Infrastructure New Zealand's proposal for a new South Auckland satellite city gains support

A proposal from Infrastructure New Zealand to investigate building a new Auckland satellite city around Paerata, north of Pukekohe, is meeting with strong support.

Property Institute of New Zealand chief executive, Ashley Church, is "applauding" the suggestion, saying it represents "the sort of big picture thinking that will ultimately resolve the Auckland housing crisis".

The proposal is contained in a new Infrastructure NZ report.

New Housing Minister Phil Twyford has already signalled interest in the concept, possibly as part of Labour's new $2 billion Kiwibuild programme to construct 10,000 new homes a year for 10 years.

Church says that the plan ticks most of the boxes required to solve Auckland's housing shortage:

“It envisages getting a very large number of homes built relatively quickly, it focuses on Auckland but proposes developing in an area where land prices are still reasonably priced, and it has a strong focus on providing lower cost housing for first home buyers”.

The report suggests that about 30,000 homes could be built in Paerata, making use of prefab construction, at an average cost of about $450,000 each. This contrasts with median prices around Auckland of about $825,000 at the moment.

"Paerata’s land is still cheap, but rising quickly," the report says.

"If bought at today’s prices, an average section of raw land would cost $17,000. Three years ago, it cost $10,000...If authorities can move before the market in Paerata, land value can be captured and used to offset infrastructure costs."

The report says that Paerata’s proximity to rail and State Highway 1 lowers the substantial risks and uncertainties around future transport needs.

"We estimate regional road and water investment as low as $700 million could be sufficient to add 30,000 dwellings to current Paerata plans. This is less than the estimated $1 billion of development contributions the city would generate. All other locations we examine [in the report] would likely cost more to service than the Auckland Council would receive in funding. Growth can pay for itself, if it is well planned."

The report says that after providing a margin for risk, the wide apparent difference between the cost of delivering a home in Paerata and current prices suggests integrated urban development at scale "is cost effective".

"In addition to enabling land value to be captured, development in Paerata offers a number of strategic advantages. It is close to industrial land at Drury and proximate to key employment centres at Manukau and Auckland airport, as well as the productive Waikato and Bay of Plenty growth regions. Water, power and aggregate supplies come from the south and, most importantly, Paerata is located on the railway line. Scale development in this location provides a unique opportunity to leverage the capacity of rail as the alternative transport mode for Auckland."

Paerata’s strategic location and Auckland’s urgent need for affordable housing close to employment indicates there was "an opportunity to go further".

"The southern rail line between Pukekohe and the Auckland CBD needs investment. Strategic prioritisation of Paerata as a growth city would generate sufficient land value uplift to fund a $2 billion duplication of the North Island Main Trunk Line."

Infrastructure NZ says wholesale changes to Auckland's Unitary Plan would not be required.

"The Rural Urban Boundary has provision for local expansion to make way for growth. Coordinated public investment aligned with planning processes and combined with affordable housing can shape urban form, without dictating it.Auckland must start using growth to catalyse the investments the city wants, not letting growth determine the investments it has to make."

The report, however, stresses that central government must play its part.

"Disproportionately high risk in relation to reward sits with the Auckland Council and developers, while too little remains with central government and the original land owners. A satellite city at Paerata will return $3-4 billion in GST alone, but less than $100 million in rates.

"Planning for growth at scale around rapid transit allows more efficient use of land and is cheaper than retrofitting established urban areas. It will deliver benefits in the form of more affordable housing for the people who live in Paerata and in the form of lower congestion and infrastructure charges for wider residents.

"But it is the ability to identify and isolate land at its raw price which provides the greatest opportunity. Auckland’s existing growth paradigm transfers the value of public investment to land values without a concomitant requirement to deliver housing at pace. More infrastructure investment is required to deliver fewer houses and weak supply reinforces high prices.

"The integrated planning and infrastructure approach of the satellite model enables infrastructure providers to share the benefit they create. Investment can be funded and affordable homes can be delivered."

This is the news release that Infrastructure New Zealand put out on the report:

A satellite city in the south key to funding and meeting growth

“The new Government should target new housing and employment on unzoned land along the rail line through Paerata to meet Auckland’s growth challenge,” says Stephen Selwood CEO of Infrastructure New Zealand.

“Our latest report released last week examines the cost of growth in different greenfield areas around the city where land is accessible and non-sensitive and finds Paerata to be the best on balance for major new development.

“It is cheaper to service with water, energy and transport and strategically located near to employment.

“If the satellite city was supported by a $2 billion upgrade of the rail corridor, we could four-track the southern rail line, allowing non-stop commuter services from the satellite to central Auckland and work places in between.

“That would put the new city within 30 minutes of the CBD and would allow rail freight to be separated from traditional commuter services. KiwiRail could operate with a much greater degree of freedom, helping to get freight off roads.

“Being within 30 minutes of the CBD would also allow much greater densities to be achieved at the satellite than would be possible under a traditional expansive urban development approach.

“Paerata would be a genuine city. It would provide a range of housing choices and with good masterplanning would be much more land efficient and resilient in a changing climate.

“The most exciting aspect is that the city could be designed to deliver all of our aspirations for the future enabling sustainable living and leveraging technology to the fullest extent.

“We can build better, stronger communities, free from the constraints of previous decisions.

“Developing at scale, we can facilitate the shift to more advanced home construction techniques, common throughout the rest of the world. These are critical to lifting productivity and enabling supply to increase.

“Scale will also be attractive to domestic and international developers and investors.

“If the new Government was to prioritise growth in a satellite city near the rail line in the south and tie new zoning to reprioritised transport investment, we could deliver homes at around half the current cost.

“We estimate that an average new home would cost $430,000 to build. That’s including land, development, infrastructure, GST – everything except a return for risk. How the satellite was delivered, including what risks were accepted by the Government, would determine what price homes could be sold for.

“This is the full cost – not a subsidy. It’s what houses should cost if we plan well and break through some of the barriers created by our current planning-funding-governance system.

“Growth can pay for itself if it is well planned.

“The growth model we have in place at the moment not only allows development in areas which cannot affordably be serviced, it is preventing the delivery of housing at its actual, affordable cost. It is enabling sprawl on productive soil and poor quality infill in established suburbs.

"Intensification of extremely expensive brownfield land is not delivering housing at the price or speed which is required.

“Proactively targeting growth around rail is cheaper, consumes less land and will deliver faster housing.

“The satellite city model can be scaled up to take advantage of new investment and provide for Auckland growth over the long term. It can be aligned with much needed investments in education and health to deliver an exemplar city of the future, providing a better urban lifestyle than can be achieved under existing practice.

“The current incremental approach to growth management in Auckland must change. It is too slow, too expensive and is adding to congestion. Integrating urban development and infrastructure “at scale” is the solution,” Selwood says.