Auckland's rising house prices have been grabbing headlines for several years. There are many theories about the reasons for continued escalating prices. Recent attention has been on whether Auckland Council is constraining land supply by having growth boundaries. Last year it was overseas investors that were being blamed. My own view is that there is no single cause or solution.
In this article, I want to address housing supply. There is no doubt not enough homes are being built to keep up with population growth. Around 20,000 to 30,000 new dwellings are needed to meet the current shortage and another 13,000 a year to keep pace with Auckland's growth. Last calendar year, the council consented just over 9000 dwellings, which is the most since 2005, but still not enough. We estimate that just over 6000 homes were built over the same time.
So why are the houses that we so desperately need not being built? In my view, the supply of land is not the main problem. Rather, the rate of building new homes is not keeping pace with the rate of consenting.
Infrastructure enabled land is not being converted into new homes.
In 2013, Auckland Council entered into a Housing Accord with the Government which involved legislation to create special housing areas (SHAs). These areas benefit from a fast track consenting process and the more permissive planning rules of our Proposed Unitary Plan - rather than the existing district plans that we inherited from the legacy councils.
Under this legislation we have worked with the Government to enable SHAs with a total potential yield of nearly 65,000 dwellings - enough to meet the shortfall and provide for at least three years of future growth. Across Auckland's 154 SHAs, around 10 per cent of this yield (just over 6000 dwellings) has been fully consented. Another 3 per cent is going through council consenting processes. The remaining 87 per cent is up to developers to progress.
Some of these developers are having preliminary discussions with the council, some have been granted the required zoning, while others have made little progress. We are working with a small number of developers who were granted SHA status very recently and have limited time to get through the consenting process before the legislation expires.
So why is land supply not turning into housing supply? I am deeply concerned about whether our construction industry has the capacity to build the houses that we need fast enough.
The 2012 Productivity Commission report into Housing Affordability found that our building industry is dominated by small players who lack economies of scale, are fragmented and grapple with ongoing skills shortages. I recently spoke to a building contractor friend of mine who told me that he simply cannot employ enough tradespeople or labourers. We should also consider whether developers are drip-feeding new supply to the market in an effort to keep values high.
Next month the consortia which successfully bid to build the new Puhoi to Wellsford motorway will be announced. That'll pave the way for a significant new player to enter the market - a player large enough to not only build motorways, but schools, hospitals and many homes. That may be just the catalyst domestic developers need to up their game and build at the scale Auckland so badly needs.
Our residents' access to suitable accommodation is too important to leave to the boom-bust nature of the construction industry. Residential building consents peaked in Auckland in 2004 at nearly 13,000 before falling to 3200 four years later.
I can't see how the industry can sustain itself and plan for growth when faced with that much volatility. We need a stable pipeline of construction that the industry can rely on year in and year out.
I don't have all the answers, but a government housing building programme may have to form part of the solution. In the 1960s and 1970s when we had a building boom, there was government assistance for first-home buyers to build new houses - this helped ensure that supply responded to increasing demand.
I would also like to see a focus on industry training to help grow the supply of skilled workers. This is critical because we cannot afford to sacrifice quality for quantity; we are currently failing around a third of our residential building inspections - a figure which is very worrying to me.