Opinion: The Government's proposed housing accord legislation gives it too much centralised power and could have far-reaching consequences

Opinion: The Government's proposed housing accord legislation gives it too much centralised power and could have far-reaching consequences

By David Hargreaves

In its current form the Government's new housing accord and "special housing areas" legislation is dangerous and could have far wider consequences than currently believed.

I think it needs urgent re-working.

What has been portrayed as a quick fix to laws to enable enactment of the Auckland Housing Accord, which was announced nearly two weeks ago, could in fact be applied much more widely. The Government, if it wished, could use this legislation in its current form to centrally control housing development in many parts of the country.

The Auckland Council, which has agreed in principle to the accord, but hasn't yet signed it, has already reacted strongly to the legislation, which was rushed into Parliament after last Thursday's Budget. Mayor Len Brown was quick to say that there were clauses in the bill that appeared "to be inconsistent with the Auckland Housing Accord”. He reiterated that the Auckland Council had not yet agreed to the accord as it has to be approved by a meeting of the full council.

And Deputy Mayor Penny Hulse then said on Friday that the legislation "seems to go back to the ‘just release the urban limits around Auckland and lets plonk houses in paddocks’ which is definitely not going to work”.

"The legislation that’s been passed certainly doesn’t follow through with much of what was negotiated through the accord and that is a concern.

“...Without the legislation re-aligned I think the Housing Accord is definitely in danger.”


Okay, so what is in it that appears to be the problem?

One immediate difficulty this observer has with it is that it was firstly portrayed as legislation simply to enact the Auckland Housing Accord. It is not.

While Auckland is the only area currently designated to be covered by the legislation, Minister of Housing Nick Smith has the power to bring in other areas. More on that specific detail shortly.

To go back a bit, this legislation appears to have been pulled together very quickly. Which is another concern. Rushed legislation can often turn out to be bad legislation, which has either unintended consequences or much wider consequences than most of the people approving the law actually believe.

A Regulatory Impact Statement by the Ministry of Business Innovation and Employment and dated April 15 was prepared prior to introduction of the legislation.

The options

This looked at four options for tackling Auckland's housing shortage. These options were:

A/ Rely solely on the Government’s proposals to reform the resource management system;

and B/ Allow Auckland’s new Unitary Plan (in either part or whole) to take effect from its notification date (September 2013) rather than its intended finalisation date (September 2016);

or C/ Establish, through specific legislation, an Urban Development Agency (at a cost of NZ$4-5 million) to take a permissive approach to the issuing of resource consents and building consents for larger housing developments and redevelopments in areas suffering severe housing affordability problems and constrained land supply;

or D/ Create special housing areas, through agreement with local councils, in which local councils would exercise more permissive resource consenting powers.

The statement gave backing to the special housing areas option.

But the statement also went on to say that the analysis contained within it had been limited by:

  1. Insufficient information on land supply restrictions across local authorities to allow precise views to be formed on the urgency of the problem or the extent to which land supply is a problem outside of Auckland
  2. Insufficient information on the specific detail and operation of each of the options to allow for a more precise analysis of how each option might impact on the behaviours and commercial decisions of land owners and property developers
  3. Insufficient information on the existing provision of trunk infrastructure in order to allow for a more precise analysis of any limitations trunk infrastructure might have for the effectiveness of each of the options
  4. The development of the option under Budget secrecy rules, which has meant that options have not been consulted on with stakeholders and affected parties outside of government

On the latter point, the statement says further on that both the proposals for creation of an Urban Development Agency and the special housing areas concept "have been developed within the constraints of the Budget process and with very limited consultation. Stakeholders outside of Government have and are being consulted on options for resources management reform, including a competition consenting agency, but have not specifically been consulted on the proposed UDA".

"The detail of the special housing areas option has been discussed with Auckland Council, who have indicated support for it, but not with other councils."

So, in other words we have a plan from the Government that has not been widely canvassed or consulted upon. Are we therefore just to accept that it will be a good one?

The legislation

What of the legislation itself then?

There is a lot of detail outlining the streamlined consents processes. I was most interested in the specifics around the workings of accords with councils, how the "special housing areas" that will be created for fast-tracked housing would be identified and lastly, but certainly not leastly, I was interested in what happens if the Government either can't reach an accord with a council, or seeks to end an existing accord.

To tackle the last bit first, the Auckland Accord says that termination of the accord will occur either three years from notification of the Unitary Plan or "six months following the date that either party gives the other party notice of its intention to withdraw from this accord".

However, the legislation now before Parliament says: "Before a housing accord may be terminated, the party intending to terminate the accord must give not less than THREE [the emphasis is mine] months public notice of the intention to terminate the housing accord on a specified date."

The Government itself did draw attention to the fact that if a housing accord is terminated or the Government can't reach agreement on one, then it will give itself the power to create special housing areas and to fast-track developments.

The specifics

With that in mind, it is worth looking at the specific clause that establishes special housing areas. For those keen to have a look themselves, it is section 16 in the bill.

This section in effect says that the special housing areas will be created by a Governor-General Order in Council on the recommendation of the Housing Minister. If the specific housing area in question is within a local authority covered by an accord, then the Housing Minister cannot recommend a housing area that hasn't first been recommended to him by the local authority.

This squares reasonably with clause 14 in the Auckland Housing Accord, which says: "The legislation will enable Special Housing Areas to be identified by the council and jointly approved by council and Government."

However, the legislation goes on to say: "The Minister has no obligation to recommend the making of an Order in Council under this section even if the Minister is satisfied that all criteria for making a recommendation are met."


This appears extraordinary. So, there's the Auckland Council believing that it and the Government will jointly decide on special housing areas. The legislation says the Minister can ignore the council's recommendations, even if they fit all the necessary criteria.

But there is more.

Section 16 of the legislation also states that the Minister can go ahead and start designating special housing areas once he has given public notice of intention to terminate an accord. So, he doesn't have to wait till the accord is officially killed off, he can go ahead once the stated intention to end the accord has been publicised, which as we can see from earlier on is three months before the ending of an accord.

Here are the pieces of section 16 that I think are particularly pertinent:

(4) Despite a proposed special housing area being within a scheduled region or district, the Minister must not recommend the making of an Order in Council under this section where—

(a) the area is within the district of an accord territorial authority, unless—

(i) the Minister’s recommendation is made on the recommendation of the accord territorial authority under section 17; or

(ii) public notice of the intention to terminate the housing accord has been given in accordance with section 13; or

(b) there is no housing accord between the Minister and the territorial authority for the district in which the area is situated, unless— 

(i) the territorial authority and the Minister have been parties to a housing accord and the accord has been terminated; or

(ii) the Minister, after endeavouring to negotiate in good faith with the territorial authority in an attempt to conclude a housing accord, has been unable to reach an agreement with that territorial authority.

(5) The Minister has no obligation to recommend the making of an Order in Council under this section, even if the Minister is satisfied that all criteria for making a recommendation are met.

In examining all this, I can fully understand why the Auckland Council now seems to have something rather worse than cold feet about jumping into bed with the Government with the accord.

This legislation in its current form would enable Housing Minister Smith to knock back any areas the council recommends as "special housing areas". It would enable him to terminate the accord. And before that accord is even officially dead he would be able to start deciding himself which areas in Auckland could be designated for fast-track development.

Central decisions

Nobody questions that Auckland needs incentives to get a move on with its housing development. But do Aucklanders want all those decisions being made in Wellington?

Okay, so you might say this is an Auckland problem. Serves the JAFAs right. Go ahead Government. Pass your legislation.


At the moment there is only one named region in the legislation - Auckland - in schedule 1 to the act, which is headed: "Regions and districts that have significant housing supply and affordability issues for purposes of Act."

So, right now, this is just about Auckland. But it might not be.

Section 9 in the act gives the Minister the power to add (through Orders in Council) other regions or districts.

Key criteria

There are two criteria for making a recommendation, both based on publicly available data. These are that in any district:

(i) the weekly mortgage payment on a median- priced house as a percentage of the median weekly take-home pay for an individual exceeds 50%, based on a 20% deposit:

(ii) the median multiple (that is, the median house price divided by the gross annual median household income) is 5.1 or over.

Okay, so the immediate question, given that we can assume Auckland fits the bill, is how many other areas might also qualify?

Well, according to interest.co.nz analysis, quite a few.

The first point to emphasise is that just one of those two criteria need to apply for the Minister to be able to say that a region has housing supply and affordability issues.

The particular criteria that will capture a number of regions, according to interest.co.nz calculation, is the first clause, the weekly mortgage payment percentage to weekly take-home pay.

We made our calculations based on: The median house prices in each district according to Real Estate Institute figures in April, adaptation of LEEDS (Statistics NZ) data for the 30-34 age group using income tax rates from the IRD, and mortgage repayments based on the value of the home loan, paid weekly for 25 years, using bank average variable rates.

Many regions qualify

According to our calculations the following areas all had weekly mortgage payments exceeding 50% of weekly take-home pay: Auckland, Tauranga, Wellington, Christchurch, Napier, New Plymouth, Porirua, Kapiti Coast, Nelson and Queenstown. Hamilton came in at a little over 49%, so might well fall into the reckoning as well.

So, in other words, this legislation could be expanded - right now - to include very many parts of the country. And if the Minister decides to designate these areas and then cannot reach a housing accord deal with them, then he would be free - according to the legislation - to start designating special housing areas and effectively running housing policy - in those regions.

Now, yes, at the moment this legislation has a designed end point (June 2017). It is supposedly transitional legislation. But that could be changed after the next election couldn't it? The sections dealing with the end of the legislation could surely be deleted later, should the Government wish.

I'm not accusing the Government of deliberately seeking sweeping powers to centrally control housing policy at a local government level, but this legislation as currently framed appears to offer that opportunity.

  median % weekly mortgage median
  house price payment multiple
Auckland North Shore  650,500 82.5% 7.7
Auckland Central  622,300 81.3% 7.1
Auckland South  489,300 72.5% 6.2
Auckland West  479,000 66.6% 5.7
Wellington City  510,900 59.5% 5.3
Christchurch  392,300 57.6% 5.1
Porirua  390,000 54.4% 4.7
Nelson 339,000 52.5% 4.7
Tauranga 327,500 51.2% 4.3
Kapiti Coast 346,000 51.2% 4.5
Napier  320,000 50.7% 4.5
New Plymouth 326,500 50.3% 4.5
Hamilton 325,000 49.2% 4.1
Wellington Hutt 343,600 46.7% 4.0
Dunedin 260,000 43.6% 3.8
Hastings 272,000 43.3% 3.8
Whangarei 292,500 42.7% 3.8
Timaru  260,000 41.7% 3.6
Palmerston North  290,000 41.5% 3.1
Gisborne 217,500 38.2% 3.8
Rotorua 239,000 36.3% 3.0
Invercargill  194,250 31.2% 2.8
Wanganui  180,000 29.6% 2.6

A hasty fix

Everybody wants to see the housing problems, particularly in Auckland, fixed. But a hasty fix such as this one could end up giving us far more problems than we already have.

This legislation needs to be vigorously examined. And it needs to be changed.

Yes, let's have central and local government working hand in hand on housing problems.

But let's not give the Government the chance to dictate its will on the regions.

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I still want to understand the mechanics of how we are to build 9000 new houses in the next 12 months ( 252 working days on an 8 hour day ) from Greenfield to handing over Keys to the front door.
It works out at about 4 NEW HOUSES PER HOUR  at full steam . Thats one house every 15 minutes.
Meanwhile , we are trying to rebuild Christchurch , and there is already a shortage of skilled tradesmen there.

What about the option of bringin factory built house.  I've seen one on show before and it's very well design and made.  Best of all it'd take very little time to set up and connect services.

I know I'm probably going to live to regret this, but...I have a few questions for you.
Why are you so opposed to more intensely developed starter homes closer to the centre of town?
Why does everything always have to be on the fringes?
What's wrong with lots of apartment/town house style properties closer to town?
Where will all these people you'd like to see on the fringes actually work and send their kids to school?
Who would pay for all that infrastructure on the fringes? Shouldn't it be paid for by developers?
Are you sure young first home buyers actually want to live on the fringes?
Why are you so focused on a 1950s and 1960s mode of living that is so dependent on cars?
(PS Bracing myself...)

Er - choice?

Er - so picking a political make believe option that isnt cost effective or sustainable in the future is a good choice?
Choice as in paying for the new infrastructure via debt that others  have to pay for is choice on their part? 
What ever happened to user pays?
New user wants new sewage pipes, new user pays.
Why should an existing rate payer pay for expanding the infrastructure for new ppl?
It makes no sense, its can kicking into the future just so some can profit (financially or politically) today.

It is cheaper to install new sewers on a clear site than to upgrade existing sewers under buildings and infrastructure (as required by intensification). The paying user will choose the cheaper option.

If you only take that 1 aspect then yes....If however you also include public transport then the cheaper option is probably existing...hence you need to consider the TCO (total cost of ownership) and how the costs change in the future.

Magic, self driving, energy free, congestion avoiding, flying cars are almost invented - they will save us.

Get real bob. Next thing you will be telling me that in the future we will have telephones without wires and everyone will have colour moving picture machines in their living rooms.

I've already got both of those. But I don't have a teleportation device, faster than light speed space ship or time travel machine so perhaps not everything in sci-fi becomes true?

Er- no. It's not choice. Hugh lambasts every way but his way, doesn't address the long-term availability of half his equation (incomes), and looks backward to project forward.
I haven't died yet - but I understand it's 100% certain that I will, and don't use the 'thus far' argument to deny it. . Hugh fails that test.

Given that a $300K fringe rents for $350 whereas a $300K cbd apartment rents for $450 it seems that the available options are already skewed towards the fringe freestanding houses.

Bernard, these questions could all be turned around:
Why are you so opposed to low density starter homes on the urban fringe?
Why does everything always have to be in existing suburbs?
What's wrong with lots of free-standing houses on the edge of town?
Where will all these people you'd like to see living near the central city find work, given that 87% of employment is outside the CBD and mostly inaccessible by public transport, and how will the schools in these areas cope with overcrowding?
Who would pay for all that infrastructure to support higher density in established suburbs? Shouldn't it be paid for by first-home buyers, who developers ultimately pass council-imposed costs onto?
Are you sure young first home buyers actually want to live in townhouses and apartments near the CBD, where the vast majority of them don't work?
Why are you so focused on a 19th century mode of living that is so dependent on trains?

"Why are you so focused on a 19th century mode of living that is so dependent on trains?"
Because in the 19th century and indeed much of the 20th (pre-WW2) we in the developed world used far less energy per person.  Since fossil energy output has peaked and the population still wants to grow we must use less energy per person.  That it seems is being determined by the price model.
No matter where you are, "Shouldn't it be paid for by first-home buyers, who developers ultimately pass council-imposed costs onto?"  the answer is, yes.
"What's wrong with lots of free-standing houses on the edge of town?" energy use....just look at how surbubia in the US isnt do ing very well....

We used less energy back then because we were poorer and were forced to live in more cramped surroundings.  But we don't need to return to that style of living to reduce energy use.
It's already happening as people buy more efficient cars, use their cars more sparingly and buy energy-efficient appliances etc.  Self-driving cars will improve energy use even more as they will be more efficient than human drivers.  And let's not forget the growing number of people who can now work from home.  
These market-driven changes will reduce energy usage much more than central planners trying to force people into apartments, which have carbon footprints almost twice those of free-standing homes, and trains, which are rapidly being overtaken in energy efficiency by new-model cars.  
As for the oft-repeated claim suburbia in the US is dying, well it's simply not true.  Suburbs in the US are growing faster and have lower poverty rates and lower crime rates than urban cores.  And contrary to the view that suburbanites all have to commute to central cities for work, US suburbs have almost as many jobs as workers.

Kleefer - Please post your reference, citing where/how the gaining of efficiencies can/will outpace ultimate depletion.
I have no view either way, but kindly show your reference for the 'apartments have higher carbon footprints' comment. I'd be interested.
Also, kindly point to the lesser use of fossil energy, globally, that these moves have delivered? How does the efficiency-per-car, compare to the total number of cars?
Could I respectfully suggest that scarcity may be the driver, not your 'market'?

"The true message for engineers and others who encourage efficiency-based solutions to our environmental problems is that product and process-level efficiency improvements, in the absence of external pressures or mandates, do not equate to system-level reductions in resource consumption Thus, improving efficiency, by itself, should not be thought of as an environmental




I'd add:   or of any sustainable goal.

1st para "poorer" I assume you mean money terms, but money is a proxy for work/energy and hence with a  finite supply and more of us we'll have less each.  We will return to cramped because transport energy is a huge % of our costs...hence our personal world is going to get a lot smaller.
"efficiency" just improves things a little no quantum shift or step, we need 8~12% steps every year from now on....
The market driven changes wont be fast enough our start early enough to lead changes, they will simply cause failures.
100,000 EV cars on the US, out of how many millions?
Suburbia, "Before the near universal extension of automobile ownership, cities were necessarily much more monocentric. Transit lines tended to converge on downtown, which made downtowns far more dominant in their share of metropolitan employment than they are today."
With petrol becoming un-affordable and even rationed the move back to Transit lines becomes inevitable, but for transit lines to work there needs to be popualtion density.
Interesting that the web site you quote is yet another "demographica" ie the ppl behind it,
Some of its backers,
"The mission of the Institute, founded in 1991 by financier and philanthropist Michael Milken, is "to improve the lives and economic conditions of diverse populations in the United States and around the world by helping business and public policy leaders identify and implement innovative ideas for creating broad-based prosperity."
I think we've covered the no more growth scenario enough...
"Kotkin argues that the model of urban development as exemplified by pre-automobile cities such as New York City and Paris is outdated in many cases. Kotkin believes in a "back to basics" approach which stresses nurturing the middle class and families with traditional suburban development. He states that the current trend of growth of suburbs will be the dominant pattern around the world.[1] As a result, he believes rail transit is not always ideal for modern cities and suburbs.[2]"
So sounds like a closed mind there........
Pepperdine University is an independent, private, medium-sized research university affiliated with the Churches of Christ.
So no religious bias there then.....yeah right.

'Cos thats how its done in Texas....yeee haaaa

Nice -sums it up.
Also because existing Hugh dream $250K houses in Clendon Park are so popular we need more of them.

Another exemplary response.
Too long to read, generally ignored the questions, repeated your proposition as if they were fact, referenced other websites about yourself, included discussion on Houston...
You could have strengthened your arguement a little by saying a professor agrees with you and more fearmongering would be good too (maybe mention that high density basically means that everyone will be forced to live in small cages).

I tried but haven't been able to find anything? 

I like how you're website has the headline "NZ planners support Demographia"
Makes it sounds like NZ planners support Demographia, which didn't make sense until I clicked it to find that NZ planners support Demographias call for more affordable housing (as almost everyone does). Quite different. 

You could be talking about yourself there Bob... waving those DBH handouts as if they validated and proved that your point of view was some kind of fact.
At least Hugh does not try to undermine someone elses opinion with your kind of slippery sarcasm...

It's not sarcasm - every Hugh post is the same.  
Have you read the DBH report? What specific part do you disagree with? 

Bob , you use that report to validate the view that..." Intensification provides affordable housing"..
I read the report thinking that it would provide some kind of  economic argument to show that this was the case.... but really... it is only a compilation of statistics..... There are no conclusions or arguments  to disagree or agree with ... in there.  
All I could find was on page 51.... " Higher density dwelling types cost less"
Page 52.. fewer apartments = fewer med. cost dwellings 
Page 56...  Apartment buildings are typically more expensive to develop, and thus to buy, than either the equivalent attached or detatched house.
This sounds like a contradiction...but just confirms what I have guessed.....  
When you are talking about intensification =affordable ... you are not talking about making land prices or costs cheaper but simply making living spaces smaller... ie. small= affordable.
It is like saying that steak is now affordable for everyone because it is now being sold in small pieces....  but really...  on a per kilo basis ..it is even more expensive.
As far as answers go... I don't really know...   What hugh says makes sense...What Dale Smith says makes sense....   some of the things u say make sense.
Cheers  Roelof

I'm not Hugh.  He is perfectly capable of replying for himself but I get sick of people distorting his position.  

Or ppl see what Hugh says his position is differs to what it really is like based on the detail of what he is saying, claiming and asking for.  Which seems to be politically libertarian, poorly justified and based on pseudo academic claims that dont appear to hold water, are wrong or are overly simplistic.

I can partly agree with the overall thrust of your concerns, David, but I think the crux of the matter lies in a Gordian Knot of entangled issues, and that the Gubmint has just decided, WTF, let's take the chainsaw to 'er.
Some strands in that there Knot:

  • TLA's have zero accountabilityfor causing time=money costs for developers, builders, homeowners and others who have committed capital at the strat of a proposal.  These costs reverbate through housing markets - read on.
  • The recent (and historically it is ten seconds old) emphasis on Elfin Safety, Working at Heights, electrical doodah certifications, site fencing and a myriad of individually innocuous but severally significant cost layers, adds to - er - costs.
  • The need by TLA's for non-Rates revenue  (because Rates is a political third rail) has generated a fee-centric bureaucracy:  Christchurch (truly) now urges prospective consent applicants to engage (paid for by guess who) in pre-application sessions to ensure that the hundreds of boxes are ticked....more, and (time=money alert) earlier cost layers.
  • Zoning, MUL's, RUB's etc all have a single outcome:  they confer a massive CG on a few lucky owners, which typically goes lightly or un-taxed.  The Productivity Commish had quite a piece on this.  Yet more costs, all paid for by greedy developers, no, wait, that would be by Hapless HouseHolders.
  • So house AND land costs are ruthlessly inflated by all of the above, (and I make no pretence to have been comprehensive here) which then generates an economic ripple effect as follows
  • Any and every dollar added to a house or a land cost, transmits instantly to the wider market.  People buy and sell, on average, in the same market, so need to buy at an inflated house plus land price.  Guess what they will then, quite rationally, expect to receive for the Old Shack.
  • Cheap credit adds fuel to this fire in two ways:  1 - it makes easier the busness of bridging any gaps between selling (less commissionj) and buying (at the inflated price).The collateral is generally good, there are tax advantages (preferences) and banks love this stuff. 2 - more, easier credit, makes price inflation less of a worry.  So prices becomer less sticky.  Classic case was the staggeringly dopey First Home scheme (2002) by Guess Who, which offered $100K Free Munny to anyone who could fog a mirror.  Total number of Mirror Foggers this assisted was around 2,000  IIRC.  But in li'l ol'; Christchurch at the time, where one could pick up a Brighton beach shack for less than $50K., the immediate effect was to add, spookliy enough, $100K to all prices everywhere. QED.  Ta very much, said the sellers, and another round of price inflation was kicked off. To recap, $100K added to every house valkue in Godzone, for the sake of 2000 no-hopers.  Some bargain....

So, to quote Bill E's aside, 20 unelected planners somewhere in the basement of the ACC are, in effect, foobarring an entire segment of the NZ macro-economy.
I don't see that Central Gubmint, acting by fiat via a different set of brown cardigans is gonna do much worse.....

I don't see that Central Gubmint, acting by fiat via a different set of brown cardigans is gonna do much worse.....
You must be joking - their disgraceful performance in Christchurch simply could not be worse.
God Defend New Zealand if Gerry ever becomes Central Gubmint planner-in-chief. 

Waymad I have some sympathy for the gordian knot argument but this particular sword cut doesn't seem very effective. For a lasting solution you would expect some institutional improvement. Say allowing Municipality Utility Districts being able to compete against the existing TLA's in the issuing of consents and providing infrastructure for new residential land. This would give genuine competition to the provision of housing infrastructure and the monopoly racket that TLA's have on development levies etc.
But what National is proposing is that Central government makes a few decrees on where some suburbs go and problem solved. It is very Muldoon like and like Muldoons initiatives it will not last past his administration.
I have two young boys and I want them to stay in New Zealand in affordable housing so am looking for a permanent solution not a temporary patch up job.

Ah, the Max Bradford approach to subdivision?
Of course, a winner.

Except that MUDs are an example of local government in action meeting local needs and Max Bradford electricity reforms were/are a collusion between central government SOEs and big business to rort householders.  
So not the same.

Correction: MUDs are an example of local government in action meeting local government needs.  

I dont even think they do that well...simple if a user wants it, that user pays.

MUDs are a can kicker, passing the cost onto others for somethung the user needs today. 

You want your boys to live somewhere like Clendon Park with a massive rates bill to pay for the local government borrowings to build sprawl infrastructure?
I'd rather my kids lived close by in a central neighbourhood apartment or minor dwelling.

Good digging into the Regulatory Impact Statement.
To have gone from "it's not a problem and even if it was we couldn't do anything" to giving themselves Canterbury like centralised emergency powers, says something must have gotten National's back up.
Yes, it is bad law for the government to give itself the power to do as it see's fit later on in a making things up as they go along kind of way. They are supposed to form actual policies and have the weaknesses of them considered through the select committee process. That said, people will forgive a lot for results, so if it works people will let this slide. If they've given themselves this much power and it doesn't work, the government can't really hide from failure.
My suspicion is there is some internal analysis floating around National that they can't win the next election unless they look like they are getting housing under control, so have suddenly started trying anything they can (so long as it isn't a labour/ green policy), but that is just speculation.

Right now Labour's proposal is still ahead because of it's certainty (10000 houses per year however unbelievable is still a promise to achieve,)
National must show it is actually achieving its promise to lower house prices in order to have more creditability than Labour's. AND must do it before next year to show ability to achieve.
Hence the current "hammer" approach to this problem aka Nick smith "smash the RUB" etc etc . 

Nick Smith is like my terrier: always chasing a rabbit but never catching one. Remember  the LGA Amendment Act 2012? What it wasn't going to do to rein in those dopey sods in local government. If you check the draft Annual Plan for your local council chances are it will say that they are making no changes as a result of the passage of the act. 
Like that act this one will also die having achieved nothing because it doesn't address the real problems.

Excellent piece David. 

Maurice Williamson will run for Mayor of Auckland againsts Len Brown later this year.
Maurice will run on a platform of "insider" to the Goverment with "special" relationship to solve Aucklanders housing needs....
Problem solved......

I hope so!

Good thread.  More light, less heat than usual.
I wasn't <arguing for> a more centralised approach, though.  I was merely reminding all and sundry that unless and until the needless cost inflation of both land and house costs is reined in, then the action of the efficient market will surely transmit every such new-build cost inflator, to all of the existing housing stock, in terms of asking price and (more slowly but just as surely), CV.
Green or brown-field, both are badly affected if in differing ways, by said cost inflation.
When one considers the following raw cost components, and compares them with asking prices fairly much everywhere, the one solid conclusion will be that there's a Helluva gap.
Them costs: I've ignored cost of capital (which could easily double 'em - at a WACC of 10%, and 7 years in the doing soup to nuts, there's yer double-up).
- rural top-end land can be had for $50K/ha (dairy is typically $30K, cropping less, this is for good hort)
- remove 1/3 for utilities, reserves, roads etc.  Build on 6600 sq m per original ha
- price per 600 sq m lot is a whopping $4,546 per lot:  11 lots/ha
- add then roads, paths, water, sewer. stormwater, power reticulation to the boundary - PC sum $60K/lot.  We are up to (rounded) $65K/lot
- give the local Clueless Council something towards fees, levies, infrastructure, buskers etc say $20K.  We are now up to $85K/lot, without having to Change the World.
- plonk a factory-built gem upon said plot.  PC allowance $120K for 120 squares (Lockwood, Fraemohs etc can do this, especially in volume - includes all internals and a roof but no found).  We are now up to $205K/house plus land
- allow for (coming to a Council near you) TC2 style rib-raft foundations, landscaping and fencing $20K.  We are now sitting on $225K for the whole shebang.
- Assume a Christchurch median income of say $62K/household. House to income multiple is therefore around 3.63.  A leetle high but do-able.
Now ask yer good selves this question:
What is preventing exactly this sort of scenario for Auckland?

What is preventing exactly this sort of scenario for Auckland?
The same thing that prevents it on the outskirts of Chch - for example at Ngai Tahu's Wigram Skies greenfields development;
That being:
- developer's margin expectations
- developer's imposition of covenants which prevent low-cost housing to be built.

Yet developers can provide serviced sections in Tauranga for less than $100k.

Yes, versus the cheapest section at Wigram Skies being upwards of $200K and the smallest house you can build is 145m2 + a whole bunch of other design conditions (I assume to prevent you from putiing in a Keith Hay, relocated or such like inexpensive home).

Waymad, I think you've done a good job previously explaining exactly what is preventing this scenario.

Hahaha - like not mentioning the developer expects a margin in his calculations!

Nasty bad developers - the government should make them do it for free.

Exactly my point - all this discussion from National about their proposals to open up land being to provide low cost housing is rubbish.  Developers will develop and covenant and set prices at whatever level maximises their profit - and we can't and shouldn't) expect otherwise.
If government wants low cost housing to be built by sector private interests - it needs to buy and develop the land (not the houses) itself - as they (government) are likely to be the only party that will subdivide and offer sections at cost. 
Government don't need to build the houses .. leave that to the buyers of the sections. These new home buyers are then free to build what they like, be it a architecturally designed place, a relocatable moved onto a section, or a kitset home.

The trouble with government acting as a developer is that their costs end up being much more than a developers margin.

Not when they are only developing a subdivision as there isn't that design element in it - just diggers, pipes, roads, concrete and street lighting .. stuff they are well place to do well given they do it all the time and have existing relationships with the right contractors.  
Certainly cost overruns and design extravagence is what we have come to expect when government does a design-build of a structure/facility (such as a stadium).  All the more reason you want to leave the actual building of the dwellings to the private sector. 

There's a lot of design in a subdivision. More than most houses. You don't just turn up at a paddock, give a digger driver a blank check and tell him (or her) to build a subdivision. Where do the roads go? widths? tracking curves? Fire refuse collection? water pressure? hydrant pressure? Drainage? Pipe diameters, falls, outfalls? surface water? ground conditions? Road basecourse required? etc.etc.
If you don't think the government can efficiently do a building even less reason to think they can efficiently do a subdiv.

There may be, Now, Bob, else all a them Plannerators are outuva job.  Did not used to be that way at all.  Three working examples:
A much younger Waymad built the rough levels in a section of an entire subdivision (Newfield - the hilly bit, Invercargill) with a Cat D7 and a cable scraper (which I broke in half, but that's a story for another day.)  Yes, there were Plans - and a few sticks in the ground, and the occasional surveyor with a dumpy, but nothing a tech drawing refugee from the local Technical College could not handle.  Strip the topsoil out to a temporary heap, cut out the main road and footpath levels to 20mm or so, level the sections, respread the topsoil on siad sections, done.   Services, K&C etc, laters.  Not a lot to it.
Te Anau useta be grass verges and gravel tracks, off the main drag.  Making streets was a two-man operation:  a grader with towed vibratory roller, tractor to buzz around, sweep and tow, contractors for K&C and gravel, sealing last.  Services (water only) already there.  Not a lot to it. 
We useta seal 20+ miles per year, from a starting point of average County gravel roads.  One rough-cut grader, one do-everything-else grader (Cat 112, me), contractors for gravel, make yer own topcourse from screened river run and clay from a likely local roadside bank, excavated with - what else - a grader.  No plans.  No surveyors (a level bolted to the front cab rail in the graders was all we ever used).  No engineers (except if they fancied a long drive into the sticks, which was not often).  Experience, feel, a taste for the right clay, and the knowledge that every single person ya met was a ratepayer, who Paid you, and who Expected Service.  Not a lot to it.
Them were the days, so you can see why I get a little excited about the current ways:  12-tonne diggers everywhere, mostly at idle, Elfin Safety up the wazoo, a whole lotta jobs for the unskilled, and 'a lot of planning needed for a subdivision'.  Maybe.  A lotta Cost fer a subdiv, more like......

All those extra hangers on = unearned income. But we are running out of room to afford that. It is quite amazing how much there is to know about a bit of dirt.

That's how they did it in the 1800's too. We are still dealing with the fallout of 'limited as to parcels titles' from inadequate surveying, subdivisions on unstable ground etc.
Good luck helping yourself to gravel out of Upuk river with your digger nowadays.

Hey Waymad, if we eat all our broccoli, will you tell us the broken cable scraper story? Please, please........

Well, it Is another day....all righty.
First up, I was working for the Copulating Spiders - the ol' MoW insignia.  The gear was probably 20+ years old (in 1972-3), and instead of a proper Cat tow-pin between dozer and scraper, MoW being the cheapskates they always were, had thoughtfully supplied a shortened piece of truck axle.  Didn't quite fit the hole - rattled around a bit. 
A fully loaded scraper could hold around 15-20 cubic metres of spoil (roughly a 3x3 floor pan, and could be crowded in good stiff clay to 3+ metres high) so I guess total weight could run 35-45 tons all up.  Two winches needed for the two cables:  one for blade height, one for apron trim and material eject/spread.
The usual round (this was topsoil stripping, to a temporary heap) was run the dozer in high gear to the pickup, change (on the fly, yes, possible) to low, drop the blade into the material, let the material crowd (if it would) until it spilled over, raise the pan to travel position, crawl back to the heap and up it, wind the dump winch which first raised up the front apron and let the material out, and then pushed the whole rear wall of the scraper forward, ejecting all material.  Bring 'er back to travel mode, high gear, off the heap, wash, rinse, repeat. 50-100 times per day - an average round was perhaps 3-5 minutes.
Working this gear gets quite repetitive, so the old mind tended to wander.
So it was, coming off the heap in high gear, with quite some surprise that I was awakened from my reverie to hear both winches screaming their heads off. Turned around to ascertain the cause.
Oh dear.
The tow-pin had sheared.  The scraper was in two pieces, quite a few metres back from the accustomed position.  The cables were running out against the brakes, hence the screams.
The scraper, empty but running down a 20-degree slope, had promptly dug in the towbar to the ruffled surface of Gaia, run clean over it tilting it around 180 degrees so it ended up facing backwards, and comprehensively foobarred the ball joint that joined the front set of wheels plus towbar, to the rest of the scraper.   Not a good look.  A two-piece scraper.
What to do?
Uncouple the  cables from the winches (hammer and wedge), run back for the dozer blade and hook it on, string its cable onto one winch, and proceed to move the pieces out of the way of the heap.
Then confess all to the bosses, but point out that a Real Caterpillar Towpin would be henceforth a Good Idea.
We ended up (days later, this was Gummint work, y'unnerstand) going way out to the backblocks of Fortrose, and bringing back another even more ancient scraper, with which I (lopsidedly - darn thing had two different sized tyres on the back, which controls cutting attitude) completed the earthworks.
With (what joy!) a Real Caterpillar Towpin which appeared, along with the immortal words 'Let's see if you can manage to f... This one Too!'

A little addition, about Elfin Safety.
The old D7 had zero electrics:  it was a hand-crank petrol pony motor start.
But the crank handle was vertical.
So, the Elfin Safety issues to start the beast:

  • stand, in yer gummies, on an iced-up top track, in a typical Invercargill frost.
  • prime the pony motor and offer up a small prayer to the appropriate deities
  • Insert the crank handle from on top of the bonnet (about chest height IIRC)
  • Pull it gently around to compression on the pony motor.
  • Take another purchase on the crank (no thumbs around the handle...) and mutter another smaller prayer.
  • Pull the crank smartly towards you.
  • If lucky, pony fires and runs.  Trim it, engage the clutch and turn over the main donk.
  • If not lucky, pony backfires and pulls you straight into the edge of the bonnet (curved, fortunately).
  • If really not lucky, bounce off bonnet, slip on track, clobber appendages on the way down to the cold hard ground.
  • If inclined to Push the crank to start, expect the backfire to merely throw you off of the track.  No bonnet edge.  Take yer pick.

Ah, and they call 'em the good 'ol days....

Bob, they build roads, reticulate water, design and build stormwater systems etc etc on a daily basis.
Sorry, I'm with waymad - developers would like us all to think it's some highly difficult and complex task .. only capable by some kind of 'elite' entreprenurial types from the private sector. That simply is not the case.  Both government and private developers hire the same engineers to do the drawings and the same contractors to do the work.  No such 'magic' that can only be delivered efficiently by the private sector.

They build them on a daily basis to a design. They don't just make it up as they go.
The government process to hire enginers and contractors gives more expensive results than the private one. Government has to have GETS system and an extra layer of management to keep everyone financilly accountable. NCNZ are now contracting to private developers as they can get more houses built cheaper than if they organise themselves.

You're quite light on subdivision costs and you wouldn't get 66% efficiency, however you might end up with a cheaply built sprawl house for $275 plus/minus $20K.
Hang on you can already buy cheap sprawl houses cheaper than that...

This Bill looks like a pretty good step in the right direction.  I disagree with David Hargreaves opinion that "The Government's proposed housing accord legislation gives it too much centralised power and could have far-reaching consequences".
Decentralisation of power is what has caused the problems of unafforable homes for large numbers of people. The people responsible for administering the powers, duties and functions designated to them have failed in their duty. 
I don't like Centralisation and think I have made this pretty clear in previous postings. The fact is both Centralising and Decentralising cause problems and if we have to have all the interferring in the market to meet the needs of the country then perhaps we have to have more swings betweeen the two to get rid of problems that always build up over time.

That was one of the most confused comments I've ever seen here.
I presume you mean 'the market' would sort things out, forever and indefinitely?
There is only one collective purpose to 'the market': to make more money.
That means off-loading every cost that can be off-loaded. Carbon would be a classic case, but all pollution is such. So too is the inadequate valuation of Natural Capital - vis a vis future generations, others, and other species. Natural Capital is valued by 'the market' as 'the cheapest we can get it at'.
Thaty kind of small-focus, small-mind approach is doomed to failure. Actually, was is the better word, given that it has already.

So PDK - what is that you don't understand??????
The market has to make money! Distortions in the market via  Centralised or decentralised (using LG) legislation and policy, change the market direction and price.
There have always been people throughout history who believe in doom and gloom. Malthusian catastrophe has frequently plagued some people's minds. 

Whats astounding PDK is I suspect your inability to think logically and critically and indeed refusal to look at any reality outside your make believe libertarian black/white universe.
So what happens then when the "market" cant make money?  yet has an imperitive to do so? why it disappears.
"believe", there is a difference between belief and knowledge, the former is religion of one form or another. The latter, education, logic, maths, data etc.  The former it seems describes yourself....
"doom and gloom. Malthusian"  thats like saying,
"oh Ive jumped off a cliff, but its hasnt hurt"  is not logical, the event has not finished yet....

We've had that discussion. Sorry if you got left behind, but to recap - anyone who thought growth could go on forever on a finite planet, and that an artifical proxy would override physics, was clearly on another one.
Strong argument, that name-calling. Hallmark of a winner.      :)

In early 2006 you could buy a dwelling in Auckland for $250K (yes, yes -  not a flash dwelling, but a dwelling). Later in 2006 that figure became $500K. This was because Auckland City increased development tax on non-sprawl development and changed some other rules.
This stopped development of higher density affordable housing.
As the graphs pages 47- 52 in the DBH report clearly show how higher density = most of the affordable housing and that as higher density stopped being built affordable housing stopped being built.

page 50 "The number of new dwellings built for less than $250,000 has fallen by 90% since 2003, while those costing more have grown by 11% per year"


page 51 "Higher density dwelling types cost less -

In 2012, 80% of new apartments, town houses, flats and studios cost less than $250,000 to build, compared to 19% of new stand-alone houses."


page 52 "Fewer apartments = fewer medium-cost dwellings"

What would the world without any government be like.
Could it work? Just get on and do it.  Let the market decide what is needed and don't have any levies taxes or fees. Will it work?
One step further do without money of any kind. 
People just work as always. But no individual gains any more than the effort put in. If.you dont do any work you cant reap any benefit. Do the work and just take what you need from the effort of others. .The issue here is  ensuring everyone does their share.  And greed wanting more than a neighbour. I see it like theft but everyone does it. 
So how does this apply to housing same deal. Everyone does their bit and receives whatever they want. People are penalized for cutting corners. I.e no new car or new house for ten years. 
I know it sounds so like a socialistic ideal but with out the money.  Actually you could still have politicians and LG
But none of the monetary implications they seem to need.  What's more no financial markets or banks.
Is that such a bad thing. ...

For Bernard,


The real debate is: "Forced intensification Versus individual choice". This is why Hugh said he doesn't have a problem with other forms of non-fringe development. Again that was never the issue. (and Kleefer made the point, further up, extremely well too).


The real argument has always been: "How do we justify outlawing fringe development, artificially". That is THE question to answer. It can only be justified on environmental grounds, if at all, because lifestyle choice is an individual decision (Do we have the right to vote on your personal bathroom colour? No. It's none of Auckland's business - only your. Right?). 


The "Saving farmland" argument is a joke. Plenty of the stuff, and the economic value of urban land is far greater than that of rural land in today. Urban land is a tiny 1 part in 125 of NZ's land area. We have a shortage of urban land - not farmland. We could just as easily say we should save urban land from the farms. 


If it really is all about the environment, then fine. Let's go there. Stick to the one and only respectable anti-sprawl argument (as a premise for an argument, to outlaw it), and also talk about how we can improve sprawl, as part of the argument, assuming 1 part in 125 is still too much city expansion. 


Is it not conspicuous that the ONLY alternative that Auckland council wants to believe exists to achieve environmental gain is higher density?




...and please don't forget cars can be incredibly efficient (5-10x more efficient than they are today...we just don't build them like that because fuel is still cheap - make it more expensive via tax?). High-density development must build for more capacity too, and demolish-and-rebuild is much more expensive than simple add-ons on the fringes. And Demogaphia has demonstrated, glaringly, that the artificial rationing of fringe land affects the entire property market profoundly, killing home affordability. (When existing housing stock doesn't have to answer to new-builds on the fringes, in the competition for sales, the prices go crazy. The theory and practice are conclusive).

You mean "forced sprawl versus individual choice"
You can already rent  Hughs's dream starter sprawl house cheaper than you can rent an apartment - at the same cost. So the market clearly wants more apartments not more sprawl.
If we get sprawl we won't get intensification. So instead of getting choice we get forced to live in sprawl. If we get intensification first then I'd be happy to see the RUB go.

Bob. What? Read this:
If we allow sprawl (without artificial price inflations) we will get less intensification - True. But ONLY because that is what the market wants.
If we get rid of the RUB's, and then the property developers start building things that the market doesn't want, then the property developers go bankrupt.

The article that says of 84 households in affordable housing a majority would prefer to live in expensive housing (but can't afford it). So what? The majority probably also want to win lotto. Should we legislate that they do?
You repeat the claim that the market prefers sprawl. Explain then why a cheap sprawl house rents for less than a CBD apartment with same capital value? The market doesn't neccessarily want sprawl - that's just an assumption. Don't confuse what people aspure to (but can't afford) with the market.

You're confused.

No, you are blinkered. The market sells what it wants and buyers have the choice of only buying what's on offer.  Classic examples are clothing, I ask for better colours and and Im told no one wants them...yet here I am standing in front of the help desk....like duh.
Same with houses, to maximise profit the builder/developer will build the biggest house on the smallest plot they can get away with. It costs the builder little more to add SqM but gets far more back.
Have a look around and tell me what % of brand new first time buyers priced houses there are....it will be a tiny % of new builds, unless its way out and you spend a fortune in petrol to get to work.

People say "the market does this, the market wants that" all the time, but it's not a helpful way of expressing it.  "The market" does not of itself do, want or think anything.   It is an environment within which individuals make choices regarding buying and selling, and respond to the signals that they are getting as a result of the choices that other individuals make. 
Most of those people, most of the time, are looking to give as little as possible of what they have to offer, in return for getting as much as possible of what they want.  The buyer will pay as much as he has to and as little as he can, and the seller will charge as much as he can and as little as he has to.  If they are unable to meet on a price, then the sale will not take place, and neither party will be worse off or better off.  If they are able to meet on a price, then the sale will take place and both parties will be better off.
You say the buyers only have the choice of buying what's on offer - but to the extent that buyer choice is constrained, so too is seller opportunity.  They can only sell what buyers are prepared to buy.  If they offer clothes in colours that nobody wants, or houses that nobody wants to live in, or ask too high a price, they won't sell them; nobody is obliged to buy something they don't want, or at a price higher than they want to pay.  If the supply side can't sell what they offer, they have to either reduce the price or change what they sell.
Similarly, if a buyer cannot find what he wants at the price he is prepared to pay, he needs to decide whether to go without it or pay a higher price for it; nobody is obliged to sell something for a low price if they can sell it to somebody else for a higher price.   If you really wanted a pair of trousers, or a ballgown, in a particular colour (well, I wouldn't want to make assumptions about your personal tastes in clothing) you could go to a tailor and get it made for you.  If you really wanted a small house on a large plot, you could buy the land and get the builder to build a small house

Well said....    and like most things... nothing is black and white..    It is about finding the balance between the tension of "central planning"... and the  freedom of individual expression  ( the" free market"... to give it a label )... out of which comes real productivity and innovation..
I found this TED video really..really interesting
It is not about Real Estate...  but the principles of innovation apply to everything...  and can often come from the most unlikely places... at the fringes ..

Don't disagree, but I wouldn't characterise central planning as a "tension". 
Bloody difficult is what it is, requiring vast amounts of data, analytical capability and monitoring and enforcement power so as to oblige people either to pay more than they want to for something, or to sell something for less than they want to.   
It's rarely, if ever, successful, for that reason. 

5x more efficient as in the present 40mpg can be 200mpg? or even 400? at 10x? When I see things like that I really wonder on the writer's engineering and scientific background.
ie sorry but thats getting a bit far fetched. If you look at a prius it maybe can get to 100mpg., while using most of its battery up, after then not so good.  Present conventional cars at 40mpg might well one day within say 5 years get to 50mpg, even maybe 80mpg...big maybe.  Then there is the cost of the materials to get to this...or the cost to buy.  Or that most poor ppl cant buy a new car at $20k let alone one at $30k or more....
Then onto "saving farmland is a joke"....changes are coming...."american" style surburbia etc isnt going to do it, as it stands.  Now yes sure lets have a discusion around just what the future will look like, but Hugh's future vision never will be, it will be more like earthship style and such a discusion is critical to have.

'They build them all to a design'
Well - yes.
Have a look at the 'design' in a few local subdivs - most anywhere, now.
There will be rubber tyre marks on the K&C, most corners.  In special cases, there will be wide muddy permanent tyre tracks as well, where the grass just never grows back.
Whoops - them Designers have forgotten that residential areas have Rubbish and Furniture Delivery trucks, Hiab trucks to winch in Spa Pools and other Consumer Stuff, Buses which (unaccountably) need ter Get Around Corners, and SUV's towing 20-foot Boat Trailers.
Whereas in t'old days, the placement of e.g. K&C was simple:  stay say 8 feet out from property boundaries, put driveways where ya see tyre tracks into the property, and if in doubt about the radius for a corner, drive a grader around the sucker and follow its rear wheel tracks.
No engineers, no planners, just craft-style workers who knew their materials and gear.  Low overheads, low cost, done efficiently in full view of the funders - the ratepayers leaning on their fences....watching.
I think the Design story is:  just because you Can, don't mean you Should....

Thank goodness for common sense (they called it phronesis - practical wisdom - in Aristotle's day).  It's all about maximising the investment.  Hence my point - if the government buys the land and plans/develops the subdivision without the profit motive - perhaps (and its a big perhaps) we would get more livable environments.  And we'd definitely get more diversity without the covenants.

Would we just get all sprawl and no intensification if the planning rules allowed both upward and outward development? Maybe sprawl but necessarily forever. I think to start with there would be sprawl as fringe prices would be so much lower than centre prices. But given time central prices would adjust and then inner city suburb renewal becomes viable. Areas that are in good locations but with crappy houses could be rebuilt more intensely. If property owners did not expect automatic property appreciation then they might consider what improvements they could do to get a better return. As Bob says apartments in good locations are desireable to some people.
And I do not know about Auckland but the tight metropolitan limit in Christchurch is not creating intensification but leap frog sprawling to places like Kaiapoi, Rolleston,Leeston etc. And an explosion in lifestyle properties. From an environmental point of view RUBs are a failure. The only beneficiaries of RUBs are empire builders in planning departments, property owners, landbanking property developers and banks who have become addicted to inflated property prices. Which one are you Bob?
New Zealand has reformed marketplace policies before when the benefit to some was considered to be outweighed by the cost to others. We got rid of farm subsidies and import licenses even when we knew there would be a difficult adjustment period. But in the end we were better for it. Reforming inflated house prices has now got to that situation and the majority of New Zealanders know it. That is why the political parties are struggling to find the right housing reform agenda.