Key Points:

A debate over city growth has emerged after a housing affordability survey released this week recommended freeing up more land for houses.

Demographia's fourth annual survey found New Zealand houses more unaffordable than those in the United States, Canada, Ireland, Britain and Australia.

The residential construction sector is now calling for more sections to be freed up, but a planning boss says this view is short-sighted and could have disastrous consequences.

Pieter Burghout, chief executive of the Master Builders Federation, praised the survey for reinforcing points he had made to the Government. But Paul Walbran, chairman of the Auckland Regional Council's regional strategy and planning committee, attacked the survey because he said it recommended urban sprawl.

Walbran said the call on Monday from Real Estate Institute president Murray Cleland and Demographia to free up land was an over-simplification of a complicated issue.

Uncontrolled urban sprawl brought inefficient demand for transport, water, waste removal and other social and physical infrastructure demands and these costs fell on the wider community through traffic congestion, environmental degradation and rates rises, Walbran said.

Nor were the present city boundaries frozen.

Auckland's urban limits had already been extended five times since 1999, adding nearly 1500ha of land for new development, he said.

More requests had come from Takanini, Mangere and Massey North. These expansions could add further land for housing and commercial activities.

"Independent research shows that a more compact city results in lower housing costs per capita, an increased average income per person and is a more efficient, cost-effective way of providing infrastructure," he said.

Urban sprawl that resulted in dormitory suburbs at great distance from employment and services negated the benefits of cheaper homes through higher transport costs, wasted time and poor access to services and employment.

"Ironically, this will be felt most by those who least can afford to own their own property - those on low and fixed incomes.

"We only have to look across the Tasman. On the Sydney fringe, development levies to cover the cost on infrastructure are running at $100,000 per household. On the outskirts of Melbourne it's reported that people spend 35 to 40 per cent of their income on transport to and from work," Walbran said.

Burghout said more land was needed for new houses and he praised Demographia for showing that those parts of the world with good urban fringe housing policies had more affordable housing.

Some Australian states had recognised this, he said. Master Builders' objected to Housing Minister Maryan Street's new bill now before Parliament which would require developers to set aside land for affordable housing.

"Our research has shown that where this imposed development affordability approach is adopted, land prices go up 10 per cent and 20 per cent fewer houses are built - and so while it might fix the problem for a small majority, the average Kiwi family will see affordable housing pushed even further out of their reach.

"We recommend making land more available, reducing building industry compliance costs and reducing local authority infrastructure fees so that they are more reasonable," Burghout said.

Phil Heatley, National's housing spokesman, said Labour should be ashamed of its performance on the housing affordability issue because New Zealand used to pride itself in the ability of its people to own their own home.

The cost of servicing a mortgage had ballooned and payments on a 25-year mortgage of 90 per cent of the median national house price had reached a record high of almost 50 per cent of the average after-tax household income.

That was up from about 36 per cent just three years ago, Heatley said.

Rob Steele, a pilot who lives in Auckland but was in Japan for five years, said housing affordability was better there because interest rates were much lower and wages were much higher.

He compared Remuera with Setagaya in south-west Tokyo, where a stand-alone 125sq m townhouse would sell for the equivalent of $900,000 to $1.3 million yet Japan's low interest rates meant it might only cost about $20,000 to service a mortgage on this property.


Survey of 227 cities in six countries to gauge affordability:

* Canadians fare best, taking 7 years, nine months to pay a mortgage.
* New Zealanders fare worst, taking 18 years, six months of a full wage.
* Los Angeles is most expensive city of 90 rated severely unaffordable.
* Canada's Thunder Bay is the cheapest out of 59 cities ranked affordable.
* 40 cities are rated as moderately unaffordable and 38 are rated as seriously unaffordable.
* Consumers are demanding more urban fringe housing.
* Land values on city fringes increase rapidly after rezoning.
* New York has the world's largest urban footprint, covering eight times the land area of Perth.