The results for the first full year of the Housing Accord between the government and Auckland Council have just been released.
It’s a politically charged topic – witness the government talking it up (“First year Auckland Housing Accord target exceeded“), and Phil Twyford from Labour rather unfairly talking it down (“Fourth housing report confirms failure“).
The Housing Accord is ultimately about increasing the number of new homes being built in Auckland. It’s open to debate how much success it’s had in its first year, but it’s also laid the groundwork for future growth.
The story so far – by the numbers
Overall, “11,060 new sections and dwellings have been achieved in the first year – more than 20 per cent above the target of 9000”. That’s perhaps a little exaggerated, as we’re actually talking about consents or approvals for those new sections and dwellings – they haven’t necessarily been built. And, as I’ve pointed out previously, the target is actually lower than the 9,975 sections and dwellings achieved in the year before the Accord came into effect.
Still, 11,060 sections and dwellings is a lift. It’s not enough of a lift (the targets for year 2 and 3 are 13,000 and 17,000 respectively, so lifting by 4,000 a year), and there’s probably some double counting compared to the previous year,* but it’s a start.
A lot of the attention has focused on Special Housing Areas, but these haven’t really translated into consents yet. That will take a bit longer, partly because it hasn’t been long since most of them were approved, and partly because they often have to go through an extra stage – getting rezoned via a plan change, before they can be subdivided. I imagine they’ll make a much bigger difference to the numbers in year two.
Behind the rhetoric, what we’re actually left with is an increase in planned construction activity (subdivision consents to create new sections, and building consents to create new homes), much of which is simply due to a recovering construction sector. And we’re still not building enough homes, especially with migration running at record levels.
I’ve shown the number of annualised building consents in Auckland below – note the very low figures in 2009-2011, and the upturn which has been underway since then.
The story so far – making the process easier
That’s not to say the Accord has been a failure. The remarks I’ve heard from people across the property industry have been quite positive. I went to the Property Council’s Residential Development Summit last month, and the Accord was given a thumbs up by a range of people. Developers are keen on the “one stop shop” where stakeholders such as Auckland Transport, NZTA, Watercare and the council consents team are all available to talk through the issues, and the consent process has been streamlined. Perhaps these are things that the council should have gotten going itself anyway, but maybe it needed a nudge from the government.
Planning applications are made under the Proposed Unitary Plan rules, and that was only possible with a law change from government. We’ve been a bit annoyed about the relative lack of “intensification” Special Housing Areas, compared to the “greenfields” ones. However, the council did say in its Auckland Plan that it wanted to have a ready supply of land for housing, and the SHAs are needed to create that supply. Besides, the Unitary Plan rules often aren’t much better than the existing rules when you’re trying to create apartments than terraces – which we’ve also criticised – so many developers wouldn’t bother.
The next step
It’s going to be tricky to ramp up construction fast enough to meet the Accord’s year 2 and 3 goals, and to actually convert the consents into built homes. An article last month suggested that building consents are unlikely to come close to the targets, based on forecasting work done for the MBIE, and that the targets might be revised downwards.
* More on the double counting, since I haven’t seen this discussed elsewhere. Within the year, the report doesn’t double count, so a piece of land gets counted when it is given subdivision consent but isn’t counted again when it’s given building consent. However, some of the building consents granted in this last year will have been given subdivision consent the year before the accord, so it’s not possible to compare the 9,975 to the 11,060.
The MBIE will address this for years 2 and 3, i.e. they won’t double count between the years of the accord.
Looking at just building consents, though, it is possible to compare the numbers over time. Those consents have risen 30% in the last year, which is pretty substantial – from 5,648 to 7,366.
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And no one ever talks about the white elephant in the room – migration. Why isnt migration tied to the number if houses that our industry can build? A whole generation are being kept out of home ownership due to the mismanagement of migration levels by successive governments.
New Zealand had net negative migration during the Muldoon years. And houses were getting more affordable – i.e. prices were falling in real terms!
But I wouldn’t be enthusiastic about returning to those policy settings.
Large billboard on Ponsonby Rd, and one at the airport.
—————-
REACH
OVER 2,000,000
CHINESE
PROPERTY BUYERS
HouGarden.com NZ Real Estate Worldwide
———
Anyone still doubting there’s a problem?
The Chinese are smart- no foreigners can buy land there.
New Zealanders are stupid. We should just copy their rule.
Excellent point although this peak is unusual as it includes large numbers of Kiwis returning home. Other countries manage migration according to local issues, why can NZ not follow the same?
How are you planning to stop kiwis returning? Interestingly high numbers of returning kiwis is of course only possible because high numbers previously left. These are both factors that are incredibly hard to control without, at the very least, all sorts of unintended consequences and injustices. We have a small population so swings in either direction will always seem disproportionate.
> How are you planning to stop kiwis returning?
You can’t, but you can vary the number of non-kiwi migrants who are allowed in, in a way that produces a steadier number of net migrants overall. For example, if 10,000 more kiwis come home, reduce the new migrant quota by 10,000.
Again this is more difficult than it may seem. Remember 2/3 of pop growth is natural, births. Then take out returning kiwis, then subtract all those from nations we have bilateral agreements with, ie Australia…. Then anyone who is a family member of a resident….Don’t think you’re going to have much to play with
> Again this is more difficult than it may seem. Remember 2/3 of pop growth is natural, births. Then take out returning kiwis, then subtract all those from nations we have bilateral agreements with, ie Australia….
It depends on what time scale you’re looking to smooth the numbers over. I was thinking more about the capacity of the construction industry in the short term, over a few years – or about unemployment related to the business cycle. I’m not thinking about long-term population growth – although if you were, it seems relevant that some of that natural population growth is going to come from the children of recent migrants, as well, so that natural growth isn’t totally independent of migration numbers.
But natural population growth is slightly easier to plan for, since you have about 5 years warning that kids are going to school, and about 18 years warning that they’ll need a house of their own. Skilled migrants generally need a house and job on day one, and schools if they already have kids. It also doesn’t have quite as much year-to-year variability, although in the long run babies come in “booms”.
Australia is also a tiny source of migrants compared to returning kiwis, and we don’t have any other bilateral agreements guaranteeing entry (except the Cook Islands, Niue and Tokelau, but they’re in a sense “kiwis returning home” since they’re New Zealand citizens).
The skilled migrant category approves about 20-25,000 resident permits a year: varying that number by 10,000 would make a large impact on net migration figures, which can swing by 10,000 or more from one year to the next.
> Then anyone who is a family member of a resident….
Oh, and in this case, the only people who are anywhere near guaranteed a visa on the strength of a family connection are partners and dependent children, neither of whom are very likely to get a separate house, and the latter unlikely to need a job.
For both better and worse, this isn’t the nineteenth century any more, and governments exercise fairly detailed control over who crosses their borders.
Exactly what I was meaning.
Peter – I wasnt arguing for net losses in migration just not 40, 000 net gains or whatever the current figure is. If the industry can only build 10, 000 a year that should be our migration target until the building industry build capability.
Otherwise prices will continue to rise at present ridiculous levels and we all will be quite literally “slaves to the banks”.
It doesn’t appear to be that the building industry is really the constaint. If they could build 12,000 per year 8 years ago but only 4000 4 years ago then the problem is NOT that they don’t have enough builders to keep up with immigration.
If the money/space/demand was there for 15,000 homes/year then the building industry would meet it by raising wages and attracting builders from Australia or out of retirement.
A good point. I suspect that it would be much easier to improve the supply side of the housing equation rather than trying to limit demand with heavy-handed restrictions on migration. That might mean (for example) improved funding for apprenticeships and training in the building industry, a faster consenting process, and cutting back regulatory limits on intensification such as building height limits and minimum parking requirements.