Why you don’t need to regulate against shoebox apartments

Sadly the Auckland Council has overturned the Independent Panel and mandated a minimum size for apartments. Frank McRae at Transport blogs why this is not needed:

1. You don’t have to live in one

No one can force you to live in a shoebox. This isn’t North Korea. It’s not even Cuba.

2. Bank lending rules mean that developers will tend towards building larger apartments

A recent article in The NBR also raised concerns at the prospect of shoebox apartments (paywalled). Despite its intentions, the article actually made a convincing case for why Minimum apartment size rules aren’t needed. The article noted that banks generally don’t like small apartments and often won’t provide loans for apartments less than 50m 2 in size. If that’s the case then developers generally won’t want to build tiny apartments. Developers aren’t in the business of throwing away money and if prospective apartment buyers can’t get a loan for a tiny house then the developers won’t want to build something no one can buy.

3. The market has an incentive to provide larger apartments

People generally favour more space than less space if they can afford it. This provides an incentive for developers to build larger apartments. Indeed, the latest round of intensified construction going on in Auckland’s city fringe is producing much larger and higher quality apartments than the construction boom of the early 2000s. This shows there is demand for larger apartments and that the market has moved on from where it was 15 years ago.

4. Limited development opportunities incentivise the development of smaller apartments

Until recently, intensified residential development was largely prohibited in most areas outside of Auckland’s CBD. This made well located residential floor space scarce. This scarcity provided an incentive to build tiny apartments like those that proliferated in the early 2000s. If additional residential floor space can be constructed in more areas, the scarcity of floor space is reduced and there is potential to provide bigger apartments. Additionally the more development opportunities there are, the more developers will need to compete on things like size and quality to attract buyers.

5. Small apartments can be nice and some people want to live in them

Despite all of the above there are still some circumstances where a developer will want to provide a small apartment and there are some people who will want to live in them. With good design, small studio apartments can be nice and they can work for some. Young people with an active social life may only need a house for crashing and the occasional shower. Why should they be denied the option of paying less money for less space? And if a cramped apartment is the best someone can find within their budget and other constraints, how would they be better off if that apartment didn’t exist?

All excellent points.

Planning rules should be about controlling the external effects of development. It’s hard to see what external effects small apartments create and why they should be of concern to anyone other than those who choose to live in them. If hand-wringing about “shoeboxes” is really from a genuine concern for the welfare of those living in them, then the hand-wringers should be even more concerned about people living in cars (the ultimate shoebox dwelling) and uninsulated garages. A small apartment is a much better option than a car or homelessness for those without other options. And for those really concerned about others having better housing options, the best way to achieve that is to ease the arbitrary rules that create an overall shortage of housing and prevent more affordable housing from being built.

It’s sad to see the Auckland Council vote for minimum sizes, which may keep prices higher than they need to be. But to be fair overall most of their votes have been in favour of the independent panel’s reccomendations.