28 Oct 2012

Nimbys thwart housing options

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Written by: Bernard Hickey
Published by: The New Zealand Herald 28 October 2012

The holy grail for any investor is making money by doing nothing. The second best option is to do nothing while stopping others from doing something that would hurt the value of their investment.

This is now dawning on policymakers trying to solve our biggest economic and social problem – housing affordability in Auckland.

The debate around the Auckland Council’s Unitary Plan and how to build 400,000 houses over the next 30 years to cope with population growth has concentrated the attention of planners, politicians and economists. This year’s renewed 10-20 per cent surge in Auckland house prices to record highs has further focused attention.

The scale of the task is enormous and the roadblocks are as big as they can get, starting with inertia and the second most powerful force in the universe after compound interest – “Not In My Back Yard”.

Nimbyism is thriving, magnified by the power of tax-free capital gains. The essence of the problem is that if Auckland is to build 300,000 of those 400,000 new houses within its boundaries, it has to hugely intensify its housing.

Former McConnell Property chief executive Martin Udale says that to hit the 300,000 target, one in five of Auckland’s 385,000 existing homes will have to be demolished to allow for medium- and high-density housing. This means a lot more apartment blocks, townhouses and intensified shopping, schooling and other infrastructure. It means the Auckland dream of a villa in a quiet suburb near to town, with a sea view and a backyard, is dead.

This Auckland Plan is at the centre of the recent clash between the Auckland Council and the Government. The Government is creating a panel to review objections to the plan, blocking attempts by the council to get it exempted from the Resource Management Act.

Finance Minister Bill English is rightly concerned about the ramp-up of house prices in Auckland beyond the reach of young families. English is right to target Auckland’s chronic inability to quickly build new houses that don’t dissolve in the rain.

Auckland’s building consents have languished to about 4000 a year for the past four years, well down on the 2002-05 levels of about 12,000 a year, which is what’s necessary to meet expected population growth.

Something’s got to give. Either Auckland builds up its centre or it sprawls to Hamilton in a blanket of single-level dwellings.

The third option is the easiest for property owners, and the most likely – that’s doing nothing and blocking development.

It has proved a profitable strategy for homeowners and land-bankers, given the median house price in Auckland has more than doubled to $515,000 in the past 10 years as the number of building consents has more than halved.

Nimby is the most profitable investment strategy in New Zealand.


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