The Housing Accord between the government and Auckland Council, and the Special Housing Areas being created as part of that accord, have been getting quite a bit of press recently. A third tranche of SHAs was approved in May, and another will come through in a few months. The MBIE have released their second monitoring report on how the Housing Accord is going. There’s some excellent analysis in there, and it’s well worth having a read. I’ll start with a couple of MBIE slides showing where new dwellings and sections are being consented.

Slide 10

Slide 11

The MBIE report also mentions that the Proposed Unitary Plan is adding 10,600 hectares of land to Auckland’s urban limits, or “nearly 20% more than the extent of the current metropolitan area”. Incidentally, that’s not far off the 25% expansion NZIER recommended in a recent report, which Stu wrote about here, making that report even more of a non-event.

The Housing Accord is all about targets, and is aimed at helping Auckland deliver more new homes over the next few years. Slide 4 shows the targets over the first three years of the Accord:

Slide 4

When the Housing Accord was announced with gusto last May, I got the impression that the targets were to be based on building consents only, and “year one” of the Accord looked like being the year to June 2014. Building consents are an excellent (and timely, and readily available) near-term indicator of housing activity, so it made sense to focus on those, and most of the media coverage at the time focused on them. Subdivision consents didn’t get much of a mention. However, looking back now, it seems like I got the wrong impression, and no doubt others did as well: looking at the draft Housing Accord, the targets were actually based on “new subdivision consents in greenfield [i.e. new] areas and building consents issued in brownfield [i.e. already urbanised] areas”.

By the time the accord was actually signed, these targets were softened quite substantially. The government and council agreed to include both sections and building consents across the Auckland region (but not “double counting” the two for the same site, of course). It was also the start of October 2013 when they signed it, so the year 1, 2 and 3 targets actually begin from then instead.

Using subdivision consents as well as building consents makes a pretty big difference to the way the targets work. In fact, the MBIE’s first monitoring report shows that in the year to September 2013 – before the accord was even signed – there were 9,975 new dwellings consented and sections created. The accord is about trying to increase the number of homes that get built, and yet the “Year 0” baseline was higher than the “Year 1” target! This baseline figure doesn’t appear in the second monitoring report, but I’d suggest to the MBIE that it’d be useful to add it back in – it’s good to have a figure to compare to, even if it makes the Year 1 progress look a little weak.

The latest report from MBIE indicates that, at the current rate, the “Year 1 target of 9,000 dwellings and sections is likely to be exceeded by almost 1,300”, i.e. the city will manage to get to 10,300 consents and sections. Again, this is a pretty minor increase on last year – less than 3%, for all the hoopla surrounding this issue! So, there isn’t a lot of aspiration in the Year 1 target, but no doubt it will give the government a chance to pat itself on the back for achieving these targets in time for the election.

Of course, it’s possible that Auckland will improve a bit on the current rate, with a recovering construction sector, households being more confident, Special Housing Areas possibly starting to kick in, and so on. But we’re hardly going to blow the target, or even last year’s figures, out of the water. And that means we’re still quite a way off being able to provide new homes fast enough for Auckland’s growth.

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  1. Those maps just show how few multi-dwelling projects are being consented. Just 19 with more than ten houses in that period, by my count.

    We need scale, and we need council and government to facilitate rather than hinder that scale.

    1. The lack of multi-dwelling projects is possibly due to the down market image of those built around Hobson Street, and more likely the quality problems encountered, made worse by body corporate issues. Perhaps the solution is for Auckland Council to repeat the Freemans Bay project of the 1960’s. Buyers would have assurance of someone to sue if there are problems, and good design to show what can be done. Fletchers are committed to apartment construction, but Stonefields design is not great.

      1. Stonefields is awful, and its connectivity is terrible too. Hobsonville is looking better, certainly in parts. But a NW busway and fast Upper Harbour Services linking that to the Northern Busway are needed now too.

  2. I dont think anyone managed to get a consent in an SHA in time for last years construction season so it’s probably premature to judge success or failure. We have SHA’s because people campaigned for a compact city- just as day follows night. Policy failure is followed by ‘something must be done’

  3. The Housing Accord has made 0% difference so far as there haven’t been any new lots/houses built in any SHAs as yet. These are all developments that would have happened anyway and are more a reflection of the effects of the GFC wearing off.

  4. Using subdivision consent data is the most reliable trend data
    Reason being that subdivided land, whether green or brown, offers a buffer to market demand
    Also on the supply side, subdivision data is a lead indicator of price
    When supply tightens, price increases. And as we all know land price is a key input to housing cost
    So in broad terms subdivision is the more useful indicator.
    At the other end of the market, the apartment trend lead indicator most often cited is yield. In the Inner City yield has slumped as LVR regulation has driven investment out of the sector

    1. But consent to subdivide does not mean sections are immediately available to builders. Christchurch ran into this problem. Lots of consents but no sections ready for building. The big thing is to change the attitude of consenting staff so they WANT to issue, not find 100 reasons why the consent should not be issued.

    1. Coincidentally, I sent the following comment to Muriel Newman a couple of days ago in response to her latest article on housing affordability and the lack of clarity of census data on housing occupation:

      The problem is that urban economics is highly complex and so are the distortions that occur in urban property markets.

      One of the ironies of many unaffordable housing market run-ups and serious bubbles in prices, as in Spain and Ireland, is that the number of empty properties can in fact increase simply because speculators are going mad buying them up expecting capital gains. They don’t care about rental income.

      It is even possible to end up with an oversupply of houses that makes the eventual bust worse.

      The inadequacy of census analysis does make it hard to tell.

      The opponents of liberalisation of land supply including Councils themselves, fight every inch of the way to have land “released” in quantities that will still be bidded up in price by speculators and land bankers and developers all trying to get their share of the boom market.

      The only way to actually make housing affordable immediately by reforming “land supply” is total liberalisation. Auctioning more licenses for imported products never brought the prices of the products down like total abolition of the licensing system does. Supply of land for housing works the same way.

      I suspect that National is merely making soothing noises to keep the votes of people who are concerned for their children and the friends children’s cost of housing, while fully understanding that their FIRE sector friends are going to have their interests protected and house prices are not going to come down because of fancy “housing accords” under which the land is still being sold to developers at 7 figures per acre. Including government owned land, may I point out.

      The increase in average size of the new homes is merely because it is people at the bottom end of the market who are disproportionately priced out by land price increases. When “house prices double” in median or average terms, the price of the houses in the bottom quintile and the top quintile and everywhere in between do not all double conveniently too. Because the increase is all in the land price, house prices at the bottom end of the market inflate far more than the ones at the top end of the market.

      I have often noted that in undistorted markets with median multiples of 3, there is effectively housing available at 3 times income, for ALL income levels. There is something at $1,000,000 for households who earn $300,000+, there is something at $300,000 for households who earn $100,000; and there is something at $90,000 for households who earn $30,000 (yes, fact – look at RE sites for US cities with a median multiple of 3). Growth containment planning eliminates the bottom end of the market. While median multiples of 6, 8 and higher look bad enough, the home that would have been $90,000 is now $360,000, meaning the multiple for the bottom earners is 12.

      What tends to happen is not that households at each income level pay twice as much for the same house as they might have previously – they tend to pay perhaps 50% more, for a house that someone at a lower income level would have bought previously. The market does a reshuffle of people and their housing choices, and the people at the bottom miss out altogether.

      The very wealthiest people may end up paying $5 million instead of $4 million for their mansion.

      And a greater proportion of housing is taken by speculators who leave it empty rather than try and rent it out at the going market rates which remain relatively normal in historical terms. It is a fallacy that rents have to increase to “catch up” with the gap that has opened between them and house prices. The potential renters can only afford so much, period, otherwise they would probably have bought a home.

      Very few people seem to have thought these things through.

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