Auckland's housing unaffordability relative to the rest of New Zealand has never been worse, having deteriorated by 22 per cent in the past year alone. If similar rates continue, Auckland's affordability will be worse than it was in 2007. Then, interest rates were around 10 per cent; now, they're well below long-run averages.
The council has a wide range of initiatives to cool house prices. The 30-year Auckland Plan encourages development inside existing suburbs (up to 70 per cent), and outside the existing city limit (up to 40 per cent).
The council actively stages the release of land to ensure seven years' supply of land is available at all times with urban zoning and bulk infrastructure services in place. The 84 special housing areas are helping to accelerate land release.
The Proposed Auckland Unitary Plan encourages more intensification in parts of Auckland with good transport connectivity.
The plan also targets a wider range of housing options for people as they progress through different stages of their lives. One- or two-person households are becoming more common, and that will continue.
Other initiatives include the creation of Development Auckland to drive large urban development projects, and financial levers to enable community housing providers to build more affordable homes.
There are factors beyond the council's control.
Demand for homes is extreme. Auckland had high growth anyway, but money has rarely been cheaper and migration has never been higher. The Reserve Bank's move to target large mortgages by landlords will modestly ease this extreme demand, but the big challenges in managing Auckland's growth remain.
The council can't throw open the doors to unmanaged growth at the city fringe without costly infrastructure upgrades. Direct connection costs can be ring-fenced and paid for by developers. But the large cost to reinforce wider infrastructure networks inevitably falls on ratepayers.
The Government is not enthusiastic about council revenue-raising proposals, such as motorway congestion charges at peak times. But using demand management tools like congestion charges and electronic road pricing is now accepted practice in cities such as Singapore and London. My advice as an economist is that we can't disregard it.
Residential construction is costly, and doing it at scale is hard. There has been little, if any, measured labour productivity growth in residential construction for 30 years. That is unacceptable.
The council is encouraging as much intensification as the community will allow. However, I don't think intensification and redevelopment are happening as much as normal economic forces would dictate.
So house prices escalate further, artificially creating more demand at the outskirts of the city, with the associated infrastructure burden. In other words, communities that resist intensification are unintentionally exacerbating the infrastructure affordability problem and their own rates burden.
Many point at the Resource Management Act as a culprit. I wonder if that is less the cause and more of a symptom. Elected members will respond to their communities' demands within the provisions of the existing law.
Action is needed on several fronts.
The most fundamental challenge is how to balance what communities judge is best for them with what is best for Auckland and the country. There is a need to relax regulatory controls on height and density, while retaining provisions for quality urban design. That will allow more dwellings per unit of land, more choice, and improve housing affordability.
We need better tools, such as road pricing and congestion charging, to raise revenue from the value created by infrastructure.
For construction productivity, many changes are needed. Particularly, I would like to see the Productivity Commission make an inquiry into how to get a 25 per cent productivity gain in residential construction within 10 to 15 years.
The time has come for decisive action by the Government, the council, the development sector, and communities to tackle housing on all fronts.
• Chris Parker is the Auckland Council's chief economist.
Debate on this article is now closed.
