Fairgray & Yeoman: Is the Unitary Plan working for Auckland?

The Unitary Plan in 2016 encouraged more infill housing to make more use of residential zoned land. File photo / Glenn Jeffrey

COMMENT

The Auckland Unitary Plan has been in force for a little over three years. Its core objectives are to provide sufficient capacity for housing and business activity, in a quality compact urban form, to deliver a sustainable future, while helping to improve housing affordability.

A number of indicators suggest quite strong performance to date. Trends in new dwelling consents, housing prices, growth patterns and housing development, and dwelling ownership show encouraging signs – in both the response to the planning environment by the Auckland housing market, and how objectives for capacity, form and affordability are being met.

It is not solely the Unitary Plan, of course. Many different factors affect Auckland's urban growth and housing market performance in combination with the planning environment. And Auckland certainly has history in both housing prices and housing supply.

By 2016, Auckland had very high housing prices and a dwelling shortfall – the legacy of the strong price growth after 2000, the slow-down in housing construction after the GFC, rapid population growth on the back of strong in-migration, substantial overseas involvement in the housing market especially in the more central areas, and the hiatus of uncertainty about what the new planning environment would bring. Auckland had its "perfect storm". Auspicious conditions indeed for the new Unitary Plan.

Some of that storm may have moved on. Auckland's housing market is showing substantial improvement in several areas. The number of consents for new dwellings has continued to grow, up by nearly a half (+46 per cent) between 2016 and 2019, to reach a new all-time high of 14,918 in the year to October 2019.

At the same time, growth pressure has been lower than anticipated. Statistics NZ figures
now indicate Auckland's household count increased by around 62,000 in the six years since Census 2013 but growth turned out to be about 30,000 households fewer than anticipated.

Which suggests the number of new dwellings being consented (and completed) may have finally overtaken the numbers of new households – perhaps whittling away some of the substantial housing shortfall. Year on year (to June 2019), there were just over 14,000 new dwelling consents issued, while household numbers increased by around 11,000.
Equally important, the biggest increase in consents is for dwellings which are smaller (under 140m sq) and lower cost (under $400,000).

In 2016 there were 6043 consents in that band, by 2019, there were 9584, and these lower value dwellings accounted for over four-fifths of Auckland's net increase.

Consent numbers doubled for dwellings of 140m sq or less doubled, accounting for three-quarters of the net increase. Average new dwelling size fell to 161m sq , a drop of -15 per cent.

Overall, the numbers show a strong response by the housing sector to provide more capacity for smaller, lower value dwellings demanded by those segments who were poorly catered for in the decade to 2016.

Much of this response is because of the wider range of housing opportunities opened up by the Plan, especially scope for infill and intensification, with land able to be used more efficiently, and account for a smaller share of total dwelling price.

Rodney Yeoman. Photo / supplied

The results to date are encouraging. Over 70 per cent of consents are for locations inside the urban edge, rather than greenfield expansion. And Auckland's new dwellings are substantially more land-efficient than the dwelling estate as a whole (according to customised data from Corelogic). Both trends indicate good progress toward a relatively compact, more efficient urban form.

Other significant changes are also evident. Housing price growth has slowed dramatically, the strong increase (25+ per cent) in the 18 months to September 2016 giving way to a flattening of the market, with the September 2019 mean price the same as September 2016. In real terms – adjusting for inflation – Auckland's prices have dropped by more than 4 per cent, a clear contrast with the rest of the country.

One reason for prices flattening is the much reduced involvement of overseas investors (non-citizen, or non-citizen and non-resident buyers) in the Auckland market.

At the same time, the reduction in in-migration has meant less competition among buyers for Auckland dwellings, and the continuing improvement in dwelling supply (as shown by consents) has meant a slight easing in demand pressures.

Douglas Fairgray. Photo / supplied

And while housing prices have stabilised, household incomes have continued to improve.
Housing affordability has improved as a consequence. The combination of better affordability and more dwellings in lower value bands has seen the entry of more first home buyers into the Auckland market.

Over the past 12 months, an estimated 5500-6000 households from the segment most vulnerable to high prices became dwelling owners for the first time (based on REINZ and Corelogic figures).

So, while Auckland's perfect housing storm of 2016 has not simply faded away, there have nevertheless been significant positive advances on key aspects of the housing front, and the Unitary Plan has contributed strongly to those gains.

• Dr J D M Fairgray is a director and Rodney Yeoman is an associate director of consultancy Market Economics Ltd.