Critics of rising Auckland land costs for housing have long pointed to the line between allowed development and the no-go greenfield territory beyond (the hated & despised metropolitan urban limits) as the lead factor in forcing prices up – not just for peripheral land but throughout the region, and flowing into overall housing costs.
Secondly, where the development & construction sectors haven’t been heavily regulated they have shown an abysmal ability to perform well. You can criticise administrators for over-zealously creating more regulation, but those rules have been a response to failure.
The first of these is a cost which can – and will soon – be remanipulated. The second is mostly a cost which begins with ensuring quality in construction, and can end there if the industry demonstrates that self-regulation works.
The most expensive factor in skyrocketing house costs is the land value, but the difficulty in acquiring peripheral greenfields hasn’t been the main problem. Builders go to the periphery when something more accessible isn’t available.
What’s more important is the ability to revisit areas built on in earlier eras, to intensify land use in the inner suburbs. Making it possible to remould existing suburbs through site aggregation & consequent intensification – which Housing NZ has experienced great frustration in trying to achieve for well over a decade – would already have forced widespread land revaluation years ago, and that’s without considering the function of heritage protection.
It’s within the power of the independent panel hearing submissions on Auckland’s unitary plan – and, next year, delivering its recommendations to the council – to propose zoning which will allow more widespread redevelopment. That doesn’t mean highrises will spring up along every suburban street, but it would offer developers & builders a far wider choice of properties, and that greater competition among potential suppliers would change the price.
This prospect is alluded to in a paper released on Wednesday by Auckland Council chief economist Chris Parker, Housing supply, choice & affordability: Trends, economic drivers & possible policy interventions.
Including 2 summary lists in the executive summary at the front, the paper runs to 101 pages. But a quick glance through those 2 lists alone will give you an idea of the many potential courses that can be followed – some conflicting with each other, but the purpose wasn’t to deliver a single comprehensive solution.
Down in the depths of the paper, Mr Parker (and the many high-level contributors to his work) gets into questions on barriers to intensification of the inner suburbs such as viewshafts. The Mt Eden viewshaft alone is estimated to have a net cost as high as $440 million.
In his summary of priorities to attack, he starts with increasing greenfield land supply, followed by permitting more intensification via the unitary plan.
He has listed 34 tools to address Auckland house prices – marking them with hammers & megaphones and colour-coding with greens, blues, yellows & reds. Among the reds is giving a gst exemption to owner-occupiers who commission new homes: “Do nothing,” he says, “any exemption is equivalent to awarding a government subsidy of the same amount, which would likely not be the best use of funds.”
Another red megaphone is awarded to restricting immigration. Mr Parker points out that immigration supports growth & economic development, restricting it could exacerbate a shortage of construction skills, and it could fall quickly anyway.
In his paper, Mr Parker says a reduction in Auckland’s median house price to median household income multiple, from the current 9-10 down to 5, might be achieved over the next 15 years if a concerted effort was made to follow recommended strategies – primarily by reducing costs of housing delivery and increasing the scale & breadth of housing options for the bottom half of the market.
An important point he makes concerns the house price median. It’s been rising as more $1 million-plus houses are built and new stock in the bottom price bracket has declined. Without preventing expensive new housing, the median can be cut simply by building more cheaper homes. A key to that is land price, and a vital accompanying factor is holding other household costs down, such as commuting.
Mr Parker was asked by mayor Len Brown & deputy mayor Penny Hulse to analyse Auckland’s housing affordability problem, identify causes and give preliminary advice on a long list of possible solutions.
“The scope of solutions considered is wider than just the council – it includes the Government, industry & the community. This is to give a more holistic understanding of the issue & solutions, and scope for collaboration & influence.”
Leading the root causes of unaffordability was the market signalling the need to transform the housing stock to accommodate as many as one million more people over the next 30 years. Demand drivers included natural population growth, strong migration, low interest rates, investor confidence & tax incentives.
Planning constraints were at to the top of the list of supply issues, followed by design requirements (as you can see above, I think this one is an excuse rather than a real cause), low construction productivity, fragmented land ownership & infrastructure needs.
Mr Parker has recommended the council work with the Government to jointly adopt an aspirational housing affordability target: “This would help to guide the development of policies, plans, regulations etc that may relate to housing supply, either directly or indirectly.”
But there are plenty of people in the property sector who will point to policies, plans & regulations as a root cause of cost rises, and they’ll be highly averse to a new round of them. Better, you might think, for a change in land pricing to flow from the tick of a zoning recommendation, reducing the need for intervention and heightening the chance of prices finding a natural level.
Links: Chief economist’s paper
Chief economist delves into Auckland housing
Action on price-to-income ratio the key issue for housing affordability, says chief economist
In depth: What’s fuelling Auckland’s house prices?
Attribution: Council paper, briefing.