By David Chaston
According to mayor Len Brown, Auckland has "enough land to build 15,000 homes" on and this land "has infrastructure and is ready to build on".
"It's a hot market ... people are building flat out and buying flat out."
But the Council is not approving consents "flat out".
In the December 2012 quarter only 1,297 consents for new residences were approved, bringing the total for 2012 to 4,581 or less than 400 per month. Many of these were for up-market construction; the number for affordable housing was very low.
We have now struggled back to a level that is similar to the one we had in the depths of the 1990's recession. Hardly "flat out".
The shortage is exacerbated by sellers being unwilling to list - properties available for sale are at all-time lows according to Barfoot & Thompson. The demand is growing, the supply is shrinking. This supply includes developments trumpeted by the Council with "prices that are relatively affordable in today's market."
"Relatively affordable in today's market" means houses that cost "from $429,000" for a small terraced house, and $529,000 for a full house.
The only problem with this definition is that these prices are about at the median house price $535,000, and above the first quartile house prices of $390,000 that first home buyers usually target. No first home buyer could actually afford them.
While a market is "hot" there will be upper income buyers for properties the Council is promoting, but zero progress is being made for families of more modest means. This can continue for a long as the Council strangles land supply and restrains new building consents. Sadly, even more families will only have the choice of renting . But rents will continue their climb if insufficient houses are actually built.
A search today on Trade Me of bare land revealed just 2,009 sections offered for sale.
A similar search of houses for sale at the first quartile price level or lower reveals 3,330 houses - but a good number of these will be distressed sales by leaky home owners who are mortgage-stressed. (This search excluded retirement units and bare land, but it does include shoebox apartments.)
The reality is much different to the Mayor's claims. Here is a RadioNZ report:
Auckland Mayor Len Brown told Radio New Zealand's Morning Report programme on Tuesday the figure includes sections that are ready to be built on.
He said there is enough land to build 15,000 homes in Flat Bush, Riverhead, Takanini, Hobsonville and within the broader Auckland metropolitan urban area. Mr Brown said the land is unconstrained, zoned, has infrastructure and is ready to build on.
The mayor said Auckland's property market is hot now because people have not been buying as many homes in the last four years.
Deputy mayor Penny Hulse also stands by the council's numbers and says the Government would do better to find ways of introducing more third party funding for local infrastructure such as libraries, which currently falls to councils and developers.
There is another problem. Few experts believe the "15,000" number and this is undermining the mayor's credibility with both the companies who are supposed to be doing the building and the Government.
Although they don't wish to be identified, we have heard residential construction industry people say the true number is about 5,000 land sites ready to be built on, with infrastructure ready.
The additional 10,000 sites are "raw land" sites probably held by landbankers rather than developers ready to build. They would take from between 18-24 months to develop once Council approval has been gained. However much of this land "is constrained by lack of connecting infrastructure and appeals".
The Mayor's reassuring rant is political hot air. Almost all Council positions are undermined by Labour/Greens policy who would need to ride roughshod over Auckland Council to get what they are promising. They also undermine what the National government is trying to achieve.
The goal is just not more housing because that will satisfy the wealthy first. The goal is affordable housing. Affordability is a function of incomes for people who need houses. For all its flaws, the Demographia study does help suggest where that affordability point is. The Labour/Greens policy agrees by targeting $300,000 as about right (although I doubt those parties know how to deliver that in the Auckland market).
Intensification will happen, but it won't be part of the solution. A quick look at Sydney will show you why - more housing, [much] higher cost. Intensification is a solution for the rail buffs so they can justify spending billions on the inner city rail. It won't materially add to supply fast enough to rebalance the excessive demand pressure existing now. New fringe housing can.
Tomorrow Auckland Council will release more details on their housing strategic action plan. Lets hope it is a more serious effort than Mayor Len's recent statements.
53 Comments
Len Brown's response is definitely shallow.
Yes, that maybe so - but he is hardly paid to perform, unlike the chief executive.
You know what they say about paying peanuts......
Spooky, innit possums, that the steep drop in consents completed coincides wiv the introduction of the General Competency provisions of Sandra Lees 2002 LG Act amendment. Allow for the lag as the penny drops. As an outsider/insider to all of this (worked on the big data cubes needed to run 10-year Plans in detail for a few smaller LG's) I know exactly the thinking that went on.
An imagined dialogue between an Eager Young Councillor and a Grizzled Old CFO:
EYC: Whee! we can spend ratepayers munny on anything we want! Especially Social and Cultural Well-beings which cover every human activity under the Sun!
CFO: Hang on, young Councillor, yer technically right. But them RatePayers are gonna worry about those bills before long.
EYC: OoooKay. So who Else can we stick with the tab, that won't appear on their Rates Bill, Oh Wise CFO?
CFO: Well, there's always Fees, Charges, Levies and Contributions! And insider Joke here, young 'un - them Contributions are Compulsory!
EYC: Who pays for all these - I mean, are they People as gonna Vote me Out?
CFO: Why, no! They are few if well connected, tend to extravagant lifestyles, being as how they are landowbers, developers, business types, builders, and bankers. They may Bitch and Moan but there aren't enough of them to sway things, if you play it Right.
EYC: You mean, they're Greedy, Profiteering Stereotypes who are Easy Prey for a few public mis-characterisations?
CFO: I couldn't possibly comment.
Allow a coupla years lag fer all this to sink in, take hold, and get going, and I reckon we have a pretty good correlation here.
T'would be interesting to get hold of a time series of aforesaid Fees, Charges, Levies and Contributions and see just how it all - er - Developed, DC.
waymad
You are so right! but how much of the extra moolah has gone into building empires of ever decreasing effiency? Len has now opened his mouth an removed all doubt he is a grinning fool. It was not just the developers that got hit, all the homeowners that did infill & renovations got hit with "reserve contributions" and forced to put in detention tanks to protect the failing stormwater systems, but noting contstructive has been done.
Combine this with the over-reaction to the 'leaky building' fiasco which has forced all home renovators to stop no wonder there is a shortage of housing in auckland - hence price pressure - this will take decades to fix that is assuming the both CG and LG finally realise what happened and I'm not optimistic
Amazing that after the debate we've had here for the last few years, we still get articles like this.
It's no more Len Brown's fault that anyone else's.
Much of the cost of rules, was as a direct result of folk seeing their 'asset' as something other than a structure which decays with time. They wanted to think it was permanent.
Then there's the wee problem of oil - $30 a barrel to $110 a berrel in 10 years. There's not one part of a house or it's servicing, isn't made of or delivered by the stuff. Anything indirect is related to it too - a lawyers fee will reflect the cost of the Beamer and the fuel for it.
Then there's the sequential 'every development is further away/costlier than the last', given that we cherry-pick the closest/cheapest first. It can't possibly deliver 'cheaper' housing.
Then there's the little matter of incomes: half the equation. They repay mortgages, they pay rents. They just happen to depend on oil too, or they don't exist (takes some getting your head around, but there you are). So they can't possibly keep pace - why is it folk can't (don't want to?) see this?
Oil prices need to be put in perspective though, the vast majority of house builld costs come from land prices + wages + consents all of which are only marginally impacted by oil prices.
What percentage of your income is spent on petrol, 3% maybe? perhaps you can extend that 6% if you include all the indirect impacts from oil prices on things like consumables? You can hardly blame that for the doubling of house prices we've had in the same 10 year period.
Julz - no, you absolutely miss my point. Read again.
Those wages expect to buy? Bits of the planet, made by, processed by, transported by, oil. I don't give a rat's a how many times it shifts before it finds that home, but find that home it will - or it doesn't exist. Not 6%, not even 60%. Nothing happens without energy being expended, and no money is ultimately underwritten unless that something happens. Energy underwrites wealth, 100%. I'll give you 'minus hydro, animal, human, solar, wind, and - grudgingly - geothermal.
What % you left with?
Folk just don'y get it. The exponential ramping disguised the process (inflated it away) until it couldn't. Then the 'price' of existing stuff went up. Kept the growth myth alive, but was unsustainable. And still is.
Humans managed fine without oil for all but the last 100 years or so, I can still grow my veges and rear my cattle without oil. You can hardly say it underwrites 100% of wealth.
Of course oil makes things more efficient as does nuclear both fusion and fission as well as bio fuels which are major ones you missed out.
We have managed fine with oil going from $30 to $100, if it was to go to $300 or even $3,000 wealth would not be destroyed, reduced of course, but it would simply make the other energy options much more viable and common.
Julz, you need to read a lot.
Bio-fuels are a non-event.
Fusion doenst exist
Fission, read the "red book," we are peaking in that and it takes 8 years and way too much fossil energty to build one plant, and most importantly it doesnt produce transportation fuels, a huge % of our needs.
Pre- 1920 we had less than 2 billion, pre 1800 about 1 billion, thats a proven level of population living off the sun's annual solar energy. However look at Britain, it was heavily oak forrested, by 1800s it was pretty much all gone.
http://en.wikipedia.org/wiki/File:World-Population-1800-2100.svg
So 1800 to 1920 we shot up to 2 billion mostly on the back of coal which peaked in 1913 in the UK, oil took the "strain" from then on to 7billion, oil is now peaking and there is nothing to replace it, ergo population will go back down to 1 ~ 2 billion inside 20 years.
Fuel at $100, why do you think the world's economy is on its back? We ration oil using cost, no more is being produced, hence the price is going up to quench demand.
"Viable", you believe in money, wrong thing, money is a proxy or IOU for work which is energy so then read up on read up on EROEI.
regards
I do read a lot,
- Bio fuels made from algea growing in waste water has huge potential.
- Fusion does exist and also has huge potential, they are building the first full scale plant as we speak.
- Fission will produce transportation fuels as we move to electric and hydrogen.
There is way to much scare mongering from vested interests on this topic
And dinnae ferget the 300 year's worth of transport fuel equivalents (that's at current fuel consumption rates) inherent in the Southland lignites.
As I've noted before, use 10% of these, SASOL the lot to diesel, accept the awful (allegedly) energy return, and buy ourselves 30 years of Transitioning.
Which is 'xackly why Solid Energy are quietly pressing ahead wiv various Lignite Conversions....
No it isn't.
They're just looking to profit.
If they were that clever, they'd be sorting sequestration before they bothered developing, on behalf of their kids and grand-kids. Instead, we have Straterror.
And the effort would be better put into Transitioning now - there's still real oil. Instead, this article is about more exponential growth.
You said it!
Algal Biofules have <b>potential</p> unfortuntaly unproven and photosynthesis is remarkably inefficient, Fusion does exist! (pity about the effiency though), Hence electric and hydrogen (a bugger to contain) depend on wishfull thinking.
The chances of 100 years of Fossil Fuel infrastructure being significantly impacted by the tech you have mention in the next 30 years - not likely
Sad but true Neven
Your food contains 10 to 30calories (depending on packaging) of fossil fuels. Everything else you buy is substantially made with oil and uses oil to get the good to your door.
3%, no, Im afraid total ignorance on your part.
Doubling, yes its a bubble and yes it will burst.
Many ppl I know are hurting on petrol at $2 a litre, just how bad will it be at $4? I use $80 a month ie 1 tank, many I know use that per week and more. So my cost at $4/litre is $160, affordable for me. Many others will be in dire straights...their costs will go from $300 to $600...so they will buy a lot less of something else...less spending == prema-recession or worse a depresion, probable.
regards
Oil would need to be closer to $350 dollars a barrel to get to $4 at the pump, most of what we pay is tax.
Don't forget if we spend more on oil the money doesn't vanish from the global economy it simply goes to oil producing nations. As they get richer they have more disposable income to spend on goods (including ours and holidays in NZ) which will keep the global enconmy going.
Sorry Julz - we simply disagree.
I made this comment to 'Brendon', and think it applies to you - don't take things for granted. Question 'the economy'. Question those 'goods' - which needed energy to be made/supplied.
And question money. More than anything, question what money is. If there is nothing in the supermarket, nothing for sale - what is it 'worth'?
The only reason all that packaging and fiber used in those goods is oil based is because oil is still the cheapest.
If oil prices go up significantly in the future your food will be delivered in a hydrogen fuelled truck, it will be packaged from material made from renewable oils and fibers and you will be wearing clothes and made from natural fibers. Our sheep farmers may finally get paid properly for the wool.
I'm very much looking forward to oil running out, there will many more jobs here in NZ, the environment will be much better off and most of our money that current goes to the oil producing nations will stay at home.
At most it's one of many factors for the slow world economy, the main ones economists raise are excessive leverage/debt, bursting house price bubbles and ageing populations. Oil prices rarely get a mention...
Even if petrol at the pump only accounted for a third of our oil use it would still only consume 9% of peoples take home pay by my estimates. A cost that triples over 10 years going from 3% to 9% can hardly be blammed for all our problems.
Look at what's happening on Waiheke Island - water tank storage capacity sufficient to cope with drought was traded off for a bigger footprint for the house, garages, decks and patios .. and most dwellings likely have a bunch of rooms going unoccupied/unused 95% of the day.
Queue for the water tanker is now four weeks and rising.
Then think what these same homeowners would need on their little plot in paradise if they also had to provide a decent percentage of their own food.
yeah
well humans are simply not sustainable are they? But eveyrthing we do is part of nature - even our so called artificial creations
But we keep on living, keep on dreaming etc etc.
I actually have faith in humanity that it will get through it all - maybe not in the long long term
Maybe faith isn't scientific, but heck what's the alternative? All slit our wrists today???
I'm with you - indeed really hopeful for the future - after all, necessity is the mother of invention. Look at Cuba in terms of relative self-sufficiency. And Costa Ricans with a GDP per capita less than a third of Americans - score way higher on the happiness index.
A bankrupt NZ would likely be a happier NZ - and our ecosystems might have a chance to recover as well.
MIA - good comment! No, in current mode we're not sustainable true. Possibly, not sustainable in any mode above a global pop of 2 billion or so.
But being proactive is the only valid approach (how many times have I written that?) and I'm here to tell you that life is more fun, more intellectually challenging, living my way than it is for most of the cloned suits.
Planning I've thought about a good deal. I knew this stuff in '75, was on a County Council and a Regional fore-runner 10 years later, done the Landcare commmittee bit, and the NGO thing. But - I never anticipated we'd be here in 2013, with every pollie on the planet still shrilling 'growth'. Didn't think we were collectively that stupid.
Planning? Has to be the Transition Town / Locavore type of thing. Much more rail, more electrified. Triage of rural sealed roads, triage of other stuff too. We're pretty lucky in this country - not too trashed and not too populated, with good hydro. New-builds should be as near self-sufficient - particularly in energy - as possible. None of my bizzo how it's done, but passive solar is a guaranteed winner. Retro-upgrading of the old stock has to happen too - the Greens WOF may be a key there. Otherwise I favour town/village clusters, close to food.
Is the Murray getting to the sea?
Except of the Green's WOF invloves forcing of debt...which given many of the ppl I know as 1 or 2 house landlords is probable. Interestingly one owns flats that are very diffiecult and very expensive to insulate, read many ks....read debt crippled, or bankrupt.
regards
Should we be concerned? I couldn't give a stuff - folks who take business risks go broke every day. Someone else will have the "many ks" you refer to and going forward the occupants of the flats - be they owners or renters - will be healthier. Hospital admission costs go down, productivity goes up. What's not to like about it?
Hi, yes we should be concerned, there has to be a fair balance in any transaction/dealing. If landlords are going broke because the dice are stacked against them then sorry that is wrong. Many ppl become landlords as retirement funds, ie sell up at 65, if they cant because the tenant has a life long possession, well that is dis-advantaging also.
Do we have any good data on just the effects of insulation v hospital rates? Im not aware of it. The link you showed my was more linked to over-crowding.
Quite often the rates are linked to lots of other things like over-crowding, and infectioius deseases which if you put the rents up to compensate for the insulation costs could make things worse ir the over-crowding because worse.
Then there is the impact on the landlords spending, lets say these are the $70k to 150k earners and you then impact their pockets, that is less money being spent in 70% of teh economy. That flows onto higher un-employment for the un-skilled and semi-skilled in particular....
Becareful what you wish for IMHO, the side effects could be severe and un-correctable.
regards
Rinse and repeat for peak oil. Growing food, they will find they have to, or at least many in NZ will. Which means much newer housing will be abandoned as un-usable, or flatten 1/2 of it to make a decent plot to eat off, really you need 800m2 not 500m2.
Of course that makes the water demand far far higher.
Unsustainable, that especially includes Hughy's long commute new housing "ideas" with petrol at $4 a litre.
regards
The problem with planning is, you dont know what the end game/position is going to be. thereofre what to plan to, but yes basically, but not blocks, you dont need that much land per family.
Self contained for most water, food and most waste.
Hugely less impacting on just about everything.
Locally this looks interesting,
regards
There is no such thing as "have" and "have not"
everybody have something, so there cannot be any "have not" especially in auckland.
Therefore everybody should be able to afford "$500,000" houses. and if they can't it's their fault.......This is Len Brown's philosophy. He only point out to "amount" of available land for building, but cleverly ignore how much they will cost to built on it .
Wonder how David Shearer can overcome this "intellectual" disconnect when he comes into power (if ever ) and try to fulfill his $300,000 houses pledge in Auckland ? Len Brown and He are both from Labour ......or is Len Brown actually giving David Shearer a big stick to beat National with this coming election by his own inaction ??
Ain’t the English language great, it's always changing and adapting, or being high jacked for ulterior motives. Awful now means terrible instead of full of awe, gay now means homosexual instead of happy and affordable now means a $300,000 70m2 two bedroom townhouse on 250m2 on the fringe of Auckland instead a free standing three bedroom house on 600m2+. I think the word affordable, in a housing context, needs to be reclaimed.
If you look at the cost of land, development, levies, consents etc. and strip out the waste, then affordability is definitely more towards the 3x medium income end that its present position. If we did this then your $300,000 would get you a property far closer into the city than at present, or if you did build high density on the fringe as they are suggesting, then you would get the same type of property far cheaper. This should not be an arguement about high/low density. It should be about removing non value adding components (waste) from the system.
Before the merge of Auckland (super) Council, Manukau, Waitakere, and some extent Northshore had built up a massive amount of land as part of their land bank approach. Why can't they sell them at cost for housing development?
After all Len loves the limelight and has the habbit of spending other people money - rates payers paid for those land! He might even earn a knighthood if he plays his cards right!
It's in the interests of councillors and politicians to keep supply of homes down, especially those aged 55 plus thinking about retirement as they are mostly property or multiple property owners and see the retirement fund coming from those properties - the higher the prices go the better. Even Labour pollies are heavily invested in property!
They simply do not give a toss about affordability. So vested interests in the political arena will keep supply down and the land bankers will sit on their properties as they watch the prices soar.
That graph above tells the story - consents for new homes pitiful and likely to remain that way for many years in Auckland as existing house prices soar in what looks like being the strongest house price surge we have ever seen.
An LVR restriction would only assist the rich to get richer as they already have the equity to acquire much more and then the rents rise further.
Excellent article thanks David. Great to see Len Brown called out with the facts. He says there's 15,000 sections ready to build. Reality - these only a few thousand.
What about in coming years? What is going to be the flow of new sections ready to build on - and numbers of new houses needed to accomodate Auckland population growth?
I think if this major is lying, or mistaken about the current situation today; he probably hasn't got a clue or hasn't planned for ongoing needs i.e. ongoing, and growing, crisis.
You're doing a great job exposing this David. I wish the other media and central government politicians would also all call him out.
yet you ignore the main problem $500k houses are outside most first time buyers pockets. BTW 5000 ready to go and 10000 could go if the land bankers were not holding o,
"The additional 10,000 sites are "raw land" sites probably held by landbankers rather than developers ready to build."
This suggests the mayor is substantially correct, the problem is the rent seekers dribbling sections onto the market in order to maximising their gains.
but of course that doesnt agree with your view point so the other side of the blinkers isnt seen.
Simple fix is the Councils/Govn buys agricultural land, enough for say 100,000 plots of say 600~800sqm at agricultural land prices, re-zones and releases it en-mass at cost.
regards
agree the cost issue is a huge problem...but if supply eased the cost would come down. I think a key issue with easing supply is the council is obsfucating, saying there are plenty of sections ready to build - when, whammo, there isn't. They're not making any land available, and when questioned about on Radio NZ, as David Chaston mentioned, they lie. Land bankers are a side issue - if sections are landbanked, then they are not ready to build on.
Im sorry but I totally do not agree. I dont see it as key (council) even if the council added say a 1km around a city the rent seekers would control the price.
There are 5000 plus another 10,000 as stated, ergo why is building an issue? because of rent seekers and limitied ppl who can pay $500k. that isnt the councils "fault" its private enterprise creating its own monopoly, that fix is easy.
regards
David You are attacking the wrong person. There is only so much that Auckland Council can do, and what you expect of Auckland Council and Len Brown is well beyond what they can do.
Unless you produce evidence (not rumour from anonymous sources) to the contrary, there are at least 15,000 sections ready to go in so far as the Council has done its form filling. Shifting those section to the next stage of building on them is not the responsibility of or within the power of the Auckland Council. The Council has to react to applications, not make them. If it has not issued many building permits compared with previous years it is becasue it hasn't received the applications, not because it has got squadrillions of applications on hold.
True the Council also has a planning and infrastructure role. If you read the Auckland Plan you will see that it is planning for more houses, it does have a coherent plan. It is trying to develop the supporting infrastructre, inlcuding the all-important public transport, notwithstanding the obstacles and money wasting (e.g. the holiday highway) of central government.
Instead of pouring vitriol on Len Brown, why not take aim at those who can do something i.e. central government who can: build state houses, set up first home loan schemes (like the Greens propose), change tax and other laws to discourage land banking, assist with funding of public transport and other infrastructure, and so on.
John Key's response to date has been a pathetic do nothing "leave it to the market" response. There is a much stronger case for ripping into that thinking than there is ripping into Len Brown, at least if you put personal aminmosity to one side.
Finally, if new houses are being built for the well off, does that not mean that the houses those people currently live in will be freed up for others to move into, and so on, so that new home buyers can move into exisitng houses. Or is there some iron clad rule that requires all first home buyers to move into new houses?
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