Archive | Land use

Councillors get confidential report on way forward as St Marys Bay sewage project heads to Environment Court

4 objections have been lodged with the Environment Court against Auckland Council’s plan to dig a giant drain under houses along the St Mary’s Bay ridge, aimed at improving stormwater & sewage flows into the Waitemata Harbour.

Above: An aerial image showing where the 1km drain would be constructed.

The council’s Healthy Waters general manager, Craig McIlroy, told the strategic procurement committee yesterday 2 community organisations & 2 individuals had lodged objections, and the council had asked the court to set up a mediation process.

In his report to the committee, Mr McIlroy said the aim was to have the drain working by the end of 2020, meeting a timeframe for a number of large infrastructure projects to be in place before the America’s Cup yachting event, meeting of APEC (Asia-Pacific Economic Co-operation, to meet in Auckland, Wellington & Christchurch) and biennial Te Matatini festival, all in 2021.

The project involves the construction of a new trunk sewer to capture current overflows and divert them to a new pump station at Point Erin. When the capacity of the pump station is exceeded, overflows will go to a new sea outfall from Point Erin to deeper moving water in the harbour.

The key ingredient of the $30 million-plus project is a 1km conveyance & storage pipeline (1.8m internal diameter, about 2500mᶟ capacity) extending from New St to Pt Erin Park, underground & beneath residential properties, recreation areas & road reserve, with an invert depth ranging between 5m and up to 22m deep. (Check the 14 November story link below for further details of the project proposal).

The St Marys Bay & Point Erin improvement project went to a hearing by independent commissioners in November. They approved it on 9 November, but objectors were then heard by the council’s regulatory committee a week later. The committee deliberated in private, didn’t issue a decision in a minute but said the decision would be made public within a week.

Although that didn’t appear to have happened, committee chair Cllr Linda Cooper told me the committee had confirmed the commissioners’ decision. The project was back before the strategic procurement committee yesterday – starting in public then going to the confidential section of the agenda for discussion of financial implications, risks & mitigations arising from procurement of the project and next steps for procurement.

Mr McIlroy outlined the present situation in his report to the procurement committee: “At present, a combined sewer network carrying both stormwater & wastewater services about 15,000 households in central Auckland, including St Marys Bay. The network is very close to capacity and combined sewer overflows are frequent, with increasing public concern regarding these and pressure to reduce them.

“The St Marys Bay area experiences high frequencies of wastewater overflows from mainly 3 engineered overflow points. A further 2 discharge onto Masefield Beach.

“The St Marys Bay & Masefield Beach water quality improvement project has been designed to resolve these issues. It is the first major project to be funded through the council’s new water quality targeted rate and forms part of the broader western isthmus water quality improvement programme.”

Mr McIlroy said that, through undertaking this project, “further improvements to the combined network can take place without continued contamination of these beaches. This is important as the full suite of proposed solutions will take some time to implement.”

He said the regulatory committee had noted in its deliberations that “they do not think there is a causal link between the works & ‘cliff instability due to the depth at which the pipeline will be installed, the construction methodology, monitoring & the technology used.’”

Earlier story:
14 November 2018: Tank to solve western isthmus overflows approved, round 2 begins Friday

Attribution: Council committee meeting, agenda, hearing documents.

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The Build Act is new US anti-China weapon

In the hubbub over the US-China trade war, one element of it skipped my notice: an act passed through both chambers of the US Congress which will heighten tension, reduce environmental safeguards & politicise aid.

The Build Act (full title, the Better Utilisation of Investments Leading to Development Act) is overtly political in its requirement for projects to serve a US foreign policy purpose.

This will be done through a new organisation, the International Development Finance Corp (IDFC), which will replace the Overseas Private Investment Corporation (OPIC), set up in 1969.

Sarah Brewin, an agriculture & investment advisor to the International Institute for Sustainable Development, wrote about the enactment of the policy change in an article for the Independent Media Institute, which appeared on EcoWatch last week.

Her key paragraph:

“The Build Act requires the IDFC to develop guidelines & criteria to ensure that each project it supports has ‘a clearly defined development & foreign policy purpose.’ The requirement that all projects serve a foreign policy purpose, combined with weakened environmental protections, could see the IDFC supporting environmentally damaging projects if they are seen to be in US foreign policy interests – for instance, if it was thought that if not financed by IDFC, the project would instead be financed by a ‘strategic competitor,’with debt, influence & diplomatic relations accruing to that competitor rather than the US.”

The Build Act advances President Donald Trump’s view that human activity is the cause of climate change, while also advancing his anti-China cause.

EcoWatch, 4 December 2018: A US-China investment war is quietly emerging, and the environment will be the ultimate casualty
Reuters article, 4 October 2018: Congress, eying China, votes to overhaul development finance
International Institute for Sustainable Development

Attribution: EcoWatch, Reuters.

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Corbel in liquidation

Christchurch-based builder Corbel Construction Ltd went into liquidation yesterday.

The liquidators are Debbie Chapman & Andrew Oorschot, of Ashton Wheelans Ltd, Christchurch.

Craig Jones & Mark Wells founded the company under the name Hobbit Homes Ltd in December 2000 and remain its directors & 96% shareholders.

Corbel opened an Auckland office in October 2015, with the ambition of becoming a national contractor.

Earlier story:
13 January 2017: Auckland projects boost Corbel

Attribution: Companies Register.

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7th month of 1000-plus consents for Auckland just like the early 1970s – for twice the population

Consents for new homes in Auckland have topped 1000 for the 7th time in 8 months and taken the region’s annual consent rate over 13,000 for the first time since the early 1970s, when the population was half the 1.696 million now.

The region’s share of national consents was steady at 37% for October, and jumped to nearly 40% for the year.

Consents rose 14% in Auckland for the month, 15% nationally. For the year, Auckland’s consents are up 25% but nationally the rise is less than 7%.

Standalones’ share up near 70% again

Standalone homes’ share of the market nationally jumped in September and again in October after a sharp decline in March was followed by another 5 months of a low share.

Standalones, at 2032 consents, topped 2000 for only the fourth month in 2 years. Consents for apartments, on the other hand, at 88 for the month, dropped below 100 for only the second time over those 2 years.

The standalone share was at 70.9% a year ago and reached 72% in January, but fell to 59.9% in March & 59.1% in April, then recovered to be above 60% over the next 6 months, reaching 65.4% in September & 69.4% in October.

Statistics NZ acting construction statistics manager Dave Adair said yesterday standalones represented 48% of Auckland consents for the year, but 74% over the rest of the country.

Although the number of consents nationally for standalones in October was 12.5% up on a year earlier at 2032 (1806), the annual consent rate for them has dropped in both the last 2 years, from 21,369 in the October 2016 year to 21,194 in the next 12 months and to 20,918 in the latest 12 months.

Apartment consents have risen every year since that sector of the market started to climb out of the global financial crisis doldrums in 2013. In the 12 months to October 2013, 943 apartment consents were issued, rising to 1916, then to 2337, to 2555, to 3001 and in the last 12 months to 3835.

Throughout those 6 years, consents for suburban units & townhouses have stayed well ahead of apartments: 1506 in the October 2013 year, then 2596, up to 3565 in 2015, then to 4267 & 4769, and to 6277 in the latest 12 months.

The national residential consent numbers for October and the year to October, compared to October last year, and the latest 12 months compared to the previous 12 months:

Total consents for new homes: 2926 (2549), up 14.8%; 32,925 (30,866), up 6.7%
Total value for new homes, plus alterations & additions: $1.298 billion ($1.227 billion), up 5.8%; $14.137 billion ($13.355 billion), up 5.9%
Alterations & additions, $165 million ($204 million), down 19.1%; $2.041 billion ($1.964 billion), up 3.9%
Standalone homes: 2032 (1806), up 12.5%; 20,918 (21,194), down 1.3%
Apartments: 88 (78), up 12.8%; 3835 (3001), up 27.8%
Retirement village units: 143 (220), down 35%; 1895 (1902), down 0.4%
Suburban townhouses & flats: 663 (445), up 49%; 6277 (4769), up 31.6%
Standalone share of consents:  69.4% for the month (70.9%); 63.5% for the year (68.7%).

All construction for October compared to October last year, and the latest 12 months compared to the previous 12 months:
Total: $1.96 billion ($1.68 billion), up 5.7%; $21.29 billion ($20.22 billion), up 5.3%
Non-residential: $622 million ($584 million), up 6.5%; $6.76 billion ($6.47 billion), up 4.5%.

The Auckland picture:

Around Auckland, residential consents were up in 9 wards and down in 4 for the month. For the year, they were up in 11 wards, down in 2.

Auckland residential consents, for October & year to October compared to October last year and the previous 12 months:

Region: 1077 (944), up 14.1% from last October, 36.8% of national total (37% last October); 13,078 (10,469), up 24.9%, 39.7% of national total for 12 months (33.9%)
Rodney: 86 (65), 791 (1022)
Albany: 203 (253), 2527 (2497)
North Shore: 39 (83), 857 (485)
Waitakere: 156 (29), 849 (555)
Waitemata & Gulf: 17 (14), 1184 (1132)
Whau: 50 (17), 593 (297)
Albert-Eden-Roskill: 96 (37), 914 (771)
Orakei: 24 (13), 440 (236)
Maungakiekie-Tamaki: 40 (36), 673 (629)
Howick: 56 (107), 866 (492)
Manukau: 79 (90), 1105 (490)
Manurewa-Papakura: 162 (152), 1596 (980)
Franklin: 69 (48), 682 (883)

Attribution: Statistics NZ.

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Private car’s days as symbol of power coming to an end

Never mind those petty rules of staying in your lane, indicating to change, obeying the traffic lights, feeding parking meters, accommodating your vehicle in an approved parking garage. No matter how beat up, or that it’s a polished company vehicle thrust into your care to proclaim your high status. Your car is a symbol of your independence & superiority.

Or, in downtown Auckland, it was.

In March, Auckland Council’s Auckland Development Office will file a report recommending trials to pedestrianise nominated streets in the central business district.

Queen St below Mayoral Drive is the primary candidate. High & Lorne Sts are among the smaller streets also likely to be high on the list.

Quay St would be reduced to 2 lanes, making it much more a pedestrian environment across from the wharves. Eastern suburbs traffic would be directed into the new traffic zones.

But before the trials, other preparation is needed. The development office wants traffic to be guided into zones, and not allowed to cross zones, and the office knows the pedestrians-only trials won’t work unless those preparations are in place.

Turning whole streets over to people on foot – plus bikes, prams, scooters, restricted visits by service vehicles and, in some streets, buses & trams – has been a venture too far for councillors for decades.

When Auckland City Council hired Ludo Campbell-Reid for the new role of urban design specialist in 2006 – coming from Tower Hamlets Council in London after earlier roles as chief executive of Urban Design London and in Cape Town – the notion of pedestrianising Queen St downhill from Mayoral Drive was getting, well, a foot into people’s thinking.

The city council turned down that idea, and also spurned pedestrianising a couple of blocks by a narrow margin. One change that did come, in 2007, was the introduction of bus lanes down Queen St. In addition, Lower Queen St between Customs & Quay Sts, and a couple of side streets – the lower end of Swanson St and Vulcan Lane – had their vehicle access ended.

But Mr Campbell-Reid switched from full-on pedestrianisation for major thoroughfares to the introduction of shared spaces, carried out in Elliot St, part of Fort St, and most recently in O’Connell St.

Meanwhile, gridlock took over, made worse over the last 2 years by the streetworks for the city rail link on Albert, Customs & Victoria Sts. People have watched – I think in awe, certainly not scowling – as they’ve waited at traffic lights and been able to observe the tunnelling below them.

And slowly the tide has turned. By the end of 2021, all going well, those tunnels are going to transport hundreds of passengers every 10 minutes or so into 3 central stations – people who have left the status symbol, the car, at home, or don’t even have one there.

The council development office, which Mr Campbell-Reid heads, can rely on those waves of passengers to lift support for locking cars out of the dominance they’ve long had in the city centre.

Those traffic trials are the biggest changes in the review of the city centre masterplan, approved in 2012, this time combined with the waterfront plan as the City Centre Masterplan 2040.

Proposed digital presentation of the new masterplan will allow for rolling reviews.

Auckland Council’s planning committee agreed unanimously yesterday to the development office’s proposals:

  • Digitisation in time to inform the council’s 2021-31 long-term plan
  • Rolling updates rather than 6-yearly updates
  • New content for public consultation & committee approval by July 2019
  • Maori outcomes
  • Grafton Gully boulevard
  • Access for everyone – the friendlier name for pedestrianisation
  • Trials & tactical urbanism initiatives to test & for consultation
  • Trial an “open streets” initiative in the city centre and work with interested local boards to trial it in other centres

Cllr Richard Hills summed it up: “At the Victoria-Queen St intersection at lunchtime, we’ve got 4500 people crossing & 500 cars. We’ve halved the number of cars coming down Queen St already, from 21,000 to 10,000. We have 7000 bikes/day coming into the city. That’s [the equivalent of] a whole lane from Silverdale.”

Committee agenda item 9, City centre masterplan 2040   

Earlier story:
12 January 2006: Auckland hires London urban design specialist Campbell-Reid

Attribution: Council committee meeting & agenda.

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The override edict versus responsible governance

Issuing edicts at the weekend is not a good way to govern in a democracy, but that’s the approach Transport, Housing & Urban Development Minister Phil Twyford has adopted to roll out a housing & urban development authority.

He’s promised consultation on the way to setting up the authority – but his proposal contains an important anti-democratic facility, the override.

This authority, under Mr Twyford’s proposal, will be able to override local & regional councils’ decisions, plans & policies on land use.

Good that he wants to speed up construction, but there are other ways to do it.

If the regulatory process is too ponderous – and it is, made worse by leaky building challenges & payouts, which in Auckland have not surprisingly made the council cautious in issuing consents – then smooth the process. Educate people, improve the construction & infrastructure sectors’ performance.

Mr Twyford’s call reminds me of the large infrastructure sector 20 years ago, seeking preferential treatment to get projects under way. My argument then was: Reject this quest, unless the small builder gets improved treatment too.

When a government minister sees a crisis without taking into account the years of failing to build or inspect properly, the number of homes vacated because of that and the billions of dollars spent in rectifying a completely unnecessary aberration from all sense, the minister is blind in at least one eye.

Creating Auckland’s unitary plan required serious thought!

Auckland Council has gone through a laborious process to replace a regional policy statement & 7 district plans with a unitary plan, 6 years after the super-city was set up. Most of that unitary plan became operable at the end of 2016. It involved consultation, submissions, council debate, hearings before an independent panel, further council consideration of panel recommendations, court conferences & decisions.

Why was all that necessary if somebody can come along and say, ‘We’ll ignore all that and do it differently’?

One of the failings of the last government was to create special housing areas that might be related to transport, job centres,shops & amenities – but in many cases were not. They were land-clearing (and, in many cases, onsell) propositions. A greater, considered community relationship wasn’t required.

Creating better communities through development proposals that are better thought through ought to be the primary consideration of this government.

A housing crisis doesn’t stand still

Mr Twyford referred again at the weekend to “the housing crisis” as if it were a stationary object. Housing need & housing demand are going to mutate.

Apart from government policies, wage-setting mechanisms, educational opportunity… population change over the last 5 years has been a huge factor in bringing on a crisis, also lifting national earnings (but making little difference to national earnings/growth head).

In Auckland, after the region’s councils agreed urban growth limits at the end of the 1990s, there was a population spike in 2003-04 under the Labour government – unheralded & quickly gone, but its effects lingered. It was the beginning of the housing market’s tightening, of the escalation in prices that rose along with the decline of interest rates, and of the unavailability of homes at prices ordinary people could afford.

Houses got bigger, far more expensive, and had more gadgets.

The urban limits, set with gradual expansion in mind, were blamed for causing the escalation of urban fringe land prices. But nobody has suggested how you can develop housing willy-nilly, efficiently & at low cost, without establishing infrastructure such as roads, power supply, water & sewers in an orderly way.

The region still needs growth corridors.

But this is where the override can be used. As an example,areas around Kumeu in West Auckland were identified decades ago as having poor drainage, and were therefore marked by councils as expensive to develop. Using an override, development could be approved, but at what later cost if not done properly?

If an urban development authority can negotiate anagreement to modify such an area to make it good for development, well & good. But should it use an override to achieve it?

The population & immigration factors

According to Statistics NZ figures, over the last 11 years the Auckland region’s population has grown by 290,400 – 46.4% of total New Zealand population growth of 625,700.

Through to 2013, Auckland’s population growth averaged 17,540/year over 6 years. In the 5 years since, that average shot up to 40,540/year.

Remember, Auckland Council went through 6 years of rewriting all its planning rules as the new super-city, created by the Government, while that explosion occurred. Do you blame a council for trying to make change orderly, when it’s faced by a population explosion not of its making?

Perhaps the council could have decided: ‘Change is occurring rapidly while we rewrite the rules, we’ll have to make some interim calls allowing for more urban land use.’

It could have tried to do that – while it faced a government intent on combating the creation of a far improved public transport network to match, and without any indication of a slowdown in immigration.

While the present government has been in power, the net migrant inflow has fallen by 11,000/year. That doesn’t ease Auckland congestion, but does reduce the growing pressure on it. It does ease some housing pressure points.


24 November 2018: New urban development agency unveiled to build more homes

Related documents

UDA factsheet.docx24.04 KB

UDA summary.pdf2.25 MB

Related stories today:

The override edict versus responsible governance

Ministry issues fact sheet on proposed new development authority Property Council chief executive likes authority model

Attribution: Ministerial release.

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Ministry issues fact sheet on proposed new development authority

Details below are from the new Ministry of Urban Development & Housing’s fact sheet on the proposed urban development authority.

“Traditionally New Zealand’s towns & cities have grown by turning neighbouring rural land into suburban homes. Second generation or ‘brownfields’ development is often difficult & risky with poor quality, aging or at-capacity infrastructure and disparate & fragmented land ownership. This means the private sector struggle to undertake these developments alone.

‘This is a new way of planning largescale & complex development so we can achieve scale & pace, co-ordinate different aspects of urban development and masterplan projects, assemble large or strategically placed parcels in developments and ensure quality intensification, great urban design & public goods.

“There are numerous urban development authorities in the US, UK & Australia.”

What will the authority achieve? According to the fact sheet:

Scale & pace: The ability to undertake largescale complex projects at pace

Co-ordination: A single public entity responsible for all aspects of urban development

Land assembly: The ability to assemble large, useful parcels of land at strategic sites

Government participation: Central government can participate directly in urban transformation at a local level.

The authority will take the best from current developments. It builds on:

  • The success of masterplanned developments, such as Hobsonville Point
  • The success of transit-led developments, such as New Lynn
  • Urban regeneration in Britomart & Wynyard Quarter
  • Current developments like Tamaki, Mangere, Roskill & Porirua

These projects are in addition to:

  • Government-led developments: The Government builds state, KiwiBuild & market homes on Crown land (eg, Northcote, Marfell)
  • KiwiBuild land for housing: The Government purchases land to build state, KiwiBuild & market homes (eg, Unitec)
  • KiwiBuild buying off the plans: The Government underwrites private developers so they can build more homes, speed up their developments, and incentivise the construction of affordable homes
  • Building public houses: The Government is investing over $4 billion to build over 6400 new public homes and renovate existing state homes
  • Local housing partnerships: The Government is partnering with local authorities to build affordable homes
  • HASHAA (the Housing Accords & Special Housing Areas Act): Council & Crown fast-track the supply of land
  • Urban growth agenda: Changing the system settings to ensure we have more affordable land, better spatial planning and finance & fund infrastructure.

Related documents

UDAfactsheet.docx24.04 KB

UDAsummary.pdf2.25 MB

Related stories today:

The override edict versus responsible governance

Ministry issues fact sheet on proposed new development authority

Property Council chief executive likes authority model

Attribution: Ministerial release.

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Property Council chief executive likes authority model

Property Council chief executive Connal Townsend called the weekend proposal from Urban Development & Housing Minister Phil Twyford “a win for urban development”, saying the new authority would help to ease the urban housing crisis.

“This new model will speed up the decision-making process on new developments. This is something that has been desperately needed for a long time.

“Our members are pleased that the approach of the new authority will be to look at the big picture of a development. This way, residential & commercial developments can more easily be provided with sensible transport links & other infrastructure which ensures communities are well planned, pleasant places to live & work.

“Overseas, urban development authorities like this one have worked very well to speed up the development of housing & infrastructure.”

Mr Townsend said the Property Council had been calling for this for a long time: “This authority, while no magic bullet, is another of the steps needed to ease the pressure on our industry.”

Related documents

UDA factsheet.docx24.04 KB

UDA summary.pdf2.25 MB

Related stories today:

The override edict versus responsible governance

Ministry issues fact sheet on proposed new development authority

Property Council chief executive likes authority model

Attribution: Property Council release.

Continue Reading

City rail link engineering company collapses 6 weeks after signing interim underground systems contract

The Australian company which won the interim joint-venture contract in October to deliver the Auckland city rail link’s underground rail systems, RCR Tomlinson Ltd, went into administration on Wednesday.

This comes 6 weeks after the project’s overall joint venture partners, Auckland Council & the Government through City Rail Link Ltd, announced the C7 interim contract for the underground systems as an important milestone.

This interim contract was to be followed by RCR Tomlinson & its partner, WSP-Opus, working with CRL, Auckland Transport & KiwiRail to formulate the full project alliance agreement, which was expected to be awarded by May 2019.

WSP-Opus is the working name for Opus International Consultants Ltd, which Canadian property services consultancy WSP Global Inc bought last December.

The project includes the provision of track, track slab, overhead line, signalling, control systems, trackside auxiliaries, control room fitout & building works.

RCR Tomlinson pointed to its precarious state in August

Trading in RCR Tomlinson’s shares was halted on 12 November at the company’s request, and further suspended 2 days later pending an earnings upgrade & consequences for its funding.

On Monday, a group of shareholders filed a class action proceeding in the New South Wales Supreme Court.

One director, David Robinson, a career engineer at McConnell Dowell who finished his 37 years there in 2015 as managing director & chief executive and was appointed to the RTR Tomlinson board on 1 March, wasn’t aware of the company’s dire predicament – he spent $A9900 to add 11,000 shares on 31 October to the 30,000 he already held.

RCR Tomlinson completed an underwritten $A100 million capital-raising on 28 September.

However, interim chief executive Bruce James said in Wednesday night’s announcement the company had been unable to secure additional funding and had appointed McGrathNicol Restructuring as voluntary administrators. The first creditors’ meeting is expected to be on Monday 3 December.

The company’s annual report, issued in August, showed its order book was down from $A1.36 billion in 2017 to $A1 billion, it had $A2 billion of revenue from continuing operations but reported a statutory loss of $A16.1 million ($A25.7 million profit in 2017), an underlying ebit loss of $A4.2 million ($A41.2 million profit in 2017).

It attributed much of its $A735 million increase in sales to the progress of a number of largescale solar farms, but also attributed the ebit loss to cost overruns on 2 of those projects, Daydream & Hayman. That resulted in cumulative writedowns of $A57 million from the original tendered margin.

The company said in its annual report issued on 28 August: “A large proportion of the writedowns were only recently identified. This was due to the onsite procedures adopted by a limited number of site personnel, which had the effect of circumventing RCR’s standard processes & project level systems relating to procurement commitments.”

Links: RCR Tomlinson
City Rail Link

Earlier story:
10 December 2017: WSP takeover of Opus down to the washup

Attribution: RCR Tomlinson, CRL release, ASX statements.

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Dickens takes aim, but the residential land fix is elusive

Rodney Dickens.

Property-focused economist Rodney Dickens took aim at the Government’s housing initiatives at the weekend.

Despite the valid criticisms, though, his harshest presentation of failure is aimed not at a single year’s performance by the present government but at 2 decades of failure by successive governments.

In doing so, Mr Dickens didn’t present a forward path.

His solution to escalating house prices is to fix section prices.

That in itself is not an answer. How do you fix? Who fixes? Where do you start?

This article comes in 3 parts:

  1. Mr Dickens’s key points in his latest Rodney’s Ravings report – which will fill you with horror although you’ve known the truth of them for a long time
  2. I will take you to some questions which I think need to be assessed, and
  3. To close, I’ll look at potential ways forward.

Now to the Dickens report:

The Government should do the obvious to fix housing affordability, says Dickens

Economist Rodney Dickens, owner & chief researcher of Strategic Risk Analysis Ltd, produced graphs at the weekend which show how far out of kilter residential section prices have gone.

Mr Dickens wanted to throw the spotlight on the role rising section prices have played in driving up new & existing house prices in Auckland and the similar story in all major urban centres except Christchurch, where the 2010-11 earthquakes set it on a different path.

KiwiBuild, one of Housing & Urban Development Minister Phil Twyford’s solutions to the slow construction rate, has experienced some teething problems: “Some people aren’t happy that it isn’t delivering new housing affordable to low income earners, while the extension of the ballot for the first 10 of the 211 KiwiBuild dwellings planned for Wanaka over 2 years may be a sign it will face indigestion problems in towns.

“More teething problems will no doubt arise. But the real criticism should be aimed at the Government’s housing initiatives more generally because they aren’t aimed enough at fixing the largest obstacle to more affordable new housing: high section prices.”

Mr Dickens’s graphs illustrate, at least in part, the role rising section prices have played in driving up prices for new & existing houses in Auckland.

Ironically, he said, the housing accord & special housing areas the National-led Government put in place in Auckland “may be belatedly starting to drive a hint of downside in sections prices. But it is far too little. Much more needs to be done to get down the cost of developing sections; it would deliver a real solution to the housing affordability problem.”

True extent of escalation much higher

Even the research he has done doesn’t show the true extent of land price escalation, because Real Estate Institute figures on section prices don’t take into account the shrinking size of sections.

Over the last 25 years, the average construction cost/m² for a new home in Auckland, based on consent data, rose 212%. The median section price rose 903% over the same period, but Mr Dickens said that because sections had been shrinking in size, the price escalation/m² for sections could well exceed 1000%.

“Obviously the cost of sections feeds directly into the cost of new dwellings, but section prices are also an implicit part of existing dwelling prices.

“A link between Auckland section & existing dwelling prices is evident in the chart below that uses the Real Estate Institute median prices. The difference between the existing dwelling price & the section price is the effective market value of the improvements, that is linked to a moderate extent to building costs.

“Between January 1993 & October 2018, the median section price increased 903% while the median dwelling price increased 514%. In the 12 months ended January 1993, the median Auckland section price was 41% of the median dwelling price, while for the 12 months ended October 2018 the median section price was 67% of the median dwelling price.

“In a country with an extremely low population density, it is madness that it costs more on average for a section than for the house built on it, even in the largest region.

“These increases, and especially the increase in section prices, look horrific when compared to the 68% increase in prices in general over the same period based on the consumers price index, the 111% increase in hourly earnings over the average employees & the 89% increase in the national average rent based on the CPI rent component.

“The causes of sky-rocketing section prices have been discussed elsewhere, including by the Productivity Commission. Relevant factors include massive increases in development contributions, council policies that effectively gave oligopolistic pricing power to landowners, and a drawn-out & expensive process for getting new subdivisions approved.”

Next, Mr Dickens compared the median section price reported by the Real Estate Institute for Auckland with the average cost of building/m² based on the new dwelling consent data: “While the median section price increased 903% between January 1993 & October 2018, the average cost/m² for new dwellings in Auckland increased 212%. Building costs have increased much more than prices in general & average hourly earnings – this is in the context of average hourly earnings most likely understating overall income growth for a range of regions not discussed here. But the increase in building costs is dwarfed by the increase in section prices.

“The increase in section prices is even worse than it looks because, since 1993, the average section size has fallen significantly. The average price/m² for Auckland sections will have increased much more than suggested by the median prices reported by the Real Estate Institute. Unfortunately, data are not available on section prices/m², but the increase will be well over 1000%.

“If Auckland section prices had increased in line with building costs, the blue line in the chart below suggests what existing dwelling prices will have done relative to what they actually did.

“If Auckland section prices had increased since 1993 in line with the average cost/m² of building new dwellings in Auckland, the median section price would be around $180,000 now rather than $575,000.

“By implication, the median existing dwelling price would be around $460,000 rather than $854,000 (ie, $394,000 or 54% lower). So why isn’t the Government (and the Auckland Council & councils in all major urban areas) doing more to get down section prices? If the problem of high section prices was fixed, the market would fix the new housing affordability problem without the need for the contentious & bureaucratic KiwiBuild ‘solution’.

“Maybe the problem lies partly with the other parties that Labour relies on for support? But the problem runs deeper than this. National had every opportunity to fix this problem when it was in government, but didn’t.

“Ironically, the minor fall in the weighted average Auckland median section price since early-2017 may be a response to the boost in supply from the 154 special housing areas approved following National introducing special housing area legislation in 2013. The 154 special housing areas were expected to add over 60,000 new dwelling sites in Auckland. But if it is, it is far too little & way too late. The special housing areas didn’t stop a massive increase in section prices since the legislation was passed in 2013 (ie, 69% based on the weighted average median price for the Auckland region).”

Links (for all 3 pages of this report):
Rodney’s Ravings, 17 November 2018: The government should do the obvious to fix housing affordability
2017, National-led Government’s urban development authorities discussion document
Solly Angel + 5 other contributors, essay 5 July 2018: The new urban peripheries: Findings for a global sample of cities, 1990-2014
Solly Angel
NYU Stern urbanisation project
Stern urban expansion initiative

Earlier stories:
16 November 2018: 3-way partnership to fund infrastructure for next big subdivision at Wainui
13 September 2018: Transport agency sets out project list
20 April 2018: Council approves quest for $300 million of government housing infrastructure money
24 July 2017: Ministers explain infrastructure funding deal
24 July 2017: New Crown entity will advance housing infrastructure
12 July 2017: Council gets $300 million infrastructure package, balance sheet-beating deal to come next
28 April 2017: Joyce lifts infrastructure intentions and talks new operating mechanisms
6 March 2017: Property Council joins call for new infrastructure funding
8 January 2017: Housing infrastructure fund call for final proposals imminent, and panellists required
26 October 2016: Goff talks up growth along with cutting congestion and revising funding
5 October 2016: Infrastructure frailty puts US financial woes in perspective
3 July 2016: 
PM talks $1 billion infrastructure fund, English talks payback frame, Smith talks grabbing more power
6 September 2007: Curtis loses fight to remove “compact” from development framework
11 April 2007: Expect 4-5 centres to be earmarked in growth strategy review

Articles on Productivity Commission:
22 August 2016: Commission sees government change as essential for urban planning
22 August 2016: Commission says everything English wanted on planning
19 August 2016: Government says it’s already implementing land for housing recommendations
 5 October 2015: Commission sends land for housing report to Government
19 June 2015: Commission looks behind high land prices
19 June 2015: Key points from land for housing report
2 June 2015: Productivity Commission draft on land for housing out in fortnight
 7 November 2014: Productivity Commission launches land supply regulation inquiry
13 April 2012: Productivity Commission misses key affordability point – again
4 April 2011: First inquiry for Productivity Commission is housing affordability

Productivity Commission releases:
11 May 2018: New inquiry into local government funding announced
2 March 2018: Why can’t Auckland build enough homes?
29 March 2017: Urban planning – moving beyond the wheel spin

Pages in this report:
1: Dickens takes aim, but the residential land fix is elusive
2: Things to keep in minds while focusing on fringe land supply
3: Cutting the margin without breaking the market…

Attribution: Rodney Dickens, Solly Angel.

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