Research and Policy
Area 1 - Sustainable Housing Supply
Government is dedicated to working with the housing sector to stimulate a sufficient supply of new housing to meet future demand, and help stabilise market conditions.
Work will be undertaken to better understand housing supply dynamics in New Zealand and to find solutions to the problems identified.This work will include a strong focus on local markets as well as the national picture.It will be informed by relevant overseas work on the factors influencing housing supply, but will reflect the special features of the New Zealand housing market.
Government's interest in supply encompasses not only the amount of housing stock under construction, but also its nature and form.Considerations such as location, quality, design and sustainability, a mix of tenure options to meet diverse needs, and environmental impact are all important aspects of supply.Government also has a role in encouraging the growth of social housing in areas of high demand.
Government's role in planning for sustainable supply includes encouraging local and regional responsiveness to changing housing requirements.Government will work with industry and other stakeholders, including local government, to gain a better understanding of the factors influencing the volume and nature of new houses built.A particular focus will be identifying areas constraining new housing supply, and reviewing policy and regulations to ensure that they are optimal for supply.
Housing Markets Under Stress
During consultation, urban and rural communities throughout New Zealand emphasised the different character of, and pressures on, the housing environment in each locality.[i]The consultation also highlighted the need for more housing in some locations.In Auckland the call to build more houses was seen as a way of cooling the 'heated' market.Building more houses was seen as a solution to the problems of affordability and low quality being experienced by some households, with a caveat that affordability should not compromise good design and construction.
In the course of the 2001-04 upswing, house price inflation was most severe in the main cities and also in centres such as Nelson, Golden Bay, Queenstown, Thames-Coromandel, parts of the Bay of Plenty and Northland.
Looking forward, the New Zealand Institute of Economic Research's projections of growth in regional gross domestic product (GDP) from 2004 to 2021 suggest that the greatest housing pressures will continue to be felt in Auckland and the Bay of Plenty.[ii]By contrast, growth is likely to be modest in the central North Island and lower South Island.
Price and Supply Trend
Since the early 1970s, even though prone to cyclical volatility, house prices in New Zealand have trended upwards, steadily gaining value in real terms.Over the 15 years to December 2004, real house prices increased by about 3.5% annually, which exceeds the rates reported over the last 20 years for the United Kingdom (2.7%) and Europe (an average of 1.1%).[iii]
This trend has had both positive and negative consequences.Quotable Value New Zealand data suggest that house prices for New Zealand as a whole increased by about 53% over the three years to 2005.At such times, greater redistribution of wealth occurs from first time buyers to existing homeowners and investors, favouring older generations at the expense of the younger.The long-run trend in house prices is widening the wealth gap between those who own property and those who do not.
The problem this area will seek to address is that real gains in asset values have benefited homeowners and investors but made it more difficult for people saving for their first home, and for some tenants in the private rental market to pay their rent.Regional differences will also be considered, reflecting that the average long-term growth in house prices in some (especially provincial) areas has been much lower than the 3.5% quoted above.
Population growth, and in particular the rate at which new households are formed, is the main underlying driver of housing demand.On top of that, in 2003-04, demand for residential property was fuelled by expatriate New Zealanders returning from overseas and new immigrants, including a strong inflow of overseas students.The home building sector expanded in response to this greater demand.Most notably, residential building consents climbed to their highest level since the 1970's.[iv]
Despite this, in a buoyant housing market, the supply-side is hard-pressed to respond quickly enough to the surge in demand for extra housing.It is difficult for planners, property developers and builders to quickly ramp up production and bottlenecks appear in the supply chain for new housing.
Nationally, the gap between the demand for and supply of housing is expected to lessen in the short to medium term, as net immigration returns to its average level of 10,000 per annum over the last decade (down from 38,000 in 2003), and building consents in the pipeline are converted into new homes.The available data does not, however, provide information on the extent to which new supply will address demand at the most affordable end of the housing market.
Government is keen to understand what proportion of the housing under construction is in the affordable price range, and how to stimulate the supply of affordable housing.The work programme under this area of the Strategy reflects Government's particular interest in this segment of the market.
Critical Links
Housing supply cannot be considered in isolation.It is important to identify the critical links between housing and factors such as demand for labour, economic growth, infrastructure development and access to services.Increased supply needs to be based on good urban planning and design to support individual and community well-being.
Other critical links include:
- employment and economic opportunities associated with the supply of affordable housing
- infrastructure, particularly transport and utilities
- the provision of services such as health, education and childcare
- the quality of housing developed for the lower quartile of the housing market
- the needs of particular population groups, for example, older people
- community participation and recreation needs.
Workforce Accommodation
In 2003 and 2004, rising house prices and rents and the shortage of suitable accommodation for workers were especially acute in regions like Nelson, Central Otago and Hawkes Bay.Rising prices in rural and coastal New Zealand can push housing costs to levels that local workers, retirees and beneficiaries may find unaffordable, making it difficult for them to sustain year-round accommodation.
If those regions are unable to attract the workers they need, opportunities for economic development will be hampered.Employers can face difficulties in attracting and retaining seasonal workers and, in some locations, skilled professionals for particular sectors.
There are opportunities to encourage business involvement in providing affordable housing for low-income households, and in addressing issues surrounding the shortage of workforce accommodation in some localities or at certain times of the year.Government has commissioned research into the connection between housing affordability, workforce accommodation, and regional development in the Nelson/Tasman/Marlborough regions.
Planning and Zoning
Subject to the level of underlying demand, the availability and cost of bare land is a major determinant of house prices.Development and land supply in growth areas require careful planning.
Demand for new residential and lifestyle zoning, for example, will need to be weighed against the economic and environmental impact on productive agricultural land at the urban fringe.The Resource Management Act 1991 places a high premium on the environmental cost of residential development.
Other potential constraints on the availability of developable land include regulations and planning mechanisms, and the historical use of some land.[v]On the other hand, there is potential for planning mechanisms like inclusionary zoning to address local shortages of affordable housing, by requiring developers to make some provision for affordable housing.
The role of local government in managing housing growth is critical.Central government will work with local government to promote optimum solutions.
Infrastructure Provisions
Rural and outer urban local authorities face the challenge of providing infrastructure such as sealed roads, along with co-ordinating the supply of electricity, safe drinking water and reticulated sewage.The cost of these essential services can significantly reduce the affordability of new housing for low-income households and lead to frustration at their inability to get ahead.Local issues range from the cost of land in the Auckland region to the barrier of infrastructure start-up costs on the East Coast, and the lack of access to reticulated sewage, water and electricity in rural Northland.
The Local Government Act 2002 permits territorial authorities to levy developer contributions where the authorities incur capital expenditure to make provision for reserves and/or infrastructure.For example, Taupo District Council in 2004 exercised the right to levy a developer contribution through its Long Term Council Community Plan, but has since announced a policy review.Local authorities may waive or reduce development contributions to promote social housing outcomes, but the foregone revenue will need to be compensated by funding from other sources if service levels and/or infrastructure provision are not to be compromised.These issues and the tensions between them need to be explored.
Urban Sustainability
In future years, due to population growth and pressures on available urban land, many people will be living closer together than in the past.At the same time, the floor space of the average dwelling is expected to grow in size.Apartment and townhouse living is part of this trend.During consultation, participants indicated nervousness about increasing residential densities to respond to growth pressures.Urban designers, planners, migrants and others who had lived in overseas cities were more receptive to some of the possibilities for mixed density communities.These groups and some private practitioners saw such development in inner Auckland as inevitable, but stressed the need for quality planning and development.
The Auckland Regional Council's population projections suggest that the greenfield land set aside for future development is insufficient to meet demand.The challenge for central and local government, together with the building industry, is to meet the shortfall with good quality medium density housing.
Government will work to promote sustainable homes and communities through its own programmes.The Urban Affairs portfolio managed by the Ministry for the Environment was created in 2002 to provide central government leadership on urban issues.This new portfolio has enabled central government agencies to take a more integrated approach to the issues that affect urban areas.A Statement of Strategic Priorities is being developed that will focus on implementation and governance at a national level.
The Sustainable Cities initiative (part of the Sustainable Development Programme of Action) led by the Ministry for the Environment and the Ministry of Economic Development reflects increasing awareness of the importance of integrated urban development and sustainability.Working with local government, it focuses on interconnected urban issues such as transport, economic development and housing affordability, initially through projects in Auckland and Wellington.
Another Government work area is Community Renewal, a partnership programme between Housing New Zealand Corporation, local authorities and the people living and working in renewal areas to promote safe, healthy and confident communities.Housing New Zealand Corporation is also collaborating with Waitakere City Council and other government agencies and parties to ensure a planned and integrated approach to the design and development of the Hobsonville site being vacated by the Ministry of Defence.Such developments have highlighted the potential for surplus Crown and possibly local government land to be set aside for housing development.
Urban Design
The New Zealand Urban Design Protocol, developed by the Ministry for the Environment (with other central and local government organisations and private sector interests), presents an opportunity for housing of all types to sit within a context of good urban design.Well-designed urban areas foster connections to the wider community, reflect neighbourhood character, and offer a choice of housing options and nearby activities for residents.As a signatory to the Protocol, Housing New Zealand Corporation is already adopting the approach the Protocol recommends.
The Resource Management Act 1991 provides for National Policy Statements on aspects of resource use.A National Policy Statement on urban design (as part of Government's programme of action for the New Zealand Urban Design Protocol) could provide guidance to local authorities making decisions under the Resource Management Act, as could a National Policy Statement on affordable housing.
The quality of new housing is equally as important as the quantity.There will be opportunities to build on activity under the Year of the Built Environment 2005 programme, and work on a housing design competition is being progressed.Housing New Zealand Corporation seeks to encourage more architects and designers to focus on the affordable housing market (a Development Guide for affordable housing is available to builders).Housing New Zealand Corporation is also developing a design and development initiative focused on low cost high quality housing.
Over time, these activities will become a co-ordinated programme across different agencies with a greater emphasis on quality construction, urban design and use of space as well as effective provision of government services.
Staging and Priorities
In the short term, the emphasis will be on:
- an Auckland-based project to find solutions to local supply constraints
- encouraging and supporting local and regional housing strategies and solutions
- continuing to implement the Community Renewal programme.
In the medium to long term, emphasis will be given to:
- promoting well-designed and appropriately located affordable housing, and integrated sustainable urban communities
- investigating rural and urban infrastructure issues including land development and essential services, linked to initiatives such as the New Zealand Urban Design Protocol
- trialling the use of planning and zoning instruments to increase the supply of affordable housing.
Government initiatives to create the conditions for a sustainable housing supply are outlined in the table on the following page.
|
Primary Initiatives-Sustainable Housing Supply |
Timeframe[vi] | ||
|
Short |
Medium |
Long | |
|
Finding Solutions |
|||
|
A project focused on Auckland to find solutions to local supply constraints |
x |
x |
|
|
Planning and Zoning |
|||
|
Consider ways to improve access to affordable housing through initiatives under the Urban Affairs portfolio (which includes the New Zealand Urban Design Protocol) and the Auckland Regional Growth Strategy |
x |
x |
|
|
Trial the use of planning and zoning instruments, such as inclusionary zoning[vii] and developer incentives, to increase the supply of affordable housing in high pressure areas |
x |
||
|
Planning and zoning solutions including integrated cross-sectoral planning in alignment with Long-Term Council Community Plans |
x |
x |
x |
|
Monitoring Trends |
|||
|
Establish mechanisms for monitoring supply including: the amount of land zoned for housing development in growth regions
|
x |
x |
|
Further initiatives within Government's work programme to create the conditions for a sustainable housing supply are outlined in the table opposite.
|
Supporting Initiatives-Sustainable Housing Supply |
Timeframe | |||
|
Short |
Medium |
Long | ||
|
Understanding Supply |
Examine the effectiveness and efficiency of regional strategies to encourage adequate long-term housing supply |
x |
x |
|
|
Identify labour market constraints that may be affecting supply |
x |
x |
||
|
Identify the constraints faced by developers and their impact on housing supply |
x |
|||
|
Supply and Affordability |
Investigate the impact of the Resource Management Act 1991 on residential development |
x |
x |
|
|
Investigate whether supply factors such as land use planning, pricing and sales methods (e.g. closed tenders) are contributing to affordability problems |
x |
|||
|
Identify how housing and sustainable urban form can contribute to reducing housing costs and pressure on infrastructure and the environment |
x |
x |
||
|
Consider how to improve the affordability of urban and rural infrastructure (including land development and essential services) |
x |
x |
||
|
Planning and Zoning |
Promote the use of local government planning to secure the development of affordable housing and infrastructure investment |
x |
x |
x |
|
Consider how investment in improving transport systems and increasing the use of public transport could be used to encourage the development of affordable housing close to employment, retail and community services such as schools, health and social services |
x |
x |
x | |
|
Support local housing needs assessments |
x |
x |
x | |
|
Promote well-designed and appropriately located affordable housing, by identifying land suitable for affordable housing development, including surplus Crown and local authority land |
x |
x |
x | |
|
With local business communities, assess the role of employers in improving the accessibility of affordable housing |
x |
|||
|
Improve existing suburbs with high concentrations of state housing and develop integrated urban communities on greenfield and other identified sites |
x |
x |
x | |
|
Identify opportunities for redevelopment of existing buildings to increase the supply of affordable housing (involving communities in any plans to increase densities) taking into consideration sustainable urban form and quality issues in intensification plans |
x |
x |
x | |
|
Continue to implement HNZC's Community Renewal programme, and involve local communities in planning and redevelopment activity. |
x |
x |
x | |
[i] Some examples: The Nelson region saw house prices grow rapidly between September 2001 and July 2004, with data from the Real Estate Institute of New Zealand showing increases of 72% in Nelson City, 78% in Nelson Country, 117% in Motueka, and 164% in Takaka.Compounding that growth is a number of other factors like the increasing popularity of the region as a holiday destination, and the willingness of people to pay a premium over local rents in the holiday season.This makes it difficult for local residents to secure appropriate permanent rental housing.
Queenstown's popularity as an international resort destination is driving house prices in the region out of reach of many who wish to work and live there.New Zealand is now recognised internationally as an attractive place to live, and local prices are perceived as low by some overseas property buyers.People seeking employment in Queenstown are finding they need to commute further and further to work as there are few affordable housing options in the town itself.In some instances people may be passing up employment opportunities because the salary or wages offered are not adequate to meet the cost of living in the region.
Northland has a number of isolated rural communities with poor quality housing stock and limited infrastructure such as adequate roading, sewage and water supply systems.Those problems are often a symptom of limited economic growth over an extended period of time in those communities.Poor quality housing can significantly increase the risk of poor health outcomes (e.g. spread of infectious diseases) and accidents (e.g. fires).
[ii] NZIER March 2005 Quarterly Predictions.
[iii] Barker, K 2004, Review of Housing Supply - Delivering Stability: Securing our Future Housing Needs, p. 122.
[iv] Statistics New Zealand building consent data (refer also Area 6 Sector Capability).
[v] Barker, K 2004, Review of Housing Supply - Delivering Stability: Securing our Future Housing Needs.
[vi] Defined in the Programme of Action chapter of this document as: short term - one to two years; medium term - three to five years; and longer term - six to 10 years and beyond.
[vii] Refer Glossary.
