Gary Taylor: Radical moves needed on housing

5:30 AM Wednesday Oct 31, 2012

The challenge facing Auckland is not just of making housing more affordable but actually building enough houses. That's beyond the capacity of the present building market and will require a radically different approach.

The Government's new housing policy announcement signals some rapprochement between it and the Auckland Council.

Over the next 30 years the population will expand by one million, requiring an additional 400,000 dwellings - an average of 13,000 dwellings per year, every year, for 30 years.

Two-thirds of that growth is expected from births and internal migration from the rest of New Zealand with the balance from immigration. Buying preferences will likely continue to diversify along with the cultural make-up of Auckland.

The Auckland Plan proposes 30 per cent to 40 per cent of the city's growth will be greenfields (subdivision of farmland) and 60 per cent to 70 per cent infill (within existing suburbs). The Government appears to have accepted that mix.

There are good reasons for maintaining a rural-urban boundary as proposed by the council and accepted by the Government. It will lead to a smaller environmental footprint and a more energy and transport efficient urban form.

But the infill target will be tough to meet using traditional approaches. It's hard to imagine around 8000 houses a year coming from infill without new drivers.

Even the smaller greenfields target is heroic. The biggest new residential development under way - Hobsonville Point - is providing 3000 new dwellings. But we need 5000 greenfields units a year.

New Zealand's building sector, as the Productivity Commission Report shows, and as the Government has accepted, is expensive partly because of its small scale and use of predominantly bespoke designs. Labour costs are more than in Australia and there's not a lot of spare skilled labour available because of the Christchurch rebuild.

Building material costs are also significantly higher than in Australia. The commission's report cited the lack of competition and dominance of Fletcher Building (which both makes and retails products) but decided to do nothing about it. The Government has decided to further investigate "supply chain" issues.

What is needed is for the Government and the Auckland Council to take the lead and create housing development authorities that can plan and build at the scale required. The Government has signalled an acceptance of this approach.

The Hobsonville Land Company is a model that could be followed. It's a Housing New Zealand subsidiary with a private-sector partner, AV Jennings, a large and experienced Australian house builder, with risks shared between the two entities. The Auckland Council is developing a Marine Industry Precinct at Hobsonville as its contribution.

Hobsonville Point has many attributes we want to see: higher density, high amenity, energy-efficient dwellings, a mix of housing types and excellent transport links.

The Tamaki Restoration Project, a joint venture between Government and the council, is a brownfields development on a similar partnership model.

Both examples use the combined resources of the state and the council to lead development while drawing on private-sector partners and strong commercial disciplines. This approach needs to be rolled out across Auckland - and quickly.

So how to do that? The council should broaden the scope and capacity of its subsidiary, Auckland Council Property, to masterplan and lead a number of large-scale housing developments. That will require seed capital but should be self-funding over time - as Hobsonville Point has confirmed. Some developments could be done with the Government as a partner, others not. All will need private sector involvement.

Similar entities overseas have mandated a proportion of affordable housing to be included in each development. We could do that here, as well as developing new assistance packages for first-time buyers.

The big issue is whether home ownership is sustainable at today's levels. The experience overseas is that, as cities grow, long-term renting is increasingly preferred over traditional home ownership. We are seeing that trend here and we can expect it to continue.

But if we don't build enough dwellings, then housing, whether for ownership or rental, will become less and less available. It's pleasing to see the Government acknowledge the market doesn't have enough grunt to deliver without central and local government involvement.

Gary Taylor is the chairman of the Environmental Defence Society and a former director of the Hobsonville Land Company.

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