Auckland Unitary Plan to make housing less affordable

To understand why this maybe so and who would benefit from this happening, we need to first define what ‘affordable’ means as the word has a number of international, and institutional definitions.

The reason why it is important to use the right definition is that depending on which definition you go with, will get totally different results of what is affordable. Or if you already know the outcome you want, then you can chose the definition to match. Imagine being able to say you are providing affordable housing even as the prices increase.

And just to help with the confusion New Zealand has no legislative or regulatory definition of what affordable housing means, so the debate usually starts with no consensus amongst our local and national political leaders. Hardly a good place to start.

One definition that is used by the World Bank, the United Nations, Harvard University Joint Centre on Housing and is quoted extensively by NZ political parties and the media is the definition developed by Demographia International Housing Affordability Survey which uses the “Median Multiple” (median house price divided by gross annual median household income) to assess housing affordability.

This approach not only compares housing affordability at the metropolitan market level, and within Nations, but also permits comparisons between international markets where there are historical similarities. Therefore we can compare how affordable housing is in NZ with say Los Angelos and Vancouver.

In the Unitary Plan, Auckland City council looked at a number of definitions including the Demographia definition. However, it favoured definitions as used in the United Kingdom where ‘affordable housing’ is a term that is used for people who are not eligible for “social” housing, but still need assistance (council intervention) to either secure home ownership or a long-term rental. In other words it is social housing by another name and is now targeted at those in household income bands from 80% to 120% of the median household income.

It’s a sad indictment that those needing social housing assistance has increased to include those of the middle class.

The Auckland City Council, for the purposes of the Action Plan have said that the definition that they will use is based on another international benchmark that parallels the favoured United Kingdom definition, in that households should not spend more than 30% of gross household income on housing costs.

By choosing this definition it allows the Auckland City Councils to limit what ‘affordable’ means, and for it to make the comparison only within its own metropolitan area, or at least no further than the national level. Rather than it be a definition that applies to all housing and can be compared internationally.

So why would the Auckland City Council want to limit the definition?

Could it be because it is trying to avoid the embarrassing comparison that shows NZ housing, at all levels are some of the most unaffordable in the world?

This will be part of it, but the real reason is so council, in their own words are,… looking for new tools and techniques that help to broaden the revenue base across a wider range of steps in the development process ….. have identified affordable housing as being a particular area where new tools are needed.

And …is looking at additional tools to help plan for and fund desired improvement to services and infrastructure to support more sustainable neighbourhoods.

And that one aspect of sustainable neighbourhoods is housing affordability…the Council has determined that it needs to take a more ‘proactive’ role in enabling affordable housing.

Seen in this light, the councils lack of action in providing truly affordable housing, that is housing that is more affordable for everyone, now makes sense.

Council have admitted they are going to need to increase revenue to provide their version of affordable housing, and under the guise of affordable housing can introduce new tools that create more revenue.

It’s a feedback loop whose sole purpose is to increase council revenue.

This can be further seen in the structure of the Rural Urban Boundary (RUB) that has clearly define plans that limits where urban growth can and cannot go over the next thirty years with newly identified land within the RUB being zoned ‘future urban’.

This land will not be released for urban development all at once but in a staged and a managed release that will occur in approximately 10 year steps.

The RUB goes on to further say ‘Operative zoning and bulk service infrastructure will need to be in place before land can be released for development and in order for this to occur, detailed structure planning, catchment management planning and plan changes to the Unitary Plan will need to be made to introduce new zones and planning provisions for the subject land. Once planning is complete land release could occur from late in the first decade wards.’

And furthermore the Unitary Plan expects growth to grow off existing council infrastructure, which they have already admitted will only be supplied to the market once sufficient demand has developed. Since most council infrastructure projects are multi-million dollar projects, demand will have to build up for many years before they will supply that infrastructure. This monopoly approach of when and if they develop infrastructure also allows them to further restrict expansion of the urban limit if they want to.

The two actions of identifying which land will be future residential (future urban) and then limiting its supply to the market by planning controls and infrastructure will ensure the price of land will rise dramatically. These type of price increases add costs which are known as non-value added costs, that is the price increases without any real value being added. If you are the section purchaser you might call this waste, or if you are the lucky land owner, a super profit.

The next question is, ‘if council is looking for revenue raising tools, how will increasing the rural land value for the land owner help council?’

One tool council are promoting that answers this question is Value Capture, or Shared land value uplift (SLVU). This option allows council to receive a portion of the increase in value in the land to fund affordable housing or physical infrastructure needed to support planned growth. It is in the council’s best interest to make sure the land increases in value.

The other option council is promoting is called Inclusionary Zoning (IZ). This is where the developer has to provide residential sections to council for free, or the money in lieu. Council then use this free land to provide more ‘affordable’ (to suitably qualified persons) housing. Council admit for this to happen would require a well-funded and established Community Housing Organisation.

This is like having to give money compulsory but on the pre-text of the money going to a charity organisation (even though you need it yourself) and then finding most of it went on the administration.

And an increase in house prices is not the only negative the house purchasers have to look forward to, As builders try to keep house price rises as low as possible, they will build lower quality or smaller homes or both, so home owners get both a higher priced house that is also of lower quality and/or smaller.

As already mentioned the Auckland Unitary Plan will be a great revenue generator for council and can only result in increased house prices and more unaffordable housing.

But there is one more benefit the council will achieve with the Unitary Plan if it is adopted, and that it is setting up the pre-conditions for rail through forced high density development.

Yes many people love living in high density, but not enough to financially justify the need for rail which needs a very large number of commuters within walking distance of the transit stations to work. And of course one of the reasons you may need to walk, is once you have spent all your money on your overpriced high density house, you do not have enough money for any other form of transport.

The Unitary Plan is nothing more than a revenue collecting and funding mechanism for a variety of council projects, including new projects of subsidised housing and rail transport. It will raise revenue by increasing land and developments costs.

Auckland needs more housing choice at truly affordable prices (as defined by the Demographia definition) that makes housing more affordable across the board but unless you want to become a subsidised ward of local government, the unitary plan will only increase the cost of your housing.

It should not be approved in its present form.

ENDS

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