses and those on the urban edge have continued to be constructed at a relatively constant rate over the past decade:In short, we’ve seen the share of new dwellings that are apartments or other higher density housing types decrease fairly dramatically compared to the numbers in the middle of last decade:Well so what? The reason this all matters becomes quite clear in the next slide – that apartments and other higher density dwelling types are much much cheaper than your typical standalone detached house.Effectively what we have seen is as follows:
- Most of Auckland’s affordable housing is provided for through the construction of higher density typologies such as apartments, townhouses, flats and studios. Very little standalone housing can be built at ‘affordable’ pricing levels.
- The supply of higher density typologies dropped off dramatically in the past five or so years.
- Therefore, the supply of affordable housing has dropped off dramatically in the past five or so years.
This is summarised in the diagram below:What all this information seems to clearly highlight, therefore, is that if we want to improve housing affordability then we need to figure out what killed off the supply of higher density housing units and we need to do something about it. Today’s release of the Unitary Plan might go some way towards resolving that issue but it seems like there are other matters such as the state of the development industry and the finance industry to fund the developers which needs to be sorted out before we’ll see progress. The other clear indication of this report is that increasing the supply of standalone houses and houses at the urban edge is likely to do nothing at all for housing affordability because those places tend to be very large and very expensive.