Auckland supply reforms fail affordability test

By Leith van Onselen

NZ Labour has hit out the “Unitary Plan” for Auckland’s housing market (explained last week) after modelling revealed that just 15% of new homes would be priced under $800,000, and fewer than 2% would be priced under $600,000. From

Labour leader Andrew Little said Government support for the plan’s housing provisions showed it was “more out of touch than anyone expected”.

“National just doesn’t get it. People need affordable homes to live in”…

“Nick Smith has got the idea from an economics text book that if you just build loads of expensive homes then naturally the price of all homes will come down. He needs to come and live in the real world.”

The biggest problem that I see with the “Unitary Plan” is that it has maintained Auckland’s Rural Urban Boundary (RUB) – albeit expanded it by 30% – leaving incentives in place for developers to continue cornering the land market, drip feeding supply, and maintaining high prices.

As explained last week, the only thing that keeps any market competitive is the continual freedom of entry into it by new players. Remove this ability, say via a growth boundary, and the market ceases to function properly allowing players to “corner supply”, such as via land banking, as is currently the case throughout New Zealand, Australia and other markets running such urban containment policies.

As long as the RUB remains in place, incentives to “land bank” and speculate will remain.

By contrast, removing the RUB altogether would increase competition among both developers and land owners, thereby driving down the cost of land/housing. The existence of high levels of competition would, in turn, make land banking particularly risky, as another nearby owner would always have the opportunity to move to the market ahead of the land banking developer.

Make no mistake, I am not advocating “open slather” development. If land needs to be preserved for environmental or social reasons, by all means the Government should do so. But it should not prevent an adjacent landowner or a landowner further afield from developing their land merely because it sits on the wrong side of an arbitrary barrier, such as the RUB.

Subject to minimum standards being met, there should be nothing to stop a rural landowner from using their land how they see fit, whether it be for commercial use or subdivision into urban lots. Moreover, there should be nothing stopping a visionary capitalist from building a whole new city, attracting employees and businesses to it with very low land costs, as has occurred with the award winning Woodlands development near Houston, Texas, but would be next to impossible in New Zealand or Australia.

Open competition underpinned by the right to develop (subject to minimum standards being met), is the key to lowering land costs and ensuring that housing becomes more affordable and the economy competitive.

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  1. I can see NZ and Tasmania soon becoming bug out havens, NZ original RE ramp up was due to cashed up anglophones during the heady days in the run up to the GFC, due to nascent fears about all the ME wars and potential blow back post 9/11. Know of some well heeled aussies and overseas sorts that are doing recon on it right now, so yeah, why would RE industry participants structure development to service lower socioeconomic locals when the profit is in servicing the needs of more wealthy clients.

    Disheveled Marsupial…. the market always knows better…. right – ??????

    • It’s ok, the locals will find that wealthy clients also have more and better things to be robbed off. And boy, do those new McMansions burn a treat…

      • I don’t know…. the Rastafari in Aoteraroa mobs would make great private security details, not to mention all the overflow from decades of ME and Stans conflict Xe – Triple Canopy can’t employ them all…

        Disheveled Marsupial…. and even in the US we can see that for all the weapons around everyone just shoots each other…. cascading psychotic episodes like bubble wrap…


    … A bubble lunatic asylum …

    New Zealand’s homes top an ‘obscene’ $900 billion combined value | Rob Stock |

    18 May 2016

    Labour support on city limits welcomed … Nick Smith … NZ Government

    2 June 2016

    New policy proposed for urban development … Nick Smith … New Zealand Government

  3. New Zealand Government must provide leadership[ on the bond financing of infrastructure … Texas Municipal Utility District style …

    National extends lead over Labour to highest in over a year. Pollster Roy Morgan says its because Government unveiled a $1 billion housing infrastructure fund |

    … extract …

    … “In further good news for National the Roy Morgan Government Confidence Rating increased strongly to 127pts (up 6.5pts) in July. The large jump in support comes immediately after Prime Minister John Key announced a $1 billion housing infrastructure reserve in early July.

    The infrastructure reserve will fund the construction of tens of thousands of new homes in high growth centres including Auckland, Christchurch, Queenstown and Tauranga. The funding will provide interest free loans to councils to help build new roads and other infrastructure needed to support new housing in these important growth centres.

    “Housing affordability and the shortage of housing is one of the key issues mentioned by New Zealanders when asked about the most important problems facing New Zealand (mentioned by 9% of New Zealanders in April 2016) as shown by the last ‘Most Important Problems facing New Zealand’ release available here.” … read more via hyperlink above …


    261 comments at The Standard on the Roy Morgan poll by 4.45pm Friday …