Labour Party housing spokesman Phil Twyford (above) proposed freeing up land use rules yesterday as a way to make housing more affordable.
Like many others, he focused on the urban boundary, which has proved such a controversial feature of the Auckland planning landscape because of its inflexibility, causing extreme price disparity.
But he went even further than Housing Minister Nick Smith in proposing to expropriate the role of local government: “Labour will free up density & height controls to allow more medium density housing and reform the use of urban growth boundaries so they don’t drive up section costs. This will curb land bankers & speculators.”
Unless National throws in the towel while it’s streets ahead, Labour won’t form the government until at least November 2017, and not then either unless it picks up its act.
Meanwhile, the main focus of housing affordability lobbies, Auckland, has an independent panel hearing submissions on the very topics Mr Twyford said Labour would introduce changes to. The panel is scheduled to deliver its recommendations to Auckland Council by July next year, in time for a council decision before the local body elections in October 2016 – and well before Labour would be in a position to deliver what Mr Twyford’s talking about.
The recommendations will result from submission, analysis, reflection – quite a good alternative to political posturing.
Smith on a losing argument
Housing Minister Nick Smith at Huapai, 2013.
Mr Twyford’s National counterpart, minister Smith, was at pains on Friday to combat an NZ Herald report that, against the proclaimed 39,000 consents under 3 years of a housing accord with Auckland Council, only 102 houses appeared to have been built in the first 2 years.
Despite his bluster, Dr Smith can’t win the argument, which he created through his own determination to score points every time the ministerial car door flaps open. The accord is not about lifting housing everywhere but in specific locations – most commonly in greenfields, making it harder for the council to pursue its compact-city policy, also making it potentially far more expensive to provide infrastructure around the whole region instead of in concentrated patches where that infrastructure can be linked more easily.
It wasn’t emphasised initially that the 39,000 consents would include an unstated number of land consents, not just house consents, and there seems to have been a widespread expectation that houses would pop up nearly instantly, when earthworks seasons alone would dictate a lot of timing and the requirement for developers to achieve a set sales ratio would dictate the start date.
Government opts for quick sprawl points over paced strategy
Aucklanders could have opted in large numbers to reject the compact-city policy when the council wrote its Auckland Plan. Not only was that policy not totally rejected, the takeup of more intensive housing – apartments in both the cbd and now also in suburban centres, and townhouse throughout the region – is up sharply.
More Aucklanders are biking, catching ferries, buses & trains to beat the motorway congestion that has resulted from central planning failures.
At the same time, consents for standalone houses have plateaued, an indication that Auckland has less of a crisis in total stock, more an issue of supplying the right stock. It also has a serious issue with pricing because price trends in New Zealand always move out from the Auckland isthmus, initially in widening circles around the region and then out to the rest of the country (with exceptional jumps elsewhere from time to time).
The start point for the price trend just happens to be an isthmus where regeneration through more intensive development is limited by zoning – where prices were going to rise anyway through pressure of immigration, and expectations of central-area children to start their new families in or near their old neighbourhoods.
Getting to grips with realities
Labour proposed before the 2014 election building 100,000 homes for first-homebuyers, concentrated at the cheaper end to meet demand from its primary electorate. While that could attack the heaviest demand for the right stock and reduce price pressure, in Auckland the council has been contemplating the provision of infrastructure simultaneously in multiple directions to meet political demands for new homes to appear quickly.
The fact that politicians can not only be silly but voluntarily prove themselves so doesn’t help a council required to service demand. Back in 1998, Auckland’s Regional Growth Forum issued a paper on intensification which concluded that structure & integration were desirable “because too many nodal centres & dispersed intensification corridors could reduce the infrastructure & transport advantages of intensification and result in increased costs to the region”.
While Auckland Council has continued on that same policy path to intensify, Government politicians seeking quick wins have defied that purpose – and have failed to disclose any notion of how to fund dispersed infrastructure.
A funding strategy Labour can’t implement
Councils used to issue debt securities to pay for specific infrastructure projects such as water or sewer lines, which would have a definite payback from new users. That role nowadays is being conducted for most councils through the Local Government Funding Agency Ltd, which has raised $5.66 billion through 91 tenders over the last 4 years.
But Auckland is looking for multi-billion-dollar capital-raising every year to serve population growth. Although the Government & the council joined in their transport strategic alignment project this year, so at last they’ll be heading down the same track, the council has taken its own initiative on funding other capital works.
In August it hired 2 independent advisory firms to review alternative sources of financing, due for completion this month.
Mr Twyford’s proposal this weekend comes in over the top of that review but, as with the planning proposals above, is something he can’t implement. In short, he wants to see local government bonds, repaid by buyers of properties in a development.
He explained: “The other new element is changing the way we fund infrastructure for new developments. Currently those costs are either subsidised by the ratepayer or passed by the developer onto the price tag of a new home. That makes houses much more expensive. It also means they are paid off through mortgages at expensive bank interest rates.
“Our new policy will see infrastructure funded by local government bonds, paid off over the lifetime of the asset through a targeted rate on the properties in the new development. This will substantially reduce the cost of new housing.
“Reforming the planning rules will stand alongside Labour’s commitment to crack down on speculators and build 100,000 new homes for first-homebuyers. These are the game-changing reforms that will fix the housing crisis and renew the dream of Kiwi homeownership.
“National has been blaming councils & the Resource Management Act for rising house prices for the past 10 years, but have done precious little to fix the problems. Labour has the policies & the political will to get the job done.”
How to make a nuanced difference
In its 2014 policy statement, the Labour Party said: “In the 1960s & 1970s, when homeownership was on the rise, 30-35% of the new houses built were entry-level homes. Today, that proportion has fallen to just 5%.
“The Crown is the only player large enough to make a real difference to the home affordability crisis. That’s why Labour will take a bold hands-on approach to fix this hole in New Zealand’s housing market.”
However, the solution doesn’t have to be government-sized big or government-style hands-on. The present government is sometimes hands-all-over, sometimes hands-off. Both sides of the political fence have too often failed to lead or facilitate so others can deliver.
If Auckland Council can start a flow of bonds for infrastructure it can start to catch up and also start to achieve some of the cost cut Mr Twyford is talking about. Passing more infrastructure work to the private sector would introduce other finance sources, though it wouldn’t satisfy the Labour concern that builders & developers are there for the money, not for the job outcome: “The price of the homes will be set at a rate sufficient to fully cover the Crown’s costs, including land, construction & finance costs. They won’t be sold at a loss. But nor will the Government seek to charge a ‘developer’s margin’. A small 1% margin on top of the Crown’s cost of borrowing is sufficient to ensure the programme is self-funding over the long term, while still keeping the homes as affordable as possible.”
Labour’s proposals aren’t what Mr Twyford called them, “ground-breaking new policy”, but the restructuring he suggests ought to reduce infrastructure costs and lower housing costs. That doesn’t always mean cheaper houses – the nature of borrowers to go for the max often means using the savings to buy a bigger or better house if the opportunity occurs.
Links: Local Government Funding Agency
Labour Party, home ownership
Earlier stories:
30 August 2015: Council picks consultants to review finance sources
24 August 2015: Council reviews itself to make next transformation
24 July 2015: New management charts full asset evaluation for council
22 July 2015: Corrected: Councils want tax reshuffle, innovation a long way off
29 June 2015: One vote short of chaos versus a levy to take Auckland forward
Attribution: Twyford & Smith releases.
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