Len Brown: Land alone won't solve Auckland's housing problem

High building costs stop many people affording a new house. Photo / Mark Mitchell

Housing affordability is the hot topic in Auckland at the moment, if the frequency of it featuring on the front page of the New Zealand Herald is any indication.

Recently the Government released its response to the Productivity Commission's investigation into housing affordability. The Government is committed to working with Auckland Council and others to see what can be done to reduce the costs of buying a home, lowering the barriers facing so many families.

The commission cited land availability as the chief constraint facing the housing market. Restricting land does have an impact on housing costs and increasing land supply does place downward pressure on the housing market. The Auckland Plan, therefore, provides for up to 40 per cent of new housing to occur on greenfield land over the next 30 years.

But Auckland currently has capacity for thousands of dwellings on existing greenfield land. So the issue is clearly more than just land supply. Opening up new greenfield land loads higher costs onto society - including local and central government (the true cost of development is not charged) - and it will not provide housing for a substantial proportion of current and future Auckland households.

That is because the cost of building new houses is simply too expensive for many households. Of the 450,000 projected future additional households in Auckland by 2051, only 30 per cent will be able to afford a dwelling costing more than $400,000 (in 2011 dollar terms). The current average Auckland house price is $618,000.

Another 30 per cent will need a dwelling in the $275,000 to $375,000 range. The remaining 40 per cent will be unlikely to afford a dwelling at all, and will need affordable rental accommodation.

It is for these reasons that Auckland Council does not agree that releasing more land is the "silver bullet". Regardless of land release, a large proportion of households will not be able to afford what the market can deliver. The issue is far more complex. Interventions across a wide spectrum will be required.

We now have broad consensus that the way forward is the creation of an affordable, quality, compact city that gives Aucklanders housing choice through mixed-density development on greenfield and brownfield sites inside the new Rural Urban Boundary, and greenfield sites in satellite towns such as Warkworth and Pukekohe. While more land supply is part of the solution, it will be nowhere near enough to address the problem.

Setting aside land, productivity in our building sector lags around 25 per cent below that of Australia. As we increase the level of intensification, we should see our productivity levels rise. Nonetheless, this is a real issue right now. Another factor is the cost of construction materials here, building materials being around 30 per cent more expensive than in Australia.

Perhaps some of the answers lie in the past. From the 1930s, successive Governments provided support for people to enter the housing market through State Advances loans. They don't exist any more but many argue such low-interest loans are the only way some first-home buyers will ever get into the market. Also, some argue that the accommodation supplement should be used to assist people into owning property rather than funding landlords.

Other issues to consider include how councils fund and pay for roads and other infrastructure associated with new subdivisions. Another option is incorporating some provisions for affordable housing in new developments into council regulatory tools. Also, the council - through its Housing Strategic Action Plan - is looking at how it could use its land assets to develop housing, including affordable housing, through partnerships with community housing, private and government sectors.

House prices are the most visible part of the housing debate, but we cannot neglect the rental market, and low-cost public housing which acts as an anchor to the rental market.

Not only do we need more public housing, we also need to manage the current housing stock with great care. We must work sensitively with communities and take individual family and wider community needs into account. People should not be displaced from the communities they often have lived in for years - community development is not something you do to people, it is something you do with them.

We don't want to create new, concentrated areas of deprivation by moving people wholesale into new state housing subdivisions. We also need to see that quality improves in terms of warm, healthy, well-designed homes that are energy-efficient, and well insulated. A developed economy should be able to deliver decent housing to all.

It is good to see the debate moving beyond simple single-issue fixes. It is a complex issue requiring the Government and councils to work together with developers, banks, the building industry and other players in the housing market to find long-term solutions.