Housing affordability

October 30th, 2012 at 9:00 am by David Farrar

Bill English announced:

  • Increasing land supply - this will include more greenfields and brownfields developments and allow further densification of cities, where appropriate.
  • Reducing delays and costs of RMA processes associated withhousing - this includes introducing a six-month time limit on council processing of medium-sized consents.
  • Improving the timely provision of infrastructure to support new housing - this will include considering new ways to co-ordinate and manage infrastructure for subdivisions.
  • Improving productivity in the construction sector – this includes an evaluation of the Productivity Partnership’s progress in achieving a 20 per cent increase in productivity by 2020.

Increasing land supply is key – especially in Auckland. There is a reasons is so much worse in Auckland than most other cities around the world. It is an artificial restriction on supply of land. And the impact on house prices is as predictable as the impact of gravity on apples.

The six month deadline for consenting of medium-sized constructions should also make a significant difference.

Labour and Greens are of course against the two major recommendations. They seem to think the answer to housing affordability is to have the Government build more homes, and everyone becomes a tenant of the state.

Not PC makes some very useful points:

The debate over affordable housing is already being framed as a debate between “sprawl” and “intensification”—a debate between those who wish to release (just a little) the planners’ ring-fences around NZ’s major cities to allow new homes on “greenfield” sections, versus those who insist we build with more intensity within the ring fence on so called “brownfield” sites.

The latter group characterise the former as being in favour of “sprawl”; the former characterise the latter as promoting the construction of the slums of tomorrow.

Both are right, and both are wrong.

What’s missing here is choice.  In talking about about development on either “greenfield” or “brownfield” sites, both advocates insist that folk do things their way. They completely ignore the fact that people have the right to choosewhere and how they live, particularly if they own the place on which they choose to settle down.

This is key. Those against increasing the urban limit are not just saying they don’t want to live further out – but they want to effectively ban others from doing the same.  They don’t want people to have choice – they want everyone in an inner city apartment.

Let people live where they wish to, as long as they bear the costs. And let those choices themselves—choices based on people’s own values for which they are prepared to pay the cost—organically reflect the way the city develops.

Exactly. If new suburbs are going to mean you need more public transport links out there, then make those who choose to live there pay for it. I suspect many will happily pay a but more for public transport if it means they can get their house for $50,000 cheaper.

The answer (with rare exceptions) is that for most bits of land in most NZ suburbs, all of the housing types listed above that make the least use of scarce urban land are allowed, and all those that help increase the number of housing units that can comfortably work in a city — and that are enormously popular overseas – almost all of these urban housing types are disallowed.

PC concludes:

We let them ring-fencethe city and stop people heading out and building away from the city when they want to –“sprawl!” is the all-too hysterical cry – and then we let them stop other people building higher density urban housing when they want to. Instead of leaving people free to choose, we have these boring “halfway houses” that some people like, but that many simply accept because that’s all that’s available, and they don’t know any better.

When there’s just so much available, so many great housing types  from which to choose, it just doesn’t make any sense.

“Sprawl” or “intensification”? That’s a false dichotomy. I say let people be free to choose.

That’s the path to genuinely liveable cities, and to affordability.

Hear hear.

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29 Responses to “Housing affordability”

  1. s.russell (1,580 comments) says:

    National’s solution to rising house prices is to increase supply. It is worth remembering what Labour’s solution was when they were in office: increase demand by subsidising selected buyers (it was a bit like Lotto).

    It was like squirting petrol on a fire of course. I could wish Labour had learnt from that but I doubt it. Even if they realise it was dumb economics they probably still think it was smart politics… and may even be right.

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  2. Shunda barunda (2,972 comments) says:

    Both parties are wrong, both parties are driven by their respective ideology.

    The Bill English’s want to take an ‘abandon ship’ mentality to large sections of urban residential property, the highly parasitic property investor that NZ has produced has no interest in investment within existing run down neighborhoods when all that nice fresh farmland is sitting safely away from the riff raff.

    The Greens are just anti development full stop.

    In my opinion this issue needs very localized planning, there is no way one rule will fit the whole country. For instance, you are right about Auckland, but the same approach in Christchurch could be disastrous in the long term, Christchurch could continue sprawling all the way to the Southern Alps over valuable farm land without careful planning and restriction.

    Urban renewal is something NZ has to start seriously looking at, we are now ‘of age’, even smaller towns are showing a serious and developing residential problem.
    The problem is also linked to poor social welfare policy and review of social welfare is an essential component to any solution.

    Reinvestment in existing urban residential areas may not be the pretty option, but it is certainly the right option, carving off more land for property developers/investors is only going to fuel the current unsustainable situation if not done properly.

    Bill English won’t do it properly.

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  3. vto (1,128 comments) says:

    Oh yeah, let people choose, let the market decide. Like in central Christchurch – ha ha ha, tossers. You have no credibility.

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  4. bhudson (4,736 comments) says:

    If new suburbs are going to mean you need more public transport links out there, then make those who choose to live there pay for it.

    Not at all. That is a removal of choice. Why should those who choose to live in outer suburbs be forced to pay for the extension of a public transport network, which they are already subsidising through their rates, if they do not wish to be users of it?

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  5. Grendel (972 comments) says:

    VTO, you dick. either way people choose.

    either those people are cardigan wearing members of the state, deciding on their clipboard what individuals can do with their own property, or its people deciding what to do with their own property.

    if either set of people should have the choice, and the responsibilities that come with that choice is the person who owns the land.

    whats your point about central christchurch, are you talking before the earthquake or after it. do you have a point or do you just like spouting hot air?

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  6. wreck1080 (3,810 comments) says:

    The oft-ignored cost of sprawl is new infrastructure.

    So, when you say that new land should be released, you should also say build new schools, new roads, new waste pipelines and so on.

    Public transport is not really a good option for ‘sprawling cities’ as they simply have such a low population density.

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  7. unaha-closp (1,140 comments) says:

    Auckland has its “centre” sitting on a peninsula on an isthmus. As long as the city is deemed to be uni-central it is geographically predetermined to be a very costly to live in. There is no more land that can be freed up to live on, because there is no more land close to Auckland. To make Auckland less costly the city needs to be decentralised.

    The only reform undertaken by central government that could possibly make a difference has already occured. The opportunity to quash the stupid, senseless Supacity. Instead we got a single city from Puhoi to Tuakau and now we get to live with the consequences.

    It is going to be expensive for a while. But then the expense of operating a business in Auckland will become too high and business will leave. Then it will become very inexpensive too.

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  8. Ross12 (1,279 comments) says:

    The real long term answer is to encourage business to get out of Auckland into smaller/regional areas. With modern technology there is no need for the concentration of business in Auckland.
    Don’t bring up the ” got to be close to the customer ” bit –with Aucklands terrible traffic I doubt many people make the effort to get to see the customer face to face unless they really have to.
    There are plenty of very successful businesses that operate out of Auckland , setting the example.
    The regions have be innovative — look at Southland with their no-fees polytech etc.

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  9. Viking2 (11,281 comments) says:

    It is going to be expensive for a while. But then the expense of operating a business in Auckland will become too high and business will leave. Then it will become very inexpensive too.

    Yep, those with any nounce are already leaving.
    A big chunk of the port related business has already.

    Deal with any Head Office in Auckland type companies and they are basically dick wits, out of touch and too expensive.

    With Internet and soon to be fast Broadband there is no logical nor sensible reason to go there.

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  10. Viking2 (11,281 comments) says:

    Jetstar goes lower, selling 1c fares

    Tuesday, 30, Oct, 2012 9:55AM

    The domestic airline war has just gone as low as it can go without giving seats away.

    Jetstar is selling fares for one cent each.

    It says 3,000 such seats will be made available by the end of this week.

    Its entire domestic network is part of the campaign – Auckland, Wellington, Christchurch, Queenstown and Dunedin.

    600 seats will be made available every week day for an hour, between 6 and 7pm.

    It’s the same week the airline has its 100 millionth passenger scheduled.

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  11. Lloyd (125 comments) says:

    When we have a housing market distorted by tax incentives, depreciation schemes and the encouragement of Loss Attracting Qualifying Companies as means to people to evade personal taxation, we end up with a situation that New Zealanders opt to purchase properties as investments. It is the perpetual purchase of housing as a hedge against inflation and to avoid the nonsense of finance companies and dodgy investment schemes which is driving prices up. Any behaviour which is rewarded is repeated; buying houses is rightly or wrongly perceived as the only safe haven for carefully husbanded savings.
    As well as thousands of “Mum and Dad” investors purchasing rental properties to secure their futures, we have the vast distortion of situations like Australian politicians purchasing dozens of New Zealand houses to take advantage of our liberal tax scheme. The love affair that we have with houses shows no sign of abating, especially when the tax regime is very clearly biased towards rewarding acquisition of additional properties.
    Affordability changes when the market changes from having new home buyers competing with cashed-up Baby Boomers assiduously guarding their accumulated savings by competing on the same market. Disincentives (and I am not in any way encouraging Capital Gains Taxes, a bloody stupid distortion in a market which has enough distortions as it is) need to be eased in over time to change investor behaviour. This will take a while and involves thinking that Labour and the Greens are utterly incapable of.

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  12. emmess (1,398 comments) says:

    The oft-ignored cost of sprawl is new infrastructure.

    So, when you say that new land should be released, you should also say build new schools, new roads, new waste pipelines and so on.

    Rubbish, to build roads through countryside is a hell of a lot cheaper than through existing suburbs.
    So for new suburbs, in places like the outskirts of Auckland, 4 lane highways should be built running next to them beforehand with a bus station at the terminus or next to the highway
    Infrastructure such as schools and pipes are needed no matter where the houses are.

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  13. Monique Watson (1,062 comments) says:

    Greens are arguing an own goal. You restrict land suply, you contribute to rich/poor class divergence.

    http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2081216

    And the infrastructure Wreck1080 has to be built by workers – more jobs.

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  14. Monique Watson (1,062 comments) says:

    MMMmmm Roads.
    Big roads and big trucks.

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  15. Jim (406 comments) says:

    “Sprawl” or “intensification”? That’s a false dichotomy. I say let people be free to choose.

    It’s not a false dichotomy. As long as the sprawl option is available then intensification will never happen. If you continue to let people follow the path of least resistance, avoid planning, and let anyone turn a quick dollar by ‘just adding a little more on the edge’ then you will end up with something like Jakarta.

    Lazy developers following a proven formula and sheep-like residents that flock to their tacky offerings. Forgetting that they actually need to get to work somewhere on a regular basis, then sit in their cars for a couple hours each day.

    There already is choice: you need to pay market rates. Everything is for sale. You want a lifestyle block on the city fringe: you can buy it now. Want a 1000m2 property in Epsom: get out your chequebook.

    What’s the bet the same people advocating for (just a teeny little more) sprawl are the ones that say Auckland is too spread out to make investment in public transport rational. This is all incredibly myopic thinking.

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  16. campit (467 comments) says:

    Increasing land supply is key – especially in Auckland. There is a reasons housing affordability is so much worse in Auckland than most other cities around the world. It is an artificial restriction on supply of land.

    Disagree. Auckland Council has the land available to build 18,000 houses in Auckland right now, so there is already “choice”. Why not focus on making dwellings more affordable, rather than simplistic, and incorrect conclusions like this?

    Housing affordability can be improved in a real way, not just a way that subsidises sprawl, which results in even more expensive housing because of the need to supply infrastructure like water, electricity, communications, transport and sewerage. These include:

    - Getting rid of completely stupid minimum parking requirements
    - Allowing the construction of small, but clever, units
    - Learning from Vancouver and making it easier to build apartments and other attached housing typologies
    - Getting rid of density limits in the upcoming Unitary Plan
    - Focusing much more on “middle density” housing, such as terraces or other small-scale intensification methods

    Central Government has a part to play here by managing it’s massive supply of Housing Corp land and dwellings more effectively too.

    [DPF: Just because 1% of land is not yet built on, does in no way mean the scarcity of land is not a major factor in the price of land. The Productivity Commission has pages and pages analysing this issue, and pretending the scarcity of land is not an issue, is like pretending gravity does not exist]

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  17. wreck1080 (3,810 comments) says:

    @emmess ::

    Rubbish to you too.

    Building any road at all is more expensive than none. Even one in the country side.

    Those new suburbs will feed more people onto already choked motorways, so it is simplistic to think you just need to build a new road in the new subdivision.

    Existing schools can be intensified, building double or triple level buildings. Cheaper than allocating new land AND building.

    And, improving existing infrastructure should have a lower cost than building completely new infrastructure….eg, how much does it cost to build a new sewage treatment plant vs improving the existing to handle more.

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  18. RRM (9,666 comments) says:

    People keep talking about “urban sprawl” as though it’s a bad thing.

    If a city becomes so big that it’s impractical to live on the East side and work on the West side – well – guess what happens? People sort their lives out accordingly, so that that isn’t a problem. I.e. they live near where they work.

    And then you get complexes like Dannemora/Botany Town Centre / East Tamaki, so you can live, work, shop and go to school without much NEED to get on Te Motaway and join the long line of tail lights heading slowly across town to the other side every day. Surely that’s a GOOD thing??!?

    There’s a completely separate issue in that all of the new homes being built are $600k – $800k brick & tile houses in Dannemora, and there just doesn’t seem to be much of a reason for a builder to build a small cheap house… but again, I’m not certain that’s a “problem” in need of a solution…?

    My recollection of driving around Auckland, is that the distances between the various areas is part of what gives them their unique characters, and that diversity of character is one of the best features about Auckland.

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  19. Shunda barunda (2,972 comments) says:

    People keep talking about “urban sprawl” as though it’s a bad thing.

    It is a bad thing in a small country that relies on agricultural exports.

    Flat ground is useful to NZ other than propping up parasitic property investors, that may be hard for some of you to swallow but tuff titties, that is the truth of the matter.

    The current state of property investment in this country is one of the most immoral things NZers have ever allowed to happen on these shores, it is completely unsustainable.

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  20. dime (9,667 comments) says:

    “If new suburbs are going to mean you need more public transport links out there, then make those who choose to live there pay for it. ” – as long as you mean through increased ticket prices. not a blanket rates charge.

    Dime’s loving his new Millwater palace :D Love being part of the sprawl.

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  21. graham (2,285 comments) says:

    The new Silverdale Shopping Centre is looking pretty good. Everything is actually a decent size – the carparks, the shops, all seem to be spacious.

    The people who developed this new shopping centre must know what they are doing, presumably. They aren’t catering for people travelling, as the motorway bypasses Silverdale and Orewa. So one can only assume they are aiming at the urban sprawl.

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  22. dime (9,667 comments) says:

    graham – yep. 3000 homes going into Millwater.

    I suspect we will see less retail in orewa but more cafes etc. quite nice.

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  23. kowtow (7,953 comments) says:

    Surely immigration is a factor. But of course we can’t /won’t go there.

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  24. Reid (16,111 comments) says:

    I was just going to say kowtow. 40,000 immigrant people a year come to Auckland. Lots of them have enough money to buy property. What the heck does that say about pressure? English completely ignores this factor.

    It’s not about stopping the flow, no-one but an idiot would suggest that. No it’s about re-directing some of the flow to the rest of the country and how to do that. Why doesn’t English talk about exploring the options around ways to do that? I mean these are people who wish to live here, they’ve already made that decision so imposing a condition that grants them favour if they don’t live in Auckland is not a big deal for people in that position. They make a choice yes or no. It’s not a blanket thou shalt not, it’s an incentive option they can take if they wish. That’s one way, there are no doubt many others.

    But as kowtow says, why is it that no-one wants to mention this elephant in the room? I mean 40,000 people with money coming in every single year. That’s got to have a much larger effect than simply the land over time. They wheel this out every 15 years or so, they talked about this in 1996. Munting fools. Why not do this if they really want to make a difference?

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  25. SPC (5,473 comments) says:

    Giving some preferential (qualifying) points to migrants who migrate to areas outside of Auckland is a good idea. And why not some more if they invest in a new home rather than bid up existing property values. Even make this one a requirement for investor migrants.

    The government should have invested in housing construction as an economic growth tool (selling off the houses means no debt builds up) when it first came into office. And by this I mean more than the low volume selling of existing Housing Corp stock to build new ones or renovate.

    Apart from a general problem with supply, there is a particular problem with a finite level of Housing Corp stock as population increases and more people do not/cannot own homes (the growing number of people not in good enough health to work under 65). Social housing is just a form of Accomodation Supplement band-aid for low income poverty, it is an admission that government is hoping charity will/can fill the growing gap in housing supply for the poor. Someone in government should read the 1948 UN Declaration on Human Rights in this regard.

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  26. voice of reason (491 comments) says:

    Kowtow / Ried – Indeed immigration is a huge factor – simply go to any house auction in Auckland and the factors pushing prices up are obvious.

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  27. Kevin (1,122 comments) says:

    IN a country that relies on agriculature and tourism for its livelihood it beggars beleif that nutbars are still advocating urban sprawl.

    Also the cost of urban sprawl is something we must all bear even though we dont want it – building new roads, railways, pressure to have more “harbour crossings”, pressure to have 2nd airports, fibre optic cable, help the bor bastards when they find our the subdivision was on unstable landfill or a toxic dump and we have to watch images of their houses collapsing into the earth.

    All this short sighted bullshit is doing is creating an enormous “infrastructure” tax bill for our children and grandchildren.

    God we need a real green party in this country.

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  28. Monique Watson (1,062 comments) says:

    Good luck with that, Kevin. Families don’t want to live in warehouse flats. And if they do end up there the socialist parties du Jour are right on top of the Gummint to build more housing and give more handouts.
    I think you’ll find that the last thing New Zealand needs is a ‘real’. Green/Socialist party.

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  29. Kevin (1,122 comments) says:

    Yes we need a blue Green Party. This party would be a long way right of national eg can’t afford benefits,because we need the money for a clean green economy and environment.

    But national wont have a bar of it they still think they can govern alone in them environment. Tossers. No ideology or strategy.

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