The New Zealand Initiative’s Jason Krupp grudgingly argues that Auckland Council is right to give Nimbys the finger

The New Zealand Initiative’s Jason Krupp grudgingly argues that Auckland Council is right to give Nimbys the finger

By Jason Krupp*

Last week the cat was set amongst the pigeons after the Herald ran a story saying that Auckland Council was trying to raise the urban density limits in the green leafy suburbs that surround the inner city without public consultation.

Squawks of alarm were immediately heard from Auckland 2040, a community group dedicated to protecting the character of the city’s residential neighbourhoods. The process was labelled a “farce” that trampled on the natural rights of citizens to have a say on the urban policies of their cities.

In all, the story made out as if the council was operating in the shadows, presumably in cahoots with developers, to bulldoze Auckland’s suburban paradise and replace it with tower blocks in a slavish pursuit of a compact city dream. It is a compelling narrative, but it is also false. What we are seeing here is Nimby-ism (Not in my back yard) in a pure and unadulterated form.

Let me elaborate.

First, while the council may not have consulted with the public on the explicit details of its most recent plans, it has long been established, at least since the creation of the so-called Super City, that urban density limits were likely to rise as part of the Auckland Unitary Plan. This is a necessary and obvious step if the city is to tackle its housing affordability challenge. Numerous studies have shown that restricting urban density increases house prices, such that houses in Auckland are now more expensive than their counterparts in London according to Bloomberg.

Second, these new density limits are marginal not radical. The council wants to change the current single-house zone, characterised by a single one or two storey house on a property, to a mixed-house zone, which will allow development of up to three stories, and potentially consist of multiple properties.

Third, although the council said it will not be notifying individual households about the density changes, that doesn’t mean residents will have no say should a developer want to park an apartment complex between them and the afternoon sun. The Resource Management Act, benighted as it is, was specifically designed to allow affected parties to have a meaningful say on developments as part of the consenting process.

While the position of Auckland 2040 and the Herne Bay Residents Association is understandable on a personal level, preserving their little slice of inner city suburbia is a price that is too high for New Zealand to pay. Recent migration data showed that New Zealand’s population is growing at its fastest pace in 40 years, and many of these new arrivals will end up in Auckland. If the turgid supply of housing does not rapidly increase to meet natural demand, already astronomical house prices are guaranteed to rise further.

And it is not just about house prices. As I have written previously, Nimby-ism facilitates a wealth transfer from young people to the older propertied generation in the form of higher rents and house prices. That is because young people have to pay higher rates for accommodation to live in areas close to where the bulk of employment occurs, namely the inner city and immediate surrounds. The more excessive this burden is, the less likely emerging generations are to reach the same level of wealth than the ones that preceded them. Keep in mind that we are referring to the tax base that is expected to shoulder the costs of government services as baby boomers enter retirement.

People who disagree with the view expressed in this piece are likely to say that we hate suburbia, and have fallen under the spell of the compact city ideology. This is not true. The Initiative’s position has always been that cities need to grow up and out. What we have also advocated for is that land markets be allowed to function efficiently, such that properties get put to their most profitable use. In most cities around the world that means that the most valuable land, often closest to the city centre, has multiple properties on it, rather than a single home. Suburban homes, which take up more space, tend to occur on the outskirts where land is cheaper.

That said, not all the blame for Auckland’s housing crisis should be laid at the feet of Nimbys.

Byzantine planning regulations and processes, both at a central and local government level, have enabled Nimbys, and have unnecessarily choked off the supply of new homes onto the market. Efforts to constrain sprawl through the use of an urban growth boundary have also ensured that Auckland is prevented from growing up or out. Adding to the troika of urban development woes is the cost of infrastructure. If the city council picks up the bill, rates and debt are likely to rise substantially - never a winning strategy if you hope to get re-elected.

However, if councils pass these costs onto homebuyers via development contributions it increases the upfront price of a house. That is to say nothing of the fact that by passing on these costs, councils may be double charging new home buyers. This is because new buyers are paying for their portion of the city’s infrastructure through their mortgage, but they are also servicing the debt that was used to pay for previous infrastructure investments.

In all, Auckland’s housing affordability crisis is a classic wicked problem, one decades in the making. It will also take decades to unpick the regulatory structures that created it. This work will however achieve little if we continue to give objectors a disproportionately large platform to stymie urban development because it may bring change to their neighbourhood.

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*Jason Krupp is a Research Fellow at The New Zealand Initiative, which provides a weekly column for interest.co.nz.

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Ah ha, easier to head off a problem before it actually exists than to wait until the sod has been turned! If the voice is loud enough, and moneyed ones usually are the loudest, then the pollies will listen!

Jason's boss at the NZ Initiative -Oliver Hartwich and Phil Twyford Labour's spokesman for Transport and Housing have also co-authored an excellent piece on how to respond to the housing crisis.

http://www.nzherald.co.nz/opinion/news/article.cfm?c_id=466&objectid=115...

What will other politicians do?

Read it and don't mean to be dim, but who actually pays for the infrastructure under their proposal? Sounds like a socialise the loses, privatise the gains scenario to me.

The new home-owners pay for infrastructure provided within the sub-division through a targeted rate or new municipal entity -a community development district. This is better than current practice of developer paying and passing on the cost to the section buyer in higher section prices. The interesting question which is not answered here is who pays for the transport infrastructure. Some sort of mode neutral system where the new development (up or out) pays.

Why is it better? to me it may just get abused where a developer gets to pocket (some of) the extra $s.

Lets say for arguments sake the max a buyer can pay is $500k and to finance that its $1000 a month, rates than are $200 a month. So for that "new method" the house is now $450k and the cost to finance $900, but then the rates is going to jump $100 to pay for that $50k "behind the scenes" When the owner comes to sell that extra rates bill the buyer will see will mean the buyer will not be prepared to offer as much..
So the owner avoids the same upfront cost and resulting mortgage but gets a higher rates bill as a result and less when they sell. Either way the house owner(s) is paying out, either to the bank or the council.

Since every developer I have ever met is at best a second hand car salesman frankly i think this is a bad idea.

Agree. And it just seems to complicate things, adding another layer of beauracracy ( damn it I'm sure that's wrong but spellcheck is offering nothing) in any and all dealings on that land.

Bureaucracy
but we knew what you meant

beauracrazy

What authors as in the above article don't seem to realise is that these new high density apartments are not cheap. They are trying to sell the new prefab aparments in Belmont for about 1.3 mil!
Plus if the rezoning of the leafy suburbs goes through, then the value of these sections will jump overnight.
How this improves affordablilty, is beyond me.

The underlying land will increase in value temporarily but with the arrival of significant new housing stock the cost for a minimum standard house will be lower even if the cost of land remains reasonably high ( houses with land will rise in value while those without will become cheaper).

This zoning change is to a mixed housing zone, not an apartment zone.
By your theory we need even more of these mixed housing zones if apartments aren't an affordable option

Naughty Nimbys! There they are enjoying their houses and living their lives and then the silly People Who Know Best flood their city with people, and then have the cheek to blame them for causing a housing shortage.

Sigh, come on Jason, look at the historical roots of the problem. These "Nimbys" are just people who went to work and bought a house. They did not create this problem.

You do know that there will be a housing shortage even if we had no immigration, right? Unless you also want to outlaw having children... Immigration is less than half of Auckland's population gain.

And you do realise that most of Auckland was once a bunch of farms. Had that generation protected those farms and prevented development, the NIMBYs wouldn't have a house themselves.

Look, I view Auckland as a different country from the rest of NZ. My point was that it seemed wrong to blame the people that didn't cause the problem in order to distract the discussion from looking at the real policy failures that caused it.

Yes, two separate entities. Not only that the ppl who will suffer if the OCR were to rise would not be the ones benefiting from Auckland's stupidity.

You do know that there will be a housing shortage even if we had no immigration, right?
.........
Pull the other leg.

They're not to blame, at least not individually and specifically - but they nonetheless benefit from the rampant property inflation. That's just a trade that someone else is on the losing side of. If they don't want the associated problems, are they willing to also give up all inflation on their properties since ? I don't think so. Can't have cake and eat it too.

As you say, they are not to blame. So who is? This is never asked. There is just something deeply wrong here. Is it the banking sector who keep lending more money to push up house prices so they have more collateral to lend more money against until the mortgaged population cannot afford the payments anymore and the RBNZ is forced to modulate the interest rate to a level that kiwis can afford? This would be the economic rent capitalised into a flow of interest payments to overseas lenders. Maybe it's not that but it sure looks that way to me.

Is it because for 30 years Auckland has had more inward migration than it can cope with? Is it both these causes plus stupid regulation that gave us a generation of leaky housing and completely stuffed the building industry?

Why do these clever people not ask the right questions?

Except until you try to remove a 100 year old villa in Ponsonby to go up 5 floors , and the Hysterical Society decides this Wood- Borer infested eyesore is a "prime example of Victorian architecture and a building worthy of Hysterics" and you are well and truly screwed .

The truth is Auckland Council itself cannot make up its mind what it wants , while dealing with all sorts of conflicting interests , and a blinkered view of everything

Yep. Auckland is built on minority lobbying overruling the silent majority.

Look at the self interest in Remuera and Meadowbank that stopped the Eastern corridor being built, which had been clearly documented on planning and road maps (proposed motorway) since the mid-60s. That route would have supported heavy transport into and out of the port with its gentle incline. Instead everyone driving through Auckland has to deal with all that heavy transport entering SH1 at spaghetti junction, the entry of which is very steep = very slow trucks entering SH1 whenever a ship is unloaded. But a few self-interested houses avoided being able to see a motorway next to the existing rail line – shock horror.

Auckland must have an element of going up. Article in recent herald had some people bemoaning that their leafy intercity single dwelling (Takapuna I think) was going to become hi density due to its proximity to main road/bus corridors (smart planning). No comment that becoming zoned for 3-5 dwellings vs existing single unit makes their property worth far more so they should be able to reap a huge gain on sale and buy in a quieter, leafier location. It also didn’t mention that Council will attempt to financially rape them via huge land based rates increase until they do.

What we are seeing here is Nimby-ism (Not in my back yard) in a pure and unadulterated form.
...........
Or what Dr Greg Clydesdale said:
"
While immigration played a key role in house inflation in the three years after 2001 (Reserve
Bank 2007), it is unknown to what extent on-going immigration continued to drive price rises.
The housing boom has meant good profits for many New Zealand companies supplying
materials and building services, but it implies investors would rather invest in their country's
homes rather than its businesses (Bollard 2005). The high returns for property has attracted
finance and reduced the capital available for productive investment (Moody, 2006). The
consequence is investment is going in to industries with limited capacity to increase per capita
incomes. For example, real estate and building are domestically bound and do not have the
market potential of export industries. They also have less opportunity to increase productivity
through new processes and products. The irony is, as these sectors grow, they have incurred
skills shortages which in turn has increased demand for skilled immigrants. The Department
of Statistics ‘Long Term Skill Shortage List’ of 28/3/2006 includes carpenter/joiner, plumber,
electricians, fitter and turners, fitter welders; all indicative of a nation building its
construction/property sector.
There is a danger that a sector of the economy is being augmented that is totally reliant on a
small domestic economy. Not only do these industries have limited potential for per-capita
growth but ‘deriving growth via factor inputs such as labour places pressure on infrastructure
such as transport and land supply, and ultimately have a further negative impact on growth
(ARC 2005). Finally, as the sector gets larger, it gains in lobbying/political strength and can
lobby for immigration regardless if it is the best interests of the economy as a whole. This
could be seen in Canada where the development industry has lobbied hard for high sustained
immigration levels (Ley and Tutchener 2001)."

DISCUSSION PAPER NEW ZEALAND IMMIGRATION POLICY

I was at a rezoning meeting. I asked if population increase was government policy. Apparently it is to " increase the wealth" (of the vested interests). Treasury paper 14-10 dumps on that one.