The Government has pumped another $31 million into the company overseeing Auckland's Hobsonville Point housing development.
Housing Minister Nick Smith said that the cash injection into the Hobsonville Land Company, a subsidiary of Housing New Zealand, would enable faster progress on the 3000-house development.
He said the money was to enable the company to purchase the remaining 16.5 hectares of land on the site two years ahead of schedule and bring 500 houses to the market earlier.
The 16.5 hectares of land is in the south west corner of the 167 hectare Hobsonville development, adjacent to the new secondary school under construction, and in an area known as the Village and Buckley blocks. The land is being purchased from the New Zealand Defence Force and the price has been determined by a process of valuation and arbitration.
"The original plan was that the Hobsonville Land Company would not purchase this area until 2015 and would fund it from house sale proceeds. The company presented a business case, approved by Cabinet, showing it was better for the taxpayer and for housing supply to bring forward this purchase and development," Smith said.
He told Parliament that 248 houses had been sold in Hobsonville so far.
"The big gains in housing will come from private housing developments off the back of Government reforms to free up land supply, increase competition in building materials, and constrain council development and compliance costs. Hobsonville highlights the Government’s pragmatic approach where we are getting on and freeing up Crown land for housing developments where it makes sense," Smith said.
The Government and the Auckland Council have signed up to the Auckland Housing Accord, through which it is aimed to have another 39,000 houses in Auckland over the next three years.
Already the Auckland Council has announced the first "Special Housing Areas" that will allow the fast-tracking of developments in that time. These areas would allow as many as 6000 houses/sections.
Another tranche of special housing areas is expected to be announced before Christmas and Smith told Parliament earlier this week he thought the next tranche would involve "at least that number again".
33 Comments
This is excellent news - Hobsonville Pt is a fantastic, well thought out development.
Sadly only 20% of the houses are first-home affordable, and come with strict income eligibility limits. And they're 10-to-1 oversold.
All other units cost more than $650k - funnily enough, there's plenty of availability of those.
$31m for 16.5 Ha of bare land = $1.87m per Ha. Add the development costs and this is hardly doing much for the cause of affordable residential land. Compare this with bare farmland in the order of $14,000 - $16,000 per Ha. The only difference between the two values is a corruptly artificially constrained supply of residential land that the government is happy to go along with and profit from.
The Govt. has in effect bid up the price of their own land. We all knew that the Housing Accord would not bring the price of land down and therefore would not make housing more affordable (unless artificially subsidized), but to encourage more expense housing, this is just plain stupid.
Yeah, I am starting to think that Kiwis intuitions were correct when they polled in favour of Labour's blunt-instrument "build lots of State houses" scheme.
Evidently the Nats can't be trusted to rock the boat with their FIRE sector buddies or endanger their own property portfolios. All actions to "restore housing affordability" will probably be mere tokenism and being "seen to be doing something".
They probably now understand all too well the extent of reform needed to actually address the problem, and are happy to do just enough for the ignorant public to think something is being honestly tried. Then "increasing the supply of land" can be rejected as a "failed solution" and we can go back to following Britain into dog-box living and housing-cost peony, with the Tories FIRE sector mates happy.
Christchurch was a natural disaster of a magnitude that demanded a wartime like response from the government not a "market" response from the insurance companies, council and building industry.
Like Labour in 1935 the government could have stepped in and bought enough rural land and rezoned it, bypassed the council on consents, worked with a handful of building companies to build thousands of low cost fixed designs at a fixed price (under $1000 sqm), Damn market competition if they're a good price and of good design. In 1935 Labour even built several joinery factories to make standardised products for the state housing programme. They utilised and trained the unemployed to provide labour for the building of the housing and the infrastructure and where appropriate, as a last resort, imported skilled labour. Only materials that could be produced at an economic cost in NZ were used. Low interest loans were provided to help manufacturers gear up. Did Fletchers benefit. Sure, but by working hand in hand with the government they made a small profit in return for continuity of work. And the houses got built quickly and at the right price.
Hundreds of repairable, relocatable homes sitting there in the red zone for lack of sections is a disgrace. Rezone some land, assist a couple of companies to gear up and move them 24/7 before they're vandalised or demolished. Make them available only to FHB or low income families.
The Savage Labour government is remembered principally for its state housing programme. What will the Key National government be remembered for in 50 years time?
If I remember rightly, Fletcher's offered about 6 weeks after the big one, to build 4000 new homes per year on the fringes if they were given a fast-track process.
It is ideology and vested interests standing in the way of this even in a disaster-hit city.
For shame.
We have been over this dozens of times. “Supply” of land for housing pretty much determines who will be “priced out” of housing of each quality level (or indeed, out of housing of their own altogether). The availability of credit merely determines “the level of debt” assumed by each quintile, with household formation and purchase of property occurring earlier (for those who do get to buy at all) than if savings (and family finance) were all-important.
House prices will be a similarly high multiple of incomes regardless of credit. The only difference that the ease of credit makes, is that those who do buy, buy sooner instead of saving for many years.
Just noted a new study from the B.I.S., discussed by Brian Fallow in the NZ Herald yesterday morning: Can non-interest rate policies stabilise housing markets? Evidence from a panel of 57 economies
http://www.bis.org/publ/work433.pdf
In the conclusion of the study they say:
“…..None of the policies designed to affect either the supply of or the demand for credit has a discernible impact on house prices. This has implications for the degree to which credit-constrained households are the marginal purchasers of housing or for the importance of housing supply, which is not explicitly considered in this Study……”
They also say that even LVR's have no discernible effect on either house prices or mortgage credit expansion. I had long understood this to be the case, based on South Korean housing market history. The only constraint on credit that has any effect on credit expansion, is restrictions on the proportion of borrower's incomes that repayments may exceed. This still does not affect house prices.
It is a well known fact that in third world countries with no mortgage finance available at all, house price median multiples are usually over 12. Young people's only option is hard work and saving, and assistance from hard-working, thrifty parents. And of course half the population remains in "illegal" shanty makeshift accomodation.
Ostrich, these issues get very complicated and the public can't be expected to follow the complexities. It is up to the experts to work out the facts and the government to do the right thing. Hugh is quite right that inflated median multiples are always due to some "control" on housing supply. But it is still possible to end up with an oversupply as they did in Ireland and Spain.
BTW it is not true that California or Nevada or Arizona had an "oversupply" as is commonly asserted. They did not have an oversupply at all when population growth via in-migration is taken into account. Florida possibly did.
The reason it is possible to have an oversupply and inflated prices, is always because the supply is rationed in some way. When those doing the rationing start issuing "permits" in abundance, the prices will not go down at all. The mere fact that there is rationing at all, ensures this.
The guarantee of price stability is "no rationing". It is like the difference between having wheat available for anybody who buys a quota allowance, and anyone being allowed to grow wheat anywhere. The latter means the price will be kept low by genuine competition.
A quota allowance can be significantly greater than the needed supply, and still be the subject of competitive bidding for the available quantity. It is the splitting of the market into two layers that is the problem. There is a "market" layer where developers deal with land vendors, competing with each other to secure sites. Then there is the market for new houses.
In the absence of UGB's, the potential supply of land for a city's growth is just as vast as the supply of land necessary to keep wheat prices low, without anyone having to compete in a bidding war to the death for ANY land at all (not just the prime sites).
As Leith’s article points out, the Irish problem was exacerbated by a mismatch of demand and supply. If these two constraints do not equal each other then you get either an oversupply and prices drop, or an under supply and prices increase.
In manufacturing this ability is known as ‘Building at the rate of Demand’, it is also known as the Toyota Method, as they are the pioneers and acknowledged experts at it. Toyota is very responsive to market demand and can tool up quickly as their systems are smaller and have more flexibility built into them. As demand increases they can quickly gear up (no bubble), and just importantly if demand decreases they can quickly scale back (no bust), but this is less of a problem as they are more in tune with their market because they are so responsive to it.
A Toyota production plant, being smaller, builds cars slower than most other car manufacturers but they tend to build more what the customer WANTS NOW, ie supply equals demand. Toyota could hold back inventory to increase price, but since a competitive price was one of the reasons customers purchased as in value for money, it would be counterproductive to cause (intentionally or not) prices to increase.
This simple fact is over looked by all those that want to build more houses per se. The market needs more Camry’s at a Camry price, not building Corollas at a Lexus price.
As mentioned above, Toyota can get cars to market quicker but their build rate is slower (because they re-tool more often in quick response to customer demand).
Prior to this, cars were built the Henry Ford way, ie built a big plant and manufacture one style for years. It used to take up to three years from car concept to first production (sound familiar) and because so much time and money had been invested, they needed larger/longer production runs to recoup their investment.
Because it can be difficult looking three years into the future, by the time they were in production, customer wants/needs had changed or maybe the designers completely miss-read what the customer would need three years out, or other economic factors would happen in the interim to prevent customers from purchasing. This caused the typical over supply under supply cycle.
Toyota were the first company to develop a system that enabled them to reduce the time from when demand occurred to when supply was supplied.
This ‘Detroit’ method we are using to supply building houses in NZ is archaic and went the way of the Dinosaurs in the car industry long ago.
You only have to look at the political parties’ response to see they are Dinosaurs, after all Dinosaurs evolved into birds, and these politicians are running around like headless chooks.
Could a real mammal please stand up?
Hugh, I think it will happen but if they did this right now then it could be a shock. Existing property would all be re-rated in light of the change in supply-demand dynamic and auckland would be a wash with mortgagee sales.
I think this the RBNZ realised a while ago that govt's eventual addressing of these housing affordability issues would result in re-rating of property in auckland, hence while it's got these LVR limits implemented without too much delay. I think Auckland needs a couple of years of consolidation at current prices, and a couple of years of 20% min dep sales churned through before it's safe to take these real steps in addressing the housing affordability problem. Otherwise you'll see the bubble pop, neg equity everywhere in auckland, and real problems for the NZ ecomony.
This just out from Gerry Brownlee;
LURP to provide speedy residential growth
Canterbury Earthquake Recovery Minister Gerry Brownlee says the creation of the Land Use Recovery Plan (LURP) will go a long way towards easing housing pressures, with new options for development across greater Christchurch.
“The LURP provides certainty across the community, informing land owners, infrastructure providers and others by outlining new areas that can be developed for new housing and businesses,” Mr Brownlee says.
“As many as 40,000 residential sections could be developed by 2028 within the greenfield priority areas under these revised rules.
“The aim is to use amended intensification rules to deliver 8,000 to 10,000 new dwellings in Christchurch City within the next 5 years.
“Getting more sections and houses to market sooner is the only thing that will ease Christchurch’s accommodation pressures.
“Putting this recovery plan in place enables the Regional Policy Statement, and the Christchurch City, Waimakariri District and Selwyn District plans to be amended to specifically allow for the greenfields development and localised intensification.
“It allows for some Christchurch residents to look at the option of subdividing the land they already own, provided their section is big enough, and this too will bring housing opportunities that would not otherwise have been possible.”
The LURP was initially developed by Environment Canterbury with the input of a wide range of interested individuals, organisations and groups. Its focus stretches between Lincoln, Prebbleton and Rolleston in the south, to Kaiapoi and Rangiora in the north.
Mr Brownlee says direction from the public has been clear as post-quake recovery has progressed.
“There is a keen desire to see well-designed, people-focused and sustainable developments along with affordable housing and reduced urban sprawl.
“This plan allows for that by giving a very clear direction about where and how new development can occur, in a manner that best assists our region’s recovery.”
Mr Brownlee says the defined actions within the plan will be undertaken collaboratively by central and local government agencies, and various other authorities.
“The strategic partners across Canterbury are working closely to make this plan viable and practical, and able to address the burgeoning issues as soon as possible.
“It’s another example of the agencies all doing their part to bolster our region through our recovery.”
For more information about the LURP visit www.cera.govt.nz/lurp. Copies of the LURP will also be made available in council service centres and public libraries across greater Christchurch next week.
Media contact: Nick Bryant 021 245 8272
About the Land Use Recovery Plan
The earthquake sequence in Canterbury that began on 4 September 2010 caused massive damage to housing, commercial buildings, underground infrastructure and transport networks.
Over 7000 dwellings will need to be demolished or re-located in the residential red zone and as many as 9000 other houses may need demolition.
Population dispersal and changes to business locations have impacted on economic activity, transport patterns, proximity to employment, entertainment and recreation.
The current Regional Policy Statement and Christchurch, Waimakariri and Selwyn district plans do not address the demands that now exist.
The current Regional Policy Statement and Christchurch district plans are relatively prescriptive regarding where development can occur and under what rules.
Existing Resource Management Act planning processes could take 3-5 years (excluding appeals) to amend current plans to reflect the changed circumstances arising from the earthquakes.
Similarly, related land transport planning and local government planning documents are now in serious need of revision.
In general, the inability to amend the planning framework quickly enough to meet predicted rebuild peaks (from late 2014) and uncertainty about how amended plans would address recovery issues has impaired recovery; new planning rules are needed quickly.
The Government recognised this need for change early and the Minister for Canterbury Earthquake Recovery used his powers under section 27 of the CER Act to amend the planning framework in 2012, to make more land immediately available for residential and commercial development.
In doing so the Minister took guidance from the decade-long and widely consulted process undertaken by all the local authorities in the greater Christchurch area, known as the Urban Development Strategy.
This was essentially an agreed position by all local authorities – the Urban Development Strategy partners – on where Christchurch and its neighbours should grow in the years to 2040, based on expected population growth.
Then the earthquakes hit and much more residential land was needed much sooner.
However, the Minister’s decision to bring more land to market by adding a chapter to the Regional Policy Statement was judicially reviewed by landowners unhappy that their land hadn’t been included in areas opened up for greenfields residential development, in particular inside the Christchurch International Airport 50 decibel noise contour.
The High Court and then the Court of Appeal decided the Minister should have used either the Canterbury Earthquake Recovery Strategy and/or a Recovery Plan to put in place these measures.
So in October 2012 Environment Canterbury, working with Christchurch City Council, Selwyn District and Waimakariri District Councils, and Te Rūnanga o Ngāi Tahu (collectively, the Urban Development Strategy strategic partners), and the New Zealand Transport Agency (NZTA) requested they be directed to develop a Land Use Recovery Plan to address land use planning and related transport and infrastructure issues for the greater Christchurch area.
In November 2012 the Minister used his powers under the Canterbury Earthquake Recovery Act to direct Environment Canterbury to lead Christchurch City Council, Selwyn District and Waimakariri District Councils, Te Rūnanga o Ngāi Tahu, NZTA and CERA to develop a Land Use Recovery Plan.
A draft Land Use Recovery Plan was delivered to the Minister by Environment Canterbury in July 2013.
The Minister asked for public comments on the draft plan, and received 149 substantial submissions which have now been summarised and analysed.
The Minister has now received a final plan which will do four things:
· Help address housing supply issues in greater Christchurch
· Support business and industry recovery through zoning and land supply
· Lower development hurdles and speed recovery
· Clarify where and when development will occur
The plan was approved by the Minister on 6 December 2013.
Hmmmm, nothing in there about ChCh Council's NZ-record development contribution fee levels. Methinks the Council is coming onside because they are getting away with using DC's as a new form of tax revenue, with High Court Justices thumbing their noses at the actual written statute law just as much as the Councils are.
Exactly....!
What happened in Ireland and Spain had a lot to do with the local governments rationing the supply of land and infrastructure, discovering that they could milk it as a new source of revenue way above and beyond the actual costs that justified their levies, and then going for broke permitting development to maximise their fee revenue.
Lets get back to first principles. The way to make something cheaper is to allow a cheaper alternative to exist and let competition reset the market.
We need to introduce more competition into the housing market, make existing houses compete against cheaper new houses/residential land. They could be PDK survive the 'peak' communes, it could be Hugh's sprawl, it could be new towns, more state housing or kiwi homes if done right could also help. It could be the break up of the building materials duopoly.
Something needs to be done. The question is will it be National or Labour?
New Zealand has gone through these changes before for the greater good. Farmers lost their subsidies, importer lost their quotas, brewers lost their six o clock swill.
Excellent points. Someone asked Michael Bassett at the launch of the 3rd NZ Initiative Housing Report, aren't the politicians scared of the backlash from the people who will lose out? Bassett replied that one thing he had learned from NZ political history, is that people will grumble, but ultimately if a government does something that is the right thing and most people can see it is right thing, and obviously vested interests have been defied for the good of everyone, you gain more respect that you lose.
I have said all along, and others have agreed with me, that Lange/Douglas/Moore/Prebble/Caygill/Shirley et al would have fixed this issue within a couple of years of it becoming a problem. We have not had action politicians of that calibre ever since. Certainly not the Clark mob (apart from their eagerness for socialism by stealth) and certainly not the current mob. A Brash National government would have had it speedily sorted, though. Wasn't 2005 a tragic lost opportunity?
But...
It is very sad the dithering Nats are not allowing the market to work, by freeing up land supply and financing infrastructure properly.
They are making fools of themselves with this Crony Capitalisim nonsense.
No wonder the public doesnt trust them and is looking to Labour for solutions.
Kiwis are lions led by donkeys if that makes sense...
Steven's idea of "making things worse", is halting the NZ house price bubble before it went to its dizziest peaks, and managing the prices back down to affordable levels by, say, 2009. Obviously a paid troll of the property/finance sector. Another forum I follow much more regularly than this one, actually outs them and bans them. It shows in results in the quality of the discussion on the forum and the kind of followers and commenters who are attracted there. The vested interests are quite happy with not being able to win fair arguments as long as their paid trolls can bury every thread in irrelevancies and outright lies. It is not in the interests of a forum's owners to tolerate this nonsense, unless their interests are also with the zero-sum rentier class against the general economic and social interest.
What I want to do "supports the vested interest more than anything else"????
So the FIRE sector are not vested interests and their opposition to reform, and property-owning MP's reluctance to do reform, is not "vested interests"?
Keep it up, pal, anyone with half a brain following this finance and economics forum can see what a knave you are. The argument has long since been settled among intelligent people, especially on forums like this one, about what the vested interests are and what "supporting" them is.
WHO "can't put up an argument that holds water"?????? All youhave done is throw in childish and disruptive statements of blatant untruth. This is what gets well-deserved bans on a truly intellectual and objective site.
he is prolific over on macrobusiness.com.au among (many) other places
http://www.macrobusiness.com.au/2013/05/reia-recycles-negative-gearing-myths/#comment-243254
Google his nic .. got a heavy web presence
I have come to understand over the years just how strong the influence of the FIRE sector is. All sorts of people in the media just shuffle their feet and gaze at the sky when you ask them why they are not giving the public the facts, this obviously includes some blogs too.
In fact, anyone with one single investment property has skin in the game, and that could be quite a lot of people, even daily newspaper "letters" editors.
I don't want to start naming people, but what I could say is that in NZ there is possibly not one single influential media organ, mainstream or online, that is prepared to simply air the facts about urban planning, housing affordability, transport policy, traffic congestion, and real life outcomes and correlations. This even includes people I would have expected a lot better of; both assenters to "free market capitalism" and people of the left who allege to have "social concern".
Investment property holdings are very possibly the problem with people on both ends of the political spectrum. This is just as likely to have been a reason for Clark government intransigence as it is today for Key government intransigence.
It is rare and refreshing to find any forum where the owners/moderators are completely open and objective on this issue, and they deserve massive credit for being so.
I am inclined to think that people in earlier generations were less shameless than the current people in positions of power and influence. There was a time when governments of both political persuasions would have simply done what was obviously the right thing on this issue, and the media would largely have supported it.
The people responsible on both "right wing free market" forums and "social justice" forums where the issue is routinely kept in a state of confusion, if their underlying motivation is their own IP portfolio, are pretty bankrupt morally. I can slightly excuse ideological idiocy as is usually found on the watermelon green left, but even many of the foot soldiers are ignorant and propagandised and can hardly be expected to understand what useful idiots they are, given that the people who should be telling them (lefties in newsrooms, uni professors, etc) are not.
Young people grizzle about "greedy landlords" pricing them out to shared accomodation 30 miles of train ride away from Uni, when it is urban planners trying to "save the planet" who are the real problem, and the same young people would regard that as an occasion for secular sainthood.
Oh I see "facts" according to PhilB....the libertarian....um...."facts" that um are not.
The biggest thing you miss (and there are a lot) is that ppl get to choose a society and 99.999% of them dont want a Libertarian one.
The fact is about 1100 ppl voted libertarian in the last election.....up from 850 the election before.....
regards
Does a majority of Kiwis want a rentier economy?
Not that you will even know what that means.
Put it another way - do Kiwis want their cities to be turned into Liverpool and Birmingham?
This is not a libertarian issue, it is an issue of the way things used to be done when a fair go counted for more, and more people in positions of influence had a conscience.
These people are not libertarians at all, in fact they are radical leftists:
http://www.audacity.org/downloads/250NTC-12-12.03.12-Aims-Draft-03-NPPF.pdf
http://www.audacity.org/downloads/250NTC-13-19.09.12-Aims-Draft-04.pdf
It doesn't matter where on the political spectrum you are; you are either a gouger, a shameless teeth-kicker of the young, and a saboteur of the economy and society; or a reformer. As I have been saying. Clark, Cullen and their colleagues were just as bad as the current mob. This is not a left-right political ideology issue, it is an issue of morality and integrity
Well it depends on your definition of a rentier economy, so if its a rentier state the definiition would be,
A rentier state is a term in political science and international relations theory used to classify those states which derive all or a substantial portion of their national revenues from the rent of indigenous resources to external clients.
Which since we sell agricultural products abroad we are indeed.
If you mean an economy of rentiers, then, "a person who lives on income from property or securities"
Which clearly we already are, until you step further back and look at who actually owns the capital, which is really foreign investors who lend to banks who lend to PIs and FHBs.
The things that you refuse to accept because of your political blinkers are,
a) Peak oil will make transportation / commuting more and more expensive, add excessive distances and that result can be clearly seen from the US disaster that is surburbia.
b) We are already in a x2 bubble, we already have land bankers standing by to make huge profits if/when the boundaries are moved.
c) Building booms wont last and will just send us as a nation into further debt.
d) Auckland rents have not risen, which begs the Q just why not if hosuing is in such short demand, eg Chch.
e) Your obvious inability to deal with the maths, and data let alone the physics/science/engineering makes basing a strategy on anything you say dodgy to say the least.
Liverpool and Birmingham, well we already have some slum areas like southern Auckland...so its only a Q of size really, which brings us back to [over-]population and carrying capacity. Oh and Ive lived and worked in and around both...they are not that bad as you imply it seems.
regards
PhilB I don't agree with everything that Douglas et al did but I get your point. I like to think that Michael Joseph Savage would have sorted this housing mess out in a few years too!
Yeah, agree, Brendon, I think no NZ government prior to the 1999 Clark one would have let it happen, in fact the ideological cancer that caused it could not have got anywhere in the era when common sense was more common. I am non-partisan in giving credit on this; I agree that M J Savage would never have let it happen; neither would John A Lee have stood for it for a moment. Muldoon is one of my least favourite politicians, but he wouldn't have stood for it either.
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