081 Housing New Zealand - Capacity and Feasibility Modelling _ MBIE - (David Hermans) _ Post Hearing Response

8/19/2019 081 Housing New Zealand - Capacity and Feasibility Modelling _ MBIE - (David Hermans) _ Post Hearing Response

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BEFORE THE AUCKLAND UNITARY PLAN INDEPENDENT HEARINGS PANEL

IN THE MATTER of the Resource Management Act 1991 and the

Local Government (Auckland Transitional

Provisions) Act 2010

AND

IN THE MATTER of Proposed Auckland Unitary Plan Topic 081 –

Rezoning and Precincts (Geographic Areas)

STATEMENT OF EVIDENCE OF THE MINISTRY OF BUSINESS, INNOVATION ANDEMPLOYMENT (SUBMITTER NO. 6319)

15 MARCH 2016

Contact:

David Hermans

Principal Advisor, Auckland Housing

Construction and Housing Markets

Ministry of Business, Innovation and Employment

[email protected] 09 919 9323

mailto:[email protected]:[email protected]:[email protected]


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1. SUMMARY

1.1. This statement of evidence from the Ministry of Business, Innovation and

Employment (MBIE) addresses the matters being considered under Topic 081 -

Rezoning and Precincts (Geographical Areas). It has a specific focus on the outputs

of the residential development capacity modelling undertaken by the Topic 013Urban Growth Expert Conferencing Group (The 013 Group).

1.2. We have reviewed the reports of the 013 Group, and the related evidence provided

by Kyle Balderston and Doug Fairgray for the Auckland Council, Philip Osborne and

Tim Heath for HNZC, and Adam Thompson, Director of Urban Economics Ltd and

member of the 013 Group.

1.3. We are comfortable that the 013 Group’s ACDCv3.7 model results are sufficiently

robust to provide enough information to form a broad view on the development

capacity provided through the PAUP, and how it can be enhanced through

reconsidering the spatial application of zones.

1.4. We have concerns about what the model results reveal, and these fall into three

categories:

The overall quantum of capacity : We consider that feasible development

capacity provided by the PAUP for approximately 240,000 dwellings in existing

urban areas is insufficient to ensure Auckland has a competitive well-functioning

housing market and a competitive urban land market over the longer-term. A

market that has confidence in the sufficiency of future capacity and supply is

less likely to result in speculative activity, and will encourage development to

occur sooner rather than waiting for values to keep appreciating.

The spatial distribution of capacity : With the exception of the city centre and

some other centres, the feasible development capacity is mostly provided in

areas where land prices reveal lower relative housing demand, or which have

lower levels of employment accessibility. Because of this, we do not consider

that the PAUP currently provides a suitable spatial distribution of residential

capacity to best support either a well-functioning housing market or an

effectively-functioning urban economy in Auckland.

The distribution and mix of typologies, sizes and prices: The PAUP only

provides for 20% of feasible development capacity through attached housing

typologies, even though developers are currently building attached dwellings at

more than twice that proportion; a proportion that is projected to be maintained

over the longer term. These are the typologies more likely to result in smaller,

more affordable dwellings. The low capacity for medium-density typologies (an

under-represented typology in Auckland) is particularly concerning. Therefore

we consider the PAUP does not provide sufficient housing choices to deliver a

well-functioning housing market in Auckland.

1.5. Our analysis and views reveal that the PAUP as notified, even with the welcome

changes to residential provisions proposed by the Council in previous evidence,does not give us comfort that the PAUP will enable a well-functioning housing


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market — and by extension, an effective-functioning urban economy. We consider

this position lends weight to the need for further ‘up-zoning’ of geographic areas in

Auckland for more density.

2. INTRODUCTION

2.1. MBIE develops and delivers policy, services, advice and regulation to support

business growth and the prosperity and wellbeing of all New Zealanders. Housing

policy — and in particular, housing supply and affordability in Auckland — is a core

focus of MBIE and of the Government more generally. MBIE is working alongside

other government agencies, local government, the private sector, and non-

government organisations to enhance affordability, social housing and the quality of

the built environment.

2.2. A well-functioning housing market is important for both economic performance and

social wellbeing. High housing costs increase social inequality, reduce labour

mobility, divert investment from more productive economic activities, represent astability risk to the macro-economy, and — through the accommodation supplement

and income-related rent subsidies — have a direct fiscal impact.

2.3. While MBIE broadly has an interest in many aspects of the PAUP, housing is the

central focus of MBIE’s submission and evidence. This reflects the importance that

MBIE and the Government currently place on achieving housing policy outcomes,

and also reflects the nationally important role the Auckland Unitary Plan will play in

delivering housing outcomes.

2.4. MBIE’s interest in Auckland housing outcomes also reflects the important link

between a well-functioning housing market and the performance of Auckland’seconomy more generally. MBIE’s three key objectives are: more competitive

businesses; job opportunities for all; and affordable housing. Constraints on housing

supply and on housing choices can reduce employment accessibility, firm

productivity and performance (by constraining access to a larger labour pool), and

ultimately living standards. Auckland’s importance in the national economy (36.6%

of GDP in year-ended March 2015) therefore makes the performance of the city a

matter of national importance.

3. SCOPE

3.1. This statement of evidence addresses the matters being considered under Topic

081 - Rezoning and Precincts (Geographical Areas), namely the spatial application

of residential zones within the Auckland Unitary Plan, but with specific focus on the

outputs of the residential development capacity modelling undertaken by the Topic

013 Urban Growth Expert Conferencing Group (The 013 Group).

3.2. It builds on the primary submission that MBIE provided in February 2014, and on

the subsequent statements of evidence provided in December 2014 for Topic 013

(RPS Urban Growth), in September 2015 for Topics 059-063 (Residential objectives

policies and controls), and in February 2016 for Topic 080 (Rezoning and Precincts

– General). We revisit some key points from that evidence in this document wherepertinent.


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3.3. MBIE’s submission, this statement of evidence, and our participation in the

Auckland Unitary Plan hearings process have been informed by the whole-of-

Government submission from the Minister for the Environment (No. 318, dated 17

December 2013). Where possible, we have also sought consistency with other

government submitters, particularly Housing New Zealand Corporation (HNZC).

3.4. In preparing this statement of evidence we have specifically reviewed the reports of

the 013 Group, statements of evidence provided by Kyle Balderston and Doug

Fairgray for the Auckland Council, Philip Osborne and Tim Heath for HNZC, and

Adam Thompson, Director of Urban Economics Ltd and member of the 013 Group.

4. OVERVIEW OF PRIMARY SUBMISSION AND PREVIOUS EVIDENCE

4.1. In our primary submission from February 2014 we argued that the PAUP does not

back up its creditable RPS-level objectives with appropriately aligned policies and

rules at the ‘district plan’ level. In particular, the PAUP:

4.1.1. Does not provide sufficient capacity through appropriate zoning and density

provisions to meet Auckland’s forecast growth, particularly in locations of

highest demand; and,

4.1.2. Fails to free residential development from complicated policies and rules that

will create high transaction costs, thereby limiting innovation and

responsiveness of supply to demand.

4.2. We argued that in doing so the PAUP does not provide for the population growth

and changing household demographics and preferences that Auckland will face

over the next thirty years.

4.3. We noted that there was a deliberate ‘down-zoning’ apparent between the

provisions and zones contained in the Draft Unitary Plan (released by the Auckland

Council for public consultation in March 2013) and the version notified in September

that same year. This widened the misalignment between the strategy and the

detailed provisions. It also exacerbated the misalignment between the areas where

demand for housing is highest (as expressed through land prices) and the areas

where the PAUP provided for growth. In addition, we noted that an ostensible

‘design-focused’ approach to consenting medium-density residential development

was instead encumbered by inflexible rules, overlays and controls that would limit

housing supply and housing choices.

4.4. We sought that — where necessary to achieve alignment with the objectives of the

Auckland Plan and RPS sections of the PAUP — the zoning, overlays, development

controls and other provisions in the PAUP should be adjusted and amended such

that they do not constrain provision of sufficient residential development to meet

Auckland’s growth projections, and to proactively enable efficient growth in areas of

high market demand.

4.5. In our evidence for Topic 013 we re-stated our qualified support for the RPS-level

urban growth policies and objectives. We noted that notwithstanding the need for

sufficient peripheral greenfield capacity to increase housing supply and meet


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demand in certain sub-markets, managing towards an intensified urban form is

consistent with urban economic theory, with global patterns of urbanisation, greater

centralisation of employment in the growing service sector, and with the social and

economic choices and trade-offs that households make in a growing city. That is,

intensification is an efficient market response to rising land prices in areas of high

demand. We stated that the locations experiencing the highest land values, and byimplication the highest levels of demand, should be considered primary locations for

intensification, and therefore should be supported by plan provisions and zoning

that reduce development constraints.

4.6. In our evidence for Topics 059-063 we stated our support for the Auckland Council

evidence that sought changes to the PAUP to uplift development capacity across

the residential zones. In particular, we supported the Auckland Council’s proposed

amendments that sought to enable a significant increase in housing capacity in

Auckland by:

4.6.1. Removing restrictions on density and height within areas identified as

appropriate for intensification;

4.6.2. Clarifying and narrowing the purpose and application of the Single House

zone (SHZ); and

4.6.3. Rationalising development controls and assessment criteria to provide more

flexibility to developers while still achieving built character, quality living

environments and residential amenity objectives.

4.7. In that evidence, we also stated that despite the ostensible uplift in total feasible

development capacity generated by the Council’s proposed changes to residentialprovisions, we remained concerned that the modelled feasible capacity still does

not provide enough opportunities for attached, medium-density housing typologies

to meet underlying and projected demand. We stated that while we supported the

Council’s proposed changes to residential provisions, we considered more still

needed to be done, and that the main way in which capacity will be further improved

is through adjustments to the spatial application of zones.

4.8. In a statement provided for Topic 080, in support of HNZC’s evidence, we re-

iterated the Government’s interest in ensuring the Unitary Plan delivers sufficient

market-feasible residential development capacity in Auckland. We also stated that,despite the number of new homes consented in Auckland (9,200 in the 12 months

to December 2015) being already above the long-term average, and characteristic

of a residential construction boom, it is still not nearly enough to meet the new

household formation resulting from current and projected population growth. To

meet this ongoing demand, the Unitary Plan needs to provide for much greater

levels of both intensification and greenfield expansion than has historically been the

case under legacy plans. We also stated that the feasible capacity provided by the

Unitary Plan needs to be much greater than underlying demand, given not all

opportunities will be taken up.

4.9. The following evidence provides more detail about MBIE’s views on the final point above in the context of the 013 Group development capacity modelling exercise.


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5. DISCUSSION OF DEVELOPMENT CAPACITY MODELLING OUTPUTS

5.1. MBIE, alongside the Ministry for the Environment, acted in an observer capacity

during the 013 Group’s development of the Auckland Council Development

Capacity 2015 (ACDC15) model and analysis. We are grateful to the Panel for this

opportunity.

5.2. We consider the ACDC15 model provides a good basis for making a broad

judgement about plan effectiveness, and for estimating the general effects of further

changes to provisions or changes to the spatial application of zones.

5.3. We have reviewed the reports of the 013 Group, and the related evidence provided

by Kyle Balderston and Dr JDM Fairgray for the Auckland Council, Philip Osborne

and Tim Heath for HNZC, and Adam Thompson, Director of Urban Economics Ltd

and member of the 013 Group.

5.4. We note that in his evidence Mr Thompson raises concerns about the recent modelruns, in that they have been undertaken by the Council without the full participation

or peer review of some members of the 013 Group. MBIE has not formed a detailed

view on the specific methodological concerns raised by Mr Thompson.

Nevertheless, our confidence in the model results would be strengthened by the

knowledge that all 013 Group members, and particularly those with property

development and economic expertise, are comfortable with the methodology

applied in each application of the model.

5.5. Despite this, we are comfortable that the model results are sufficiently robust to

provide us with enough information to form a broad view on the development

capacity provided through the PAUP, and how it can be enhanced through thespatial application of zones.

5.6. As with our previous evidence, we consider that the modelling outputs should be

used with appropriate qualification. As the reports of the 013 Group state, the model

is a static analysis, with no feedback mechanisms. It does not factor in matters such

as ‘development chance’ and sub-optimal development occurring on sites (which

could reduce capacity), and the opportunities that can arise from land aggregation

and increased land values (which could increase feasible capacity). Mr Balderston’s

most recent evidence further clarifies the limitations of the model results: he

describes it as providing a starting point for making forecasts, but it does notconstitute a forecast in itself.

5.7. We consider it is useful to use the model outputs to understand the relative change

in market-feasible capacity afforded by changes to planning provisions and zoning,

and also to assess whether the overall modelled capacity is of sufficient quantity

and quality to more likely result in a well-functioning housing market and urban

economy. This suggests we should not place the emphasis on determining whether

there is an absolute match between plan-enabled feasible development capacity

and specific medium- or long-term demand projections and/or supply targets.

5.8. The latest version of the ACDC15 model (ACDC15v3.7) is described in theevidence of Mr Balderston and Dr Fairgray. It shows that the PAUP — with the


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modifications to residential zone controls proposed by Council in its 059-063

evidence — enables a commercially feasible development capacity of between

223,802 and 307,817 dwellings, depending on the scenario chosen (e.g. highest

return, lowest price, most dwellings).

5.9. We agree with the evidence of Mr Osborne and Mr Heath for HNZC that the filter for‘highest return’ represents the most likely market response to development

opportunities afforded by the PAUP. The ‘highest return’ scenario provides a

capacity of 239,682 dwellings, comprising (as outlined in the evidence of Dr

Fairgray) 30,533 apartments, 19,322 terraces or attached townhouses, and 189,827

standalone houses. References from here on in this paper to the ACDCv3.7 model

results are usually a reference to the ‘highest return’ scenario results.

5.10. Mr Balderston’s evidence also provides a spatial rendering of the results by

typology, including useful ‘heat maps’ that demonstrate the relative increase in

development capacity that the PAUP provides over existing densities. We have

found that the presentation that Mr Balderston and Dr Fairgray gave the Panel on 4

March 2016 also contains particularly useful information.

5.11. We recognise that the feasible development capacity described by ACDCv3.7 is a

significant improvement on the 64,000 commercially-feasible dwellings that the

original ACDC results indicated were available to the market. However, despite this

improvement, all of our original concerns remain as to what the modelling results

actually tell us. We note that some of these concerns appear to be similarly

reflected in the evidence provided by Mr Balderston and Dr Fairgray.

5.12. Our concerns about the model results fall into three categories:

The overall quantum of capacity

The spatial distribution of capacity

The distribution and mix of typologies, sizes and prices

The overall quantum of capacity

5.13. In our statement of evidence for Topic 080 we noted that, despite Auckland

currently consenting dwellings at above the long-term average, demand continues

to exceed supply. Our estimate is that the accumulated shortfall of dwellings (in thesense of a latent demand for households that might have otherwise formed had

sufficient housing been available) is likely to climb to over 30,000 by June 2016.

5.14. Statistics New Zealand projects that Auckland’s population will grow by a further

939,600 people by 2043 based on its high-growth scenario, and will have an

average household size of 2.7 persons. Combined with our estimated housing

shortfall, this suggests that the rough Auckland Plan estimate of 400,000 additional

dwellings being required over 30 years — or approximately 13,000 per year —

remains an appropriate yardstick. The Statistics New Zealand medium household

growth projection (736,100 additional people) may be the most likely scenario to

occur. In the context of zoning decisions, we consider there is little cost or risk to

erring on the side of over-capacity, particularly as it can help reduce land


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speculation by reducing perceptions of artificial scarcity. We also note that at the

moment Auckland’s population is growing at a rate greater than the Statistics New

Zealand high projection, with 43,500 people added in the year to June 2015.

5.15. The ACDC15 model focuses on the existing urban area, within which the Auckland

Plan and PAUP RPS-level growth strategy suggests 60-70% of Auckland’s dwellinggrowth will, or should, occur. This suggests a required capacity of 240,000 to

280,000 dwellings in this area, with approximately 120,000 to 160,000 dwellings

occurring in new greenfield areas and satellite towns. We note that despite this

being the agreed urban growth strategy, the ‘70:40’ strategy is broadly consistent

with what urban economics tells us that a relatively unconstrained urban land and

housing market might otherwise deliver.

5.16. We note that the evidence of Dr Fairgray tends to focus on supply and demand

dynamics over the next ten years, out to 2026, rather than the 30-year horizon of

the Auckland Plan and PAUP RPS. We concur that projecting supply and demand

accurately beyond 10 years is difficult, given the uncertainties around market

conditions, land prices, and the nature of demand. The following graph illustrates

the nature of the problem, where the red-dashed line represents projected demand

for housing (based on the medium-growth) scenario and the bars represent known

Crown-led and private-led residential developments. You can see that the growth in

known development plans rapidly falls away after about 5 years, leaving the

shortfall to be plugged by developments not yet known or imagined:

5.17. It is true that as land prices increase, and as public investment in transport

infrastructure and other amenity-enhancing investments bear fruit, then more areas

will become sufficiently market-attractive over time to increase the feasibility of

development. It is also true that as the Unitary Plan is reviewed after (or within) the

statutory 10-year period required by the Resource Management Act, then additional

areas can be zoned for higher densities and yield. Nevertheless, for the purpose of

assessing the sufficiency of development capacity provided by the Auckland Unitary

Plan, we prefer the larger demand projection provided by the longer 30-yeartimeframe. This is for the following related reasons:


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5.17.1. We consider a well-functioning housing market requires a large number of

potential development opportunities to be available, so that developers and

prospective homeowners have a wide variety of choices, and so that

downward competitive pressure is applied to land prices across the city. If

the market has confidence in the sufficiency of future development

capacity and supply over the long term, then this would help reducespeculation-driven price increases, as well as encouraging landowners to

develop their land sooner rather than hold out for higher prices later (i.e.

land-bank). We note that 240,000 dwellings is approximately equal to, or

slightly less than, the 30-year demand projection, and only about 200% of

the 10-year demand. Notwithstanding the additional opportunities that may

arise over time, this would require every currently-feasible development

opportunity to be taken up within 30 years to the maximum feasible

capacity of each site, or for every other opportunity to be taken up over a

10-year period.

5.17.2. In addition, given ‘development chance’ — that is, the observation that the

owners of feasible sites may not wish to realise the development potential,

or may wish to develop to a sub-optimal density for lifestyle reasons —

then the feasible capacity in existing urban areas needs to be significantly

more than projected demand in order to ensure enough redevelopment

opportunities are realised. Focusing on the longer-term demand

projections as the benchmark provides a larger figure to aim towards.

5.17.3. Perhaps more importantly, we consider that focusing only on the capacity

required over ten years risks foregoing future redevelopment opportunities,

by locking in sub-optimal housing typologies and sizes which will not besubsequently redeveloped within the 30-year horizon of the Unitary Plan.

For example, we consider there will be scenarios where a market-attractive

area has a constrained zoning, but where the economics could feasibly

support development at higher densities (say, medium-density apartment

typologies). The low-density development may still be considered feasible,

and there may still be sufficient demand for some wealthy households to

purchase the resulting expensive, large houses. If the area has a less

constraining zoning, the higher-density option that yields a greater number

of dwellings may provide the higher development return. However, the

zoning precludes this option, and pushes developers towards the sub-optimal outcome. Re-zoning the area in 10 years’ time could be a fruitless

exercise given the lower-density development that occurred in the interim

will have many more decades of economic life before it is suitable for

redevelopment once more. This dynamic, experienced across enough

areas, could exclude a large number of current and future redevelopment

opportunities if the Unitary Plan is too conservative in its residential zoning.

It distorts investment incentives, affects productivity on that investment and

carries real economic cost.

5.17.4. We also note the importance of having more than 10 years’ worth of

dwelling capacity in a plan even with a 10-year life span. Even if the PAUP

had sufficient capacity for 10-years’ worth of household growth, by the


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ninth year of its life there might only be one year’s worth of that capacity

left. The market may anticipate the shortages in capacity and supply that

could occur through such an approach, and reflect this through unhelpful

land-banking and higher house prices. In this regard, we note that the

Auckland Plan calls for the Unitary Plan to have 20 years’ “forward view” of

housing supply.

5.18. Given the above discussion, we consider that the feasible capacity for

approximately 240,000 dwellings provided by the PAUP, according to the

ACDCv3.7 outputs, is insufficient to ensure Auckland has a well-functioning housing

market and a competitive urban land market over the longer-term.

The spatial distr ibut io n of capacity

5.19. As we have noted in previous evidence, increased prices are both a signal to use a

resource more efficiently (in the example of land values) and to produce more of a

good or service (in the example of houses). In urban areas, these dynamics playout in tandem — increased land values and house prices will lead to intensification

of the land-use, by increasing the ratio of dwellings to land area. Land values are a

clear indicator of the demand for that land, and thus the urban locations with the

highest land values are usually by implication the areas with the highest levels of

housing demand.1

5.20. The high demand is usually explained by proximity to and/or accessibility to

employment opportunities, urban and natural amenities, and transport links. In an

Auckland context, this is easily revealed through land-value maps which show the

highest land values in the central isthmus and coastal areas:

Auckland land value ‘heat map’ (source: Auckland Council GIS)

1 We note that whether that underlying demand is being met or not could be determined by examining

improvement values. You would expect that high value land would be used more intensively (by way of greater

improvements to land) and provide the highest economic returns. The ratio of improvements value to land

value, therefore, can signal the areas with the highest levels of unmet housing demand. High value land areas

with relatively low improvements value to land value ratios might indicate that land supply is particularlyconstricted in those areas. We haven’t had time to undertake this analysis for this evidence.


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5.21. These high-value areas are therefore the primary locations for intensification, and

should be supported by commensurate plan provisions in order to support an

efficient and well-functioning housing market. In contrast, intensification is less likely

to be viable where land is cheaper, even if planning provisions enable it to occur. Mr

Balderston notes this in his evidence, where he states “denser developments are

able to moderate the cost of new floorspace on expensive land (compared to lessdense developments) but are more expensive on lower value land”.

5.22. From MBIE’s perspective, reducing the rules that constrain residential intensification

in these more in-demand areas is desirable not just from a narrow housing market

perspective; it also speaks to our interests in the efficient and productive functioning

of the Auckland economy, and the opportunities that brings for all its current and

future residents, and for New Zealand.

5.23. Auckland benefits from the advantages that cities bring in terms of scale, diversity

and specialisation. Because of its size, and because of agglomeration economics

that work in its favour, Auckland is on average more productive than the rest of New

Zealand. Its economic performance will be increasingly important for New Zealand’s

future wellbeing. But Auckland’s success and advantages rest on the ability for its

firms and people to connect easily with one another in the region: for firms to be

able to maximise the number of skilled workers they have access to, and for people

to be able to maximise the number of employment opportunities, and opportunities

for specialisation, that they have access to. Accessibility, therefore, is a key

component of city performance, and economic and social wellbeing.

5.24. The Auckland Transport Alignment Project (ATAP) is an ongoing collaboration

between central government and the Auckland Council. The ATAP FoundationReport was released in February 2016, and amongst other things revealed that

access to employment in Auckland varies significantly by location and declines

comparatively rapidly beyond the central area. It notes that “by 2046 more than a

million people will be living in the western and southern parts of Auckland, nearly

half the region’s population. However, these areas see relatively little improvement

in their access to employment over time, particularly by private vehicle. The wider

implications of these areas being at least partly excluded from the benefits of

Auckland’s expanding employment base over the next 30 years are potentially

significant, particularly given they include parts of Auckland with higher levels of

deprivation, as well as a number ofkey future urban growth areas.”

5.25. This reveals a transport investment challenge for central and local government,

which ATAP is focused on solving, but it also reveals important information about

the preferred locations for residential growth from an employment-accessibility

perspective. In contrast to areas in the South and West, the report notes that

“access to employment by both car and public transport for those living in the

central (isthmus) part of Auckland appears to improve throughout the next 30 years,

reflecting the general growth in employment as well as its projected centralisation”.

5.26. This finding contrasts with the spatial rendering of the ACDC15v3.7 results and the

accompanying ‘heat maps’ provided by Mr Balderston. In Mr Balderston’s own


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words, they show that the development capacity constraints in the PAUP resemble

a “donut with a candle in the middle”:

Extracted from the Evidence of Kyle Balderston for Auckland Council

5.27. The results reveal there is feasible capacity provided for standalone dwellings in a

large number of more peripheral suburban areas, particularly in the southern and

western parts of Auckland, and there is much feasible capacity for higher-density

apartments in the central city area and in Takapuna and some other centres and

corridors. However, there is very little feasible capacity in most of the more central

isthmus locations that, from the land-value and employment accessibility

perspective outlined above, are the most desirable areas to be focusing

development opportunities. This reveals that large parts of the central area have a

constraining single-house zoning as well as restrictive heritage and other overlays

under the PAUP.

5.28. With the exception of the city centre and some other centres such as Takapuna, the

ACDCv3.7 modelling reveals that development capacity is mostly provided in areas

where land prices reveal lower relative housing demand, or which have lower levels

of employment accessibility. Because of this, we do not consider that the PAUP

currently provides a suitable spatial distribution of residential capacity to support

either a well-functioning housing market or an effectively-functioning urban

economy in Auckland.


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The distr ibut ion and m ix of typolo gies, sizes and p rices

5.29. The ACDC15v3.7 modelling reveals that the PAUP provides a lot of feasible

capacity for standalone houses in many suburbs (80% of feasible capacity), a lot of

capacity for apartments in the city centre and some other centres (12%), but very

little in the way of capacity for terraced housing and other attached, medium-densitytypologies (8%):

5.30. We do not consider this is an accurate reflection of the mix of current or anticipated

demand for these typologies. Nor does it reflect the Auckland Plan growth strategy,

which expects that around 60% of all new dwellings will be attached if the Council

achieves its strategic aim for 70% of new dwellings to be supplied in existing urban

areas. In that scenario, the Auckland Plan calls for an average of over 8,000

attached dwellings per year over 30 years.

5.31. In our evidence for Topics 059-063 we highlighted the third National Construction

Pipeline Report, produced for MBIE in July 2015 by BRANZ. This forecasts 94,000

new dwelling consents in Auckland between January 2013 and December 2020

(about 13,000 a year), but importantly it projects the number of multi units (attached

typologies such as terraces and apartments) to grow to over 6,000 a year, to be

almost the same number as attached dwellings in 2020:


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Number of consents for detached and multi-unit dwellings in Auckland

5.32. In our previous evidence we also showed that the rate of building consents for

attached dwellings in Auckland has grown rapidly since 2013, and was about 3,000

in 2015 — as seen in the building consent data from Statistics New Zealand below:

5.33. Since highlighting that data we can confirm that this upward trend is continuing, and

in the three months between October and December 2015 1,281 dwellings in multi-

unit buildings accounted for 47% of all new dwellings consented in Auckland.

5.34. In contrast to the above figures, the ACDCv3.7 modelling reveals that the PAUP

only provides for 20% of current feasible capacity through attached typologies, even

when developers are currently building attached dwellings at more than twice that

proportion (utilising legacy plans and special housing areas), a proportion that is

projected to be maintained over the longer term.


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5.35. The Housing We’d Choose Study undertaken for the Auckland Council in 2015

confirms what has been observable across Auckland for some time: that people are

willing to trade off house size for location, affordability and quality, and that there is

an under-supply of quality medium- and higher density housing in most Auckland

suburbs. Although it’s true that buyers show a preference for larger homes (and

large sections) wherever possible, that preference is still constrained by what theycan afford.

5.36. These typologies are more likely than standalone houses to be smaller and more

affordable, given that land price makes up a lower portion of the overall house price,

something that can hold true even when the house is located in a more desirable,

higher-value area. They are also a typology that are in increasing demand from

renters and investors, first-home buyers, and elderly households wishing to down-

size but remain in their familiar neighbourhoods. The low capacity for medium-

density typologies (an under-represented typology in Auckland) is particularly

concerning. This is the typology that best suits the more central suburbs outside thecity centre.

5.37. Certainly, when looking historically, the fact that new homes were smaller and a

much greater proportion were priced below the median value of existing stock

suggests that the residential construction market once supplied significant demand

from first home buyers and less wealthy households. As there is little to suggest

that this market has disappeared, tapping this latent demand once more by

removing restrictions on smaller, denser dwellings (which can also provide greater

returns for developers) would increase the breadth of the target market for

residential construction and thus increase the likelihood of supplying sufficient

additional housing.

5.38. Our analysis of the ACDCv3.7 results reveals that the PAUP does not provide

sufficient capacity for medium-density and other attached typologies to meet

projected demand, and as a result does not provide sufficient housing choice to

deliver a well-functioning housing market in Auckland.

6. CONCLUSION

6.1. The analysis and views above reveal that the PAUP as notified, even with the

changes to residential provisions proposed by the Council in previous evidence,

does not provide sufficient feasible development capacity to give us comfort that awell-functioning housing market — and by extension, an effective-functioning urban

economy — will result. We consider this position lends weight to the need for further

‘up-zoning’ of geographic areas in Auckland for higher density. Alongside the well-

managed greenfield expansion that the PAUP (and the Council’s Future Urban

Land Supply Strategy) promises, this will ensure there is appropriate balance and

choices in Auckland’s housing market.

Documents

081 Housing New Zealand - Capacity and Feasibility Modelling _ MBIE - (David Hermans) _ Post Hearing Response