Productivity Commission slams Auckland’s failed housing system

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By Leith van Onselen

New Zealand’s Productivity Commission (PC) has released a new report entitled “Urban planning – moving beyond the wheel spin”, which examines the current urban planning system in New Zealand and provides recommendations for a better-performing system.

Unfortunately, I am not able to download the full PDF report, so instead I have to rely on Interest.co.nz’s Alex Tarrant, who has examined the report:

Auckland’s well-documented housing and infrastructure issues are front and centre of the Productivity Commission’s documentation of New Zealand’s urban planning system failures.

New Zealand’s largest city is mentioned 723 times in the 516-page report calling for widespread reform of the system, including a scrapping of the Resource Management Act in favour of new less restrictive legislation, and greater central government guidance on urban planning.

The Commission puts it bluntly, suggesting problems faced in Auckland are like a cancer that has spread to other parts of the country:
“The example of Auckland illustrates some central failures of the current system.”

“Auckland, home to a third of New Zealand’s people, has been and is still experiencing extremely fast population growth. Aucklanders, armed with the system’s planning tools, have struggled to respond to this pressure either by providing greater density in central parts or by expanding outwards at the city’s boundaries,” it says.

“While some specific interests have benefited, the resulting scarcity has driven a protracted land and house price spiral that has been socially and economically harmful. It has now adversely affected many parts of New Zealand and many New Zealanders.”

Restrictive land-use regulation including policies preventing intensification of historic suburbs surrounding the city centre, poor transport links, and, most of all, funding constraints, have all played a part.

So basically, Auckland’s housing system is under siege from the combination of rapid population growth butting heads with a dysfunctional planning system, which is unable to cope with the population influx. The end result of which is Auckland experiencing rampant house price inflation and becoming one of the world’s most expensive cities:

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Auckland median house price

The bad news is that without radical planning reform, or a dramatic cut to immigration, the situation in Auckland is set to worsen.

Immigration into New Zealand is running at break-neck pace:

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NZ Net Migration

Recent population projections from Statistics New Zealand estimated that Auckland’s population will rise between 37% (low growth scenario) and 75% (high growth scenario) between 2013 and 2043:

ScreenHunter_17596 Feb. 22 09.13

Driven by mass immigration:

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Auckland will continue to be New Zealand’s fastest growing region. Among regions, Auckland is projected to receive over half New Zealand’s net migration, and account for over half the country’s growth in the period to 2043…

ScreenHunter_17595 Feb. 22 08.53

Sure, the planning system obviously needs to be fixed. But something also needs to be done to stem demand, including the deluge of new migrants projected to inundate Auckland over coming decades.

Why not address the problem at its source and reduce immigration to sensible and sustainable levels?

[email protected]

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About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.