Stephen Selwood: Affordable houses are close to places of work

A large development is set for Paerata, with 30,000 homes likely to be built just north of Pukekohe. Photo / Nick Reed

Opinion

• Stephen Selwood is chief executive of Infrastructure New Zealand.

It is a cliché now to say Auckland must grow up and out. But what many do not realise is that the cost of land and building is so distorted that until it grows out, its ability to grow up is severely compromised.

Take the growth area of Tamaki, for example. It's a priority because land is, or more precisely was, affordable, is generally lower density and is in large part owned by the state. Yet even there, a 750 square metre property is now valued at an incredible $1 million. This means that even if we triple the density, more or less as planned, we're asking new home owners to pay $333,000 for 250sq m of land.

That doesn't sound too bad, but it is just the first step. Redeveloping the section, or group of sections, so that this type of density can be supported — that is, adding stormwater, transport, new sewerage and water supply, subdivision fees and so on — will cost a developer in the vicinity of $100,000 a dwelling.

So, before there's even a roof over someone's head, the cost of a small section is $400,000-$450,000.

Add on a house at say $2000 per square metre, plus GST, and the cost of that new 150sq m "affordable" home will be about $850,000.

This is a problem because this price level is roughly double the amount a "regular" Auckland household can afford on a "regular" Auckland household income.

In other words, before you even get a house built, you've priced out of the market the half of Auckland households who earn below $85,000 per annum.

Move to Henderson and the picture is hardly better. The same 750sq m section is closer to $900,000 to buy and, at a 46-minute train ride to the CBD, not ideally located for higher density.

Somewhere that density would and could go, if permitted, is close to the CBD. But here land prices are so high that only much higher densities are cost-effective.

That's not necessarily a bad thing, but high-rise construction is expensive. It costs about twice as much per square metre to build a typical high-density home as low density.

An apartment large enough for a family will cost about $400,000 just to build. Land, development, fees and infrastructure will be extra.

Elevated risks to the developer also require profit margins to be wider, making higher-density living something best suited to higher-income households.

In other words, it is not possible to build homes Aucklanders can afford under current regulations and practices. This is why Auckland is building half as many homes as it needs and why the city is now 40,000 homes short.

To build enough homes for people to live in, land unzoned and not inflated to distorted levels must be accessed.

Relaxing metropolitan boundary restrictions is vital. Critically, opening large land holdings will also facilitate development at scale, which will unlock the potential for prefabrication and manufactured housing, thereby lowering the overall costs of delivering homes.

The challenge for the Government is to encourage development which does not simply substitute high housing costs with high transport costs.

That's where a satellite city comes in. Developed around rail on un-zoned land in Paerata, Drury and Karaka, and with 45-minute express train services to the CBD, an affordable and accessible satellite city can be developed.

But the objective of a true "city" is to create a centre of activity where people can live and work.

By leveraging its social investment programme in things like education and integrating this with quality transport, the Government and the Auckland Council can generate jobs at the same time as facilitating new, affordable housing.

Aucklanders without homes will be able to buy one without a public subsidy and not have to face two hours in a car each working day, while at the same time clogging up the network.

Congestion and housing problems are not addressed under the current plan. Change will require an alliance between central and local government, a different approach to risk and new thinking about how we enable Auckland's growth.

All of these are opportunities the new Government can embrace.