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By Matt L, on May 16th, 2013 Last week the Government announced it had reached a housing accord with the Auckland Council in a bid to get more houses built and ease issues over housing affordability.
The legislation, to be introduced to Parliament as part of Budget 2013, will enable Special Housing Areas to be created by the Auckland Council with approval of Government. In these areas it will be possible to override restrictions on housing put in place by Auckland’s eight predecessor Councils, like the Metropolitan Urban Limit.
Qualifying developments in these Special Housing Areas will be able to be streamlined, providing they are consistent with Auckland’s Unitary Plan, once it is notified, expected in September this year. New greenfield developments of more than 50 dwellings will be able to be approved in six months as compared to the current average of three years and brownfield developments in three months as compared to the current average of one year. The streamlined process will not be available for high rise developments that will need to be considered under existing rules until the Unitary Plan has been finalised in 2016.
“This is a three year agreement to address these housing supply issues in the interim until Auckland Council’s Unitary Plan becomes fully operative and the Government’s Resource Management Act reforms for planning processes take effect.
“The Government respects in this Accord that it is for Auckland to decide where and how it wishes to grow. The Government is giving new powers for council to get some pace around new housing development and is agreeing on aspirational targets to ensure Auckland’s housing supply and affordability issues are addressed.
Overall the accord seemed straight forward enough and fairly sensible. At a high level the council would decide on a number of Special Housing Areas. Qualifying developments within these areas are able to use a fast tracked process to get consent and would have to comply with the rules in the Unitary Plan when it is formally notified later this year.
To me the accord seemed fairly positive as it would make it quite easy for medium density developments – the kind that will likely be the majority of intensification that occurs – to happen in any brownfield areas selected. This was especially the case as a site only needs capacity for 5 dwellings to qualify. There was one issue though, while the council would be able to select the special housing areas, the government had to approve them. That leaves the question of what happened if the council and government couldn’t agree on where the special housing areas should be.
Today it seems we have our answer. Along with the budget, the government has introduced the legislation to enable the special housing areas to be designated. Nick Smith has also issued a press release about it which includes this.
“If an accord cannot be reached in an area of severe housing unaffordability, the Government can intervene by establishing special housing areas and issuing consents for developments.”
Budget 2013 includes $7.2 million over four years to help the Ministry of Business, Innovation and Employment fund the initiative.
The legislation will go through its first reading as part of Budget 2013 before being sent to a select committee for a shortened six-week timetable for urgent consideration and progress.
“This legislation is an immediate and short-term response to housing pressures in areas facing severe housing affordability problems,” Dr Smith says.
“This provides time for the Government’s substantive changes to resource management reforms and the subsequent council planning processes to bear fruit and address these land and housing supply issues in the longer term.”
In other words, if the council and government can’t come to an agreement on the locations for the special housing areas, the government will simply override the council and do what they want. It makes a complete mockery of the announcement that the government and council made last week. It turns out that this is not a case of both sides compromising but one of the government twisting the councils arm behind its back to get their way while also forcing the council to smile at the camera and pretend everything is good.
Len Brown has obviously also been surprised by this as he has already come out with the statement below.
Auckland Mayor Len Brown has welcomed the introduction of legislation for housing accords, but says he will be seeking clarification on a number of points to ensure the final legislation is consistent with the draft Auckland Housing Accord.
“There are clauses in the bill introduced today that appear to be inconsistent with the Auckland Housing Accord,” says Len Brown.
“My expectation is that the Select Committee process will provide an opportunity to clear up these inconsistencies.
“Clearly, in relation to the accord, the point of the legislation is to give effect to the agreements we reached.
“The accord still needs to be considered and agreed by the Auckland Council’s Governing Body. Before we can do this we need to be certain that the legislation is consistent with the agreements in the accord.
Len Brown said he would be writing to Housing Minister Nick Smith to raise questions about the consistency of the accord and the current bill.
The Housing Accord is an agreement between Auckland Mayor Len Brown and the Minister of Housing aimed at tackling issues of housing affordability and supply in Auckland.
It is subject to agreement by Auckland Council.
The streamlined consenting process outlined in the accord can only take effect once the council’s draft Unitary Plan is adopted for notification – expected to be September this year.
It would also be interesting to see how the government determine housing unaffordability, my guess would be the flawed Demographia study as it is something that the government have pointed to in the past.
By Matt L, on May 10th, 2013 Back in March and just before the council released the Unitary Plan, Nick Smith hit headlines by saying that he was going to smash Aucklands Metropolitan Urban Limit in a bid to make housing more affordable but it appeared he was primarily focused on enabling the city to sprawl faster. Over the ensuring weeks a lot of claims and counter claims flying between the council and the government over the best solution. The government seemed to just want the current urban limits removed and for the development process to start. The council suggested that the fastest way for that to happen was actually through implementing the Unitary Plan sooner as that is intended to open up new land and that elements within it would result in better overall developments.
Eventually both parties decided to take the arguing behind closed doors to try and work things out. Today both parties have announced that they have come to an agreement over the issue in the form of the Auckland Housing Accord. Here is the governments take on it.
An Auckland Housing Accord has been agreed today by Housing Minister Dr Nick Smith and Auckland Mayor Len Brown to urgently increase the supply and affordability of housing in Auckland.
“This Accord will help deliver thousands of new homes for Auckland by streamlining the planning and consenting process and getting Government and Council working more closely together on housing development,” Dr Smith said.
“This balanced and pragmatic agreement addresses the economic risks to New Zealand’s economy of an over-heated and supply constrained Auckland housing market. It is good news for Auckland families wanting access to more affordable houses to buy and rent.”
The legislation, to be introduced to Parliament as part of Budget 2013, will enable Special Housing Areas to be created by the Auckland Council with approval of Government. In these areas it will be possible to override restrictions on housing put in place by Auckland’s eight predecessor Councils, like the Metropolitan Urban Limit.
Qualifying developments in these Special Housing Areas will be able to be streamlined, providing they are consistent with Auckland’s Unitary Plan, once it is notified, expected in September this year. New greenfield developments of more than 50 dwellings will be able to be approved in six months as compared to the current average of three years and brownfield developments in three months as compared to the current average of one year. The streamlined process will not be available for high rise developments that will need to be considered under existing rules until the Unitary Plan has been finalised in 2016.
“This is a three year agreement to address these housing supply issues in the interim until Auckland Council’s Unitary Plan becomes fully operative and the Government’s Resource Management Act reforms for planning processes take effect.
“The Government respects in this Accord that it is for Auckland to decide where and how it wishes to grow. The Government is giving new powers for council to get some pace around new housing development and is agreeing on aspirational targets to ensure Auckland’s housing supply and affordability issues are addressed.
“The Accord sets a target of 9,000 additional residential houses being consented for in Year 1, 13,000 in Year 2, and 17,000 in Year 3. This is a huge boost on the average 3,600 homes that have been consented each year over the past four years and the 7,400 a year over the past 20 years.
“The Accord is a sensible solution to the problem of ensuring a robust process for submissions and hearings on Auckland’s 30 year Unitary Plan, while ensuring progress is made now on Auckland’s housing supply and affordability issues. It is about getting on and building the least contentious 39,000 houses of the 400,000 identified in the draft Unitary Plan.
“This agreement will also enable the Government and Council to make progress on other housing issues. There is a commitment to an inquiry into building material and construction costs, a better coordination on delivering core infrastructure to support new housing and a feasibility study on the development of New Zealand’s first online building consent process in Auckland. There are also significant developments at Tāmaki, Hobsonville, Papakura and Weymouth and across Housing New Zealand’s Auckland housing stock to improve the quality and quantity of Auckland homes.
“This Accord is the product of six weeks of intense discussions with Auckland Mayor Len Brown, his deputy Penny Hulse, and many council and government officials. I wish to publicly thank them for their willingness to engage and to help find this constructive way forward.”
The Auckland Housing Accord is subject to agreement by the Auckland Council and legislation being passed by Parliament. The Accord and legislation will expire when the new Auckland Unitary Plan becomes fully operative, expected in 2016.
At first glance it seems like a fairly decent comprise solution however as always, the devil is in the detail. The way I read things, the council will nominate a series of greenfield and brownfield special housing areas in which the less controversial elements of the unitary plan will take effect straight away. That means that for the rest of Auckland, the unitary plan won’t come into effect until it has been through the Board of Inquiry process set out by Amy Adams earlier this year (or late last year). Allowing the council to decide on the areas that will be subject to this seems like a good idea.
The area of the announcement that most caught my attention was the comments that the streamlined processes will not apply to high rise developments, after all, just what is deemed high rise? The factsheet provided goes someway to answering that.
Overall the accord seems like a decent compromise between the government and council, it will however be interesting to see what areas get selected as special housing zones. Here is the accord itself, the factsheet and the Q&As that go with it.
Also here is Len Browns take on it with the most interesting part being that he suggests that in return for faster consenting in these special housing areas, including affordable housing components in them will likely be a council requirement.
By Matt L, on April 15th, 2013 One of the key issues impacting on housing affordability has been a lack of new dwellings in the past few years, particularly in the areas where people want to live. The segment of the market hardest hit was the apartment market as shown in the most recent government report on housing affordability.
But it appears that we are now starting to see this market coming back with a raft of new apartments being proposed not just in the CBD but all around Auckland. A couple of well-known examples are:
New Lynn: Merchant Quarter Condominiums – 10 levels of apartments being proposed above a new car parking building and medical clinic development right next to the train station
Manukau: M Central – The conversion of an existing office building (ex IRD) to apartments and retail
City: Sugartree – A series of apartment buildings being developed around Cook and Nelson St.
City: 132 Vincent St – Another office conversion
Grey Lynn: The Issac – A lower rise development (four stories) that is already well under construction.
These are just a handful of them and I’m sure there are some I have missed. Further as far as I’m aware all of these have been selling fairly well which is a good sign. We can now another good looking building to the list with a new development called Urba being launched quietly last week. It is to be located just outside the CBD on Howe St and is replacing the building you see below.
And here is what the building is expected to look like.
As well as some pretty nice looking apartments, some of which will have amazing views, there are also some other neat amenities included:
Overall it does look like a pretty nice development. Apartments come in a range of sizes with 74 sq m, two bedroom apartments generally costing in the range of $380-490k. For a dwelling of that size, in that location it doesn’t seem too bad at all and could be ideal for a young couple looking for their first home.
This development, and the others listed above all seem to be a step above the crappy apartments we have saw in the early to mid 2000′s and while we can’t truly say how good they will or won’t be, the signs so far are extremely positive. Developers building good developments are going to be absolutely key for the general public to gain trust that apartments are a viable alternative and in doing so they can then really start to help address some of our housing affordability problems.
By Matt L, on April 3rd, 2013 NIMBYs make me so mad sometimes with the latest example comes from Onehunga. In a bid to get better use out of the extensive amount of land that they own, Housing NZ entered into a partnership with Saltburn Ltd to redevelop a handful of sites they have in Onehunga.
The land is owned by Housing New Zealand and comprises three large sections with houses which will be demolished.
The original plan was to replace them with 26 units of varying sizes, a third of which would be privately sold and the rest used as state and social housing.
The plan is the first of its kind for the country and Housing New Zealand spokeswoman Marie Winfield says it is a model for how the 69,000 properties the corporation owns throughout New Zealand – 32,000 of which are in Auckland – could be redeveloped to provide better state housing and help ease the housing crisis.
 The sites in question are to the right of the image, I’m not sure which of the three houses are the ones going though. I quite like the idea, removing three houses but replacing them with 26 apartments clearly provides a lot more dwellings which is exactly what we need. The idea of selling 1/3rd of them is also good as having private owners can be useful in helping to keep the place well maintained as well as helping to pay for the development. We also get more social/state housing out of the deal so it seems great all round. That is until the NIMBY neighbours step in.
Their complaints included inadequate provision of car parking, out of character construction materials and concerns over a three storey apartment block.
They were not opposed to the principle of mixed tenure housing but wanted the development to be “lower, lesser, safe for children and in harmony with the architecture here”.
Following a series of meetings plans have now been redrawn.
Saltburn has reduced the number of units from 26 to 21, and increased parking spaces from 17 to 29.
The three storey apartment is also off the table, replaced by terraced housing.
Saltburn is run by husband and wife James and Johanna Klein who say they have taken those concerns on board.
“The original plan wasn’t that well received by neighbours,” Mr Klein says.
“As a result we have had three meetings and come up with a revised plan.
“There will now be 13 terraced houses and eight community housing units, down from 10.”
Residents had also opposed the use of brick cladding, saying it was out of character with the two streets’ 1860s cottages.
To address that the new properties closest to the streets will instead be clad with weatherboards.
So less dwellings get built, 5 might not seem like much but if the same thing over dozens of similar developments will quickly add up. Of course it is never enough for the existing locals though.
“It’s a marked improvement,” he says. “But we still think it’s an over-development of the site.
“We’ve suggested they take two more units out to create more car parks . . . we’re saying they need 35 car parks straight away.
“We’re hoping we can continue working with them to achieve a solution,” Mr Dorn says.
One result of the change of plans is that the houses to be sold to the public will now be more expensive.
So the locals are trying to force the developers to build almost 2 carparks for every single dwelling, further encouraging residents to drive, yet they also talk about wanting it to be safer for their kids. Removing even more dwellings and increasing carparking is something that would only serve to further push up the cost of the remaining units that are sold to the general public.
By Mr Anderson, on March 14th, 2013 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.
By Mr Anderson, on March 13th, 2013 The question of how many available sections there are in Auckland for development has yet again raised its head in the last couple of days, with much debate over whether there are 15,000 or 2,000 or some number in between of sections available to build houses on. This from yesterday’s NZ Herald:
Auckland has 2000 new sections ready to build houses on, says Mayor Len Brown, who last month claimed there was enough land for 15,000 homes.
As debate grows about housing and land supply in Auckland, Mr Brown is no longer claiming the city has enough new land to build 15,000 houses “right now”.
Instead, he is saying there is capacity for 15,000 homes on ready-to-go greenfield land in areas such as Flat Bush, Takanini and Hobsonville, but only 2000 sections have reached the building stage.
“The remainder require subdivision and internal servicing by private sector developers to create sections,” Mr Brown said.
Much of the debate seems to be around semantics – what constitutes ‘ready to go’ land? What is the role of Council in delivering land to that point? What is greenfield land?
Clearly there’s a process that developers go through to turn what starts out as countryside into urbanised housing. I’m not really an expert but it seems like it probably goes along these lines:
- Land is highlighted as suitable for future urban growth (i.e. placed inside the urban growth boundary). Usually this land seems to get a ‘future urban’ zone or something similar to prevent further subdivision that would make it difficult for that land to be comprehensively redeveloped in the future.
- Structure planning occurs to highlights where roads, parks, schools and other facilities should go as well as which areas should be zoned for what activities/intensities in the future.
- Rezoning occurs to enable redevelopment. Bulk infrastructure (water mains, arterial roads etc.) is provided.
- Land is subdivided down to section sizes and internal roads and pipes, electricity and phone lines are provided to each site.
- House is built and then occupied.
At some point (between steps three and four it would seem) the job of council is done. The main roads have been built, the land has been rezoned, the bulk water supply, wastewater pipes and so forth have been put in. Unless the Council is fulfilling the role of land developer, which in some cases they might well be (like Flat Bush town centre, which I think the Council owns) then it’s hard to lay too much blame at Council for not forcing developers into the final processes of subdividing and building on their land. Ironically one of the biggest greenfield developments on the go at the moment is at Hobsonville – where the government is effectively ‘the developer’. Maybe they need to tell themselves to hurry up and develop that land a bit quicker?
So it seems to me as though something is clearly going wrong between the ‘rezoning’ step and the actual land subdivision step – the difference between the 15,000 figure (which is quite a lot of capacity) and the 2,000 figure (which really isn’t that much). Some developers are sitting on land that has been rezoned and has been provided with bulk infrastructure yet for some reason they’re not subdividing it down to urban sized lots and either building the houses themselves or getting someone else to build the houses. It would be really great to get a better understanding of what’s needed in that process and what’s going wrong at the moment.
Of course Housing Minister Nick Smith’s proposal to get rid of the urban limits doesn’t do anything about resolving the issues that are clearly holding back the supply of sections in current greenfield areas. It’s way back at step one – vastly increasing the amount of land highlighted as potentially suitable for future urban development. Not too dissimilar from seems to already be happening actually.
Dr Smith vowed to break the “stranglehold” of the council’s policy of containing urban sprawl – a policy he says is “killing the dreams of Aucklanders” by driving up house prices.
The minister wants to open up more land outside the existing metropolitan urban limit to peg back land prices which, he said, were the biggest factor putting home ownership out of reach of many.
Mr Brown hit back, saying Dr Smith was advocating a flawed Los Angeles model of “suburban sprawl” going back to the 1940s and 1950s.
The mayor said the new unitary plan – a draft is being released on Friday – provided for a balanced approach of intensification of existing land and releasing new land to house a further million people in Auckland over the next 30 years.
Ironically of course the government’s process for the Auckland Unitary Plan means that no new greenfield land highlighted in the Plan will actually become rezoned for development (i.e. step three) until quite a few years from now – as pointed out by Phil Twyford in parliament today and by Brian Rudman in the NZ Herald last week.
Hopefully the release of the draft Unitary Plan at the end of this week will start to shed some light on all these issues.
By Matt L, on March 7th, 2013 The governments new housing minister, Nick Smith has hit headlines this morning saying that he is going to smash Auckland’s Metropolitan Urban Limit (MUL) in a bid to make housing more affordable. But the more you look into his statements, the more it appears that he has arrived at his position purely based on ideology rather than facts.
New Housing Minister Nick Smith is vowing to break the “stranglehold” of Auckland Council’s policy of containing urban sprawl – a policy he says is “killing the dreams of Aucklanders” by driving up house prices.
In his first major interview on how he plans to tackle the housing affordability issue handed to him in January’s Cabinet reshuffle, he said his focus would be on opening up land supply because land prices were the biggest factor putting home ownership out of reach of many Aucklanders.
“There’s no question in my mind that we have to break through the stranglehold that the existing legal metropolitan urban limit has on land supply,” he said.
But Auckland Mayor Len Brown hit back last night, saying Dr Smith was advocating a flawed Los Angeles model of “suburban sprawl and unbridled land availability”.
“I’m pretty disappointed in the minister’s positioning, and I am disappointed because it reflects a philosophy or view of city development, and particularly development of our city, that goes back to the forties and fifties,” he said.
Nick is using some fairly emotive language here and what’s more, it seems to ignore the work that has been going on about this issue. For starters by being so focused on only one aspect of the issue, land supply, he seems to be ignoring all of the other factors that go into the price of housing. He also seems to ignore another key factor in mix, demand. The reality is that Auckland’s population is growing, and growing faster than the rest of the country combined, more people flooding into the city is always going to put more pressure on house prices.
 Projected Population Growth And on that subject, these days more and more people are wanting to live in the suburbs closer to the city, the very places where we can’t create more land, not flung out to the outskirts of town. This is especially the case for young people who don’t share the utopian vision of the house in the suburbs that our parents, or even grandparents were sold on in the post war years. The article continues:
“When we are looking at growth in Auckland of 2 per cent a year, we are going to need sections at the rate of 12,000 a year,” he said. “The metropolitan urban limit is a stranglehold on land that is killing the dreams of Aucklanders wanting to own their home and we have to work with the council to find the tools to increase that land supply and bring section prices back.”
He said the council’s plan to contain 60 to 70 per cent of new housing within the current built-up area would fail due to “community angst over intensification” and economic reality that squeezing two houses on to one existing quarter-acre section could knock $200,000 off the value of the existing house.
First of all, we don’t need 12,000 sections a year, we need need 12,000 dwellings, the two are not the same thing. He is also kidding himself if he thinks that we are building quarter acre sections. In fact it would be interesting to find out when the last subdivision was built that contained quarter acre sections. A quarter acre is ~1000 sq meters yet most recent housing developments tend to have sections less than half that size. In fact many of the houses going in at Hobsonville are on sections of less than 300 sq meters. So If you look at the current development patterns, we have already moved away from the quarter acre paradise that people claim when opposing intensification. Speaking of which, any GIS wizards out there able to work out just what the average section size is in Auckland?
Further his comments about infill housing miss some key details. Yes the value of the existing section will drop but overall both pieces of land will have a higher value. Also he seems to be suggesting that someone who owns a quarter acre of land isn’t capable of making a decision on whether they want to subdivide their land and along with the trade off’s that entails. After all no one is proposing that the council is going to go in and force people to split their land up. I also don’t agree with the suggestion that there will be a lot of community angst, yes there will be some in specific cases but by in large, most of the intensification that will occur over the next 30 years will be medium density developments, that is town houses, terraced houses and low rise apartments.
But Mr Brown said Aucklanders had already agreed on the city’s “compact footprint” through developing the first Auckland Plan, and Dr Smith should stop debating it.
He said the plan was based on “a model that is developing truly internationally competitive cities with strong economic bases to them and that give rise to outstanding transport operations within a more compact framework”.
“Have a look at Melbourne,” he said. “Have a look at Hong Kong. Have a look at London. All of those cities, by and large, are operating off what is regarded as best practice.”
As Len says in this bit, there has already been plenty of debate around housing and by in large, I think that most of the community do agree that Auckland should get denser. When I attended a discussion group about the Unitary Plan late last year, I was quite surprised by the discussion around this topic and how much everyone, of all ages and backgrounds agreed with the direction we are heading. This leads me to believe that the majority of those complaining about increased density are very much a vocal minority.
I do have to disagree with Len’s example cities though, Melbourne is more sprawling, with a lower population density than we have. Hong Kong is the complete opposite and not exactly the example we are planning to follow either. What we need is somewhere in between. I also think we need to be talking more about the advantages of having higher densities in Auckland, particularly the additional amenities that it enables, like having more local shops, cafes, dairies or better parks etc.
Both Nick Smith a Len Brown were also on Radio New Zealand this morning talking about this topic.
or Listen here.
Nick brings up another issue that needs to be addressed. The Unitary Plan which gets released for discussion next week proposes to remove the MUL and open up more land. Yet recent announcements from the government will likely prevent those changes from coming into effect for a number of years. Something also picked up by reporter Todd Niall in this report:
Or listen here.
Overall it seems to me that that Nick Smith has come into this debate with a massive agenda focused solely on removing the urban limit rather than looking at the whole picture. He appears to be planning on using his powers of government to get enact his ideological agenda. As Steve C said this morning “it’s interesting how the democratic process imposed on local government, i.e. consult, consult, consult, differs from the deomocratic process for central government, i.e. we’re elected and we’ll do what we want”
By Matt L, on February 7th, 2013 It’s not often that we almost completely agree with a Herald editorial, in fact just last week I rubbished the editorial on another harbour crossing. This one however is different. The first few paragraphs talks about Labour’s recently announced housing policy, along with some of the political reaction to it. However it is the second half of the editorial that made me almost fall off my chair.
Mr Shearer, while making the most of the party’s “KiwiBuild” scheme, wisely reduced its aims somewhat. The only homes it could provide in Auckland for under $300,000 would be two-bedroom apartments or terraced houses, he said. Labour’s standalone family homes were more likely to be up to $550,000.
It sounds like Labour has more of the latter in mind than the apartments and terraces. If so, the party should think again. The standalone family home with its lawn, driveway, garage, rotary clothesline and garden shed is still regarded as a New Zealand birthright but it exists these days more in fond imagination than in fact.
Many, perhaps most, home-owners are dispensing with the lawns and gardens, concreting them over for parking space for the two or three cars family members might own. Double garages are the norm, and families find more use for decks, patios and pools than grass and soil.
Growing children do not seem to miss the backyards of yesteryear, their preferred activities are on computer screens, digital devices, television or scooters and skateboards on the concrete outside.
Children in families that cannot afford today’s big houses and pools and home entertainment, nevertheless share the modern preferences. They are unlikely to play games on a lawn, and their parents are unlikely to garden, if they had the space. They can afford scooters for the children, and some digital equipment, and supermarkets made gardens superfluous long ago.
So why not two-bedroom apartments and terraced housing? If Labour can provide these in Auckland for no more than $300,000, they could provide struggling young families with a perfectly ample first home.
Apartments and terraced housing for the less well-off might sound like the “projects” that for all their sensitive planning, rapidly became urban ghettos in big cities overseas. But those were rental accommodation, Labour is proposing only homes for sale. If all units in its proposed developments were owner-occupied there is every reason to expect the homes would be well maintained, retain their value and let the young mortgagors build equity.
Their Kiwi dream is the same as it has always been: a home of their own, a stake in a community, a place to raise children. Low-cost units can give them it all.
“Wow” was the first word that popped into my head, and I actually had to double check that it was the herald that I was reading. For too long the debate about housing seems to have been framed as either forcing people to live in shoeboxes in the CBD or living in mansions on the edge of town. It’s nice to see some more in depth thinking going on in the herald that the issue is more nuanced than that. What we are starting to see is a generational shift occurring as young people increasingly want to live in locations that have good amenities and that are closer to the city. People are generally quite good at making compromises, like the size of their backyard (or if they need one at all), if it means they can get benefits in other ways. As an example, people might be much more willing to give up on having a larger home and backyard if it means that their local shops/bar/park/transport stop are within a short walk compared to having to drive everywhere.
Perhaps if I had to give any criticism at all, the editorial doesn’t mention anything about location. If we build these apartments or terraced houses in the right locations, the increase in density can also benefit existing communities. More people in an area can help to justify new business (increasing local amenities), it can justify more or better quality local parks, and can help justify better provision of public transport. However, considering where the Herald has come from in the past I’m inclined to let it slide for now though as at least they are showing some progress. Let’s just hope we don’t have to wait for years for another quality Herald housing editorial.
By Stu Donovan, on January 27th, 2013 My last two posts (here and here) considered Demographia’s recently released survey of housing affordability for 2013, which concluded that housing in NZ is increasingly unaffordable.
My first post suggested Demographia’s primary findings were not supported by independent evidence, such as alternative “rent-income” and “home affordability” indicators. My second post then outlined some issues with their “median-multiple” indicator (calculated as the median house price divided by the median household income).
This post will now refine some of these criticisms, before outlining some of my own ideas on the causes of housing affordability issues in New Zealand. First I wanted to tease out some of implicit assumptions that underpin Demographia’s “median-multiple” indicator, namely:
- Median-matching: This issue was best articulated by James H: “the median-multiple indicator carries an assumption: that the income-earners at and around the median are the same group who demand the houses priced at and around the median, and that result can be extrapolated for other price-income pairings. As mentioned in the post, that excludes measurement for a large group of earners at many income levels who are in fact happy to rent for a range of reasons. Also I doubt whether median houses are often bought by median earners for a variety of reasons including life stages, geographical differences etc.”
- Independent inputs: This issue relates to the fact that the two inputs into the median-multiple indicator (house prices are income) are actually not independent of each other. Consider a situation, for example, where most of the houses in New Zealand were being bought and sold by relatively wealthy households, and that these households subsequently experienced high income growth, while incomes for the general population remained broadly unchanged. In this situation the median house price (and median-multiple indicator) would rise simply because income growth was concentrated within the same people that were purchasing properties, rather than because housing was becoming less affordable.
The second issue is quite important, because it implies that changes in income may in fact impact on house prices. The figure below illustrates the input data used by Demographia for Australia. In this graph, we find a strong positive correlation between median household income (x-axis) and median house prices (y-axis).
This suggests that locations with high incomes have more expensive housing (surprise surprise!). More specifically, it suggests that for every $1 increase in median household income there is a corresponding $5.1 increase in median house price. While that sounds like a lot, note that income is measured p.a. whereas house prices are “total.”
My final comment is on the relevance of Demographia’s indicator. i.e. the “so what” question? It seems that the parts of New Zealand with the highest median-multiple ratios, such as Auckland, are actually attracting the fastest population growth, as illustrated below. Of course, this may reflect other factors that are at play, but it does suggest that our housing affordability (at least as measured by the median-multiple indicator) is not yet significant enough to drive people away.
Thus, population growth in these places seems to be going the other direction from what Demographia would expect – we are increasingly moving to areas that they consider to be unaffordable. Based on this evidence, I’d suggest that the median-multiple indicator used by Demographia is not a good measure of housing affordability. Instead, it seems to measure:
- The degree to which income growth is invested in housing; and
- Population growth (which will tend to push up property prices but suppress income growth).
It’s not clear to me that the median-multiple indicator measures housing affordability, and nor is it clear to me that the urban containment policies pursued by local governments are binding to the degree that they have major impacts on property prices. They may be – but Demographia’s indicator does not, and cannot, tell you that.
My personal view is that the primary impact of local government regulations is not through the constraints they place on land supply (i.e. urban containment), but actually through the barriers they create to the development of more compact and affordable housing. Here’s some examples of regulations pursued by local governments in New Zealand that seem likely to restrict the supply of affordable housing:
- Minimum lot sizes – i.e. “all ye who have less money shall be forced to purchase land you don’t want.”
- Minimum apartment sizes – i.e. “all ye who have less money shall be forced to purchase living space you don’t want.”
- Minimum parking requirements – i.e. “all ye who have less money shall be forced to pay for vehicles you don’t own”.
- Maximum height limits – i.e. “all ye who chose to live like rats are consigned to perish like rats – on the street.”
- Heritage protections – i.e. “all ye who don’t have the money to renovate a villa shall live elsewhere.”
In my experience these policies are often more binding constraints than the availability of land. So my suggestion is that housing affordability has less to do with policies that favour urban containment (as Demographia and the National Party would have you believe) than they are to do with the plethora of policies that suppress more intensive and affordable housing. I’d go as far as to say that most of our policy settings have a systematic bias against the development of compact and affordable housing.
In this light, it seems that recent political announcements have missed the mark. National are deluding themselves into thinking that the release of land on the urban periphery will deliver meaningful and sustained reductions in the cost of land, and by extension housing. Labour and the Greens, meanwhile, seem intent on using government capital to build our way out of the problem – which is not only expensive but also runs the risk (at least on the surface) of building the wrong kinds of houses in the wrong places. None of these three parties seems to yet acknowledge that some of our issues with housing affordability may be the result of policies that prevent urban intensification.
So instead of writing the foreword to next year’s (deeply flawed) Demographia report, I’d suggest that Bill English – and other National cabinet Ministers – should be writing letters in support of proposals to develop apartments, town houses, and units in places like Milford and Orakei. And more importantly, they should be making submissions on aspects of the draft Unitary Plan that support and/or prevent more compact and affordable accommodation options. Onya Bill.
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