grimes ahsi 5oct09
TRANSCRIPT
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Housing:Auckland Supply Issues
Arthur Grimes (Motu)*
Research funded by
FRST, CHRANZ, DBH, HNZC
*Views expressed are exploratory, designed to stimulate debate on
productivity issues; and are solely those of the author.
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A Key Issue
Median house price/median hhold income:
- Auckland normal: 3.0
- Auckland 2006: 6.9- Brisbane 2006: 6.1
- Austin (US) 2006: 3.1
Why are Auckland prices so high?
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Decade Price Increases (to 2005)
Land prices are the main culprit
House Res. Land
Rodney 131% 315%
Nth Shore 110% 174%
Waitakere 115% 286%
Auckland City 115% 335%Manukau 92% 108%
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Expansion vs Intensification
Expansion (sprawl) is curbed by MUL
Intensification is curbed by:
Planning restrictions
Community opposition
Lack of suitable sites
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Aucklands MUL
Land values vary by a factorof 10 across the MUL border.
Implies zoning (MUL)affects land use (as it isdesigned to do).
Hence, MUL impacts on
shape & degree ofdevelopment.
Legend
MetroLine_NZMG
urru92
Independent urban community
Main urban
Rural area with high urban influence
Rural area without high urban influence
Satellite urban community
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History of the MUL
MULs in use in Auckland for >50 years
Explicit MUL arose from ARPS
In large part reflected earlier boundaries Recent small changes (e.g. Flatbush)
Urban activities not permitted outside MUL
Rigorously enforced
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MUL Research Findings
Auckland land price model estimated to capture
key features of urban land prices
Consistent large MUL boundary effect after
controls for: distance from CBD, town centres, social
variables, coast, TLA, rural
MUL boundary effect (post-1998) approx 10
(1000%)
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Impact of Distance from CBD on Real Land Values:
Baseline Model
0
0.2
0.4
0.6
0.8
1
1.2
1.4
0.
2 5 7
14
21
28
35
42
49
56
63
70
77
84
91
98
Distance (kilometres)
Impact
1992
1995
1998
2001
2003
Increasing Relative Value of Inner City
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Building consents 2000-2005:
MUL & CBD Predominate
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Interviews - Developers & Local Govt:
Major Constraints to Res. Development (% yes)
Private Sector Public Sector
Cost of building materials 58% 30%
Cost of land 84% 70% .
Land availability 79% 60%
Land ownership 74% 90% .
Consent processing times 89% 50%
Planning procedures 84% 30%
Development contributions 84% 50% .
Community opposition 68% 90% .
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Key Points
Intensification has not been achieved except CBD
Infill is difficult
Dispersed ownership & community objections
Greenfields land is limited & expensive
Council processes inhibit new supply
Risk that Aucklands development is stifled by
high house prices
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Implications for Policy
Trade-off between housing affordability vs sprawl Current policy choice is to make houses more expensive
But Auckland is land-rich
Could extend MUL around existing infrastructure (Nthn Mtway)
Regularly update infrastructure & land availability estimates Expand land availability as required (tender to reduce cartel rents)
Tax land (cost of under-developed holdings)
Make infill development easier (& better)
Address RMA (notification) & other regulatory issues Examine extension of compulsory purchase provisions
Development costs currently front-loaded Consider council infrastructure bonds
And betterment taxes