Development update: December 2016

2016 has been a big year for development, and by “development” I mean the process of getting new homes built, or any other new buildings for that matter.

In the last “development update” post for the year, I wanted to look back at some of the highlights which you might have missed. You can click through to these at the bottom of the RCG Development Tracker page.

  • January focused on retail. “Up until 2007, the retail sector was on a roll, and new shopping centres were being built all over the place. That changed when the recession hit in 2008 [but] 2015-2016 sees the biggest expansion since the GFC”.
  • In March, I covered some research I did with RCG, and some other housing stuff. “In the long term [attached homes will] make up at least 50% of the new homes we build”. I’ve picked that in 2017, we’ll consent more of those than detached houses. Will we get there? Hard to say at this point.
  • June was all about housing. I looked at the pipeline for ‘attached dwellings’, which I’ll update in the new year.
  • July compared construction trends for Auckland and Christchurch
  • August focused on Stonefields, a 2,500-home development. “Looking at Stonefields today, you could be fooled into thinking it’s almost finished, but the reality is it’s not even halfway”.
  • September covered office development across Auckland (most of it is in the city centre)
  • November looked at some of the housing projects which haven’t gone ahead, for various reasons.

 

Tracking housing and other projects

The RCG Development Tracker has an interactive map, now showing 827 projects across the country, including every brownfields Special Housing Area, big growth nodes like Hobsonville Point and Stonefields, plus billions of dollars’ worth of retail, office and accommodation developments.

It also shows Auckland’s Rapid Transit Network – the trains, the Northern Busway, plus some new links which will be built in the next few years such as the City Rail Link (now thankfully underway) and AMETI busway (which continues to languish). The Northwestern busway isn’t on there, as it’s even further away and doesn’t have any funding yet.*

In Auckland, we’re building some of everything. Shopping centres, offices, industrial buildings; hotels and other accommodation; and of course homes of all types and sizes. Apartments, terraces, retirement villages, and “traditional” detached houses (more on those later). Just about everything is booming. This year I’ve written on the tourism boom, migration boom, international education boom and construction crunch (which is really a boom as well).

So those are all positive, I guess, but there are issues that come with them. The big issue being a shortage of housing, with real effects on people’s quality of life. Other issues being high construction costs, and what looks like low wage/ productivity/ real income growth (so we’re not that much better off on a ‘per capita’ basis). Plus, there are some wobbles starting to emerge: house prices flattening or starting to fall, and signs of real problems in the international education industry.

 

How many homes are we really building?

Most months, I put together a graph showing the number of building consents for new homes. This is a good indicator of how many homes are going to be built. By the time a development gets its building consent approved, it already has planning approvals, and the design is pretty much complete. The developer has 12 months to start building (otherwise the consent expires), and almost all consents do eventually turn into homes.

Here’s the latest consents data, which shows that 9,800 new homes were consented in the 12 months to October 2016:

There’s obviously a lag between building consents being approved and the home being completed. Historically, the average lag is about six months, but this lag is getting much longer. Only 7,700 homes were completed in the 12 months to June 2016, but 9,251 homes were consented in 2015, and 7,632 were consented in 2014.

So, consents do get converted into homes, but we’re well behind on doing it.

Why the delays?

There are two reasons for the delays. One is that builders everywhere are busy, so they’re struggling to put enough resources together.

The other reason is that apartments take longer to build than terraces, and terraces take longer to build than detached houses. As Auckland builds a larger share of attached dwellings, the lag between consents and completions would be getting bigger even if builders weren’t flat out. At a guess, we probably need to allow at least two years for apartments from consent to completion, and at least one year for terraces.

So does that mean that we need to build more detached houses if we want to solve Auckland’s housing crisis? Surprisingly, the answer is no – in the long term, we’ll get more homes built if we focus on attached homes, like apartments and terraces.

There’s nothing very traditional about the detached houses being built today. They average a whopping 235 square metres – what is that, six bedrooms? – and they’re often double storey, with complicated shapes compared to the brick-and-tile boxes of the past. Plus, they’re mainly on the edges of the city. Affordable housing they are not.

Apartments and terraces, of course, tend to be much smaller in size. Although they cost a bit more to build on a ‘per square metre’ basis (especially for apartments), they tend to be cheaper overall.

And on that note, have a great summer everyone, take care when getting around and remember to wear sunblock!

 

* Motorways aren’t shown; they get enough attention already. Suffice it to say, the government is widening pretty much any motorway they can, and trying to put new motorways anywhere they can, and the costs are never questioned.

Australian city centres: a good-news story

Last week I was in Brisbane for work. There seem to be quite a few cranes around the city, including midrise apartment developments creeping along the riverfront to the west of the city centre. The Brisbane CBD proper is still quite sterile at night after all the office workers have left – it’s an absolute pain in the neck to try and find dinner. But it seems to be developing little live-work satellites along the side of the river.

Transportblog kept an occasional eye on development trends over in Australian cities as a sign of what could happen in Auckland. (If urban planning rules and the development sector were geared up for it.)

attached-proportions-Oz-NZ-2015

New data suggests that Australia’s apartment boom is paying off: Prices are levelling off and potentially even falling, and city centres are becoming increasingly vibrant around the clock due to an upsurge in residential population.

However, the odd thing is that this success story is being reported as a bad thing by Australian journalists.

First, Jonathan Pearlman (The Straits Times) warns that an “apartment glut looms in major Aussie cities“:

In the two largest cities of Sydney and Melbourne, high prices and strong demand for properties in the inner city or near railway stations have led to a dramatic shift away from houses to apartments.

The central bank and analysts have warned of a looming “apartment glut” which could deflate the nation’s soaring property market.

Economist Shane Oliver from AMP Capital told The Straits Times that apartment prices in parts of Sydney and Melbourne are likely to fall by about 15 to 20 per cent over the next two years.

The falls could cause a broader decline across the market, even though some areas, especially in Sydney, still have an undersupply of housing.

“We have a huge spike in supply of apartments over the next couple of years, often in fairly concentrated areas,” he said. “It will cause an indigestion problem.”

This seems like an excessively negative spin. Personally, I would describe this as “improving housing affordability” rather than an “indigestion problem”. But regardless of how you describe it, it does seem clear that building lots of apartments can improve affordability. (As it seems to have done in the Auckland city centre.)

Second, Michael Bleby and Nick Lenaghan (AFR) say that “things not so great when you go downtown” in Sydney and Melbourne. Again, this seems like a good-news story being spun as bad news:

Neither Sydney nor Melbourne is the old-fashioned post-5pm ghost town it once was – when Australia’s army of office workers deserted its day time environment en masse for homes in the suburbs.

The country’s two largest CBDs are now thriving residential centres. People walk their dogs, buy their groceries and exercise on streets that just decades ago were limited to suit-wearing, white collar employees.

“You couldn’t have envisaged this, given our suburban history and the fact that the city just died at night,” says Sydney Lord Mayor Clover Moore. “Australia’s grown up in the last couple of decades.”

That change in Sydney and also further south, in the Victorian capital, marks a huge turnaround. The problem is, it’s too successful. A city can’t thrive on residents alone. It needs workers – preferably highly paid ones – in industries that make the city a place people want to go to.

We’ve also seen this in Auckland. Unprecedented and unexpected growth in the city centre population has led to a downtown revival: More people, more restaurants, more street life. This is a basically good thing, as it means a city where people can get more of the things that they want.

city-centre-population-1996-2016

However, perhaps it’s possible that things can get out of whack – that development can tilt too far in one direction for a while, and “crowd out” other uses. The problem is that the “solutions” proposed in Melbourne and Sydney are likely to make the problem worse. Take this for instance:

In Melbourne, the state government has introduced plot ratios to rein in the extent of development on each site. In a bid to swing the balance back toward commercial space, developers can win additional height if they provide a “public benefit” which, oddly enough, these days includes office space.

[…] The sort of tenants that global cities are seeking to attract – the offices of global corporations that in part sell themselves to their own customers based on their prime global footprint – won’t just swap the CBD for somewhere nearby, Rawnsley says.

“If they can’t find a home in the Sydney CBD or the Melbourne CBD, they’re not going to go Box Hill or Parramatta, they’re going to Singapore or Shanghai or Tokyo or Seattle,” he says.

If a lack of office space in the city centre is driving economic growth and productive firms to locate in other cities instead of Melbourne, restricting the size of buildings in the Melbourne city centre will almost worsen the problem, not improve it.

What do you think of the news from Australian cities?

Farnham Street residents looking at each other down the barrel of a gun

Caution: this post contains references to John Farnham.

I was updating the Development Tracker recently, and added another one to the list – 9 Farnham Street. It hasn’t made it off the starting blocks yet, despite a couple of attempts.

In 2008, and perhaps for some time before that, 9 Farnham Street was being advertised for a five-storey building, with three floors of office and two penthouse apartments:

9 Farnham Streetview

Source: Google Streetview

The sign was still up in 2009, but sometime after that it was taken down. The GFC put a dampener on new development in a lot of places.

In April 2013, resource consent was granted for 14 apartments, but – shockingly – only 10 carparks. This raised the ire of some local residents, who had their story told in the Herald on 1st April, 2014, the best day of the year for airing public grievances. They decided that they were not gonna sit in silence, and nor were they gonna live with fear.

The three local residents were able to bolster their group with two elected representatives, who help to add gravitas to the obligatory photo of everyone standing in front of the site looking concerned, although sadly only one person out of five had their arms crossed.

A Parnell group is upset about approval for a big new apartment building, saying office workers’ cars already clog their street.

Farnham St residents Jill Tonks, Rosa Volz and Paul O’Connor are angry that a six-storey 14-unit block with only 10 carparks has been permitted to go ahead at 9 Farnham St after Auckland Council approved it on a non-notified basis.

Councillor Mike Lee and Waitemata Local Board member Christopher Dempsey are also concerned.

The article doesn’t specifically say what has the elected representatives “concerned” – maybe the non-notification, maybe the lack of parking, maybe the idea that anyone could put up a building on this pristine site. I’ll simply note that Mike Lee has frequently taken issue with plans or policies for new housing (to be fair, so have many other local representatives, although not to the same extent. Hopefully in the post-Unitary Plan era, we can start to move past this).

Anyway, if it’s the lack of parking that has Mike concerned, I hope that there is much more to concern him in the future. I see the number of new developments being marketed with few (or even no) carparks per unit as a positive sign, and I mean this in the nicest, wanting-to-make-society-as-well-off-as-possible kind of way.

Unfortunately, nothing has quite happened with this development yet. It seems like the apartments were on sale from Nov 2014 – Jul 2015, and were then taken back off the market (the real estate ad says the building has 18 carparks, funnily enough).

534058E

The proposed building which was marketed over 2014-2015.

The site changed hands in March this year, and no action since.

Unfortunately, the nature of our local democracy means that if you’re an existing resident with a strong current attachment to the area, you’re the voice. The potential residents – who, I should point out, are all someone’s daughter, all someone’s son – don’t get much chance to say whether they’d like to live there.

Porte Cochere 2 – Pedestrians 0

While looking at Auckland Transport’s website I found they’d uploaded a number of plans relating to the City Rail Link (the same place I saw the K Rd image from this morning’s post). One of the documents showed the plans for Albert St after the CRL has been completed. The image below shows the section between Victoria St and Wellesley St and highlights what I think is a major issue, the pedestrian environment.

As you can see the future NDG development like the existing Crowne Plaza next to it have large Porte Cochere’s sucking vehicles off the street potentially at speed and all in an area where there is likely to be a lot of pedestrians following the opening of the CRL. The NDG one is made worse by also being the access to the service lane that currently exists. It appears the pedestrians who are in the area might be restricted to some narrow footpaths.

albert-st-porte-cochere

It probably would have been better just to have required that both porte cochere’s be joined up and made into a lane with some activation between that and the street rather than what has been proposed.

If you can’t remember, this is what the NDG building is meant to look like

ndg-centre-1

And here’s a close up of the vehicle entrance – although I guess the people who made the rendering weren’t so focused on the detail of things like the traffic direction

ndg-centre-2

We haven’t heard anything about what’s happening on the NDG development so as much as I want to see that parking crater filled in, in some ways I hope it doesn’t go ahead and the next plan for the site can improve this situation.

Nibbling at the edges of Auckland

Recently Google updated their satellite images for some large parts of Auckland – generally the urban area greater than about 10km from the city centre. Based on some of the detail in the images my guess is they’re from about May this year.

One thing that struck me about them was it became quite visible where the city was growing on its fringes due to lots of golden brown areas from where top soil had been removed to enable developments to occur. These are just some high level images but if you zoom in you can often see infrastructure like road networks under construction and in some cases houses being built too.

North

Developments at Orewa, Millwater, on the Whangaparaoa Peninsula and at Long Bay can clearly be seen

google-maps-greenfield-development-north-highlighted

West

The West has developments at Huapai, Riverhead, Whenuapai, Hobsonville, Westgate, Massey and Swanson visible

google-maps-greenfield-development-west-highlighted

South/East

The most obvious thing from the South/East are the developments around Ormiston.

google-maps-greenfield-development-south-highlighted

Development update: August 2016

If you’re not one of the avid followers of the RCG Development Tracker – “Trackies”, as they like to be known* – you might have missed a few tweaks I made last month.

The Tracker does a good job of showing discrete, one-off projects, but it’s a little harder to represent major long-term developments. For example, Hobsonville Point is going through massive growth at the moment, and delivering something like 5,000 new homes by the time it’s finished.

What I used to do for places like Hobsonville Point or Stonefields was show some of the individual projects – apartment buildings, etc – but not the overall development. I’ve now added in the outlines of these areas to the Tracker map, and added brief descriptions. The tricky part, which I haven’t quite worked out yet, is how to best represent them in the Tracker tables. Currently they’re excluded for the most part, but watch this space.

Anyway, let’s talk about Stonefields. Looking at Stonefields today, you could be fooled into thinking it’s almost finished, but the reality is it’s not even halfway.

Stonefields

Stonefields in the RCG Development Tracker – yellow dots are apartment buildings

 

Most of the townhouses and terraces planned for Stonefields have now been built, but there are still around 1,500 apartments to come. So far, only 1,000 homes have been consented in Stonefields, and the master plan (below) envisages 2,500 in total.

Stonefields master plan 08.2011

The first homes were completed in 2007, but those were the ‘easy’ ones – along Ngahue Drive and Magma Crescent, at roughly the same level as the surrounding suburbs, opposite a golf course and in a traditional detached format.

The construction then moved into the quarry itself, not helped by the GFC and recession hitting in 2008 (the original developer, Landco, went into receivership and Todd Property Group took over). In those years, it was much easier to sell detached townhouses than terraces, so the townhouses were built first. In the last few years, there’s been a gradual shift towards building terraces and apartments.

The first apartment building (Saltus) was completed in 2013, two more followed in 2015, and another two are under construction at the moment. There will be quite a number still to come.

Stonefields School opened in 2011, and the Stonefields Market opened in 2014, although the SuperValue supermarket didn’t open until February 2016. The parks and landscaped areas around Stonefields were developed gradually, with the playground opening in September 2014 (although not without controversy).

Stonefields could take another five years to complete, and have a population of around 6,000 people – that’s double the current population of 3,000(ish), and as late as 2006 there was no one living there at all.

One issue with Stonefields is that it has quite poor transport connectivity – the only access routes are along College Rd. In the New Network, Stonefields will be served by the 725 bus linking it to the Panmure and Glen Innes train stations. However, the bus will only run every 20 minutes at peak times, and every 30 minutes at other times.

Hopefully, as Stonefields’ population keeps growing, it will support more frequent bus services…

 

* I just made this up.

Slicing the housing cake: Developer profits versus capital gains

Who benefits from enabling housing development? And who bears the costs of restricting it?

One common refrain is that reducing regulations to enable housing will deliver higher profits to developers, while disadvantaging existing homeowners, who must contend with more people living in the neighbourhood. Another view is that restricting housing supply primarily benefits existing homeowners, who earn (untaxed) capital gains, while disadvantaging people who don’t own homes.

Along with Fran O’Sullivan, Arthur Grimes, Bernard Hickey, and many other commentators, I tend to agree with the second viewpoint: The primary distributional impact of restrictions on housing supply is to benefit existing homeowners at the expense of future homeowners. In this post I will argue that 1) we face a choice between existing and future home owners and 2) profits from development pale in comparison to untaxed capital gains on property.

So if you’re concerned about rampant profiteering, then you should be in favour of enabling more housing development.

Profit, homeowners, and false dichotomies

Developers undoubtedly set out to make a profit. They are after all putting their own time and money into building something, which in the process exposes them to risks. In this context it seems reasonable that they get something in return, otherwise, why would they develop housing at all? Whether developers earn a reasonable profit then effectively comes down to competition, and the best way to encourage competition is to enable lots of people to be developers.

In general, the more we restrict and regulate the supply of housing, then we will get less supply and less competition.

Those who rally against developers making profits seem to ignore that most of Auckland’s existing housing stock resulted from profit-seeking developers. This includes many houses that are now protected for heritage reasons. So it’s not clear to me that simply because developers are look to make a profit today, that the resulting developments will not be valued.

It is certainly fair to say that developers will only able to make a profit from development if they build something that people are prepared to pay for today. This is another way of saying that developers must consider their customers , i.e. people who want somewhere to live. So it strikes me as a false dichotomy for people to argue that developers “put profit before people”: If developers didn’t meet the needs of at least ***some*** people, then they wouldn’t make a profit.

Instead, the main trade-off seems to be between existing and future homeowners. I think Arthur Grimes described the trade-off best when he said (source):

My call for policies to drive a house price collapse is driven by my personal value judgement that it’s great for young families and families on lower incomes, to be able to afford to buy a house if they wish to do so. My concern is not for older, richer families, couples or individuals who already own their own (highly appreciated) house.

In this quote Arthur observes that we primarily have a choice between existing homeowners and future homeowners. He doesn’t mention developers at all. So when councillors vote for regulations that restrict housing supply, they are effectively voting in favour of existing homeowners. This is fine, provided they are comfortable with adopting what I consider to be a typically conservative position. These councillors are, in effect, behaving like Tories; they are protecting those who already have wealth.

The effects of restricting supply: Dislocation and rampant profits

However, building new homes isn’t the only – or even the main – way to make a profit in Auckland’s current housing market. Due to restricted housing supply, we aren’t building enough homes to meet demand. As a result, prices have risen.

Rising prices has two primary effects. First, it squeezes low-income people out of the market. This is a well-documented phenomenon. As the California Legislative Analyst’s Office found in an analysis of the San Francisco Bay Area, suburbs that developed less housing experienced more displacement. Without new housing development, every new resident must displace an existing resident – a vicious dynamic that hits low-income households hardest:

LAO development and displacement chart

A lack of housing supply is compounded by distortionary tax policies – principally our unwillingness to tax unearned capital gains on housing – with the result that house prices are going up at a fast clip. This provides an unearned, untaxed capital gains windfall for people who are lucky enough to own property.

Unearned capital gains, unlike developer profits, are a win-lose scenario. People who own houses win, as the value of their assets rise. But people who are renting or trying to buy a home lose to an equal extent, as they face higher and higher prices.

So how large are capital gains compared to developer profits, anyway?

In recent years, untaxed capital gains on residential property have been very large relative to developer profits. According to data from the Reserve Bank, untaxed capital gains on residential property exceeded $100 billion last year:

  • In the first quarter of 2016, the total value of residential property in New Zealand was $905 billion
  • One year earlier, the value of residential property was only $791 billion.

By comparison, according to Statistics NZ’s most recent (2014) Annual Enterprise Survey, which tracks industry performance, residential housing construction firms (ANZSIC E301) made gross, before-tax profits of a mere $570 million. Even if we add in “other construction services” (ANZSIC E321, E322, E323, E324, and E329), which includes land development firms as well as a whole bunch of other stuff, total residential development profits add up to no more than $2 billion a year, before tax. And developers pay taxes on those profits! For the visual learners out there, here’s the data in a chart:

Developer profits vs capital gains chart

In other words, the profits that developers earn are relatively insignificant compared to the unearned, untaxed capital gains that have accrued to property owners. I would argue that the latter are largely the result of regulations that restrict housing supply, and hence represent a transfer from future homeowners, and to a lesser degree developers, to existing homeowners.

So what’s the takeaway message from all this? Well, if Councillors like Mike Lee and Cathy Casey are concerned about profiteering in New Zealand society (and they say they are), then they should start pushing to enable more housing development in Auckland. Yes, developers may make slightly more money in the process, but this increase pales in comparison to the reduction in untaxed capital gains that would accrue to existing home-owners. If you’re concerned about people making unearned profits, then regulations that restrict housing supply and which drive up the prices of existing dwellings should be your primary target.

Development update: July 2016

Christchurch

It’s been a while since our last update of Christchurch building consents – the number of new homes being approved by the various councils in the area.

Chch consents to May 2016

Christchurch City has had a bit of an uptick in the last couple of months, whereas consent numbers in the surrounding districts (Selwyn and Waimakariri) have flattened off – for Selwyn, at least, still much higher than the historical average.

I’m surprised by the ongoing strength of the consent figures in Christchurch, not just for residential construction (i.e. homes) but also for non-residential (i.e. everything else). It seems like it might be a while longer until we get much movement of builders from the Garden City to Auckland.

Also, since a reader asked for it, here’s a comparison of the overall Canterbury region vs Auckland. This is based on the actual value of construction carried out each quarter (although it’s been seasonally adjusted to remove some of the noise).

AKL vs CANT construction

So, although Canterbury has just over a third of Auckland’s population, in early 2014 it was carrying out about the same amount of building work. This was a truly massive redeployment of resources, more than $1 billion per quarter – see how it compares to Canterbury’s pre-earthquake level of activity.

Canterbury has dipped back a little from its peak, but based on the building consent data (which is a bit of a ‘forecast’ of future activity), it’s probably going to plateau for a while longer.

Auckland, on the other hand, has had sharp increases recently – the level of activity has just about doubled in the last five years (although this includes price increases).

Lastly, before we leave Christchurch, one of the long-delayed ‘anchor projects’ for the CBD is finally starting, with the Government deciding to go it alone on the Convention Centre after the preferred developer pulled out.

Auckland

Given Auckland’s housing issues, I try to update the graph below each month. It shows the number of new homes being consented in Auckland each year.

AKL consents to May 2016

It’s a little hard to see here, but the figures in the last couple of months have been pretty disappointing. The total number of consents has dropped back a little (from 9,566 a year to 9,434). Plus, the number of apartment consents has fallen back from close to 2,000 to around 1,500. The numbers are pretty volatile – a big building could have 100-200 apartments, so the timing of those makes a big impact. We’ve now had three months when almost no new apartments were granted consent.

Detached houses, though, have been on the rise. Any new homes are better than no new homes, so that’s something, but it’s the ‘denser’ housing that needs more effort.

In happier news, downtown Auckland is still buzzing even in the cold weather, and there’s plenty going on with the start on the CRL, demolishing the old Downtown centre, Wynyard Quarter work and more.

Lastly, I’d like to give a shoutout to the new Quay St cycleway, which is a great addition to the cycling network but also a neat ride in its own right.

Development update: June 2016

It’s been a little while since I wrote a “Development Update” post, and a lot has happened since then:

  • The final batch of Special Housing Areas was approved.
  • Downtown Shopping Centre has closed, and is about to be demolished. Tunnels for the City Rail Link will be built underneath, and the site will be redeveloped as Commercial Bay, an office tower and shopping centre.
  • Speaking of the City Rail Link, it’s is now officially under construction.
  • My count of homes which are currently “under construction” keeps edging up – it’s now up to 6,000, and that’s just for Auckland apartments and terraces.
  • Several major buildings have been completed, including Urba Residences (144 apartments just off K Road), Unilodge on Whitaker (300 student apartments) and VXV Three (offices in Wynyard Quarter). Vinegar Lane keeps ticking away, with Countdown also open as of today.
  • A number of new homes are now being marketed, such as NXN Apartments, Nugent Rise, The Eight, Eden Green and The International.

So, quite a bit then, and it’s all in the RCG Development Tracker, along with a host of other information on 700-odd projects.

It all adds up to a pretty big ‘pipeline’ of homes which are recently completed, under construction or being sold off the plans.

Pipeline to June 2016

The tricky part is that, as I’ve written previously, the construction sector is getting really stretched. That’s worth a post of its own, which will happen in the next week. In the meantime, the government keeps finding it politically convenient to blame the Council for all of Auckland’s problems. Convenient it may be, but it’s not particularly helpful for Aucklanders.

Unfortunately, based on “building consent” numbers, Auckland has actually gone backwards in the last couple of months, in terms of the number of homes approved for building.

Dwelling consents to Apr 2016

9,353 homes were consented in the year to April 2016, down from 9,534 in the year to February. The main reason is that apartment consents are volatile, and have had a couple of bad months. It’s a different picture than the top graph shows – that’s more of a “leading” indicator in a sense, so consents should come back up again.

None of it is enough, though, and if you want a bit more evidence:

  • The Auckland Plan target is for the city to build 13,000 homes a year over the next 30 years.
  • That includes an average of 10,000 homes a year in the first decade, which started in 2012 so we’re already playing catchup on that. Plus, as per the graph above, Auckland has only ever achieved 10,000 homes a year a few times, and that was when we were building far more apartments than we are currently.
  • I’ve recently done some calculations that Auckland needs to build 14,000 homes a year to meet current demand (with immigration at its current high levels).
  • We’d need at least 16,000 homes a year if not for the fact that Aucklanders have also been moving to other parts of New Zealand, which partly balances out the immigration from overseas.
  • Most economic commentators think Auckland already has a shortage of 20,000 to 50,000 homes, which will take many years to address.

This is a huge challenge, although it probably looks pretty good if you’re a builder!

The end of Auckland’s old growth model

The New Zealand Council for Infrastructure Development’s public shark-jumping exercise the other week got me thinking. While their flagship policy of a new megabillion eastern tunnel project is a bit mad, their report does a reasonable job of diagnosing one of the core problems facing Auckland. That is, the city’s land-use and transport plans are not always well aligned.

That’s illustrated nicely in their maps of intensification opportunities around rail stations – red circles indicate places where apartment and townhouse development is generally discouraged under the draft Unitary Plan.

NZCID - ATAP response - Land Use Train

In short, we’re fixing our city’s rapid transit network – and it’s long since time we did that! – but we may need to do more to get the best out of the investment by enabling intensive development around train stations.

As a point of contrast, I recently visited Sydney on the way back from a work trip to Australia and spent a day wandering around the city looking at stuff – it’s a great walking city. And I’ve got to say: they don’t waffle around with upzoning there. When they choose to redevelop a brownfield area, the debate isn’t between whether two or three storeys should be allowed. The question is whether to go ten, twenty, or thirty storeys. And they’re willing to back that up with new rapid transit where needed.

Auckland is different. We build rapid transit infrastructure haltingly, in fits and starts, and when governments choose to accelerate road projects, busways are left to progress through the queue. And while the Unitary Plan is a fine step forward, it’s really just the start of the conversation about how we should modernise our planning rules for a 21st-century city.

But change is needed. Because, as NZCID’s report unintentionally illustrates, Auckland’s arrived at the end of its growth model of the past 50 years. It’s kaput. We may be able to kludge it back into action for a bit, but make no mistake: it will seize up again. And so we need to design a new growth model.

The old growth model was as follows:

  • Build some roads and water pipes out into the countryside
  • Build some houses on the paddocks this opens up for development
  • Repeat when necessary.

This isn’t necessarily a bad model. It’s simple, and it works reasonably well provided that some schools and shops and jobs move outwards as well. But it’s got some subtle pathologies – e.g. street networks that preclude future transport choices, environmental impacts, etc.

And, more importantly, this growth model is inherently self-limiting in a location like Auckland. There are two reasons for this:

  • First, geographic constraints. Auckland is situated on a narrow isthmus between two harbours. We run out of proximate land for housing much more rapidly than other cities – which means that we must build up much more rapidly than other growing cities.
  • Second, the spatial cost of road transport. Geography gives Auckland many pinch points – over the Waitemata Harbour and across the portages at either edge of the isthmus. It’s intrinsically challenging to keep pumping cars through narrow pinch points. Adding motorway lanes will only get more costly in the future – as NZCID’s eastern motorway proposal demonstrates.

We can’t avoid the consequences of these constraints by metamorphosing into a polycentric city… because that’s already happened. Only one in five jobs is located in the city centre and fringe. The rest are elsewhere. If there are major gains to be had from dispersal, we have already achieved them. We can’t count on more of the same to help us escape the geometric realities.

And here’s the thing: If we insist that we must keep on doing more of the same, we will instead do nothing. If it is truly necessary to build something like NZCID’s eastern motorway tunnel to enable urban growth in Auckland, we probably won’t grow. It’s not feasible to spend a decade of Auckland’s transport infrastructure budget on a single road. (And it’s not ethical to borrow the money from future generations, who don’t have a say in what gets built.)

So we need a different growth model. I don’t have all the answers – who does? – but here are a few thoughts on what that might look like, focusing on the transport infrastructure part of the picture. (Elsewhere, I’ve discussed the role of pricing and the need to rethink policies that limit housing choice.)

First and foremost, we must recognise that this growth model is self-limiting due to its reliance on a single transport mode – cars. Cars are great for lots of things, but they occupy a lot of space both when in motion and when sitting around. This is not an advantage in a city as geographically constrained as Auckland.

If we invest in a way that ensures that all new entrants to the city must use cars for most travel, then it will come back to bite us. If people know that new housing in their neighbourhood will inevitably mean more people parking in their preferred spot on the street, they will oppose it. (No matter how mindlessly hypocritical it is to claim a property right over a public street!) If they know that a new suburb on the edge of town will mean more cars jostling for space on the road during their morning commute, they will oppose it.

And if they’re presented with the bill to build all the new roads needed to keep the cars flowing, they’ll vote against it. Roads are expensive, and people don’t like it when their rates go up.

Second, we must recognise that there are alternatives. Public transport and cycling can offer great mobility at a much lower spatial cost than cars. If we want to increase mobility in a growing city, we need to make much greater use of these transport modes.

Litman-space-required-by-mode

It can be challenging to make the transition, as developing these networks means thinking about infrastructure and transport services differently. It means paying much more attention to how humans may behave out there on the street – i.e. what will make them feel safe in a cycle lane, or what will make it possible for them to transfer painlessly between buses. But it’s fundamentally possible.

Third, one key consideration when building these modes is that they should be built in advance of growth, so that they can lead and shape development rather than trying to catch up with it. At present, we very much take a “roads first” philosophy to greenfield areas – i.e. building lots of lanes on day one, and coming back years later to retrofit public transport to address the resulting congestion.

The perverse consequence is that this locks in a largely car-dependent urban form on the edge of the city, exacerbating the self-limiting features of our current growth model. Unwinding that is costly and difficult. A “rapid transit first” approach would save us a lot of that trouble.

Fortunately, as Matt highlighted in a recent post on Auckland Transport’s consultation on transport for future urban growth, that’s a realistic option. We’ve got the ability to develop rail stations in Drury and extend busways to Silverdale and Northwest Auckland.

TFUG - Draft Preferred Plan - South

But change doesn’t happen of its own volition: policymakers have to choose to change. So here’s a simple message: If you start a sentence by saying “we need more land for housing…” the next words out of your mouth should be “… and therefore here are some rapid transit investments we should make to support it.”