From the Auckland Plan, how Auckland has developed since 1840.
From the Auckland Plan, how Auckland has developed since 1840.
There have been many issues in the debate how Auckland should develop and a lot of it comes down to preferences and in particular housing preferences. On the one side of the debate there are those – who are often baby boomer generation or older – who claim that no-one wants to live in an apartment and that we all want big standalone houses. They extrapolate that to mean we should focus on building a lot more standalone houses on the urban fringe.
We (and others) have long said that a range of dwelling types are needed in many locations to give people choice in where and they live. That allows people to make trade-offs based on their location/amenity preferences and how much they’re prepared to pay. That means even you would prefer a large house, if living closer to the city is important to you then you may be prepared to live in a terraced house or apartment rather than have a large house on the outskirts of town. Of course many also prefer higher density living.
Previous research in to the issue of preferences was often simplistic not taking into account the real world constraints and trade-offs people make. As reported by the herald yesterday, new research for the council finally addresses that missing part and has some interesting findings. The report is here (4mb).
Perhaps its key finding is that while there is a majority of people who would prefer a standalone house, the current housing stock more than satisfies that demand that outside the city centre there is a shortfall of units and apartments.
The research divided Auckland up in to eight general sectors “according to land value and spatial location” as shown below. This was used to help in identifying where people currently live and where they would be prepared to live based on various factors.
Respondents were asked to identify the relative importance of 58 features grouped across five categories without considering any constraints. The five categories are:
Each feature was ranked as either ‘very important’, ‘of some importance’ or ‘not at all important’ and then they had to pick the top five of the ones they ranked very important. That resulted in this outcome for the five categories
The top 15 individual features are shown below. As you can see a safe neighbourhood is by far and away the most important thing while a standalone dwelling is just over half as important. I was a little surprised that none of the amenity (proximity to facilities) featured in the top 15.
Below are how the respondents rated features in each of the categories – remember these rankings are without any constraints.
The second stage of the survey looked at what happens when a financial constraint is added in. Key findings from this were:
The table below shows the results of the once costs were considered. The numbers in green show the 9% who would move to a more expensive area after considering the implications. The blue is the 47% would stay in the same area they were in and the red represents the 40% who would shift to lower priced typologies if they were available. As you can see the isthmus is the preferred option followed by the coastal North Shore and East Auckland i.e. coastal areas.
The report highlights that there is clearly a mismatch between what housing stock exists, what is being currently being consented and what people would choose if it were available. They say the idea of high density in the city centre and low density elsewhere doesn’t match the preferences shown in the study highlighting that we need more dwelling options in a lot more places. The question is whether our future planning laws will allow for that.
In particular what we need is the missing middle
Of course those boomers who think no one wants an apartment and that everyone wants a stand alone house refuse to believe it and continue to spout that it’s the council’s fault for not allowing unlimited sprawl.
In the herald in recent times one of the strongest media voices calling for a better urban environment, for density done well and many of the other topics we talk about has been Jack Tame. He’s currently filling in for Mike Hosking on ZB (and Seven Sharp I believe) and his piece yesterday on housing was fantastic and well worth a listen.
Now can we please have Jack replace Mike permanently?
A decision by the council’s Development Committee has been pitched as a battle of whether a 20ha block of land at Hobsonville Point should be used for housing or a film studio and is the outcome of competing visions for the land from two council controlled organisations. Of course things aren’t quite as simple as that – including just how much land is being talked about. The whole thing seems a bit like two children arguing and the parent (council) having to pick which one it believes the most.
The land was initially earmarked by the former Waitakere City Council as being for a marine industry precinct however for various reasons that hasn’t gone ahead. The council in the past have agreed that the land would be developed if the marine precinct didn’t go ahead.
Auckland Council Properties Ltd want to develop the full 20ha providing 441 dwellings across 14ha of the land and the remaining 6ha of land would go towards an employment hub. They say that this option would recoup the $36 million already spent on the land and provide the council a $34 million profit.
Auckland Tourism, Events and Economic Development (ATEED) is to use 10ha of the land for a film studio and the remaining 10ha used for 315 houses. Interestingly both proposals have the same density of housing, the difference is how that’s laid out and integrates with the rest of Hobsonville and it is also said that the ACPL option does much better in this regard.
High level analysis by CBRE suggests that with this option the council will achieve $24 million less from the development. In return ATEED say the film studio will create 435 new jobs which over 25 years would generate the equivalent of $483 million (in $2007). No mention seems to be made of how many extra jobs would be generated by the employment hub.
ACPL also say they think a realistic alternative for a film studio would be better located just down the road closer to the industrial area going in around Westgate and say they’ve even offered to help find and acquire a site for those purposes. Presumably the benefits of a film studio precinct would be fairly independent of the location
The council have voted to give ATEED an extra four months to come up with a more solid proposal for a film studio.
I don’t have a firm view on either proposal but suspect the ACPL one is probably the stronger of the two primarily because I can’t see what unique benefits having a film studio with a near waterfront location are vs having it down the road. What do you think?
The Productivity Commission has released a draft report called Using Land for Housing which looks at options for how more land can be made available for development. At first blush that may sound like code for “open up lots of greenfield land for development” however the report appears to actually look at many of the issues in a holistic way giving a fairly balanced outcome. On a first skim through I agree with most of the changes the commission has suggested.
Before I go into the recommendations I think it’s useful to highlight that the commission start off by showing a good understanding of why cities are important. This is from a short summary document however there is a more detailed discussion in the draft paper. I think this is important as far too often if feels like many see and treat cities – particularly Auckland – like some kind of unnatural aberration sucking the value out of the rural areas.
The main recommendations revolve around a few key categories, namely: planning/regulation, infrastructure and overcoming existing barriers/behaviour.
The recommendation that’s probably gained probably the most attention so far falls into that last category and is the suggestion of setting up Urban Development Authorities (UDA) – much like Auckland Council is already doing by merging Waterfront Auckland and their property CCO. They say a UDA could assemble, rezone and prepare for development large parcels of greenfield or brownfield and then partnering with private developers to build at scale. This seems pretty much identical to what’s being going on at Wynyard Quarter.
What’s gaining attention though is a suggestion that these UDAs could have powers of compulsory acquisition which would help in assembling suitable land and address issues such as land banking. It’s worth noting that compulsory acquisition was possible in the past and I believe is partly how the former Waitakere City Council was able to buy up large amounts of the town centre – although the government has currently removed the ability to do so in future.
They also suggest these UDA’s could help capture some of the increased value that occurs from the development. Overall I think the idea of a UDA is a good one although I can certainly understand the concerns about giving so much power to them.
Looking at the other parts of the report, they say that one of the current issues is that existing homeowners have a disproportionate influence on local political processes as they are the ones who benefit the most from restricting supply in their area – thereby inflating the value of their own property/s. This then gives those homeowners greater incentive to be more politically active and push for regulations that restrict development opportunities. This is of course exactly what we saw happen in the Unitary Plan discussions.
To counter this the commission suggest that councils engage in more sophisticated consultation processes and giving the government more say in planning processes. I do agree with the first point but the second I’m not so sure about given the past comments from the likes of Nick Smith.
The commission specifically call out a number of planning regulations that have been imposed – often by the processes above – that have made it much more difficult and costly to develop urban land thereby reducing density. They make the following recommendations in this regard saying we should:
We have addressed all of these points in the past, especially the minimum parking requirement issue so it’s great to see the commission pick up on these points.
There is quite an extensive amount of discussion on the issue of the provision of infrastructure and how it is funded. In short they suggest funding constraints – often from the political processes mentioned earlier – makes it difficult for core infrastructure such as water and roads to be built in advance so it is done piecemeal which adds extra costs to the process.
They suggest that councils need additional tools to both help manage demand on existing infrastructure and to help fund new infrastructure that supports growth. They particularly point out that the government need to allow for road pricing on existing roads where it can be justified.
They also want to see more variable pricing in things like water connections. The example of Watercare is used which charges a flat fee for any new connection however they say that distorts costs and reduces transparency. Instead they think the charge should be influenced by local conditions i.e. if connecting a new dwelling an area has excess capacity in the network then that could be cheaper to connect to the network than a house on the edge of town in a new subdivision that needs new pipes installed.
Interestingly the specifically call out as not practical a few finance methods often suggested by those pushing greenfield growth such as Tax increment financing (TIF) and Municipal utility districts (MUDs). They do call for greater use of targeted rates to pay for local infrastructure though, for example the costs of the core infrastructure to new developments mentioned above could perhaps be paid off by a targeted rate levied against that area so it doesn’t impact on the rates of the rest of the city.
A few other recommendations around rates are made. This includes that council rates should be based on land values not capital values as it would encourage “land to flow to its highest value use”. It also suggests that the government should pay rates on core crown land including hospitals and schools. This is for the same reason as having rates based on land values, to encourage the best use of it. It’s one recommendation that I’m sure won’t be implemented. I would like to see rates paid by other organisations too such as churches. An example I highlighted the other day on twitter was this one up around Oteha with huge amounts of land dedicated to parking that pays almost nothing in rates due to being a church. Note: this is not a debate about or an attack on religion.
There are a number of other recommendations and in the interests of space and time I won’t cover them all. All up it seems like a fairly well balanced report that importantly recognises that cities and density are important. If you want to make a submission, you need to do so by 4 August.
I was a bit surprised to hear the Property Institute of New Zealand warn of an “apartment bubble” in Auckland earlier this week. I was even more surprised when I read their press release. The CEO, Ashley Church, is predicting a bubble as a response to 1) banks being likely to decrease their deposit thresholds on apartments from 20% to 15%, and 2) the Reserve Bank potentially bringing in “loan-to-income restrictions”, where mortgagees would then only be able to borrow X times their income.
The press release then gives a hypothetical chain of events:
However, this chain of events misses out half of what defines a bubble. He’s postulated a rise in prices, sure. But where does the subsequent decrease happen? To me, this sounds like a recipe for a one-off, permanent increase in apartment prices. A permanent shift in the demand curve, as it were. I’m not making any predictions on apartment prices, I’m just pointing out that the chain of events here doesn’t actually include a drop in prices, and therefore isn’t a bubble.
Moving on from that (rather important) point, there are a lot of other strange things in this press release. Firstly, it seems a bit far-fetched that the Reserve Bank would impose harsh restrictions to the extent that only “the very wealthy” could afford freestanding homes, and the press release also ignores the price response (i.e. prices would drop, and many people would still end up in those homes – there aren’t enough “very wealthy” people to fill them all up).
Secondly, if the Reserve Bank is going to clamp down on Auckland home loans, it’ll be because they’re worried about a city-wide bubble. I’d say this is a much bigger concern than an apartment bubble – it’d affect a lot more people.
Point 7 is one I’ve been reading a few variations of recently, which doesn’t follow from economic intuition. If landlords drop out of the market, do rents to rise? Given that each landlord dropping out of the market means there’s an owner-occupier there instead – and therefore a smaller rental market on both sides – the effect on rents might go either way.
Points 6 and 8 in the chain of events are odd too, essentially scaremongering about large numbers of low-quality apartments. The press release continues in a similar vein:
It’s a strangely political statement itself, coming from an organisation which began as the professional body for valuers. The PINZ’s statement in March that “the Reserve Bank Governor needs to “stop chasing shadows and stick to his knitting” seems a bit ironic.
As an aside, I think it’s great that the banks reviewing their lending policies on apartments; after all, it’s a more established market now than it was ten years ago, and there’s (hopefully) a lot less speculation going in that market than there was in the mid-2000s boom-bust. The banks will still be cautious about lending for leaky or leasehold buildings, and perhaps shoeboxes, and once those are taken out of the equation the apartments that are left should have a manageable level of risk.
On the whole the government’s new policy of opening up excess land in Auckland for development is not a bad one. As I mentioned when it was announced, the devil was always going to be in the details and on that front the government hasn’t been doing so well. The two most prominent issues that have emerged have been:
Combined the issues suggest an element rushed policy making where the details simply haven’t been thought through. In my view, of the two the first is by far the most serious issue and one probably best left with others to talk about. The second one raises some additional questions – some of which have been highlighted well by Deputy Mayor Penny Hulse.
First and foremost, as part of the Unitary Plan the site is zoned as part of the metropolitan centre as shown below.
The zoning means it’s possible to build mixed use and up to 18 storeys on the site although it feels like it has mixed potential. It’s sandwiched between the motorway and some large, not overly pedestrian friendly roads – Manukau Station Rd should have scaled down after the motorway was finished. It kind of has the feeling of being land in the middle of a motorway interchange.
The image below shows the intersection of Manukau Station Rd and Wiri Station Rd/Davies Cres. As you can see it looks like a traffic engineers dream with slip lanes on all corners and extra lanes for those turning right
On the plus side it is just across the road from the Manukau Train Station and new MIT campus while obviously a short walk to the rest of the Manukau city centre. That alone makes it odd that the government suggest only putting around 60 terraced houses on the site. This isn’t to say the site should have to be developed to 18 storeys but given its location and the demand for housing it seem insane to only think about putting 60 dwellings on it.
The situation raises two questions in my mind.
On the Weekend TV3’s The Nation discussed what could end up being one of the defining issues of the next few decades, generational inequality. At its most basic it’s the idea that through various policy decisions older generations have effectively pulled up the ladder behind them on issues such as housing and infrastructure thereby making it much more difficult for younger generations. This is also something that’s not unique to New Zealand and the same issues are also being grappled with in many western countries.
First up on The Nation was Shamubeel Eaqub from the NZ Institute of Economic Research (NZIER) talking primarily about housing and how that it’s not just about home ownership but that it is likely to have other impacts throughout society such as pushing out poorer people further away from the city and the opportunities it can offer while saddling them with higher transport costs.
Following this The Nation hosted a debate (two segments) between a Baby boomers represented by former National MP Tau Henare, Former National Party President Michelle Boag and Otago University Economist Simon Chapple and ‘Team Gen X and Y’ represented by Morgan Foundation Economist Geoff Simmons, Green MP Julie Anne Genter and former Salient Editor Asher Emanuel.
In my view the contrast between the two groups was stark. The younger were much more calm and composed, they seemed to have come prepared with facts and were able to (or at least attempted to) use them. By comparison the boomers (with perhaps the exception of Simon) where shouty and arrogant and best summed up by Michelle Boag’s closing comment of “Don’t give me evidence”. Another thing I noticed was that quite often when trying to say that they had it tough the boomers were actually referring to the experiences of their parents struggling to get by which in many ways is one of the core points of the generational debate. Older generations worked hard to give their boomer kids a better future but those boomers are increasingly putting in place polices that make it difficult for younger generations to do the same.
The debate primarily focused on housing. As expected there were of the typical old chestnuts that often get trotted out in this kind of debate. These include:
That also raises another issue that was highlighted in that there is an element of regulatory capture in urban planning. Existing home owners in desirable areas have used the planning process to prevent any new housing to be developed in their neighbourhoods, thus driving up the value of their houses. Any moves to change that are met with strong opposition come election time so politicians are too scared to do anything.
There were a few other related issues too such as education, employment and superannuation.
As mentioned these issues aren’t unique to NZ. This popped up in my twitter feed yesterday showing much of the same arguments are happening in Vancouver.
Did you watch the debate (or have you now)? What did you think of it?
As Auckland housing hysteria gets more, well, hysterical, there seem to be a few people worried that investors are leaving homes vacant rather than bothering to rent them out – preferring to rely on capital gains as a source of income instead.
Leaving aside the obvious question of why you wouldn’t rent them out as well as getting capital gains (after all, this can be made pretty hassle-free with a property manager, and helps to cover the ongoing costs of the property), there is some concern that this is a widespread phenomenon and contributes to a housing shortage in Auckland.
I’m assuming from Peter’s post the other day that we’re now happy to broaden our readers’ musical education as well as providing commentary and encouraging intelligent debate about transport issues (although my “Transport-Related Song of the Week” post series never really panned out), so here’s a topical song:
North and South recently ran an article on the apparent phenomenon, called “Running on Empty” (which is also a catchy number by NZ band The D4). It does suggest that much of the issue is at the suburb level, which I’ll leave for another post. It also notes that some vacancies will be due to Kiwis now living overseas, or splitting their time between multiple homes:
The most easily accessible source of data on vacant homes comes from the census. The 2013 census shows that, on census night, there were 33,360 unoccupied homes across Auckland. That sounds like a lot. Out of the 500,000-odd homes in Auckland, it’s 6.6%, which might still sound like a lot.
However, it’s almost unchanged from 2006, when there were 33,330 unoccupied homes, 7.0% of the total. And not much up from the 29,586 recorded in 2001, also 7.0% of the total. When I first saw these stats, I thought of them more as something indicating the current shortage of homes – i.e. housing is tighter, so more homes are being occupied.
When you look at these stats on a regional level, you see that Auckland has a smaller percentage of vacancies than any other region except Nelson:
Again, this made me wonder if Auckland’s low vacancy rate suggested a persistently tight housing market. But then I looked at the stats for New Zealand’s cities, leaving aside the more rural districts:
This suggests that Auckland is actually in a similar range to most NZ cities – but no one is suggesting that there’s a spate of Invercargill investors leaving homes vacant just so they can enjoy the capital gain. It’d be interesting to look at this data more closely: I’d like to look at different Auckland suburbs in another post, and maybe there is some truth to the claim that it’s a problem in some areas – then again, maybe Herne Bay homeowners are simply more likely to be away on holiday, or overseas contracts and so on.
At a city-wide level, though, I don’t think there’s much we can take out of this. I think it’s a myth that there are large numbers of people leaving homes vacant for speculative reasons, and I think the data in this post goes a long way to busting it. I also don’t see support for my original hypothesis that low vacancies in Auckland suggest a housing shortage. That doesn’t mean we don’t have a shortage, but the vacancy data doesn’t really tell us. Of course, since the census we’ve had two years of strong population growth and not built enough homes for all the new Aucklanders…
Last week the Government announced an interesting scheme to advance housing supply by redeveloping up to 500 hectares of State land. It’s still not clear how the land will be released, what the land tenure arrangement will be, or how affordable units could be delivered. Without knowing the full details of the initiative, this seems like a worthwhile initiative, one that has a lot of similarities with a plan recently proposed in New York City.
To get a feel for the extent of public land across the City, I took a look at ownership data from LINZ. Here’s a look at the public land in Takapuna (Blue = Crown, Yellow = Council). Takapuna is not unique in having boatloads of developable public land. In Takapuna the public is blessed with multiple lawn bowls, a golf course, and parking- heaps of council parking- reminding me of the Shoup-y quote, ‘we have a city where parking is cheap for cars and housing is expensive for people.’
Taking a closer look at the Crown land reveals a crazily undeveloped piece of property at the corner of Anzac Street and The Terrace. The property (below, red) has two old buildings serving the police department and of course more car parking. Besides the disamenity of having sloppy, low density buildings in a town centre. there is a real opportunity cost with having such an unproductive piece of land regardless of property owner.
Because the property is so under-captilised it only contributes $24,306 to the Council’s base rates or $9.44 per m2.
To put how poorly this property is performing in perspective, lets do the math. (See also: Want lower rates cut back on urban sprawl). Below is the new Turing project on Great North Road consisting of 27 apartment of a variety of sizes and bedroooms.
Using the rating data from the Council GIS viewer the property I compiled the CV data for each unit. The 27 dwelling units combined total over $15 million of rateable improvement value on top of $8 million in land value. Applying a .73% tax rate across the site (the ratings data is not showing yet) yields a whopping $168,000 per year.
This site is less than half the size of the Takapuna site but yields more than seven times the ratings base. On a per m2 basis the Turing is 17 times more productive than the Takapuna site.
The Takapuna site is uniquely re-developable since it is has such a low improvement value compared to its land value, but this is no different than the rest of the Council car parks around the town centre, and in fact all over the city. There is no shortage of urban land.
How is it fair that these two properties have such disparate rating values? This is where a land tax would help. Taxing land separately and at a higher rate than the buildings and other improvements that sit on top of that land would help to remove barriers to property being put into more productive uses (housing anyone?), and create a disincentive for what is essentially land banking.
Releasing public land across the city for residential uses is a good start. Ensuring that all property across the city can be more productive by removing the barriers to redevelopment, including the tax regime, would be even better.