Unitary Plan: Will it make housing affordable?

A huge jump in more intensive housing permitted in central Auckland may be the breakthrough that frustrated first home buyers Bharat Bhushan and Lovely Garg have been looking for.

The Herald has followed the couple's search for a home since early this year. They believe the latest version of the Auckland Unitary Plan may finally give them a shot at finding an affordable house on the central isthmus.

"I'm happy with this plan because there will be more houses, so I have a chance to get one," said Bhushan, 31, an IT worker now renting in Blockhouse Bay with his wife, an early childhood teacher.

"One of the criteria I was looking for was to get something really close to the centre, because if I want to get something in the affordable range I have to go really far. With this plan it will be easier to get something in central."

The plan proposes a massive 60 per cent increase in the area originally allocated for "mixed housing urban" development up to three storeys high on the central isthmus, lifting the zone from 15 per cent of the isthmus to 25 per cent.

Bhushan said he would be happy with a small two-bedroom home, even if it was a townhouse or apartment, as long as it costs under $650,000.

He isn't worried that the panel that heard submissions on the Unitary Plan has deleted an Auckland Council proposal to require 10 per cent of homes in new developments of over 15 units to be "affordable".

"You can say that 10 per cent of houses should be affordable, but if there are no houses that doesn't make sense," he said.

"If there are a lot more houses, they should become automatically affordable."

Experts say the new plan should make housing more affordable "in time" - but they are divided over whether it should be strengthened to make houses more affordable sooner.

What the plan does

The plan recommended by the independent hearings panel aims to make housing more affordable mainly by permitting a lot more houses to be built. It:

• Allows 422,000 extra homes in the next 25 years, up from 296,000 in the last version of Auckland Council's proposed plan.

• Allows 62 per cent of the extra homes (260,000) in more intensive development within the existing urban area.

• Allows Housing NZ alone to build 39,000 extra homes on its existing land for a mix of social and private housing where it now has 30,000 state houses. The council's last version would have permitted only 23,000 extra homes on this land.

• Allows the other 38 per cent of new homes (152,000) outside the current urban boundary.

What the plan doesn't do

The panel has rejected a clause in the council's proposed plan that would have required developers to include at least 10 per cent "affordable" housing in all new developments of more than 15 homes.

Specifically, the council proposed that "affordable" should be defined to mean that households earning between 80 and 120 per cent of the Auckland median household income would not have to pay more than 30 per cent of their gross income in rent or mortgage payments.

Anyone later selling one of these homes would only be able to sell it to people who meet the same affordability requirements.

The panel's argument

The panel says it was persuaded by Housing NZ and the Ministry of Business, Innovation and Employment that the 10 per cent affordable clause "would likely reduce the efficiency of the housing market due to effectively being a tax on the supply of dwellings and be redistributional in their effect".

In effect, a developer would have to charge more for the other 90 per cent of houses to cover the cost of selling the affordable 10 per cent for less, and that could be a disincentive to new developments.

The panel accepted arguments by Housing NZ and the ministry that "the most appropriate way for the plan to address housing affordability in the region is by enabling a significant increase in residential development capacity and a greater range of housing sizes and types."

"While these issues are unlikely to resolve the issue of affordability in isolation, they are the primary way the plan can contribute to this issue," it said.

What the experts say

Generation Rent co-author Shamubeel Eaqub is urging the council to vote down the panel's recommendation on this point and reinstate the 10 per cent affordable requirement to speed up more affordability.

He said permitting a lot more housing and more intensification would bring down housing prices "over time". The price of land would rise because the plan allowed more homes to be built on it, but the price of each home would fall because there would be more homes on each section of land.

"It will produce more affordable housing over time from the supply of smaller houses," he said.

But he said the 10 per cent affordable clause, known as "inclusionary zoning", could force more affordable housing immediately.

"With inclusionary zoning at least we could have fast-tracked some of the supply of housing that will be targeted at people currently being marginalised and priced out," he said.

Community housing spokesman Peter Jeffries of the Community of Refuge Trust said the panel's recommendation to axe the 10 per cent requirement was "a step back".

"The unitary plan by no means guarantees that it's going to address the overcrowding and the homelessness situation that we have," he said.

He said community housing agencies would use a 10 per cent requirement to build both social rental housing and housing for sale through schemes such as shared equity, where buyers buy only about half of a house initially and buy the other half gradually over about 10 years.