More land won't mean cheaper homes, says critic

Fletcher's chief executive claims more land needs to be freed up if Auckland is to grow and prosper. Photo / Richard Robinson

An environmentalist has accused Fletcher Building of being greedy and rebuffed its recipe for solving housing affordability problems.

Gary Taylor, the chairman of the Environmental Defence Society, criticised Fletcher for demanding the Government and Auckland Council expand urban limits to create more housing.

"Fletcher, with its market dominance, stands to make a fortune out of building more houses. But that won't make housing more affordable. It will, however, contribute to Fletcher's excessive profit-taking, which is a big part of the problem," Taylor said.

In a column for the Herald's Mood of the Boardroom publication last Thursday, Jonathan Ling, Fletcher's chief executive, said central and local government must free up more land, particularly in Auckland, if the city is to grow and prosper.

But Taylor said it was an urban myth that more land brought cheaper houses.

"It won't make any real dent on cost because raw land value - a greenfield site before it's subdivided and developed - is only around 10 to 15 per cent of the total value of a new house and land package," Taylor said, advocating instead the creation of a more competitive building supplies market, improving labour inputs, reducing development levies and consenting costs and tightening up on infrastructure spending.

Increasing land supply would have little impact because the other 90 per cent of costs were relatively fixed and out of the developer's control, said Taylor, a former director of Housing NZ's Hobsonville Land Company.

Philip King, Fletcher's investor relations manager, cited his company's submission to the Productivity Commission and said land prices made up almost half the cost of new houses so it made sense to make more land available.

"Land price rises have outstripped other building costs by a factor of more than two to one over the past two decades. Construction materials have increased by around 70 per cent whereas section prices have gone up fourfold in nominal terms or threefold in CPI adjusted terms," King said.

The Real Estate Institute and Statistics NZ found the biggest driver in the increase in house prices has been land value appreciation, King said.

"There are many other influences on the cost of housing which were extensively canvassed in the Productivity Commission report and Jonathan's comments merely sought to highlight one of these as a significant area requiring attention.

" Housing affordability is much lower in Auckland than in Invercargill. Why? Chiefly, because land values in Auckland are much higher."