Why Auckland Council should tell the Productivity Commission to stick it…

Last week, the government-appointed Productivity Commission released it’s report on housing affordability. To cut a very long report short, it makes two main recommendations:

1. Open up more land for development via removal of urban limits in Auckland

2. De-regulate the building industry

Two words – leaky homes – make a mockery of that second recommendation (easy, wasn’t it?)…so this blog will focus on #1…

The Commission’s argument for opening up more land is simple. Auckland’s metropolitan urban limit (MUL) naturally limits the land available for development, land becomes scarce and therefore more expensive, and by extension new houses become more expensive. No planner would argue against the notion of land scarcity causing the cost of land to increase – it’s simple economics. Where Auckland’s planners and the Commission differ is on how to respond. The Commission wants more land, the Council wants more efficient use of existing land.

Urban limits are imposed on the predication that they will be accompanied by intensification within the limits, thereby overcoming the increased cost of land by allowing an increase in housing supply. While the Commission used the example of a “$150,000 house on a $300,000 section” as a prospect no developer would undertake, a valid counter-argument is that multi-unit development is increasingly viable as land prices increase. Five $150,000 units on that $300,000 section all of a sudden look very appealing to the developer. The arguments for intensification are well documented – more conducive to public transport, less auto dependence, less loss on productive agricultural land, et cetera…

The problem in Auckland has been that the imposition of the urban limit has not been accompanied by the necessary changes in District Plan rules to allow for the intensification needed to increase the housing supply within urban limits. Most of the planning rules such as building heights and minimum parking requirements work against intensification. Thus, while we’ve limited the land supply with one planning mechanism, we’ve prevented intensification and therefore limited housing supply with another. Plenty of developers want to undertake intensive development, but the rules stop them from doing so. Up-zoning land to allow for more intensive development is necessary to make the urban limit work as intended. Otherwise, urban limits and planning rules essentially cancel each other out, and increased housing prices is the result. Tellingly, you won’t find any recommendations about up-zoning in the Productivity Commission report…

But wait, I hear you say…isn’t that entire argument predicated on the idea that everybody wants to live in high intensity development??? Yes. Which brings me to my next point. The Auckland Plan allows for a huge amount of urban expansion. You won’t find anything about this in the Commission’s report either. You’ll often read in the news media that the Council wants to “cram in” 75% of growth within the urban limit over the next 30 years, and that’s true. What you won’t read is that that still leaves in excess of 100,000 dwellings outside the current urban limit. By comparison, the former Manukau City had a housing stock of 94,000 and North Shore City had 72,000. Assuming 3 persons per dwelling, that’s 300,000 people outside the current urban limit, which in itself is approaching a Christchurch or Wellington-size population…and you thought Auckland Council was anti-sprawl…

Another thing you won’t find in the Commission’s report is any reference to land bankers. The Commission conveniently ignores that there’s actually huge swathes of greenfield land remaining within the current urban limits – room for another 30,000 dwellings. Why haven’t these areas been developed? Because land owners are sitting on the land, worsening the land shortage, watching the value of their land increase before they finally drip-feed it onto the market. They effectively control the supply of land much more than urban limits do, and removing urban limits will do nothing to stop it. All it will achieve is give them MORE land to sit on and drip-feed at the same rate as they always have. As long as land banking is allowed, land scarcity will always be a problem…

The Productivity Commission’s report ignores all of these things – no recommendations for up-zoning, no mention of the significant allowances for sprawl in the Auckland Plan, no mention of land bankers controlling the land supply. Even more tellingly, the report says little or nothing about the housing bubble fuelled by foreign capital, nothing about speculators or a capital gains tax, very little about the high costs and lack of competition in the building industry, nothing about developer bonuses for affordable developments…nothing. The simplicity of the Commission’s argument – that relaxing urban limits will magically cure our housing affordability problem – says to me that this is simply a land bankers’ lobby in disguise…

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About Liam W

Urbanist, transport nerd, general curmudgeon.

Posted on December 19, 2011, in Uncategorized. Bookmark the permalink. Leave a comment.

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