Jason Krupp says if urban NZ is serious about tackling housing affordability, local govt and planners must include property prices in their planning

By Jason Krupp*

Last week Minister for the Environment Amy Adams piled into the Auckland Council over the Unitary Plan, saying the rule set was unlikely to come close to delivering the 300,000 plus houses the city needs over the next 30 years.

The minister noted that the plan imposed even more red tape on the already regulation-choked sector, and if anything, was likely to worsen housing affordability in Auckland.

The critique of Auckland’s compact city development strategy was a timely and bold call by Adams.

Despite having pursued urban containment strategies in some form or other since the late 1980s, Auckland is the seventh most unaffordable housing market in the developed world according to the Demographia survey.
The fact that the city’s planners continue to flirt with compact city ideology as part of the Unitary Plan was worthy of a reality check from the Minister.

But while she was at it, Adams could have extended her critique to the other councils in New Zealand who are looking to use compact urban form changes as a means of tackling rising house prices.

Tauranga, for example, implemented a compact development policy framework in the mid-2000s, and the city of 120,000 people is ranked as the second least affordable city in the country to a buy a house.

Wellington is another, and indeed Christchurch’s redevelopment is swaddled in so much red tape that it is safe to conclude that it will follow a similar development track. This is built on the belief that it is always better to build up instead of out.

The stark reality is that limiting land supply in cities will always feed through into higher land prices, and hence less affordable housing. Cities need to grow up and out. In other words, be freed from the red tape that has choked off housing supply.

That is the key message from Up or Out: Examining the Trade-Offs of Urban Form, a report on compact cities that we (The New Zealand Initiative) are publishing today.

The report sought to match the promises of compact development with the academic and historic track record. The results emphatically show that policies that limit city growth create a scarcity value on land that quickly outstrips any gains from compact development.

This can be seen in the Demographia data, where the least affordable cities in the world are the ones that have pursued urban growth containment, while those with less restrictive zoning laws are the most affordable.

This is supported by numerous economic studies, including leading urban economist Edward Glaeser, which show that the more restrictive a planning regime, the less affordable that city’s housing market is.

It remains to be seen whether Auckland Council will take Adams’s submission on board. Similarly, there is no indication that the message is getting through elsewhere. But while local government can turn a deaf ear to central government, it can’t do the same to voters.

If urban New Zealanders are serious about tackling housing affordability, they need to insist that local government and planners include property prices in their planning. They also must abandon the misplaced belief that you can design your way out of the problems associated with modern cities using regulation.

As former World Bank planner Alain Bertaud stated: if the Communist Party of China believes that resource allocation is best achieved through markets, why do we still believe it can be achieved through central planning?

*Jason Krupp is a research fellow at public policy think tank the NZ Initiative.

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6 Comments

And central Govt should include it in their CPI 

Brilliant and practical suggestion.  I know the district plans Im familar with include land quality, maori sensitivity, all sorts of reasons not to zone for residential use.  If they balanced house prices against all these reasons that would be good.
 
Free up land around the fringe, it will drop land prices 30% plus (to use a popular number around here), in outer subburbs and the developers will start to pile in knowing they can build houses they can sell lots of, i.e under 600k.
 

As former World Bank planner Alain Bertaud stated: if the Communist Party of China believes that resource allocation is best achieved through markets, why do we still believe it can be achieved through central planning?
Talking about markets - peak hour road travel is completely subsidised.  Peak hour drivers pay no congestion tolls at all.
Implement congestion tolling, remove density restrictions from land use zoning (adverse effects still to be mitigated) & then let the market decide how much development should go up & how much out.

Yes, talking about markets, if market mechanisms were allowed to function, then a lot of banks, globally and in NZ/AUS, would have been forced out of business in the years since 2007 and the remaining ones would be a lot more cautious about credit bubbles.
 
However, we live in an era of central bank planning in which the price of money is not set by markets, but by government officials around the world.
 
I think that is the major market failure at the heart of the problem. AKL house prices fell in 2007-12 no matter overregulation simply because banks were more cautious about lending. Now, with full bail-out guarantees for every dog and his mother, the party goes on.
 
Ok, urban planning and ridiculous Council fees need to be addressed and so does immigration. But the main problem is in my view the distorted global market for money.

Quite an interesting article here from The Independent on what it's calling 'rabbit-hutch Britain' http://www.independent.co.uk/news/uk/home-news/rabbithutch-britain-growi...

Don’t ever underestimate council’s effect on prices; I’ll give you one of my recent examples. There is an overland flowpath through one of my properties being developed so I have to form the flow path around the new house. I’ve got no problem with this, all it takes is a 150 high solid foundation wall along one side of the house, cost of the wall $1200. Que the council, they want new surveyors reports, new engineer report, lodging a easement where I pay for their lawyers AND my lawyers, further storm water contributions and inspection fees. Total council imposed costs $9,400.

In my opinon there is something seriously wrong when 90% of the cost of a wall is bureaucracy.