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For Aucklanders with ambitions to own a home and keep their heads above water, the news is both good and bad. A Government package on housing affordability, delayed by the cabinet reshuffle, is now expected early next month, and will include a pilot shared equity scheme in Auckland. The bad news is it may help only a handful when affordability is an issue for most income earners craving a standalone house.
The Government scheme follows the September announcement of a joint venture involving the Auckland City Council and the non-profit NZ Housing Foundation. Under the shared ownership arrangement, households earning between $50,000 and $90,000 will be expected to finance just 75 per cent of the market price; the housing foundation funding the rest and recouping its investment - and 25 per cent of the capital gain - when the house is sold.
Auckland City has pledged $9 million over the next five years to help in the construction of 100 homes across the city under the deal.
Though modelled on "third way" approaches to address housing needs which have taken root in Britain, the local moves stop a long way short of the proactive role played by local and central government agencies there - ranging from mortgage assistance to house-building grants and town planning requirements for affordable housing. And Auckland City's tentative first steps may be its last - new mayor John Banks has pledged to pull out of the joint venture if he can.
Professor Glen Bramley, a British expert on affordable housing who is visiting New Zealand, says shared equity and similar schemes offering a financial leg-up have caught on in Britain since the early 1990s, when tenants were given the right to buy council houses at significant discounts.
But they are not for everyone, which is why a broad mix of policies is needed to deal with Auckland's housing affordability crisis.
Bramley, professor of housing and urban studies at Heriot-Watt University in Edinburgh, is a member of an independent panel set up to advise the British Government and local authorities on affordability and planning issues. He is known for devising a model which predicts affordable housing need - allowing agencies time to increase supply - and for research into the link between secure housing and better educational attainment.
While here on a lecture tour, he is speaking to advisers in the Prime Minister's Department and Housing NZ.
Several variations on shared equity and ownership schemes are emerging in Britain to overcome objections of taxpayers subsidising homeowners who later reap the windfall of rising house prices. Bramley says schemes need to be targeted, transparent and not too complicated. He believes the subsidy for affordable homes should come from a reduced profit for the landowner rather than the public purse and sees a role for the private sector.
He believes central and local government can promote affordability by taking a more hands-on role in planning and management of urban growth and, in the case of central government, increasing the housing supply and providing infrastructure.
It's a message which may fall on deaf ears in laissez-faire New Zealand. Auckland City's venture into shared equity housing was touted as a demonstration project to show it was feasible to build affordable housing in the city. But the local body elections appear to have scuppered that goal.
"We don't renege on contractual obligations but I don't think we have one and, if we haven't, then that project is at serious risk," Mayor Banks told the Weekend Herald.
"I think it's a very poor ad hoc approach and it's no business of this local authority, which is seriously cash-strapped."
Banks says the Government should be using some of its $8.5 billion tax surplus to help young people into first homes. He does not see a council role in buying strategic sites to ease the way for future intensive housing projects. "Why doesn't the Government strategically purchase these sites? Why do you have to leave it to the narrow band of ratepayers to fund everything that moves?"
In contrast, Christchurch City Council is considering creating a "regeneration agency" to guide inner-city revitalisation, which might include buying sites to facilitate redevelopment and forming joint ventures with developers. Its general manager of strategy and planning, Mike Theelen, says the council - which aims to have 30,000 living in the city centre by 2021 - wants to encourage a broader mix of housing than the market might otherwise deliver.
"Simply relying on the city plan and on the market means we will get there more slowly and we run the risk of some dislocation of existing residential communities.
"One of the difficulties for developers is to aggregate sites of sufficient size because landholdings are very fragmented. Councils can afford to buy land and hold on to it."
It's an approach Bramley supports. "It makes a lot of sense given you have very small social housing stock and quite a big affordability problem.
"Part of planning for smart growth is to plan for a mix of densities and housing types and affordability plans."
Smart growth is a more palatable term for intensification, or the compact city approach which Auckland has adopted to manage its growth. That approach has been linked to the city's affordability problem - with developers arguing that the metropolitan limits are forcing land values up by limiting supply. But Bramley is no advocate of simply releasing more land in far flung fields to ease the pressure.
In Britain, an accepted yardstick of an affordability squeeze is when the ratio of household incomes to market prices gets beyond 5 or 6; Bramley seems concerned to learn that on the Auckland isthmus the ratio is nearer 10 (see sidebar).
Why should a low density city of only 1.2 million have a house price crisis? Geography plays a part, he says - being surrounded by water, with narrow peninsulas, means Auckland, like Sydney, runs into physical limits. "Growth could happen but it would have to happen quite a way out of the city centre and you've got very poor public transport.
"You've got to make a transition now."
That transition - to higher density living with accompanying infrastructure improvements - has been underwhelming to date and run into a public backlash. But it must happen, says Bramley.
Auckland is becoming a mini world city and is important to the New Zealand economy, he says. Its growth is connected to dynamic Asian economies, while events like the America's Cup have raised its international profile.
"So the potential for big growth is there and it's unlikely that any government is going to throttle it back.
"It's much more likely to [try to] accommodate this growth in an intelligent, smart way rather than in a way that leads to degradation of the environment, which in the short run could damage competitiveness."
But if sprawl is harmful and costly, so is much of the high density housing built in the last two decades. What's needed is not just better planning, but more proactive management.
This includes master planning, where councils and developers draw up a blueprint to ensure large scale projects include public amenities, such as good design, pedestrian linkages and open space, and do not harm existing neighbourhoods.
"Quality of life and the environment are significant parts of competitiveness in cities, he says. "To ruin your waterfronts and coastal areas and best suburbs through ill-thought-out crude developments would undermine the city's strengths. So you want a form of smart growth that protects these assets."
Bramley says debate here seems polarised between "the traditional quarter acre and why can't it go on and the alternative of tower blocks.
"[Smart growth] is actually about selective intensification of some suburban areas close to public transport."
But it's unlikely to happen if left to the market.
He likes the sound of Housing NZ's Hobsonville airbase development, with its mix of social, affordable and upmarket housing and varying densities (despite its location on the city's outer rim where there is little public transport).
"There's a case for state and local government taking a more proactive role to push supply up - I'm a bit more sceptical about how wonderfully the market works."
Councils can also prescribe affordability - not just with incentives such as discounted development levies or extra height allowances - but by insisting on it. "In England," says Bramley, "if developers want planning permission they have to do it [provide affordable housing within projects]."
"In a way, whenever the market cools down, developers may be quite glad that it gives them an alternative. Developers follow a herd instinct - smart planning may protect them from their own follies."
With more hands-on planning and management, he says Aucklanders can have the best of both worlds - house and garden suburbs with good quality high density living in appropriate areas.
"Suburbs have many attributes - you don't want to lose that."
A gap in the calculation
Buying a house in Auckland City means signing up to a yawning gap between income and market value, according to Quotable Value NZ and Statistics New Zealand research.
In Mt Eden, where QVNZ estimates a median market price for a standalone dwelling of $831,000, most incomes range from $70,000 to $100,000.
The ratio is similar in Mt Albert, where QVNZ estimates a median price of $614,000 in a suburb where most incomes sit between $55,000 and $70,000.
It's an issue whether you are in Remuera or Glen Innes, where Auckland City Council figures show a median price for all dwellings of $450,000 in a suburb where incomes average $45,000.
That makes affordability not just an issue for first homebuyers but for second and third homebuyers able to contribute 50 per cent or more in equity. With most banks now charging 9.2 per cent for a three-year table loan, households need $565 a week to service a $300,000 mortgage. These households must earn nearly $1500 a week to stay below the 30 per cent threshold for mortgage stress, above which most banks are reluctant to lend. That puts the isthmus off-limits to all but the top 5 per cent of household incomes at the national level.
Auckland City's most affordable suburb appears to be Ellerslie, where the estimated median market value is $536,000 and incomes sit between $70,000 and $100,000.
Little wonder the real estate market has at last levelled off - and many experts believe the market may plateau for some years, rather than months.
