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By choosing the wrong definition of 'affordability', Auckland Council's Unitary Plan ends up focused on the wrong goals says Dale Smith

Property
By choosing the wrong definition of 'affordability', Auckland Council's Unitary Plan ends up focused on the wrong goals says Dale Smith
Dale Smith explains the likely outcomes if the Auckland Unitary Plan is adopted without changes

By Dale Smith*

The Auckland Unitary Plan is 'designed' to make housing less affordable for most buyers.

To understand why this maybe so and who would benefit from this happening, we need to first define what ‘affordable’ means as the word has a number of international, and institutional definitions.

The reason why it is important to use the right definition is that depending on which definition you go with, will get totally different results of what is affordable.

Or if you already know the outcome you want, then you can chose the definition to match.

Imagine being able to say you are providing affordable housing even as the prices increase.

And just to help with the confusion New Zealand has no legislative or regulatory definition of what affordable housing means so the debate usually starts with no consensus among our local and national political leaders.

Hardly a good place to start.

First step - defining 'affordability'

One definition that is used  by the World Bank, the United Nations, Harvard University Joint Centre on Housing and is quoted extensively by NZ political parties and the media is the definition developed  by the Demographia International Housing Affordability Survey which uses the 'Median Multiple' (median house price divided by gross annual median household income) to assess housing affordability.

This approach not only compares housing affordability at the metropolitan market level, and within nations, but also permits comparisons between international markets where there are historical similarities. Therefore we can compare how affordable housing is in NZ with say Los Angeles and Vancouver.

In the Unitary Plan, Auckland Council looked at a number of definitions including the Demographia definition. However, it favoured definitions as used in the United Kingdom where ‘affordable housing’ is a term that is used for people who are not eligible for “social” housing, but still need assistance (council intervention) to either secure home ownership or a long-term rental.

In other words it is social housing by another name and is now targeted at those in household income bands from 80% to 120% of the median household income.

It’s a sad indictment that those needing social housing assistance has increased to include those of the middle class.

The Auckland Council, for the purposes of the Action Plan have said that the definition that they will use is based on another international benchmark that parallels the favoured United Kingdom definition, in that households should not spend more than 30% of gross household income on housing costs.

Although having done this, they then use the word affordable without any further reference as to whether the housing that they might make affordable by any action of the Unitary Plan is actually affordable to this defined group.

By choosing this definition it allows the Auckland Council to limit what ‘affordable’ means, and for it to make the comparison only within its own metropolitan area, or at least no further than the national level. Rather than it be a definition that applies to all housing and can be compared internationally.

So why would the Auckland Council want to limit the definition?

Could it be because it is trying to avoid the embarrassing comparison that shows NZ housing, at all levels are some of the most unaffordable in the world?

This will be part of it, but the real reason is so council, in their own words are, "... looking for new tools and techniques that help to broaden the revenue base across a wider range of steps in the development process ….. have identified affordable housing as being a particular area where new tools are needed."

And "...is looking at additional tools to help plan for and fund desired improvement to services and infrastructure to support more sustainable neighbourhoods."

"And that one aspect of sustainable neighbourhoods is housing affordability ... the Council has determined that it needs to take a more ‘proactive’ role in enabling affordable housing."

The drive for revenue

Seen in this light, the councils lack of action in providing truly affordable housing, that is housing that is more affordable for everyone, now makes sense. 

Council have admitted they are going to need to increase revenue to provide their version of affordable housing, and under the guise of affordable housing can introduce new tools that create more revenue.

It’s a feedback loop whose sole purpose is to increase council revenue.

This can be further seen in the structure of the Rural Urban Boundary (RUB) that has clearly define plans that limits where urban growth can and cannot go over the next thirty years with  newly identified land within the RUB  being zoned ‘future urban’.

This land will not be released for urban development all at once but in a staged and a managed release that will occur in approximately 10 year steps.

The RUB goes on to further say "Operative zoning and bulk service infrastructure will need to be in place before land can be released for development and in order for this to occur, detailed structure planning, catchment management planning and plan changes to the Unitary Plan will need to be made to introduce new zones and planning provisions for the subject land. Once planning is complete land release could occur from late in the first decade wards."

And furthermore the Unitary Plan expects growth to grow off existing council infrastructure, which they have already admitted will only be supplied to the market once sufficient demand has developed.

Since most council infrastructure projects are multi-million dollar projects, demand will have to build up for many years before they will supply that infrastructure.

This monopoly approach of when and if they develop infrastructure also allows them to further restrict expansion of the urban limit if they want to.

Land prices will rise

The two actions of identifying which land will be future residential (future urban) and then limiting its supply to the market by planning controls and infrastructure will ensure the price of land will rise dramatically.

These type of price increases add costs which are known as non-value added costs, that is the price increases without any real value being added. If you are the section purchaser you might call this waste, or if you are the lucky land owner, a super profit.

The next question is, ‘if council is looking for revenue raising tools, how will increasing the rural land value for the land owner help Council?’

How the Council will capture revenue

One tool Council are promoting that answers this question is Value Capture, or Shared land value uplift (SLVU).

This option allows council to receive a portion of the increase in value in the land to fund affordable housing or physical infrastructure needed to support planned growth. It is in the council’s best interest to make sure the land increases in value.

The other option council is promoting is called Inclusionary Zoning (IZ).

This is where the developer has to provide residential sections to council for free, or the money in lieu.

Council then use this free land to provide more ‘affordable’ (to suitably qualified persons) housing. Council admit for this to happen would require a well-funded and established Community Housing Organisation. 

This is like having to give money compulsory but on the pre-text of the money going to a charity organisation (even though you need it yourself) and then finding most of it went on the administration.

And an increase in house prices is not the only negative the house purchasers have to look forward to. As builders try to keep house price rises as low as possible (because they have had to pay so much for the land), they will build lower quality or smaller homes or both, so home owners get both a higher priced house that is also of lower quality and/or smaller.

As already mentioned the Auckland Unitary Plan will be a great revenue generator for council and can only result in increased house prices and more unaffordable housing.

Using density to justify rail

But there is one more benefit the Council will achieve with the Unitary Plan if it is adopted, and that it is setting up the pre-conditions for rail through forced high density development.

Yes many people love living in high density, but not enough to financially justify the need for rail which needs a very large number of commuters within walking distance of the transit stations to work. And of course one of the reasons you may need to walk, is once you have spent all your money on your overpriced high density house, you do not have enough money for any other form of transport.

A plan for People, or people for a Plan?

The Unitary Plan is nothing more than a revenue collecting and funding mechanism for a variety of council projects, including new projects of subsidised housing and rail transport. It will raise revenue by increasing land and developments costs.

Auckland needs more housing choice at truly affordable prices (as defined by the Demographia definition) that makes housing more affordable across the board but unless you want to become a subsidised ward of local government, the Unitary Plan will only increase the cost of your housing.

It should not be approved in its present form.

------------------------------------------------------

Dale Smith runs a private consultancy specialising in research, development, marketing and sales strategies, and 'developing at the rate-of-demand strategies' for urban developments. You can contact him here »

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39 Comments

Thak you for a great read.

I believe affordable housing is not coming because of this

 

How much land is required to house an extra 1 million people?

The simple answer is to look at Auckland now

Population: 1.377 million (Jun 2011)
Area: 1,086 km²

That is roughly 750 km² for 1 million people

As this population increase is happening over the next 30 years that is 25 km² of land to be converted to residential every single year for the next 30 years

Who believes the Council, or the Government is going to release that much land?

It is not going to happen

Lets look at it another way

Assuming four people per house (two parents and two children) we need 250.000 houses
If each house sits on a 500 m² section that is a total of 125,000,000 m² of land required.
As there are 1,000,000 m²  in one km² of  land that is 125 km² of of land needed.
But that is just the land for houses. What about land for
Roads to get to those houses
Schools - say 300,000 kids requiring about 300 schools
Shopping Centres
Hospitals
Police and Fire stations
And so on

Clearly they are going to need over this 125 km² of of land. Lets say an additional 25 km² for these extras. That is a total of 150 km² over 30 years OR
5 km² of land every year for the next 30 years

It is not going to happen

So let us look at apartment blocks
The Council say no higher than eight stories.
If each apartment is on an outside wall in order to have a view (of the other apartments no doubt)  then
There will be one apartment on each corner and, say one in-between those corner apartments. Any more and there will be too much wasted space in the centre.
A total of eight apartments per level that is sixty four apartments per building
As a total of 250,000 apartments are needed (see above) that is a total of 3,900 apartment blocks
So there needs to be built 130 apartment blocks every year for the next 30 years

It is not going to happen.

To conclude
Auckland house prices are not in a bubble
Within a few short years you will not be able to buy a house in Auckland for under $1 million
Camping grounds will become overcrouded
Homelessness will be everywhere and
Within 10 years Auckland will become a third world slum

Thank goodness i don't live there

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Your analysis is spot on. The mathamatics are clear, as are your opinions, but I doubt Auckland will become a "third world slum" within 10 years. I hope it never does!

We could also define our own version of affordable housing, a Kiwi version! Who cares what people in Los Angeles are paying for houses? Or anywhere for that matter Why do we choose to follow systems and practices that have failed repeatedly? Why do we pay attention to institutions created elsewhere for other people, and who knows for what purpose?

Why do we heed?

HGW

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Hi Hevi – Yes it is important that we care whether housing is affordable, on a realtive basis with other countries. Remember, when as kids you wouldn’t eat your veges and Mum would make some comparison with a third world country so you would realise how lucky you were.

Well there is some ungrateful home owner in Texas who thought they were paying too much for their housing until someone pointed out how much we pay for housing in NZ.

It’s not that we should be aspiring for more material wealth, but what we have should not be costing us so much.  And remember, we did have our own definition of Kiwi affordability; it’s just that we cannot afford it anymore.

 

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Judging by your reply I can see I misplaced my question.

I doubts anybody in Texas cares about what happens in NZ.

I grew up in a "third world country" and let me tell you that for $100k NZ one can buy a brick and mortar house that withstands earthquakes, has 3 or 4 bedrooms, parquet floors, custom made windows and probably a maid or two... Your comparison is very poor and your answer is bleak.

HGW

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Hi Hevi – Not sure I still understand where you think NZ should be in terms of housing, but I do agree that we should not be following a lot of what is happening overseas, the British property planning system as one example. Your example of a ‘third world’ country where they can buy a nice home for 100k is exactly my point, except we should be able to do that in NZ, just like they can do in Texas, which like us, is a ‘first world’ country. I do think that there is a uniquely NZ lifestyle that we are losing, part of the reason, I think, is that families are increasing having to work longer hours to make ends meet, because of housing costs in particular, which means we do not have time or the money to take advantage of what NZ has to offer. I don’t care whether people choose to live in high density or low density, but I do care when I see that we are paying for huge non value added (waste) costs for all our housing.  I’m not saying we need more material wealth (maybe even less). What we need is the supply of land and housing without the added non-value costs.   Housing, as a basic requirement, should not be used by councils in particular who have a monopoly (dictatorship) position, as an open ended revenue collection system. You used to be able to buy a house in NZ at 3x medium household income, and having been involved in the property development industry since then in both NZ and Texas, the reasons why you now cannot, and the solutions are obvious to me.  

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Hello Dale, I just spent the best part of an hour explaining my point of view regarding this issue. However when I tried posting it, it vanished! I will try to reply again tomorrow for this is a very important topic for me since my family now lives here and will stay here for a while.

Thank you for taking the time to reply. I appreciate your effort and good will. Keep up the good work.

Sincerely,

HGW

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Good article and great comment Mike; numbers don't lie. 

 

I have no doubt that the private sector, given a chance, could meet most of the demand considering the potential profits on offer.  The hand brake that is the council is certainly the problem, can we privatise the council?

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yes - their definition of 'affordability' is wrong.

 

So is Demographia's.

 

So are all attempts to look at the future, which refer to money (an artificial, man-invented proxy) without looking at the limits of the physical planet.

 

We have to move the debate past such folk. Overdue to do so, in fact. We may not even be able to maintain a 'steady-state' economy with the resources we have now, let alone the 'growing' one that both 'sides' laud.

 

Housing built now has to live through this:

http://www.smithsonianmag.com/science-nature/Looking-Back-on-the-Limits-of-Growth.html

 

Which means that insisting on looking at things in $ terms is stupid.

 

There are two types who realise what is coming: the altruistic who suggest that urban rail is a good idea, and the selfish types who want to own what will be left.

 

Then there are the slow ones left behind, still debating yesterday.

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We haven't really been steady state for some time PDK. I reckon that limits of growth is optimistic, just think when peak services was in New Zealand? I would say Roger Douglas kicked that off and by the time student loans came in we were well past it.

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Brlliant commentary!

It is not only local government that benefits from ever increasing house prices. There are a few other leaches attached to that body, and that body is ours! it is our time and energy they are tapping into, and that of our children..., and grand-children!

The question is what to do?

HGW

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Someone' sucked in by pathetic sensationalist Herald reporting.

 

It's always been 2 storeys Permitted, 3 Constrolled etc. If Herald reporters can't read a District Plan don't know the difference between the various Resourec Consent statuses they should be fired - unless they do know and are just trying to cause a sensation.

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For affordable housing you actually need to incentivise it. Currently the only way for developers to make money is to build mcmansions. What that does is pull the average sale price up of all property and it does nothing to make housing affordable. 

Make small to medium new houses more profitable for developers and they will start to build more.

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The article has a clear view that the Unitary Plan is all about gaining extra Council revenue and supporting the Council's preference for its' train system.

Assuming the revenue point is valid, what then is the revenue to be used for? The article is a little less clear on this, (and sort of, it seems to me, tries to leave the impression that it is about power hungry councillors just wanting more money to play with), but there are clear clues that the two main needs for the money are to build extra infrastructure to support new housing, and to help lower to middle class people afford to buy or rent houses in some way.

Both of these seem reasonable objectives; and meet Auckland's stated vision of trying to be the world's most liveable city.

Worrying about affordability for the wealthiest among us is not really important; we've either been on the ladder long enough for that not to be a worry; or incomes are high enough to manage. In any case if they are not, then across the top end market, prices will come down.

We also want and need middle class people to be able to live here; and preferably to enjoy the benefits of a great city. Ideally not stuck tens of miles away (unless they really prefer to be). There are social housing models to manage that; whether enforced proportions of any development; or direct subsidies in some way.

Some focus on transport systems is critical.

Overall, a key to affordability seems to be to build enough residences. The market will then find a way of pricing those residences to meet the market; assuming most property owners would prefer some income to none.

So by my reading, the author helps explain the Unitary Plan, but does not make a good case against it.

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Stephen L – You raise some good points, I would not call the councillors power hungry – although this would be true to a certain degree.

 

The quote of ‘It is hard to make people understand, when there salary is dependent on them not understanding,’ would be more appropriate.

 

The point I would make is 1) Every time an extra middleman is added into the chain, then there is an extra cost. This cost maybe legitimate if a value greater than that cost is achieved, but if not, then it should not be there. 2) Even if the value is greater than the cost, is the middleman in question (council in this case) the most efficient organisation to deliver the desired value.

 

My contention is that there are many unnecessary costs added to the delivery of land, and that of the costs that are necessary, council is not always the best organisation to supply them. For example, the promotion of gravity feed waste water infrastructure for new subdivisions is yesterday’s technology when modern STEP type systems are cheaper and more environmentally friendly. Council, having inherited the older gravity feed systems, need the development levies from the new subdivisions (brown or greenfield’s) to subsidise the upgrade of the existing gravity feed system. And the reason it needs upgraded is not due to the extra demand on the system from the new houses (in part), but because the present system is in need of an upgrade anyway due to previous councils have not kept up with capital replacement.

 

And finally, there will always be a need to some subsidised organisation (public or private) to provide social housing to a certain portion of the population, but when that now includes the middleclass, and under the guise of ‘affordable’ housing, then something is wrong.

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Dale,

Am sympathetic to the idea that Auckland City Council just may have a number of Humphries in their bureaucracy protecting their jobs; and also to the broad principle that more middlemen are usually not an advance. I also don't know much about wastewater systems, so am willing to defer to you on that (as long as it doesn't mean a septic tank in everyone's back yard).

 

Some middlemen though sometimes are helpful, as the leaky homes debacle proved (although that case may well have us now overreacting too much with bureaucracy).

 

Good elected councillors (as opposed to the bureaucrats) should ideally look for a reasonable balance- am not sure if we have that in Auckland or not.

 

Regardless, the Unitary Plan seems more about having a detailed plan of what sorts of properties can be built where (having made considerable changes to the status quo in that regard); with assumptions around how many of each type actually will be built. I don't think it really defines that we must also be overbureacratic in managing to it. That is a separate issue to fix, if it needs fixing.

 

It then has plans for infrastructure to support the new plans, and makes assumptions about how that will be paid for. Objectors to the plans seem to be either NIMBY status quo supporters, or laissez faire developers who are happy to have the costs of the resulting infrastructure foisted on someone else- primarily existing ratepayers. These latter objectors don't seem to be saying that the Unitary Plan cannot deliver the numbers of houses; but that they might be too expensive. I would let the market decide what type of houses to build within the parameters of the plan, understanding that whatever plan or non plan is used, low-middle class people may now need a subsidy of some sort in either rent or purchase.

 

On a separate note; the fact the middle class now struggle to afford housing without subsidies is far more a factor of income inequality in a modern world (and the fact we have put subsidies like accommodation supplements and WFF in, which become self fulfilling on their effect on rents, house prices and so on- albeit I can't think of an easy solution to get back out of such subsidies). That issue is more in the remit of central government and the Reserve Bank than the Council. 

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I reckon my 280m2 house in Greenhithe will be $1.2M when finished, having a rebuild. I will only have a $250K mortgage though. Thanks Len, I laud you for increasing my house value. I am sure you will rape me though thru rates.

Places like Greenhithe will only increase in value as the UP does not have high rises coming here, When people get sick of high density livinng people will be crawling over themseles to live in open high rise free Greenhithe.

Anyone want to offer me $1.4M?

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Low interest rates are going to force NZ properties in a Japan senario.

from 2005

"The biggest lesson from Japan is not to fall into the same state of denial that existed here," said Yukio Noguchi, a finance professor at Waseda University in Tokyo who is perhaps the leading authority on the Japanese bubble.

"During a bubble, people don't believe that prices will fall," he said. "This has been proven wrong so many times in the past. But there's something in human nature that makes us unable to learn from history."

Homeowners were among the biggest victims of the Japanese real estate bubble. In Japan's six largest cities, residential prices dropped 64 percent from 1991 to last year. By most estimates, millions of homebuyers took substantial losses on the largest purchase of their lives.

Their experiences contain many warnings. One is to shun the sort of temptations that appear in red-hot real estate markets, particularly the use of risky or exotic loans to borrow beyond one's means. Another is to avoid property that may be hard to unload when the market cools.

http://www.nytimes.com/2005/12/25/business/yourmoney/25japan.html?pagewanted=all&_r=0
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Wow AndrewJ!  Prices about to crash 65% you say!  I take it you'll be selling your Auckland house for cheap then?  Please post the link to your TradeMe add, I'll do you a favor and offer you only 50% below it's current market value and help you avoid some of those 65% loses. 

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No what Im trying to say is that low interest rates will destroy capital. The warning from Japan is just to point out that you won't see it coming. Group thinking is dangerous.

  I could make some predictions like Fonterra is totally up to its neck in it. Sheep and beef exports will crash after the drought. The government is going to find it hard to pay its way, more retrenchment, in the State sector and more taxes. Heartache on the farm.

  The lower the interest rates go the worse its going to get. 

 

from the same link

 

"It was déjà vu," Professor Noguchi said. "People were in a rush to buy, and at extraordinary prices. I saw this same haste psychology in Japan" in the 1980's. "The classic definition of a bubble," he added, "is people buying on false expectations about future prices, and buying with the hope of selling in the future."

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I reckon my 280m2 house in Greenhithe will be $1.2M when finished, having a rebuild. I will only have a $250K mortgage though. Thanks Len, I laud you for increasing my house value. I am sure you will rape me though thru rates.

Places like Greenhithe will only increase in value as the UP does not have high rises coming here, When people get sick of high density livinng people will be crawling over themseles to live in open high rise free Greenhithe.

Anyone want to offer me $1.4M?

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Len should not be trying to build a socialist Nivarna out of NZ's largest city.

Does the Government know about this?

This Unitary plan needs to be stopped. 

Its like Len is living on another planet. Household debt needs to go down. The Country can't afford another debt binge. 

 

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Kiwi - it would be good if he was.

 

That link I added upthread, the graph was run with 'double resources' - which is to say: another planet.

 

Made diddly-squat to the outcome.

 

Which means Dale's comments about sewers (I presume he means 'as in serviced', not 'stand alone') miss the big picture, completely. Also means that cornucopians calling socialists names, is just pathetic. Is it possible we can raise the level of debate?

 

  I served on a County Council, anguished over such as 'to sewer or not to sewer', whether to use gravity, who would need pumped, where it would go, how to dispose. Even then - pre  '89, I knew enough to reckon that the next lot of pipes might be the last that went in, that LA's would be triaging flat-out after Peak Oil (which I then reckoned to be between 2000-2010) and that the more of the system that worked unassisted, the better.

 

My apologies, I didn't know then about the probability of a permanent GFC skewing the pitchthis early  - I learned of that when I looked around for the signs that the underwrite had peaked - looked at the bubble, and figured it out. As you'll see from the graph in the link, they have it later, but then, banks weren't quite so far ahead of themselves in 1970. The more you're levered, the further you trip.

 

LG will be permanently strapped, and will be in more triage mode as time goes on. A lot of them are starting to catch on, at least down this way. Compact is best, as it is served by the least infrastructure, and downhill drains best. But - whether that is the best social format, I dunno. You have to bring food in, waste out, and do the Panem et Cirencensus  thing to keep the restlessness at bay.

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Hi Powerdownkiwi- STEP systems can operate as either part of a community based system or stand-alone (but does need a certain amount of space), as I’m sure you will know. And I would presume your system is stand alone, but then you have enough space?

Waste comes in many forms and is natural to a point, but that does not mean we should encourage it a la the Auckland Unitary Plan.

Altruism, as you mentioned in an earlier comment, is truly an amazing innate behaviour, but it can hardly be claimed to be as such when the behaviour is coerced from the individual, and the individuals who benefit from such coercion, knowing they are being subsidised, are egoistic by default.

 

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Nice point.

One has to be a part of a community for some time to appreciate what you and powerdown are getting at. Only then can you see the degeneration. What was. What is now. As time goes by, as more and more people arrive from other places, less pleasant places whence they escape from, what they had, coming to a better place that offers a more ready-made pleasant environment that hasn't yet de-generated. Problem is, their base line is the level of de-generation they escaped from. Only once they have been here for some time will they see the deterioration they in turn have caused, and only then will they join with you in what you are seeing now. Too late. Can't turn back the clock.

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Dale Smith - I don't do beer, but that reply almost earned a shirazx if you're ever in this neck of the woods.

 

I remember having serious discussions with the DCC circa 1990, about their waste. They had untold forestry........always likes a feed. Instead, they lengthened the sea outfall......

 

go well

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Just stop Auckland's population increase.No more development.

If allowed to get bigger the expansion will suck even more in, so growth could be exponential even.

At great cost to the environment, quality of life, ratepayers and taxpayers.

A discussion needs to be had on exactly how big the place should be, and limits placed.

Probably by limiting immigration.

QED

 

PS

Anybody in the Green Party reading this stuff???Speak up, if you believe in environmental preservation...

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Probably, but they have a bit of a problem. They're offering relief from poverty, cheap housing, and cheaper power. You can't have them and not impact your habitat a tad.

  Jeanette F got it, and got it in spades. We probably need her back; she's doing the rounds with a talk about 'A Steady-State Economy, apparently. A brave, smart, gracious lady - several notches above what we have at the moment.

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The Burghers are not offering relief from poverty - they can't - that's a pipe dream

 

They keep leading the lemmings to the edge of the cliff with pipe-dreams
What they are offering is more and more ambulances at the bottom of the cliff.
Never thinking to erect a barrier at the top of the cliff.

 

All foretold. Burghers. Hamelin. Pied Piper. Lemmings. Pretty Music. Over the cliff.

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Hi Kiwichas – I would suggest that it is how we grow, not so much if we grow.  There is something not right when all we are doing is encouraging Kiwi families to leave, just to be replaced by new New Zealanders. It's a little like encouraging houses to be bought and sold for the sake of it, with the only benefit being the real estate sales commission generated. As it is about a ¼ of NZ’s population lives overseas, and not just for the OE experience.

The rest of the world can swamp NZ with speculative property investment money in the blink of the eye if they wanted to. That’s the one main reservation I have, whether or not urban boundaries are relaxed or not, we will never be able to meet the rate-of-demand (and hence there will always be a supply shortage) if immigrants and overseas investor money can always trump whatever supply we generate.

 

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As ex-green party...I dont know what they read but its not much green,

The very first thing IF you are serious about being green is preach population control, no other option now and even thats probably 30 years too late. That means no imigration and less children. Id also argue for NZers living abroad taht when their passports expire so does their right of abode and citizenship here.  

The former of course is a huge vote loser amonsgt the working poor, few want to listen to that message and guess where the Green's are picking up votes.

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A) Auckland has serious transport issues that urban sprawl will make significantly worse

b) if we add say 30000 houses past the current muls, house prices will not go down much, but traffic will get much worse

C) nz needs somewhere with high density as young people (20s and 30s) tend to like to live there. Maybe they won't leave for overseas so much if Auckland had some exciting areas to live

d) foreigners buying houses is a good thing - it forces us to build more houses turning foreign money into jobs and growth

e) if low density leads to low cost housing, Auckland should already have some of the cheapest houses in the world

f) no one is proposing high density everywhere, I think it is just 9% of the city

g) no one is forcing anyone to build high density.

H) If anyone should be pro unitary plan it should be right wingers - they should be all for letting the market decide whether people want to live in apartments or terraced houses near the city or full sections miles away from the city, instead they are trying to protect their rich friends that have big sections in Epsom.

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You are being sensible and rational.

 

This thread is for conspiricy theories and paranoia.

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A response to Jimbo:

A) How will "sprawl" make traffic worse?

B) How will adding all those people to the existing urban area, using the already stretched roading network, be better for traffic?

C) Agree, but putting urban limits around the city will make high-density living more expensive.

D) The artificial land supply restrictions mean the demand from foreign buyers tends to generate rising prices rather than increases in building (look how bad the building consent numbers are).

E) Auckland isn't a low-density city by "new world" (Australia, Canada, US, NZ) standards.  And it's not high density per se that makes housing unaffordable but the extent of the restrictions on land supply.  A number of the more expensive markets in the Demographia survey have lower density than Auckland.

F) Three-storey apartment blocks can be built in about half of the city.  This is certainly higher density than what people are used to.  

G) No but the council's target of up to 70% of new development inside the rural urban boundary will require a large proportion of detached homes to be bulldozed and turned into flats/apartments.  People may not want to stay in their homes if they end up boxed in by three-storey apartments. 

H) It's not "letting the market decide" when the market is massively distorted by urban limits that act as welfare for land bankers and cause house prices to be two to three times would they would be otherwise.

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I'd be happy if they got rid of the muls as long as they also got rid of every restriction preventing high density, making a fair playing field for the market to decide. But nationals wish to remove the muls while keeping the current limits on heights, dwellings per lot, etc will only cause problems. 

Of course sprawl causes traffic issues, most other cities the size of Auckland have much better public transport, we keep on getting told that public transport isn't viable in Auckland as it is too sparse.

the real demand in Auckland is in the central suburbs, removing the muls will do nothing to alleviate that demand. I know if I had to choose between a terraced house in mt Eden or a 1/4 acre 30 kms out with an hour long drive each way to work which one I'd choose, and I'm definitely not alone. The 1/4 acre dream is alive and well I the rest of the country, but it can't survive forever in Auckland.

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Great article ... 

To me...sadly....  it makes sense.   I hope it gets out to a wider audience.

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Dale, great article.

 

As a former LG finance type, and having toiled in the data mines which underly their ten Yera Plans, I have a better than average understanding of the inner workings here.

 

I think you are most probably right about the revenue-raising aspect.  The revenue chain which rolls up to 'Rates Required' is a political third rail:  touch it, you is dead.  Rates can rise by inflation (a mixture of capital equipment, consumer, capital project indices), but that's it.

 

Whereas ticket-clipping in property related transactions, on an increasingly lengthy chain of prerequisites, certifications, checks, inspections - all, of course, offered by a salaried monopolistic entity with zero notion of the time value of money, but that's just a side benefit - doesn't add to Rates Required:  it sits far, far away under Fees and Service Revenues.   The Far Queue, one could term it, and it certainly must feel like that to those unfortunates enmeshed in its gears.

 

This is, of course, a very similar chain to that of the mortgage business in the US, which started out from the old-fashioned small bank which wrote, administered and collected its own loans, went through he securisitaion and bundling phases, and ended up with multiple levels of securisation, insurances, swaps, and derivative, derivativee squared, cubed etc and other financial devices.   The common thread was that, eventually, no added value accrued, the ticket-clipping led fairly directly to rising income inequality and to the GFC. 

 

All this, to return to the ACC and its revenue machinations, is supposed to be revealed to all via the LTP, the Annual Plan, and the Annual Reports.

 

However, ya needs to be a dedicated soul, and said Plans and reports are perfectly innocent of any helpful statistics or KPI's especially in the property area.

 

Just to be a nuisance, I occasionally incite my local council to keep and publish stats about such obvious aspects as:

  • Average development contribution per type of section (residential, commercial, industrial, government, other
  • Average total elapsed time for subdivision approvals
  • Averages compared to other NZ TLA's (League Table)
  • Imputed interest costs caused by this time if estimated at IRD Use of Money rates etc

This would at least turn up the gas under the ineptocrats.

 

Of course (and I expect no less) such submissions are routinely fobbed off with an inventive variant of 'We Know Best'.

 

The real issue is - what can be done about all of this - the unaffordability, the arcane processes, the added complexities and costs, and the fact that, as Biil E has noted, 20 unelected planners somewhere in the bowels of NZ's largest city, can be permitted to foobar an important segment of the NZ economy.

 

Because there's another result of all of this.

 

Added costs to new housing, new land, new infrastructure don't remain locked up in those sections, suburbs or cities.

 

They bleed sideways everywhere:  that higher cost  for a Flatbush Four-bedder also inflates asking prices for a 60-year-old Grey Lynn doer-upper which has had two coats of paint in its entire life.

 

That's the real damage.

 

What to do?

 

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The old measure of affordability cannot be used in NZ as most buyers in NZ don't start from $0.  Most have equity from the last property, money from parents, money from OE, inheritance or any other number of reasons for having a healthy deposit.  So someone buying a 'average' house for $600k is probably only borrowing $400k, which of course significantly throws out the affordability calcs. 

 

The average price is also mis-leading because most cities have lots of housing options, flats, apartments, terraces, etc.  Auckland has mostly free standing houses; when we start to build cheaper options the average price will come down but free standing house prices wont.  I agree with Mike B that detached houses in Auckland will all be over 1 mil soon as this is broadly in line with prices for stand alone houses in other cities. 

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Isn't it funny  that Kiwi's agree that everyone should stop using Aucklandls roads, and  use Public Transport.

That is " everyone but me"

I'll bet that if they took a decent sample of Kiwis at questioned them , most would not be keen to give up their cars.

Its like tax increases , I am happy if someone else pays the tax  increases but I dont fancy paying any more in tax

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