The release of the Studio D4/Jasmax report on the Auckland Plan the other day really did throw the ‘cat amongst the pigeons’, as the saying goes – particularly in terms of highlighting the question of what level of change to existing urban areas would need to be made to reach target levels of intensification. That’s going to be a key issue when it comes to big decisions on the Auckland Plan over the next month or two. I’ve commented on the flip-side of this debate a number of times before: the level of urban expansion that the Plan also proposes.

Another key ‘benefit’ of allowing more urban sprawl, so say its proponents, is an improvement to housing affordability. There’s some logic in this at a basic level: if you constrain the supply of land then its price goes up is basic economics. But when it comes to reality, things can be a bit more complicated than that.

Yesterday’s NZ Herald ran a story about housing affordability, reporting on the annual Demographia study into this issue:

The eighth annual Demographia International Housing Affordability Survey, co-authored by Wendell Cox in the US and Hugh Pavletich here, showed New Zealand had no affordable markets, and Auckland was the worst.

It noted that it has been only 20 years since most markets in New Zealand were within reach according to the study’s criteria, with average prices equivalent to less than three times the average annual income.

Housing should not cost more than three times annual income to be ranked affordable, Demographia says. Housing costing more than five times the annual average income was considered severely unaffordable.

The average Auckland house is valued at 6.4 times the city’s annual average household income, only marginally less affordable than the greater London area.

As someone with vague hopes of owning a house one day, I’m well aware of how unaffordable it is. Also, I’m well aware of how housing affordability has dramatically reduced over the past decade as prices have skyrocketed.

The report’s authors, typically, blame land-use policies that restrict land supply (like Auckland’s urban limit):

In the report, Mr Pavletich blamed restrictive land policies in Auckland for pushing up values compared with incomes, rather than other factors such as low wages.

“The economic evidence indicates that this trend is strongly related to the implementation of more restrictive land use regulations, especially measures that create scarcity in land for housing thus driving up prices,” the study said…

…Dr Bob Bruegmann, professor emeritus of art history, architecture and urban planning at the University of Illinois at Chicago, introduced the study saying the rise of smart growth policies to tighten land supply had a big effect particularly in Australia “where the recent rise in prices has been particularly sharp and, given the vast extent of the country, the urban containment policies are particularly contentious”.

Bob Dey’s Property Report had an excellent analysis of the study – also published yesterday:

The argument might seem simple: Provide more land on the fringe, and enough of it to generate competition, and prices will come down. Against that, a counter-argument is that extending suburbia further from the centre increases transport costs, which ought to be taken into account in the overall housing cost picture.

The more complicated question is: How, without a calamity, do you put land prices into reverse without upsetting the existing market? Would buyers accept the absence of capital gain? Lenders have been hit by defaults during the global financial crisis, but would they accept long-term housing deflation? What happens to the construction industry if builders see reduced capital gain at the end of their project?

This is a very interesting question to consider, and one that has been in my mind as I have a think about what might happen to property prices around Auckland if – for argument’s sake – we were to just remove the urban limit and allow pretty much unfettered sprawl. I suppose there are two scenarios:

First, it could make the big difference that Demographia think it would and significantly lower housing prices throughout the whole urban area. While this could be great for me, if housing in inner parts of the city become significantly cheaper, I tend to think that the broader economic consequences of plummeting housing prices (particularly in a country like New Zealand where people have so much of their wealth tied up in housing) could be quite severe. In the long-run I guess it would be good for housing to become more affordable, although it’s interesting to note that other cities with unaffordable housing (Sydney and Vancouver) tend to be the cities vying with Auckland at the very top of various league-tables of the world’s most liveable and desirable cities. In the short run, a huge drop in housing prices seems likely to have a pretty major, and potentially disastrous, economic impact.

The second scenario is that allowing more urban sprawl wouldn’t make much difference to housing prices, except on the extreme urban periphery. There’s some logic to this scenario too: prices in a particular area are determined by the level of demand and supply in that particular area. Adding more houses near Drury doesn’t change the supply of housing in Ponsonby and seems unlikely to change the demand for housing in Ponsonby – so why would it have a huge impact on Ponsonby house prices? Arguably, all we would be doing by allowing more urban sprawl is shifting the poor out to the urban periphery – where they replace housing costs with transport costs, and we all need to subsidise them by building new roads, pipes, schools and so forth.

This second scenario is looked at in another recent article on Bob Dey’s excellent website, where he quotes from Patrick Fontein’s (yes, the primary author of the Studio D4/Jasmax report) submission on the Auckland Plan:

Mr Fontein said the urban limit had been so stringently applied that buying & trading land within it was an investment class in itself, which had led to inflated section prices: “Auckland Council needs to ensure there is sufficient land zoned for urban intensification, as well as greenfield development.

“Releasing more land will somewhat improve the affordability of new house prices, but as new houses on the external Auckland suburbs are still priced in excess of $550-600,000, releasing more land will have almost no impact on housing affordability in the $200-$450,000 price range. Careful consideration needs to be made of the total infrastructure costs of new greenfield locations, as the cost of infrastructure in certain locations will add substantially to developed land cost.

“The main effect on existing Auckland property prices of releasing substantial new greenfield development sites will be to reduce demand for low-amenity-value existing suburbs, such that these suburbs over time will become less attractive, will not be able to attract re-investment capital and these low-amenity suburbs will gradually decay. This will have the effect of making these low-amenity suburbs even less desirable, which then makes these suburbs more affordable!! (eg, some people upgrade from an older low-amenity suburb to a new house in a new subdivision, and there are relatively not enough buyers attracted into the older low-amenity suburb).”

Obviously this is just the opinion of one person – albeit someone who has been pretty close to the industry and has looked at the matter in quite a bit of detail. His key link between housing affordability and urban sprawl relates to the reduced focus there will be on reinvesting in poorer suburbs, leading to their further decay – with the corollary being that through such a process they will become more affordable. I may have somewhat misinterpreted what he means, but it sounds something like what I call the ‘Detroit doughnut effect’ where urban sprawl leads to decay and near abandonment of many parts of the existing city. Not exactly what I think we want already troublesome parts of Auckland to descend to.

I still think there’s an argument that the incremental, well planned, release of additional land for development has some effect on housing prices – more to ensure they don’t go higher rather than bringing them significantly lower. But that needs to be matched with providing more housing units in the parts of Auckland where people actually really want to live – through clever and well designed (and located) intensification. Obviously there are parts of Auckland where intensification isn’t appropriate, or where only a certain level of intensification is appropriate. Working that out is complicated, ensuring good design is complicated, aligning our transport infrastructure investment with where we are focusing intensification is complicated. Devising schemes to create a supply of affordable housing where people want to live is complicated. But that’s OK: if it was easy it would be boring.

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  1. I get quite sick of the over simplistic argument of open more land and prices will fall as it does nothing to improve the affordability of the attractive inner suburbs (like you point out). It also doesn’t look at generational changes that are impacting the equation. I’m in my late 20’s and pretty much everyone in my age group would rather live closer to the city that out in the far flung suburbs, even in some of the nicer new ones simply because they feel it is too far away. This is almost the opposite to parents of our age group who wanted to get away from the city and didn’t mind travelling further.

    1. I agree, it’s a very simplistic view IMO and the impact of unfettered sprawl is obvious in so many American cities where there are large tracts of land basically abandoned as admin says. Basically it’s cheaper and more marketable to start afresh out on the outskirts than to attempt any sort of brownfield redevelopment. Auckland is sparawling as it is and anyone who claims there’s a lack of land within the urban limits clearly has never visited a city that has developed through intensification. Personally, I have absolutely no desire to live further out than the city fringe suburbs of Ponsonby et al, and know very few people my age who would want to. I guess years of living in apatments where a tram is at my door step and bars and restaurants are within a few minutes cycle or walk have have made be realise how depressing the car-dependent suburbs of Auckland are. I

      want to be able to pop out for a drink with drinks in the evening – something that becomes an ordeal if you have to throw in a 30 minute car drive and searching for a park.

  2. It always amazes me that amount of media attention this survey generates, since it says exactly the same thing year after year. I can give you the headline now: “Group which believes restrictions on land supply increase house prices produces statistics which say restrictions on land supply increase house prices”. Maybe too long for the Herald?

    I think Bob Dey raises an interesting point about what would be required to bring Auckland prices to within Demographia’s definition of “affordable”. Either incomes have to double, or house prices have to halve. How much greenfield development on the fringes would have to occur to halve Auckland house prices?

    1. Furthermore, halving house prices is a pretty unprecedented level of wealth destruction. Or, shall we say, wealth reallocation to those who currently own land outside the urban limits.

      1. The wealth destruction doesn’t have to be dramatic. With three percent inflation and static house prices the problem (6:1 price:income ratio needing to be closer to 3:1) is sorted in a little over twenty years.

        If house prices remain high then you’re essentially reverting to a pre-industrial revolution ownership model. If no one except the very wealthy are able to purchase houses then you need to inherit one or you’ll spend your entire life renting from someone who inherited more than one.

        But the bigger worry is that 6:1 price:income ratio is a bubble and will end suddenly with catastrophic effects on the economy. I’d rather that the government and council took action to allow a gradual erosion in value rather than risking a sudden collapse. I’ve seen what negative equity did to a lot of people in the UK circa 1990 and it wasn’t pretty.

        1. Obi is right about the static price pattern. This is what historically has happened in Auckland [since the depression, that is], steepish spikes followed by long a flatlining in value that takes years and years to absorb the earlier over-reach. This doesn’t mean of course that within the market there aren’t macro trends that mean that some areas still rise and others fall. And we are seeing that now as Auckland is part of a global OECD trend of shifting back to town, which in Auckland largely means inner suburbs, and they are continuing to more than hold value because of a finite supply and strong demand. But should the cost of a detached Victorian house in Ponsonby be subject of anyone’s policy? Well I don’t see it being relevant to a housing affordability debate anymore than the price of Bollinger at the French Cafe. However the Council certainly could make regulatory changes to encourage the development of apartments on appropriate sites like Gt North Rd in GreyLynn/Arch Hill…. Oh hang-on, isn’t that’s what the plan proposes?

          Are we in a bubble? In other words is this crisis a discontinuity from the last 60 years? Quite likely, as it seems that the post-war certainties are all but over for the OECD nations. But for a violent correction to take place much depends on other factors and thus far we have zombied our way through. There is, however, a good argument that a big bang could be preferable to a decade or two of chronic stagflation. Especially for the young. But it looks like the Baby Boomers are still in charge and are willing to roast their children and grand-childrens’ hopes by sacrificing everything to maintain high asset prices. So it goes.

        2. “But should the cost of a detached Victorian house in Ponsonby be subject of anyone’s policy?”

          This is one of those infrequent days when I agree completely with you.

          I don’t know that Ponsonby is relevant. The research concerns average house prices and average incomes across the whole city. It doesn’t matter that there are expensive houses in Ponsonby that only rich people can afford AS LONG AS there are cheap houses somewhere else that poor people can afford. I think the argument for sprawl is that city edge housing will be cheap, although that isn’t necessarily so in practice… city edge housing in South Auckland is cheap whereas in Rodney it is expensive (partly because of house size in Rodney, I suspect).

          I’m amazed that anyone can afford a house these days. I’m probably a rarity that my $450k apartment cost only about three times my salary. The thought of my paying, say, $900k for a place in Ponsonby isn’t realistic or desirable. How many people (or couples) are earning $300k p.a. and are willing to put off having children for the length of time it takes to pay off the mortgage? And how do people earning $50k p.a. afford anything anywhere in the city?

        3. I think that’s a very important point Obi, housing affordability really has little to do with the average or median price and a lot more to do with the lower quintile.

          I don’t know about actual houses in particular, but I’m looking at buying *housing* for myself to live in and there is plenty available for about three times my income. Admittedly these are mostly one or two bedroom flats/apartments, but then again I am just one person. If I were to get a larger place, get some flatmates paying rent and include their incomes in our houshold income, there would still be a multitude of options for three times the income. This is all still the ‘affordable’ end of the market.

  3. Buried in the Commercial Property section of the Great Auckland Bugle this morning [after the ads for ‘ladies’] is an important corrective to yesterday’s Demographica/Pavlovich nonsense:

    Very good stuff by Phil Twyford, Labour’s shadow transport minister.

    Interesting that the editors don’t want to bother the general reader with a balanced view on the Auckland Plan debate….

    1. But yet today the most popular article in the ever-calm and non-hysterical herald is entitled ‘renters in race for space in inner city’.

      so quite clearly, as dick quacked, no-one wants to live in the inner suburbs and we must immediately tarmac over eveything north of taupo. as the Letting Agent Lesley Wills, of Ray White said:
      “Give me a million houses in Ponsonby. People love Ponsonby.”

  4. So on the fringe with bad transport options you can pay over half a million dollars of hard-earned cash or commit yourself to 30 years of wage slavery, all for your new neighbour to put in a woodburner, and reduce your home to unliveable for 8 months of the year, without you having a say in it, and whilst you may have a right to complain, no one is ever going to listen to you, so you are left with a choice: move away, taking a multiple tens of thousand dollar loss, or suicide.

    That’s the reality of the suburbs for me. I couldn’t live in the suburbs again at any cost.

    Why are people allowed to install “home heating” that is polluting, poisonous and toxic that has some terrible externalised costs ($2000 per unit per annum when quantified in Sydney, and I’d estimate the same in Auckland) that reduce our suburbs to completely unliveable (admittedly for some people only, other people willingly kill themselves with smoke, but they are stupid morons)? Why aren’t all solid fuel heaters banned? (Don’t give me any of that industry bullshit marketing about “clean” woodburners – there is no such thing.)

    Why, why, why? It is the stupidest thing that New Zealand does by far.

    Access to parks, transport links, moderate cost, shops within walking distance, and air you can breathe year round. Why should that be difficult?

    700 people in Auckland die each year due to woodsmoke.

    1. For how much I love wood burners, I don’t think in Auckland you’d need one. With this mild climate a well insulated house would do the job, winter and summer.
      Back to the house prices, being in the late 20s myself and fed up with maintaning someone who was born with two houses, I’m currently looking into the Auckland market.
      My very personal point of view is that the government should encourage (by tax breaks or similar) to invest more in productive fields. In this way there would be less money to lend for housing and the house prices would go down, and the productivity up.
      In the end the prices are so high because there’s a lot of access to credit. Actually, because the banks want to lend you money. They offer me money every time I go to the bank…

      1. The banks only want to lend money on property, though. People who want to invest in productive enterprises can’t get a cent from the banks unless they have property as security, and sometimes not even then.

        Just look at this local situation where a software exporter couldn’t raise $2m locally while a woman living just up the street from him had 53 rental properties.

        1. Exactly, the government has to do something, in this case incentivise the investment in productive enterprises with lower taxation, or tax more the gains on housing investments.

    2. Matt I am looking for stats that give the slightest bit of evidence that 700 people in Auckland die due to woodfires and other than your posting on the Kapiti coast blog I’m not finding it. I did find reference to 700 people dying due to particulates, but there are a number of things that release particulates. While you may get less wood smoke in the central city there are a whole lot of other stuff which is worse. The fine stuff that you can’t see is much worse than the stuff you can as it gets nice and deep into your lungs (ozone, dioxin, heavy metals etc), while the wood smoke particulates get caught up in the mucus lining

      You say it is your “right” to live without woodsmoke, what about my right not to have to smell my neighbours roses? I live next to a busy road, what about my right not to have heavy trucks shake my house?

      Part of living in a society is putting up with stuff other people do even if it does affect you.

      But back to affordability we almost need the council to step in and build flats/apartments were the focus isn’t so much on the short term bottom dollar but long term livability, wwhether it be 4-5 storey flats around a central community garden/park or 15 storey Korean/asian style community apartments/officetels

      1. I’ve read figures of 1100 nationwide, and 700 for Auckland. It was a 2007 study (The HAPNZ one I think – I’ll have to look it up) True it is particulates rather than woodsmoke, but woodsmoke is the problem more than vehicle exhausts by a long, long way (even in central Auckland).

        “while the wood smoke particulates get caught up in the mucus lining” – untrue. A lot of woodsmoke particulates are sub 2.5 micron. These are the ones that are the nanoparticles that go through the lung walls and into the bloodstream. NZ doesn’t even measure sub 2.5 micron particles. The only standards are for 10 micron size. The standards are lax. They allow pollution above the UN standards. Any efforts to get the standards tightened (in Australia for instance) has faced resistance from the manufacturer’s association – the AHHA (and it’s NZ based NZHHA) who are evil bastards.

        There is not enough measuring of air pollution so the rates of air pollution are under reported in NZ, as so too is the death rate. I’d be surprised if 700 was on the low side.

        Roses smell nice, and the smell isn’t going to kill you. Truck noise and vibration is not in anyway analogous to the problem of particulate pollution. Argument by false analogy is the best people can come up with against my argument.

        “Part of living in a society is putting up with stuff other people do even if it does affect you.” – well I fucking well couldn’t. I had to take the tens of thousands of dollars of losses. Where is the justice in that?

        Yes I am angry. But I am also absolutely right. Woodburners are shihouse, primitive, polluting technology and they should be 100% prohibited.

        Clean air is a human right. It is one of Maslow’s basic human needs. Woodburners are shitting in our own nest.

        And who are you to tell me that I have no “right” to clean air? My previous neighbours tried to tell me the same thing. The law protected them. It didn’t protect me. If my air is fouled I should be able to destroy that cause at source. But then again, I should never have been put in that position in the first place. I lost my home.

        How many people move house because of air pollution each year? No one knows. No one collects the data. It is not reported at all, which means it is underreported.

        $2000 a year per annum in externalised costs. They should be banned just on economic arguments.

        It is immoral to heat your home using wood.

        1. Don’t worry I’m used to no-one listening to me on woodsmoke. It may just have been the worst thing that has ever happened to me, yet no-one gives a damn about my experiences, and everyone just wants to shut me up. And when I show some of my emotion, which is still pretty damn raw, I make every one uncomfortable. I talked to a friend, and she said my emotions were like hers when she was raped, and no-one gave a damn about her. There that should make you even more uncomfortable.

          To me suburban sprawl and the air pollution in those suburbs is inexorably linked.

    3. Matt, I must ask what exactly is your problem with woodburners for you to keep bringing them up all the time? Do you have some particular health issue that is aggrevated by woodsmoke?

      My house in Auckland has a woodburner that gets daily use in winter, as do both houses on either side. It doesn’t make any part of the property or neighbourhood unliveable for any part of the year. Here near the coast in Auckland at least there is never any smog or smoke pall.

      I disagree they are primitive or shithouse, we can heat the whole house from early evening to the following morning of one lump of wood in our very efficient firebox. Incidentally the wood has come from a large dead pine tree from the property that looks like it will give us three or four years of heating. We have no other heating in the house save for one person who likes to use an electric blanket. That’s pretty efficient in my book, using a waste product to produce heat with no perceptible ill effects.

      1. Hey I’m not allowed to mention them but your “no perceptible ill effects” means that you do not understand what you are doing to the air outside, and downwind where people are trying to live.

        Yet you’ve just pushed $2000 a year from externalised costs from sick days, premature costs and you’ve kept people from being outside, from exercising, and yes, from even being able to live there. You could have forced some of your neighbours out of their houses and you’d be completely oblivious to it. You could have directly led to the death of your neighbours and yet you’re oblivious to it.

        That’s why I’ve got a problem with it.

        1. No one lives downwind if me, only the Pacific Ocean. You might have a good argument about the ill effects of emissions and particulates at the global level, but in my case there are no effects at the local level.

        2. Yeah that’s the argument people used in Raumati South. Except for all the nights that are still. Thank Toutatis I was only renting.

          And when the regional council finally got off their bums and measured – they measured that Raumati South was polluted against the weak standards.

          So I think you’re kidding yourself Nick.

        3. Well perhaps a modern review would show high particulate pollution levels here on the East Coast Bays, but the ARC study from 2004 doesn’t show a problem. There certainly isn’t any shortage of people being outside, living and exercising here, or any noticeable pollution any time.

          Maybe I’m kidding myself that my neighbourhood doesn’t suffer from any appreciable houshold smoke pollution, but maybe it actually doesn’t have a problem. Have you considered that maybe you’re kidding yourself that woodsmoke is a major public health crisis everywhere in New Zealand?

        4. @Nick up above.

          I’m not saying in every place, but in a whole lot of different places.

          And I wouldn’t risk buying in a town or suburb anywhere in New Zealand.

        5. It’s a big problem in the south. I believe Canterbury outlawed all new installations of wood burners several years ago.

          Given that we don’t have a standard for particles smaller than 10 microns, and it’s the ones that’re smaller than 2.5 microns that are really dangerous, Handlebars Matt’s point that we have no data to know if there’s really a problem is well-made. However, we do know that wood smoke is high in <2.5 micron particulates, and we know that there's a lot of wood smoke about. One need only walk outside in winter to smell that people have wood fires going.

          Ultimately, we need to improve our pollution standards before anything will change. Without standards, there's no reason to collect the data. Without the data, there's no evidence that there's a problem. What's known is that wood smoke is unhealthy, and that Aucklanders do rather love their wood-burning fires.

        6. Wow. I absolutely love woodfires, ever since I rented a place in Uni that had one. One thing I always liked about moving back to NZ was having a woodburner in winter.

          I recall it being an issue in Christchurch,but I thought that was general smog rather than dangerous particles. Go figure.

        7. The smog was a symptom. When you have so much unburned material in the air that you have smog, and you know that there’re a lot of sub-2.5 micron particles coming out of the instruments that produce the unburned material, it follows that you have a lot of dangerous particles in the air.

          Christchurch’s smog problem was a health problem, regardless of how it appeared. The health issues are largely from the very tiny particles present in wood smoke, so banning new wood burners has the benefit of, over time, reducing the particulate counts in the air.

        8. While we are at it lets ban those plants with a strong perfume, bugs the hell out of me, plus plants with lots of pollen, they make me sneeze. And babies, the next door neighbours baby keeps me up at night and wakes me in the morning (lack of sleep has been shown to have health affects).

  5. The counter-factual to Demographica’s position, that what happens to house prices at the borders won’t matter a damn in the city, makes far more sense to me. I came to that conclusion myself in a comment a few weeks ago, arguing with (I think) Swan. People want to live in because it’s got amenity value, and good schools, and it’s close to the city, and the transport links are good. A house in is not interchangeable on any basis other than providing a roof over one’s head, and I suspect that most people who are in a position to choose are looking at far more than just not getting abused by the elements.

    One way in which I could see sprawl affecting prices in established suburbs is the rating impacts associated with supporting all the new subdivisions. Since rates are related to land value, and people definitely do move to get their rates down, inner-city suburbs being the preserve of the wealthy can only be cemented further because they’re the only ones who can afford the rates. It won’t drive prices down, because people with the money to buy in those suburbs will pay whatever is asked. A lower buying price doesn’t lower the rateable value, after all, so even if you save $150k on the purchase you still have to pay the rates.

    1. Precisely, the idea that the entire region operates as a single competitive property market is absolute hooey. You can already get your pick of a three bedroom house on a full section on the fringe for half the supposed median price.

      For example a quick search on Trademe shows 152 listings for three bedroom homes in Manurewa and it’s surrounding suburbs for sale between $200k and $250k. This fact has no impact on the price of a villa in Mt Eden or a luxury home on the cliff at St Helliers, because they are two completely different markets. People aren’t in any way spending a million dollars to live in Epsom because there aren’t enough houses on the fringe of Manurewa, so why a further glut in the supply of cheap houses on the fringe of Manurewa have any affect on prices in Epsom?

      It’s true that a shortage of supply increases price, but the shortage of housing supply isn’t at the peri-urban fringe. The real shortage is in those inner suburbs where people would prefer to live. The only thing that is going to affect the price of a house in Mt Eden or Epsom is an increase in the supply of housing in those suburbs or ones like them. Given we no longer have huge subdivisions worth of land left within the areas people actually want to live, the only real strategy to increase this supply is to redevelop low value land uses with medium and high density housing at appropriate places within these desirable areas. A cheap three bedroom home in Maurewa isn’t going to compete in the same market as a three bedroom house in Epsom… but a cheap three bedroom terraced apartment in Epsom will.

      That might be hard to stomach for property developers and ideologically driven “researchers” who can only equate the term ‘housing’ with ‘a detached house on a full section in the semi-coutryside’.

      1. Increasing density in some of the developed fringe areas will also attract some of the amenities that make living in the inner suburbs desirable: good hospitality venues, more selection of higher-quality retail, etc. It will not, and cannot, tackle the “Grammar Zone” phenomena, however, and that’s one of the big draw cards of the inner suburbs: high-decile schools with name recognition. Schools that don’t have a semi-resident police officer (as opposed to James Cook and Manurewa High, since we’re discussing that end of town).
        Nothing currently being done or proposed by National will do a thing about the Grammar Zone issue, either. It’ll continue to leave the low-decile schools as educational dead-zones, with parents desperate to get their kids into a better school regardless of the actual quality of education at those schools. Allowing league tables won’t help, either.

        The spread out from the inner suburbs towards Onehunga and Mt Wellington has driven low-income families into clusters, with the low-quality neighbours lowering house prices and encouraging more low-quality buyers or renters. This is a hard one to fix, since high-quality neighbours don’t want to buy in low-quality neighbourhoods if they can help it, but if intensification is to have any real hope it will be suburbs like Manurewa that bear the brunt of the up-zoning, no matter what the Council says about targeted town centres. They’re low-density suburbs, the houses are mostly over 20 years old, and because property is cheap it’s ripe for developmental plucking.

        One personal observation of the effects of sprawl, I spent my first 10 years in Manurewa, through the 1980s. It was, then, a nice suburb, a little bit down at the heel in places, and definitely with the odd “problem family”, but largely it was nice. Now, it very definitely isn’t, to the point where my very broad-minded and tolerant Hamilton-based (since 1991) mother made the same observation to me just last weekend.

  6. Also, it’s not like Auckland is an island of unaffordability in a sea of cheap housing. The national average is still 5.7:1. We’re an influential market, to be sure, but there’s a hell of a lot more of the rest of the country than there is of Auckland.

    Where’s the rest of this unaffordable housing coming from? Can’t just be Wellington, either. Hamilton? sprawling like crazy. Tauranga? Likewise. Same with Taupo, and Rotorua. There’s sprawl going on all over the place, but we still have a median national level of unaffordability that’s on a par with Los Angeles. If it’s all down to the MUL, the national average should be down around 4, or even lower, as the rest of the country drags Auckland’s contribution back towards “normal”.

  7. One point that just popped into my head in response to the ‘our cities must sprawl in order to keep housing affordable’ line that is often trotted out (authors of the aforementioned study):

    In the 2000s, we saw massive amounts of sprawl (think of the parts of Auckland that weren’t there in 2000), yet we saw house prices:wage ratios soar. Surely this implies that more sprawl will not simply equal more affordability? I might go sit down in my room and have a think about what that could be, once I walk around this large elephant with ‘capital gains tax’ written on it.

    1. Hell, go back 20 years, which is how long ago we had “affordable” housing in Auckland. The city has sprawled dramatically in that time. If we go back 25 years, my aunt and uncle lived in Massey and they were surrounded by open grassland. Now Massey is a sea of houses.
      Look at Albany, and West Harbour. Look at Flat Bush, and The Gardens. I remember when Redoubt Rd was all farms and lifestyle blocks, and Everglade Dr was the edge of civilisation.

      The objective evidence is that Auckland has grown and grown and grown, and as it has so have the house prices.

  8. A huge part of the problem is the tax situation. This encourages people into buying investment property as it is untaxed when sold. This makes it a risk free and lucrative investment. The one catch is that you need existing equity in the form of either another property or large deposit to enter the investment. This means that people who already have one house are more likely to be able to afford to outbid new buyers.
    New buyers meanwhile are in a race to build a deposit quicker than the market can raise prices.

    1. Very true, my own personal experience has been that once you own a property the banks (even today) are more than happy to use equity in that house as a deposit on another one – this all comes crashing down, like it did in the US, when values drop – perhaps expaining why National is so happy to see sprawl because they’re well aware it won’t affect the value of their innercity investment properties, whilst their mates who’ve been landbanking all these years will make a killing on property development.

  9. Fantastic debates in this article.

    Hugh Pavletich is a self-interested developer. I’m sure he knows that releasing land on the city limits will do nothing for housing affordability. Unless of course massive tracts of land are freed-up. He knows that response will not happen: not palatable to property owners come elections. He doesn’t want that scenario since his investments would lose value through continual cheaper property prices. In three years when he sells plots of land the values would have continued to fall as more completed developments come to market. Hugh just wants land supply to increase a bit so he can make more bucks through secured price inflation or stabilisation, when he sells.

    Urban sprawl is not good for rate-payers since infrastructure costs will be borne by them. The solution to me is creating lots of freed up brownfield development down main roads and in areas where people want to live. Give generous but appropriate height allowances to developers. Get them building sooner rather than later by scaling down bonus floor areas. For example: every two years. That’s will get developers moving cause they can see the $$$$$ melting away. Cluster high residential together and away from low density suburbs so the high risers can go cheaper while private houses in the short term maintain value. Also it provides greater housing choice for consumers. The high-rises would get built since there is profit in them. If you give free rain to property owners to build what they like (true free market) then development will be dotted around and prices will stay high. Also people would complain living next to a high rise.

  10. As a percentage, I wonder, how many people rent in these ‘affordable’ cities compared to Auckland? I don’t suppose that the people buying rental properties for capital gain are the ones who are creating the pressure on house prices with the eventual result being people can’t buy so they rent? I still think capital gains tax on housing will make a big difference to long term property prices.
    Another thing that I think is an issue, and related, is the willingness of developers and owners to build big footprint houses that they don’t really need but do so in the hope of a better ‘return on investment’. I read somewhere that the average size of a NZ house is now bigger than ‘the land of supersize me’ and just smaller than Australia. Surely a 200 sq/m house is going to cost a lot more to build than a 100 sq/m house (and require more land)?

  11. NZ Herald once again publishes a pro sprawl argument. David makes a serious cock up by saying that 25% of Auckland’d housing stock is apartments and that this will grow to 44%. These numbers are only correct if you include everything that shares a wall with a neighbour yet there is a huge difference between a duplex or row of town houses and an apartment tower. He rails against the loss of backyards yet lumps many of the housing types that preserve a small outdoor area into the same category.

    1. Yep I wrote a response to that. It’s just sensationalist to use the word ‘apartments’ to describe any form of housing that isn’t a detached house on a full size section. Most of what is proposed is townhouses, duplexes, terraces and low rise flats, not apartment towers.

      1. Exactly. The reality is that developments like this have a ton of wasted space simply because of the set back from the road, the space between neighbours and the mostly single storey nature of the houses. If you removed those two things and made houses two stories you could easily double the density of the suburb and provide everyone with a similar or larger backyard.,174.91708&spn=0.002394,0.004801&hnear=Botany+Downs,+Auckland&gl=nz&t=h&z=18

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