Advocates of Auckland Council’s compact model for growth say three-storey apartments are most effective way to restore affordability and no suburb is exempt.

The Herald's Home Truths series examines the causes of our growing housing unaffordability crisis and explores possible solutions. Follow the full series here.

Remuera home owners may not like it, says Peter Jeffries, but three-storey apartments in the suburbs offer the last real chance at housing affordability in Auckland.

The chief executive of CORT community housing is a vocal supporter of the compact city model in Auckland Council's Unitary Plan, a new planning rulebook that will define the shape of Auckland's future for decades to come.

The plan decides what can be built and where - and it has sparked a generational and politically divisive debate about housing density and height in traditional suburbs.


So far there is support for intensification in town centres, along main arterial routes and close to transport hubs, but the idea of low-rise apartments with no density controls in the suburbs has prompted a public backlash.

The council did itself no favours with a proposal to rezone about 30,000 properties in a late change to its submission on the proposed Unitary Plan without informing homeowners.

The proposal - which would have had to come back to the council from an independent hearings panel in July for a final decision - was rejected by a majority of councillors, after a long, often emotional debate in which young supporters of change accused their older opponents of selfishly protecting their own interests.

Jeffries argues that the problem will not go away. Auckland is going to grow by 75 per cent over the next 30 years, he says, and suburbs like Remuera have to share the burden of growth.

He estimates three-storey apartments can be built relatively cheaply for $7500 to $8000sq m or $375,000 for a one-bedroom, and $490,000 for a 65sq m two-bedroom apartment.

This is because low-rise apartments are cheaper than high-rise apartments, which have higher construction costs for facilities like lifts.

Jeffries says the real bite of the Auckland housing crisis is not the effect on the 44 per cent of property owners but the 56 per cent of renters.

As soon as you throttle supply, he says, you push up house prices and that pushes up rents for people not on the property ladder, "and now less likely to get on the property ladder".

Architect David Gibbs is another advocate of the compact city model, but admits the council has done a poor job of selling the concept, benefits and explaining the higher costs of sprawl.

"It is the only real choice in terms of addressing affordability," says Gibbs.

Greenfield land on the edge of the city can be affordable, he says, but providing infrastructure can be up to eight times the cost of inner-city land.

Gibbs says a really great Auckland could be built on 300sq m detached and 170-180sq m terraced house sites. There need not be a fixation on apartments, which will eventually account for about 6 per cent of housing, he says.

"I see us following the model in Sydney and Melbourne of terraced houses and small-lot houses being the heavy lifters of density."

Gibbs says inner-city suburbs will be expensive but "really good" suburbs like Northcote, Glenfield, Beach Haven, Birkdale, Mangere, Onehunga and One Tree Hill will be affordable.

The pressure to find affordable solutions has increased as the apartment market - skewed by new more expensive developments - has taken off, after years of stagnant price growth. Trade Me reported last September that average asking prices had climbed by 49 per cent in 12 months and this month QV spokeswoman Andrea Rush said the apartment market had risen by more than 20 per cent in the 12 months to March.

It was increasingly hard, she said, to find an apartment for under $550,000, particularly one that did not have leaky building issues.

Apartment buyers also had to factor in body corporate costs and required higher deposits by the banks making it harder for first- home buyers, she said.

Other critics have pointed the finger at council red tape. A research paper by Arthur Grimes and Ian Mitchell - controversially seized on by Housing Minister Nick Smith last year - calculated that regulation and resource consent added between $105,000 and $180,000 to the cost of an apartment unit, compared to between $32,500 and $60,000 to the cost of a house.

In their study, which was based on interviews with property developers, Grimes and Mitchell estimated building height limits added an additional $18,000 to $32,000 to the development costs of an apartment unit, the requirement for a balcony an extra $40,000 to $70,000, floor-to-ceiling height controls an additional $21,000 to $36,000 and $6000 to $15,000 a unit to conform to the Auckland Council's desired mix of apartments.

The paper criticised Auckland's apartment requirements and resource consent process. It argued that the increase in the floor-to-ceiling height requirement - from 2.4m to 2.55m or 2.7m - "makes it difficult to develop affordable apartments" although it did not impact on developments in the mid- to upper-price level.

Another big initiative designed to increase the number of houses and trim prices is the housing accord between Auckland Council and the Government, signed in 2013, with a target of 39,000 new sections and houses consented over three years.

Across the region, 27,708 of the targeted 39,000 consents had been achieved at the end of March.

But more than two years into the accord, only about 700 houses have been completed under its "fast-track" rules.

Mayor Len Brown says obviously more need to be built, but the latest tranche of special housing areas brings the total to 154 with potential for 56,000 new homes.

Appetites strong for chic apartment living

Among the fashion boutiques, cafes and restaurants on Ponsonby Rd, a new storefront selling apartments off the plans gives an indication of the state of the central city market.

The apartments are mostly city fringe, architecturally designed with artist impressions of modern furniture, fittings and open views.

Prices start at $469,000 for a two-bedroom apartment at Alto Sugartree in Union St to $1.375 million for a similar size at Western Park on Hopetoun St, just off Ponsonby Rd.

Craig Watkins, director of Apartmint, says buyers are a mix of older people looking to downsize their villa, investors and young people wanting the hustle and bustle of city life.

A few are first-home buyers.

Mr Watkins says typical building costs are about $10,000/sq m or $500,000 for a studio/one-bedroom apartment and about $800,000 for a two-bedroom apartment. A carpark costs a further $50,000.

Demand for high-quality, city fringe apartments and townhouses is strong, says Mr Watkins, whose sales staff have sold 12 of 16 townhouses at a new development in Kingsland in six weeks.

The two-bedroom townhouses, 150m from the railway station, have each sold for between $800,000 and $1,050,000.

Mr Watkins, whose job it is to find sites and work with developers, says there is no shortage of prime corner sites that capture light and sun.

The 30-year veteran in the property market also has an interest in providing affordable housing, saying Apartmint is close to releasing a 52-apartment development in Morningside where prices start at $437,000 for a 46sq m studio, $500,000 for a one-bedroom apartment and $730,000 for three bedrooms.

$500,000 - building costs for a studio/one-bedroom apartment on the city fringe

$800,000 - building costs for a two-bedroom apartment on the city fringe

$50,000 - extra for a car parking space