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Smith says Govt planning new regulatory intervention in Auckland; says tough decisions needed on Heritage overlays restricting supply

Smith says Govt planning new regulatory intervention in Auckland; says tough decisions needed on Heritage overlays restricting supply
A subdivision underway in Remuera. Photo by Lynn Grieveson/Hive News

By Bernard Hickey

Building and Housing Minister Nick Smith has flagged new unspecified regulatory interventions in Auckland's housing market to ramp up supply.

Moving to address growing concerns from the Reserve Bank and others that the supply response to Auckland's resurgent house price inflation is insufficient to cope with record high net migration, Smith signalled new measures at a regular media briefing late on Wednesday with Mayor Len Brown on the progress on the Auckland Housing Accord.

"What we see from this first quarter report is just ahead of the pace on year two, but we're not underestimating the degree to which we're going to have to continue to pedal very hard right through both Council and Government operations to keep that momentum going," Smith said.

Smith said the Government's HomeStart scheme for subsidising first home buyers of new homes starting on April 1 would create tens of thousands of new buyers in the Auckland market looking for homes costing less than NZ$550,000.

"We still have a job to do to convince the residential construction industry that there is demand and need for new homes in that more affordable price bracket. The Government is working with the Council on other additional initiatives in the city to make sure that we meet these targets, and we're looking forward to making announcements on those in the next month or two," he said.

Smith declined to spell out what was being planned.

"There's discussions that we need to have with the council and with other parties and it's not appropriate for those to be in the public arena at this stage. The work that's going on -- the Housing Project Office, the Accord -- a lot is going well, but I'm not saying to the people of Auckland that's all we're doing. We think more is required and we're planning to do more, and when I'm in position to announce the 'more' that we're doing, I'll be more than happy to share it with you," Smith said.

Smith said the Government was not considering fresh capital investment of its own to boost housing supply in Auckland.  Bill English said last week the Government was preparing new measures to ramp up activity at the Tamaki Redevelopment Company, including potential extra capital investment.

"No. The Government is not contemplating further specific investment, but there are other regulatory interventions that we think are going to be required to ensure that we keep the pace of growth in residential housing in Auckland, and we'll be making announcements on those when we're in a position to do so," Smith said.

Sympathy with Wheeler

Brown and Smith were also asked about Graeme Wheeler's comments to the Finance and Expenditure Committee last week about the need to loosen height restrictions and other anti-densification measures to increase the number of homes built closer to the CBD.

Brown said he would welcome taking Wheeler on a tour of new apartment developments in the CBD and said more intense developments around transport nodes further away from the city were substantial. However, he also said the Unitary Plan, which had earlier densification measures watered down in 2013 after a revolt by home-owners in the 'heritage' areas, was reviewed every six to seven years.

Smith said he agreed with Wheeler that more needed to be done and the bank's concerns were being addressed as part of an Independent Panel's assessment of the Unitary Plan.

"If you look at the Unitary Plan and the process that has been agreed with the Auckland Council. It's currently before an independent panel. My own Ministry has made submissions consistent with the concerns of the Reserve Bank Governor, particularly around the Heritage overlays," Smith said.

"That's an issue that the Panel will work through and provide recommendations back to Len's Council and is a work in progress. I don't want you to take that the Reserve Bank's comments are being ignored. They are constructive and are part of the things that we have to work through," he said.

"In 2017 that Unitary Plan process will be complete and the sort of issues that the Reserve Bank Governor is raising around Heritage and landscape overlays, and the potential negative effect on the capacity to be able to build more housing in the areas around the CBD is going to require some tough calls by both Government and the people of Auckland."

Council PPPs on housing?

Brown said Auckland ratepayers would not support investing more capital in building houses, but the Council could work with others to see affordable homes built.

"One of the things that we are focusing on -- aside from the work we're doing in the housing accord -- is also we're looking to work with the private sector and the third sector -- the likes of the Housing Foundation -- in leveraging our land as much as we can and we're thinking in particular of the housing for the elderly villages that we own -- 68 of across the region," Brown said, adding the Council was looking for partnerships with others.

"The ratepayers of Auckland will not be looking to back the build itself, but we certainly have land and the ability to engage with those who have the capital and the capability to build upon it. We'll be looking to make a contribution," Brown said.

Smith also referred to the use of substantial Government and Council land holdings in Auckland.

"Government and Council are both squeezing the lemon pretty hard looking at our own land holdings through the city of Auckland as to where there are housing opportunities, and there's more we can both do in that space," Smith said.

Brown said Barfoot figures on Wednesday showed a pickup in sales of properties for less than NZ$500,000.

"That reflects the fact that we've absolutely got the hammer down on potential developments with a price tag under that figure,"

Code compliance non-compliance

Smith said there had been 529 building consents issued in the Special Housing Areas as at December 31, but he could not say how many houses had been built, given problems monitoring the number of houses to have Code Compliance Certificates granted.

"There is a large level of non-compliance with getting Code Compliance Certificates. We've had advice that as many as 20-30% are not finally completed to the point they get a Code Compliance Certificate. There are Building Act changes that the Government is working on to change that culture and improve that," Smith said.

Without those changes, data around the number of houses completed would be uninformative, he said.

Smith also suggested the Government was working to increase the number of migrants with building skills to help ramp up construction "to ensure we get best price."

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Most of those in leafy heritage and low density areas bought there because that is what they want.
Need the National  led government need reminding that possibly as many as 80%+ are their natural constituency.?

Not only what they wanted, it's what they paid for

But if that land owner paid for the land an wants to subdivide, he can't. It's a lose-lose situation: the developer can't develop, and two new homeowners can't live in that suburb.

Here we go ............ again

What they were guaranteed  leafy heritage and low density for ever....NIMBYS!?? Now were is my gold card?

What's it to do with them?
"We still have a job to do to convince the residential construction industry that there is demand and need for new homes in that more affordable price bracket"
Page 24 of the monitoring report shows that the median section price in Auckland is now $475K. Add the standard $200K for a structure and you get the median house price pretty much spot on.
Land has more than doubled in price since 2006. There is plenty of it sitting around with just grass on it right now. So why the price bubble?
It's nothing to do with the builders. Once again Smith is trying to drag our attention away from the really obvious problem (the one he doesn't want to deal with) and towards a fake problem.

Len Brown silliness alert:
Brown said Barfoot figures on Wednesday showed a pickup in sales of properties for less than NZ$500,000.
"That reflects the fact that we've absolutely got the hammer down on potential developments with a price tag under that figure,"
I would have thought that if there really was confidence that there was soon going to be a flood of affordable houses on the market many people would hold off for the better value the brand new homes would offer.
Or.... nobody has any faith in the council plan for housing and is snapping up the last of the affordable chicken coops while they can.

Has Len Brown  got a clue about what his council charges are for subdividing a section and even to  run a water tap to the subdivision ?
Clearly not .
He would be horrified if he knew .
A water meter and tap real actual cost is  about $300 , but Auckland Council charges $12,000.00 , and thats just the start .
In 2011 a water connection was $7,000
In 2012 it went to $9,000
In July 2014 it increased to $12,000
Inflation was ....... 2% pa
Go Figure !
A simple subdivision is about $40,000 in fees alone . DC fees can be $20,000 and if you have trees its about $12,000 extra per section
Putting in a concrete driveway to Council specs  is anything up to $100 k , including $10k to $20 k that council charges fro the changes to the pavement .
Land can only go up in price with this utter madness

The time for "twinkly stars and unicorn" housing policies in Auckland is over. 
It's time for someone in government or Auckland Council to get real and to put in place the policies that will work today not in thirty years time.
Let's be very clear. Even if people were allowed to erect their own origami tent on the median empty section in Auckland their house would still cost 6.3 times their annual household income. The empty section alone is severely unaffordable.
The following is a "housing misery index" compiled by comparing building consents for dwellings against population growth. Given that Auckland housing is already way overcrowded compared to everywhere else in the country you would think the only performance target that Auckland Council would aim at would be to get house prices and, therefore, overcrowding down, whatever it took.
In this index a positive number means housing is getting better, negative it gets worse. 

2005     0.1

2006     -0.8

2007     -0.1

2008     -0.1

2009     -2.5

2010     -2.4

2011     -3.4

2012     -1.5

2013     -0.6

2014     -2.4

2015     -1.8 (projected)


So housing overcrowding has been getting consistently worse since 2006 and neither Auckland Council nor the government appear to have any sense of urgency about fixing the problem today.

I'm expecting to see something similar to what was done in Chch, where govt rezones the land, and greenlights the developments.  The misery doesn't really justify the rampant speculation going on in the housing market, or the migration, just my opinion.  Why would you move to an overcrowded ratrace where it takes one income just to pay the rent?  Maybe for a year or two, just to do something different?

Don't want keep on harping about Aust, but Len Brown and his bods should make a quick trip across to its sister city, Brisbane to see how quick and easy in the process of issuing permit around here 

Permit for what?

Building permit

The Auckland problem is granting consent to subdivide land in the first place. By the time you get to actually building you are past the majority of the lunacy. 
Not that Auckland Council doesn't have ways of making you tear your hair out there as well :-)

Do the zones not have subdivisions as permitted?  Would it be as simple as rezoning to make subdivision permitted, it actually should be that simple.

Residential building is the permitted activity in the zone but each subdivision needs to be checked for hazard mitigation, layout, conformance with section sizes etc etc etc etc. Not to mention the calculation of financial and development contributions.

There was a house down the street from where I live near Brisbane CBD, it was on a double size section (800ish sqm) and advertised for sale in late November last year.  A Sold sign came up few days later, the house has since been shifted about 10m to the left, the section subdivided and now up for sale.. all done in couple of months!

CM _ I spend quite a bit of time in Brisbane and the GC/Sunshine Coast areas....and I am always astounded at how fast things get done......I think Aussies in general have a better get on with it attitude.......I always find them on the whole more practical.......maybe that is because of the natural environment and what it can deliver.......Aussies also like and expect a certain quality of life.....they like to have good disposable income so they can do the things they're interested in......

Our house has two streets frontage but only one crossing, I was asking the Council if I can have another kerb crosssing.  Yep the fee is $240 and will take 4-5 days.  
Now try that in Auckland.
Tony76 - not sure if you know.  Brisbane has few flood risk areas, they can lift a house and put onto steel poles  (up to 4m high) in a few days

Love them or hate them, the Aussies have got it right when it comes to getting things done.

Interesting as here in Wgtn 1 or 2 ppl I know tied to do that and the council didnt want to do it.
The minimum charge is $300 here for a consent, so you got a bargin at $240 I reckon, take it while you can.

Wow thats crazy, the development must have been right next to the council as they were sick and tired of the noise ;)

Smith and co have no idea of the problem if they think that heritage overlays are causing supply issues.
The reality is that there is too much migration.  It is not benefitting NZ at all. 
The demand is for individual homes, not apartments or units.  Areas that need redeveloped are in a stranglehold of state ownership, which for some bizarre reason the government wants to redevelop themselves into slum housing rather than letting the market decide what would be the best use of these areas (ie by selling them).
The solution is simply - build a mix of new state housing and cheap housing in fringe green or brown field locations and upgrade transport links to those areas.  Then sell the inner suburb state housing stock to the open market on an individual house sale basis, which would expand the number of suburbs those craving the central Auckland lifestyle can choose from.
Problem solved with net zero cost to the government...

Chris_J I have been saying for a long time that new towns with better transport links is one practical answer to affordable housing. Especially if rural price land can be accessed. Your solution with State and afforable housing seems a bit like Labour's KiwiBuild proposal.
Re selling off inner suburb State housing. Probably the best solution is that existing State Housing is sold off to a developer to build more intensive housing on the precondition that the same number of State Housing tenancies are retained. If the surplus residences were sold at a pre-arranged fixed affordable price then again it would be like Labour's KiwiBuild proposal. Alternatively the developer could be allowed to sell at whatever the 'market' price allows.
The good thing about intensifying existing State housing in the above manner is this would create mixed neighbourhoods that are less slum like.

There is a serious need to deinstitutionalise our voted in fathers and their wing men.......stop ringing your hands and get on with it....if you don't significantly up the numbers of houses being built and get some affordability back into the market then National will simply not get back in at the next elections.
Get rid of the regulation and the regulators.....let the free market be in control.....yes there will be the odd person who might get taken for a ride....but so what......all the regulation is only there because we had stupid people in the first place.....the cost of protecting stupid people is too high.....if you want an educated society for goodness sake let some of them get an education in the real world doing real things, making real decisions, in the real free market and maybe they will learn what a shoddy building is and what shoddy materials are and what a good carpenter and other tradies do !!!

A handy estimator to see just what the current DC rort will cost ya...
As it's Web-based, it's unaffected by the tears yez will undoubtedly shed as ya looks at the bottom line....

A useful RBNZ change to borrowing rules based on Basel will have a lot more benefit than Smith and his crazy ideas.

My brother is an architect working with a group of smaller builders like the ones contracting for WFH in Millwater.
They're being completely rational. There is still a market for 800+ new builds (FHBs with help, and second home buyers), and while it exists, the profit is better, why would you screw around with sub-600k?
There are no incentives to build "cheap" houses, unless you have the advantage of scale and it's a billion plus development.

when building you're looking for equivalent of capital gain.
In the small end there isn't the margin/revenue size to make it work.  too many overheads, too many subbies required each witht their own overheads.  50% mark up on 200k build only gives 100k for all those costs.     50% markup on 600k house, 300k ...and since most overheads don't linearly scale, if at all, the 300k is where the NP is.

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Days to the General Election: 39
See Party Policies here. Party Lists here.