Auckland Council is consenting many more dwellings, especially smaller dwelling units. And building these will require a different type of construction worker, one already in hot demand

Auckland Council is consenting many more dwellings, especially smaller dwelling units. And building these will require a different type of construction worker, one already in hot demand

By Shane Martin & David Norman*

• Consents for new dwellings are the highest they’ve been for 14 years and are approaching the highest ever, which is welcome news against a backdrop of a housing shortage of 46,000 dwellings.

• The mix of dwelling type has changed significantly, and the average dwelling size has plummeted, mostly due to budget constraints encouraging a switch from stand-alone houses to townhouses and apartments, but also due to changing patterns in apartment and townhouse size.

• Multi-unit dwelling construction requires a skillset that differs somewhat to that required for stand-alone homes, and is more akin to nonresidential building. With the recent surge in nonresidential building activity, this suggests we will see non-residential and more complex multi-unit developments competing for workers.

Unitary Plan encourages different mix of dwelling types

The last eight years have seen massive changes for the Auckland Region. Between 2010 and 2017, Statistics New Zealand estimates that Auckland’s population grew by over 15%, with the bulk of the growth in just four years. At the same time, new home construction could not keep up. Our most recent estimate is that we have a housing shortfall of about 46,000 dwellings. This is up about 4,000 in the last year – even with a substantial uptick in the number of dwellings under construction.

A swelling population and housing shortage was directly targeted by the Auckland Unitary Plan (UP) which became operative (in part) in late 2016. The UP drastically changed what could be built and where. Most of Auckland received zoning that allowed for more dwellings to be built than before. This allowed for many more apartments, townhouses, and other attached dwellings than under the old zoning regulations.

But just because more dense housing has been enabled, does not mean the market will respond by switching to new typologies and delivering what the UP has enabled. But it has. In 2010, 84% of all new dwellings consented were stand-alone homes. Even though this is a historically high figure, it shows where Auckland was pre-amalgamation.

By 2016, stand-alone houses accounted for 55-60% of all dwellings consented. In the past 12 months, this figure has shrunk to about 47%. In the 28 years for which there is data, the percentage had never previously been under 50%. All of this tells us that, at the very least, the UP has enabled the trend towards multi-unit development that started around 2014 to continue and even accelerate.

Put another way, while the number of dwellings consented over the past 12 months is three and a half times higher than over the year to May 2010 (12,300 v. 3,500), stand-alone dwelling consents have only doubled (5,700 v. 2,900). During this time, the number of apartments has increased by a factor of 30 and the number of townhouses has increased by a factor of nine.

A classic onion pattern

We’re now seeing development patterns exactly as we’d expect in a city (see also the map on the back page). Land close to the CBD is more expensive and is more intensively developed in response. But now, areas close to the CBD like Albert-Eden-Roskill Ward, North Shore Ward, and Waitemata and Gulf Ward have also experienced significant growth in apartments.

Townhouses are the next highest density of development, and these are growing fastest in the wards surrounding the ones with high apartment growth – Albany, Manukau, Manurewa-Papakura, Maungakiekie-Tamaki, and Waitakere have all seen intense townhouse growth. Finally, areas on the edges of the region like Franklin, Howick, and Rodney Wards have the biggest share and some of the largest numbers of stand-alone houses being consented.

The drivers of shrinking size

At least two factors are affecting average dwelling size in Auckland. The dominant factor is the changes in typology over the past several years. It is no secret that stand-alone houses are usually the largest, followed by townhouses, with apartments being the smallest, on average.

As house prices have surged, people have been making the trade-off to apartment or townhouse living to overcome budget constraints.

So as more of the smaller attached dwellings are being constructed, the average new dwelling size has shrunk considerably. In 2010, the average new dwelling was about 213 square metres, while this past year it was 167.

But a second factor has had a subtler impact – the changing size within the apartment and townhouse typologies. Since 2007, newly built houses have remained almost the same size, though they are very slightly smaller over the past two years. Townhouses have also gotten smaller over the past 10 years but are directly in line with the average townhouse built since the turn of the century.

Apartments seem to be much more variable, bouncing around between an average of 80 and 160 square metres. Anecdotally, this is a product of the “shoebox” student apartment boom in the mid-2000s, followed by the Global Financial Crisis (GFC). As the New Zealand economy began recovering from the GFC, large penthouse apartments in attractive locations (e.g. Wynyard Quarter) were built. Since then, however, price pressures have required more “mainstream” purchasers to buy apartments, and average size has fallen to around 100 square metres.

All of this tells us that the average dwelling size is changing – not predominantly because houses, townhouses, and apartments are becoming particularly larger or smaller – but because the share of each type of dwelling has changed so massively. In fact, over 80% of the size change since 2010 can be attributed to the mix of housing type.

What does this mean for Auckland’s housing shortfall?

The good news is that Auckland is delivering the more intensive development closer to jobs and other amenities that has the added bonuses of limiting additional congestion, minimising environmental impacts, optimising existing infrastructure, and making public transport more viable. And the volume of homes being delivered is rising.

The more challenging question is how we are going to get all this multi-unit residential building done, especially with the massive increase in nonresidential buildings consented (up more than 60% in the year to June 2018)? The additional nonresidential development is driven by increased private sector demand for space, which use a lot of the same trade skills as multi-unit residential development. This means competition for workers to undertake these two development types – nonresidential building and multi-unit residential building – will be strong.

The government has announced a wider immigration programme (rather than its initial Kiwibuild visa proposal) to address the demand for construction workers, but as the graph above shows, the gap between what we’ve consented and what we have delivered is already significant and may well widen as the competition for workers on more complex projects accelerates.

*Shane Martin is an economist in the chief economist unit & David Norman is chief economist at the Auckland Council. This article is published with permission. The original version is here.

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From far away and outside the game, this smells strongly of cheerleading for the Benefits of the UP. Other contributing factors to changes in mix of dwelling types can be adduced:

  • Demographics: the downsizing from 3-4 bedders to townhouses to apartments (and thence to retirement villages) - standard life-cycle stuff.
  • Price - a shoebox may be all that childless FHB's and recent immigrants can afford. And development surely follows preferences expressed via Markets rather than just permitted by Plans....
  • Assortative buying - given the choice between a shack but with a decent plot in somewhere south of the Mangere Bridge, and a CBD shoebox , which might win? The phrase 'buying the neighbourhood' springs to mind.

It is, however, pleasant to see the 'economists' earning their no doubt plushly padded keep, by getting out and shaking the pom-poms in public.

It's much less clear that their view is free of AC bias......

Yes this is what I thought. Auckland Council saying Auckland Council are doing a fantastic job! (Content supplied by Auckland Council).

There was an article similar to this maybe 3 weeks ago? And then a rebuttal by Rodney Dickens.

Yes this is what I thought. Auckland Council saying Auckland Council are doing a fantastic job! (Content supplied by Auckland Council).

There was an article similar to this maybe 3 weeks ago? And then a rebuttal by Rodney Dickens.

Ha ha. Pretty much the same as Henry Ford crowing over how much the world likes black Model T's.

Or Brezhnev taking satisfaction in the length of the lines outside Soviet Russian shops.

People can't express via markets their preference to trade off size in favour of location when the authorities had previously outlawed that option.

Smaller dwellings will presumably put downward pressure on median price. Doom and gloomers will no doubt claim this reflects equally on values of existing stock.

Does it matter? I looked at the Youtube video on the new Kiwibuild homes in McKlennan Park and that clarified my thought process. Stuff this TD lark, I need to buy real landed property for my children’s future. Otherwise my grandchildren will be in these dog boxes. I’m hoping there’s a dip post the buyer ban.

I went and checked them out. I can't imagine raising a young family in them.

The 4th bedroom in the 4 bedroom one was hilarious, I think my (oversize) computer desk would just squeeze in there. 3 bedrooms plus small study/storage room is more honest. The houses look to be built well enough, and with full insulation and double glazing are certainly better built than most of the FHB/rental stock in Auckland, but they are just small and basic. The Three bedroom one had larger bedrooms than the 3 + study, but the master bedroom wouldn't really take a king size bed and a couple of dressers comfortably. You'll learn not to accumulate crapola if you live in one of those.

People who are saying they are subsidised are dreaming, they are fairly priced for what you get.

They are “subsidised” only in the sense that the government has taken all the risk without taking any profit, to deliver a typology that the market wouldn’t readily deliver itself. This is why there is a ballot - if there was no ballot, do you really think the free market would price them the same?

I wish you lot would get your story straight.. I keep hearing these were already being built and Labour has done nothing but slap a kiwibuild sticker on them to pretend like they have done something, and now you are saying they got the developer to build houses they wouldn't have normally built.. perhaps you could get together, have a huddle and decide which one it is?

Reductio ad absurdum

Kiwibuild has both, claiming credit for some developments that were initiated before the election, as well as providing incentives for new developments that may not have happened without kiwibuild. I agree that some of the construction may not be very desirable.

I think the key point of difference is that a Kiwibuild home has a price point/cap. Would the house have gone on to be built and sold for $xxx,xxx more than the cap and in a much different configuration in the absence of kiwibuild?

Only problem with that is the kiwibuild cap for 3 bedroom places was $650k, the kiwibuild ones in Papakuraare being sold for $580k, and the 4 beds for $649k.

Unless you can find what comparable units in the development sold for there is little to compare it to to figure out the relative pricing. Most unfortunately aren't advertised with prices.

We are talking about the 18? Houses that are about to go on sale, the other developments that haven't yet happened are irrelevant in this discussion.

I think it’s a good thing if smaller, cheaper housing stock comes online. Only realistic way to give first home buyers a chance in my opinion. If this puts downward pressure on median price, it doesn’t mean that the value of existing housing stock is going down, as the DGMs will claim. This is why the REINZ and Q.V. house price indexes are good.

I actually thought those kiwibuild houses looked well built and designed.

Watch "Inside a KiwiBuild house Papakura to host open homes: RNZ Checkpoint" on YouTube

Would be buyer Robert, rated the KB house 7 out of 10 overall :) but 2 out of 10 (says it all doesn't it) for the papakura location :( I am all for a successful kb, at 579k for a 3 bedroom on a tiny section on the outskirts of Auckland I don't rate it. Far, far better to build in central suburbs

Papakura is a great place. Well it is if your work is not in the CBD or any place in between.

Maybe the sections could be four times the 200sqm section, in order words 800sqm or just cut the price by a third (govt subsidy would be required) Then there would be something to offer buyers to tempt them from better options closer to the city. There will always be some who love the location but you can't say papakura has proximity to the city except in sprawled out auckland. It always shocks me when commentators suggest daily commuting to Auckland from Hamilton, Huntly and Te Kauwhata.

It always shocks me when commentators suggest daily commuting to Auckland from Hamilton, Huntly and Te Kauwhata.

I get the impression this is sometimes more to do with avoiding confronting the need to intensify more further in. Avoid it by pretending we can keep all that undesirable stuff out on the fringes.

Who’s avoiding it? A few here have laid the economics out. It doesn’t work with the current inputs and the COL have done nothing disruptive to change that mix.

You've never seen anyone against intensification of Auckland's "leafy suburbs" further in?

Yes, I was a vocal opponent of the Unitary Plan, but National bulldozed it through anyway, including some undemocratic changes at the end. The result in my area is that single house sites are being developed into double sites, because those are the economics the UP allowed to work. My point is that the market will develop according to economics and the COL have done nothing to change the inputs further. All I see here is the stick i.e. light a financial fire under owners to force them out. Think of the carrot instead and you might see owners welcoming change.

I am a bit confused here. From what I understand, the Auckland council was responsible for the unitary plan. I would be interested in hearing the reasons why you think National has ownership and not the council?

It had Council planning input but the approval was led by the Independent Hearings Panel who were appointed by National Government Ministers. The council process had consultative meetings then someone screwed the scrum and upzoned swathes of single house zones to higher density with no representation. The Panel legitimised the approach. I lobbied the local MP but got no satisfaction, but as I have with his religious views I sucked it up and voted for him in 2017. Sometimes you just have to suck it up to get a higher priority. In the end it’s been positive. Average houses from the 50/60s are being removed and replaced with two new houses in the $2.5 million price range. It lifts not detracts from the neighbourhood and kills the chance that increased density will subsequently occur in my street

Thanks for the explanation.

If I understand correctly from what you wrote and what I have found on the Auckland Council website, the Council defined and developed the plan with some consultation and then updated the plan after the consultation. The Council defined and updated plan was then approved by a Panel that was appointed by the government.

That’s the sanitised view. In my opinion, someone made a sudden non consulted change to the plan and got it rubber stamped by some National Party lackies. It was a farce, but it does show a weakness that I think will be exploited by National in the future in that people like me will make a lot of noise about things that they plan that impact negatively but not actually change their voting preference.

So the base cause was within the council, but then approved by a panel that was appointed by National. To me, the primary cause of this was the council. The final approver may be complicit, but the responsible party for the content put in front of the panel for approval was the council.

Blaming only "National" for this is somewhat of a partisan statement. I am learning that I should expect this type of partisan filter nowadays.

Looking through the panel members, I'd be curious as to why you consider all of them to be National lackeys. Their background doesn't appear to correlate with this assessment.

If a decent railway had be put in place roughly 150 years ago this question would not arise. It ought to be possible to travel at high speed between Huntley and Auckland. Compare with almost any European city of similar size to Auckland. Blame Queen Victoria. Is it too late to conceive of a upgrade or would the cost be just too high?

I recall there was a commuter train service from Hamilton up until about 2005 when it got canned as not viable. A new service has been talked about since even duncan garner weighed in, and one is due to start in a year. A lot of people who daily travel from Hamilton to Auckland are tradies so it definitely won't help them. I doubt that it would be a high speed train though but the extra investment could be worth it, as a lot more people would use it.

yes it did run, but I think there was such poor support (sabotage even) from the various agencies involved in running the service that the initial strong patronage faded away which is a huge shame considering the potential that such a service has. If there's one thing this country excels at, it is having
(A.) possibly the smallest population in proportion to its landmass but...
(B.) having a world leading inability to organize our society efficiently in spite of being such a small population.
Why is this?

(A.) is disputable. Much harder to dispute (B.) - but how about Bangkok traffic congestion (they employed town planners from my place of origin, the UK).

Rick, this will never happen with the COL as it favours National leaning voters so I can detail my disruptive plan here.

The churches own leasehold land on the flat in Kohimarama. As it’s a non favoured title the improvements are usually low valued. The government should go to the church and buy out the leasehold land in one tranche. They then rezone the land to mid rise apartments. That drives up the land value and the lessors will know that are in trouble at renewal time. The government gives them a win situation where they vacate the land in return for a unit in a new development. The government then leases the land out long term with covenants to build quality buildings. No affordable housing because that would be ridiculous but it could target downsizers or dinkies, thereby increasing supply.

The government then leases the land out long term with covenants to build quality buildings.

Of course owning a home that has leasehold land under it is only a slightly improved form of rental. It allows for longterm occupation but keeps the lessees poor from not owning the freehold title. Expat, surely if the govt is going to the trouble of buying out the churches, and redeveloping the properties, you would favour cutting up the titles into unit titles?
PS, was opposing the UP worth the aggravation in the end as I think it went through pretty much as it had been planned.

There are many forms of leasehold with different terms, rights and payments. You could even argue that freehold is a type of leasehold in that rates are payable forever at a price out of the owners control. I have lived in countries with 50 and 75 year land lease terms with an upfront payment that is valued almost like freehold, at the start. I have no fixed view on the title size. The idea is to allow people to live without fear of renewal uncertainty, at a price that’s doable in an area close to the CBD.

Re the Unitary Plan, I was blindsided by the upzoning and will never fully trust a political process again. I do think it’s important though to oppose what you don’t agree with even if it’s not always effective. I take that approach with the COL here and I see others do the same on Stuff and Trademe. That’s how movements start. You need to declare an opinion, if you have one, to find similar thinking people and it goes from there. Otherwise the spin merchants have the upper hand and we are little more that pawns.

I was in favour of housing development then and still am so definitely like the UP. In my opinion it hasn't gone far enough.

Developers generally know what they are doing!
KiwiBuild is totally overrated by many that think it is a godsend from Twyford.
Families that have a deposit will not want to buy these boxes and the ones with buggerall deposit will not be able to service the loan.
They will be ok for young couples but if you want kids then forget it as the sections sizes are pathetic.

Kids are not chickens mate, they do not legally require a set sqm of yard space. There is such a thing as parks, playgrounds, pools, community centres and libraries where parents have for generations been using these community spaces to tire the boundless energy of the rascals out so they are ready to eat & sleep back in the house. Even more common nowadays is someone else can arrange any transport and supervision so parents do not even need to be there while they work 60hr+ weeks.

Developers are greedy - 3 houses on 700sqm with no garden/deck space around the houses. You're literally confined to the house should you buy it.

I saw this one in Howick, there isn't even space for a BBQ on the outside with the 4msq deck at the front door and a sewerage service thing in front of that. No thanks.

Hahahaha. House area 199m2 land area 210m2.