Archive | Growth strategy

Fairgray works through the question: Who’s really the house price villain?

An historical perspective shows Auckland house prices might not be quite as far out of whack as is commonly thought.

Market Economics Ltd director Doug Fairgray presents that perspective in a column in his monthly newsletter, Is there an (urban) limit to apportioning blame?

Dr Fairgray produced the basis of Auckland Council evidence at the unitary plan hearings on many aspects of its proposal to introduce rural:urban boundaries around the region, replacing the old metropolitan urban limits, and on the availability of land to provide for housing growth over the next 30 years.

Dr Fairgray wrote in his newsletter that Prime Minister John Key, Finance Minister Bill English & Housing Minister Nick Smith had all blamed constrained land supply as the dominant influence causing high housing prices, and wanted the urban boundaries to go.

Labour housing spokesperson Phil Twyford also blamed these limits as the primary cause of Auckland’s housing supply & affordability issues.

The article below doesn’t contain all the graphic material which Dr Fairgray has posted on his newsletter. For a fuller understanding of his view, I recommend visiting that as well (click the link at the foot of this article).

Dr Fairgray wrote:

Given the urgency to rein in growth in housing prices, there also seems to be some belief that removing urban limits will result in a significant price response in the short or medium term…. Important questions arising from this are to what extent Auckland’s urban limits are really to blame for the housing affordability crisis, and which other factors may have contributed to the current situation.

Urban economies & their housing markets are complex, and the experience of those familiar with their workings tells us that important issues like housing affordability seldom arise from one dominant cause. Even more rarely are they able to be solved by simple, one-dimensional solutions.

There is plenty of information around to offer a reasonable evidence base as to the various contributing factors to the current affordability problems, and how these have acted over that time to drive prices up, drive demand up and to limit supply.

First, what actual trends in dwelling prices & housing affordability are evident over the past 25 years or so, in Auckland & across the rest of New Zealand? Auckland housing prices have long been higher than the national average. In June 1990, the median in Auckland was around $145,000 or 29% above the national median. Through the 1990s, Auckland prices grew slightly faster than the national trend, and by 2000 the median was around $240,000, or 36% above the national median (according to REINZ figures).”

[Latest figures from the Real Estate Institute show the Auckland premium in May was 59%, down from 63% a year ago].

Dr Fairgray said the period from 2000-08 was important, leading up to the GFC (global financial crisis) of 2007-08: During this period there were substantial increases in dwelling prices throughout New Zealand, with prices more than doubling in dollar terms between June 2000 and the peak in December 2007. Interestingly, the increase in Auckland prices (110%) was the lowest of all regions in percentage terms leading up to the GFC – the national average was 122%. As a consequence, by December 2007 the Auckland median price – though by now $460,000 – was ‘only’ 30% (or $105,000) above the New Zealand median.

This period is important for several reasons. First, the rates of price increase were high nationally, at 11%/year between June 2000 & December 2007 (according to CoreLogic statistics). Prices rose far ahead of inflation, so the cost of housing increased substantially in real terms, throughout the country. Second, the price increases bore little relation to underlying population growth.

Auckland had the strongest population growth (17.6%) but the lowest price growth (110%). Among the other regions, Southland had no population growth but dwelling prices increased by 208%, East Cape had population decline but a 176% increase in prices, and Canterbury had population growth of 11.8% with dwelling price growth of 167%. Clearly, substantial price increases occurred without significant population growth & associated need for urban expansion.

The dwelling price growth was driven by a number of factors, but major contributors – as identified by the Reserve Bank – were the relatively low cost of finance & the ease with which credit was available. Consumer confidence was high, it was easy for households to move upward in the housing market by simply increasing their indebtedness, sales volumes were high as the market gathered momentum and investors were attracted by the potential for good capital gains.”

What has driven recent upsurge?

The drop in confidence & building activity in the post-GFC period caused a considerable slowdown in Auckland’s new housing supply throughout the period from 2008 until 2014, which meant that the consenting & supply of new dwellings lagged well behind population growth. This gap in new dwelling supply has been an important contributor to the increase in prices since mid-2012.

However, since 2012 the difference in price growth is very marked between Auckland and the rest of the nation.

So what is driving this latest upsurge? Simply, the conditions which underpinned the price boom through the pre-GFC period have returned, but with greater effect. The principal drivers again include the ease of securing finance to purchase dwellings, stimulated by the strong competition among banks & financial institutions to increase their loan books, together with historically low interest rates making loans more affordable, and in particular the record levels of population growth in Auckland driven by record in-migration.

Investors are very active in the market, with returns from residential property being attractive compared with other investment options. While the residential construction sector has ramped up considerably, and numbers of new dwellings consented are growing steadily (9566 to March 2016 compared with 7940 a year earlier, and 6530 just 2 years earlier), pent-up demand & new demand continues to outpace the supply of new dwellings.

These key drivers are clearly recognised by the Reserve Bank, with Deputy Governor Grant Spencer noting in October 2013 that ‘the period of rapid price increases over the past 2 years has coincided with very low interest rates & easier bank credit. Banks have competed aggressively for mortgage business and this has contributed to a ramp up in housing demand, which has far exceeded the available supply…the supply of houses is an important determinant of house prices – but it is only one side of the story…. house price inflation has accelerated only over the past 2 years, over the same period that credit conditions became easier and population growth picked up with stronger net inward migration.’

The land supply question

Much of it seems to be based on the view that the rise in Auckland’s prices in the pre-GFC period was due to a shortage of land supply. And in this regard, a lot has been made of 2 simple ‘big-ticket’ numbers. One is the shift which meant that land value accounts for over 60% of Auckland residential property value, when historically land had been only 30-35% of a residential property’s total value (CV). The other has been the oft-quoted figure that land values inside the urban edge are 9 or 10 times those outside the edge, and the implication that the edge itself is responsible for the differential.

The Productivity Commission’s report into housing affordability attributed the increase in the land value component to a shortage of residential land in Auckland. However, that does not explain why dwelling price growth occurred across the whole country through the early 2000s, driven especially by easy credit & high consumer confidence. This price growth was very far ahead of population growth, in every region including Auckland, and occurred in regions where land supply to accommodate population growth was not an issue.

Also highly relevant is that a feature of the New Zealand local government structure sees each local authority requiring a general property revaluation every 3 years, during which the valuation service responsible (in most cases, QVNZ) has to examine the current property prices, as well as property trends & a range of other influences. That revaluation means each (residential) property is assigned a land value & an improvement value which is consistent with sale prices in the locality.

These changes were not unique to New Zealand. What happened in this country was part of a global pattern. Strong increases in housing prices were evident during this period in many western economies, notable examples being the UK, Australia, Canada & Ireland.

Post-gfc

Following the GFC, there was a modest correction in housing prices throughout New Zealand, with Auckland prices dropping 10% by March 2009. Activity in the housing market was far below the pre-GFC level, with sales volumes low and consumer confidence down. With the drop in values, many house owners just sat tight, opting to ride out the decrease in property values by doing nothing, and waiting in the hope that values would increase again. Low confidence was reflected in low demand for dwellings, including new builds. However, this was not simply an Auckland issue – between 2007 & 2010 (June years), the number of new consents tumbled by 46% in Auckland, and by 37% across the rest of New Zealand.

The Auckland residential construction sector underwent major contraction, with total employment (including working proprietors) dropping by 21% by 2010, and total employee numbers dropping by 28%, according to Statistics NZ. The sector did not return to its pre-GFC size until 2014, although total employment grew by 18% to 2015.

Dwelling prices

However, the post-GFC slowdown in price growth did not last. Between June 2012 & June 2015 Auckland prices rose by 52%, far ahead of the national change. The latest REINZ figures indicate further growth of more than 12% in the year to April 2016, which suggests the total increase since 2012 will be around 65%. Auckland is now showing both high rates of increase in dwelling prices, and considerably higher rates than the rest of New Zealand, and that difference has accelerated during 2014 & 2015.

One consequence is that Auckland dwelling prices have very obviously broken away from the trends in the rest of the country. Apart from the mid-1990s, throughout the period until mid-2011, Auckland price growth was not markedly ahead of the rest of the country. Auckland’s price growth rates were higher but were not strongly out of kilter.

Population growth & in-migration

Interestingly, this Reserve Bank assessment was made in late 2013, before the current in-migration wave had really started. Rates of in-migration have a strong effect on Auckland’s dwelling prices, particularly because a substantial share of migrants locate in Auckland, whether New Zealanders returning from overseas, or citizens of other countries. This is no surprise, because population growth drives demand for more dwellings. However, while growth from natural increase is steady & quite predictable, in-migration can generate considerable extra demand within a short time frame. Figure 4 below shows the very strong coincidence between the patterns of dwelling price growth in Auckland since the early 1990s, and the levels of in-migration to Auckland.

It is also no surprise that the record levels of in-migration to Auckland seen since 2013 will have contributed strongly to the growth in dwelling prices. Over the period from 2006 to 2013, population growth was around 19,000 annually, mainly from natural increase. However, since 2013 Auckland’s annual population growth has more than doubled, and the latest migration statistics indicate that growth to June 2016 will be greater again. That means Auckland’s annual population growth over the 2014-16 period will be about 2.25 times that seen in the previous 7 years, with about 22,000 more people each year seeking somewhere to live.

Auckland’s net inflow is very predominantly citizens of other countries, and the latest Statistics NZ figures show there is still a net outflow of New Zealand citizens from Auckland. Consequently, over the 3 years to March 2016, the Auckland region had a net migration gain of 72,052, made up of a net gain of 86,207 citizens of other countries, and a net loss of 14,155 New Zealand citizens (predominantly moving to Australia). This shows quite clearly that Auckland’s migration gain is due not to New Zealanders returning from Australia, but to citizens of other countries who wish to live here.

Until 2013, the population increase translated to 7000 additional dwellings annually (at 2.75/household). However, the current levels of population growth translate to around 15,000 dwellings annually. This major jump in demand has come on top of the post-GFC construction slowdown – which was itself compounded by a deal of ‘wait & see’ around the formation of the new Auckland Council – meaning that by 2013 Auckland already had a housing shortfall in the order of 14,000 dwellings.

Given the strong causal connection between population growth & demand for housing, it is not a huge leap to make the link between the record levels of in-migration and the on-going very strong growth in dwelling prices. An MBIE briefing to senior ministers (including Mr English & Dr Smith) on housing affordability in 2014 identified a number of ‘options with a likely impact in less than 2 years include – Change migration settings [because]…Net inflows (particularly unexpected inflows) have large effects on house prices, as supply severely lags demand.’ The likely impact of reducing migration was identified as a ‘…reduction on demand, depending on scale of migration reduction’ which would be ‘…likely to particularly affect Auckland.’

All of which raises the critical question of why central government’s focus is so strongly, and very predominantly, on land supply & the price of land as the cause of the dwelling supply shortfall & the affordability crisis, and on the removal of urban limits as a primary solution.

Land supply

Much of it seems to be based on the view that the rise in Auckland’s prices in the pre-GFC period was due to a shortage of land supply. And in this regard, a lot has been made of 2 simple ‘big-ticket’ numbers. One is the shift which meant that land value accounts for over 60% of Auckland residential property value, when historically land had been only 30-35% of a residential property’s total value (CV). The other has been the oft-quoted figure that land values inside the urban edge are 9 or 10 times those outside the edge, and the implication that the edge itself is responsible for the differential.

The Productivity Commission’s report into housing affordability attributed the increase in the land value component to a shortage of residential land in Auckland. However, that does not explain why dwelling price growth occurred across the whole country through the early 2000s, driven especially by easy credit & high consumer confidence. This price growth was very far ahead of population growth, in every region including Auckland, and occurred in regions where land supply to accommodate population growth was not an issue.

Also highly relevant is that a feature of the New Zealand local government structure sees each local authority requiring a general property revaluation every 3 years, during which the valuation service responsible (in most cases, QVNZ) has to examine the current property prices, as well as property trends & a range of other influences. That revaluation means each (residential) property is assigned a land value and an improvement value which is consistent with sale prices in the locality.

Rising land values

The revaluations prepared in Auckland in the pre-GFC period had to be in line with the major growth in dwelling prices. A property’s capital value (CV) has just 2 component parts, the land value (LV) & the improvement value (IV). An important feature was that prices – and therefore values – had risen dramatically, but the replacement cost of existing improvements on residential properties had increased much more slowly. Since the CV must approximate the sale price, and there was limited underlying growth in the value of existing improvements, then the only other component to account for the increase in CV must be the land value. As a consequence, there were considerable increases recorded in residential land value for all of the territorial authorities in Auckland as the revaluations rolled out during this period.

This suggests that the Auckland-wide increase in the land value component of capital value was driven quite strongly by the overall increase in the values of existing residential properties, rather than necessarily arising as a direct consequence of a shortfall in residential land supply.

That does not mean that the supply of land for new dwellings did not have some effect. The study into Auckland’s residential land supply for the Department of Building & Housing identified how urban limits have effect on both supply & development responses, though it also concluded that “….conventional density housing is projected to be exhausted by 2023. In Auckland City, North Shore & Manukau, conventional density land supply is projected to be exhausted between 2015 & 2016, or in 7-8 years’ time.” However, the fact that there was 7-8 years’ conventional capacity remaining by 2008 indicates that land supply was one of a number of influences on the Auckland market. Consent numbers had declined considerably after 2004, the decline coinciding with a sharp drop in consumer confidence in 2005 – confidence generally being a good lead indicator of housing development trends – as well as a slowdown in net in-migration, and a slowing in dwelling price rises at that time. Hence, there is considerable evidence that a shortfall in residential land supply in Auckland was not the sole, or even the primary driver of the growth in dwelling prices, or of the shift in the structure of residential property values which saw the land component exceed the improvement component from the mid-2000s.

Also in direct contrast with the view that ‘the price of land is the primary problem’ is the research undertaken for MBIE – and contained in the November 2014 ministers’ briefing alongside the advice on migration policy. This identified in relation to Housing Accords & Special Housing Aras Act/land supply that ‘if land prices fall by 1%/quarter, the NZ regional housing model forecasts that house prices will only be 0.2% lower after 5 years’. Simply, their research showed that a drop of 19% in land price could be expected to lead to a drop of just 0.2% in house prices.

Abolishing urban limits?

Finally, setting aside for the moment the question of whether land supply & land price is the key villain in the housing market drama, the obvious question is how effective the ‘solution’ of abolishing urban limits could be, especially in the short to medium term. Identifying land for urbanisation and getting it serviced, developed & released to the market is not a short-term solution to housing prices – it does not happen overnight. Any effect which the removal of urban limits might have on land prices would take a considerable time to flow through, first to raw land prices, and subsequently to dwelling prices.

Moreover, the proposed Auckland unitary plan already would provide for new urbanisation over a very large area of land (12,000ha+ of future urban zone). It is not clear how signalling that yet more land can be urbanised is expected to reduce the cost of land, when that land already identified will take quite a few years to service & develop, and require very large expenditure on infrastructure. It is difficult to see how allowing more land to be identified as potentially urban would have any material effect on housing prices – just as the research for MBIE showed – and particularly how it could offset the much, much stronger influences of migration growth & easy access to finance.

The Auckland urban economy needs its future form & efficiency to be guided by solid evidence – not shaped by migration policy.

Link:
Market Economics memo June 2016

Attribution: Market Economics newsletter.

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Council development agency to decide initial shortlist by December

Auckland Council’s new development agency will cut a list of 9 large-site targets down to a shortlist of 2-3 when it reports back to the council’s Auckland development committee on 10 December.

When council strategists started on the project they had a list of 64 large sites that were recommended, referred to as type 1. The agency formed on 1 September, Panuku Development Auckland, will take over from here.

The council’s principal business growth & infrastructure advisor, David Taylor, said in a report to the committee yesterday the type 1 urban redevelopment areas would require a high custodial, long-term approach, such as the redevelopment activities at the Auckland waterfront. This was integral to council priorities such as spatial priorities & special housing areas.

The 9 areas on the list at the moment are Manukau, Otahuhu, Onehunga, Newmarket, Northcote, Takapuna, Mt Eden Station, Avondale & Henderson.

Cllr Cameron Brewer said Newmarket & Mt Eden station were potentially the top 2 in terms of market attractiveness, but asked if they were unlikely to make the shortlist because the council would have less land influence there.

Mr Taylor said all recommended sites had tradeoffs, and at this stage of Panuku’s existence control over how an area developed was important to it: “Without any funding for Panuku, land is a key element.”

Cllr Brewer warned that the public raised concerns about the role the council might get into in development: “If we’re starting to get into the role of purchasing land….” He said Panuku’s role needed to be in forming partnerships and facilitating development not in competing with the private sector.

Cllr Cathy Casey pointed to a role of providing housing for the elderly but was concerned at the emphasis on location, citing the Catholic Church’s Liston Village as an example where there was competition between taking land occupied by a number of elderly residents and using it for a park: “The local board has the view given the housing shortage that we retain the village. The location doesn’t enter into your list, but housing for older people is an issue across the whole region.”

Mr Taylor said Panuku had housing for older people as a separate project line. He said the initial type 1 category was about size, where the council agency could facilitate development and draw in partners: “Where we had some skin in the game was important.”

Attribution: Council committee meeting & agenda.

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First priority list proposed for new council development agency

Auckland Council staff will put 9 locations to a council committee on Thursday as priority areas for its new development arm to focus on.

They are: Manukau, Otahuhu, Onehunga, Newmarket, Northcote, Takapuna, Mt Eden Station, Avondale & Henderson.

These areas were selected after an urban location analysis project and will be put to the council’s Auckland development committee as areas for the new agency, to Panuku Development Auckland, to consider.

Panuku Development Auckland was formed on 1 September through the merger of Auckland Council Property Ltd & Waterfront Auckland.

The council’s principal business growth & infrastructure advisor, David Taylor, says in a report for Thursday’s meeting the analysis was done in the transition to recommend locations for the new “type 1” urban redevelopment programme, which would require a high custodial, long-term approach to redevelopment, such as the redevelopment activities at the Auckland waterfront.

Mr Taylor said the work done through this project, and the focus of Panuku especially as it relates to type 1 locations, was integral to council priorities such as spatial priorities & special housing areas.

The new organisation’s board could now shortlist type 1 locations and develop a type 1 programme. Mr Taylor said Panuku would also prioritise the existing portfolio carried over from Auckland Council Property and the treatment of these projects into other less custodial programmes.

“Panuku will seek to develop a view on the full range of programmes – including the next-order type 2 & 3 locations – they will take forward across the Auckland region and will engage further with councillors, local boards & communities on this before the end of the year.”

Attribution: Committee agenda.

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Another contortion on development capacity

A report on residential development capacity of the Auckland region, produced for the independent hearings panel on the unitary plan, raises the same questions as were raised in initial modelling 2 years ago, again without answering the primary question.

That primary question, which is political, is: Should you allow the Auckland urban footprint to expand without constraint, or should you contain it?

That’s before considering the second question, in the form of ‘how long is a piece of string?’: Which population projection for the next 30 years is the real one?

The Government came to Auckland’s rescue over the weekend, when Immigration Minister Michael Woodhouse came up some new incentives to chase immigrants out of the region. I filed it under ‘regional growth strategy’, though of course it has nothing to do with any such strategy. Strategies are born of deep thought, not scribblings on a notepad to get past a nuisance issue for the moment.

But if the Government did have such a strategy, it might be to encourage migration – both internally and from overseas – towards some of the regional research centres Economic Development Minister Steven Joyce has been promoting.

Numerous rural points north & south of Auckland – Wellsford, Warkworth, Pukekohe – are actually in the Auckland Council area. They are treated as outposts when, under the Steven Joyce scenario, they might be treated as centres with a growth future.

In that scenario, they might encourage new business and, on the back of that, some more intensive housing than is considered appropriate in their present economic climates.

There was plenty of angst when council modellers came up figures for housing capacity 2 years ago which critics said were unrealistic. They included places like schools & churches, business premises listed for potential change but unlikely to have a change of use.

That criticism ignores the real estate cry: Everything is for sale.

Churches use commercial premises when it suits, schools can develop vertically. One point made in the report is that bulk retail outlets aren’t going to quit new premises in the near future. Wrong. Developers develop, retailers change what they consider is optimum.

The report released last Thursday is the outcome of an “expert conference”, part of the process to formulate the unitary plan, which ran over 5 months and was facilitated by David Hill.

He chaired an experts conferencing group of 15, backed up by a property developers expert group of 8 (2 of whom were in both groups). I would call the combined group practitioners & campaigners, some demonstrating expertise.

As an example of what I see as erroneous thinking in the report, there’s this statement on bulk retail staying put: “Many of the recently developed bulk retail areas are on what were business 4 sites and are now often zoned mixed use sites. These sites have a relatively low level of improvements (meaning their development potential will often show up as ‘residential development feasible’), however many of the owners of these relatively new retail stores will not want to change their use to residential. Many of these sites have also been subdivided into strata titles, with many owners in a body corporate system (ie, not easy for a developer to buy).”

What happens when you start building apartments above bulk retail? And schools, and amenities? And you take out parking spaces because many of the customers live on site?

Will Penrose remain the heartland of Auckland industry? Will the poorly used Eden Park remain a stadium? Will South Auckland grow new types of business for a more educated population? Will Aucklanders occupy a whole range of different housing types as they move into quite different futures?

And the question that’s always waiting for planners who think in terms of finite frames: If we get the million extra people projected (on the high side of the scale) in 30 years, what happens in 30 years + 1 day?

The report’s conclusion says: “A property development experts group provided robust development costs & sales price data which have enabled Auckland Council’s RIMU team (research & evaluation unit)  to set up the Auckland Council development capacity (ACDC) model, that is able to import CfGS calculated plan enabled capacity, make some adjustments to dwelling capacity in more intensive developments reflecting zoning and typology, followed by more importantly development feasible capacity.

The ACDC15 Model has estimated that the currently enabled development feasible capacity enabled by the PAUP on the sites modelled is 64,420 dwellings.

The results of the ACDC15 development feasible dwellings are generally consistent with the results of earlier pilot development capacity modelling undertaken by SD4/PF, AT and DF, which identified that developable capacity is less than plan-enabled capacity.

As well as the currently feasible capacity, there is the HNZC potential of 19,000 dwellings (lower scenario only) to be developed over the period to 2041.

The panel’s report says the expert group had divergent views on the impacts of some issues affecting the number of dwellings that could be developed within the 30-year timeframe:

Issues that will reduce the achieved reality from the latest model results:

  1. Development chance
  2. Capacity utilisation
  3. Infrastructure constraints
  4. Development sites costing more than the CV

Issues that will increase the achieved reality from the latest model results:

  1. Site amalgamation
  2. The effects of time improving viability on any chosen site
  3. Very effective developers being able to perform better than the “mid-range”.

The expert group accepted that the anticipated effect of all of these issues depended on a range of assumptions, and the report said confidence in those assumptions might require further expert group assessment.

Link: Expert conference, topic 13, outcome report, residential developable capacity for Auckland

Attribution: Panel report.

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New measures to take migrants away from Auckland

The Government’s answer to immigrant pressure on Auckland is to offer incentives to go elsewhere in the country.

Immigration Minister Michael Woodhouse said yesterday the Government would introduce a package of immigration measures aimed at improving the spread of workers, skills & investment outside Auckland.

However, one line in his release sounded entirely discriminatory against new immigrants: “New Zealanders will always be first in line for jobs and that won’t change.”

For the rest of it, Mr Woodhouse sounded gung-ho: “Thousands of people from all over the world are moving to New Zealand because it is a good place to live, work & raise a family. Those people make a significant contribution to New Zealand’s economic growth by providing skills, labour & capital we need, along with valuable cultural & business links.

“Currently, many new migrants settle in Auckland, which faces infrastructure challenges as it transforms into a truly international city. At the same time, business owners in other parts of New Zealand often struggle to find enough skilled workers to meet their demands.

“While there are already incentives to encourage migrants to move to areas outside of Auckland, we can do a better job of matching the needs of regions with available migrants & investors.”

New measures to take effect from 1 November include:

  • boosting the bonus points for skilled migrants applying for residence with a job offer outside Auckland from 10 to 30 points
  • doubling the points for entrepreneurs planning to set up businesses in the regions under the entrepreneur work visa from 20 to 40 points, and
  • streamlining the labour market test to provide employers with more certainty, earlier in the visa application process.

In addition, from mid-2016 a pathway to residence will be provided for a limited number of long-term migrants on temporary work visas in the South Island.

“Unemployment across the mainland is nearly half that of the North Island, and labour is in short supply. Most workers in lower-skilled jobs must apply to renew their work visas every year. Some of these people have worked hard and paid tax to New Zealand for many years. They are valued at work & in their community, but have no avenue to settle here permanently.

“We’re looking at offering residence to some migrants, who have applied at least 5 times for their annual work visa. In return, we will require them to commit to the South Island regions where they’ve put down roots.”

Mr Woodhouse said the Government was also considering a new global impact visa to attract high-impact entrepreneurs, investors & start-up teams to launch global ventures from New Zealand.

“I will announce further details later this year, but we envisage this visa would be offered to a limited number of younger, highly talented, successful & well connected entrepreneurs from places like Silicon Valley.”

Attribution: Ministerial release.

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Council wants feedback on greenfield rezoning sequence

Auckland Council has put a draft strategy on rezoning 11,000ha of future urban land out for public feedback. Public consultation runs from today until Monday 17 August.

The strategy is about determining the sequence & timing for the 11,000ha of greenfield land to be made ready for urban development over the next 30 years.

It’s zoned future urban in the proposed Auckland unitary plan and is inside the rural:urban boundary.

The draft future urban land supply strategy focuses on land located in: 

North – Warkworth, Wainui & Silverdale-Dairy Flat
North-west – Whenuapai, Redhills, Kumeu-Huapai & Riverhead
South – Takanini, Opaheke-Drury, Karaka, Paerata & Pukekohe.

The land is mainly rural, so development can’t occur until bulk infrastructure is in place.

Deputy mayor Penny Hulse said yesterday the strategy aimed to provide a logical sequence for when the land can be made development-ready through the co-ordination & delivery of the necessary bulk infrastructure.

The proposal doesn’t reconsider the location of the rural:urban boundary or the future urban zone, which the unitary plan independent hearings panel will effectively determine when it delivers its recommendations to the council.

Mrs Hulse said an estimated $13.7 billion of preliminary bulk infrastructure would be needed to get the nominated areas ready for development: “The area we’re talking about with this land is equivalent to 1.5 times the size of urban Hamilton, so the scale of infrastructure required is enormous. Obviously we can’t develop everywhere at once, so we have to make informed choices on the order & timing to make these areas development-ready.”

Link: Shape Auckland

Attribution: Council release.

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Council to vote today on how much housing can be outside boundary

Published 6 March 2012

Auckland Council’s Auckland Plan committee got halfway to deciding yesterday whether to stick with a proposal for 70% of new homes to be inside the metropolitan urban limit, then deferred the decision until today.

That was in the plan section on development strategy. Staff also presented councillors with a completely revised chapter on housing (see separate story) and that was accepted, along with some tougher wording sought by Cllr Cathy Casey – and also with removal of the word “intervention” from 2 recommendations on council action, sought by Cllr Dick Quax, who said the less council intervention the better.

Apart from the undecided chapter on development strategy, the committee will have a full draft plan before it when it meets again today to confirm what will be put out to public consultation.

Cllr Quax has run a campaign demanding evidence for the council’s support of a compact city policy, in the belief that the vast majority of Aucklanders prefer to live in stand-alone homes in suburbia, not in more intensive developments.

When he was seeking information in January about reports on the proposed quality compact city concept for Auckland, he said he & some other councillors “are questioning both the viability of the compact city proposal and the process used to justify it…. I don’t think that shoebox apartment living, wall-to-wall townhouses and the denial of suburban living is a viable option for Auckland’s future, and if council officials have information that reflects the same conclusion, councillors need to see it….

“Concepts like ‘vision’ & ‘aspiration’ have been the domain of the council’s public relations machine for nearly a year. But the Local Government (Auckland Council) Act requires us to produce an evidential spatial plan, which is based on rigorous analysis, not assumption.”

That was when the council target for new homes inside the metropolitan urban limit was 75%. For yesterday’s meeting, the target was reduced to 70%, with the possibility that only 60% would be achieved. Cllr Quax said it would take huge political resilience to achieve 70%: “I remain unconvinced that we can actually do it, and if you have a plan you should plan to succeed.”

In response to Cllr Cameron Brewer, who cited Environment Minister Nick Smith last year wanting assurance “that the compact city won’t be too negative on house & land prices”, chief planning officer Roger Blakely said: “We’ve addressed the critical issues from the Productivity Commission and how that impacts on prices. One of their recommendations was you have at least 20 years of land in the pipeline, and up to 10 years of that ready to go. We’ve got the 20 years in the pipeline and 5-10 years – around a median of 7-8 years – to go.

“One of our recommendations in the draft Auckland Plan is there will be release of large tracts of land as needed. We’re also looking at some possible market mechanisms on the way land can be released to developers.

“Another factor they (the commission) raised was councils looking hard at their own costs, consenting & so on, and that’s one of the recommendations in the planning report as well.”

Dr Blakeley said ministerial staff had indicated their ministers were pleased with council proposals.

In contrast to Cllr Quax, Cllr Wayne Walker wanted assurance that the 60:40 model was practical: “Housing is going to become difficult because of resource scarcity, and house sizes are going to drop because present sizes are unsustainable and larger house sizes are becoming increasingly unaffordable. I think we have to work back from it and work out how to do it. It is not business as usual, it is business unusual. I don’t think even 70% (new homes inside the urban limit) is possible.”

Dr Blakeley said the council’s models confirmed that the more dispersed form of development would result in increased greenhouse gas emissions. He said if 40% of new homes over the next 30 years were outside the urban limit, up to 115,000 new homes & 1400ha of new business land could be in “greenfield areas for investigation” & satellite towns. 2 satellites have been proposed – Pukekohe in the south, with a potential population of 50,000, and Warkworth in the north with 20,000.

Cllr Walker questioned the need for that much business land as well, saying: “Everything is getting leaner & meaner & incredibly much more energy efficient. There is not as much space required and increasingly business is going up.”

Cllr Quax wanted to know the density ratio for the compact city as well, but spatial & infrastructure strategy manager Dave Clelland said density shouldn’t be a target as “it almost implies a uniform typology across an area”. He said the region’s overall density would increase over the years, but development would be very place-based.

Deputy mayor & committee chairman Penny Hulse tried to draw the debate away from specific numbers, saying: “This is a very broadbrush document. We don’t want the growth, we’re not pushing for the growth, it’s coming whether we’re ready or not. This sets out a broadbrushed plan by which we can manage that. This (plan) just gives people an idea over the next 20 years of what to expect. This is not tying us down to absolute detail in precise areas. The unitary plan will define this in more detail but if we don’t plan (broadly) we will end up in a shemozzle.”

Cllr Quax: “I agree with that, but we’ve got numbers, we’ve got targets. That looks very prescriptive, it doesn’t look broadbrush at all. It looks like a set of targets we’re aiming for.”

Dr Blakeley said staff were recommending the council provide for more intensive zoning through the unitary plan process over the next 12 months – the implementation plan accompanying the vision of the umbrella spatial Auckland Plan – but councillors would need to know what they were aiming for, both inside the urban boundary and for rural areas.

Ensuring long-term supply of land for urban development would include phasing, releasing & servicing of land, and would require 3-yearly reviews of the supply pipeline, he said.

With some questions on the development strategy still to be answered, Cllr Hulse deferred a decision on that part of the plan to Tuesday’s session and moved on to the housing chapter.

Related story: Council acknowledges role in lifting housing cost, enters partnership to raise productivity, has plans to fix housing stock mismatch, slated for soft policy on rental underclass

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Attribution: Council committee meeting & agenda, story written by Bob Dey for the Bob Dey Property Report.

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ARC goes succinct in bid to leave lasting policy statement

Published 2 March 2010

The Auckland Regional Council has learned a new word in its dying days: succinct.

 

After producing a monumental review of the state of the regional environment last month – to be released in a couple of weeks – the regional politicians were confronted with a timetable for the review of the regional policy statement that would take hearings beyond election time in October.

 

Regional policy group manager Noel Reardon told the council’s regional strategy & planning committee today staff would complete several technical workstreams in the next month and the process, begun in November 2007, had reached the stage when pre-notification consultation would normally occur.

 

But the same staff who would progress this were also required to deal with regional plan changes, appeals against the regional policy statement and the regional plan for air, land & water, and over shifts in the metropolitan urban limit.

 

Meanwhile, the basis for any policy was shifting – apart from the switch to the new unitary Auckland Council in November, legislative changes include the second phase of reforms to the Resource Management Act, transport legislation, new national policy statements and new national environmental standards, and there is a proposal for a new spatial planning framework for the region.

 

Mr Reardon said the council could formally notify its regional policy statement review: “However, even were it to be notified today, the consultation requirements & public notification timeframes in the Resource Management Act mean the hearing of submissions and decision on the proposed policy statement would rest with the new council.”

 

Mr Reardon said providing the new council with an adaptable policy framework might be of more use.

 

The council’s second option was to halt the review, neither adopting no notifying the draft, which would waste work already done on it.

 

The third option, recommended by staff and approved by councillors, was to adopt the review & supporting technical documents but not notify it: “The draft could then be handed to the Auckland Transition Agency or the Auckland Council to inform the development of a new planning framework.” The council will still undertake some targeted consultation, focusing on the workability of policies.

 

The policy statement directly affects how land is to be developed, and Cllr Joel Cayford was one who expressed concern at handing over a half-finished document on vital matters such as that. He said that, in terms of the amended Resource Management Act & new governance structure, “the regional policy statement that we’ve been working on so hard could be entirely irrlevant”.

 

Cllr Cayford suggested, and others agreed, the regional council’s best course now would be to compile a document containing schedules, maps, specifics on development corridors & the like, “leaving a pretty succinct legacy document of future direction for the region. I see it as a 20-page sort of thing, so it doesn’t get lost. I don’t have any confidence in the Auckland Council producing anything for a while. If we could pull together some of the real grunty bits of what we’ve done, it won’t have been consulted over but it will be our best shot of it, land use stuff,  it would be a useful thing to hand on.”

 

Earlier stories:

4 December 2008: ARC sets out way to a firmer grip on development

6 August 2008: ARC land & transport policy jigsaw starts to come together

 

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Attribution: Council committee meeting & agenda, story written by Bob Dey for the Bob Dey Property Report.

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ARC sets out way to a firmer grip on development

Published 3 December 2008; additional section on business land & growth capacity published 4 December 2008

The Auckland Regional Council set out yesterday how it wants to take a firmer grip on regional development.

 

Under the recommendations adopted by the council’s regional strategy & planning committee:

 

The council would support, in principle, a strategic approach to metropolitan urban limits so all relevant issues in the identified area are addressed, in sharp contrast to the present ad hoc, incremental approachMetropolitan urban limits would be moved to include greenfield areas earmarked for large-lot business development under future-urban classificationsCertainty of sequencing & timing of land release would be given either in district plans or in the regional policy statementSimilarly, certainty would be given on appropriate land uses, urban form & design, integration of land use & transport, infrastructure (including the appropriate balance between employment & residential uses and other services), andRecognising the importance of achieving quality in intensification, matters relating to quality of urban design should be incorporated into the policy.

This would be a fundamental change from stonewalling by the regional council on urban expansion while local councils want to allow various non-complying developments that exceed accepted limits.

 

But the regional council also wants to push local councils into accepting more precise growth targets – and wants to force the local councils to stick to these targets. In many cases, when a council has been faced with intensive development that raises an outcry, it’s caved in to the nimby (not in my back yard) syndrome.

 

The regional debate on managing urban growth is complicated by a number of other factors:

 

The policy on air qualityThe proposal for a more sophisticated hierarchy of growth centresLate arrival of a business land strategy, andThe method by which growth capacity can be identified & monitored.

The regional council is working towards a series of new policy statements, to be agreed by November 2009, but with the drafts required by next March so they can be taken out to consultation.

 

While it would be easy for developers to overlook the policy on air quality as something that doesn’t concern them – issues such as domestic fires & vehicle emissions can seem like somebody else’s problem – these issues can set very real constraints.

 

The council’s environmental policy & planning group manager, Alastair Smaill, told councillors in his report yesterday a decision on how particulate matter is monitored could be decisive in limiting industrial development, all because of levels being exceeded by other sources such as traffic, home heating, roadworks & other construction activities.

 

“Industrial emissions are a comparatively minor contributor of particulate matter. However, these exceedences of the national environmental standard will have a significant impact on the consenting of new industry in the region after 2013, despite the fact that industry has not caused the exceedences.” On top of that constrain, he said: “Further regulating industry in this way will not solve Auckland’s air quality issues.”

 

Mr Smaill said the regional council could take a stand on traffic management to reduce its effect on air quality, which would also result in specifying land development opportunities.

 

“It could require new development to be managed in a manner which ensures that sensitive land uses – such as hospitals, schools & childcare facilities – are set back from major roads. A separation distance of 100m or more has major health benefits. The regional policy statement could also indicate the ARC’s support for initiatives aimed at relocating existing sensitive land uses.”

 

Methods he suggested included using corridor management plans, directing heavy-duty diesel vehicles on to specific routes and continuing to highlight ways of reducing private vehicle use.

 

The air quality issue ties in with the council’s proposed directions for managing urban growth in this way, as outlined in a report by the council’s regional development policy team: “The review of the regional policy statement needs to address how the region will provide for quality of life, whilst accommodating future growth and managing the pressures & impacts on the region’s natural & physical resources.

 

“This will partly be achieved through a more directive approach to how the regional policy statement manages anticipated growth in the region, as initiated through plan change 6 to the statement.”

 

A schedule to plan change 6 – not yet in force, but giving effect to the regional growth concept (of a compact urban area) and integrating land use & transport – lists high-density centres & corridors, and future urban areas around the region, all to be publicly notified by 2010.

 

Calculating capacity & business land need – slowly

 

The Regional Growth Forum project to calculate available business land & requirements for new land, begun at the start of this decade, has spawned 2 new projects – the regional classification project, intended to generate a more sophisticated understanding of the region’s centres, corridors & business areas; and the futures land use & transport project, which is intended to use the information from the other project to update future land use to accommodate new population & employment growth projections out to 2050.

 

However, regional policy group manager Noel Reardon said the first of these projects wouldn’t be ready to feed into the draft regional policy statement, scheduled for next March.

 

Mr Reardon said regional council staff wanted direction from councillors “regarding emerging suggestions on how to integrate an updated & refined land use into the regional policy statement, and to provide a more directive approach to urban growth management”.

 

Schedule 1 to plan change 6, as well as identifying growth areas, sets a timetable for expanding the metropolitan urban limit. But because of faster growth than anticipated, projections had been changed to expect the population of 2 million in the region to be reached by 2035 instead of 2050, and that by 2050 the population could reach 2.3 million.

 

That meant capacity would fall short and highlighted the need for the region’s sector agreements to provide detail on potential locations for residential & employment growth.

 

Mr Reardon said capacity calculations could be provided in 3 ways:

 

By geographic sector, broadly estimated for a minimum 20-year period, but leaving the detail to the local councilsBy individual council areaBy growth area, with the regional council seeking to ensure that local councils “appropriately plan for the potential capacity in these areas.

“Each of the options outlined above would also require developing provisions in the regional policy statement review, to ensure that territorial authorities give effect to these capacity numbers through district plan changes.”

 

Mr Reardon said the regional council staff preferred the third option because calculating by growth area “would provide greater certainty about the location, scale & sequencing of growth”.

 

Mr Reardon said the continuing assessment was likely to point to the need for additional greenfield land outside the present metropolitan urban limits to accommodate growth in group 1 (large-lot industrial) business sectors.

 

“It is recommended that this could be achieved by identifying greenfield location for future business land in the policy statement review as additions to the future urban areas identified in schedule 1.

 

“Supporting policies & methods would also need to be provided to require district plans to provide appropriate zoning in these locations and to outline the range of business activities expected, consistent with the regional classification of business areas.

 

“The benefit of this approach would be to provide clarity about the location & extent of future business areas and their timing for release, thereby reducing the clamour for more greenfield business land in an ad hoc fashion.

 

“As this would signal further amendments to the metropolitan urban limit boundary in the future, it is suggested that, as a first step, where business greenfield areas are already identified in schedule 1 (eg, Hingaia), these could be included within the boundary as part of the review. This would reduce the need to undertake discrete policy statement changes (MUL shifts) over time.”

 

Mr Reardon said this approach was also based on the intention that existing business areas & potential brownfield development opportunities are fully used and provide a significant contribution to meeting the region’s demand for business land.

 

Comment: If you have managed to read this far, you may have gathered my reason for extending the story to contain the quotes on business land, going into some detail. It demonstrates the process, the long time it takes to plan, the desire of planners to have precise targets mapped out, and the never-ending extra planning that gets thrown into the process without an answer ever being produced.

 

While this has been happening, land traders have grabbed sites and raised prices on assumptions that, one day, zoning will change. The slow deliberation has raised development costs immensely.

 

Want to comment? Email [email protected].

                                       

Attribution: Council committee meeting & agenda, story written by Bob Dey for the Bob Dey Property Report.

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ARC land & transport policy jigsaw starts to come together

Published 5 August 2008

The Auckland Regional Council’s decision today to endorse a regional fuel tax is one part of a fragmented jigsaw which is, quite quickly, starting to come together.

 

Less attention will be paid to the review of the regional policy statement, a complicated exercise also nearing completion.

 

A third element of crucial change concerns the city waterfront. A draft strategy to relocate the remainder of the bulk liquids industry from Wynyard Pt – to make way for a new residential, commercial & recreational quarter while retaining parts of the fishing & marine industries – was presented to the regional council’s strategy & planning committee today.

 

Auckland City Council commissioners have completed their hearing of submissions on the land part of redeveloping the former tank farm into this people-oriented Wynyard Quarter. And the regional council hearing on the watery part of it is under way.

 

The regional policy statement has been a key document in the regional council’s attempt to enforce the metropolitan urban limit in 2 ways – one by promoting a more compact, more intensively built city-region, the other by opposing urbanisation outside the MUL.

 

Territorial councils in the region, particularly those with land on the fringes, have often turned against the notion of a compact city inside the MUL, partly because they need more urban users to pay for services but mostly because there is a constant clamour to subdivide below permitted block sizes of 20ha for rural zones & 4ha for lifestyle.

 

In keeping with the regional council’s opposition to development which would transform country areas to citified use, the council had reports today on 2 court rulings, one which supported its case, one which found that development outside the MUL would invariably raise precedent & integrity issues. In addition, the committee received details of 6 proposals around the region where the council’s policy implementation staff have lodged submissions opposing development, and 2 in support.

 

In general, those submissions are made where the regional council’s staff feel the urban containment policy is being breached.

 

The fuel tax, which still has to get Government approval, would start at 1c/litre of petrol or diesel on 1 July 2009, rising to 3c a year later & 5c in 2011. The regional council’s aim is to make up the $700 million cash gap between perceived public transport needs and revenue derived from rates & distributions from Auckland Regional Holdings, owner of Ports of Auckland Ltd.

 

The public transport improvements include electrification of the regional rail network, 20 new or upgraded railway stations, reopening of the Onehunga branch line for passenger services next year, more frequent Pukekohe services and the Manukau City Centre rail link opened by July 2010. Bus services around the region would be improved and numerous improvements for ferry wharves & services are proposed.

 

The regional council would raise $605 million of debt to fund the ARTA (Auckland Regional Transport Authority) projects and would be repaid from the fuel tax.

 

Until last year, regional transport issues were debated primarily as matters of easing congestion – and therefore, usually, of providing more roadway. The focus now is on integration between land use & transport provision.

 

The review report, compiled by regional policy statement manager Matthew Twose & senior policy analyst Louise Gobby, acknowledges a shift in attitudes, “which requires a strategic management approach, rather than merely a focus on resources & adverse effects”. That shift includes the discovery of sustainability, support for integrating management between Resource Management Act documents & other regional strategies, changes to the RMA that require greater consideration be given to heritage, iwi & biodiversity and legislative changes to the role of local government.

 

One of the most important parts of the review document for the property industry is a statement on the relationship between the regional policy statement, regional growth strategy & plan change 6 (under the Local Government Auckland Amendment Act), focusing on land use, intensification & transport integration within the MUL “to help the region achieve a good quality of life for current & future residents”.

 

Among principles now included in the growth strategy are preservation of areas valued for their natural & cultural attributes, development of other agreed areas in ways that retain their character & values and building an urban form that provides residents with a good quality of life.

 

“The regional policy statement is the major mechanism by which these principles are reviewed & translated into land-use decisions,” said the review report endorsed today.

 

The next step is for the regional council to opt for a 2-part structure, the first part containing issues & objectives, the second containing policies & methods. That will be debated next week and a draft in that form will be put up for approval in December, followed by public consultation next March.

 

The aim of the regional council, through the tying together of all these strands, is to provide more certain direction, and that direction is towards the concept of a compact city supported by efficient public transport networks.

 

Want to comment? Email [email protected].

 

Attribution: Council meeting, agenda, story written by Bob Dey for The Bob Dey Property Report.

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