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Special Housing Areas a con?

Last year the government and the Auckland Council announced a housing accord that would designate areas within Auckland as Special Housing Areas in which the council would offer a fast tracked consenting process for developers subject to certain conditions. It was touted as a way to address the increasing cost of building new houses in response to rapidly escalating house prices. It also came not long after the government had been talking about smashing Auckland’s urban limits leaving many to fear it was just a vehicle to encourage sprawl and line the pockets of land bankers. So far three tranches of special housing areas have been announced – Tranche 1, Tranche 2, Tranche 3 - and while they have started to shift towards more urban redevelopment sites, many of the initial locations for developments we would often associate with traditional sprawl including locations in Kumeu, Flat Bush, Papakura, Pukekohe and Silverdale.

Special Housing Areas 1, 2 & 3

It’s now starting to appear that not all that was promised about the SHA’s is happening in reality and that instead property owners and developers are using the process to increase the value of their sites before flicking them off to someone else – colour me surprised. The Manukau Courier reports:

Are the first cracks appearing in the much-trumpeted plan to solve Auckland’s housing crisis?

Developers at four of the 63 Special Housing Areas (SHAs) across the city have pulled out of the new fast-track consent process, the Auckland Council confirms.

And planning consultant Jon Maplesden, who has clients within SHAs, says he knows of several more developers who are unhappy and others who are “just not even bothering with it”.

Their reasons include frustration with infrastructure provision and the cost of providing the stipulated “affordable” housing.

Developers are opting out at the Murphy’s Rd site in Flat Bush with capacity for 275 houses; Addison in Takanini, 500 houses; Anselmi Ridge in Pukekohe, 150 houses; and the Millwater section of Silverdale North, 472 houses.

and

Maplesden says some landowners haven’t applied for SHA status to build houses but to add value to the land.

“There’s a number of them that I know are trying hard to sell them.”

The council confirms the land in the Albany Highway SHA has been sold.

Housing developments in Takanini and Pukekohe are being built by McConnell Property and its plans were already well advanced before the areas were designated as SHAs, marketing manager Jo Anderson says.

“To redesign would be further time and cost to do so. On these multi-stage developments, the local staff had been involved in the development for a number of years and stages, so for consistency we preferred to have those personnel also process any new resource consent applications.”

Maplesden says developers who apply for fast-track consent for, say, 500 houses, won’t be building all of those houses at once. Historically there are “very few” projects that have built at a rate of more than 100 houses per year, he says.

“No developer, not even Fletchers, can afford to do a 500-lot development all at once.”

So a 3000-dwelling SHA could take 30 years to complete, he says.

Wow so land owners are using the SHA process to increase the value of their land before flicking it off for likely a nice bit of profit – well colour me surprised. To me the issue of land owners on the city’s fringe only slowly releasing land is an issue that has been largely ignored by many who promote opening up greenfield land. We can unleash the limits as much as we like but if the people owning the land only release it one little bit at a time to ensure they get a high price for it then there’s not much that the council or the government can do about it short of getting into the land banking business themselves.

With not many new SHA developments seemingly getting off the ground – other than those where an SHA was applied to an already underway development like Hobsonville Point – it’s shaping up that the whole idea of the SHA’s could end up a significant failure that only served to line the pockets of a few land bankers.

34 comments to Special Housing Areas a con?

  • The problem is that any proper solution to Auckland’s housing shortage will have to strike at the heart of the speculative property bubble. And we know that Turkeys never vote for their own Thanksgiving. It may take something truly cataclysmic like a 2nd Great Depression to reform the housing market.

  • It’s more complicated than you suggest Matt. Yes Johns ‘developers’ who are selling on
    have taken the lift however theres real risk in holding in a stagnating market.

  • Ran Derson

    Consenting at the Hobsonville point SHA isn’t fast – the consent for my lot has been delay three months so far.

  • jacques

    a solution: start with the central city suburbs – a good way to make sure these new denser areas don’t cause big transport issues in view of the inadequate infrastructure. people who live in them should ideally be able to walk to work.

    • Except that all the Baby Boomer NIMBYs in central suburbs are fighting change with all their wealth and power – and don’t give a damn what is happening to their children’s/grandchildren’s generations. Pity they haven’t followed the self sacrificing attitude of their parents (my grandparents) who worked hard all their lives to pass on a better country.

      I think it is time for good old fashioned 1940s state led development – like we saw in Wellington (or we still see in Northern Europe). Acquire land, build the public transport and facilities, build the housing, sell it and use the profits to fund the next development. Rinse and repeat.

      Why do we blindly follow US influenced, neoliberal development strategies? Maybe they aren’t the best fit for NZ and that is why we are having so many problems with housing. We have a lot of structural, geographic and cultural differences with the US.

      • Waspman

        Well said goosoid but this is 30 years after the me me free market neo liberal experiment started, so its no surprise we’ve arrived at this point.

        6 years have come and gone under this government and bit by bit the housing speculators market have rendered the most basic of Kiwi things, your own home, out of reach for many. This whole rushed pie in the sky scheme reeked of being done for appearances simply so National could fight the unaffordable housing fire that was taking hold and say they were doing everything in their power. What a joke!

        All of the fundamentals under pinning the problems of Auckland’s housing market must be addressed, not just supply. All more houses on their own were ever going to do was throw more petrol on the bonfire!

        • > All more houses on their own were ever going to do was throw more petrol on the bonfire!

          There are other issues than supply, but even if we don’t address them, more supply means prices not rising as fast, and housing available to more people. Both of which are good things.

        • Yes but I often think it is chicken and the egg. Did BBs end up with that attitude because of neoliberal ideology or did a neoliberal agenda just fit the attitude of a lot of BBs to future generations?

          I would argue the problem isn’t supply per se (after all, lots of cheap, low quality homes in fringe areas) but a shortage of good homes in areas people want to live in. And NIMBYs are stopping anything happen in those areas.

          If we had some developments built that were rail/busway and cycling oriented and state led, that would ensure we get the kind of housing people actually want. Not more McMansions on the fringe. For me places like Houten (http://en.wikipedia.org/wiki/Houten) and Vauban (http://en.wikipedia.org/wiki/Vauban,_Freiburg) are the kind of innovative solutions we need to look at – not frigging Marsden City.

      • Bryan

        Many of the boomers believe they’re protecting the central suburbs for their children’s/grandchildren’s generations, out of fear the changes will wipe out the financial value of the inheritance they have been accumulating over their lifetime, and destroy the neighbourhood values they treasure.

        imho many boomers were taught the self sacrificing attitude of their parents, and have worked hard all their lives to pass on a better country. Should all boomers be tarred by the actions of the few who wraught the neo-liberal experiment in the mid ’80s? After all, boomers lost more from the share market crashes of ’87 and ’97 and the GFC and finance company collapses of ’08, than Gen X and Gen Y have earnt.

  • Stevenz

    “increase the value of their land before flicking it off for likely a nice bit of profit ”
    This is utterly ordinary developer behaviour. Property is often flipped at specific points in the process, each seller profiting from his actions in raising the value of the land. Residential developers rarely have a long term interest in a project. “Solving” Auckland’s housing “crisis” isn’t in their business plan.

  • tuktuk

    Labour/Greens….time to plug the policy gap here?
    It is complex however, and any future policy will need to be carefully crafted. A knee-jerk reaction to what is starting to look like a policy failure won’t deliver a better outcome.

  • I take the point about land-banking, but I have a real hard time seeing how land-banking can work EXCEPT if there’s pretty restrictive urban limits. Imagine there were no limit at all and the whole North Island could be developed as 50 story apartment buildings (for thought experiment’s sake). Could any property cartel possibly lock up all the land around Auckland for releasing in slow drips to maintain prices? I’d say so improbable as to be effectively impossible. Let’s make it more restrictive: all the land within, say, a 50km radius of downtown Auckland is available for such development, but that there’s a known timeline and set routes for trunk infrastructure. Maybe the land-bankers could lock up stuff along those routes, but it would still be way harder – and especially if other developers could put in their own infrastructure at their own cost. The amount that the land-bankers could extract as rent would be limited by infrastructure costs. Ok, now make it more restrictive again and have it like it is now: a fairly tight urban limit (albeit recently eased) combined with tight density restrictions, with a fairly predictable path for future releases. Much easier for that land to get locked up.

    So is the problem then the land-bankers, or the system that lets them more easily cartelise things?

    I do kinda like the idea of just declaring that any property can have 50-story apartment buildings. I know it’s impracticable due to shading externalities and trunk infrastructure. But imagine the outrage from those who’d invested much on the assumption that land supply would be tight forever….

  • mfwic

    If your cost of holding land is 8%pa then you develop if you expect the land to appreciate by less than 8%pa. If the Council puts a limit on land supply that results in your land going up by more than 8%pa then you hold on to the land and get the capital gain and you keep hold of it until it isn’t going up by more than 8%. Sensible foresters cut down their trees only when they expect the logs to grow in value by less than their cost of capital. This means if the interest rates are low you hold on longer, same with land. If interest rates are higher you sell sooner. As for the land bankers you deal with them by leap-frogging them and opening up the next bit which pushes the future price down so they develop.

    • I agree with you and I am all for releasing the boundary around the city. However, there also has to be a corresponding law taking away (most if not all) density restrictions on development with the existing boundary. Otherwise you are just distorting the market massively towards sprawl and auto dependent development – no free market at all just social engineering.

  • Sanctuary

    “…but if the people owning the land only release it one little bit at a time to ensure they get a high price for it then there’s not much that the council or the government can do about it…”

    The whole reliance on the private sector to provide the right sort of housing in the right places is an utter failure. It only continues because of blind adherence to free market ideology. A sensible government would use the Public Works Act to acquire land at a fair (not windfall) price in places that suited a coherent settlement strategy (i.e. brownfield sites near PT corridors) and the state would use it’s economies of scale to mass-produce the houses to on-sell at cost in a range of different styles and price points.

  • George D

    A capital gains tax – like almost every other advanced economy in the world has – would take some of the attraction out of this activity, and ensure that we at least get something out of it when we can’t.

    • Rharris

      This will have little to no effect. The developers will probably be paying tax on these profits so pretty pointless.

      • James M

        Best case scenario: CGT dampens our rampant, unsustainable, foreign debt-fuelled property bubble and promote capital flowing to more productive parts of the economy.
        Worst case scenario: CGT will have ‘little to no effect’

        Seems a bit of a no-brainer…

  • Frank McRae

    Due to planning restrictions there are still so few sites with development potential in Auckland that there is an incentive to absorb holding costs and wait for capital gains. Make the whole city a ‘Special housing area’ and that will solve the land banking problem.

  • Malcolm M

    Even brownfield development of large sites needs the public sector to co-ordinate development. In Sydney the redevelopment of Green Square, located in what would otherwise be a high-value area between the CBD and the Airport, has been hampered by insufficient public sector involvement. Ideally the public sector should buy the land at market rates, realign property titles (with allowance for widening any necessary roads) and sell it on to developers. Read here what the development industry think should have happened at Green Square.

    http://www.planning.org.au/documents/item/5025

  • Don

    A classic economic case of market failure. The landowners do not wish to be told how they should package their housing estates.
    A similar case exists with multi story apartment complexes being built in ‘my neighborhood’.
    The Council plan is out of kilter with the folk who seek to maximise the return they obtain from their land.

  • nemisis

    A clear lack of vision by Government .Council and planners. Why do we pay these guys their salaries when clearly their strategies do not work and we have blogs like this trying to solve the problem.
    A public /private partnership to redevelop the city in consultation with each community is one way to move things forward. Scrap the unitary plan and create urban housing authorities with the power to comprehensively plan model redevelopments and plough the profits back into community services instead of into the back pockets of singleminded developers. Eg Zone say Newton as a SHA, give them the powers to come up with a master plan and give them the finances and power to buy out those against the master plan and get on with it. Playing around with rules to control developers is reactive and a complete waste of time because the outcomes for joanne citizen is their communities being raped by the tinpot developers who do not give a stuff about community values.

  • Martin W.

    I think we have enough of space available within the urban/rural boundary. I agree also we need more to build up. But it is not only about building up it is also using the land productively. Just considering my short stroll from home to work each day i can identify at least 20 places which are neither occupied nor used. I could think of a rate increase if the land is not used. E.g. if one owns a house it is not rented out nor owner occupied the owner get double or tripple rates. If you own green land, but what is zoned as land to build on double rates etc. Works pretty well where I am from. If none is registered at the place you pay double land tax.

  • Realist

    The SHA process was complete window dressing. The Council cannot afford the new infrastructure needed in the greenfield areas and the often fragmented ownership of sites means private applicants are unwilling or unable to provide this infrastructure themselves.

    It’s a complete shambles but appears nothing shakes the faith of these neoliberals that the wonderful market always delivers.

    Yeah right.

  • The land value is relative to the location of sewage stormwater water power and telecoms. No services no value for residential dev.

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