Every weekend we dig into the archives. This post was originally published in December 2011.

The good old ‘compact city’ versus ‘urban sprawl’ debate has been reignited – with a Productivity Commission report on Housing Affordability pointing the finger at land-use regulation as a major cause for reduced housing affordability over the past decade: particularly in Auckland. The full report thinks about the facts in quite a bit of detail, assessing interesting things like the relationship between the number of properties/sections sold with the price of each section. It also spends a few pages looking at urban planning regulations generally, although doesn’t go into enough detail on this matter in my opinion.

The report’s summary version briefly discusses the relationship between planning regulations and housing affordability:I think it’s obvious and logical that reducing the supply of land available for urban development will drive up the cost of land where such development can take place. That’s about the most fundamental rule of economics: increase something’s scarcity and its price will go up. You can see this when comparing the number of sections & dwellings sold in Auckland over the past 20 years with the price of them. There’s a ‘de-coupling’ of price with the number sold, which suggests that it’s scarcity of supply that is driving up prices, but for some reason those high prices aren’t then stimulating more supply: Looking at the data a bit closer, we can also see that most of the “new builds” constructed in recent times are at the very top end of the market – something quite different to what was the case 30 or so years ago: The report makes the (correct in my opinion) conclusion on this particular matter that, because land has become so expensive, developers need to build huge places in order to get a return on that land. This is pretty obvious, as you simply don’t make money by putting a $150,000 house on a $400,000 piece of land.

So, to cut things short, I think the report is correct in saying that a scarcity of land (created by planning tools such as the Metropolitan Urban Limits) has driven up land prices, which has generally meant that only expensive new housing has been built, and has also meant that nowhere near enough housing has been built. However, where I differ is in the proposed remedy. The report seems to think that the solution is to allow a lot more urban sprawl (even more than what the Auckland Plan proposes, which is A LOT).

There are many arguments against allowing too much sprawl. One increasingly valid argument is that sprawl is actually not what the market wants – in many US cities the outer suburbs are being abandoned as demographic change and rising fuel prices encourage inner-city living. Along with environmental arguments against sprawl, perhaps the most compelling is simply that of efficiency and infrastructure cost. One of the background papers supporting the Auckland Plan noted the following:The cost of providing urban sprawl with infrastructure is not limited to roads, pipes and parks – but also things like building new schools and hospitals and adding to the operating costs of many services that have to cover a wider area than before. It is not exaggerating things to say that many cities in the USA (Detroit, Buffalo and Cleveland come to mind) are bankrupting themselves because over the past 30-40 years they have grown hugely in physical size, but not in populations, and can no longer support such an inefficient urban form.

So there are many compelling arguments against urban sprawl. But at the same time, if housing is becoming impossibly unaffordable in Auckland we can’t just do nothing about that either. Especially if it’s a lack of housing supply which has played such a key role in the affordability crisis. Here’s where the commission’s position annoys me somewhat – did they even bother to read the Draft Auckland Plan? Do they realise that it provides 100,000 new units on the urban periphery over the next 30 years (around as many households as there were in all of Manukau City in 2006)? Do they realise that the Plan will lead to significant intensification through upzoning? While they seem to understand the difficulty in getting consents for ‘brownfield’ development (probably one of the biggest problems in making intensification happen), they don’t seem to realise that solving this problem might mean that we don’t need to build as much sprawl as you might think. Planning somehow gets the blame once again for focusing too much on preventing sprawl when in actual fact – as I have explained so many times before – around 95% of our planning rules actively promote sprawl and prohibit anything else.

But perhaps the most fundamental question we may wish to ask ourselves is this: “where do we want our affordable housing to be located?” If we are to improving affordability by allowing a lot more urban sprawl, then we will end up pushing the city’s poor to the periphery, trapping them in a cycle of spending more and more of their income on transport, and as petrol becomes more expensive it seems likely they’ll end up worse than before. Or should we be looking to a balanced approach that focuses much more on intensification – so we can provide affordable housing in parts of the city where people actually want to live? Where are the recommendations that development bonuses be given to developers who provide a number of affordable housing units? Where are the recommendations that District Plan rules be updated so they’re consistent with regional planning documents and actually make intensification happen?

The fact that we don’t see these recommendations (too much) makes me pretty sceptical of the whole exercise. There are some good things in the report, highlighting that we do need to boost supply and highlighting to some extent what the flaws of our planning system are when it comes to actually making stuff happen. But the huge focus on more sprawl is an overly simplistic answer to a pretty complex question – and is an answer with unintended consequences that I think far outweigh its supposed benefits.

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20 comments

  1. Interesting seeing this article again so many years later.

    While we are still a long way off having a good urban planning framework for Auckland, the Unitary Plan is a step in the right direction. The significant uptick in intensification we’ve seen since 2011 goes a long way to proving that a sprawl approach is not what potential homebuyers or renters want.

    For me, the (then-new) Productivity Commission lost credibility entirely by the approach it took in this 2011/2012 report. Some of the data/evidence they quoted was manipulated (easy to establish when you looked at the original reports they referenced) to ensure it supported their pro-sprawl preference and avoid highlighting other issues that drive development behaviours. Frankly I’m amazed the Commission still exists – great idea in theory, just very questionable in execution.

  2. I still can’t fathom why so many developers and civic authorities in NZ can’t think beyond the square of suburbs of American-style cul-de-sacs of detached housing. What is their malfunction?

    Especially given how the population is increasingly from Asian nations, who (amongst others) definitely generally prefer terraced housing and apartments.

    1. Probably because there’s not a whole heap of trust in apartments from locals given the crap we got served up a couple of decades ago. Those same shoeboxes became the price floor as supply constraints kicked in, meaning that apartments offered relatively poor value until relatively recently. Some developers have thankfully figured out you can build well-finished apartments to a price sensitive market, but I entirely understand Aucklanders being sceptical of buying apartments, even in blocks that have already had remediation done. Body Corp laws could use a substantial tune-up as well.

      1. In smaller centres it’s simply inertia. You have planning codes that favour suburbia because they were written that way decades ago. You have funders that stick to what they know and they only know suburbia, and you have a small industry of one man band builders and small scale developers who are only tooled up to produce single level stand alone timber framed houses.

        This line doesn’t really fit with reality in Auckland though, because a just over half of the consents issued in Auckland last year were for apartments, terraces and other attached dwellings.

        There is a lot of them being built, sold and lived in. So clearly people trust them at least as much as the alternatives, in the right conditions.

        1. “and you have a small industry of one man band builders and small scale developers who are only tooled up to produce single level stand alone timber framed houses.”

          Plenty of those builders are clearly capable of building large multi-story detached houses (like those dreadful McMansions).
          How much more difficult is it for them to build terraced housing, small apartment blocks, shop on ground floor, living space above, etc?

      2. “Probably because there’s not a whole heap of trust in apartments from locals given the crap we got served up a couple of decades ago”
        Well yeah.
        But most of the detached housing from 1990-2010 in NZ is just as rubbish. It wasn’t just the apartments that were mickey-mouse and leaky, a friend of mine’s parents bought a brand new house after she and her siblings had left home around the year 2000 and after three years the ceiling in some rooms had big black mildew patches (and both her parents started suffering from health problems).

        But I suppose it all comes down to perceptions.

    2. Simple. It’s easier to make money in that model. Easier to get consents; easier to construct; easier to sell (traditionally); easier to chunk down into multiple stages which shares risk out.

      I have no problem with making a profit; but if that is the sole determinant of social and environmental outcomes you can quickly see why we have failed to change the course of housing delivery.

      1. “Easier to get consents; easier to construct; easier to sell (traditionally); easier to chunk down into multiple stages which shares risk out.”

        But surely that’s correlated with civic authorities not being able to think beyond the square?
        Theoretically; there shouldn’t be any more difficulty in planning, getting the consent of and constructing a 4-story block of apartments and a cul-de-sac street of detached houses (where there were previously only fields). Why there is, is what needs to be rectified.

  3. The Curtin University figures on intensification costs are interesting. They seem to point in a different direction from the Productivity Commission statement that infill / multi-storey / brownfield development costs are higher.

    So, I’d like to see similar figures for Auckland, with a clear description of what is being counted. I’ve seen some recent comments on other posts suggesting that fringe development costs are high because of infrastructure, but I doubt that would explain most of the difference. A lot of the cost difference in the Curtin figures could be due to differences in floor area.

    I am undecided on what the policy settings on the urban development boundary should be, but I don’t buy the argument that there is little demand for urban fringe housing. If that was the case you wouldn’t see the big jump up in values between rural land and subdivided land either side of the urban development boundary.

    I also don’t think drawing examples from the property speculation mania in the States around 2007 has any relevance here. The Auckland situation is the reverse really of what happened there.

    My main concern though is that something big needs to be done. Housing affordability is too big a social problem to ignore – it’s got the prospect of changing the fabric of Auckland and perhaps much of New Zealand society for good.

    Kiwibuild seems to have sunk slowly beneath the waves. So why not charge up the Kainga Ora (Housing NZ) style developments like Simon Wilson talked about in this morning’s Herald, if there is much more scope to do them.

    Reducing the barriers to intensification and factors driving the costs of all development will also help. But if we’re relying on those changes, they need to happen soon and be truly effective.

    1. Have you read any of the submissions by the NZ Centre for Sustainable Cities? They have great links to useful resources. I linked to three of them in this post: https://www.greaterauckland.org.nz/2019/07/04/good-density/

      Some of the barriers to intensification are things like the recent decision to use ratepayers’ money to continue to accommodate caryards on the key transport corridors where the intensification/placemaking/modeshift should be happening. This is ongoing corporate welfare that undermines the compact city strategy: https://i.stuff.co.nz/auckland/118675768/aucklands-great-north-rd-to-get-revamp-to-stop-car-transporters-parking-illegally?cid=app-iPhone&fbclid=IwAR22oKaI1Lz2dYqxGro3V4yMIHERDDiQ0qkByeFpzeB4a5PAZ99MozBj5vk

      In this post I demonstrated what should have been happening instead, which would have resulted in a change in practices and a gradual decline in the prevalence of those businesses, with mixed amenity replacing them:

      https://www.greaterauckland.org.nz/2019/04/30/great-north-boulevard/

      1. I am lukewarm about the idea of driving everything but white collar businesses out of central areas. Those yards employ a lot of people and tend to serve local areas and businesses. Surely the question is how to better design the street so that local businesses can operate without road user safety being compromised, rather than just drive everyone that isn’t a lawyer or architect out of the city centre.

        1. Buttwizard, didn’t you reconsider that view after the post on the subject?

          “Those yards employ a lot of people” isn’t true, compared to the mixed use development that could replace them. Car yards are very space hungry, and provide very few jobs. Each car yard could house many businesses on the ground floor and have several levels of apartments above. They don’t “tend to serve local areas and businesses”, they are simply the corporate automotive world’s retail outlet, subsidised by yours truly through:

          – being allowed to operate unsafely, now, meaning we’re not seeing the modeshift to sustainable modes that we should be seeing, and
          – soon, through being given more very expensive, highly contested road corridor space to try to reduce the danger.

          The chance AT will develop a safe scheme for car transporters to operate safely in a street that is a “place” – as per AT’s Sustainability Framework and designed “for activities that may have traditionally occurred in the suburban backyard” – as per Council strategy, where people mix and mingle, and children cycle safely…

          … is miniscule, Buttwizard.

      2. How is ratepayers money being used to accommodate caryards?

        Why open-air car yards exist in some places yet not in other places is correlated with land value. Those car yards inherently require some space and can’t survive on high-valued land.
        What you find in built-up areas is that automobiles are sold in showrooms and that those showrooms are on the bottom floor of a multi-story building which also hosts offices (or sometimes accommodation) above it.

        Of course; the trade in second-hand automobiles (which is most of the automobiles in NZ) is usually not lucrative enough for the dealer to rent a showroom unless it’s in something like luxury vehicles or sports cars. So that trade is more pushed to the outer fringes where property is cheaper
        Sometimes they base themselves in purpose-built car years but often they’re also based within industrial warehouses. When I lived in London 15 years ago; I bought a SEAT Ibiza, one previous owner of 19 months, from this place:
        https://www.facebook.com/pages/category/Car-Dealership/Rm-Motors-120674831795136/
        Now I invite you to look at this place on google maps (and the car rental yard next to it) to get an idea of how these businesses can still exist in built-up areas.

      3. If there isn’t scope to do a lot more of the Housing NZ style developments, then I think if you’re going to move the dial on the housing market through intensification, you need to take on the bigger barriers to intensification. Like maybe the building height restrictions around the city fringe and reform of the RMA and planning processes.

        The people on the other side of those arguments also have reasonable points to make, but development needs to get opened up somehow. The lesson of the land-banking discussion, is that if you have enough different development opportunities so that developers are competing against each other then prices will get driven down. Else you just get local mini-monopolies and people sitting on land until the sale price is high.

        Those Sustainable Cities links are really about the discussion we had last week. I agree that the shadow carbon price used in cost-benefit analysis should get raised, probably quite a bit.

  4. I live in Grey Lynn and can safely say I’ve never wandered over to one of the Car Yards to pick up a car like I would to get a loaf of bread from the Dairy. Hardly serving the community.

    Nobody suggest moving Blue Collar work out of the City, but reality is that as Cities grow these sort of businesses that as Heidi says, employ low numbers for the space they take up end up moving further out….but if you can show me the actual benefits for the huge number of them appearing in that location over them being in less Central areas, other than you trying to appear like someone fighting the good fight for the working class (selling McLarens is hardly working class!!!) then go for it.

  5. Why only view on supply? What is the demand ? Can someone work out the demand number in the past 15 years, year by year vs NZ natural growth. Merely look at supply isn’t fair!

  6. The only way we will get more affordable housing is for the government to build much more of it. Whether its ‘urban sprawl’ or intensification the market will never be able to deliver affordable housing in Auckland. The cost of land and building prohibits it, and neither is likely to come down significantly

    1. I’m all for more state housing to help alleviate the current crisis.
      To be honest; I think the government should look at re-developing and intensifying the existing State housing areas.

      On a tangent: I saw a week or so ago people completely ruling-out any rail to the airport from extending the Onhenuga line via Mangere because of some road intersection. This was under the presumption that such a line would be absolutely obliged to use the motorway corridor because it makes it more affordable as opposed to having to compulsory acquire private property.
      But isn’t Mangere mostly state housing? Which means that most of the land (and the housing sitting on it) is ultimately owned by the government.
      I know that a lot of state housing across NZ was sold off in the late 1990s, but how much of the housing in Mangere was sold?
      But anyhow; I was thinking that it might not be so much more expensive & difficult (if at all) to route any rail to Mangere away from the motorway corridor and to somewhere that’s a better fit for providing rail transport to the area.

      But back on topic: Unless I’m mistaken about how much of Mangere and other state housing areas that remains owned by the government; the entire area could be redeveloped. Not merely knocking the old state houses down, but even completely re-designing the street layout.

  7. Urban growth can be planned well and keep construction costs down but requires a coherent long term construction plan. Infill construction projects can help densify cities but carries extra build costs and extra public transport costs (tunnels, etc)

    A city such as Wellington is lucky that it is constraint by geography and has all of it’s growth along existing public transport lines. It isn’t perfect but works realtively well. If Auckland orientated to a well planned transport spine (AKA regional rail, Drury south, new port) there would be cost efficienies and staging growth would be simple.

    Imagine if the next stage of housing only required plugging in another train station to a functioning regional rail line? This is the UK model of transport orientated developments and is rumoured to be cost neutral because the highly valued land is sold at a premium once the station is complete. It appears that the new housing authority is heading that way (although I could be wrong)

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