By Bernard Hickey
Is there any more powerful phrase in the minds and spreadsheets of Auckland's real estate chatterati than 'Double Grammar Zone.'?
Just the thought of those three worlds plastered across a real estate billboard is enough to make any red blooded agent salivate. It's also enough to make any property developer in the Grammar Zones see stars and dollar signs. That's why there are as many as 1,800 apartments are expected to be built in the Auckland Grammar zone over the next three years.
But those three words and the thought of all those apartments springing up is also enough to make the admissions officers and headmasters and headmistresses of EGS and AGS go green at the gills.
They are packed to the gunwales with students already and aren't in a position to easily expand, given a lack of available land and restrictions on building heights. They are also close to the point where even if they could accept extra students, it would destroy their ability to operate cohesively. School assemblies would have to be held in Mt Eden stadium.
It is also a problem common across the ages. It is Auckland's own real estate version of the 'Tragedy of the Commons'.
An ostensibly free property right worth up to NZ$500,000 per property is now bundled to any property in the Grammar Zone. The perfectly rational thing for any developer to do is to assemble as many bundles of these 'free' property rights and attach them to property to make a killing. Even better if a piece of land with one of those rights can be turned into a set of townhouses or apartments with dozens of those rights.
It's the Auckland version of grazing the commons. Just buy a house in the Grammar Zones and turn it into an apartment block stacked full of new students. It's the biggest free kick in the history of real estate.
This tragedy of the commons is now playing out in apartment development advertisements in a variety of languages being displayed across the world, and it's making a few of the old-timers in the Grammar Zones and in the Ministry of Education a little nervous.
So what is to be done? It is a tricky and of course politically explosive problem.
The obvious options would cause more than a residents in the leafy zones to splutter into their flat whites. The boundaries of the zones could be contracted to ensure the increasingly dense populations of Mt Eden, Epsom, Remuera and Parnell did not overwhelm the two Newmarket schools. That is the riot option. Understandably, those on the fringes who paid top dollar for those three words would feel robbed.
The second would be to restrict out-of-zone admissions or to implement some kind of admission restrictions based on academic or some other kind of meritocratic criteria. That would break the ethos of state-funded schools and pose a significant challenge to the cultures of both EGS and AGS. That's the demi-riot option as it would create a type of two tiered Grammar Zone.
A third option has been floated by Epsom MP and ACT leader David Seymour. That is to somehow change the Education Act to allow the boards of schools such as EGS and AGS to restrict entrance based on the age of a house or residence. Essentially, the residents of any apartments built after a certain date -- say 2020 -- would not be eligible for the two schools. They would perhaps be eligible for a new third school, which has yet to be built or even planned. This is the land rush option. It would be one way to accelerate the apartment building boom. It would also mean apartments built after 2020 would be much cheaper and available for those without secondary age kids, which is an increasing proportion.
The fourth option is to make the developers and the owners of the new residences pay for entry to the schools, which would at least make the process transparent, given a good portion of those students could be argued are overseas students anyway -- and they are supposed to pay fees.
The final option is to simply turn the schools into fee paying schools. There is certainly plenty of demand for such assets. Private equity group Pacific Equity Partners is reported to be in talks to buy Academic Colleges Group, which includes schools in Auckland, for NZ$500 million. Perhaps the free market ACT party could get behind such a public asset sale? That would be a double riot option with a sideshow lynching of the local MP.
All the options are ugly, but are the inevitable result of creating a resource with public money that is highly desirable and virtually free to all those able to buy into the zones.
Free money can't last forever.
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A version of this article first appeared in the Herald on Sunday. It is here with permission.
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