Murray Sherwin: Making housing more affordable

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Photo / Paul Estcourt
Photo / Paul Estcourt

So you are about to buy a house? You will have a head full of hopes, dreams and ambitions for your new home - and some limitations. House-buying for most is about choices, compromises and trade-offs.

Top of the list is your budget - what you can afford to pay and your overall debt servicing capacity. Within that budget you will be thinking about how many bedrooms and bathrooms you need, how much living space, storage and parking space, which neighbourhoods you would prefer, how close to work, schools, shops, family and friends, parks you want to be.

And what about transport? Will you walk, cycle, drive, or use public transport?

It is a complex mix. The better off you are, the broader the choices available and the less pressing the compromises faced.

For those on lower incomes, the choices become much harder and the compromises are more challenging - less space, less attractive neighbourhoods, longer commutes, poorer quality houses.

That is why the Productivity Commission has been asking how can New Zealanders get better housing at prices they can afford?

One influence on housing affordability and housing choice is local planning policies.

This is particularly significant in Auckland as our largest and fastest growing city.

The Auckland Council reports a housing shortfall now of 10,000 homes and expects that a further 11,000 new homes will be needed each year over the next 30 years.

The Auckland spatial plan is an outline of how the city intends to provide for that growth. The plan adopts a "compact urban form" concept that aims to limit suburban "sprawl" and encourage greater density of housing within existing city boundaries.

The plan proposes that 75 per cent of the expected population growth will be accommodated through a mix of high and medium-rise housing, and lower-rise terrace and townhouse developments.

But will this offer enough homes that are affordable and attractive relative to expanded greenfield developments on the city outskirts?

The answer depends on a number of important considerations. On the plus side for greenfield development:

* Conventional low-rise homes on greenfield sites are generally less expensive to build than housing in higher density infill, multi-storey or brownfields developments.

* The land is cheaper - a real issue in Auckland where section prices account for almost 60 per cent of the cost of a new house on average (compared with 40 per cent across the rest of New Zealand).

But the cost arguments cut both ways. Transport costs may be higher and access to public transport more limited in suburban greenfields settings. The significance of this will, however, depend on where the buyer is working. Only around 12 per cent of Auckland's workforce works in the CBD. The other 88 per cent is distributed quite widely across the city.

And the cost of connecting to critical infrastructure services - water supply, sewage collection, stormwater drainage - may be expensive on greenfields developments, with that cost typically reflected in the cost of the section through council development levies.

Whether "brownfield" development within existing urban limits provides for cheaper access to existing infrastructure depends critically on the state and capacity of that existing urban infrastructure. If new infrastructure is needed to accommodate increased housing density, that can be very expensive.

An argument for intensifying land use within city boundaries is that it avoids the need for new infrastructure investment although, obviously, this will not be the case where the existing infrastructure is already at or near capacity.

The Productivity Commission's draft findings, now out for public consultation, suggest that meeting the housing needs and aspirations of our people may require more greenfields development around our rapidly growing urban centres.

Section prices have escalated rapidly in these centres, putting serious pressure on the ability to provide starter homes to many New Zealanders looking for their first step on the housing ladder.

Does the commission oppose the compact urban form concept? No. Intensification is an essential part of the solution to housing our growing population.

However, the compact city will flow only when local authorities and property developers can create ways to make living in a denser city more attractive and affordable. It should be one of the available choices for homebuyers, but not the only choice.

Is the commission on the right track? Let us know what you think. Our draft report, released on December 16, can be found at productivity.govt.nz. Submissions are invited by February 11. The final report will be provided to the Government by March 16.

Murray Sherwin is chair of the New Zealand Productivity Commission.

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