A former Reserve Bank chairman has called for the Government and Auckland Council to enact policies to deliberately "collapse" the city's house prices by at least 40 per cent and intensify building along Tamaki Dr with Gold Coast-style towers.
Arthur Grimes delivered a hard-hitting speech at an Auckland Conversations event, calling for swift action to resolve the housing crisis, and the city's eastern suburbs to have high-rise residential blocks, ready for the next generation of Aucklanders.
The median house price was $1 million, up from an already too high level of $600,000 five years ago, he said.
"I think we should set ourselves a target now of looking for a collapse in house prices of at least 40 per cent in Auckland, OK? And that should be a political approach ... central Government and local government politicians should be out there saying, 'We're trying to have policies in place that will collapse house prices in Auckland by at least 40 per cent', because that will only take them back to a level where they were too high already five years ago," Grimes told the Auckland Conversations forum.
"Realistically we have to do that, right? When I've put this to politicians, they're not too keen on it. How do we then go about trying to achieve it? We need to intensify in Auckland.
"I don't think there's any doubt. It doesn't matter if it's Freemans Bay, Parnell, Remuera, Kohimaramara, Ellerslie. We certainly need to intensify," Grimes said.
"I can't understand why that whole [area] from Orakei to St Heliers is not like the Gold Coast.
"Basically, in my experience of other cities, you would expect anywhere with those sorts of beaches close to Auckland ... would have line-to-line skyscrapers all the way along there and that's the kind of Auckland I would expect and I think young people would expect. The old people won't and I'm inbetween," he said.
"Clearly that population there didn't want that. But they're the old population. We've got to think about the next population." Nick Smith, Building and Housing and Environment Minister, focused more on Grimes' tower suggestion than the 40 per cent house price collapse idea.
"The objective of our housing policies is slower house price inflation and long-term improvements in ownership and affordability. Housing markets are volatile and people need to be cautious of current high prices and low interest rates in ensuring they do not get themselves too exposed in the event of shifts in either," Smith said.
Listen: The future of housing in Auckland:
"It is not appropriate for me, as Environment Minister, to comment on Mr Arthur Grimes' specific views in Kohimarama and St Heliers while the Independent Hearings Panel is considering the new Unitary Plan for Auckland. The Government's view is that Auckland will need to grow both out and up to achieve the necessary increases in housing supply and improvements in affordability.
"The proportion between up and out is for the Auckland Council to decide but the new National Policy Statement on Urban Development will require that the council provides sufficient overall capacity for new development to match projected growth," Smith said.
Grimes also called for state intervention to free up Auckland land for more residential development.
"Purchase of land is a real difficulty. I favour use of the Public Works Act - compulsorily acquire large tracts of land," he said.
He then wants the Government to go much further, removing homeowners' property rights on density and enable height for significant growth, not compensating urban dwellers for changes in property rights.
It doesn't matter if it's Freemans Bay, Parnell, Remuera, Kohimaramara, Ellerslie. We certainly need to intensify.
Smith indicated some support for this suggestion from Grimes.
"The Productivity Commission has recommended compulsory acquisition powers under the Public Works Act for housing in specific areas. This recommendation is being explored as part of the Government's work on what powers an Urban Development Authority may have but no decisions have yet been made. For the record, I have not discussed the issues raised with Mr Grimes," Smith said.
Dean Kimpton, the council's chief operating officer, said more houses were needed, not price drops.
"Council's view on housing is we need to address its supply, choice, affordability and quality. We have challenges in each of those areas, not least of which being consented land is not being converted into quality homes at the rate Auckland's growth needs," Kimpton said.
"We have consented land for over 94,000 homes, the building industry is ramping up, but currently lacks the capacity to build at a rate of 13,000 per annum. This compares with the current build rate of some 6000," he said.
"The council is absolutely committed to working with developers and new partners to get more homes built in Auckland."
Carlos Chambers, a Generation Zero governance team member, also spoke at the Auckland Conversations event and said city living was attractive. The prospect of not owning a garden did not concern the young generation who were "willing to take hits" if it meant proximity to work and play.
An apartment held more appeal than a three-bedroom house with a garden on the outskirts of Auckland, Chambers said. The attitude of needing to have a house to get rich needed to shift, he said.
• Reserve Bank chairman 2003-2013.
• Former Reserve Bank chief economist.
• Former National Bank of New Zealand chief economist.
• Senior fellow at Motu Research.
• Adjunct professor of economics, Victoria University.
• Financial Markets Authority board member.