It's the sale of the century: 230ha to 270ha of Auckland public or state land is being sold to private or sharemarket-listed developers, to build free-market homes across the city.
From Northcote to Tāmaki, Oranga to Hobsonville Point, Mt Roskill to Māngere and throughout Northcote's town centre, large blocks of state land are being sold bit-by-bit in a 15- to 20-year plan.
Drive around Roskill South and you'll see the result: new state homes close to new privately-owned houses, on recently-sold former state land.
We're losing state land? At the very time we have about 24,000 people on the state house waiting list? At first glance, the sales seem to make little sense.
After all, everyone knows the value of real estate is in the land. As any Auckland rates bill for a stand-alone house will reveal, "improvements" or buildings don't comprise the bulk of the value, except in the case of apartments or intensively developed sites. The money is in the land.
So who is buying Auckland's state estate? The answer includes Wellington-headquartered apartment specialists Willis Bond; Shane and Anna Brealey's NZ Living; NZX-listed Winton Land headed by Chris Meehan; Fletcher Building subsidiary Fletcher Living, headed by Steve Evans; Mike Greer Homes; Tony and Robyn Houston's Modul; group house builder Universal Homes, owned by the Chinese government; and Gary Gordon's Solution Street.
Those are just a few of the large development businesses buying what was the public's land, home to thousands of old weatherboard and corrugated iron single-level 1950s and '60s state homes, now being demolished to make way for more intensive apartments or townhouses.
Governments in the 1950s and '60s bought big blocks around Auckland, purchasing in what were then greenfields sites as the city's boundaries advanced.
If a state land sale and redevelopment is not happening in your street, you might not care that much. But it's a big deal: given that Auckland land is going for about $1200/sq m-$1500/sq m, the 230ha-270ha could be worth more than $4 billion.
Nick Goodall, research head at property data company CoreLogic, says that based on vacant land sales the median Auckland land price was about $1590/sq m in the last quarter of 2021 and the first three months of this year.
Auckland Council's property-owning arm Eke Panuku Development Auckland leases out public land at the Wynyard Quarter for terms of just over a century. Meanwhile, large parts of the Auckland housing estate are being sold outright, not leased.
Why the differing approach?
Kāinga Ora - Homes and Communities owns nearly 1400ha of land scattered throughout suburban and central Auckland. Of that, large-scale holdings amount to 458ha and it's 55-60 per cent of that which will be sold. Kāinga Ora was previously Housing NZ, merged with the Hobsonville Land Company, more latterly Homes Land Community.
Whatever the entity is called these days, it runs operations on government land acquired for the purposes of housing people who most need it. The Ministry of Social Development is the state agency which handles the rental money for state homes, but it's KO when it comes to who owns the state house.
For the first time in about half a century since the Auckland public estate was acquired, large chunks of it are gradually being sold - fairly quietly too, without many people noticing, in a 15- to 20-year plan.
Street by street, advertised on NZME's OneRoof property website and elsewhere, that public land is going: agreements drawn up, blocks carved off, financial arrangements agreed to, contracts signed ... public land gone into private ownership.
It's no accident, but a deliberate policy to sell that public land.
Why? To raise money to pay for the intensification and redevelopment of state homes. For every state house that stood on its large traditional section, three homes replace it, and sometimes far more.
The man behind this sale of the century is public servant Mark Fraser, Kāinga Ora's urban development and delivery general manager.
He has worked for the state agency for the past 11 years and names the repurposing of Shed 10 on Princes Wharf and construction of The Cloud as some of his previous projects before joining what was then the Hobsonville Land Company in 2011.
A recreational cyclist who lives at Kāinga Ora showcase Hobsonville Point, Fraser seems more akin to a private developer than a civil servant, working from smart industrial-style offices on the Hobsonville waterfront.
The urban development and delivery group he heads brings together functions that support Kāinga Ora to deliver large-scale and complex urban development projects nationally.
The group is responsible for all land development activities to deliver builder-ready land to its builder/developer partners. It designs and builds all urban development infrastructure, above and below ground, and co-ordinates the delivery of major public infrastructure projects.
Even Fraser calls the work a once-in-a-century opportunity and says $246m of revenue has so far been generated from Auckland state land sales.
"The group's programme of work has no precedent in New Zealand in terms of scale and will be truly transformational," he says. "It provides a once in a century opportunity to improve the supply, quality and affordability of our homes, both state and privately owned, and the liveability of our neighbourhoods."
He doesn't see a downside to selling the land. "We are selling several billion dollars worth of land. Auckland has 1397ha of state house land and we're selling 55 to 60 per cent of large-scale holdings."
That amounts to big chunks being sold in each of the five areas now under development: Hobsonville Point, Mt Roskill, Tāmaki, Oranga and Māngere, although Fraser points out that some areas need more state housing than others, so "we're selling more in Roskill than Māngere".
The sales are completely justified, he says, to pay for the multibillion-dollar redevelopment of Auckland's public housing estate. Without those land sales, there wouldn't be enough money to pay for all the new state houses, he says.
"These suburbs are so well located for Auckland, it would be a shame to not make the most of the location and to do that, we need to lift density."
He's referring to the need to sell land to fund more intensive projects - that three-times formula of three replacements for every state house that existed.
Fraser is thinking almost into the next century. "We create blocks we call superlots. The land we retain in state ownership, we are doing in contiguous lots, or one parcel. If in 70 years' time we want to renew those homes, we own all of that."
Not all state housing blocks in Auckland can become superlots: "We call them the missing teeth," Fraser explains, referring to cases where state house tenants became owners when that was allowed.
Those "missing teeth" create big obstacles to KO's intensification plans, interrupting block development and pepper-potting private with state ownership.
But in perfect contiguous blocks of state house, Fraser says Kāinga Ora often finds advantages with cul de sac streets and houses bordering on reserves or parks, the back of the house invariably facing that wide open green area.
Some cul de sacs become through roads, with a state house at the end often being removed to link road networks.
When Kāinga Ora builds on its superlots and creates terraces and apartments, the green belt is a major governing factor in layouts, design and home orientation. Apartments are more likely to face those parks, an about-turn on the old homes which often turned their backs on green spaces.
When the land is sold to developers, Kāinga Ora sets requirements on form, delivery times and standards or, as Fraser puts it, "we put covenants in place on time, design, home performance and density".
A recent example was Willis Bond breaking ground in early May at its Catalina Point apartments at Hobsonville Point, with Dave McGuinness and his uncle Willis Bond managing director Mark McGuinness there alongside Peter Thompson, managing director of real estate company Barfoot & Thompson - such is the value of sales in those apartments, now under construction.
It was Kāinga Ora that sold Willis Bond the land for the apartments.
All this activity poses a question: is the real point not so much about the sell-off as the fact that for half a century, we did almost nothing with Auckland's valuable state housing estate?
Houses weren't rebuilt or improved, and children got sick from living in what some have described as "killer boxes".
Fraser acknowledges that argument, saying that "after 50 or 60 years, these houses are no longer fit for purpose".
"The older a house gets, the more expensive it gets. Stuff breaks so the trigger has been to address the renewal. With these projects we also have big holdings with locations that are not well used. They can be better used."
Housing Minister Megan Woods railed against a Herald headline about state housing being sold.
"Our Government is not 'selling state housing'. The public housing developments - large scale projects- involve selling certain parcels of Crown-owned land where public housing land is being redeveloped. The sales allow us to finance our partnership with developers to deliver public and affordable housing such as KiwiBuild homes, in exchange for them building some housing on Crown land at market rates," Woods said.
The irony of a Labour Government selling a big chunk of Auckland's large-scale state land estate is not lost on the critics.
Chris Bishop, National's housing spokesman, calls it "deeply hypocritical for the Labour Government to be engaging in this massive hock-off. Clearly, it makes financial sense for Kāinga Ora to sell land but the Labour Party's traditional view of the world is that the state should never sell land yet they're going about it en masse here."
Bishop is concerned about the sale and its scale.
But Woods said: "I'm surprised to see the National Party speak out against the kind of regeneration that is being enabled, given they also bought into this model at a smaller scale at Hobsonville Point.
"Our Government is proudly undertaking the biggest rebuild of public housing since the 1970s, with brand new, warm dry homes to replace old homes well past their use-by date. The partnerships with developers to add affordable and market housing into these suburbs is resulting in regeneration of these suburbs, with improved infrastructure and more affordable housing.
"Creating a mix of housing as we do in these suburbs is hugely important for creating resilient communities. It's a well-established fact that concentrating large amounts of solely public housing in one location, is not good for urban planning or communities. As ever, it would be great to hear what National's policy is on public housing as well as what they would do to solve the housing crisis they presided over, and left for Labour to deal with," Woods said today.
Alan Johnson, a social policy analyst formerly with the Salvation Army and co-convenor of Child Poverty Action, also opposes the Auckland state land sales but says he is well aware that it's happening and has been for some time.
"It's an atrocious thing to sell all this land, being done at the behest of Treasury," says Johnson. "It's state-sponsored gentrification. Kāinga Ora's annual report makes it clear what they are doing.
"But they're having problems with the model because infrastructure is far more expensive to rebuild than KO anticipated. It wasn't well-built in the post-war years in areas like Māngere, Otara, Glen Innes and Mt Roskill. It's tough and expensive. There's no value because you might spend as much as what the land is worth on the infrastructure renewal. It doesn't make commercial sense to do this," Johnson says.
"The intensification and shift to better designed and built houses is overdue. But if all you're going to do after 15 years of effort, disruption and risk is end up with the same numbers of social housing as before, how is it you haven't provided for a greater population and an ageing population? What's happening is KO is assuming the settings are OK. Fraser is being disingenuous to say this is the only way to do it. It could work far better if the Government wanted to put more equity into it, not sell the land, build better houses but build more of them," Johnson says.
The sales are "reprehensible" because Auckland would soon run out of land for social housing and would find it tough and expensive to buy elsewhere. "What we're doing is selling out the opportunity to build significant volumes of social housing in the next 10 to 15 years. It's a shortsighted thing. We're selling the potential and our future."
On May 18, Prime Minister Jacinda Ardern attacked National's state housing policies, saying the Government's housing investment was "a critical focus for us, against the pledge of the Opposition to do nothing more than ... sell public housing, as they did when they were in office".
This Government had built more than 9000 public homes, "more homes than any government since the 1970s", Ardern told the House.
She didn't mention the Auckland large-scale land sales.
Green Party social housing spokesperson Ricardo Menendez March wants to see an overhaul of the mixed-tenure development model that is resulting in so much state land being sold in Auckland.
"The current mixed-tenure model prioritises private housing that is out of reach for families who need housing the most," he argues. "The focus on private housing has the potential to gentrify communities, further displacing people on low incomes already living in neighbourhoods."
Kāinga Ora selling land also has Te Tiriti implications, making it harder for the Crown to return land to Māori, Menendez March says.
"We agree with the Tāmaki Regeneration Company who said that in hindsight they wouldn't be supporting using land for private housing for future developments at our social services and community select committee during the annual review hearings," he says.
The Government should borrow more to build new state homes, Menendez March says.
"At a time when the public housing waiting list continues to increase, and low income families face cost of living pressures, the time is right for the Government to review their approach to developments."
Not all has gone well for Kāinga Ora with the schemes. For example, an Australian builder failed part-way through development in Auckland.
Integrated Modular Build was building 50 apartments for Kāinga Ora but was forecast to have a $1.6m deficit, and construction experts said it had left sites in a sorry state with unfinished buildings.
Kāinga Ora said it had awarded $10m of construction contracts to the company on Kervil Ave, Te Atatu and $10m of work for a superlot on Tonar St, Northcote. Those places are now being finished by a local builder.
On some state house blocks, no land is sold. Five state homes once stood at 56-64 Taramea St, Avondale but that now has 18 new state units, 18 carparks, a playground and two blocks of apartments, all two-bedroom units, each around 72sq m. No land was sold to the private market in that redevelopment.
Brooke van Velden, Act's housing spokesperson, supports the sales and wants more of them.
"The sale of land will open up about 600ha of Auckland real estate for new housing development," she says. "We have a growing wait list for social housing because there aren't enough homes for the number of people that want to live in them.
"Kāinga Ora is also the country's largest slum-lord. This land can be used by private developers to build newer and better homes so people don't need to be on wait-lists for state housing in the first place," she says.
The Act Party welcomes the sales but wonders why Kāinga ora has also been in the market against private developers and first-home buyers, bidding up the price of land and homes in Auckland while selling off its own, she says.
WHAT A STATE LAND BUYER SAYS
NZ Living founder Shane Brealey has bought 6ha from Kāinga Ora and Tāmaki Regeneration Company for hundreds of new Auckland homes, mainly apartments.
His business has built 568 new places:
• 45 per cent were retained by his business under the build-to-rent model
• 39 per cent were sold as the more affordable targeted KiwiBuild, going to first home buyers who met income and other criteria
• 16 per cent were sold at market rates, without any restrictions
NZ Living paid $800 to $1500 per square metre. The average during purchases in the past four years was $1000/sq m, Brealey says.
He estimates that the land planned for sale could be worth about billions, based on the $1200/sq m price his business paid at the upper end.
All up, he says the deals have been excellent for buyers and vendors. He's not commenting on whether it's good for the public or taxpayers.
"The $60m we have paid for the land in contested tenders processes have gone a long way to paying for the new infrastructure needed in these areas," he says.
He estimates that the large-scale land holdings earmarked for sale would be enough to take tens of thousands of state homes, if the state agency retained all its land in Auckland and sold none of it.
"We don't need that many new state homes in Auckland, do we?" Brealey says. "Kāinga Ora is building around 1000 new houses annually currently. A third state, a third affordable and a third market seems sound to me for sharing the rebuild load and to create more interesting communities."
OUR STATE ESTATE
• New Zealand has 3870ha of state housing land
• That land is controlled by Kāinga Ora - Homes and Communities
• KO owns and manages 68,800 state homes nationally
• NZ has a $2.5b state house building programme under way
• Auckland has 1397ha of state house land
• Large-scale holdings amount to 458ha
• 55-60 per cent or 250ha-270ha of that is being sold over 15-20 years
• That funds rebuilds at Northcote, Tāmaki, Oranga, Mt Roskill, Māngere
• KO plans to build 40,000 Auckland homes during 15-20 years
• It plans 11,000 homes in Mt Roskill
• 10,000 are planned in Māngere
• 1200 for Oranga between Ellerslie and Onehunga
• 10,500 homes are planned in Tāmaki
• Update: this article has been updated with comments from Housing Minister Megan Woods.