By Bernard Hickey
The Auckland Housing Accord at the centre of this week's budget is what the Americans would call a Hail Mary pass.
Bill English and Len Brown have committed to issue 39,000 building consents over the next three years in a belated and increasingly desperate attempt to deal with Auckland's housing shortage.
The hope is a surge of new supply will cap the latest 10% plus surge in house prices that the Reserve Bank has warned could derail low inflation off its 1-3% track and trigger interest rate hikes.
Both the National Government and Len Brown now know their re-election prospects hang on the perception they are 'doing something' about Auckland's housing affordability and supply crisis.
But this 39,000 consent forecast is so heroic as to be barely believable.
A glance at the accompanying chart shows the scale of the challenge.
The forecast for 9,000 consents in 2014 would be the fastest in a decade and more than double what we've seen in the last five years. The 44% jump in 2015 to 13,000 consents would be more consents than has ever been built in any one year.
It would be higher than at the peak of the building boom in 2003 and 2004, which was before the doubling of land and house prices.
The explosion in 2016 to 17,000 would be astounding.
It is simply incredible, and not the amazingly brilliant sense. It's just not credible, given neither the central government or the Council plan to build those houses.
The assumption is that once it is easier to actually consent a new building, the buyers will be there with cash in hand, the developers will be there with cash in hand, and the tradespeople will be there with tools in hand.
This cannot happen given the current numbers of skilled workers in Auckland, the current land and construction costs, and the lack of development finance for developers.
The finance companies they relied on in the last boom in 2003 and 2004 are gone. The low land prices they relied on for that boom are gone. The lower construction costs necessary to tempt the buyers have disappeared. The tradespeople needed to build these houses have either gone to Christchurch or to Australia.
Brown and English are kidding themselves that if they consent them they will come.
The real problem is the 25% over valuation of the land and buildings. This will be magnified by the interest rate hikes widely expected over 2014 and 2015.
Until there is widespread reduction in the cost of land and buildings those consent forecasts are an empty promise.
Until there is a plan to create new home building companies, train more staff and build the infrastructure to support those houses this is a chimera.
Building those 39,000 affordable homes would be wonderful, but right now it's a promise in search of a credible plan.
This article was first published in the Herald on Sunday. It is used here with permission.