Aucklanders build bigger as land values soar

Rising land prices in Auckland have spurred owners to build bigger and more expensive homes so as not to under-capitalise the value of the land. Photo / Richard Robinson

Auckland land prices have surged ahead of the rest of the country as a proportion of the cost of a new dwelling, spurring owners to almost double the size of their houses in the past four decades and exacerbating a shortfall of properties, according to the Productivity Commission.

Land prices in Auckland now account for 60 per cent of the cost of a new dwelling, compared to an average 48 per cent across the rest of the country, the commission says in its Using land for housing issues paper. It's calling for submissions by December 22. The review builds on the commission's 2012 report on ways to improve housing affordability, which was critical of Auckland Council's concept at the time of a compact city approach.

"Housing affordability is a key challenge facing New Zealand, especially in our growing cities," commission chairman Murray Sherwin said in a statement. "The limited availability and high price of land is a concern when housing is becoming difficult to access for many."

There was evidence that as well as undermining housing affordability, rising land prices spurred owners to build bigger and more expensive homes so as not to under-capitalise the value of the land, the paper says.

Average floor sizes for new dwellings had grown to almost 200 square metres by 2009, among the largest in the world, from an average 110m2 in the 1970s.

By 2031, Auckland is forecast to be home to 2 million people, or 40 per cent of New Zealand's projected 5.15 million population. A 2012 Auckland Council estimate noted that 13,000 new dwellings were needed a year to keep pace with the growing population.
Perversely, the number of people per dwelling is forecast to decline to 2.4 by 2031 from 2.6 in 2011, the paper says, citing Statistics New Zealand data.

Total households across the country would rise to 2.1 million from 1.67 million.

The paper noted that local authorities are somewhat conflicted in tackling housing pressures because existing landowners "have strong incentives to lobby for rules which protect or enhance" the value of their property. Local authorities "are elected by existing residents who have interest in protecting the amenity value of their properties (the not in my back yard, or Nimby factor) and keeping rates low," it said.

The inquiry will not include a review of the Resource Management Act or the Building Act. But it has been asked to make recommendations on: policies, strategies, outcomes and processes for urban land supply, including provision of infrastructure; funding and governance of water and transport infrastructure; governance, transparency and accountability of the planning system; and involvement and engagement with the community, the paper says.

The commission will also consider what lessons can be learned from initiatives such as Housing Accords and Special Housing Areas, and the approach to rebuilding the city of Christchurch.

"The ability to access and use land for housing is affected by local government planning processes, such as district plans, long-term plans, resource consents, and local rules such as height restrictions or minimum lot size rules," Sherwin said. "These processes help protect the environment and ensure communities have the services they need to prosper. But it's equally important that they don't unnecessarily restrict the supply of land for housing for our growing cities."

It noted a review of Christchurch City Council's planning and resource consent processes found they were "large, cumbersome and difficult to navigate" while a self-evaluation of Wellington City Council's district plan found it "complex and exacerbated by" the existing of various incarnations of the plan, which forced developers to hire consultants to help navigate the consent process.

The inquiry will also consider urban development models used overseas, such as Place Victoria, a commercial developer that redevelops surplus government brownfield sites.