The Productivity Commission has made sweeping recommendations to free up land for affordable housing in draft report

The Productivity Commission has released its draft report Using land for Housing, which looks at the processes New Zealand''s fastest growing cities use to provide land for housing.

The draft report has made 38 recommendations that cover a wide range of issues from the minimum size of apartments to how the costs of infrastructure such as roads and sewerage that are required for new developments, could be paid for.

It has also recommended that new Urban Development Authorities could be established with compulsory acquisition powers to acquire land and oversee its development for new housing.

Many of its recommendations will be seen as radical by some, such as wiping minimum size requirements and the need to provide balconies and car parks for apartments, while others may view them as practical steps to reduce housing costs.

However the Commission's Chairman, Murray Sherwin, makes it clear that the report was aimed at the need to provide more affordable housing and that growing up i.e., building more apartments, as well as growing out, beyond existing urban areas, would be necessary to achieve that.

"Land supply is a critical first step to address housing affordability," Sherwin said.

Our fast growing cities need to be able to grow up and out.

"Without unlocking land supply, any efficiencies made elsewhere in the construction chain are only likely to flow on to higher land prices, rather than cheaper houses.

Sherwin also said our housing needs were changing and there was a growing demand for smaller, cheaper housing options.

" New Zealand's population is growing and the size of our households is shrinking," he said.

"The housing market to provide more choice of dwelling types and sizes to meet that changing demand.

"But land use regulations often constrain the production of small, affordable dwellings, both in built up areas and on the fringes of our cities.

"High land prices encourage production of larger, more expensive housing," he said.

The report made 38 specific recommendations to address those issues, and these are summarised below.

But it began by giving a grim review of the outlook for the supply of new housing in Auckland, where the shortage is the most acute. 

It noted that in 2012 Auckland Council estimated that the city had a shortfall of between 20,000 and 30,000 dwellings and would require 13,000 new dwellings a year just to keep pace with demand and stop the shortfall increasing further.

It was estimated that 46,000 new dwellings would have been needed by the end of last year, but that from 2012 to 2014 only 14,052 dwellings were consented.

"This is about half of what the council estimates is required just to accommodate new demand. In the meantime, the shortfall of dwellings is continuing to grow," the report said.

"If new dwellings in Auckland grow by about 8000 a year in the future, which is higher than in any year since 2005, by 2020 the shortfall will grow to about 60,000."

The report also noted that even if what it described as the "ambitious" new dwelling consent targets in the Auckland Housing Accord were met, that "...would still leave Auckland 26,500 dwellings short by the end of 2016."

And it warns that each year that the shortfall continues is likely to result in additional pent up demand, meaning the average  number of new dwellings required to meet demand will increase.

Several of the report's key recommendations are summarised below, and a there's a link to the whole report at the end of this article for those who wish to read it in full.  

• Remove controls on apartment sizes.

​The report says controls on apartment sizes were introduced, in part, because of concerns about the adequacy of ventilation, natural light and noise insulation, but that those issues should be dealt with through specific regulations and the Building Code.

It says that once the Ministry of Business Innovation and Employment has completed planned work around air quality, lighting, acoustics and access in multi-unit buildings, councils should review minimum apartment size rules with a view to removing them.

• Remove minimum parking requirements.

​The report says minimum parking requirements create land use inefficiencies and higher construction costs and represent an effective subsidy to car users, encouraging excessive use of vehicles.

It recommends they be removed from District Plans.

• Review and possibly remove building height limits.

The report says building height limits contribute to housing shortages and higher prices and force cities to expand outwards, increasing transport costs and working against goals of using land more efficiently. It recommends that councils undertake robust cost-benefit analysis before introducing height limits and should remove them where it cannot be demonstrated that that their benefits outweigh their costs.

• Remove excessive controls on the interior design of buildings.

The report says controls in District Plans on the internal design and construction of buildings that are more stringent than those contained in the Building Act may be unlawful. Councils should review these and if they exceed Building Act standards, remove them. 

• Clarify the role of the Resource Management Act.

The report noted that there were strongly divergent views about how the RMA affected councils' ability to encourage land supply for housing. It recommends that the Government amend the Act to clarify the the importance of urban growth and housing relative to the Act's other objectives.

• Introduce user charges on existing roads.

At present tolls can only be introduced on new roading developments. The report recommends the Government amend the law to allow councils to introduce tolls on existing roads as well.

• Adjust development contributions to reflect variances in infrastructure costs.

Information about the relationship between dwelling floor areas and the cost of providing infrastructure should be included in councils' development contribution polices. If smaller dwellings have lower infrastructure costs [per unit] that should be reflected in lower charges.

• Make greater use of targeted rates.

Targeted rates allow for the cost of infrastructure projects to be funded by council debt and then paid for by the users of the assets through their rates over a long period of time, rather than as an upfront levy added to development costs.

• Make the Government pay rates on Crown land.

​At present, core Crown land is exempt from rates which the reports says is not justified. Removing the exemption would encourage more active monitoring of Crown land and encourage the release of unused land for housing. The report recommends Treasury investigates the removal of the rates exemption, including on land occupied by schools and hospitals.

The report also said there was a strong case for setting rates based on land values rather than capital values, but stopped short of recommending this.

• Exempt overseas developers from requiring Overseas Investment Office approval to acquire development land.

The report said Treasury should investigate removing the requirement for the Government to approve the sale of land to overseas developers, "providing the land is developed into housing and resold within an acceptable timeframe."

• Establish an Urban Development Authority (UDA) with compulsory acquisition powers.

UDAs would lead and coordinate large scale residential development in designated areas in partnership with private sector developers.

The Commission is seeking public submissions on the draft report and people have until August 4 to make these.

To read the full 374 page draft report, click on this link:

---------------------------------------------------------------------------------------------------------------------------------------

Our free Property email newsletter brings you all the stories about residential and commercial property and the forces that move these huge markets. Sign up here.

To subscribe to our Property newsletter, enter your email address here. It's free.

---------------------------------------------------------------------------------------------------------------------------------------