ANZ economists say even with the housing accord working as intended it could take 15 years to remedy Auckland's housing shortage

Even with the new proposed Auckland Housing Accord working as intended it could take till 2028 to resolve Auckland's shortage of housing, according to ANZ economists.

In their monthly property focus the economists have examined various scenarios for how the Auckland housing market might pan out and conclude that the city's housing issues will take "a long time to resolve".

"Auckland’s housing needs are a moving as opposed to a static target. With Auckland projected to account for more than 60% of the population growth in New Zealand over coming years it could take until 2028 to clear the shortage," they say.

Auckland has a perceived shortage at the moment of about 30,000 houses and in recent years has been averaging less than 4000 new homes a year. While the figures are now growing again after the shocks of the 2008 global financial crisis, latest figures from Statistics New Zealand show that Auckland had consents issued for only 1669 new houses in the first four months of this year.

The Government and the Auckland Council recently agreed a housing accord that would target 39,000 houses over the next three years. See all our housing accord-related stories here. New legislation has been rushed into Parliament to enable this accord and perhaps future accords in other local government areas. However, the Auckland council has not been pleased with what's in the legislation and is indicating it won't sign the accord till the legislation is changed.

Deputy Mayor Penny Hulse told Radio New Zealand this morning that the council's current focus is on the new Unitary Plan, on which public feedback closes today, and “Until the Government change the [housing accords] legislation to better reflect the intent of the housing accord the accord remains on the backburner”.

The ANZ economists note that "a multi-pronged attack on the Auckland property market has been launched".

"The RBNZ is set to curtail exuberant demand via leaning on prudential policy initiatives, including loan-to-value ratio restrictions. Meanwhile supply side initiatives include the Housing Accord and Unitary Plan, which aims to build 13,000 units per year in Auckland, an enquiry into construction costs, and changes in the delivery of social housing.

"We wouldn’t be surprised to see more talk of changes to the tax system too. It’s a potent combination, but how do the numbers stack up? While this analysis is sensitive to the assumptions used, the bottom line is that Auckland’s housing issues will take a long time to resolve."

The economists analysed four dwelling construction scenarios for Auckland, these being:

1. A “low construction” scenario, where the number of dwellings constructed in Auckland stays at post-2009 averages (around 4,000 dwellings per annum). Under this scenario the net shortage climbs above 150,000 dwellings by 2031;
2.  A “historical averages” scenario, where the number of dwellings constructed in Auckland is equal to its 20- year average of around 7,500 dwellings. Housing shortages still climb towards 80,000 dwellings by 2031;
3. A “10,000 per annum” scenario. The housing shortage remains around 30,000 dwellings over the next 20 years; and
4. The “implementation of the Accord and Unitary Plan” scenario, with an average of 13,000 dwellings constructed over the next 30 years. In this instance housing shortages peak at closer to 40,000 by 2014, but then steadily decline thereafter, with no net shortages by 2028. These estimates provide some allowance for depreciation of the existing dwelling stock.

"These various scenarios highlight quite marked differences in projected housing demand and supply balances," the economists say.

"Based on the estimated demand of 10,000 dwellings per annum, the range of housing balances becomes wide. Reasonably small annual differences can cumulate up to large gaps with the passage of time.

"What they also show is that even if construction proceeds as outlined in the Accord and Unitary Plans it will not be until 2028 that housing shortages are eliminated altogether. That’s a long way off."