The Government has settled on a simplistic solution to the Auckland housing shortage. It will simply order the Auckland Council to expand its residential zoning until prices are stabilised. The order will take the form of a national policy statement that is expected to be issued very soon, possibly today. It would more accurately be called a national policy directive since it will have the force of law. If councils do not comply with it, the Prime Minister says, developers will be able to take the council to court, "and they will win".
It appears the directive will set a desired average house price as a proportion of the average income and require councils to zone more land for housing where the average price is above that trigger point. Finance Minister Bill English has suggested the trigger could be 10 times the median income, which Auckland's average house will soon reach. If the price of houses was simply a result of a shortage of zoned land, this alone could be a solution. But on its own, it will achieve almost nothing.
The limits of urban expansion are not just lines on a map, a council could draw the lines further out, or even abolish them altogether, and urban development would still be constrained by the infrastructure the council can afford to provide. Unless the Government is about to also order the council to extend its roads, sewers, water supply and the like, to every development that may be proposed on its periphery, it is hard to see its national policy statement having much effect. And if it does contain an infrastructure spending directive, the councils' ratepayers will be alarmed.
John Key expects the debate will soon turn to the question of who should pay for the additional infrastructure. The Labour Party has a very good answer. Councils could be permitted to raise the money by issuing bonds secured against the rates to be collected from the new area served. This idea has several attractions, not least spreading the rewards of residential property investment. Rather than investing in ever more houses, people with savings could buy bonds that would give them a return on an investment in services to the houses. There is an unsatisfied demand for bonds and as an alternative to property investment they could reduce the rate house prices are rising.
The practical question remains, though, who decides where infrastructure will be extended for residential development to occur? The land-use planning profession will be reluctant to surrender that decision to developers, though they might have to under the Government's proposed directive. If developers are able to go to court to force a council to change their land zoning, as Mr Key implies, the developers will be leading the direction of the city's expansion.
