Government plans to send warning letters over lack of progress in about 14 out of 100 Special Housing Areas

Developers who have been sitting on Auckland land earmarked for fast-tracked housing are being warned to start building or lose their special privileges.

Housing Minister Nick Smith will send warning letters about 14 out of 100 Special Housing Areas (SHAs) which have failed to make any progress in the past 18 months.

All of the stalled housing developments are in Auckland. The minister would not give details about them, saying the owners would be given a chance to explain why they had not yet applied for resource consents.

If progress was not made, they would lose the perks that came with SHA status, which included the ability to fast-track consents or get other concessions on their developments.

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Prime Minister John Key said yesterday that the letters were not a threat, but added: "We've made it clear right from day one if you want to have Special Housing Areas ... we want you to speed up supply for the Auckland market and the other areas around the country."

The SHAs are the Government's main tool for increasing housing supply. They were introduced in late 2013 as part of a deal with Auckland Council to grant consents for 39,000 houses by 2016. The most recent update by officials showed only 170 houses have been built within the Auckland SHAs.

Dr Smith and Mr Key would not say whether some SHA owners were guilty of "land-banking", or sitting on buildable land as it gained value.

The Reserve Bank last week recommended regulating against land-banking because it was contributing to high house prices.

Mr Key did not express support for this, but said the Government was prepared to take short-term action to improve housing supply. He also said the Government had "actively encouraged" the bank to "explore areas they think they can make a difference [in]" on the supply side.

In contrast to the bank's advice last week, Mr Key said residential property in New Zealand was not overvalued. This prompted Labour's housing spokesman, Phil Twyford, to say the Prime Minister was in "deep denial" and unconcerned about the potential for a housing bubble.

Their comments came as inflation fell to just 0.1 per cent, which would usually give the Reserve Bank scope to cut interest rates.

But Green Party co-leader Russel Norman said: "Households and businesses could benefit from interest rate cuts, but because National is not addressing the Auckland housing crisis it makes [cuts] harder for the ... bank."

Special Housing Areas

• Fast-tracked housing areas which allow developers to cut consent time and subdivision process from 18 months to six months.

• 100 SHAs established since late 2013 (84 in Auckland), with a capacity for 47,000 homes.

• 170 houses built so far in Auckland SHAs.