Archive | Regional growth

Industrial sites are selling as Drury South Crossing kicks into second gear

6 of the 11 industrial lots in block 1 of the Drury South Crossing development zone down the Southern Motorway out of Auckland have been sold. 2 more are unavailable, leaving 3 still on the market.

3 of the 13 lots in block 2 have been sold, 2 are unavailable and one is under contract – 7 still available.

The sold lots range from about 1000m² up to 3.44ha.

Image above: Drury South Crossing’s masterplan – housing nearest the motorway, industrial back towards the quarry, commercial in the middle, open space where the creek wends its way through the floodplain.

Even now, a decade after initial development planning began, Drury is a place you pass on State Highway 1 at speed. In the background is a quarry carved out of the hillside, in the foreground there were cows. This was rural Auckland, and its transformation into a major urban hub has begun.

Stevenson Group Ltd, best known as a trucking company but also the owner & operator of infrastructure necessities such as quarries & concrete supplies, has gone through the long processes of rezoning and designing the future for Drury South’s 361ha, getting the land rezoned in 2013 for a mix of industrial & business development, and this month enters a marketing phase.

The company has done one thing that politicians around the region largely failed to do over the last 2 decades: produce a supply of large-lot industrial land. That & efficient access are keys to Auckland’s prosperity.

Drury South Crossing will serve a multitude of needs:

  • an industrial hub
  • a portion for residential development, plus some commercial
  • improvement of water flows & water quality
  • new jobs in South Auckland
  • the incentive for numerous new transport links – an improved road to Pukekohe, the Mill Rd connection up through Manukau, a new railway station, an industrial base with good access to ports, central Auckland and to the regions immediately to the south.

To focus on the development, Stevenson has sold its quarry business to Fulton Hogan Ltd (although the Huntly quarry has been pulled from the transaction following Commerce Commission concerns). It’s also sold the 50ha residential development site, nearest the motorway, to Classic Group, which will build about 800 houses on it (starting price point $580,000, midpoint $680,000). The first homes should be available this year.

An impetus for swathes of housing development

Since it got the land rezoned, Stevenson’s project has also been the impetus for large swathes of residential development on nearby farmland. Kiwi Property Group Ltd bought 51ha to create a town centre, Karaka & Drury Ltd (Charles Ma) has begun work on 2 residential developments at Drury, the first for 68ha and the second for 85ha, set to yield about 2700 homes plus a village centre, and Fulton Hogan has acquired land for about 2000 homes.

Across the motorway & further north, the Hugh Green Group is preparing 97ha to take 2000 homes in its Park Estate subdivision, and has just opened it up to expressions of interest.

The mix localises industrial jobs

Drury South Crossing chief executive Stephen Hughes.

Stephen Hughes, chief executive of Stevenson’s Drury South Crossing project, expects some staff at businesses in its industrial subdivision will bike to work along cycleways from these new suburbs. Within 13km of this new business hub, the population is anticipated to grow to 60,000.

Among the unusual features of Drury South Crossing – given the extra word in its name to signify its role at the heart of new transport links – 90ha of passive amenity & waterspace has been set aside to manage the floodplain, where the borders of creeks feeding into the Hingaia Stream will be greatly enhanced.

One big change enabling all this development was the completion of Auckland Council’s unitary plan in 2016, providing for far more intensification in existing suburbs and marking greenfields as future urban zones, effectively dismantling the rural:urban boundaries established in the 1990s.

Mr Hughes said without that change, Stevenson wouldn’t have secured the political support to develop outside the MUL (the metropolitan urban limits). The second change allowing Drury (and other centres) to forge ahead was the last government’s scheme for special housing areas. Although few houses were developed quickly, those areas were earmarked for housing and development is starting to occur.

From State Highway 1 across to the Stevenson quarry – the space between will be filled with houses nearest the motorway, some commercial further back, industrial towards the quarry. Those scratches on the photo are power lines – Transpower will have a site in the precinct.

Meanwhile, the Stevenson focus is on the industrial land, broken into large blocks and, in the case of blocks 1 & 2, broken down into smaller lots and already selling.

Block 3 has about 20ha at the moment, and some buyers are looking for that amount of land: “There are 3 requests for a block that size we’re in discussions on,” Mr Hughes said in December.

Potential occupants of those bigger sites are both manufacturers & distributors, and logistics companies that will service the upper North Island from this base.

Drury South Crossing is expected to create over 5000 jobs directly and 10,000 more indirectly in the Auckland region. Economic analysis by Market Economics Ltd puts the direct financial contribution into local gdp at $800 million/year, plus $2.3billion/year into regional gdp. The construction phase alone is expected to contribute $700 million to gdp.

BDeep articles aimed at giving you context

  • This is the first of the new BDeep focus articles in The Bob Dey Property Reporton development around the region.

You’ll see a different style of presentation here – pieces of information, not a single long, complete article. So, over time, you’ll be able to build up a picture of areas around the region, putting development in context.

Today’s piece hardly scratches the surface of Drury South’s context. With regular contributions, you’ll see the gaps filled in.

Link: Drury South Crossing

Some of the earlier stories:
16 October 2018: Fulton Hogan drops Huntly quarry from Stevenson purchase, Commerce Commission happy
22 September 2017: Kiwi Property settles second Drury site purchase
10 September 2017: Second round for Auranga precinct confirms Drury as major growth centre
2 July 2014: Report indicates acute shortage of industrial land likely, but key land advocates don’t press for specific measures
30 June 2014: Report says business land supply “at best” meets 5-year demand
30 August 2013: Drury South industrial area plan change & MUL extension approved

Attribution: Company releases, interview, website.

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Adding houses to a peninsula ought to take more thought, as Penlink hopefuls learn

When my wife & I moved to the Whangaparaoa Peninsula at the end of 1982 the district council had plans drawn up for 6 lanes along the early part of the peninsula, narrowing as you went on. There was even the possibility of 8 lanes.

This year, there are 3 lanes for the first couple of hundred metres, with a spectacular light show for the direction-switching centre lane.

Through most of the period following World II until the early 1980s, the peninsula was dotted with baches, had a few camping grounds, and not much was new.

We bought a sturdy bach, added to it, and caught the bus to the city to work. My wife still uses the bus from the Silverdale park-&-ride. I swim in the sea while the morning commuter peak is at its worst, travel more often outside peak hours and, unfortunately, drive.

Penlink notion 30 years ago

As Wilkins & Davies began its plummet toward liquidation post-1987 crash, it began more urgent promotion of the Hobbs Bay land which it owned (now Gulf Harbour), including promoting the Penlink crossing of the Weiti River.

From one phone survey at that time, it appeared the bridge & road past Stillwater would cover zero distance and would also take no time to traverse. As the years went by, residential development continued and congestion naturally worsened, so the potential time saving steadily grew – the population now exceeds 30,000. One later development proposal at the marina was sought on the basis that Penlink would be built: the magnet was the much faster journey commuters would experience.

When engineering & design consultancy Holmes Group Ltd sought consent to develop the Peninsula golfcourse at the start of the peninsula (the role later taken over by Fletcher Residential Ltd), commissioners said it shouldn’t happen until alternative exits from the peninsula were created, specifically a southward motorway ramp at Millwater. That ramp opened 3 years ago. The Fletcher subdivision offers exits that don’t take traffic directly to the peninsula road, but for travellers to the city the natural path is through the same Hibiscus Coast Highway intersection all the peninsula traffic uses.

The journey between that peninsula-coast highway intersection and the motorway ramps at Silverdale is now littered with traffic light-controlled intersections, slowing all journeys – a natural consequence of building multiple retail centres along the route, especially a large supermarket near the motorway ramps.

You can argue that it makes no sense to continue piling more houses on to a peninsula which has only one entry point for travel beyond Red Beach, the suburb still on the mainland at the start of the peninsula. But that is to argue that people (like me) shouldn’t enjoy the coastal lifestyle the peninsula offers.

The questions then become: What kinds of housing are appropriate for an area that has one of the fastest growth rates in the country, and what sorts of access are appropriate?

Do we all need to live in separate houses? Probably not. That intensification has picked up recently along the Orewa beachfront, one beach beyond Red Beach up the coast from Whangaparaoa, there are apartments at the Gulf Harbour marina and new terraced housing is being built (in a dip without sea views) in a large subdivision at Stanmore Bay.

One of the first stories on this website, in early 2000, was about the by-then-former owner of the Whangaparaoa Plaza shopping centre, Philip Fava, being locked out of it by an investment partner. Mr Fava, always full of bright ideas, had intended to build a 10-storey apartment or office block on the former pub site adjoining the shopping plaza, looking down the coast to the North Shore & cbd from a peninsula ridgeline, at a time when America’s Cup fever was rising.

Instead, his lenders opted for a single-storey Warehouse store. Next door, the shopping centre is about to get a refurbish following the departure of a number of tenants to new space at Silverdale.

Single-storey retail developments waste spectacular views where more intensive development – which might include retail – would have long made sense.

A better view forward

The planning for such development would necessarily encompass a number of factors which tend to be parked in separate baskets – retail catchments, residential potential, work access, the ability to reduce commuter traffic by localising work, the provision of public transport (and improvement of it to meet a larger customer base).

Now, the imperative is to build access – within 10 years – to cope with current road congestion which can extend a 10-minute journey to 30 minutes and be part of extending a 30-minute journey to the cbd to 90 minutes.

The answer needs to be a range of near-future solutions, particularly the localising of work but, for commuters, transport options which don’t start by cluttering the peninsula exit with more one-occupant cars.

It can’t just be about a road & a bridge, which is what I see in the past & latest versions of ATAP (the Auckland transport alignment project between Auckland Council & the Government).

Read the ATAP report 2018 [PDF, 2 MB]
30 June 2014, Penlink traffic & economic analysis by Beca

Earlier stories:
30 August 2013: Pertinent observations a highlight of Red Beach golfcourse conversion decision
3 January 2012: Council opts to notify golfcourse subdivision while local board wants it bought for reserve
2000: Fava escorted out of his old shopping centre

Attribution: This website’s files.

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Local board identifies 10 city fringe economic actions to prioritise

The Waitemata Local Board will vote on Tuesday on a refreshed local economic development action plan for the city fringe, which has identified 18 actions, 10 of them prioritised.

The board approved its first such plan in 2014 and the replacement is intended to provide a framework to guide local economic development actions for 3-5 years.

Auckland Council local economic development strategic planner John Norman says in a report to Tuesday’s local board meeting the local economic development team at Ateed (Auckland Tourism Events & Economic Development) commissioned Business Lab to undertake the refresh on behalf of the local board.

“The refreshed plan has concentrated on the role that the local board can play in assisting & supporting economic growth within the city fringe. The actions are identified against the desired outcomes of the adopted Waitemata Local Board plan – namely thriving communities, placemaking, the natural environment, built environment, accessibility & strong economy.

The board has identified 10 actions as priorities:

  1. Enable a city fringe identity
  2. Lead space activation
  3. Advocate for local area plans
  4. Advocate for a Parnell precinct plan
  5. Advocate for a low carbon economy
  6. Advocate for minimisation of disruption
  7. Enable connectivity to Parnell train station
  8. Enable improved relationships with Auckland Transport
  9. Enable business intelligence, and
  10. Enable greater business support.

Mr Norman said that, once the refreshed plan is approved, Ateed staff would work with the board to agree which of the priority initiatives should be activated first and what budget would be required to deliver them.

Waitemata Local Board agenda, Tuesday 21 November
20, Auckland’s city fringe local economic development action plan refresh
Final draft action plan

Attribution: Local board agenda.

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Churton warns Orakei board of declining standards from relentless intensification

Orakei Local Board member Troy Churton has questioned residential intensification at several spots around the ward in his report to the board’s meeting on Thursday, chiefly for height infringements, being out of character & resultant commuter congestion.

He’s also raised a question over the impact of cycleways on St Stephens Avenue & Gladstone Rd, which Auckland Transport is pursuing.

In his report as the board’s lead member on planning & regulatory matters, Mr Churton said that at a training day & workshop he discussed “‘triggers’ requiring planners to forward files to me for comment as to whether they should be notified or not”.

He went on to list projects where he understood the developer intended to breach the 16m height limit, notably at 29-35 & 37 Coates Avenue, Orakei, and, in one case, the quality of design on a landmark site “where the very best of design standards should be implemented”.

In his report on 29-35 Coates Avenue, Mr Churton said: “I do not accept the assessment of environment effects report at page 10 suggesting it is appropriate to disregard effects below 16m simply because a previous consent may have found there to be no more than minor effects for a 4-storey building previously applied for and of lower height.

“The receiving environment of this development is the area of Coates Avenue that currently has some multi-storeyed development. Overall the proposal is to likely to contribute to an obvious dominant high, built environment. This is said to be consistent with the future character of the area.

“It is, however, currently not the character of the area and there can be no expectation that just because a one’s set of standards enables certain types of development, that the community & landowners suddenly forego concern for the existing state of character or will seek to exploit those activities.

“The future character of the area relies on developments that are designed to meet standards and not infringe them. This proposal may, for want of being designed to meet height & height:boundary standards, therefore disrupts amenity value in the existing neighbourhood of mostly lower level surrounding residential built form & character.

“It will plainly meet many other unitary plan purposes and would not attract a notification trigger if designed to standard as to height & height:boundary.

“If the advice that I received in my training recently was that standards are to be upheld, then this matter presents an adverse effect as to height that is more than minor and should be notified.

“If, however, council planners intend on facilitating an ongoing culture of enabling developers to treat standards they are all very aware of in due diligence for a site and as measures to be willingly infringed, then there is a case to say the positive effects of the proposal in this zone & area may mitigate the potential adverse effects.”

Meadowbank Station & commuter parking

On the development proposal for 4 Koa St, Meadowbank – 14 units on 3 levels plus 10 basement parking spaces – Mr Churton said Housing NZ owned houses in the street and supported the application and the applicant wanted limited notification.

However, he questioned the adequacy of parking provision in a cul de sac which was some distance (450m) from the Meadowbank station but wasn’t exempt from commuter parking because commuters’ cars already saturated the area.

“While I have reservations about the bulk & scale, by itself in this zone it is not such an infringement as to be a special circumstance that would likely meet the requirements for discretionary public notification. However, there is a very high degree of public interest in ensuring quality built environs in this area as a number of other intensification projects are pursued, some from Housing NZ.”

Mr Churton suggested this development go to the council’s urban design panel for approval before a final decision was made on notification.

On a development proposal for 234, 236 & 236A Kepa Rd, on a prominent arterial ridgeline at the top of Mission Bay, Mr Churton said the proposed height infringement of up to 1m might seem small but, in an area where other intensification was also planned, the precaution of notification should be taken: “The cumulative effects of such a mass of multi-storey development where height infringements might be allowed for some is, in my view, a more than minor effect.”

At 9-11 Purewa Rd, Meadowbank, Mr Churton raised the quality objection: “Whilst not adverse [averse, I think] to intensification per se, the board views are to believe this proposed development will have a seriously detrimental effect on what is at present a desirable & sought-after residential area of our ward.”

He said a number of residents in the vicinity objected to “the poor design features”, drastically changed from the initial proposal “to a series of tenement-like structures with outdated features which have long been discarded in modern building practice- ie, external stairways.

“The size, and more importantly the density, of the planned construction has potential for adverse social impacts on an otherwise safe & pleasant community. This area of Meadowbank St Johns is already facing saturation problems with the increased traffic flow & parking overload on local streets from intensification, growing commuter use of the Meadowbank train station and the expansion from the nearby retirement village expansion.”

Mr Churton said the Purewa Rd site next to Hobson Bay & the railway line was a gateway to the Orakei ward via rail: “This is an example of a site where the very best of design standards should be implemented.”


Mr Churton said these cycleways on St Stephens Avenue & Gladstone Rd would eradicate onstreet parking for fringe cbd residents & workers as well as destination parking for tourism to places like the Rose Gardens on Gladstone Rd.

He said they also had “no apparent connection” to changes that might happen along Tamaki Drive or in stage 4 of the shared path crossing.

He wants the board to meet Auckland Transport to discuss the cycleways & stage 4 shared path across Hobson Bay.

Orakei Local Board agenda
12, Notice of motion, Member Troy Churton – Tamaki Drive & wider cycle route integration
25, Board member report, Troy Churton 
Addendum – examples of notification comments made as portfolio leader
NZ Transport Agency: Auckland urban cycleways programme
Auckland Transport: Cycling & walking programme

Attribution: Board agenda.

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4 intensive residential & development properties sell

A mix of 4 properties in the intensive living & residential development sectors were sold at Bayleys auctions this week – an apartment in the 1930s Brooklyn building in the cbd, one of 2 properties in the future urban zone 28km north of the cbd at Dairy Flat, a St Heliers townhouse and a Manurewa section with development consents in place.


Learning Quarter

Brooklyn, 66 Emily Place, unit 14:
Features: one-bedroom apartment in 1930s building
Outgoings: rates $1532/year including gst; body corp levy $4208/year
Outcome: sold for $461,000
Agents: Diane Jackson & Julie Prince

Isthmus east

St Heliers

41C Vale Rd:
Features: 3-bedroom townhouse, 3 bathrooms, courtyard, parking space
Outcome: sold for $1.125 million
Agents: John Howard & Josie Moon


The 2 rural properties marked future urban, one sold and the other passed in.

Dairy Flat

18 Green Rd:
Features: flat 3.38ha in 18 paddocks, 3-bedroom house, 2 bathrooms, double garage
Outcome: passed in
Agents: Graeme Mann & Karen Asquith

20 Green Rd:
Features: 9620m² site, 2 tenanted houses, one of 2 bedrooms, the other of 3 bedrooms & 2 bathrooms, each with a single garage
Outcome: sold for $1.3 million
Agents: Graeme Mann & Karen Asquith



40 Sturdee Rd:
Features: 809m² section, 3-bedroom house near motorways, health facilities & shopping centres, resource & building consents for development approved
Outcome: sold for $725,000
Agents: Shan Collings & Marlene Dragicevich


220 Great South Rd, unit 1:
Features: 161m² refurbished standalone mainstreet bungalow containing 7 single-level offices
Outcome: passed in
Agents: Piyush Kumar & Peter Migounoff

Attribution: Agency release.

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Tracking ideas Sun27Sep16 – sprawl v compact, inclusionary housing, infrastructure funding, related pieces, Making NZ

Sprawl v compact research stops short
Inclusionary housing another debate that’s international
Infrastructure funding options
Related pieces
Making NZ a home for planning thinkpieces

Tracking ideas is a Bob Dey Property Report section devoted to ideas on property questions such as urban strategies & design, many from overseas but with relevance to Auckland.

This page today flits between foreign, mostly American, information and Auckland. I’ve listed a large number of links to work through – it’s a library piece, not a quick read. And I’ve mentioned a couple of points which may be true in the US but don’t apply in Auckland because circumstances here have changed.

Sprawl v compact research stops short

In another round of the sprawl v compact argument, US analyst Issi Romem produced an article a fortnight ago that’s already been taken by some notable news outlets as something approaching gospel.

Some of what I’ve read among the many links below leaves me mystified about the writer’s point, some of the complicated analysis requires more digestion, here & there I’ve spotted contributions worth taking further.

The first mystery, for me, is how Dr Romem’s figures (down to 2 percentage points) on housing development over the last 3 decades can point to a sensible way forward in times which have started to change very quickly.

An inappropriate template

The US – and New Zealand followed, though to a less extravagant extent – launched into suburban development in the 1950s, pushed along by the availability of cars for general consumption. That doesn’t mean the development of those suburbs was a perfect mechanism for housing fast-growing populations, or that in an isthmus-centred place like Auckland the carpetlaying grid template would be appropriate.

One side of the argument now is that central intensification should be used to provide a larger proportion of housing, that this will be cheaper than sprawl on the fringes of the region. On the other side, proponents of extending the urban footprint say this will provide cheaper land and thereby cheaper housing.

How you count the numbers, and which numbers, makes a big difference. Do you include a travel component, or not? Does it measure cbd to wherever, or some to more local workplaces? How many cars does a household have?

Housing comparisons undefined

All the research, and all the comments, refers to housing, houses, apartments…. You, the reader, can only guess at what kind of economic units are being referred to. At the start of the 1980s, the standard New Zealand house (used in Master Builders statistics) was 93m² (1000ft²). Standard houses now are more likely to be over 200m², perhaps over 300m² including garage, with indoor-outdoor flow to make it hard to assess actual, practical size.

Old sausage-block flats were small, commonly under 80m², and a high proportion of apartments built in the last 20 years will also measure less than that. But, in recent times, terraces, townhouses, cross-leases, standalones on small sections and a smattering of apartments will exceed 200m².

Section sizes have been shrinking for 20 years. From 809m² (one-5th of an acre, far more common than the ‘quarter-acre paradise’, 1012m²), sections now can be down at 200m².

In Auckland, now, the Government is a key participant in redeveloping at Hobsonville Point, in the Glen Innes-Tamaki area and at Northcote. The Government-owned Housing NZ is still contesting unitary plan decisions limiting what it can do on many other sites where it’s aggregated land, wants to reposition old housing or wants to do a mix of upgrade & new.

In most of the American research, apartments or other intensified housing in the city centre are compared to development on the distant suburban fringe, with no indication of how close they are to being alternative options, and no calculation of commute costs.

Commuting from Faraway

In Auckland, we have a 20km stretch through Dairy Flat, between the ridge above the Albany basin & Silverdale, and very large areas between Karaka, Pukekohe and west to the coast likely to be developed for housing. You can bet it won’t be turned over to housing at the US standard of 4 houses/acre gross (10/ha) – more likely a mix of standalones on sub-400m² sections, terraces and, a novelty, suburban apartment blocks.

Where will these residents work? Shop? How will they get there? Do we create new communities – or faraway dormitory suburbs? Will the commute be made easy first, or wait for an economic number of travellers to buy at Faraway?

What kind of local jobs will be there? Rodney District Council, in its last years before the super-city was created in 2010, envisaged an innovation zone of business & education as well as housing north-west of Silverdale, a strategy that would increase jobs & education and reduce the commute. That kind of thinking needs to be revived.

Completion of the Auckland unitary plan enables the course of infrastructure provision to be more clearly defined (the appeals still to be determined shouldn’t drastically alter this), but there will still be questionmarks over how much more intensive development might be put in train in the inner suburbs.

Back to Dr Romem

Today’s Ideas page traverses ideas on infrastructure funding, inclusionary zoning as a way of introducing some more affordable housing, and city shape (focusing on Auckland being linear, having satellites, or concentrated around nodes).

This journey over the weekend has taken me to a wide range of views on transport, land use, access – starting with American, returning to New Zealand via international links (Wendell Cox, co-author of the Demographia studies with Hugh Pavletich of Christchurch; and housing & urban development thinker Phil Hayward of Lower Hutt, whose comments appear in a couple of the international & local threads).

At my first stop, Dr Issi Romem’s Can US cities compensate for curbing sprawl by growing denser? offered 4 central points:

  • The link between housing production and outward expansion is unmistakable: cities that expand more produce proportionally more new housing
  • Throughout the country, housing production is skewed towards low density areas
  • Densification has slowed down across the board, and especially in expensive cities, undermining their ability to compensate for less outward expansion
  • Unless they enact fundamental changes that allow for substantially more densification, cities confronting growth pressure face a tradeoff between accommodating growth through outward expansion, or accepting the social implications of failing to build enough new housing.

While Dr Romem’s research shows his first point appears true historically in the US, in Auckland at least that may be much less so in the last 5 years. On his second point, land price & ease of development are the crucial factors. Auckland has a short history of apartment building (though a long history of much less intensive sausage-block flats), and it’s come in bursts. Building consents are now approaching the 2004 level, but the price range is limited – almost entirely above what’s deemed “affordable”.

Romem says less outward means less overall

Dr Romem is the chief economist at BuildZoom, a San Francisco website aimed at matching clients to construction contractors. He was previously an economist at OnPoint Analytics, earned his PhD in economics at Berkeley, and consulted for the Bay Area Council Economic Institute on matters involving transport, real estate & the regional economy.

In this report, he found that, when cities change their pace of outward expansion, their rate of housing production tends to change accordingly.

“Both expensive & expansive cities are economically vibrant and face pressure to grow, but whereas expansive cities like Atlanta, Houston & Phoenix continually provide ample new housing at affordable prices, expensive cities like San Francisco, New York & San Diego do not. Since the 1970s, expensive cities have failed to produce enough new homes to keep real housing costs steady, and as a result they have curbed their population growth and sent real housing prices on a long-run upward spiral.”

He saw 2 key reasons for housing production to correspond so closely with outward expansion:

  • Undeveloped & low density areas produce a disproportionately large share of cities’ new housing. Restricting the flow of undeveloped land “into” a city chokes off subsequent rounds of densification, because low density areas add new housing more readily than denser ones, and
  • Cities which curb their outward expansion are also likely to curb densification within the existing footprint, eg, through more restrictive land use policy.

“Housing production’s skew towards low density areas is important, because it is consistent with the notion that a greater inflow of undeveloped land helps cities produce more housing, through both initial development & subsequent rounds of densification. For reasons explained earlier, eg, with respect to vacant lots, such densification is easier in low density areas. Crucially, expansive cities’ namesake outward expansion keeps low density areas more plentiful there than in expensive cities. In contrast, expensive cities have limited their inflow of undeveloped land by curbing their outward expansion, thereby choking off the initial development of new areas as well as subsequent rounds of densification.”

Densification has slowed down across the board, but much more so in expensive cities

Dr Romem said an important development of recent decades was the increasing paucity of densification: “During the first post-war decades, it was fairly common for areas to grow more dense through construction on vacant lots, and in particular through the replacement of older structures with new ones containing more dwellings. The data show that densification has grown far less common over time, especially in the expensive cities.”

He said the results were similar for areas first developed before World War II.

“Aside from the slowdown in densification, the numbers also tell us that in the US today, substantial densification is the exception. Just 3.8% of areas adding over 1 home/acre (4/ha) and just 0.95% adding over 2 homes/acre over the span of a decade is not very much, and the fraction of areas that cross the 4- & 10-home/acre (16- & 40/ha) thresholds each decade is also exceedingly small. In fact, the vast majority of the developed area of US cities maintains a fixed level of density that doesn’t usually change much over time….

“By curbing their outward expansion, expensive cities have stemmed their subsequent supply of low density areas that are flush with opportunities for further development. A sizable share of densification occurs through infill – not the kind of infill for which planners reserve the term, but simply construction on vacant land scattered within developed areas. The best land is used first, and as densification progresses the remaining lots are fewer and increasingly more challenging to build on, until redevelopment ultimately becomes the only alternative.

“Expansive cities maintain a robust supply of fresh land that is in the early phases of the progression. In contrast, expensive cities’ reduced rate of outward expansion means that most of their land is farther along in the progression, and as a result it is getting harder for them to densify. It is no coincidence that builders today report an unprecedented shortage of vacant lots that is most pronounced in the West & the North-east, where expensive cities cluster.”

Dr Romem’s assessments may also have been true in New Zealand, Auckland in particular, but the intensification trend is strong at the moment. Building consent figures over the last 2 years show intensive housing (apartments, retirement village units, townhouses & suburban units) showed 29.4% of consents nationally were for such intensive development in the July 2015 year, falling to 28.5% of a bigger total (up from 7600 of 25,700 to 8300 of 29,000) in the July 2016 year. I don’t have the breakdown for each market segment for Auckland alone.

Auckland apartment pricing has risen since the market bottomed in 2011. The market in standalone homes has skyrocketed in that period, but the 2 markets differ in their foreign input. Overseas investors have strongly influenced recent house prices, but have had a much longer association with the apartment market, which has relied on marketing overseas in this boom & the last one to get projects started.

The path forward

Dr Romem saw 3 paths forward in the US:

  • Cities that expand with gusto will maintain housing at more affordable levels, but this will further entrench the ills associated with sprawl; today’s expansive cities are already on this path
  • Avoiding expansion, and maintaining the status quo with respect to densification, will divert population growth towards more accommodating cities and render housing increasingly unaffordable for a growing share of the population; it will unequivocally change the social character of these cities, while keeping their physical facade intact, and
  • Enacting fundamental changes to land use policy that prompt far more substantial densification than any US city has undergone to date; expensive cities would have to embrace redevelopment; if new transport infrastructure connects undeveloped areas to the city, or functionally tethers existing nearby cities to it, then such infrastructure amounts to a catalyst for expansion.

Cox says research supports stance against ‘forced density’

Wendell Cox, principal of Demographia, wrote the book War on the dream: How anti-sprawl policy threatens the quality of life 10 years ago. In an article on the New Geography website on Wednesday, The incompatibility of forced density & housing affordability, he said Dr Romem’s research “supports the conclusion that anti-sprawl policy (urban containment policy) is incompatible with housing affordability. He quoted Dr Romem’s finding: “Cities that have curbed their expansion have – with limited exception – failed to compensate with densification. As a result they have produced far less housing than they would otherwise, with severe national implications for housing affordability, geographic mobility & access to opportunity, all of which are keenly felt today as we approach the top of housing cycle.”

Journal accepts the sprawl argument

In the Wall Street Journal, Laura Kusisto wrote: “Building sprawling suburbs is better at making cities affordable than building tall towers, according to research released Wednesday. Environmentalists, urban planners & economists are pushing cities such as New York & San Francisco to build more housing to help combat rapidly rising rents and home prices that are crowding out the middle class.”

At CityLab, Richard Florida noted the expansive versus expensive comparison and said if most development was low density it would amount to sprawl even if the overall urban footprint didn’t increase, and asked: “Do we continue to try to sprawl our way to the American dream, or do we add the density that powers innovation & economic growth?”

A Planetizen report said Dr Romem’s research “shows that housing affordability increases with a region’s ability to build outwards, as opposed to upwards. Densification largely has not accompanied efforts to curb sprawl.”

The Planetizen take was that the research found “sprawl may be bad for the environment & liveability, increasing dependence on the automobile and making transit less practical, but in terms of housing affordability, it’s a winner”.

In comments on the Romem report, Phil Hayward of Lower Hutt wrote (in a much longer comment): “I believe that everywhere that intensification & redevelopment have been adopted as significant proportions of planned housing supply, the results have been the opposite of the anticipated ‘affordability’. Site values increase to incorporate ‘development potential’ as soon as any rezoning occurs, which increases the costs that developers need to sustain while at the same time reducing their margins. All the gain falls to the incumbent owners of sites. In many cases, the expected ‘supply’ does not materialise.”

Hard boundaries go as immigration spike continues

Auckland, as a region with urban boundaries for 20 years – and “hard” boundaries for most of that time, in that they weren’t easily changed without going through protracted litigation – has been the main host for 2 immigration spikes, in 2003-04 and the present one that began with the turnaround from net outflow to net inflow in January 2013.

The latest annual net inflow was 69,000, of whom 32,200 were destined for Auckland. Neither inflow has been matched by an adequate rise in housebuilding. Consents for new homes issued in the last 12 months, 29,000 nationally, 9600 in Auckland, would barely house the national inflow while the Auckland consents would be inadequate to house all the new migrants, let alone internal migration & natural increase.

That can be turned into an excuse, aided by slow consent processes. Auckland was also behind during the 2003-04 immigration spike, but builders worked to catch up

For the first of those migration spikes, Auckland’s policy statement on land use was in the hands of the now-gone regional council. For the second, it’s in the hands of the successor unitary council, and the spike has coincided with the 3 years it’s taken to get the council’s unitary plan from start to almost finished. The housing accord with the Government through that period has enabled a lift in consents, though still well short of demand, and a finalised unitary plan will make intensification easier in many areas.

The “forced density” Mr Cox writes of is not what we have in Auckland, although the Government is leading rebuilds & newbuilds in 3 suburbs – Hobsonville Point, Glen Innes-Tamaki & Northcote. 2 of those projects involve rejuvenating Housing NZ properties, with additional intensive housing, while Hobsonville Point is all new (except for repositioning of a couple of handfuls of former Defence Force houses) and is being built by private contractors.

Current consents for apartments are no longer just in the central city, and include a number of high-price projects – upward of $10,000/m² for some consented 2 years ago, higher than that for more recent projects.

Occupants of those, and of new retirement villages, will free up existing housing, much of it in city fringe suburbs. The question, then, is: Where is the supply for lower market levels?

The answer is that it’s not going to appear until land prices ease, interest rates rise, speculation diminishes and developers & designers adjust their sights.

Issi Romem, BuildZoom, 14 September 2016: Can US cities compensate for curbing sprawl by growing denser?
Wendell Cox, New Geography 21 September 2016: The incompatibility of forced density & housing affordability
Planetizen, 16 September 2016: If housing affordability is top concern, let metro regions sprawl
Wall Street Journal, 14 September 2016: What if urban sprawl is the only realistic way to create affordable cities?
Richard Florida, CityLab, 14 September 2016: The difficulties of density
Phil Hayward comment, 18 September 2016

Inclusionary housing another debate that’s international

Debates over housing affordability, inclusionary zoning, sprawl & urban boundaries are international and can often relate to what happens in Auckland.

Jamues Brasuell wrote on the Planetizen website this week that Portland, Oregon, was considering a new inclusionary zoning policy – ending a statewide ban – but some believed it would have the opposite effect to that intended.

The inclusionary zoning policy is up for debate following a decision by the state to repeal a statewide ban on inclusionary housing requirements. City Observatory columnist Joe Cortright, a panellist at an Urban Land Institute forum on it, suggested ending parking requirements instead, saying inclusionary zoning & weakened urban growth boundaries weren’t effective tools for reducing the price of housing.

Mr Cortright focused on the consequences of “bursting” Portland’s urban growth boundary, saying that possibility, combined with new inclusionary zoning, could make Portland’s affordability worse.

He argued 7 points:

  1. Affordability is about growing up, not out
  2. The market demand/affordability problem is in the urban core
  3. Adding more supply in the core is the key to addressing affordability
  4. Inclusionary zoning increases market prices
  5. Inclusionary zoning creates only token numbers of affordable units
  6. Inclusionary zoning requirements would encourage further sprawl. (Because inclusionary zoning is likely to apply only to housing built in Portland, but not in suburban jurisdictions, it will effectively be a way of penalising & disincentivising dense development in the city relative to housing on the periphery)
  7. If we want to make housing more affordable, let’s get rid of parking requirements. (Oregon actually does allow inclusionary zoning – for cars, in the form of parking requirements. Requiring parking reduces the amount of land that can be used to house people, and directly drives up the price of new homes & apartments. These costs get passed on to homebuyers & renters. Studies show that in urban centres, parking requirements drive up rents by something in the order of about $US200/month. If we want to increase affordability we ought to be getting rid of this kind of hidden housing tax).

Planetizen, 19 September 2016: Inclusionary zoning & unintended consequences
Planetizen, 4 February 2016: Cortright: Oregon legislation would make housing affordability worse
City Observatory, 3 February 2016: Bursting Portland’s urban growth boundary won’t make housing more affordable (and a number of counter points in the comments)

Infrastructure funding options

Only when it doesn’t work does anybody think about infrastructure, says Just Economics LLC director Rick Rybeck.

In an article for Revitalization News, Funding infrastructure to rebuild equitable, green prosperity, said divorcing payment from infrastructure from payment for it made it harder to understand how the money was spent.

People also didn’t understand that, when infrastructure was designed & implemented well, it often inflated the price of well-served land. Where does that lead? “The infrastructure we create to facilitate development pushes development away and is partly responsible for sprawl,” he said. User charges, including road user charges, could help focus the mind on cost.

Just Economics says on its website it helps communities harmonise economic incentives with public policy objectives to:

  • reduce blight by putting vacant & boarded-up properties back into use
  • enhance business & employment opportunities
  • fund transit & other public infrastructure
  • reduce parking & traffic congestion
  • enhance housing affordability
  • enhance the environment, and
  • reduce sprawl.

The company says it accomplishes these goals by helping communities re-engineer taxes, fees & regulations so:

  • incentives embedded in taxes, fees & regulations encourage the private sector to create jobs, affordable housing, transport efficiency & sustainable economic development
  • needed public revenues are obtained, and
  • government sustainability, efficiency & competitiveness are enhanced.

Related pieces

These articles led me to several related articles on various websites. Check them out:

Charles Marohn, Strong Towns, 19 September 2016: Infrastructure spending for dummies
Revitalization News, 15 July 2015: Funding infrastructure to rebuild equitable, green prosperity
Rick Rybeck, report for Washington DC Tax Revision Commission, 2013: Funding long-term infrastructure needs for growth, sustainability & equity
Just Economics LLC (Rick Rybeck)

Making NZ a home for planning thinkpieces

A group of professionals who want to raise the level of public debate & understanding about housing, infrastructure, cities & planning launched the Making NZ blogsite in July.

I’ve quoted some of them below about the launch & their reasoning, but Making NZ cracks a mention today because of links to a number of its contributors who’ve commented recently on topics above – notably intensification & affordability.

Blog editor Matthew Webster said the group of contributors saw affordable housing, economics, infrastructure & design as important components.

Phil Hayward, an independent researcher, writer & lobbyist on urban policy issues, said: “A lot of urban policy is based on plausible assumptions that actually are not supported by real-life experience anywhere. For example, changing zoning to allow more intense development is always forecasted to unleash far more supply of housing units than what actually ends up being built. This is mostly because these zoning changes cause land values to increase even faster than otherwise and, as Arthur Grimes pointed out in a 2010 paper, all the profit potential is captured in land values rather than in newly constructed buildings.

“We should learn from the decades of over-estimated housing supply by urban planners in the UK, and avoid a replay of their costly & now-irreversible blundering.”

Development planning consultant Phil McDermott said: “Transport policy in our largest & most troubled market aims to focus investment in already intensively developed urban areas, raising environmental & financial risks. It’s a double whammy for unaffordability. Existing urban areas with limited capacity for growth receive expensive improvements. While that will increase the desirability of living there for some of those that can afford the higher costs & inflated property values, it leaves many more stranded without access either to traditional suburban housing or to multi-unit dwellings of any quality.

“One key, in the case of Auckland, is to free up for development sufficient greenfields land so the land value/rent curve is at least stabilised from the fringe back into the inner city, allowing more affordable & better quality housing to be developed citywide.”

Andrew Atkin blog, Building Utopia, 12 June 2013: Auckland versus Los Angeles
Making NZ, for urban planning that works
Phil Hayward, Making NZ, 1 September 2016: The myth of affordable intensification
NZ Herald, 29 February 2016: Dushko Bogunovich & Matthew Bradbury: Curing Auckland’s growing pains
Peter Nunns, Transport Blog, 7 March 2016 (and a long line of comments): The linear city and other science fictions

Attribution: BuildZoom, New Geography, Planetizen, Wall St Journal, CityLab, City Observatory, Strong Towns, Revitalization News, Just Economics, Making NZ, Andrew Atkin, Phil Hayward, NZ Herald, Transport Blog

Regular leads: Planetizen.

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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.


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.

Market Economics memo June 2016

Attribution: Market Economics newsletter.

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Tracking ideas M20June16 – Sprawl & infrastructure, tiny house rules

Sprawl not the problem, infrastructure is
Affordability versus rules

Tracking ideas is a Bob Dey Property Report section devoted to ideas on property questions such as urban strategies & design, many from overseas but with relevance to Auckland.

Sprawl not the problem, infrastructure is

Charles Marohn, founder of the Strong Towns organisation in the US, writes about ever-topical subjects such as sprawl & intensification without the dogmatic approach of many American protagonists.

He wrote about the term ‘sprawl’ a couple of months ago, got drawn into a debate on definitions and came out the other side still saying sprawl wasn’t the problem he was trying to solve.

The problem is the development of infrastructure which can’t be sustained long-term. It will be fine for a couple of decades, and then the repairs come due – at great cost. One of those is roads, another is underground pipework.

We have the same issues here, and the stentorian monologues of recent weeks – of politicians saying ‘This is what you will do, or else’ – ensure that we will suffer those problems. In small towns we already do. With an ageing population, a proportionately shrinking workforce, changing imperatives.

Will the newcomers – the next generation, immigrants – want to pay to dig up & replace old pipes if they can get new ones more cheaply without the dig?

‘Inter-generational equity’ is a term I became acutely aware of as it was bandied about a decade or so ago, and I cringed. Now it’s in the handbook. It supposedly meant passing some of the cost of developing infrastructure on to future generations who would benefit from it.

What it really meant was handing large debt & tired or obsolete assets to your grandchildren.

Back to Mr Marohn: “I’ve repeatedly made the claim that Texas 2016 is essentially California 1986. Texans pride themselves on having a high growth, dynamic economy, free of legacy costs & burdensome regulations….just like California did a generation ago.

“California got started on the suburban experiment 3 decades ahead of Texas (thanks to a more forgiving climate) and has arrived at the logical destination 3 decades earlier. The Lone Star state need only look west for a preview of coming attractions.”

Detroit the story of America

Detroit is the town where they made the cars that enabled suburbs everywhere to sprawl into the sunset, and it’s now hit hard times. Mr Marohn again: “The auto-centric style of development undermined the resiliency of the city, tearing down social, political & financial strength that had made Detroit one of the world’s greatest cities. Once this strength was undermined, once Detroit became a fragile city, it was only a matter of time.

Detroit is the story of America: hard won, incremental gains replaced with an illusion of wealth ultimately sustained by a mountain of debt.

Dallas story familiar

On Dallas, Mr Marohn’s sub-headings will tell you a familiar story:

  1. Rising revenues
  2. High debt levels
  3. Persistent structural deficits
  4. Dissatisfied population

Auckland Council & the entities it controls have an abundance of critics of their performance. We all have our gripes, and a council survey out this week shows we’re very much at the ‘dissatisfied population’ stage.

The question, for Mr Marohn, was this: “How can Dallas be growing robustly, have relatively high tax rates and yet have persistent & large budget deficits? It’s not wasteful government. It’s not incompetence. It’s not right-wing crazies starving the government beast. The problem is that growth on the top line is not turning into growth of the bottom line. For each dollar of revenue the city is receiving, it is taking on far more than a dollar of liability & expense. In the second life cycle of the growth Ponzi scheme, that can be covered up with debt (done that) but, ultimately, the lack of financial productivity starts to produce recurring, structural deficits that have no obvious cause and no apparent solution.”

Strong Towns, 15 June 2016: Dallas, a budget soap opera
Strong Towns, 7 June 2016: We are all Detroit
Strong Towns, 20 April 2016: The sprawl conversation
Strong Towns, 18 April 2016: Sprawl is not the problem
Strong Towns, tag: The suburban experiment
Charlie LeDuff: Detroit, an American autopsy (published 2013)
Strong Towns, 10 December 2015: America’s suburban experiment

Affordability versus rules

Housing affordability is an issue around the world. This San Francisco take on it, by Johnny Sanphillippo, sets out many of the barriers you might face here:

“Many years ago when I was infinitely younger & a lot poorer I rented a little 9ft x 18ft (about 3m x 6m, so 18m²) backyard cottage behind an old Victorian in San Francisco. Today you might call it a Tiny House or Micro Flat. But back then it was just a 1930s potting shed that had been fitted with a toilet, shower & kitchenette. I was incredibly happy there.

“The space was exactly what I needed, the rent was low, and I didn’t need roommates to make ends meet. The landlord was also happy to have rental income to augment his pension as he aged. This was ‘affordable housing’ that was entirely supplied by the private sector without government subsidies. Yet every aspect of this little backyard cottage is completely illegal under today’s zoning & building codes.”

Johnny Sanphillippo, Strong Towns, 16 June 2016: Affordable housing that might have been

Attribution: Strong Towns

Regular leads: Planetizen

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Oteha Valley case demonstrates gap between allowing for infrastructure and reality

Auckland Transport was offered a solution to a suburban roading problem 3 years ago and didn’t pick it up. Instead, it was in the Environment Court last week seeking yet another extended lapse period for a designation blighting private land earmarked for over 500 apartments.

That pitches the Auckland Council-controlled organisation against efficiently upgrading infrastructure – which you might have thought was its job – and also against accelerating the provision of housing, which both mayor Len Brown and Housing Minister Nick Smith have been clamouring for under the government-council housing accord.

The solution? Instead of Auckland Transport waiting until the 2021-22 financial year for budgeted funding, the developer that has owned the land since 2001 would build the road, incorporating it into its development, and offset the costs against the estimated $14 million-plus of development contributions.

Unitary plan implications

The road application also has unitary plan implications. Originally, North Shore City Council’s application for an extension of Medallion Drive from Oteha Valley Rd up to Fairview Avenue at Albany (taken over by Auckland Transport when it was created in 2010) was to service new housing. Most of that had already been built or was underway, including the Fairview lifestyle village at the bottom of the slope, facing northward State Highway 1 traffic, but some new subdivision is being developed.

When David Kirkpatrick (as a hearing commissioner; he’s now a judge and chairing the independent panel on the unitary plan) heard the notice of requirement application in 2013 and agreed to a 10-year designation, there was no mention of the importance of a semi-arterial route winding its way between State Highway 1 & East Coast Rd, from Apollo Drive off Constellation Drive at the southern end, along Hugh Green Drive & McClymonts Rd before becoming Medallion Drive.

The proposed 170m extension north of Oteha Valley Rd would eliminate either one or 2 T junctions, depending on whether the foot of Fairview Avenue across a one-lane bridge was stopped, creating a roundabout on Oteha Valley Rd, to be replaced by signals in due course.

The land-owning opponents, developer North Eastern Investments Ltd & landowner Heritage Land Ltd (John Farquhar), presented evidence from transport engineer Brett Harries that the T junctions were more efficient.

From the top of this proposed extension, Fairview Avenue would wind its way as it does now to Lonely Track Rd, on the ridge above Albany, where it marks the metropolitan urban limit.

Under Auckland Council’s proposals in the new unitary plan, that border would be replaced by a rural:urban boundary which, at this part of the map, would be in exactly the same spot. The view north from Lonely Track Rd is to remain bush & rural, although pressure is inevitable for housing to spill over the ridge.

The question then becomes: Is Auckland Transport trying to set up an eventual arterial route crossing that ridge to serve the new housing to the north which currently Auckland Council opposes?

The notice of requirement

The Environment Court hearing is in 2 parts. It began before Judge Jeff Smith and commissioners Kathryn Edmonds & David Bunting on 23 January, with Auckland Transport’s opening by Gerald Lanning followed by cross-examination on its 10-year notice of requirement to take land owned by North Eastern Investments & Heritage Land, and smaller amounts from 4 other owners, for the Medallion Drive extension.

Mr Farquhar’s evidence, led by Matt Casey QC, opened on Monday and will resume on 18 February. After completion of the notice of requirement evidence, the appeal by the Farquhar companies against refusal of development consent – notably for the positioning of 2 apartment blocks shadowing a kindergarten – will be heard. Repositioning those 2 blocks relies on the outcome on the notice of requirement for the road.

The affected development

Mr Farquhar’s proposals are for 419 apartments in 23 blocks and a mixed-use development fronting Oteha Valley Rd containing 45 apartments & just over 3000m² of commercial space. The East West apartment blocks, for which consent was declined in 2012 because of the requirement for road access beyond the site and for shading of a kindergarten, would have 32 units in an 8-storey building and 28 units in a 7-storey building.

Most of the area Auckland Transport seeks to designate is on Heritage Land’s 56 Fairview Avenue – 7881m² of the total 10,864m². 2837m² is on 4 other properties and 146m² is for a creek crossing.

Mr Farquhar, of Palmerston North, bought the bulk of his 8.4ha Oteha Valley site in 2001 and a small access lot in 2006. He secured regional land use consents in 2004, but North Shore City Council eventually declined consents for all 3 components of his proposed development in 2009. A joint memorandum resolved the appeals in principle in July 2012, and he anticipated a final consent memorandum would be lodged with the Environment Court soon after – “provided the notice of requirement problem is resolved”.

Bad faith alleged

In court on Monday, Mr Casey alleged Auckland Transport had continued the bad faith Mr Farquhar said the North Shore council had shown in not negotiating transparently – or, on a number of resolvable issues, at all – with him.

Mr Farquhar has argued that Auckland Transport doesn’t need his land because it can upgrade roads it already owns satisfactorily. Mr Casey outlined to the Environment Court how Mr Farquhar’s hand had been forced to provide for the council-preferred road although it had no legal status. He said comparable effects hadn’t been properly analysed and Auckland Transport had provided no assessment establishing claimed benefits.

Auckland Transport effectively held a veto over the Farquhar development because the designation land, wider than the carriageway, overlapped his building footprint. One Auckland Transport witness said agreement on earthworks could be reached to enable either development to proceed first.

Judge Kirkpatrick picked that point up in his recommendation in 2013. But, Mr Casey said: “It is now 2016 and no such agreement has eventuated. This has not been due to a lack of willingness on the part of NEIL (North Eastern Investments Ltd)…

“NEIL accepts that the court cannot compel Auckland Transport to pursue another option, but nor can the court compel Auckland Transport to implement its chosen option, even if it confirms the notice of requirement. All it guarantees is that NEIL will not be able to do anything within the designation area that Auckland Transport does not agree to.

“NEIL has an abiding concern that, once Auckland Transport properly understands the real cost of the project, it simply will not be funded and it will languish.”

Because of the ongoing inaction & uncertainty, Mr Casey said NEIL wanted the lapse period for the notice of requirement cut from 10 years to 2 years to ensure Auckland Transport stayed focused & committed: “Auckland Transport assured both NEIL & this court over 4 years ago that it intended to commence acquisition discussions in parallel with the notice of requirement process, rather than awaiting its completion. It has not done so and now – remarkably – claims it requires a longer lapse period to allow it.

“It was always open to Auckland Transport to initiate land acquisition earlier, but it chose not to. Having opted not to commence acquisition, Auckland Transport should not now demand a longer lapse period to do so.

“The court’s suggestion that Auckland Transport might be given 2 years to complete land acquisition is strongly resisted by NEIL. Auckland Transport’s evidence is that it has funds available to acquire the land now. There is no good reason why it should take more than 6 months for any acquisition to be completed.

“Auckland Transport advised the court (in the appeal against North Shore City Council’s plan change 32) that it had funding available and would commence acquisition negotiations with NEIL in December 2011. In August 2012 it sent Mr Farquhar information that the construction would commence in 2017 and be completed by 2018.

“Nothing Auckland Transport says about timing & the availability of funding can be relied on at any level.”

The view south over the Fairview retirement village, motorway & Albany park-&-ride toward the Albany Centre.

The view south over the Fairview retirement village, motorway & Albany park-&-ride toward the Albany Centre.

Image at top: South from Lonely Track Rd to Constellation Drive. The Medallion Drive extension would become the new route to Oteha Valley Rd for residents of the nearest group of houses.

Earlier stories:
1 November 2013: Commissioner agrees long designation period for link road above Oteha Valley, but supports landowner’s fast-track proposal
16 September 2013: 420-plus homes ready to go, but council might take decade putting road to elsewhere through site

Attribution: Court hearing, unitary plan.

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Urban boundary & zones under the spotlight

The rural:urban boundary – a red flag designed to torment those who would extend standalone suburban housing further afield.

According to the council mantra, one reason for the boundary’s existence is to protect environmentally sensitive areas & rural productive land. Zoning could provide that protection – if such zones were taken seriously as no-go areas rather than what they’ve always been, challenges to increase development margin by using cheaper land.

The real purpose in creating the boundary, though, was to fence the urban area in, started in the late 1990s for a variety of reasons – transport & infrastructure efficiency, improved accessibility, housing diversity & market demand on top of the environmental reasons.

To improve the likelihood that intensified living would grab a growing share of the housing market, tightening the screws on sprawl would enhance apartments & townhouses as competitively priced accommodation.

However, over the last 20 years those screws have been tightened intermittently, the inevitable seepage across the rural boundary hasn’t been well structured, councils proved incapable of enhancing infrastructure to the required degree and, most importantly, the differential between urban & spreading suburban infrastructure costs never became a message ingrained in the public consciousness.

The role of infrastructure pricing

As an example of how infrastructure pricing should have been playing a vital role in Auckland’s development, figures provided in 2012 on the rationale for a large aggregates quarry extension at Brookby, in the south of the region, showed how the choice of one alternative over another could affect the path of development.

In an economics paper for the Brookby Quarries Ltd application, Greg Akehurst & Tom Worley of Market Economics Ltd wrote: “There has been and will continue to be significant growth in demand for aggregate from the Auckland economy. It is estimated that the average house requires some 400 tonnes of aggregate as part of its construction and that a 1km stretch of motorway lane requires between 28-39,000 tonnes of aggregate (depending on the nature of the terrain).

“Effectively, Auckland’s built future is aggregate held together by binding agents such as cement. Every tilt slab warehouse requires 560 tonnes/100m², every new edge of urban area subdivision requires local streets at 10,300 tonnes/km, with the pipe water services requiring 8100 tonnes/km; or every town centre highrise apartment requiring around 60 tonnes/100m². Auckland is built of aggregate.”

That kind of information is what we should have been basing our growth & housing debates on.

Thinking communal costs, we would look at reducing road-building and seeking alternatives if they could be proven to be more efficient for operations, and in terms of capital & operating costs. Instead, we have expanded – the size of houses, the distances people commute, and the time everything takes.

We would still want roads – but maybe development could encourage travel in both directions at once, instead of a long queue in and a long queue home in the evening.

The zone hearings start

Over the next 4 months, starting tomorrow, the independent panel on Auckland’s unitary plan will hear a seemingly endless string of submissions on zoning, including changes sought to rural:urban boundary lines.

Many of those submissions are site-specific for small areas, a few including changes supported by the council but most opposed as denting the consistency of the boundary lines. Some, such as proposals for Dairy Flat, would add hundreds of hectares to the urban area, raising concerns for the local aerodrome’s future. At Pukekohe, a shift in the boundary would reduce the area of quality soils that might be urbanised.

Since the panel began its work last year, much of its time has been devoted to prehearings & mediation. The zone hearings starting now are out in the open and the final round of submissions through to the end of April, when the panel will retire to complete its recommendation to the council.

Hearings panel website

Attribution: Unitary plan evidence, Regional Growth Forum, Brookby quarry hearing evidence.

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