Tauranga could lose up to $1.609 billion in gross domestic product (GDP) within 10 years if the city's dire housing shortage isn't urgently addressed.
And a forecast weekly rent of just under $1000 and an average house price of $1.612 million could result in thousands leaving the city, a new report warns.
In papers prepared for a Tauranga City Council Strategy, Finance and Risk Committee meeting on Monday, staff warned of the economic impact of a future, and extant, shortage in housing.
City planning and growth manager Andrew Mead, and growth research and analytics team leader Ayv Greenway, expressed in the papers the need for urgency in "addressing these matters... as quickly as possible".
The concern came alongside an independent report by the NZ Institute of Economic Research, which assessed the potential economic impacts of housing capacity shortfalls already identified in Tauranga.
The institute estimated the existing housing market was "not in equilibrium" regarding supply and demand, as there was already a housing shortage, which in 2021 ranged from 4267 to 5295 homes.
The shortage was expected to balloon to between 7092 and 8993 in 10 years.
The figures include a "competitiveness margin" of up to 20 per cent, aimed at allowing for factors such as growth being higher than anticipated, increasing competition between developers to create more efficient land and house markets and therefore lower prices, and also some land not being developed as initially planned.
The institute predicted the housing shortage would result in 14,951 people being unable to live in Tauranga within 10 years. This translated to a cumulative GDP loss of $1.609bn, which was expected to be primarily felt in the land and housing development sectors, but which would also flow through the wider economy.
"NZIER market discussions indicate deteriorating housing affordability will encourage more Tauranga residents to move to neighbouring regions such as Rotorua, Matamata, and Katikati (or presumably people wishing to move to Tauranga locating in these places instead)," Mead and Greenway said.
Tied in with the likely impact of the Government's National Policy Statement of Urban Development (NPS-UD) standards, the median house price was expected to increase from $1m to $1.612m in 10 years. Weekly rent could rise from $620 to $998.
In June, a survey of 185 new builds listed for sale in Tauranga found an average asking price of $1.167 million.
"With no new housing being offered at less than $700,000 and very limited stock at less than $1m, new housing stock is relatively unaffordable compared to incomes in Tauranga."
Infometrics data shows Tauranga's average household income was $99,492.
Mead and Greenway acknowledged house prices had started to fall, but said land development and house construction costs continued to rise, driven by increasing materials, labour and infrastructure costs.
"This points to further increases in the cost of new housing product over time to achieve profitable outcomes for the development and construction sectors."
As a result, the city was likely to see an increase in smaller-scale projects, such as two-level terrace housing instead of multi-level apartments, and larger-scale projects focussing on more unique opportunities such as the retirement sector or public sector housing, they said.
A focus on the higher end of the market, where additional costs could be more easily absorbed, was also likely.
The report also revealed a five-year delay for the start of Te Tumu, considered to be one of Tauranga's most important housing development areas. Work was now not expected to begin here until 2030, partly due to "ongoing challenges".
Western Bay of Plenty economic development organisation Priority One chief executive Nigel Tutt said the report, which was an update to one commissioned by the economic development agency and Council a few years ago, underlined that the housing shortfall was a major issue, bringing with it increased prices and negative impacts on the economy.
"We should collectively be very concerned about the effects of high housing and rental prices on the wellbeing of our community."
Tutt said the housing shortage "must be addressed with urgency".
"Our local authorities are trying hard to address it but a team approach is needed. We need central government politicians to show that they are serious about improving housing outcomes by removing barriers and fast-tracking developments."
The report was commissioned as part of the council's preparation for a Future Development Strategy and eventual Long Term Plan 2024-34.
Bay Financial mentors' manager Shirley McCombe said house prices and rent played an "enormous" role in the lives of the people the budgetary service worked with.
"It is usually the largest expense a family has in their weekly outgoings. Shelter is a basic need, and for many, it is constantly under threat," she said.
McCombe said she believed Tauranga's housing affordability issue would mean the number of people able to own their own homes would continue to decrease, impacting generational wealth.
"Often the family home is the largest asset they own, and the profits are distributed to the next generation when a person dies. This will widen the gap between those who have and those who do not, with each generation," she said.
McCombe shared the concerns that people could be forced to live elsewhere because the city will become too unaffordable.
"Absolutely, Tauranga is such a desirable place to live, and desirability has a cost. For some, that cost will be too high."
The committee will be expected to accept the reports and note the housing shortfall and urgency required for action.
Council staff were expected to continue "with urgency" plans for residential and development projects at Tauranga West, Te Tumu, Keenan Rd, Ōhauiti South, Smiths Farm, Parau Farm, Rowesdale Drive, and intensification plan changes.
Work was also expected to continue with Government ministers and officials regarding efficient planning and zoning processes.
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