Anne Gibson

Property editor of the NZ Herald

Affordable housing: a political battlefield

Many first-time buyers are struggling to find an affordable house in Auckland, where average prices top $600,000. Anne Gibson reports on the latest attempt to break the deadlock.

An artist's impression of the townhouse development planned for Panama Rd, Mt Wellington.
An artist's impression of the townhouse development planned for Panama Rd, Mt Wellington.

Just over four months ago, printer Layton Armstrong and vet Charmaine Abraham began house-hunting in the Otahuhu/Mt Wellington area, looking at places going for about $400,000.

But like many thousands of people, the couple's hunt has left them disappointed amd living with relatives.

"You put your hand up once and get taken out," Ms Abraham says of auctions, which account for 90 per cent of sales around that way.

They resorted to letterbox flyers in the nine most desirable streets and got lucky when they met a hedge-trimming homeowner who jumped at a private sale option. But at the bank's behest, the couple engaged a valuer who found that house was worth much less than the asking price. So they lost the deal, a bitter turn of events because that might have been their best shot.

"We tried to negotiate but the owner had already listed it for sale with an agent and sold it - for the amount originally being asked," Mr Armstrong says.

Affordable housing: the topic on everyone's lips and a political battlefield.

Finance Minister Bill English has described current house prices as ridiculous, especially for young people with a student loan trying to buy their first home. "The most unfair aspect of it is that there's no housing being built for people in the lowest quartile of income," he said in July. "Like none. That is clearly unsustainable."

Labour leader David Shearer tried to seize the initiative two weeks ago with a $1.5 billion scheme to build 100,000 basic homes costing less than $300,000 each in the next decade. National rubbished the KiwiBuild plan as unrealistic and countered with its own, more modest, version - Housing Minister Phil Heatley announced that 20 per cent of the 2500 to 3000 houses at the new Hobsonville Point development would be priced at $485,000 or less, resulting in about 500 to 600 affordable homes built there.

Alan McMahon, Colliers International's Queen St-based national research and consulting director, said though Labour's scheme was commendable, it was also probably totally unworkable because of tight land supply.

"Unless we build to medium or high density (five storeys or more), we don't have nearly enough land in Auckland to accommodate tens of thousands of new homes. And if we zoned currently rural land, it would cost a fortune to service, and transport to schools, workplaces, shops etc would render them unaffordable except to a minority anyway.

"Limiting house prices to say $300,000 will severely limit the developer's ability to buy land, whether it is Housing New Zealand or a private developer. Private owners will be unlikely to sell land for the provision of such homes when they could get more for selling to a private developer to build a more expensive house, hence justifying a higher land price."

Other critics questioned how first-time homeowners could be stopped from renting out and profiting from the 100,000 houses. "Saying they have to live there for a period of time? Does that mean an army of inspectors dropping by randomly to ensure an owner is home?" asked a visitor to specialist website propbd.co.nz.

Leaders in the leaky building sector have proposed mass demolitions of rotten complexes, replacing them with much higher-density higher-quality houses; this is yet to materialise. But one private developer reckons he has the answer, even if the numbers are low. Redwood Group's Tony Gapes is planning Auckland's biggest new affordable housing estate, creating 450 to 500 townhouses at 33 Panama Rd between Mt Wellington and Otahuhu.

Charles Cooper, Colliers International's managing director, said the $150 million-$200 million scheme would offer houses for $350,000 to $450,000 and he anticipates such a strong appetite that he has begun compiling a buyers' shortlist.

QV lists the 10.3ha property south of Sylvia Park and north of the Otahuhu town centre as having a $16.5 million valuation, made up of $15.5 million in land and the rest in buildings. The property, now used to raise garden plants, is run by Zealandia Horticulture, which is intending to move further out of the city.

Mr Cooper said Colliers spotted the land and put a proposal to Mr Gapes who can build 343 residences there "as of right". Architects Studio Pacific have designed the house, which Mr Cooper said would be extremely high-quality with insulated foundations, so far above the existing Building Code "that this will set the new code". They will stand in clusters of four or five, joined by a concrete slab partition firewall, have two to four bedrooms, a single internal lock-up garage, parking for a second car, front and rear courtyards with a service area for rubbish and recycling, two lounge rooms, and fully fitted out kitchens and bathrooms. Only about 22 per cent of the land will be built on, the rest landscaped and paved.

The construction start date for the unnamed subdivision will depend on when planning permission is granted "but we'll call it in the first half of next year", Mr Cooper says.

Steve Bull, G J Gardner Manukau and East Auckland master franchise owner, believes the scheme can work. Social agencies have asked him to build three to four-bedroom brick and tile stand-alone places for around $380,000, so the Panama Rd scheme is feasible, he says, although land prices and Watercare and Auckland Council fees still bug him.

Asked why Mr Gapes seems to be the only one able to develop affordable mass housing, Mr McMahon says it is not that other developers cannot but "it is that there is no incentive for them to do so while the market is still critically under-supplied... and stand-alone big houses are the most profitable to build and sell.

"So why would developers choose to build cheaper homes?" he says, referring to luxury estates rising at Long Bay where Todd Property is developing 2500 houses and stand-alone three-bedroom homes are expected to start at $700,000. The sections alone are going for an average of $450,000. Todd justifies not building affordable housing because of the length of time involved in getting consents, the type of sites it owns, high infrastructure outlay and high holding costs.

Mr McMahon says Panama Rd is unique because it lacks many of these features, mainly because it is a former commercial site and not previously unused rural land. "It is not the responsibility of private property developers to provide affordable housing. Their job is to maximise profits. So the danger is that as new land is released, it will be developed in a style and at a price point that only enables existing house owners to buy." He says the best hope for affordable housing is the release of more former commercial and industrial sites like Panama Rd, ideally close to existing urban areas and the CBD.

"Developers will not reduce their prices unless they have to. Relying on competition to reduce prices and increase choice in a market which looks to be chronically undersupplied for some years hence is optimistic."

And despite the hype over Panama Rd as one of the biggest affordable housing developments in Auckland for many years, Ms Abraham and Mr Armstrong are not interested in it.

"No way," they say, referring to privacy issues, the desire for a standalone house and a section with vegetable garden and qualms about the neighbourhood. "We might as well buy into a block of units."

The couple were drawn to Mt Wellington/Otahuhu because it is near where Ms Abraham works, offers some of the best buying in the $400,000 bracket close to the CBD but still has a big stock of stand-alone older solid houses on good sized sections. That, they say, is every Kiwi's dream; to have a section they can call their own. Not for them the squeezed-up townhouse maximising the floor area ration.

They now realise they will have to pay more than they originally thought. But seeing places pitched to first-home buyers around $650,000 but marketed as affordable leaves them smarting, especially as they realise they're competing with investors and speculators.

Says Ms Abraham; "We're seeing places we've looked up snapped up, then appearing on Trade Me for rent for $400 to $440 a week."

- NZ Herald

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