The search for living room

By Steve Hart

Affordability: Auckland needs 10,000 new homes a year to keep up with demand writes Steve Hart

The Addison development, Takanini, 2007, touted as a benchmark for medium-density housing. Photo / Supplied
The Addison development, Takanini, 2007, touted as a benchmark for medium-density housing. Photo / Supplied

Auckland is the only region in New Zealand where home affordability has decreased over the past year.

The latest report from the Massey University Real Estate Analysis Unit shows buying a home in every other region in the country has become easier since August 2011.

Professor Bob Hargreaves, director of Massey's Real Estate Analysis Unit says house prices in Auckland are increasing faster than other regions due to the imbalance of new supply to meet demand from an increasing population. "While interest rates stay low and builders aren't building, house prices will continue to rise in Auckland," he says. In addition, low interest rates are helping first-time buyers enter the housing market, putting upward pressure on prices.

Auckland needs 10,000 new homes every year to keep up with demand. Mayor Len Brown says there is the land available to build 18,500 homes, but finance is a stumbling block.

In Parliament, appeals for cash on behalf of Brown by Labour's Annette King fell on the deaf ears of Minister of Finance Bill English.

"It is a novel suggestion that the Government would provide capital for property development on the fringes of Auckland," said English.

Green Party housing spokesperson Holly Walker says it would be a mistake for the Government to allow more development on Auckland's urban fringe "in its attempt to address the growing housing affordability crisis".

"Housing developments on the urban fringe come with hidden transport and infrastructure costs which can be crippling for families' budgets," says Walker.

"Medium-density, small dwellings centred around existing community amenities with good transport and recreational services is a better model for helping the average first home buyer in Auckland to get a foot on the property ladder."

Housing affordability is based on house prices, interest rates and average incomes. The cost of a median house in New Zealand today is 5.2 times median income, but in Auckland the figure is 6.4 times median income. A ratio above five is considered unaffordable, says English.

"The housing market is not working properly," he says. "Despite demand for low-cost houses, relatively few are being built, in part because of the high cost of land - particularly in Auckland.

"Constrained supply, and high prices for housing, force high levels of household borrowing that is detrimental for households and the economy.

"Less [supply] of unaffordable housing means we have high levels of private sector debt to foreigners. We are ranked along with the heavily indebt European countries when it comes to that measure."

High property prices are also causing a drain on government finances, says English. "Income-related rents are forecast to rise by 30 per cent over the next four years which will cost the Government around $200 million a year," he says.

"Even in a slow economy housing affordability remains a deep-seated complex and serious problem; there are no quick fixes."

The Productivity Commission's housing affordability report says affordable housing is fundamental to the success of communities.

Commission chairman Murray Sherwin says: "Younger people and those on lower incomes currently have much less chance of ever purchasing their own home."

Containment policies such as "smart growth" and Auckland's Metropolitan Urban Limit were found by the commission to have an adverse effect on housing affordability by limiting the availability of land for housing.

"Pressure on land prices needs to be reduced and the commission has recommended that there be an immediate release of new land for residential development in high demand areas such as Auckland," says Sherwin.

"There is no need for our homes to be expensive. The community housing sector has a unique and very valuable role to fill. It can provide below market rents and more security of tenure than is available from private landlords. But the social housing sector will need considerable assistance if it is to scale up to the extent required, and do so within a reasonably short timeframe."

Stephen Selwood, CEO of the New Zealand Council for Infrastructure Development, says Tamaki is a suburb with considerable land that has relatively old, extremely expensive-to-maintain state houses.

"They are sitting on one eighth of an acre and quarter-acre sections," he says. "The land there is significantly under-utilised, and it is a good location - handy to rail and the city.

"We could put three homes in Tamaki where there is one; people living there could be moved into brand new low-cost homes, low-cost not only in their construction but also in heating and maintenance."

Selwood says a redevelopment of Tamaki could see a third of homes being sold, a third used for shared equity housing and the remainder for social housing. "A state home is not a right for life, it should be viewed as more of a helping hand up, not just a permanent helping hand."

- NZ Herald

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