Disclaimer: I own an apartment in Auckland, which generates excessive rents that inn turn help fund a lavish overseas lifestyle. My pecuniary interest in maintaining policies that reduce the supply of apartments in Auckland has not influenced this post in any way.

This post from a few months ago explained how apartments (even expensive ones!) can improve housing affordability. The same is true for housing generally: Provided that developments make a net positive contribution to the housing stock, then houses will become more affordable. So new housing is generally a good thing, and should be viewed as such. Despite the efforts of the anti-housing brigade, such as Bernard Orsman at the Herald and Auckland2040, we seem to be moving towards consensus on many issues. It was encouraging, for example, to see Phil Twyford and Oliver Hartwich collaborate on this recent article about housing in Auckland.

In this post I want to focus on the relationship between apartments and affordability. The reason I focus on apartments is because I consider them to be the *only* viable solution to Auckland’s housing issues. Why? It’s a numbers game. No other housing typology appears to have the ability to scale up to meet the demand for new dwellings in Auckland, especially in central areas. The figure below illustrates trends in consents for different housing typologies in Auckland.

Auckland Dwelling Consents

To illustrate my point, I think is instructive to consider the example of Hobsonville Point. This often-touted greenfields development has been 10 years in the baking and will ultimately deliver 3,000 new dwellings. That’s all good, and the development itself has many commendable attributes. But what impact does Hobsonville Point have on the wider housing market in Auckland? As it turns out, not much.

While we’re currently consenting about 8,000 new dwellings per annum, most commentators believe Auckland needs to average 12,000 – 20,000 new dwellings per annum. This means we need to increase the number of dwelling consents by around 50% from the current level, or 4,000 dwellings per annum. If we are to achieve this increase by building detached dwellings, then we would need an extra 1-2 “Hobsonville Point scale” greenfield developments ready every year.

It’s difficult to see how this could be achieved, for the simple reason that detached dwellings are resource intensive. Not only in terms of the land they require, but also the materials and labour involved in their construction. Even at present levels of activity, Auckland’s construction industry is approaching short-term capacity, most notably in terms of skilled labour. Meanwhile the infrastructure required to support an additional 2 Hobsonville Point developments per annum would likely stretch the public sector. And investment in public infrastructure would of course compete for resources with private sector construction, adding inflation fuel to the construction/housing cost fire.

If you’re interested in these issues more generally, then I’d suggest reading this report by Auckland Council’s Chief Economist, Chris Parker. It’s worth the effort …

Let’s now consider trends in Auckland’s apartment market. The previous figure illustrates how attached dwellings constitute approximately 40% of new dwelling consents. However, as discussed in this post on Australia’s apartment boom, 40% is relatively low compared to cities Sydney, Melbourne, and Brisbane, where attached dwellings represent more than 55% of new consents. And compared to what Auckland achieved in the recent past, 40% is definitely on the low side, as shown in the graph below.

What caused the big drop-off in apartment consents in Auckland circa 2005? This article from June 2005 provides some hints (emphasis added):

The Auckland City Council is continuing its attack on sub-standard apartments with the introduction of new design controls that spell the end for “shoe-box” sized dwellingsThe new controls stipulate a minimum studio apartment size as well measures to improve poor ventilation and sound-proofing. Cheek-by-jowl apartments and ugly concrete towers also will be banned. The moves are the second council initiative aimed at improving the standard of Auckland apartments, following its earlier decision to score all new buildings on their design merits and to reject developments that do not come up to standard and fast track those that do. Deputy Mayor Dr Bruce Hucker said the latest moves “sounded the death knell of the pokey apartment, ugly building era”.

The above quote is instructive for planners and policy-makers everywhere: The last comment by Dr Hucker (who was both a planner and a councillor) suggest that “pokey” apartments and “ugly” buildings go hand-in-hand.

Is the external appearance of a building defined by its internal configuration? No, obviously not. There are many examples of fine-looking building which house small apartments, and vice versa. This statement conflates two rather distinct issues, namely 1) the external appearance of apartment buildings and 2) the internal configuration of apartments. Nonetheless, Auckland City Council’s “attack” on apartments was “successful” at achieving its objective: The number of consents for new apartments in Auckland dropped off rapidly following the drafting and adoption of these policy changes circa 2005.

Fast forward 10 years and Auckland is now experiencing a positive demand shock caused by strong net migration, which in turn has seen prices rise rapidly. Unfortunately, our apartment market is less able to respond to this demand shock. I appreciate that it is all very easy to criticize policy decisions with the benefit of hindsight. The main point, however, is to observe that policies were implemented which made it harder to develop apartments in Auckland. These policies do appear to have reduced the supply of new apartments, and Auckland now lags behind comparable Australian cities in terms of rates of apartment development.

In a city that is experiencing considerable growth and house price pressures, I think this is undesirable. That’s all there is to it.

Given this recent historical experience, one might think Auckland Council would now be looking to enable more apartment development. Unfortunately, planning policies in Auckland remain somewhat hostile to apartment development. Consider the following figure, which shows the proportion of land assigned to different zones under the proposed Unitary Plan, as well as the Preliminary Position ultimately adopted by Council (NB: The latter made a slight shift towards enabling more intensive development).

PAUP zoning changes - Dec 15 2

The preliminary position would zone only 6% of Auckland’s urban land for “Terrace Housing and Apartment Buildings”, while another 17% is zoned as “Mixed Housing Urban”. Put another way, more than 75% of Auckland is zoned as being off-limits to apartments. I’m interested to know if anyone has data for other cities.

Zoning is of course not the only regulatory barrier to apartment development. There are a number of regulations which apply to the apartments that are constructed, including minimum apartment sizes, minimum balcony requirements, and minimum car-park requirements. The general effect of these regulations is to increase the cost of apartments. While estimates of the costs of these regulations vary between study, but the general range is illustrated in the figure below (NB: Ignore the Demographia numbers; their analysis is bollocks).

In percentage terms, these additional costs will have the largest impact on the cost of small apartments. That is, not only have apartments become more expensive generally (and hence we have less of them), but low-cost apartments are likely to have become proportionally more expensive. Research by the Productivity Commission shows that Auckland’s house price distribution has indeed shifted up in the last two decades or so, i.e. there’s a lack of affordable houses in the Auckland region, as illustrated below.

House price distribution auckl

At this point I hope all of you are screaming “eeek”: Our housing policies appear to be screwing over the people who can least afford it. I don’t think it’s too much of a stretch to suggest that the escalating costs for low-cost housing in Auckland has contributed to worsening child poverty statistics. Yup, it’s that serious. Regulations like minimum apartment sizes and minimum balcony sizes are that serious.

What do you think? Is it reasonable for more than three-quarters of Auckland’s metropolitan land area to be zoned off-limits to apartments? Is it reasonable to impose regulations that increase the cost of small apartments by around 50-100%? When these costs are being borne by the households which can least afford it? When the purpose and benefits of these regulations don’t seem to be well-understood by the people who advocate for their adoption?

It all seems a bit naff to me.

Discuss.

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62 comments

  1. I have always wondered what the externality is that minimum apartment sizes are trying to fix. Aside from moral panic.

    1. I don’t think there was an external cost, it was just people in power imposing their values onto others. Before some people could choose a small apartment, then the rule was passed that removed that choice and now the option for some is no apartment at all.

      1. Yes, I think your comment touches the two key issues I have with minimum apartment sizes:
        1. What is the externality they’re trying to solve?
        2. What is their impact on people who can no longer afford apartments?

        #1 is not able to articulated by the planners I’ve spoken to, while #2 is generally ignored.

        From what I can tell, people who can’t afford small apartments basically don’t have any housing options any more. So they are either forced to live in a shared living environment, which may or may not be ideal.

  2. Get a Land Value Tax in, rather than property taxes (property taxes also tax buildings, this is a no-no if you want to increase building). LVT can also allow other taxes to be reduced, so it can be revenue-neutral if people wish.

    LVT strongly discourages wastage of land and also captures the value of public transport improvements in the local area. It also penalises NIMBY because if NIMBYs block supply, they increase the value of their own land and are pushed into higher tax bracket.

    Proceeds can also be used to fund targeted or general housing stimulus.

    Authorities have to get on top of housing problems in Auckland, and quickly. Failure to do so will mean that rents will suddenly explode, and then you have people advocating for ruinous rent control, which can completely wreck a city.

  3. I don’t have a problem with the minimum apartment size requirement or the quality control issues for things like ventilation they had.
    They could probably do away with the balcony requirement to save costs.
    But I do agree that they should open up more zoning to high-intensity/high-rise.

    One other thing that I have noticed which seems to be a missing piece in the puzzle is the medium rise complexes like you have in Europe and US/Canada a la Condomiums. You do see these in Auckland – As retirement village buildings! but not so much as apartments!
    The whole 5-7 level complex gives good bang for buck and doesn’t overload areas that aren’t designed for high-rise. One area in particular that would be good for this would be between Smales Farm-Akoranga on the Takapuna side of the motorway… This area has good PT access with the busway etc. Other areas would be those surrounding the city centre (that aren’t designated for high-rise), Birkenhead/Northcote/Takapuna etc

    1. The current proposed minima are 40 m² for an apartment and 30 m² for a studio. 40 m² is a fairly large area for a one-bedroom apartment. And it’s not like there are no single-person households in Auckland.

      Coming from Europe myself, I’d say 95% of the buildings you see in cities over there are missing here, or at least quite rare. Including terraced housing, low-rise (like 3 storey) apartments, medium rise apartments, etc. Basically if you don’t want either an apartment in a high-rise, or a free standing house, you’re screwed.

    2. Remember that central government also sets building standards via the Building Act, which from what I understand effectively results in a minimum apartment size of 20-25 sqm. So the question here is not whether there should be minimum apartment sizes at all, but whether Auckland Council should set standards that are higher than those proposed in the Building Act? And if so why?

    1. > Put another way, more than 75% of Auckland is zoned as being off-limits to apartments. I’m interested to know if anyone has data for other cities.

      Based on the graph, it only includes the five residential zone types, not commercial zones that also allow residential uses. By that standard, for example, 100% of Wellington City is off-limits to apartments, since both of its residential-only zones do not permit apartments. (They’re allowed in the city centre and various town centre commercial zones).

      That said, Auckland’s shortage of commercial space is, if anything, even more severe than its shortage of residential space, so I think it may be reasonable not to focus overly on trying to meet much of Auckland’s housing demand in the few areas zoned as acceptable for commercial uses.

      The obvious solution to both problems is to vastly increase the amount of land zoned as acceptable for commercial use or apartments. Allowing smaller, crappier (and so cheaper) apartments to be built is definitely better than nothing, but most of the cost is in the artificial scarcity of developable land, brought about by restrictive zoning. This allows a tiny number of (sometimes politically connected) landbankers to drive up prices.

      1. “Based on the graph, it only includes the five residential zone types, not commercial zones that also allow residential uses.”

        If you stated it as a % of all urban zoned land then it might come out with an even lower proportion of area available for apartments because it would add large areas where no residential uses are allowed (industrial zones) and the centres only make up a small area.

        Also in 94% of residential zoned areas you can’t build over three storeys, and 94% of residential zoned areas have onerous parking requirements which prevent small apartment developments from pencilling out.

    2. The 75% just applies to those residential zones in the graph. You’re correct there are other zones which also allow for apartment development, e.g. metro and town centre, although my understanding is that both these zones are very small, i.e. in the order of 0-2%. Correct me if I am wrong.

      As Frank notes, if you add in all the other zones then you may even get a figure that is higher than 75%.

  4. I think part of the issue is how do you define “apartment”. If you think tower blocks of 4+ storeys, then this low proportion figure may be right.

    But the PAUP allows a single house zone dwelling to be split into 2 [independent] sub-units. Think main house and a self-contained Granny flat as on such obvious type, but not the only one.

    Previously that wasn’t allowed and the old ACC used to strenuously aim to stop and would actively root out such schemes during consent applications.

    Now I’d call those apartments, some might call them “flats” – no matter what you call it – the outcome is the same – you get multiple shared owners of the same area of land i.e. increase the density of the people living there from the same dwelling..

    Now, if the Single House and Mixed Suburban zones collectively make up 70% (under Preliminary position) to 75% (under PAUP as notified) of the total and each dwelling was split into two sub-dwellings.

    Then the housing crisis could be fixed overnight as suddenly every existing dwelling could become 2 “apartments”.That would potentially add 75% more “apartments” from the existing housing stock just like that

    Now that won’t happen that way, but developers aren’t exactly steaming ahead building previously consented apartments everywhere in Auckland – outside the CBD that is.

    For example large parts of Stonefields are zoned for many large apartment buildings [each up to 8 storeys high], and has been since it was approved by the Environment court back in 2006 or so.
    And how many of those apartments have been built so far? 2, a 3rd has sold off the plans but has not yet been built. Many more than that are planned, but we’re talking well over 10 years since they were approved and we have 3 apartments to show for it?

    I don’t know why that is? Perhaps the developer has concentrated on the detached and terrace housing first, then added the apartments later?
    Perhaps the market that is buying there doesn’t want apartments in the numbers planned, so hence they’re not selling as fast as they could?
    Each apartment building seems to sell out once its bought to market, so maybe its a construction constraint problem? Not enough cranes available or something?

    So given the current lag in building consented “apartments” in huge multi-storey developments we [don’t] see currently being built everywhere, it seems that holding out for this style of apartments as the great saviour won’t probably solve the problem anytime soon either.
    Without a huge step-change in construction activity.

    But maybe they are going to happen, just not the tilt-slab eyesores that everyone thinks when they hear “apartments”?

    Could be that apartments are already being planned, silently and quietly to be “built” quickly and easily in the existing single house zones by simply reconfiguring existing single-house zone dwellings?

    1. In terms of scalability, I prefer to look at the consent data shown in the first graph. This shows that from Dec-11 consents for new apartments have increased almost ten-fold, while consents for new detached dwellings have increased only 30%.

      1. And yet all those consents are not even clearing the backlog of the existing dwelling shortage (3+ years supply we’re commonly told is the current backlog), let alone supplying the needs of the market today, nor the future.
        So each and every year we underbuild the number needed, adding another 4000 or so dwelings to the shortage.
        Meanwhile demand goes in the other direction, increasing the shortage further.

        This lack of timely supply of the market indicates, that the “market” is not working properly. But I am not sure if the minimum size and balcony rules alone are responsible for much (and cetainly not all) of that.

        I think the problems with the building/construction industry in Auckland and NZ in general are wider and deeper than someone just rocking up and “saying lots more apartments please” as the solution.

        Its like roads, and maybe the answer here is also not to keep building more of the same, but instead use what dwellings you already have way more efficiently first before you wholesale redevelop everything?

  5. Poverty is not solved by providing shitty shoeboxes in which you stuff the poor. All that does is further penalise poor and enrich the developers. Poverty is dealt with by increasing incomes.
    As for preventing tiny apartments being built, yes that is exactly what I voted for, to prevent the kind of awful density you see in cities like Shanghai (an extreme example).
    It is possible to increase Auckland’s density without resorting to tiny floor area apartments.
    Yes more of the land should be available to apartments but those still need to be of a decent size and quality.

    It seems to me you are conflating two arguments, more apartments does not need to mean smaller apartments.

    1. Nobody’s forcing the poor into smaller apartments. It just provides that further option for those who want that kind of dwelling.

      1. Yes that’s the thing that people often fail to consider: What is the next best option for these people: Living at home with Mum and Dad? Sharing a flat with other people? Sharing a room with other people? Sleeping in a van parked on the side of the road? A boarding hostel?

        Basically, the people who choose to live in these apartments are likely to be there because it represents the best option for the at the time. I don’t understand how planners, and people like Bart, can slavishly write-off the preferences of these people without at least having the decency to talk to them and find out what they think of their accommodation, and where they’d live if it didn’t exist.

        Honestly, it frustrates me that so many people are judge others’ choices yet so slow to try and show some empathy/understanding. In this case, I know of no robust studies that have demonstrated that the inhabitants of small apartments would rather not have them!

    2. Small does not need to mean ‘shitty’. Quality issues can be addressed through some regulation, daylight, insulation, ventilation, and weathertighness are more important than size. Give me small and well designed and built over big and leaky any day.

      Furthermore you may have no problem affording an expensive home but why should others who cannot be priced out of the whole city? What business is it of yours how much space other people decide is adequate, and especially at what price point they wish, or are able to commit to dwelling costs?

      Improving dwelling affordability is indeed a means to address poverty. Size does definitely influence cost. If we want to increase supply of entry level dwelling then small apartments are important.

      1. Agree with you. However, with reference to stu’s comments about the Building Act, many developers and even MBIE were strongly opposed to both size and quality controls in the PAUP. I think the general reason AC is trying to impose standards over and above the building act is that its sets the bar incredibly low in terms of a range of quality factors like energy, insulation, materials etc.

    3. “Poverty is not solved by providing shitty shoeboxes in which you stuff the poor. All that does is further penalise poor and enrich the developers.”

      How does it penalise the poor? Presumably anyone who lives in these apartments weighed up the options available to them and this was the best place they could afford within their own set of needs and limitations. What would happen to the resident’s of these “shoebox” apartments if these apartments didn’t exist? How would they be better off?

      1. They get to live miles from anywhere and need to pay exorbitant interest rates on their car loans. Oh wait….

      2. Exactly Frank. Dr Hucker effectively said “I dont like your choice of home so I will see to it you will be homeless” He said that through his deeds.

    4. Bart’s comments are completely on mark. We dont need shoebox apartments, we need more mid rise devlopment that doesnt rely on packing people into apartments where your bed folds down from the wall and your bedroom has no windows. No body in NZ should accept the greed that is demonstrated by apartments like Zest on Hobson St.

      Planning regulations like minimum size set a minimum standard, like any laws do, and should not force prices up if we actually had proper competition in the housing market. You should focus on the planning regs that prevent supply, not those that maintain quality.

      Otherwise you sound like cheerleaders for property developers profit margins.

      1. That’s a conservative-left meme I’ve seen going around the place – that if you support no minimum on apartment size, then you are “making greedy property developers rich”. Based on the idea that property developers are something like drug dealers or someone else who don’t have a right to make a living. And the mention of “Shanghai” is also a gross appeal to ethnic prejudice.

        Tiny apartments at tiny rents? Who could possibly be opposed to that? Where else are single low-income people or childless couples going to live?

    5. Space is definitely not an overriding factor for everyone – you need space to store kids, who need bedrooms, and crap that you buy; for the segments of the population for whom neither of those is a concern a cozy apartment is likely to be the better option. By requiring people to pay for more space to live in there’s an inducement to buy more furniture and other expensive, hard-to-move, space-occupying crap, otherwise your house is empty and looks povvo.

      Slightly stupid, but I’m sure you all know about the Tiny House movement; apply that thinking to apartments and it’s not so far fetched that a small apartment could actually be nice.

      Since the single family dwelling market is relatively well supplied compared to the apartment market (not absolutely well supplied because too much land is locked in gardens and driveways – as Scott M says more midrise is needed), the whole point of this is that it makes sense to cater to both sides of the equation, rather than saying ‘poor people with kids who need space matter, and poor people without kids who don’t need space don’t’.

      The worst thing about Zest and all the other ugly towers on Hobson St isn’t the floor area, but the design, security gates, and car parks, not to mention being sandwiched between two of the ugliest streets in the CBD.

    6. Hi Bart,

      No I don’t think I’m conflating two arguments. Holding other factors constant, smaller apartments does mean more apartments. The same is not true for the relationship between external appearance and internal configuration.

      In terms of solving poverty, I think you’re missing the point. It is evident that poverty in Auckland would be reduced if housing costs were lower. Hence, policies which push up the costs of housing – especially for low income households – will tend to make poverty worse. It’s worth noting that in the absence of apartments more people will tend to live in detached dwellings, which have higher transport and energy costs. So by not allowing apartments to be built we’re effectively pushing up costs for 1) housing, 2) energy, and 3) transport. Ultimately these three items account for about 50% of total household expenditure, so it’s big bikkies.

      Nobody’s blaming you for previously voting in support of these bad policies. I may even have voted the same way at the time, I simply don’t know. But from observing the impacts of these policies, and with the benefit of hindsight, we can now conclude that these policies have had a detrimental impact on housing affordability in Auckland.

      I’d encourage you to not be too emotionally attached to decisions made in the past, as it tends to prevent you from being open to new evidence. And I’ve presented quite a bit of evidence to suggest that these policies are having large impacts on the costs of new apartments, which in turn is likely to negatively impact on the well-being of the affected (low-income) households.

      You, on the other hand, have presented no evidence.

    7. ‘Poverty is dealt with by increasing incomes.’ Well, yes. But that’s not something that planners have control over. They do have control over the housing choices available to the poor. Plenty of poor people might prefer an affordable small apartment to an unaffordable bigger one. Let’s not let the perfect be the enemy of the good.

  6. As usual planners are failing to do their job properly and Plan to meet the needs of the city. Often their rules are knee jerk responses to crap architects and political interest groups. After 55 years of ” planning ” by planners the question has to be asked is the damage done by planners worth it. Would it be much worst if we had left it to building regulations{ health and safety} and the market. I suspect not. The process of planning as we have seen it is inflexible and illogical. I say dump the RMA in urban environments and start again with a new methodology.
    On the matter of the built environment we also need to get better architects out of our universities because alot of the rubbish we get dished up is a result of untalented students getting their degree and let loose on our cities.
    The building regulations especially the fire codes are often illogical and create unnecessary expense. The amount of hardware now required for earthquakes in Auckland is ridiculous and there needs to be a proper risk analysis done to prevent the cost of building becoming unaffordable..
    I am comfortable with the 6 percent as it gives time to iron out the bugs( the current unitary plan rules are clunky and open to abuse )Given the greater powers given to planners re design ,I predict developments will get bogged down by petty urban designers with their own agendas blackmailing developers so they can get their projects through. Its happening now so it will only get worse.

  7. I’m surprised at the amount of space which could be used for apartments in the CBD but is just left vacant – e.g. there are a couple of empty lots on High St; some on Liverpool St – not to mention all the land used up by car parks. Getting rid of all the disincentives you mentioned might move closer towards tipping over the edge whereby it made sense for all the Wilson Parking etc. garages (e.g. Hobson St, Durham St, Victoria St) to be redeveloped as apartments.

    The universities currently play a big role in housing demand in the CBD – there’s about 2.5k students living in UoA residences alone (with planned expansion at a new site on Symonds and rebuilding the Grafton site – UoA accommodation is heaving at the seams in terms of people who want to live there), plus AUT accommodation (500 residents) and all the cheapy buildings around the bit between Symonds St and the motorway which appeal to students. Is it important to get more apartments for people who are going to live in Auckland full time and for longer than a year at a time?

    1. Yes, but I think some historical perspective is useful.

      Up until the mid-1990s the former Councils actively prevented residential development in the city centre. Auckland’s city centre was a desolate soul-less wasteland with poor retail activities.

      Then the rules changed circa 1996. Among the first demographics to move in were the students, both domestic and international. This provided an injection of economic activity which started to turn the city centre around. Over the next 10-20 years, the resurgence in Auckland’s city centre has progressed apace.

      As this happened, the diversity of residential apartments also tended to increase and move into high-end apartments designed for professionals. So effectively the apartment market was “rounding itself out”. Having started with student apartments, and then moving into young professionals. This brought with it greater diversity in retail activities, e.g. higher quality cafes/restaurants and clothes stores.

      The logical next step, from what I can tell, is for more 2-4 bedroom apartments that are designed for 1) young families and/or 2) flat environments. I agree that it is missing, but I don’t necessarily agree that we need policies to support this kind of thing from happening. From what I can tell it seems to be happening anyway.

  8. This article assumes that multi-storied apartments are cheaper than single storied houses, but offers no figures to back up this assumption. From information posted last year, this is not true until the building is more than 5 stories. Buildings of this height are very difficult in Auckland because of our supposed desire to view the city’s volcanic cones. The CBD is full of empty or nearly properties which would indicate zoning is not the only problem.

    1. I agree that some minimum degree of scale is needed to make apartments cheaper. As you note the cut-off seems to be about 5 storeys, which seems about right.

      Bear in mind, however, that this critical threshold is impacted partly by the policies that regulate how apartments can be developed. So if onerous regulations like minimum apartment sizes were removed, then you may find that apartment buildings become more viable at fewer storeys.

      Also note that regardless of scale, apartments were previously getting built by the market, and they were getting built much cheaper prior to these policies being adopted.

    2. Multi-storied apartments are indeed cheaper to build. For one thing, what is most expensive in a low-rise building is the foundation, adding a livable basement and a second story is a less expensive way to add more living space because you can have the same space with a smaller footprint. However, unlike what you say, it is widely acknowledged that buildings above 4 stories are significantly more expensive to build, because much more strict construction rules are implemented for such buildings, mandating steel or concrete frames, elevators, sprinkler systems and the like.

      The cheapest form of housing is undoubtedly the low-rise (3 stories or less) wooden-framed walk-up apartment. Low-rise, wooden-framed buildings are very affordable to build per square foot, in Québec, similar buildings recently built in the exurbs (where land prices are extremely low) are sold for about 1 500$ per square meter, no matter if they are single-family houses or condos, they have roughly the same price per square meter of floor area. On the other hand, condos located in buildings with 5 stories and more, even deep in the suburbs, tend to have a cost per square meter of floor area of at least 2 500$, significantly more than the low-rise, walk-up buildings.

      Low-rise apartments have the additional advantage of consuming less land per unit, and are generally much smaller than single-family houses, so lower land prices per unit, smaller units and similar construction cost per square meter of floor area… all result in apartments being more affordable than houses. Of course, if you have tiny single-family houses on small lots like in Japan, you can roughly equal the price of small apartments.

      In urban areas, land shortages mean that land costs can be so high that even affordably built homes and apartments become expensive to own because of the price of land, so that higher-density mid-rise or high-rise apartments become cost-competitive. I find this information by doing an admittedly anecdotal comparison of condos and houses on the market, comparing new constructions, type and location.

      1. I’d be interested in any comment about the cost difference between the 2-3 storey walk up apartment building (with shared stairs) and the 2-3 storey traditional English terrace house (2-3storey dwellings with shared walls on both sides and separate street entrances).

        1. The cost difference per square foot of floor area is likely insignificant. If you have say a 3 000-square foot lot on which you can either build a duplex that is 30-ft X 30-ft with one unite per story or two row houses that are 15-ft x 30-ft with two stories, then I’d assume that the construction cost is roughly the same for both. They are almost the same building, just subdivided differently (but if the row houses are built separately at different times, the construction cost may be a bit higher because you have twice the mobilizing cost for labor and equipment). The duplex has an advantage in that it requires only one stairway, while the two row houses would each require their own stairway, so that is more wasted interior space. On the other hand, row houses can be more attractive than a large apartment because it provides owners with a private front and back yard.

          However, apartments can be made much smaller than row houses, which allows them to be more affordable per unit. A 3-story low-rise apartment building on a 30-foot wide lot can have a 1 000-square foot unit on the ground floor and two 500-sf units per floor on the second and third story. You can’t do that with a row house, a 500-sf row house would probably need to occupy a 15-foot wide lot on its own, and would have only a ground floor. There is a limit to how narrow you can make a dwelling unit. The smallest 3-story row house you can build is probably around 1 200-square foot big (13-foot wide, 30-foot deep, 3 stories). Of course, people can find a way to achieve a similar result by sharing the bigger row house. 3 people co-renting a 1 500-sf row house is roughly the same (in terms of density and economy) as 3 people each individually renting out 500-sf apartments (though the living experience is radically different).

    3. But the point wasn’t that low-rise apartments are cheap, the point is that the kind of housing available is not a good match for the kind of households in the city.

      Judging from how many people are flatting over here, I’d expect Auckland to have a similar mismatch.

  9. I’m sorry but thus far small shoebox size apartments *have* resulted in sh!tty apartments blocks, because developers are going for the maximum buck for the minimum outlay. If you are lobbying to remove the medium density/size rules (which I’m not in favour of) then you *must* implement a maximum occupancy rule **and enforce it!!** Otherwise you will have a poor family of 4+ living in a 30sqm one bedroom apartment.
    I’m totally onboard with zoning more areas for apartment dwellings. Bloomberg did it in New York so maybe we can do something similar. Offer a rebate or freeze on city rates (it’s a city tax there) for 10 years (say) – this encourages developers to get in and build the things, rather than sit on the land and wait. 4-6 storey apartment buildings are the norm in Brooklyn and we need that happening here in Auckland, near the CBD and around transport hubs. The New North Road ridgeline should be full of construction by now, not the piecemeal development happening at present.
    [continued below]

    1. [continued]
      All we’re getting so far is various standalone single developments pepper potted all over the place. If the whole block/neighbourhood is 4-6 level apartment/townhouse living you’ll see people adjust very quickly. But it’s not happening because people squeal like stuck pigs about the ‘character’ and ‘history’ of their suburb. Sorry, but it’s 2016 and if you live on Dominion Road, Sandringham Road, or similar then the city needs your space – and you’ll be well compensated for it, I’m sure. (I’m not talking forced sales, but the market will incentivise owners – if you thought Asian buyers were paying over the odds wait until apartment developers come into the market).
      And the other factor in all of this *is* the cost of building – both labour and building products. Building in Auckland is very expensive and that requires investors/developers to take a big punt on doing anything. I’m not suggesting they need any guaranteed returns, but there does need to be some stability brought to bear on labour and building product pricing. If not then don’t complain that there is no affordable housing in Auckland.

    2. I’m sorry but you’ve just identified correlation not causation? You can’t simply say that small apartments are equivalent to ugly buildings because some ugly buildings were built in Auckland that housed small apartments!

      My understanding is that maximum occupancy rules are difficult to apply and enforce, but correct me if I am wrong.

  10. I can’t and don’t want children, I don’t want pets, nor a car or do I want a large space to clean. The audacity people have saying I can’t enter a voluntary agreement of free will for the home choice I want is a national disgrace.

    1. It’s a National Party disgrace that New Zealanders incomes are so low that many are unable to afford a proper house in the suburbs. Imagine a working class family jammed into a 30 m2 apartment. Classy, but it is their “choice”. I believe in society’s right, through Government and Council, to set and enforce minimum standards.

      1. It’s absurd to attribute low incomes solely to the National Party.

        Q: How do minimum floor area requirements prevent a working class family from jamming into a 30 sqm apartment?
        A: They don’t.

        Q: How do minimum floor area requirements enable a working class family to buy a house?
        A: They don’t.

        Q. How do small households with low-incomes fare in the presence of minimum floor area requirements?
        A. Badly.

      2. Len Brown is Labour. New Zealand can afford housing, just not New Zealanders living under the governance of Len Brown.

      3. Neither I nor the rest of my family WANT a “proper house in the suburb”. We want a cheap inner-city apartment. Where does this arrogance come from in deciding what it is “proper” for other people to live in?

  11. What we have to remember is that rules and regulations aren’t drawn up by someone sitting at a desk and talking to his or her computer – we used to call it interviewing your typewriter. They came about through a situation that existed at the time, or from public pressure. The minimum size requirements on new apartments came after considerable public pressure at the time, which spilled over into an election issue. Remember at the time Auckland did not have the housing shortage that it has now, and even those with the most comprehensive crystal balls did not predicted it, or if they did no one believed them. It was also a time when there was a mass exodus of tradies to Australia simply because there was no work for them in Auckland.

  12. You appear to have missed out land costs in this analysis of Auckland’s property market. This, rather large, omission leads to setting greenfield suburbia and urban apartments as if they were a dichotomy, in reality they are both complimentary growth avenues in any normal city.

    The cost of land in Auckland is too high. The metro land availability in Auckland is too small. This means that any investment in developing any property in Auckland is retarded – this applies to both apartments and suburbia. Construction investors in Australasia will find better profits to be made in any of the other growing cities.

    If we were to expand the metro limit we would achieve many things. Increase the number of apartments and houses being built. Increase wage and job growth. Have living costs fall or at least stop soaring.

  13. I am typing this sitting in a 26 m2 condo in central Manila. It meets all my needs and in fact I had a family of 4 staying with me last week. I don’t have a problem with small spaces, they meet the basic needs and this one is very convenient. We have a swimming pool and there is a huge shopping mall across the road. There are many tower blocks like this one and they are sold as ‘luxury’ apartments.

  14. My view is that more high-rise apartments could avoid the need to intensify heritage areas.

    I.e. if we focused on places like the GNR ridge, New Lynn and other metropolitan centres, a half-dozen 20 storey blocks in each place and the problem’s solved without worrying the poor dears of Mt Eden about those horrible ruffians moving into the terraces up the road

  15. And a question for those saying we don’t need minimum apartment sizes: why do we need a minimum wage then? Surely we should just let the market decide and if people want to voluntarily enter into employment for $4 an hour who are we to say they can’t?

    1. Your analogy is off EC, for the simple reason that people have to pay for their housing (purchase and upkeep) and all else being equal a bigger house costs more than a small one.

      Here is a better analogy, shall we introduce minimum car sizes? Ban all hatchbacks and compacts and only let people buy a full size sedan with a 2.0l engine? After all who would want a small car right, because a big car is always better, why would we force the poor into shoebox hatchbacks. We should definitely have minimum car sizes.

      1. And minimum capability smart phones, please. I know people who still use a candy bar phone. How naff they don’t respond appropriately to my pxts.

    2. Just because something has the concept of minimum anything doesn’t make another concept with minimums logically equivalent. There is no acceptable answer to your question because the implied statement is nonsensical.

      If we need a minimum wage to prevent exploitation of workers when unemployment exists, then we also need minimum size cats because that must also be good.

      1. Well, in the former case you are setting “let the market decide what an appropriate sized apartment is”
        In the latter case, you are saying “the market cannot be trusted to decide what an appropriate wage is”

        Both distort the free market but you only support one. That’s logically inconsistent. If you want to be a libertarian, that’s fine by me, just be consistently so.

        1. The difference is the clear externality of starving children that has always occured without a minimum wage.

          What externality does allowing small apartments create?

          I would be careful with the slippery slope arguments like that too. They are very unpopular here

  16. I would scrap minimum wage, simple economics shows a subsidy is better than a price control as controls create a shortages in this case jobs for young and underprivileged people since it’s too risky to invest in someone who may have low MRP.

    Instead it would be better to have a universal income system, negative income tax or higher transfer payments.

    1. If a business cannot afford to pay a decent wage and make a profit, then their business is not sustainable. A subsidy is paid by all tax payers to prop up an unsustainable ” private” business. The minimum wage needs to be at least the living wage to help the 200,000 New Zealand children currently living in poverty.

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