That requires a stable economy, not a deliberately overheated one.
They need assurance that infrastructure will be in place when they come to build. That requires changes to infrastructure funding, which may be on the way.
Buyers need assurance that they will be entering communities with considered access to jobs, shops & amenities. That requires more thought on overall urban development, some of which is happening at a number of points around Auckland.
And the pricing needs to be “right”.
The first (steady workload) is haphazard, the second (infrastructure provision) has long been played in reverse, and the third (thinking community development through well in advance) has mostly been a laughable question but has been happening in the age of the supercity council.
In Auckland until 2010, the central Auckland City Council on the isthmus played against those stretching to the region’s borders.
The suburban & rural councils needed a supply of jobs, plus infrastructure such as roads and power, water & waste services which they were in no position to provide before users’ arrival was imminent:
- Manukau provided industrial land & a central business district
- North Shore had industrial land but a restricted business district until the former Housing Corp land at Albany was opened up to both industry & a new business district
- Waitakere had 2 business districts & some business land
- The fringe districts of Rodney in the north, Papakura & Franklin the south had plenty of land with restrictive zoning, limited supplies of industrial land and little finance available to pursue growth agendas.
1990s accord worked in reverse
A growth accord at the end of the 1990s theoretically enhanced the councils’ abilities to prepare for new suburbs, but in fact highlighted the contest between the centre’s desire not to see business or tertiary education head elsewhere. At the same time, Auckland City Council began to allow residential intensification of nominally business-zoned land, while that council & the regional council resisted the advance of suburbia beyond the existing fringes.
You have, therefore, over 20 years of implacable resistance to sane expansion, only recently subdued. And the change of heart, coming well after the 2003-04 immigration spike, wasn’t accompanied by the funds to provide infrastructure ahead of housing development.
That was when the Government needed to make crucial decisions on how to supply funds beyond those coming from the ratepayer base. 15 years on, the response to the plight is that the Government should undertake the fix because councils have failed, instead of supplying funding differently so those councils (principally Auckland) could succeed.
The terms of Auckland Council’s unitary plan, mostly given final approval in November 2016, enabled 2 major changes:
- Far more land, zoned future urban, would be available for housing, and
- Suburban rezoning meant mostly low-level intensification became possible as of right through much the existing urban area.
However, by 2016:
- Land prices had spiralled upward
- Infrastructure in place was inadequate to meet a population surge, and
- Funding to provide new infrastructure wasn’t available until subdivision sales brought in payments from home buyers.
All of these problems have been obvious to the blindest onlooker, and have been unanswered to the tune of billions of dollars in price escalation, led by fringe land price escalation.
The question now is:
- How to produce equitable solutions?
- Equitable, because producing cheaper housing for new buyers now would create a string of impacts on existing owners, including devaluation & negative equity.
2 important equations are the levels of net immigration & natural increase.
Over the last 10 years, according to Statistics NZ, immigrants made up 52.6% of New Zealand’s population increase – 332,900 of 632,900.
Over the last 5 years, however, the net inflow of migrants was ramped up to 66.6% of the increase – 274,700 of a total increase of 412,400. Natural population growth contributed an average 30,000/year over the decade, averaging 32,460/year over the first 5 years, declining by 15% to an average 27,540/year over the last 5 years.
Births don’t create instant demand for more houses, deaths create openings, both of those spread nationally. Immigrants create instant demand on arrival, heavily weighted to Auckland.
During the switch from intentions-based to outcomes-based migrant counts, Statistics NZ has stopped producing calculations region by region, but on the old counting system the net inflow of migrants to Auckland rose from 42% in 2015 to 48% in 2016, and to 51.6% in 2017.
The net inflow of migrants hit 72,000/year in July 2017, then started to slide, falling by 11,000 (14.7%) through to the end of 2018. Statistics NZ’s new method of counting migrants – outcomes-based with monthly recounts, replacing the intentions-based system – dropped the count from 61,750 at the end of 2018 to a wide range of numbers centring on about 50,000/year since then.
That range, using the new system & monthly recounts, is from about 43,000/year to about 56,000/year.
Given the uncertainty over those numbers, it’s hard to estimate the consequent housing need, and even harder when regional calculations aren’t available in any form.
Government policy ought to be playing a role in guiding future migration patterns. For many NZ citizens, the health of the Australian economy is a major factor. Jobs there at higher wages become attractive, but the Australian economy is down at the moment, and may fall further as the US trade war against China persists. That keeps many New Zealanders at home.
Chinese investors saw New Zealand as a place to plant capital, much of it through buying houses, but that investment avenue has been plugged and Chinese immigration is down.
Nevertheless, overall immigration remains high, maintaining pressure for more housing, though of a different kind from investment stock.
This government came to power with at least some of its members advocating reduced immigration, but that advocacy has disappeared.
It ought to be revived, with specific planks. Migrants generally know big cities, and their focus in deciding to cross the world shouldn’t be simply to live in our biggest one. But to change that intent, New Zealand needs to make more centres attractive to migrants in terms of jobs, earnings & lifestyle.
Part of that attraction will be the ability to move quickly around the country, hence transport programmes should remain a priority.
Reducing immigration, if initially only through weeding out people likely to be less productive, should send a message that the era of windfall profits from fringe landholdings is over.
That message can also be sent by the Government working in partnership with councils & developers to produce new beyond-the-fringe centres that can grow to stand alone.
For instance, you will see in today’s Bob Dey Property Report diary an application for a new subdivision at Warkworth.
Warkworth, part of the Auckland region, can growth into a larger centre, and that can happen at numerous other points outside the central urban footprint.
That sort of spread can help reduce fringe land prices, and therefore housing costs. Construction quality can help: a council that sees quality work is going to start worrying less about major faults, and stop nitpicking.
In summary, from me, the answer to our housing problems lies not with the Government or councils taking over a sector’s development functions, but in supporting them by leading to best opportunities – a trained labourforce, opening development scope in a range of places that don’t amount simply to extending the fringe, smoothing regulatory practices.
And, most important, not flooding cities with more immigrants than can be comfortably placed. You might have as many immigrants as before, but you’d give them reason to spread out, and you’d give them & existing inhabitants reason to like new centres that aren’t simply fringe extensions.
Related stories today:
- Housing land shortages, the Treasury view, my take on the state of play & where to next
- Treasury view: Take harder approach to land use regulation
- A few adjustments can make our housing issues dissolve