10 Oct 2013

Editorial: Success of housing plans really depends on the buyers

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Photo by: Brett Phibbs
Published: The New Zealand Herald – 10 October 2013

Though Housing Minister Nick Smith calls them sections, "units" is probably more accurate.

Though Housing Minister Nick Smith calls them sections, “units” is probably more accurate.

Auckland’s first “special housing areas” announced yesterday are in predictable places: East Tamaki, Papakura and Pukekohe in the south of the region, West Harbour, Kumeu and Hobsonville in the west. These areas were designated for population growth in the Auckland Council’s 30-year-plan and their land values are comparatively low. Thus they satisfy the aims of both parties to the Auckland housing accord. The council wants to contain urban sprawl and the Government wants more affordable houses to be built.

Whether these areas satisfy the immediate aspirations of first home-seekers remains to be seen.

The Government firmly believes the solution to rising prices lies in increasing the supply of houses, not dampening the demand for them by restricting loans or taxing investments. Now that the Reserve Bank has restricted lending on low deposits, the Government seems particularly anxious to increase the supply of ready building sites.

It hopes to see 6000 new houses built in the 11 areas agreed with the council.

Developers will get faster consents on condition they provide a certain proportion of the houses at an agreed range of prices. The precise proportions and prices appear to be a matter of negotiation in each application for development consent.

Applications that provide the desired ratio of affordable homes will be processed within six months if they are a “greenfield” (new) residential development and three months if they are a “brownfield” redevelopment. Consents at that speed should be ample incentive to build at a reduced value. But the success of the policy depends entirely on demand. If developers cannot sell modest homes in these places off the plans, construction would seem unlikely.

The special areas are all on the urban periphery apart from one at Orakei, a 0.8ha site for 75 homes. “Intensification”, the main objective of the council’s Unitary Plan, would seem to be well-served. A 10ha site at West Harbour is envisaged to have 166 homes, the 65ha Huapai Triangle at Kumeu, 2000 homes, a 7ha site on Flat Bush School Rd, East Tamaki, 300.

Though Housing Minister Nick Smith calls them sections, “units” is probably more accurate. The density of these developments would make them a very different proposition to subdivisions on a city periphery where previous generations frequently found their first home. The council may need to ensure that community facilities and public transport services compensate for a want of recreational space at home.

The Government, however, wants to reduce the contributions required from developers towards public reserves and recreation. It believes these also cause house prices to be higher than they need be. As well as increasing the supply of residential land, reducing development levies and fast-tracking consents, the minister talks of getting “better value” for building materials and improving productivity in the construction industry.

All of those supply-side improvements would help but demand needs to be tackled too. It may be that the Reserve Bank’s limits on high loan-to-value mortgages introduced last week will do more to contain house price inflation than the plans announced yesterday. If first home-seekers are ready to settle for apartments they probably will not look for them in outlying new developments.

Under the accord, the Government and the council plan to provide 39,000 new homes in the next three years. That rate must be sustained for 30 years to accommodate the council’s expected population. But buyers will decide whether the plan works.


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