The NZ Initiative's Eric Crampton says a govt committed to housing affordability would implement the Productivity Commission’s better urban planning agenda

The NZ Initiative's Eric Crampton says a govt committed to housing affordability would implement the Productivity Commission’s better urban planning agenda

By Eric Crampton*

Well, there is now a manual for getting out of the housing crisis. But it may take some time.

The Productivity Commission gazed into the urban planning abyss and, rather than being driven mad, found the set of changes that will restore housing affordability. And so, this morning, it released Better Urban Planning, the Commission’s recommendations for a future planning system. 

Spanning 498 pages, the Productivity Commission report covers everything from improved central and local government planning, to infrastructure financing, and even culture within the planning community. 

Fully implementing the set of changes would do a lot to improve future housing affordability. The future planning system they envision removes most of the bottlenecks that stand between land that is suitable for development and actual development. 

Most importantly, the Commission recommends automatic triggers bringing forward the supply of zoned land whenever the price difference between zoned and non-developable land gets too high.

If urban planning is working as it should, the only systematic cost difference between land inside and outside of a rural-urban boundary should be the value of the infrastructure already available inside the zone. Large price differences signal that demand for housing exceeds the supply of zoned land: it’s the zoning that is then attracting a price premium. Automatically releasing more land whenever that happens both ensures sufficient supply to meet demand and discourages land-banking. And so kudos to the Productivity Commission for recommending using the price gap between zoned and unzoned land as a trigger for liberalising the supply of zoned land. We at The Initiative would recommend that trigger should be pulled whenever land inside the boundary carries a price premium greater than the cost of infrastructure provision. 

Learning from experience with the Auckland Unitary Plan process, the Commission also suggests using Independent Hearings Panels more frequently on plan changes. Getting quick rulings on new or reviewed council plans through an IHP process would streamline the process for those trying to provide new housing. And the Commission’s recommendation to bring affected communities onside by providing infrastructure or service upgrades along with new development nearby could help mitigate the NIMBYism that has stymied new development.

But wait, there’s more! 

The Productivity Commission also provides recommendations to help councils provide infrastructure when debt constraints prove binding. Auckland is near its debt constraint, so borrowing to build more infrastructure causes problems. The barrier is substantial. Infrastructure spending that passes any reasonable cost-benefit assessment cannot get through because, in the short term, interest charges on the resulting debt grow more quickly than rates revenue from development that has not yet happened. 

One obvious alternative would be for Auckland Council to sell off assets like council-owned golf courses in valuable areas. The transformation of underused golf courses into housing would both help ease the housing crisis directly, by getting more houses built, but also by providing funds allowing more infrastructure construction despite Council debt limits. But golfers are more reliable voters in Council elections than are those living in garages. 

The Productivity Commission report looks to other changes to help get around councils’ debt constraints. When new infrastructure allows new development, the value of surrounding properties goes up. Levying landowners for that uplift in value is one way of funding needed infrastructure, although Council will still face the politically difficult problem of charging people for unrealised gains. Other mechanisms would allow those buying new dwellings to pay off the infrastructure cost over time. Both could get around the current constraints.

There is much more within the report. But what is not in the report is any sense of what would be needed to implement its recommendations. The recommendations span rather a few legislative areas; drafting legislation to give effect to the recommendations, even in the best circumstances, would not happen quickly. 

And Auckland’s housing crisis is going on right now. 

A government committed to housing affordability would set the process in place for implementing the Productivity Commission’s agenda. But it would also think about measures that could help in the interim. In the current system, Council sees little upside from new development. Infrastructure costs bind, and local voters complain about new development. And cultures within planning departments that emphasise lengthy process over housing affordability will not change without a spark. 

In the Initiative’s Free to Build report, Jason Krupp and Luke Malpass recommended providing local councils with a grant equivalent to central government’s GST take on new construction. If the planning system were set correctly, this would not be necessary. But in the second-best world in which we live, and until plans are changed, councils need that stronger incentive. 

We at The Initiative recommend that an incoming government provide that kind of grant to councils over the next three years. Time-limiting the grant would encourage councils to let development happen now, and to remove bottlenecks from consenting processes, so that new housing can come onstream more quickly. Within-council considerations change when permitting delays cost council directly.

The Productivity Commission has provided us an excellent long-term manual for getting out of the housing crisis. We need to complement it with some measures that could also bring housing costs down in the shorter term. Stronger incentives for councils to allow new development should be part of that solution.

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*Eric Crampton is the head of research at The New Zealand Initiative, which writes a fortnightly column for interest.co.nz.

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Any solution is possible if the government - first admits that there is a housing crisis.

What will one solve if there is no problem- No problem -as per elected national government

nick smith has said acute and labour says crisis. they are almost synonyms.
nick smith will use words to try and win a debate, or try make him look good.

Methinks NZ's Reverse Midas is a tad optimistic in thinking his words will make him look good.

I hope your right but we will see if he gets re-elected. I really hope not an electorate seat.But he can still get on as a list. A very strong point for killing MMP!

land used to grow food (dairy, beef, lamb, crops) is very hard to zone into residential, and so it should be, esp when theres plenty of 700sqm sections with 100sqm houses on them in places like palmy - higher density is the way forward here.

Auckland is near its debt constraint, so borrowing to build more infrastructure causes problems. The barrier is substantial. Infrastructure spending that passes any reasonable cost-benefit assessment cannot get through because, in the short term, interest charges on the resulting debt grow more quickly than rates revenue from development that has not yet happened.

I like the assumption that Auckland undertakes "any reasonable cost-benefit assessment" - what a joke.

Here are 3 examples of the results of Auckland's existing "reasonable cost-benefit assessment":
1, Dairy Flat - South of Dairy Flat development is banned, North of Dairy Flat a large sprawl is taking place.
2, Kumeu - East of Kumeu development is banned, West of Kumeu a large sprawl is taking place.
3, Ardmore/Pukekohe - At Ardmore development is banned, at Pukekohe a large sprawl is to be built.

Auckland Council bans development from taking place close to the city, short commutes are banned, small additions to existing infrastructure are banned.

Auckland Council prefers to build large sprawling developments kilometres away from the city and build long extensive infrastructure links to facilitate this sprawl.

Auckland’s housing crisis is going on right now, because Auckland Council wastes $billions.

there seemed to quite some houses going up in ardmore last time I was out there
map here

That Takanini suburb you've shown is an example of the sort of compact, medium density, suburbs that would be built on the Ardmore plains - if we were allowed. The residents would be able to commute on an excellent rail service and we would have affordable housing.

Unfortunately Auckland Council has spent all the money places like West of Kumeu, creating low density sprawl and a completely car centric future.

Too bad it is as ugly as all hell, narrow streets and houses with far more cars outside them than they have parking for as they are majority owned by investors and each has several people in it. They are future ghettos.

Had a look at Hobsonville Point lately, PocketAces?

That's the place that went from being about affordable housing to being about small-but-expensive houses, yeah?

Yep. Our council saw all those potential small compact affordable houses being built and positively freaked out. The houses remain just as affordable, but the land has been made hellish expensive.

Yeah...I thought I saw land advertised for around $500k for ...250sqm?

WTF

I'll see you, and raise you $179K (slightly bigger section to be fair)
http://www.trademe.co.nz/property/residential/sections-for-sale/auction-...

That's the one. I wouldn't expect it to be a ghetto with starting prices around the $800-900k mark.

thought I might have been slightly out. you make a good point then. Would love to know the logic or non logic behind it then.

Most of the transportation planning was done by Auckland Transport prior to 2013, whilst they were taking a lot of bribes.

11
up

Winston Churchill: Roads are made, streets are made, services are improved, electric light turns night into day, water is brought from reservoirs a hundred miles off in the mountains — and all the while the landlord sits still. Every one of those improvements is effected by the labour and cost of other people and the taxpayers. To not one of those improvements does the land monopolist, as a land monopolist, contribute, and yet by every one of them the value of his land is enhanced."

"The interaction between the inelastic supply of land and the highly elastic supply of mortgage lending lies at the heart of the house price boom over the past few decades."

https://medium.com/@danielbentley1980/a-nation-of-landowners-but-for-how-long-a8419d3b9e6e

Just wondering - does the Productivity commission work at all with the Ponzi Nomics commission?
The latter have stated that there is an unlimited source of buyers if prices become "affordable". The market is bottomless .. off the top of my head they mentioned millions across Asia & Africa who may jump at the chance. Please open more land so that houses become affordable for the masses... let us be free to build without restraint

Auckland council is sitting on useless golf courses, while they are up to their eyeballs in debt and homelessness?!?!?!?!
Is there no end to the incompetence?

Those golf courses were in existence and owned and debt free 80 if not 100 years ago ...

Now Auckland Super council is up to its eyeballs in debt in providing infrastructure for all the imports and migrants

Are you suggesting Auckland Council should now sell off those recreation space golf courses ?

Well...most of our politicians seem to see selling off New Zealand piece by piece as the road to prosperity...so it would make sense for us to sell these too.

Golf courses are important for residents and users to engage themselves in healthy recreational activities. The limited green spaces in Auckland Isthmus will need to be protected and kept untouched thank you.

Open green spaces where everyone can go are awesome and necessary, gold courses, not so much

We all know which socio economic group use golf courses. It's like a sick joke.

In your posts last year you acknowledged to being a migrant ... which disqualifies you from offering any such advice let alone criticism ... there are many grannies who participate in a weekly game of golf ... such exercise plus regular use of their gold card gets them out of the house ... keeping them fitter and healthier than would otherwise be the case ... and keeps them out of hospitals and minimises their demands on the health system

>mportant for residents and users to engage themselves in healthy recreational activities.

Those are called parks and are free for anyone to access.

Im all for open green spaces, but we don't need golfers to monopolise them. Let them shift to the regions if they want golf, golfers don't have to live in Auckland - they should go to where there is no pressure - just like the unemployed should.

Open the golf courses up to freedom campers,homeless people, mutlicultural markets and festivals, communal veg gardens, foreign workers camps and so on. A place for eveyone.

Is the golf course providing net cash flow for the Auckland Council?
Surely that is a good thing for finances plus the health/outdoors benefits.And like someone said above the golf course might not be in debt but Auckland Council might be.

alternatively you can sell it, and council gets 1 big lump sum and rates as income, probably more income money than it is currently getting from the golf course, them numbers I would like to know.

I would be open to a compromise open the golf course to the public for walks at least, then the golfers keep there course and people get their conditional green space. Although I am not sure if this of course would work. But this compromise seems better then building houses everywhere.

There is consequences to building houses everywhere. okay you might get more houses, but you equally might get more crime, more unhealthy/unfit people...etc. The balance is important because if not we will pay for it either way wheher that be taxes for more jails hospitals. my point is it is a trade off(which I might not be articulating too well here).

my point is build up and out but not infill, especially the big green open spaces! But then again the big green open spaces are easy pickings for developers because they offer scale.

On homelessness it is not as simple as building houses.

I doubt any of them are cash flow positive. They are likely a boat anchor. Why not build more cashflow negative rental properties on them. The council should be trying much harder to keep the bank happy.

Nothing will happen till people vote for change.

Any solution to start - possible with change of government.

Densification of existing sites is surely better than destroying what limited green space there is on the Auckland isthmus. Build up, add more dwellings on existing urban land space. Do all the things we've been hearing about for years that never seem to happen enough.

IANAG (I Am Not A Golfer) - but leave the green spaces alone. Lazy chat from the author of this article, which is otherwise full of good thinking.

You know there's a really, really easy way to fix the so called housing crisis: We have more than 33,000 Auckland dwellings are officially classified empty and that was based off the 2013 Census figures predate an increase in foreign buyers in 2014-2015. So we've probably got far more than London's empty home issue.

We just need to tax the buggers (Off shore Speculators) to get them to sell and hey presto, housing crisis over! If Vancouver can have such a tax then so can we.

Rise of the ghost homes - More than 33,000 Auckland dwellings officially classified empty
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=1165...

London’s 39,353 Anonymously Owned Properties Is Starting To Become A Problem
https://betterdwelling.com/city/london/londons-39353-anonymously-owned-p...

Why can'they do a full analysis on the 33000 empty homes.it would be nice to have a breakdown of the criteria, e.g. up for sale,between renting, left empty... Even if it was only half that were empty and left to rot that would be great for supply.

Nick smith can say there is not enough evidence, but surely you have to do the investigation first?