When you've worked hard for years, the kids are growing fast and you've scraped together a decent deposit, most New Zealand families expect to settle down in their own home. Even in Auckland's crazy property market.
Sheryl Hay had the same dream. With bank approval to borrow up to $450,000 on top of their $50,000 savings, she thought it doable for her, her twin teenage children and partner Soe Ulae to put renting behind them. Their combined annual earnings put them at the upper end of Auckland's middle income bracket, which ranges from $80,000-$120,000. Yet their expectations were modest - an "older-style" three-bedroom home would be fine, perhaps with a garage or rumpus so the twins could play table tennis.
"My partner works at the airport, I work in Penrose and the kids are at college in Pakuranga so we were looking for somewhere central to all three."
But after a year of being outbid at auctions - mainly by property investors - she wrote in desperation to Housing Minister Nick Smith.
"He wrote back and suggested we look in Hobsonville (37km away)."
She says the minister's solution would be practical only if she and her partner changed jobs and the children moved school.
"It would cost me more than the mortgage to get to work each day."
Her property search included nearby Flat Bush, where 14,000 homes are due by 2025 under council development plans. But she was told nothing was available for less than $700,000 - standalone house builders are focusing on McMansions to make a buck. What irks her most is that prices for older homes are being pushed up, in her experience, mainly by foreign investors.
The gulf between Auckland house prices and middle income earners has been widening for years. For families wanting a stand-alone home, it reached 7-10 times annual incomes in the inner suburbs a decade ago and has since spread like a contagion.
Smith has slammed the urban containment policy of the Auckland Council and its predecessors for "killing the dreams of Aucklanders" by pushing up house prices. The Government last week introduced a law change to free up land supply inside and outside the urban limits - in part gambling that cheaper rural land will enable more affordable houses. But Smith says there's scope to declare special housing areas on Housing NZ sites at Weymouth and Takanini and in urban areas earmarked for intensification. He says a big driver of higher prices is the rules builders are forced to follow; the special areas will cut through restrictive planning such as site density limits. "Higher quality equates to high price."
But houses won't spring up overnight - and many doubt they will have much impact on market values. Hay believes the Government should tackle the demand side, not just the supply.
"Every one we've bid for, bar one or two, we've been outbid by Asian buyers and they've gone for rent within weeks. I thought we had a pretty reasonable amount for a beginner home but it's impossible - we can't find anything."
She believes non-resident buyers should face taxes similar to those introduced in Hong Kong and Singapore (see below) while a capital gains tax should apply on all investment properties. "It doesn't seem fair. I feel like we should give up and spend the money on a bloody good holiday."
Auckland's slow build up
The compact city policy which Auckland councils signed up to in 1999 was supposed to deliver more housing in high-density zones in the inner city and around town centres, as well as ringfenced greenfield sites on the city fringes. But developers haven't followed the blueprint and supply hasn't kept pace with demand for various reasons - recession, financial sector implosion, difficulties finding suitable sites and a backlash against poorly planned, and designed higher density housing.
New building consents plunged from 2005 and averaged around 4,000 homes a year from 2007 to 2011 - a historic low and well short of the 13,000 homes a year that the council says are needed. Large subdivisions managed by Housing NZ and the council at Hobsonville and Takanini and by the council at Flat Bush are all years behind schedule; in Hobsonville deliberately delayed to await better market conditions.
The supply crisis was forecast just as the affordability crisis was foreseen by planners at the old regional council, who unveiled an affordability strategy in 2003. Inaction followed. A suite of measures now being considered by the Auckland Council is broadly similar. Council manager of Auckland strategy and research Ree Anderson says the divided local body structure stymied progress in the past; that should change under a single council.
It's possible to find that 3-bedroom home for under $500,000 in outer-edge subdivisions such as Hobsonville, but to ease affordability in established suburbs, a range of options are available - yet only some are in the pipeline.
Six steps to an affordable home
Some frequently overlooked ideas to tackle Auckland's housing crisis
1. Turn down the heat
Many frustrated home buyers support Sheryl Hay's call for a capital gains tax on investment properties and taxes on non-resident purchasers. Hong Kong and Singapore have introduced 15 per cent "stamp duty" taxes on foreign buyers to cool their property markets. In Australia, non-residents need approval to buy "new-builds"; restrictions apply to purchasing for investment purposes and their rental income is taxed at 29-45 per cent. Properties other than the main home are subject to capital gains tax. Here, Labour and the Greens advocate a capital gains tax but the Government has ruled it out. Critics say it is difficult to enforce, only kicks in on the sale of the home and would make renting less affordable.
2. Helping hand
Various financial assistance schemes exist to bridge the gap between the buyer's upper limit and the market price, usually in developments financed by community housing and philanthropic agencies prepared to wait longer for a return. Council or Government underwriting is often sought so banks can reduce borrowing costs. Examples include:
Shared equity: Typically, the buyer puts in, say, 70 per cent of the house cost and the developer (usually a philanthropic or council-backed provider) retains a 30 per cent stake. Buyers can increase their share as their incomes and the property's value rises, potentially becoming the full owner.
Starter loans: Institutional investors and philanthropic groups can pool capital into a housing bond to provide starter loans at low fixed interest rates, often with council or government underwriting.
3. Cut the costs
Councils have worked hard to reduce consenting delays and costs which deter builders, sometimes following legislative changes (Building Act, RMA). But developers still baulk at fees and charges - especially development levies. The council has piloted a scheme allowing these charges to be deferred until after homes are built and sold, giving developers a cashflow break.
The Government has begun an inquiry into the cost of building materials - builders claim many products are far cheaper overseas but they cannot access them.
Both Government and councils are studying ways to reduce the cost of utilities and services, such as through better co-ordination.
4. Get building
New housing stock - be it apartments, multi-unit or standalone - creates churn, increasing first homebuyer options with old or new. The city has space for around 23,000 dwellings on vacant lots and on 15 greenfield subdivisions inside the urban boundaries. But only 1900 lots in the subdivisions are "developer ready" - with roads and utilities connected as far as the site. The Government response is legislation to designate "special housing areas" to override current planning rules under a "Housing Accord" with the council. Smith promises it will deliver 39,000 homes in three years - up with the 13,000 homes-a-year pace the council says is needed.
5. Get with the plan
Higher density zones since 1999 should have allowed cheaper dwellings, with more lots per site. But land values and construction costs soared, while population growth and investor demand pushed market values even higher. Developers didn't play ball - citing problems finding suitable sites, costs, lack of demand and public backlash against their own early shoddy projects. If the draft unitary plan prompts more developers to follow the blueprint, higher densities around town centres and in mixed housing zones should deliver more affordable options.
The draft plan relaxes density rules (allowing more diverse dwelling types and sizes) and narrows the opportunities for neighbours to object.
The council is finalising its action plan for affordability, which looks at using council land, rates policy and planning instruments.
Ensuring housing is within reach of middle income earners has slipped through the cracks between council, Government and private developers for more than a decade. Yet it's important for economic as well as social reasons. Someone needs to own the problem. The last Labour Government began looking at an urban development authority to co-ordinate development before it was voted out, but developers oppose any hint of more bureaucracy. Nick Smith says the Housing Accord should bring affordability to the fore. "We need to have an upfront discussion about the balance between affordability and quality."