Bernard Hickey argues everyone in the entire economy should care when the Grey Lynn Residents Association blocks the development of a new apartment block on Great North Rd

By Bernard Hickey

Sheep farmers in Southland and first home buyers in Palmerston North shouldn't have to care about the exact nature of building consents in Grey Lynn.

But this week it became increasingly clear that all New Zealanders have to care about the housing supply shortages and planning restrictions in Auckland that are acting like a giant handbrake on the economy.

One example of how the isthmus of Auckland has in effect become everyone's back yard was an apparently very local dispute reported in the New Zealand Herald this week.

Local residents in Grey Lynn and Arch Hill voiced their outrage at plans by a developer for a seven storey high block of 30 apartments on Great North Road.

The residents are against more intense development of their leafy suburb close to the CBD.

The developer, Greer Stephens, originally presented a five storey proposal for 20 apartments, but has since upgraded it to seven storeys and 30 apartments and said council officers have indicated their support.

This is despite changes last year to the draft Auckland Unitary Plan that effectively de-intensifed zoning and height restrictions near the CBD.

This followed an anti-intensification campaign against the original draft plan by local residents who didn't want their urban landscape of villas, trees and uninterrupted views of the sea and sky to be blighted by apartment blocks.

Fair enough, most fellow villa owners would say.

Not In My Back Yard is a powerful gravitational force in local politics.

That would all be fine if the only parties affected were local residents. But that is not the case with Auckland.

It has a powerful gravitational force of its own on the entire New Zealand economy, including on those sheep farmers in Southland and the first home buyers in Palmerston.

We have seen that in spades over the last year. Real Estate Institute figures released this week show house price inflation in Auckland and Christchurch was responsible for more than 75% of all the house price inflation nationally in the last year.

The Reserve Bank imposed its speed limit on high Loan to Value Ratio mortgages to reduce some of the risks to the financial system from an over-valued housing market, and the Auckland market in particular.

The IMF is not warning that New Zealand's house prices are 80% above their long term averages relative to rents because of the house prices in Invercargill or Palmerston North.

The Reserve Bank has just increased interest rates by 0.75% and is likely to add another hike by the end of next month, in part because of the pressures on inflation being generated out of the housing market in Auckland.

First home buyers and exporters across the nation are paying the price for the 23% rise in house prices seen over the last two years in the central and eastern suburbs that make up the Auckland isthmus.

They're paying the price in a variety of ways.

First home buyers from Ponsonby to Palmerston North have been dramatically curtailed in the last year because of the high LVR speed limit. Exporters are quietly fuming at the strength in the New Zealand dollar despite 20%-plus falls in the prices of milk powder and logs.

Reserve Bank Governor Graeme Wheeler may well be saying the currency is unsustainably high, but as he was saying it and putting up interest rates it rose even higher.

The Government's sense of frustration is palpable over the inability of Auckland to solve its housing supply and affordability problems.

Last week Environment Minister Amy Adams lodged a submission with the Auckland Council criticising the Auckland Unitary Plan as inflexible, costly and too restrictive to meet the housing needs of an expected rise in Auckland's population to two million by 2031.

She pointed to forecasts that showed the plan's newly de-intensified height rules and limits on 'sprawl' would allow only half the necessary new homes to be built.

Anyone reading her submission would jump straight into an auction room and bid whatever it took to buy land on the isthmus, confident that these restrictions plus the inevitable population growth would generate another tripling over land prices over the next two decade.

Finance Minister Bill English was just as frustrated this week when he told a select committee it was "ridiculous" that the Auckland Council restrictions had effectively made it "illegal to build a house that costs less than NZ$600,000."

English pointed to the residents' backlash against the rules on intensification in the debate last year on the unitary plan. "The Auckland Council got rolled by their ratepayers," he said.

Which takes us back to the "outrage" from the Grey Lynn Residents Association and that of Keith Milne, the villa owner living next door to the proposed seven storey apartment block. Understandably, Milne doesn't want an apartment block in his back yard, even though the developer has reassured the council the building would not shade its neighbours or block views.

But has he and the council thought about what that opposition means for the rest of New Zealand?

This dispute on Great North Road may seem like an intensely local one, but it is one that everyone from Invercargill to Kaitaia should know about because it is symptomatic of a tension between private property rights and the public good that needs to be sorted for the good of the economy.

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A version of this piece has also run in the Herald on Sunday. It is here with permission.

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23 Comments

That is why there needs to be a National Policy Statement regarding housing affordability embedded in the RMA. To give guidance to the local councils and the Environment court. This being a major theme of Friday's Top 10. http://www.interest.co.nz/opinion/70493/fridays-top-10-brendon-harr%C3%A...

Really enjoyed your Top 10 on Friday, Brendon.  This statement from that Chch mum living in a caravan was the most telling for me;
"How my kids see the world now frightens me. They've been so accepting, they don't squabble about not having their own space. It worries me a bit that they won't complain - that this has become normal."
I don't think anyone in NZ would want any of our children to think growing up in a caravan to be 'normal'.  Slippery slope to third world conditions.
 
The Chch rental market should have been regulated immediately in the aftermath of the second quake to prevent the type of price gouging we now see.
 
As for a national policy statement in the RMA .. not sure that is the best way to resolve the problem. I wonder what you think of a regime of regulatory betterment and taking?
 
Betterments need only apply to asset sales or development consents (whichever event is first to take advantage of the betterment) and takings would be applied (as in this case) where a council decides to grant a consent for a non-complying activity. I haven't really thought it through, but the point is presently those taking advantage of a betterment pay nothing for it and those being disadvantaged by the neighbour taking advantage of it, receive no monetary recognition for the taking.
 
Already such a regime has been discussed with respect to a possible means to deal with future climate change risk-reduction policies.

Thank you Kate for your kind words. Those stories had a powerful effect on me too. I think at a certain level unaffordable housing becomes a 'moral' issue. I have compared it to the goverance failings of the Indian and Irish famines. Others have compared the housing affordability campaign as similiar to the campaign against the political/economic system of slavery.
 
I don't really get what you mean about regulatory betterment and taking? Can you explain further?
 
I think that the National Policy Statement in the RMA should be part of a broader housing affordability package. It is not a silver bullet.  I see it as giving weight to the wider communities need for affordable housing against the local Nimby need to not change anything. So I see it as helpful and think the government is playing politics in rejecting co-operating with Labour on this matter.
 
Did you see the details about the Bertaud's seminars? Hopefully that is enlightening.....
 
 

Also referred to as "betterment" and "worsenment" - as in this essay on the topic;
http://leofoley.com/PDF/Betterment(Spain).pdf
 
My point being - nimbyism (to my mind) is a legitimate response to a real property rights issue - just as restrictive zoning is similarly a legitimate property rights issue. Seems to me that if we want a truly permissive planning regime, then there needs to be some method of compensating for "worsenment" and charging for "betterment" as a means to fairly effect such significant changes.
 
I did see your reference to Bertaud - but haven't yet had a chance to study the link. On the issue of affordable houses .. I don't think it realistic to attempt to regulate (i.e., force) commercial sub-division developers into supplying this social requirement.  If there are to be affordable houses built in the manner of Beazley Homes of the past;
http://www.teara.govt.nz/en/photograph/24192/beazley-homes-factory
 
I think it will need to be a government initiative and likely built on government land.  Effectively a replacement programme of state housing stock.
 

I would not want to try to create something new from scratch planning wise. Why not use elements that we know works. Take the best from the likes of Germany and Texas. Plus make incremental changes to our current system, such as the National Policy Statement in the RMA until we get the desired outcome.
 
Obviously the less restrictive the planning regime is the less unearnt 'betterment' will exist. So that would be a good start.
 
You need to read up on Bertaud because forcing developers into supplying a certain amount of 'social' housing is not what he is advocating.

True - less restriction in respect of urban limits means that there would be less windfall gains (i.e., betterment) on the fringes.
 
But that doesn't solve the "worsenment" issue - i.e., the NIMBY issue .. whether it be NIMBYISM at the centre where high rise intensification is desired, or at the rural residential periphery, where low rise intensification is desired. In other words, NIMBYISM exists because there is no compensation regime for those negatively affected by land-use change.
 
Why not create something from scratch planning wise?  The RMA is over 20 years old now - past its use by date; amended more than twice yearly since its enactment and still not satisfying any particular sector in society.  I agree with the idea that if it ain't broke, don't fix it ... but I don't think that is the case with the RMA. I think we've moved on from 1991 and there is a lot more awareness around environmental (and infrastructure) limits.
 

I think this 'worsenment' idea is a can of worms.
 
There would be no certainty about how far property rights extend to. Claims, delays and hidden agendas would be endemic in my opinion.
 
I think it would be better that as much as possible we should move to the German type planning system.
 
Landowners have a right to develop their own land and no right to prevent another landowner the right to develop their land. Unless the municipal plan specifically excludes that type of development.
 
Restrictions being few and permanent in nature.

Really ?  The real producing economy is in the south island.  And rural. Crazy house buyers in Grey Lynn is an odd sideshow.
The Nimbys are not the issue either.
It's the imbalance between production (south) and consumerism (north)

Buried in the last paragraph is the statement from Greer Stephens
"the developer reassured the council the building would not shade its neighbours or block views"
 
How does that work?
 
C'mon Bernard, do you ever sore-thumb test what you read? Do you ever do the "everyman" test? Or is it the man-in-the-street test? Do you ever get outside and take a wander round and have a looksee for yourself. You know - check it out?
 
Over the past 5 years, following interest.co.nz on property and the goings on in Herne Bay and Grey Lynn, many people have poured a lot of money into these areas particularly with Grey Lynn shirt-tailing its next door neighbour Herne Bay. They have paid heavily to buy into a suburb of single-story villas with un-obstructed views of their surroundings, an ambience that has existed for over 100 years
 
That's about to change
 
Watching the development of multi-level units and apartments in my suburb I can assure you that some-one has to be affected. Even a two story house nextdoor to a single level house affects the view. If it's on the northern side, it must affect the late-afternoon winter sun.
 
Worst of all will be parking of 30-60 residents cars. Plus another 10 or so for visitors. Even with underground car-parking, they dont use it until last thing at night. That's if they can be bothered. That affects the neighbourhood for 100's of metres either side. But Great North Road. Laughable.
 
My sympathies to Keith Milne. He's been done. He's a goner, whether it's 3, 5 or 7 stories high. At 4 units per level it will have a dominating presence. He should rescue his investment and get out now. If he can.

That's why we need effective public transport - we shouldn't be planning for more cars in Auckland, it's the very cause of so many of our problems.  These people need to get over themselves and realise that they're living in the centre of an international city.
 
If they want a view, move to the North Shore.

your point i agree with but your example has twisted the argument. 
the grey lynn objection is not about the intensification it is about rules and whether they should be broken so one person can make a short term profit at the expense of many others incurring a long term loss.
the rules allow a 4 level building both now and with the proposed plan. why should a 7 storey building be built?  there is plenty of land available in the proposed unitary plan for 7 level buildings but not on the land he has in grey lynn.
if it is allowed im sure there wont be any objection for the villa owner next door to build an 8 level building or to build a chemical storage facility. 
 

Only one person makes a profit? I'd argue the benefits are shared - intensification tends to more affordable property.

your point i agree with but your example has twisted the argument. 
the grey lynn objection is not about the intensification it is about rules and whether they should be broken so one person can make a short term profit at the expense of many others incurring a long term loss.
the rules allow a 4 level building both now and with the proposed plan. why should a 7 storey building be built?  there is plenty of land available in the proposed unitary plan for 7 level buildings but not on the land he has in grey lynn.
if it is allowed im sure there wont be any objection for the villa owner next door to build an 8 level building or to build a chemical storage facility. 
 

So why do we not deal with the issue  - an expected rise in Auckland's population to two million by 2031.
The primary resources of NZ are not limlitless and do not have an unlimited ability to cope with an ever increasing population. Solving housing  through building/intensification, land release or whatever will not alter the fact that each new arrival (via birth or otherwise) brings with it a demand on resources we cannot possibly meet.  We are already beyond maximum capacity.....

Just allow Auckland to grow outwards. Cities are supposed to grow bigger as population increases. The problem we have is that the Auckland council is trying to restrict that.

Local ratepayers tried stopping development at Long Bay and Waimauku. Lots of Nimbys with Lifestyle blocks.

Exactly - no matter whether it is an up or out solution (or both) - there are NIMBYs in both places. And that is perfectly understandable.

The answer is simple. Give the government the power to overrule nimby backed councils.
What is the government for, if not to look after the country's best interests?  
Ohh, wait, MP's own how much property?

Bernard
You are niave if you think this 7 v 5 stories carry-on will have any effect of housing affordability, Yes we have plan to intensify Auckland but 'oversupply' will not occur and certainly a developer such as this has no interest in doing so, this is totally about making more money for Mr Stephen. Fair enough I here you libertarian types say - business is business, but  please don't claim that 'supply and demand' will provide, 'supply and demand'  is in action here but the demand is for a stable growth asset not for an affordable roof over ones head
Neven
 

Conservative Aucklanders have been holding back the city for decades.  Failure to effectively develop the isthmus (including blocking comprehensive public transport) is one of the reasons we fail to attract genuine talent - they want to live in a truly world class city, not a piecemeal hatchet job dominated by whinging baby boomers.
 
The 'not my backyard' mentality continues to hold us back and it's one of the main reasons I'll get out of here once I've accomplished what I need to.

There is another side to this.
People who sell there property do so on the basis of the unitary plan rules in place or what is being signalled. If the council is going to chop and change rules at will I don't really see that as fair.
What I'm saying is that people who sell there property when it is zoned to 4 stories effectively have lost money. If it is now going to be 7 stories the land is now overnight worth significantly more before a spade goes in the ground.
So what we need is clarity and we need it as soon as possible. Otherwise people will just hold onto their property and not sell which will further increase prices due to lack of supply.

ACT Epsom candidate David Seymour's remarks in this The Nation interview were pretty telling. And how do they reconcile with party leader Jamie Whyte's policy to weaken the RMA? Would the real ACT Party please stand up?

http://www.tv3.co.nz/THE-NATION-The-Nation-Sunday-June-8-2014/tabid/3692...

David Seymour: “And they do not want their neighbourhoods intensified with eight story towers next to their homes…”
Julie Anne Genter: "So this is interesting, because this is supposedly the free market party arguing for regulation of higher prices where land values are high, where people want to live..."
Seymour: "What I'm arguing is that the people of Epsom have bought into certain property rights and the character of their community..."

Yes, I thought that hilarious when I heard it. But the point is, ACT supporters are the biggest of the NIMBYs around - hence the reason they argue for AKL going out not up .. and feed the line that the MUL is killing Auckland. Indeed they just don't want up - or even multi-unit, single story sub-divisions next door. The further out the poor folks go the better.