Jason Krupp says if urban NZ is serious about tackling housing affordability, local govt and planners must include property prices in their planning

By Jason Krupp*

Last week Minister for the Environment Amy Adams piled into the Auckland Council over the Unitary Plan, saying the rule set was unlikely to come close to delivering the 300,000 plus houses the city needs over the next 30 years.

The minister noted that the plan imposed even more red tape on the already regulation-choked sector, and if anything, was likely to worsen housing affordability in Auckland.

The critique of Auckland’s compact city development strategy was a timely and bold call by Adams.

Despite having pursued urban containment strategies in some form or other since the late 1980s, Auckland is the seventh most unaffordable housing market in the developed world according to the Demographia survey.
The fact that the city’s planners continue to flirt with compact city ideology as part of the Unitary Plan was worthy of a reality check from the Minister.

But while she was at it, Adams could have extended her critique to the other councils in New Zealand who are looking to use compact urban form changes as a means of tackling rising house prices.

Tauranga, for example, implemented a compact development policy framework in the mid-2000s, and the city of 120,000 people is ranked as the second least affordable city in the country to a buy a house.

Wellington is another, and indeed Christchurch’s redevelopment is swaddled in so much red tape that it is safe to conclude that it will follow a similar development track. This is built on the belief that it is always better to build up instead of out.

The stark reality is that limiting land supply in cities will always feed through into higher land prices, and hence less affordable housing. Cities need to grow up and out. In other words, be freed from the red tape that has choked off housing supply.

That is the key message from Up or Out: Examining the Trade-Offs of Urban Form, a report on compact cities that we (The New Zealand Initiative) are publishing today.

The report sought to match the promises of compact development with the academic and historic track record. The results emphatically show that policies that limit city growth create a scarcity value on land that quickly outstrips any gains from compact development.

This can be seen in the Demographia data, where the least affordable cities in the world are the ones that have pursued urban growth containment, while those with less restrictive zoning laws are the most affordable.

This is supported by numerous economic studies, including leading urban economist Edward Glaeser, which show that the more restrictive a planning regime, the less affordable that city’s housing market is.

It remains to be seen whether Auckland Council will take Adams’s submission on board. Similarly, there is no indication that the message is getting through elsewhere. But while local government can turn a deaf ear to central government, it can’t do the same to voters.

If urban New Zealanders are serious about tackling housing affordability, they need to insist that local government and planners include property prices in their planning. They also must abandon the misplaced belief that you can design your way out of the problems associated with modern cities using regulation.

As former World Bank planner Alain Bertaud stated: if the Communist Party of China believes that resource allocation is best achieved through markets, why do we still believe it can be achieved through central planning?

*Jason Krupp is a research fellow at public policy think tank the NZ Initiative.