It seems like the relationship between planning controls and housing affordability is not going to go away any time soon, with Deputy Prime Minister Bill English noting recently that he thinks planning rules are a major contributor to inequality.
Planning policies have probably increased inequality amongst New Zealanders more than any other policies through higher housing costs, Finance Minister Bill English says…
…Mr English used the briefing to again emphasise the Government’s focus on addressing housing issues which featured in Prime Minister John Key’s Cabinet reshuffle yesterday.
However, when asked about his comment suggesting inequality was increasing — something he and Mr Key have previously refused to acknowledge — he said what he meant was that rising housing costs due to land supply constraints had prevented inequality from abating.
Mr English said the Government would “persist with housing reforms to make housing more affordable for more New Zealanders particularly low income New Zealanders”.
The issue of ‘land supply’ is somewhat of a red herring, as we know from valuation data that prices are rising quickest in inner areas and unless Mr English plans on filling in half the Waitemata Harbour for housing, increasing land supply is unlikely to have much impact on the increasing desire of Aucklanders to live centrally. What that requires is simply more housing, which in these areas means more terraced houses, more apartments, more townhouses, more granny flats and so on.
Yet we also know from looking at many apartment buildings underway at the moment that they’re not cheap. Decently sized apartments in many of the buildings going up in Grey Lynn or Herne Bay (admittedly high end suburbs) are pushing the million dollar mark. We’ve also been able to build some pretty cheap low end apartments like can be seen in places like the Hobson/Nelson St corridor. While at a macro-level providing more high-end or low end housing will at some point provide an affordability benefit, it seems like Auckland is yet to figure out how to build large numbers of affordable apartments that aren’t crap and/or that might be suitable for families.
Of course we are not the only city to struggle with housing affordability. Most highly liveable cities have expensive housing, it’s a sign of their attractiveness as a place to live. However, it does seem in other places there is more progress in providing relatively affordable housing in areas which aren’t way out on the urban edge.
Let’s take Vancouver for example, which regularly publishes statistics about average house prices for different housing typologies. Vancouver has very expensive housing on average, for a number of similar reasons to Auckland (an attractive place to live, strong immigration, growing population etc.), but that doesn’t mean all housing in Vancouver is expensive:
The average price for a detached house in Vancouver is pushing close to a million Canadian dollars, which is huge. However, the average price for attached houses or apartments is way lower than this, showing that there is plenty of housing supply in Vancouver at much cheaper prices than the overall average. Furthermore, unlike Auckland, it’s pretty likely that these more affordable places aren’t way out in outer suburban areas requiring us to spend huge amounts of money on transport.
So how has Vancouver managed to generate a supply of fairly affordable apartments and other attached housing typologies? Well without digging into it too deeply, it seems that critically they’ve built heaps of them. Let’s look at how the composition of housing types in Vancouver has changed over the past 20 years:
The graphs are a little confusing as the vertical axis is total dwelling numbers rather than percentages, but you can see that in 2011 two thirds of dwellings in Vancouver were not single detached houses. There were over 350,000 apartments. It’s not 100% the same but this shows similar data for Auckland broken down by Single Dwellings, Attached dwellings (flats/units/townhouses/apartments/houses joined together) or other dwellings (motor camps, baches, dwellings as part of a business or shop etc.).
Next look at the comparison from Vancouver between new housing starts for apartments compared to detached dwellings:
Consistently it seems like 75-80% of new dwellings built in Vancouver in recent years have been apartments, terraced houses or other attached typologies. This ongoing supply seems to be holding prices for these typologies at reasonably affordable levels. Again by comparison for over the last year just 27% of new building consents were for apartments an attached dwelling type.
It also seems like Vancouver doesn’t have an irrational fear of building heights like Auckland, especially in its regional centres where major apartment developments seem to be proposed or occurring frequently – like this one:
While this scale clearly would only be appropriate in certain locations, it’s worth some consideration in areas along the rail network that will benefit a lot from City Rail Link and may not have typical heritage concerns – I’m thinking Morningside, Avondale, more at New Lynn, maybe Onehunga.
It seems that one lesson we can learn from Vancouver quite clearly is that if you build enough apartments it does seem like you can ensure they’re fairly affordable. Plus they’re likely to be within walking distance of rapid transit and a whole pile of key services. Sounds better than an “affordable” house out the back of Papakura or Silverdale where you need to drive 50km a day to do anything.
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So compressed into one sentence soundbite, “it’s not about lack of land, it’s about lack of floorspace.”?
Seems clear that Auckland has a shortage of dwellings in inner areas. Way less clear whether we have a shortage of McMansions out the back of Kumeu.
Exactly, I find the idea that ‘Auckland’ has a housing crisis to be deliberately misleading. Whenever a story about Auckland’s housing crisis runs it talks about Ponsonby, Grey Lynn etc – I’ve never heard about any housing crisis in Papakura, Pukekohe or Kumeu where the solution supposedly lies. It seems that the housing crisis is limited to within 10km of the CBD.
Yes. There is a problem for many affording somewhere decent to live. And there is another, but quite different, problem for another group who struggle to afford to live where they’d prefer to. #Ponsonbyproblem.
More spatially efficient dwellings, ie apartments do go a considerable distance to meet the needs of both groups. Especially, as Matt says above, at quantity.
“Revealed: The new Ponsonby”
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11324293
“the big gains are now in fringe suburbs”
QV shows faster growth over the last 12 months in Rodney (10.6%) and Waitakere (11.1%) than central Auckland (8.0%).
A couple of quick points:
1) While QV data is the best around, it’s useful to look over a longer period than twelve months. Try 5 years, 10 years, or more if you can.
2) Percentage figures are fine, and how these sorts of things are usually reported, but what matters more to people are dollars and cents. The absolute changes are probably more important than the percentage ones, especially for the inner city where an 8% rise is still larger than an 11% or 12% rise in rural Auckland.
I live in Downtown Vancouver – Surrey is really far away, I think about 40 minutes on the SkyTrain. It’s like building apartments in the middle of Henderson or Botany Downs – it would never fly in NZ, I suspect! Even Maple Ridge has some blocks. Every station has apartment towers surrounding it.
There is a new development (http://www.theamazingbrentwood.com/) going up in Brentwood (corner Lougheed and Willingdon) – it was a mall parking lot but is being redeveloped into two towers connected to the skytrain station there – the first tower was sold out immediately. They are redeveloping the mall to better integrate (a mall decreasing their parking lot size!). It includes children’s play area etc etc. They get it.
There is another development diagonally across from it that is a bit further ahead. It’s still a strange area, not very walkable, Lougheed Highway is a monster and hard to cross, not good for cycling, not human scale at all, but the more people living there will eventually make a difference, maybe.
The vibe of this sort of stuff I get is similar in Auckland – lots of people whinging about apartments going up and anything perceived to impact the ability to drive cars (see: bike lanes) but the difference seems to be that they just get on and do it here anyway.
There were some mistakes, I think. Yaletown is generally derided and it lacks character – there really is nothing there to do or see, no real retail or culture. I live only a few minutes away and I never go there. Coal Harbour is nice also, but the same problem. They are both just really tall suburbs rather than well integrated communities. That’s my main concern – NZ doesn’t always seem willing to learn from the mistakes others make, rather plunging headfirst into the same situations.
Not just like building apartments in New Lynn?!
Maybe! Tides turn slowly…
Vancouver has really high apartment blocks like Singapore and Hong Kong. Auckland with 4-6 story blocks gets the worst of both worlds; no real density and no real cost savings but has lost the trees and grass of suburban living. The way to overcome NIMBYs is for the Council to buy whole blocks and redevelop for builders to build on.
Absolutely spot on. Let’s get back to more of the government led development NZ did in the 1940s. This is how the rail oriented suburbs (the first real TODs in NZ) in Lower Hutt were done. The local body buys the land, designs all the infrastructure, zones the land to suit the desired housing type (so in your example, 10 storey apartment blocks) and then either sells the land off to developers to build the apartments or contracts itself with say Fletchers to build the blocks. It is done all over the world very successfully.
The profits can then be used to do another development and so on.I just visited friends in Singapore and we stayed in their 4 bedroom, two storey penthouse (25th level) apartment on Marine Parade Road – they have two boys 6 & 10 years old. Their block alone had 100 apartments of good size and there were 10 blocks all the same size – so 1,000 3-4 bedroom apartments – in an area of roughly 12 hectares (120,000 sqm). These were surrounded by tennis courts, swimming pool and grass areas where the local kids played football.
On that same area you would get 300 houses with 400 sqm area or 150 houses with 800sqm area. This is the basic equation Matt is talking about.Over the other side of the ECP highway (with cycle friendly underpasses every few hundred metres) was the reclaimed land that is the East Coast Park. This features a cycle road (it really is a road – not a path) that will eventually go all the way to CBD.
Now this is way more intense than Auckland needs but I certainly didn’t feel claustrophobic in the area. My friends moved from the suburbs of Melbourne to Singapore and said that it is way more child friendly in Singapore. Only issue is that the kids go to the Australian International School rather than a local school so their friends are more scattered – but that is an expat issue not a housing issue.
I didn’t give a desired number of stories but would prefer 25 rather than 10 if it gave really nice green areas. In Singapore they are demolishing 10 storied blocks as too small. In some of the HDB areas they have unfortunately replaced the lawn between blocks with 2 story car park buildings.
Totally agree. To take a topical example, Orakei Point would have been better with fewer, taller buildings and more open, greener spaces
Agree.
Hopefully New Lynn will get more stylish taller buildings with green space, instead of more rows of (poorly built) town houses. Wonder if you could fit one in the middle of the velodrome? Or on top of Lynn Mall?
4-6 stories is a fantastic human scale though.
Take a wander through the older parts of nice European cities and they’re all about that height. Vienna, Barcelona, Seville, Paris, London.
The difference is that there’s heaps of them, so you get density through that, rather than just height.
You beat me to it Scott. I was going to say exactly the same thing. Nothing wrong with mid density 4-6 storey places as per in lots of European cities that are still aesthetically pleasing.
I agree Scott those are cool cities and do have a human feel. They are great to look at and walk around in as a tourist and imagine all the history. I have lived in a few as a young adult and it was awesome.
However, a lot of those places lack green space nearby – especially open green space that can be used by kids to play games or run around. Many just have manicured parks where you aren’t even allowed on the grass. I think the real high rise towers actually create a nicer urban green space if done properly, as they are in places like Singapore. Once kids are old enough they can get around easily as well and enjoy that space.
I lived in a 10+ storey “sidliste” in an outer Prague suburb called Krc that was bloody horrible architecturally and no human scale at all. However, it had a small forest nearby, schools within a few hundred metres and football fields and tennis courts in between the towers. There were kids running around all the time. I would rather have raised kids there than in the funky 4-6 storey apartment blocks in central Prague.
What I don’t believe is that kids need a big back yard to have a good childhood. I grew up in suburban Chch and once I was old enough to get out on my bike (so after 10), I didn’t spend much time in the backyard. I was out in parks, eeling in streams and generally doing stupid stuff with mates on bikes within 3-5kms of home.
That is what childhood is about. Not locked into a backyard in a McMansion, miles from anything, playing with your sole sibling or whatever other kids were driven over by their parents. That is the reality for many kids now and it is f*cking sad.
I teach those McMansion kids when they’re 12/13. It’s scary that of a class of 28, only 6 could throw a ball properly. We need to let our kids loose in parks, climbing frames, trees without constant supervision/rant
That really is sad at such a fundamental level.
The right is ideologically opposed to land use planning in general so that’s what they’re going to fault every chance they get. It disrupts the free market, you see. What is rarely if ever mentioned is that it is Supposed to disrupt the free market because the free market doesn’t provide the range of housing types that meet the needs of the entire population, and it doesn’t give a rat’s about impacts on neighbours (nicely borne out by the RMA). The particular problem with this argument for residential is that developers have no long term interest in the value or quality of the property. They build it (with someone else’s money), you buy it, and they’re gone. That’s why someone needs to look after the public good, and that someone will never be Bill English.
But there is no free market. The restrictions on intensive development mean that the rules favour developers building low density, sprawl. I have a few developer clients who have been in the news lamenting how difficult it is to build even medium density housing. And these are guys who lost their shirts on low density sprawl around Auckland during the GFC.
Places like Houston and Atlanta trumpet that they are the result of free market forces but that is absolute BS. Those cities have just as many restrictions on intensive development – whether by way of exclusionary zoning in the city proper (minimum lot size, minimum parking, maximum coverage, minimum setback etc) or by way of private covenants put on by the developers when the development was set up in the surrounding counties.
Also, residents can vote to put in place restrictions and (really crazy for me as a lawyer) the county/state/city authorities in (at least in Texas) will enforce those private covenants using public money. Just insane.
If there was a real free market, as existed before WW1 in pretty much every city in the world, you get Ponsonby, Freemans Bay, St Marys Bay – dense small houses on small lots close to shops and employment. That doesn’t exist anywhere now except maybe the barrios/favelas of South America or other informal settlements in developing countries.
I gotta give you a +1 here goosoid.
The Freemans Bay 200m2 sections give a pretty high density, and are very popular.
In the name of “housing choices” I wonder if a developer/ Gummint will ever try that. After all- there’s more than one way to skin a cat right?
And it is not like this approach is some crazy idea that hasn’t been tried anywhere. It is basically the approach in Germany – though Germany of course has low property ownership and high renting rates.
But it also has very little restrictions on how housing is built as it is seen as a fundamental right to have cheap housing – especially in a country where homelessness was a problem in living memory:
http://www.ft.com/intl/cms/s/0/14fe8e4c-1567-11e4-ae2e-00144feabdc0.html#axzz3FgR6qYg3
Interesting quote in the context of Auckland:
“Planning regulations favour development, including high-density housing.
The one exception is Munich, where local rules ban high-rises to protect historic views. And Munich pays the price, with the highest average monthly rental costs – €16 a square metre versus €10 in Berlin.”
One issue I have heard raised against high renting rates is the lack of inter generational wealth. But that assumes Germans do nothing with their excess money – which is not true. They tend to invest it for their retirement which in turn makes more capital available for businesses, which then creates employment.
Sorry, we can’t have affordable housing within Auckland. It would destroy our character.
“our character”
being arseholes.
Some interesting comment here
http://www.interest.co.nz/property/72319/john-bolton-shows-what-property-developer-against-when-constructing-houses-costs-syst
wow from reading that chart it looks like 50% of the cost we paid for the apartment goes to legal, accounting and sales!
Only 30% cost goes to actual construction of the apartment.
No wonder our apartment are getting so little value for money.
Seriously, we should reform our process to cut the costs inefficiencies and reduce risk.
So his bare land is about 7.25% of the final costs (just over $18m according this his “selling price” of around 570K buy price for 35 units.
Making it buildable land, which includes consent process, some legal and earthworks and development contributions (i.e. to have sections that are ready to build on aka “buildable” with water power and sewerage) added 3 times the bare land cost i.e. 22% of the total cost). The total cost of this development about 29% was in the land and making it ready for building. i.e. not even 1/3rd. This is hardly a major finding.
And is pretty much the same as in the rest of NZ.
The other 2/3rds had all the other costs which include finance/holding costs, consultants/contractor margins and sales and marketing costs and sales agent commissions which are all “additional” costs after the sections are ready and then the building costs were lumped on top at about 1/3rd building costs, and all the other stuff and margins and profit the other 1/3rd.
All up interesting breakdown, I don’t agree though with including all GST as a cost – as a registered property developer he can claw back the GST paid on all his inputs even if the input providers are not GST registered, so the actual GST payable will be lower than the GST on the 18.25m which is about 2.2m. And since he shelled out over half the total in “costs” to get this built then his GST bill should be half of that 2.2m figure if not more.
The “total” GST component he shows is more or less including the overall profit margin here that he said he made of 8%.
So, if we want to finger point at council as the main culprits here – as is the current trend, you can say that the council were at fault at best, for the developer contributions, the consent costs and some of the consultants costs – not all.
Lets say 50% of the consultants costs were solely due to the council requirements and legal costs.
The rest of that consultant cost will be for drawings and designs and other stuff (like legal sales and purchase agreements, contractor negotiations and legal around that) – that he would have to produce/spend anyway regardless of whether consent was already in place or not – so can’t be considered council costs. So thats 1.0m + 0.65m + 0.825m = 2.5m, so council is “responsible” for at best 14% of the total costs.
So even if we took an axe to the RMA tomorrow, and wiped out all of those council “red tape” costs in one go, no resource consent fees, fewer legal costs as no RMA rules to abide by and no development contributions, then the total build cost will still be north of 15m – on land that cost 1.3m.
But the consultants “50%” share, the contractor margins and the finance costs and net GST (none of which are council caused/able to be “red taped away”) are way more than the council side of the ledger.
At around 3.7m
Yes its an expensive business doing property development, but it seems to me to be fingering councils as the main culprits here when they are directly and indirectly responsible for a mere 14% of the overall costs is pretty simplistic at best and more like something unprintable in reality. When you see all these other snouts in the trough at the same time – Government included with the GST, it easy to see why the money soon goes. But its not fair to simply blame councils for that problem. There is a bigger problem in the building industry that is obviously crying out for some proper Government involvement rather than the slash and burn on the RMA and the usual suspects.
So if we want to get cheaper houses then making cheap land available which is what these greenfields developments all are proposing to do won’t actually fix the problem really no matter how cheap you make it.
Even if they all gave away the land, and council red tape did not exist, the costs incurred by building would still be well over 15m.
BTW: I don’t consider the development contributions and consent costs paid at around $47k per house as exceptional costs (thats not even 10% of the overall costs). Considering what the represents.
And that in essence represents around 20 years of average rates being pre-paid “up front” (by the eventual purchaser) and if that wasn’t charged up front, then everyone in Auckland’s rates would have to rise by around $1-2K annually to cover the full costs of this development and all the others like it that take place over the next 20 years in lieu of council consent fees and contributions.
So its easy to point the finger but closer examination shows that the picture is a lot more broader than many parties seem to think based on the way they spout on about it and the easy “solutions” they all seem to have.
It would be interesting to speculate that had the development been concentrated into fewer apartment buildings instead of 35 low-rise dwellings how the costs side would have changed. I doubt the sales side would change much (or certainly wouldn’t be less) but the land costs would be lower.
How about a targeted rate – one that attaches to the specific dwellings in this development for 10 years, covering the development costs?
May look like 6 of one, half dozen of the other, but sounds to me like a lot of extra work for council to set up and maintain such registers, so why not charge it up front?
A lot of the costs that development contributions cover are up front costs as well, so its only fair that the bulk of these costs and their financing is paid by the beneficiary.
In this case the owner of the new dwelling.
So, it appears one of the easiest way to solve the problem is increase the scale of the project and loosen height restriction.
Since legal, accounting, financing and council cost does not increase significantly for a project of 35 units or 350 units.
So the larger the project, the less overhead per unit.
In that case, if our zoning only allows 4-6 story buildings, it would not be cost effective.
Good to know some on the right believe in intensification, John Banks and Michelle Boag both have apartments in the Stamford Residence. Maybe they could talk with the government about the benefits of apartments.
Not sure I’d want to live anywhere they let riff-raff like that in.
The NZ Initiative has produced some great reports on how Germany/Switzerland have kept prices down by not using land rates to fund local government, but using a slice of income taxes. So the local government got more money by attracting more people and they attracted more people by turning housing into a commodity rather than an investment which kept prices low. Basically houses cost the same in Germany now as they did 30 years ago, adjusted for inflation. At least that was my understanding.
In NZ the local government is a monopoly that can charge whatever it wants to fund its own things and customers are trapped in Auckland because that’s where the jobs are. NZI raises the very novel idea that Auckland should break up back to the several councils, get rid of land rates and fund local government through income taxes. There will be a heck of a lot of disruption, but I think we will see a long term decline in housing values and building costs as several councils aggressively compete to attract people to maintain their share of that tax income.
Right, so more twaddle from NZI. Really this is just ideology not enquiry.
Didn’t we just spend a vast fortune (and still are doing so), to actually rid Auckland of all these “competing” councils who did all the things NZI suggest are required to fix the problem?
And more to the point, wasn’t it because all those competing councils set the paths to the current mess in train many years back now, that we did this amalgmation?
So why the heck would be want to go back and repeat one more time, the failed experiments that didn’t work anywhere it was ever tried in NZ?
And why is Wellington and Christchurch so keen on a “single governing body” concept if its so morally and everything else bankrupt?
… now going back would be sheer madness and completely ideologically driven process with no redeeming features.
So I yep, expect it will be Nick Smith’s (aka Minister of “Invented Crises”, oops I meant, “Housing Minister”) official policy from next week then.
Local Government income taxes are a bad idea – they provide incentive for people to own property in Auckland but not to receive income from there. This would fuel even more housing speculation, provide greater incentives to use land inefficiently, and cause jobs to go elsewhere. We already have too much capital tied up in housing and disproportionately high taxes on income.
The new head of NZI Eric Crampton has been scathing of Local Government income taxes http://offsettingbehaviour.blogspot.co.nz/2014/04/local-government-financing.html
Would be interesting to know how Nation MP David Bennett measures popularity of housing types
http://www.stuff.co.nz/waikato-times/news/10601690/Councils-point-finger-at-Govt-for-home-hardship
Hamilton East MP David Bennett said his discussions with Hamilton City Council showed areas where housing was more affordable than others.
The cost of land was prohibitive but apartment buildings could provide an option for more affordable housing but were unpopular in Hamilton, he said.
Presumably the are more popular than the one where the cost of land prohibits you from buying one.
With the right policies and promotion, Auckland could get billions of dollars of Chinese investment in apartments that is currently going to Vancouver, London, Sydney and now Melbourne. Some Melbourne apartment developments are marketed and sold off-the-plan almost exclusively to Chinese investors. Chinese development companies have experience in building apartments, and are looking to do this in other jurisdictions.
http://www.theage.com.au/business/chinese-investors-are-pushing-into-melbourne-and-sydney-20141010-113q7x.html
Could the area between Glenn Innes station and Stonefields be promoted or developed in a way favourable to high rise ? Most of the land is either in public ownership (the motorway reservation that is unlikely to be required), tertiary education (but will be moving), and industrial. Some type of public-private partnership, perhaps brokered by the Council, so there are some economies of scale in development approvals ?
I think it’s important to point out that what pulls these prices down is the great number of small 1-bedroom apartments. OK, sure, small apartments is a way to deal with high housing prices that is sometimes unavailable because of minimum lot sizes, parking requirements and the like which makes building small apartments unprofitable or downright illegal. But let’s not pretend Vancouver is cheap. Condos (apartments/flats) in Vancouver proper cost about 500-600$ per square foot. There are some available for less than 400 000$, but these are all studios and 1-bedroom 400 to 600 square foot apartments.
To get affordable housing, you have to go far in the suburbs, like in Surrey, which is a 35-min rapid transit ride away from downtown Vancouver (not counting transfers), or a 35-minute drive… in the middle of the night (much worse in peak hour). There you can find properties worth 200 to 300$ per square foot. They have been building quite a lot of condos and townhouses in the far suburbs, but house prices in Vancouver proper are still very high. The big problem there is the vast swaths of the city of Vancouver which are still zoned exclusively for single-family homes. They have started to allow laneway house to do some smooth densification, but if they could convert houses to townhouses or 3-4 story condo buildings, they could really make a dent in housing prices. The problem with the approach of building high-rises in central locations (though not bad in itself) is that high-rises cost a lot to build, easily twice what low-rise condos cost per square foot. I think it stands to reason that building new housing is not likely to be able to lower the price of housing below the construction cost of the type of housing you build. If the market price of housing units fall below their construction costs, construction will grind to a halt until prices increase once again to the level where starting to build new units is profitable once more.