The good old ‘compact city’ versus ‘urban sprawl’ debate has been reignited – with a Productivity Commission report on Housing Affordability pointing the finger at land-use regulation as a major cause for reduced housing affordability over the past decade: particularly in Auckland. The full report thinks about the facts in quite a bit of detail, assessing interesting things like the relationship between the number of properties/sections sold with the price of each section. It also spends a few pages looking at urban planning regulations generally, although doesn’t go into enough detail on this matter in my opinion.

The report’s summary version briefly discusses the relationship between planning regulations and housing affordability:I think it’s obvious and logical that reducing the supply of land available for urban development will drive up the cost of land where such development can take place. That’s about the most fundamental rule of economics: increase something’s scarcity and its price will go up. You can see this when comparing the number of sections & dwellings sold in Auckland over the past 20 years with the price of them. There’s a ‘de-coupling’ of price with the number sold, which suggests that it’s scarcity of supply that is driving up prices, but for some reason those high prices aren’t then stimulating more supply: Looking at the data a bit closer, we can also see that most of the “new builds” constructed in recent times are at the very top end of the market – something quite different to what was the case 30 or so years ago: The report makes the (correct in my opinion) conclusion on this particular matter that, because land has become so expensive, developers need to build huge places in order to get a return on that land. This is pretty obvious, as you simply don’t make money by putting a $150,000 house on a $400,000 piece of land.

So, to cut things short, I think the report is correct in saying that a scarcity of land (created by planning tools such as the Metropolitan Urban Limits) has driven up land prices, which has generally meant that only expensive new housing has been built, and has also meant that nowhere near enough housing has been built. However, where I differ is in the proposed remedy. The report seems to think that the solution is to allow a lot more urban sprawl (even more than what the Auckland Plan proposes, which is A LOT).

There are many arguments against allowing too much sprawl. One increasingly valid argument is that sprawl is actually not what the market wants – in many US cities the outer suburbs are being abandoned as demographic change and rising fuel prices encourage inner-city living. Along with environmental arguments against sprawl, perhaps the most compelling is simply that of efficiency and infrastructure cost. One of the background papers supporting the Auckland Plan noted the following:The cost of providing urban sprawl with infrastructure is not limited to roads, pipes and parks – but also things like building new schools and hospitals and adding to the operating costs of many services that have to cover a wider area than before. It is not exaggerating things to say that many cities in the USA (Detroit, Buffalo and Cleveland come to mind) are bankrupting themselves because over the past 30-40 years they have grown hugely in physical size, but not in populations, and can no longer support such an inefficient urban form.

So there are many compelling arguments against urban sprawl. But at the same time, if housing is becoming impossibly unaffordable in Auckland we can’t just do nothing about that either. Especially if it’s a lack of housing supply which has played such a key role in the affordability crisis. Here’s where the commission’s position annoys me somewhat – did they even bother to read the Draft Auckland Plan? Do they realise that it provides 100,000 new units on the urban periphery over the next 30 years (around as many households as there were in all of Manukau City in 2006)? Do they realise that the Plan will lead to significant intensification through upzoning? While they seem to understand the difficulty in getting consents for ‘brownfield’ development (probably one of the biggest problems in making intensification happen), they don’t seem to realise that solving this problem might mean that we don’t need to build as much sprawl as you might think. Planning somehow gets the blame once again for focusing too much on preventing sprawl when in actual fact – as I have explained so many times before – around 95% of our planning rules actively promote sprawl and prohibit anything else.

But perhaps the most fundamental question we may wish to ask ourselves is this: “where do we want our affordable housing to be located?” If we are to improving affordability by allowing a lot more urban sprawl, then we will end up pushing the city’s poor to the periphery, trapping them in a cycle of spending more and more of their income on transport, and as petrol becomes more expensive it seems likely they’ll end up worse than before. Or should we be looking to a balanced approach that focuses much more on intensification – so we can provide affordable housing in parts of the city where people actually want to live? Where are the recommendations that development bonuses be given to developers who provide a number of affordable housing units? Where are the recommendations that District Plan rules be updated so they’re consistent with regional planning documents and actually make intensification happen?

The fact that we don’t see these recommendations (too much) makes me pretty sceptical of the whole exercise. There are some good things in the report, highlighting that we do need to boost supply and highlighting to some extent what the flaws of our planning system are when it comes to actually making stuff happen. But the huge focus on more sprawl is an overly simplistic answer to a pretty complex question – and is an answer with unintended consequences that I think far outweigh its supposed benefits.

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63 comments

  1. Im always deeply skeptical about these “independent” reports. If you follow the money trail the report outcomes are always consistent with the views of whomever is funding it. Cr Mike Lee has come out swinging in today’s Herald’ labeling the Commission “rednecks in expensive suits…”

    I do wonder why the Government sees fit to interfere with Auckland’s planning processes. Clearly they cannot accept that Auckland should be able to make their own decisions around land use planning.

  2. They don’t seem to have done any research of ‘Gen Y&Z’ factor that is influencing things. That factor is something which really pisses me off but also has an impact on how bad the housing affordability crisis is. What I mean by this is that we keep hearing stories about couples on good incomes not able to afford their ‘dream house’ and invariably the area they want to buy in are suburbs like Ponsonby or Mt Eden. Basically they are wanting to be able to go straight to the top of the property ladder and not work their way up it which is something the commission themselves says people should do and why they suggest affordable housing on the fringes.

    Building lots more houses out on the fringe isn’t going to solve this issue because because those suburbs will still be in high demand and the only way to address that demand would be through putting more dwellings in those areas through intensification.

  3. There’s an old saying in science and in research in general which is “crap in = crap out’, likewise if the title of your study is ‘affordability of housing’ i.e. how can building a new McMansion be made as cheaply as possible then it’s clear from the outset that the answer will be ‘open up land everywhere for sprawl’. If the study was perhaps about best-value for the council and ratepayers, and how to keep and improve green space in and around the city, we’d come to a different conclusion all together.

    I too sometimes wonder why they even bothered to make a super city because National seem so obsessed with controling every aspect of the city that they should have simply disbanded the council and set up a ministerial position.

    1. rtc, that’s exactly what they thought they were doing but we all voted wrong, pesky thing democracy, that’s why they are always trying to ‘reform’ it. See Key’s post election comments re MMP.

  4. WRT housing affordability in NZ:
    Problem 1:
    As Josh has pointed out many times in his posts its the planning rules that stack up against smart intensification – which is why I know some developers (and I have heard a few quite stunning stories about there frustrations with council) in the end say – stuff it – I am off to build somewhere where I can simply get it done without drama and that is generally a greenfield site, stand alone house thank you very much. As much as the Auckland plan is espousing the virtues of a more balanced approach (sprawl and intensification) the bureaucratic process is still heavily biased against quality higher density – not intentionally I think given that at an aspirational level the council are singing a lets intensify song, but the district planning provisions need to catch up fast – the unitary plan can’t come fast enough. So in the end you get this mind set and many submitters to the commission say we want to be able to do development where its easy, that way we can make it cheaper.
    Problem 2:
    No capital gains tax. Many punters out there do not just own a second or third investment property but several. Without getting into the issues of renting, the fact remains there is at least a certain supply of housing that is effectively “banked” by one person and thus not on the market for other home buyers
    Problem 3:
    I read that Fletcher’s CEO in his take on why housing is so expensive cites building costs as part of the problem – this is true, but in part because we a have a complete monopoly (guess who) on the primary building materials (timber – framing, cladding etc). Unlike Australia who have at least two or three main competitors for this resource. Lack of competition generally means greater cost.

  5. There is always reference back to “the market”, but the market (i.e. us) only ever have a fixed amount of dollars to spend on things. With housing, we are usually applying a trade-off between our housing costs and our transport costs. I could choose to live closer to work, shops, amenities, etc and transport would be a lot simpler & cheaper (more likely to be able to walk/bike for example) but those properties not surprisingly cost a bit more. Or I could choose to get a cheaper place in the ‘burbs, but I will be spending the balance on the extra transport costs I’m now incurring. Either way I’ll still be spending about the same amount of money, although that relative balance could change depending on the price of petrol.

    The difference however is that suburban sprawl housing costs the Council more to service, which we all end up paying for. And all that driving (unless I’ve got a good PT service) probably doesn’t do much for my health either, again costing all of us taxpayers when I end up in hospital. Unless the Productivity Commission factors in those external costs into its study (and there’s no doubt others), it’s going to come to some very narrow-minded conclusions.

    1. Exactly, which is why Ling emphasized the idea of everyone living ’10 minutes’ away from work. Quite how he will achieve that I don’t know. But the point is that he sees housing money, money that could go to his company, being spent on the commute instead. He really ought to be lobbying for public transport too. Not only could his sister company Construction be building the CRL but it would help make those suburbs more viable and allow people to spend a bigger proportion of their income on their living and not on driving.

  6. Building wouldn’t be so expensive if the building industry hadn’t built all the leaky homes over the past 20 years which has led to all kinds of extra costs when building a new house. Next year, certification comes into effect and from what I have heard builders expect it to increase the cost of building or renovating a house even more. In my mind, this has all come from the changes to the Building Act in the early 90’s.

  7. First note is the Productivity Commission was set up because the ACT party pushed it, and the main people are all from the Treasury who blame the govt for everything and the private sector for notihng. So no suprises with the main outcome of the report.
    The real issue at the moment with housing is that no houses or new sections are being built in Auckland at all, but this is a finance issue. The main sources of developers finance have all gone broke.
    Also the private sector is controlling the supply of land to ensure prices are kept at the highest possible level.
    Auckland does not have a large number of directions in which to sprawl, it is very different to American Cities in this regard. Hence easier for private sector to slow release of land.
    Another thing is the hilly nature complicates the engineering work required to build sections.
    Overall I think the report is very shallow considering the amount of time they’ve had, and ideology has prevented them from looking at the real issues.

  8. I agree with the post and some of the comments here that planning and zoning rules working against intensification have not been addressed at all (or at least very lightly) by the report. There seems to be a bias against multi unit development. One chart in the report compares infill to greenfields housing costs (pg 102) that shows infill is more expensive than greenfield development. This is one of the major reasons the report uses to dismiss encouragement of intensified development as a means of increasing affordability.

    But in no place does the report acknowledge that those costs are based on current planning and zoning regulations. If you have minimum apartment sizes and maximum building heights, and a restricted supply of appropriately zoned brownfield land, then you will get higher costs per apartment, but the report ignores this possibility.

    The other thing the report does is provide community resistance as a reason against intensification. But it does not talk about community resistance against sprawl being a valid reason against greenfields development. This seems hypocritical as MUL’s etc are brought in by democratically elected councils.

    1. Excellent points Swan, completely agree with your observations on community resistance – they can’t have it both ways.

  9. This report is deeply flawed.

    First, it mentions “perceived” benefits of owner-occupied dwellings, but never actually discusses/quantifies what these benefits are. And even if benefits from high levels of owner-occupied dwellings do exist (for example more “cohesive” communities) then they must be weighed up against additional costs, such as more rigid/less responsive labour market (changing jobs is that much harder when you have a fixed abode).

    Second, the analysis of rents is very interesting, and this is where the study really comes undone: Data shows that rents have grown barely faster than CPI. So while “home ownership” has become more unaffordable, the cost of “housing itself” is broadly the same cost as it was before. Stated differently, the “cost” of housing must be measured by rents, not property prices. You don’t measure the affordability of biscuits in terms of the price of a new cookie machine!

    So what the report needed (but failed) to do was show a clear link between 1) public policies, 2) higher property prices, 3) fewer owner-occupied dwellings, and 4) negative economic impacts. Because it failed to join these dots, I’d suggest it’s recommendations are on very, very shaky economic grounds.

    It’s focus on freeing up land (instead of other constraints on development, such as minimum parking requirements and building height limits) is not based on informed analysis.

  10. Surely if a lot of cheap, quality, high-density infill housing is built in the City and City Fringe, and in the various PT-enriched town centres like New Lynn or Onehunga, then everyone benefits. It will drive down prices for similarly cheap big-section housing out in the fringes, and people who prefer not having a commute can trade off with those who like having a garden.

    Also, does anyone else get a frisson of fear when people start talking about living on a big property out in the wilds as the “traditional Kiwi dream”, as if it was something they were entitled to, even after petrol is $6 a litre; and telling those of us who don’t like it to “move to Europe”? That’s almost a radical-rightwing attitude.

  11. “…I think it’s obvious and logical that reducing the supply of land available for urban development will drive up the cost of land where such development can take place…” is a statement that would be true if one can only imagine development continuing using the current highly inefficient building methods and spatial layouts. Reading the reports in the media on the Productivity Commission report I am again struck by the blinkered poverty of imagination that our lock-stepped neo-liberal thinkers seem to have. They can only imagine extrapolating from what is now and what begin everything from first looking to the proscriptions of a developer only free-market solution. Interest group capture within an all prevailing ideological carapace reduces almost all debate by our technocrats and experts to simply re-broadcasting the limited aims of profit driven lobbyists.

    Recently the History Channel re-played the 2003 popular history TV series “What the Industrial Revolution Did for Us”. Hosted by the affable Dan Cruiskshank, one episode (six) of this series dealt with the revolution in City Living brought about by the mass production building methods of Thomas Cubitt. The key thing to my mind is the term “mass production”, which drove down the unit cost of housing in London. It is worth watching with a mind to our current housing problems in our fast-growing and (only) city. I was think about this episode when I wnet to buy my Xmas Cheese from Mercer the other day, ruminating on what Thomas Cubitt’s methods could do with the blot on the landscape that is the old freezing works in Penrose. Then I read this, and seemed to me several of your comments point to the obvious solution to the problem:

    “…we can also see that most of the “new builds” constructed in recent times are at the very top end of the market…”
    “…because land has become so expensive, developers need to build huge places in order to get a return on that land…”
    “…While they seem to understand the difficulty in getting consents for ‘brownfield’ development…”

    All these are issues of artisan construction methods by (usually) under-capitalised builders for private developers seeking only a maximum market return. In terms of building houses, we seem in many ways to be still be stuck in first half of the 18th century.

    What is so obviously missing from the mix to my mind is the goverment. Take the derelict Penrose industrial site. it has a railway line right smack bang through it and it is right next to the Southern Motorway. It is around 2km to Sylvia Park. The whole high employment area of Penrose is within walking distance. Great communication links already exist. Government could easily fastrack brownfield development approval. To my mind common sense screams out that the government should be the developer of choice for an experimental model community utilizing mass-produced, high quality housing with shared communal spaces in one of the numerous derelict sites in these industrial areas of Auckland.

    Developers are usually greedy philistines. They’ve never seen a pristine beach they didn’t think would look nicer would a line of beige McMansions on it. Who amongst them is going to start building high-density housing until someone takes a punt and and proves it works, and is popular? And anyway, come to think of it, why do we need private sector developers at all if the government can provide very affordable, proper-sized (125 sq metre+), 2-3 story terraced family housing with a mix of ownership models (outright ownership through to long term leased and housing corp rental – reform of our tennancy laws for greater security of tenure on very long term leases should be a high priority), and with integrated PT for all New Zealanders?

    1. Sanctuary you hit the nail on the head re. mass production methods.

      The report talks about this in some detail, and identifies our current building industry as essentially a cottage industry without any economies of scale. But it fails to see the elephant in the room that multi-unit accomodation over a large area is far more likely to enjoy economies of scale.

    2. To be fair to the Southdown site, it’s also just up the road from the co-generation facility. I’m not entirely convinced I would want to live there without some serious landscaping to ensure there’s a lot of vegetation to help with air quality.

      And is that rail line the Southern, or just a spur to the inland port? The site is certainly not terribly convenient to the Penrose station; I ride the Harbour path regularly, and it’s a long way from Southdown up to Penrose station. I think Hugo Johnson Drive is over a kilometre long all by itself. I know that when Southdown has caught fire it’s required very long runs of hose back to the nearest hydrants at Church Street.

      1. Did the ride again this morning. It’s 800m from the northern entrance to the old freezing works site to the intersection Church Street and Hugo Johnson Drive. It’s about another kilometre from there to Platform 3 at Penrose. That’s much, much too far to be any kind of walk-up catchment, and it’s further still to Otahuhu. I guess you could build some kind of footbridge or underpass to get under the railway to Great South Road (probably via Church Street East), but it’s still going to be over a kilometre to walk to Penrose station.

        1. 1k is very reasonable if you don’t have a long walk on the other end too. Should be able to walk that in <10 mins.

        2. It’s not reasonable, actually. Walk-up catchment for public transport is considered to be 800 metres for the vast majority of patrons. At one kilometre you’re talking about something like 2% of patrons. Within 800 metres it’s still down around two-thirds.

          Also, the average walking speed is 4km/h, which means a 1km walk is 15 minutes, not sub-10 as you suggest.

        3. 4km is a bit slow, average walking speed is 4.5km for older people, and 5.5 for younger, but i think you’ll find people <40yrs living in a city heading to their morning commute can walk much faster than 'average'! ( in Singapore for instance average pedestrian speed is 6km/h)
          http://en.wikipedia.org/wiki/Walking
          http://gothamist.com/2007/05/03/nyc_ranks_eight.php

          I'm currently 500m from a tube station in london and people consider my place to be very very handy to the station. And i think nothing of walking 850m if i need to get to the nearest overground station.

          One thing my friends who have moved back to nz really notice is that no one walks anywhere, no wonder NZ has an obesity problem.

        4. Interesting stats, still don’t change the fact that 800m is about as far as you can reasonably expect people to walk. That’s based on data from Singapore, too, so you can’t dismiss it as being restricted to a culture where people don’t walk places.

          As for not walking in NZ, no surprises when a lot of places have nowhere to walk to other than, if you’re lucky, the local park. Any serious expedition requires going somewhere else, and since public transport is still largely unfriendly for most non-commuter trips people drive.

        5. This is the point though, if we want to improve congestion, environmental impact, and health outcomes, we need to make it acceptable to walk 800m.
          People are supposed to get 30mins of exercise every day, 800m is nothing!

          I prefer getting the train rather than tube to work, as i sometimes get a seat on the train, whereas on the tube i get squished against the door and end up with a sore neck for the rest of the day. It’s a 1.4km walk at the other end, but overall it’s the same amount of time as the train is quicker. There really is nothing special about how my body was put together, most people are capable of walking 1.4km.

          People can and should walk further to rapid transport, you can’t have rapid transport if there’s a stop every 400m.

        6. 800m means a stop every 1.6km, not every 400m. And if you have a proper feeder bus network to a rapid transit network, you can have much wider spacings on the RTN. Keeping to 800m is entirely possible.

          Again, the 800m figure comes from Singapore, a country with a high-quality public transport system and a culture of people walking to access it. It’s generally accepted, based on things that Josh has said in here. Whether you agree with it is completely irrelevant, because you are a single anecdotal data point. Detailed academic studies carry far more weight with me than your opinions, sorry.

        7. ” Detailed academic studies carry far more weight with me than your opinions, sorry.”

          I’d like to see some detailed academic studies, i did a quick search and only found conjecture. Can you post your links?

          At most the data seemed to be “how far did you travel to a stop” not “how far would you”, capturing intention is much less reliable. The thing about collecting how far you did travel is that it’s circular, it’s generally accepted that people wont walk more than 800m and ideally 400m, and so authorities aim to meet that. If authorities provide stops such that the maximum any one residence is from a stop is 800m, is it then any surprise when you measure it that no one walked more than 800m?

          What we need is to rip out half the stops and see how much ridership decreases because of the longer walk or increases due to the faster overall commute. But that’s never going to happen.

          What we also need is a government education campaign to encouraging walking, it will save the government billions in the long run. It’s criminal that we will spend shedloads of my taxpayers money (or at least will be once i move back :), on e.g. diabetes treatments and stomach bypasses, but almost nothing on prevention. Everyone knows they are supposed to get exercise, but you have to keep repeating the message before peoples change their behaviour. I notice that nationals transport policy document during the election did not even mention walking and cycling, and now with Brownlee as minister…

        8. The study was posted in here. I can’t find it right now, but if Josh sees this he probably knows the post I mean.

          It looked at how far people had come by various means to reach an RTN station. The vast, vast majority (over 90%) of pedestrians had come from within 800m. Cyclists came from further out, but still only a couple of kilometres, which probably is a function of the overlap between stations. Beyond that, it was feeder buses. So, no, I dispute your assertion that it’s a circular assessment.

        9. The 400m stops i took from this human transit blog
          http://www.humantransit.org/2011/04/basics-walking-distance-to-transit.html

          Found some good links here today, but very north american focused, i think europeans are happy to walk further than americans. http://ridethisbike.com/2009/02/how-far-people-walk-for-mass-transit.html

          But your right you don’t need a stop every 400m, however the problem with multiplying that by 2 to give 800m (or 1.6km if you are targeting a 800m walk) is that most people don’t fly to their nearest stop. They have to walk to the main road first, and walk if that means they’ve walked 500m before they even start walking down the main road the the nearest bus stop?

          That’s why alleyways are so important and i’m concerned the newer suburbs i’ve seen in AKL don’t seem to have them. Hopefully it’s just my small sample size and flat bush etc is full of them?

          I’ve been impressed in the UK visiting people that live in the outer commuter suburbs. Not something that appeals at all personally but i think it works really well for the family who want peaceful suburbia. The road layout is a complete maze of dead end roads ensuring no through traffic. With no through traffic it means the roads only need to be big enough for one car moving + one on each side parked – more room for housing, and keeps the speeds down. But there is a comprehensive network of short alleyways linking the roads such that the various shops, buses, and rail station are a very direct walk no matter where you are.

  12. I know the council has made mention of intervening in the market to get outcomes but perhaps as a way to defend their position they need to put that into action a lot more.

    The council has an investment CCO, perhaps get them to develop a range of low cost but appealing units and start buying and developing brownfields sites themselves (with the requirement for a certain level of commercial return of course). This should also help to push the council to reform planning and consenting issues as it would be in the councils interest to do so but it would also provide a new income stream for the council. Once a number of successful sites have been done and they could look at also selling the plans to private developers to use themselves.

    Of course the government is likely to come in and try and force the MUL open asap, in this regard the council needs to have a plan like above in place and push back and get perhaps 3-5 years to prove that their plans can work.

  13. Great write up. I agree entirely. As an economist, all I can say is NZ is in dire need of better urban economists! Isn’t that right Stu?

    1. Absolutely, we need a new generation of urban economists that is pragmatic, not ideological. Too many key issues in urban economics are at odds with the assumptions that underpin the neoclassical economics framework. It’s easy to show that in urban areas 1) economies of scale, 2) network effects, 3) externalities, and 4) imperfect competition are not “second-order” effects that can be dismissed; they are in fact the dominant effects that should be considered.

      Unfortunately the Productivity Commission thinks that the MUL is main reason why land is so expensive in Auckland. If they simply read Josh’s early post on land use in Manukau City (http://greaterakl.wpengine.com/2011/12/15/analysing-manukaus-land-use/) they could see that 75% of available land has been taken up by private vehicles, either in the form of roads and/or parking. The opportunity cost of this land is huge, and is not covered by drivers. So the solution to “freeing up land” is vastly more complicated than the Productivity Commission thinks.

      It’s a real shame they took such a simplistic approach. This was an opportunity to take some time and really investigate the core issues.

  14. Interesting and related film clip from Planetizen looking at this problem in 1959 – linked below.

    http://www.planetizen.com/node/53121

    It’s from the US Building Council and even they decry the “wastefulness” of mindless sprawl. It’s official: The Government is officially flogging a horse that’s been dead for 60 years.

  15. Why can’t we simply install a little user pays?

    If a developer wants to turn a couple of farms on the outskirts into subdivisions, why shouldn’t they pay the full cost of local power / sewerage / roads + district road / pt /school /hospital upgrades? Why should people get to buy cheap land on the outskirts and be subsidised by those in existing suburbs?

  16. I was going to provide a link to an electronic library full of essays from International Academics on Urban Planning, Economics and Management to provide a counter balance to comments here.
    But I wonder do I even bother – i.e able to read it with an open mind or will everyone attack the person who owns the Library rather than debate the material?

    1. Ben, the response obviously depends on how you say what you say. If you provide further insight on infrastructure costs of sprawl versus intensification or a well argued opinion on what the best balance should be between growing up and out might be, then I think you will get a well reasoned answer.

      If you start speaking for everyone, claiming that we all supposedly want to waste our lives mowing lawns and driving, before spouting that planners are social engineers forcing everyone to live on top of each other, you will be deservedly criticised and mocked.

  17. I just don’t see how opening up greenfield sites will provide for “affordable” housing.

    First of all “affordable” means different things to different people. But I seriously doubt that, as a developer, if you built a new 4bdr, 2bdr house on the city fringe, even one a smaller section, it would go for anything less than 400,000k. Which is definitely unaffordable to most first home buyers.

    Proponents must be hanging on the fact that increased supply will bring the price down. Yeah, if I sell houses outside the existing MUL for $400,000, the price of houses in Mt Wellington, New Lynn, Howick and Birkenhead will decrease and become more attainable to the first home buyer. delusional.

    1. What we need to do is to tweak our planning rules in a way that enables developers to make money while building smaller places. Changing demographics means that in the future we are likely to have more and more demand for smaller places. Problem is our current planning rules make it generally impossible for developers to make a profit while building anything other than a McMansion.

      1. Or have the council (through one of its CCO’s) build large amounts of the housing the council is wanting, the report talks about how we simply don’t have the economies of scale but that is something the council could develop which would still allow it to get a commercial return off the process.

    2. Supply and demand is not delusional, it’s basic economics.

      I’d argue for a compact vibrant city surrounded by outstanding natural beauty instead of suburban sprawl. But whether supply is increased through intensification or sprawl, i accept it will lower prices (or keep them steady in the face of an increasing population).

      Houses in desirable central suburbs will still cost more than new ones built on the outskirts, but they will cost less than they would if supply is not increased elsewhere. Increasing demand without increasing supply will push up prices.

      1. The problem with your assertion is that what happens at the fringes won’t have any impact on the desirable inner suburbs because, well, the fringes aren’t inner suburbs, they’re the fringes. The only thing that’ll affect the price of housing in the likes of Mt Eden, Ponsonby, etc, is a huge increase in the available stock in those suburbs. That you can buy an equal-sized house for 2/3 the price in Pukekohe or Silverdale is completely irrelevant to someone who wants to live in Mt Eden or Ponsonby. You can already buy equal-sized houses on equal-sized sections for considerably less than you’ll pay in Mt Eden or Ponsonby, if you look further out. The existence of those houses isn’t doing a thing to drop the price of inner-city houses, because they’re not competing for the same market.

        A huge intensification in the inner suburbs is the only thing that’ll lower prices in those areas. What happens in the outer suburbs is, if you’ll pardon the pun, just meddling at the edges.

        1. Who are these people that are sleeping on the street because they can’t get a house in ponsonby?

          Sure housing isn’t a fungible good but to suggest that different suburbs aren’t at all substitutable?

          People who like Mt Eden but don’t want to pay the price, might consider Balmoral and spend their saved cash on holidays. Those who quite like Balmoral but don’t want to pay the price might pick Three Kings and spend the rest on a nicer car. Those that like Three Kings but want a holiday batch too might pick Mt Roskill, and so on until you reach todays outer fringes. If those fringes aren’t available people will be forced to compete for the existing stock of housing, forgoing the nice holidays, and spending it all on a house.

          “That you can buy an equal-sized house for 2/3 the price in Pukekohe or Silverdale is completely irrelevant to someone who wants to live in Mt Eden or Ponsonby”
          It is totally relevant, the increase in supply in the outer suburbs drains demand from the inner suburbs. Not everyone is dead set on Mt Eden, and some people given the option will choose to save money and live in Silverdale. But if they don’t have that option, they’ll be another family chasing a house in Mt Eden.

          If you’re hungry and there’s a power cut, and KFC is the only place in town with a backup generator, would you be more likely to consider KFC, or would you stay hungry? How about those around you, would you expect it to be another regular day for the staff at KFC, or busier than normal?

  18. Ah, if only the world followed “basic economics” like the high school texts books says it would. Well, I guess they do when you keep the facts basic, rather than what they actually are.

    Let’s go back to the issue – housing availability. That is, for first home buyers to move from renting to owning. And again, any new townhouse on the city fringes is going to cost 400k. At least. Now that wasn’t affordable for the first home buyer before, so why will it be now? And that price is not going to make a jot of difference to the price of inner city suburbs because it’s not lower, or not significantly lower enough to offset the issue of distance and isolation, for most people anyway.

    You see, in a power cut, people might only have the choice of KFC or starving. But for first home owners wanting to buy a house they don’t just have the choice of owning on the fringes or living on the street. They can retain the status quo – renting in the area in which they desire, albeit disappointed they don’t own. It’s what they are doing now, rather than living in Hamilton and driving to Auckland every day.

    Open up greenfield sites and build 400k houses by all means. But watch when the first home buyer is still priced out and before this magical event of inner city suburb price price fall occurs, the baby boomers and other investors ( already home owners) buys to rent ( or live in and rent out his mt Eden villa) and the problem is no better, or worse. And then you look out to the hideous sprawl you have created for nothing.

  19. ” And again, any new townhouse on the city fringes is going to cost 400k. At least. Now that wasn’t affordable for the first home buyer before, so why will it be now?”

    Because the family that wants a new townhouse on the city fringes can now buy that instead of competing for the small unit in the inner suburbs that they don’t really want but is their only option.

    ” They can retain the status quo – renting in the area in which they desire, albeit disappointed they don’t own.”
    You can’t retain the status quo in a city that is growing, either you build up or you build out. If you do neither then price will go up until demand is reduced to the level of supply. i.e. people will live with ma and pa until their late 30s instead of late 20s.

  20. If they couldn’t afford 400k in the existing suburbs in auckland before, why can they magically afford it now a new greenfield site has been developed? You talk as if the developer will sell a townhouse on the fringe for the same price as a small unit in the inner city. They won’t. It will be considerably more.

    So how is this helping the first home buyer? It isn’t. All it helps is developers, existing homeowners who have got equity in more modest houses, and investors who can afford that 400k price for a modest yield offset by a capital gain.

  21. Building a 400K house on the fringes helps the first time buyer in exactly the same way as building a block of 400K apartments in the inner suburbs. It increases supply. Houses are substitute-able, if you can’t get your dream house, you look for the next best thing, that next best thing is then not available for the first time buyer.

    Do you seriously think that if we hadn’t build Flat Bush, it wouldn’t be any harder for first time buyers than it is today?

    How about all the 1 bed apartments they have built in botnay/flatbush, do you think if they were not built, one bed apartments in the inner suburbs would be the same price?

    How about if the floods in the phillipines wiped out enough sunflower production to double the price of margarine, would you consider butter instead? If more people start buying butter would you expect the price to remain the same?

    If the council keeps the urban limits (as i think they should), but doesn’t do enough to enable intensification, then supply is constrained and prices will go up. If you increase supply through sprawl or intensification prices will be lower than they otherwise would be.

  22. You are talking housing availability, which is an issue for the future, but one adequately dealt with by the spatial plan in my opinion. But the focus of the first line of the report summary above (and mine) is housing “affordability” for first time buyers.

    If you build a new townhouse on the fringe for 400k it doesn’t cause a drop in house prices for everything under 400k. Houses above $400k may drop a little, but when 400k is too much to the first home buyer in the first place, that’s irrelevant.

    In terms of townhouses, merely Increasing supply will not make those types of houses, anywhere, more affordable for first home buyers are because the price at which they are set is already out of reach and even if it weren’t, the combination of investors, those with equity and immigration would soon put it back out of reach again.

    Not building flat bush might not have made it any harder for first home buyers, but building it didn’t make it any easier. So why would we replicate that outside of our existing limits when we still have space for intensification?

    No one believes that we should be stuck with these limits forever, and the spatial plan promotes expansion carefully. But building townhouses on the fringe – and it’s hard to see anything but townhouses being built at this stage – won’t me townhouses any more affordable – for first home buyers.

    1. “affordability” = price vs income. Price = supply vs demand. Increasing supply = lower price = more affordable

      Therefore greenfields do help with affordability.

      “If you build a new townhouse on the fringe for 400k it doesn’t cause a drop in house prices for everything under 400k”
      The people buying these 400K houses, where did they come from? Do you think some of them might have come from a smaller 300K house they are now selling? Houses are a substituteable good, if you increase supply in one location or price point, it has an impact on other locations / price points.

      “Not building flat bush might not have made it any harder for first home buyers, but building it didn’t make it any easier.”

      It did make it easier *than it otherwise would have been*. Of course house prices didn’t drop in the inner suburbs as we have high inflation and immigration increasing demand faster than supply. But if supply was even less, because there was no flat bush, prices would be much higher than they are now, making it harder for first time buyers. If it’s not harder, it must be easier.

      Take a drive around flat bush, there are actually quite a lot of one bedroom apartment blocks.

      If affordability is your only concern we should be building more one bed apartments in the outskirts.

  23. Why did they need to wait until a particular family sold? There are plenty of 300k homes available. Probably not in desirable locations but at 300k probably in identical locations to the one that’s just become available given the same value.

    Either 300k Was already out of their reach, or they are too optimistic. Either way, a new 400k townhouse on the fringes wont have changed their situation one bit.

    1. The market is a collection of individuals.

      “a new 400k townhouse on the fringes wont have changed their situation one bit.”

      How about if two 400K house are built? How about 3? How about enough for 40,000 people[1]?

      That’s 40,000 people that would otherwise be pushing up prices of existing houses in existing suburbs (or living with ma and pa because they’ve been priced out).

      [1] http://www.manukau.govt.nz/EN/Yourcommunity/FlatBush/Pages/FlatBushBetterWay.aspx

    2. Point is if you want to make a point against sprawl,

      Make it about living in an exciting vibrant city because it’s compact, people can get around easy, and there’s allot more going on because allot more people go out.

      Make it about preserving the natural beauty of the surrounding countryside.

      Make it about reducing our transport emissions

      Make it about the cost to the tax payer of new infrastructure.

      Make it about increasing our wealth because employers can build more successful companies when they can recruit the right skills if they aren’t denied half the population how live more than a 45 minute peak hour drive away.

      Don’t make it about housing affordability because smaller places are even more affordable on the ourskirts. The job is to show that there actually is demand for higher density, if you build it they will come, and that making do with less space is worth the trade off.

  24. If any of the buyers are buying an additional home, immigrants from overseas, migrants from other nz cities or investors, then they haven’t freed up any new homes in Auckland. That’s a big chunk of recent purchases in Auckland in the last 10yrs I would think.

    The rest? They would all have to be giving up smaller townhouses in areas more desirable than those where the existing 300k available ones are located. Which means they probably aren’t 300k in the place Too many ifs I think….

    I actually think the “affordability” issue is a bit of a myth because there is always a place most people can afford. If location or size doesnt suit, you either compromise or rent (most dont stay with ma and pa as you suggest). So it’s why I think building more dwellings on fringes doesn’t really help. Smaller, intensive dwellings which should, in the main be lower priced, is the only way to get people in the market.

  25. “If any of the buyers are buying an additional home, immigrants from overseas, migrants from other nz cities or investors, then they haven’t freed up any new homes in Auckland. ”

    Some of them will be new arrivals, some of them will be second home investors, and some of them will be trading up or down the family home.

    But all of them will be buying a new home instead of competing for the existing stock of homes, and thus the existing stock of homes are cheaper than they otherwise would have been.

    If/when we quality higher density inner suburban apartments, some of them will get purchased by new immigrants, some by investors, some by those trading the family home up/down. But all of them will be buying a new house instead of competing for the existing stock.

    Supply is supply[1]…

    [1] Just to be pedantic, houses aren’t fungible but they are substituable so housing at the outskirts will reduce cost at the centre but will remain cheaper than the centre, unless the outskirts is by the beach

    1. Oh for god sake you two, you are going around and around and around worse than a Merry Go Round stuck at Max Speed.
      We got your points in the first two sets of comments you made – the rest is pure bore.

      Look do the rest of us a favour and go find some academic essays to either further the debate or give weight to your answers.

      http://www.rmastudies.org.nz/library <<<< start here. Go through all 177 articles and all the externally linked essays in each of those 177 articles – should keep you occupied for a while over Xmas. If you get through those I have plenty more where that came from.

      Now I am going to lead by example and post a link from an academic source
      http://www.macrobusiness.com.au/2011/09/housing-supply-australia-look-to-texas-to-solve <<< and there it is

      Given its an alternative view but valid none the less
      It is own another way to fund infrastructure for Green (and Brown if you get creative) field development with the Spatial Plan has lots of. And believe me, we need all the academic material we can get on alternative ways to fund our infrastructure developments no matter if we sprawl, intensify or both.

      Have a read at least and share your thoughts (constructively) on it

  26. Texas: 696,200 km2
    New Zealand 268,021 km2

    The same reason that Queensland has cheaper land than Auckland – there is bucket loads of it.

    1. Texas: 25,145,561 people = 36 people per km2
      NZ: 4,362,000 people = 16 people per km2

      Might be lots of land but there’s twice as many people competing for each km2 of it.

      http://en.wikipedia.org/wiki/File:Texas_population_map.png
      http://en.wikipedia.org/wiki/File:NewZealandPopulationDensity.png

      Not the colour scales don’t match. Same level of colour is more dense in the texas map.

      @Luke
      Looks like there’s lots of easy flat space radiating out from takanini to expand if sprawl is what we wanted + following S16 north. Compared to the texas triangle though, much trickier to expand around the remaining hills and harbor. Thank you, you have given me hope that even with Joyce and Co in charge, mother nature may have the final say in the compact vs sprawl debate.

      1. Yes but it also has a much greater comparative expanse of fairly flat land compared to NZ (where quite a bit of the country is a bloody great mountain range or 2 or islands like the Chatam’s). Again, much like Queensland. The UK or Japan provide a much better comparison in my opinion.

  27. @Bryce this a a good point. Auckland has limited flat areas in which to expand easily due to the narrow isthmus.
    therefore much easier for development companies to strangle the land supply. That I think is a big underlying issue.
    Most of the contiguous land in the Shore is now filled up, and that been developed recently is hilly parcels that are expensive to service. Same in Henderson, and Flat Bush will take up the remainder of the easy flat land in East Auckland. Still a bit east of Takanini, but this is plastered with lifestyle blocks to difficult to develop.

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