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Housing:Auckland Supply Issues

Arthur Grimes (Motu)*

Research funded by

FRST, CHRANZ, DBH, HNZC

*Views expressed are exploratory, designed to stimulate debate on

productivity issues; and are solely those of the author.

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A Key Issue

Median house price/median hhold income:

- Auckland normal: 3.0

- Auckland 2006: 6.9- Brisbane 2006: 6.1

- Austin (US) 2006: 3.1

Why are Auckland prices so high?

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Decade Price Increases (to 2005)

Land prices are the main culprit

House Res. Land

Rodney 131% 315%

Nth Shore 110% 174%

Waitakere 115% 286%

Auckland City 115% 335%Manukau 92% 108%

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Expansion vs Intensification

Expansion (sprawl) is curbed by MUL

Intensification is curbed by:

Planning restrictions

Community opposition

Lack of suitable sites

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Aucklands MUL

Land values vary by a factorof 10 across the MUL border.

Implies zoning (MUL)affects land use (as it isdesigned to do).

Hence, MUL impacts on

shape & degree ofdevelopment.

Legend

MetroLine_NZMG

urru92

Independent urban community

Main urban

Rural area with high urban influence

Rural area without high urban influence

Satellite urban community

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History of the MUL

MULs in use in Auckland for >50 years

Explicit MUL arose from ARPS

In large part reflected earlier boundaries Recent small changes (e.g. Flatbush)

Urban activities not permitted outside MUL

Rigorously enforced

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MUL Research Findings

Auckland land price model estimated to capture

key features of urban land prices

Consistent large MUL boundary effect after

controls for: distance from CBD, town centres, social

variables, coast, TLA, rural

MUL boundary effect (post-1998) approx 10

(1000%)

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Impact of Distance from CBD on Real Land Values:

Baseline Model

0

0.2

0.4

0.6

0.8

1

1.2

1.4

0.

2 5 7

14

21

28

35

42

49

56

63

70

77

84

91

98

Distance (kilometres)

Impact

1992

1995

1998

2001

2003

Increasing Relative Value of Inner City

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Building consents 2000-2005:

MUL & CBD Predominate

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Interviews - Developers & Local Govt:

Major Constraints to Res. Development (% yes)

Private Sector Public Sector

Cost of building materials 58% 30%

Cost of land 84% 70% .

Land availability 79% 60%

Land ownership 74% 90% .

Consent processing times 89% 50%

Planning procedures 84% 30%

Development contributions 84% 50% .

Community opposition 68% 90% .

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Key Points

Intensification has not been achieved except CBD

Infill is difficult

Dispersed ownership & community objections

Greenfields land is limited & expensive

Council processes inhibit new supply

Risk that Aucklands development is stifled by

high house prices

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Implications for Policy

Trade-off between housing affordability vs sprawl Current policy choice is to make houses more expensive

But Auckland is land-rich

Could extend MUL around existing infrastructure (Nthn Mtway)

Regularly update infrastructure & land availability estimates Expand land availability as required (tender to reduce cartel rents)

Tax land (cost of under-developed holdings)

Make infill development easier (& better)

Address RMA (notification) & other regulatory issues Examine extension of compulsory purchase provisions

Development costs currently front-loaded Consider council infrastructure bonds

And betterment taxes