Auckland land shortage 'critical', study finds

By Brian Fallow

In recent years, demand for housing in Greater Auckland has been outstripping supply.

That is apparent in the steep rise in house prices, and in Census data showing the population grew faster than the number of dwellings between 2001 and 2006.

A study by economic researcher Motu says the biggest single factor hobbling the building sector's ability to meet demand is land availability.

Because most families prefer to live in standalone houses it is likely that prices and costs will continue to rise and population growth will eventually be curtailed, Motu says, possibly below the 2 million level local authorities are projecting by 2050.

The councils can either accept a future of high prices and slower growth or move to contain development costs by expanding or removing the metropolitan urban limits - the boundary under the regional growth strategy within which residential, business and other "urban activities" are to occur.

The alternative to expansion is intensification or higher density housing, which would be suitable if enough people preferred - or settled for - apartment living.

Intensification is being stifled by zoning restrictions, community opposition, unwieldy and slow consent processes, lack of available sites and the costs of infrastructure.

The Motu work, led by Arthur Grimes, is based on statistical analysis and interviews with developers, architects and local body officials.

The researchers found that more than three-quarters of the rise in house prices can be explained by higher land costs.

Construction costs are much less of a factor. Between 2000 and 2005 construction costs rose 12 per cent. Over the same period prices for vacant sections rose by 139 per cent in Auckland City, 119 per cent in Waitakere and 99 per cent in Franklin.

They found the metropolitan urban limit boundary has been acting as a constraint. Greenfields land prices within the metropolitan urban limit are a lot higher than outside it.

And building has been occurring towards the metropolitan urban limit line, and in inner-city apartments.

"There hasn't been a lot of infill elsewhere and especially not around the transport nodes where they were looking to get it,"Grimes said.

The evidence from the interviews suggests several reasons intensification has been limited.

One is fragmented land ownership in areas already built-up.

Unlike Britain, Australia or the United States there is no provision for the compulsory acquisition of land in cases where one or two hold-outs prevent the accumulation of a site suitable for medium density development.

Another obstacle is the not-in-my-backyard reaction - community opposition fuelled by projects of indifferent quality elsewhere. Officials tended to see that as the single biggest constraint on intensification.

Developers said they would do just about anything to avoid having a project notified under the Resource Management Act, because of the costly delays it involved. That encouraged the lowest common denominator design and discouraged innovation.

Officials accused developers of being interested only in the lowest possible cost, while others asked whether New Zealand architects really knew how to design such projects, so different from the quarter-acre tradition.

The study's modelling looked at how supply (measured by building consents) had responded to demand (measured by increases in house prices relative to land and construction costs).

"At the region-wide level supply, responsiveness has increased since 2000. However, this result appears to have been driven by the reaction of the Auckland apartment market. Once we exclude this effect, responsiveness to market forces appears to have fallen since 2000."

It also found marked differences in responsiveness between different council areas. Waitakere, Manukau and Rodney showed a relatively high supply response when prices rose relative to costs.

But North Shore and Auckland City were not statistically different from zero. That does not mean that no additional housing is built, only that supply responds slowly and weakly to market signals about the demand.

When Auckland City's data were split between apartments and houses, they found apartment building was responsive to prices and costs, but not standalone houses.

When developers were asked about the service standards of Auckland councils there was a strong consensus that they were all considerably more problematic to deal with than councils in smaller towns and cities.

Manukau tended to be thought of as the most helpful, North Shore as the least helpful.

Around 80 per cent of developers saw the infrastructure and development contributions councils impose as a major constraint.

They objected to having to pay for all of an infrastructure upgrade when it also benefited existing residents.

And many said councils should be more willing to fund infrastructure investments through loans, which could be repaid through a rates surcharge over time, instead of the cost being front-loaded.

They also pointed to a lack of co-ordination between urban development and transport planning.

A stretch of the Northern Motorway, from Albany to Silverdale, runs through rural land which is outside the metropolitan urban limit and cannot be developed. Some of the proposed western ring route will border on the metropolitan urban limit so that it serves an urban area to its east but a rural area to its west.

"It is very difficult to build in density in places where people don't want it, where the city already exists," Grimes said. "So they need to be looking at opening up development along the major transport corridors."

He cited the Northern Motorway where it runs through farmland, the western rail line to Swanson and the route to Hamilton.

"The bulk of consumer demand is still for standalone housing but there is little zoned land available for sustained development of such dwellings," the Motu report says.

"The result of this land shortage will continue to be inflation of land values until prices meet major consumer resistance. Other cities may attract some would-be Aucklanders.

"A more likely scenario is that people priced out of the Auckland market and economy will migrate to cities in Australia that are addressing planning and affordable housing concerns."

Supply v demand

As MPs run an inquiry into housing affordability, a report by economic researcher Motu points the finger at land availability in general, and the planners' metropolitan urban limits in particular, as the main reason housing supply in Auckland has struggled to keep up with demand.

* Between 2001 and 2006 Greater Auckland's population grew 11.6 per cent but the number of dwellings by 10.9 per cent.

* Developers say land costs and regulatory costs (especially delays) are their biggest headaches, materials and labour costs much less so.

* In 2005 in Auckland City the median vacant section price was 91 per cent of the median house price.

* In six other local authorities it was between 56 per cent and 77 per cent.

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