It also leads to greater productivity and economic growth through people working close together, more viable public transport and better use of existing infrastructure such as water pipes, phone lines and schools.
Intensification also has a combined effect, says regional strategy manager Ree Anderson, as more people require more shops and services, which in turn attract more people and create a vibrant, thriving neighbourhood.
She cites the opening of two new supermarkets in downtown Auckland in response to an influx of more than 25,000 inner city residents over the past 15 years.
Getting people into smaller homes is also one of the council's main weapons for solving the city's housing crisis. Auckland is currently about 10,000 homes short and construction in the city has nosedived because of the global economic recession and the need to rebuild earthquake-shattered Christchurch. Median house prices, which nudge the $500,000 mark, are 6.4 times the average household income - less affordable than New York and Los Angeles.
The council predicts that by 2041, seven out of 10 households will be unable to afford a relatively cheap house at $400,000 or more in today's dollars.
The plan says a large part of the problem is a mismatch between house sizes and people's needs and ability to pay. The size of the average household has shrunk in the last 20 years but the size of a typical stand-alone Auckland home has grown by 35 per cent from 144sq m in 1991 to 220sq m last year. Our houses are second in size only to Australia's and more than twice as big as those in many European countries. More than two-thirds have three or more bedrooms, even though nearly half of all households consist of only one or two people.
Anderson says people may have to accept smaller homes in higher density neighbourhoods if housing is to become more affordable.
There are benefits beyond the obvious drop in the house price, she says. "If you start to add in other costs, for example transport costs, then that affects the whole affordability of living for people."
She rejects the idea that planners are trying to tell people where and how to live. On the contrary, she says, it's about giving people more choices, as she found when she met with a group of new immigrants in West Auckland.
"Some of those communities were saying, 'please provide us with enhanced services for rail because we will use the train and we will live in more intensified houses, and give us broadband', because they'll use their technology on the train."
The compact city plan is inextricably linked to the council's enthusiasm for more public transport and fewer car journeys.
The Auckland Plan envisages an ideal neighbourhood of high-density homes, where residents walk 15 minutes or cycle five minutes to the local shops - surely not a practical alternative to the typical Auckland family's weekly supermarket shop by car?
No, says Anderson, but at least the compact city model ensures everyone has a choice. "For those people who can't drive - say if you're elderly or disabled - there's another option."
The Productivity Commission, which published its findings on house affordability in March, argues that the council's analysis misses the point for ideological reasons. It says the biggest factor in rising house prices is the price of land, especially in Auckland where sections cost almost twice the national average.
Commission chairman Murray Sherwin says the main problem is the council's adherence to the rural-urban boundary, which restricts land supply and pushes up prices. He has also questioned the reliability of two of its key supporting arguments for the compact city - lower infrastructure costs and better public transport use.
Writing in the Herald last year, Sherwin said intensification in existing suburbs could still be expensive for ratepayers if ageing services like water and sewerage needed upgrading. He predicted many home-buyers would probably still drive to work, as public transport tended to serve the central city, yet only 12 per cent of workers were based in the CBD.
Chief planning officer Roger Blakeley says the plan is already pushing out into the countryside. The revised version allows for up to 160,000 homes outside the rural-urban boundary - bigger than the old Manukau City - in selected areas, such as south of Orewa, between West Harbour and Kumeu and south and west of Papakura.
The council also believes the commission is downplaying other important factors such as building costs, which are up to 30 per cent higher than Australia's. It costs $167,271 to build a typical house in Auckland, compared to $118,107 in Melbourne and $121,873 on the Gold Coast.
To read the full plan, go to http://www.aucklandcouncil.govt.nz/EN/AboutCouncil/meetingsagendas/governingbody/Pages/home.aspx
