Rachel Fieldhouse

Real Estate

Auckland leads by example to battle housing affordability

Auckland leads by example to battle housing affordability

Relaxing planning rules could be the solution for the housing crisis, by both increasing the housing supply and helping rent and property prices to fall by as much as 12.5 percent, according to new research.

After Auckland “up-zoned” three quarters of the city in 2016, meaning that townhouses, terraces and units were allowed to be built within 20 kilometres of the CBD under the city’s planning laws, the number of homes in the New Zealand city has increased by five percent over the past five years, according to the report, The Impact of Up-zoning on Housing Construction in Auckland.

Dr Ryan Greenaway-McGrevy, a University of Auckland professor of economics and one of the report’s authors, said that relaxing planning laws helped increase housing supply significantly

“The punchline is the policy did encourage, certainly, higher rates of construction and dwelling stock,” Greenaway-McGrevy told The Sydney Morning Herald

“And it will increase over time.”

As for housing affordability crises in other countries and cities, Greenaway-McGrevy said broad applications of up-zoning - rather than selective applications attempted in other countries - was the key to Auckland’s success.

“The point of difference [in Auckland] is just the sheer pervasiveness of the up-zoning policy. We’re not talking about transit-oriented up-zoning areas. We’re talking about the close-to-blanket inner suburban area of Auckland,” he said. “We’ve had a larger area of construction and a much higher uptake.”

“If cities are considering up-zoning they really need to shy away from only small, targeted areas that are permitted to build up and think about implementing the policy more broadly.

“I certainly think any policymakers or commentators thinking about how to tackle housing affordability in Sydney and Melbourne should look to Auckland in greater detail.”

He said up-zoning can also decrease the construction cost of property types that aren’t land-intensive, such as townhouses, apartments and terraces, while also meaning that fewer households would be consigned to far-flung urban areas and required to use carbon emissions-heavy commuting.

Greenaway-McGrevy added that these benefits far outweigh the costs of preserving a city’s heritage by banning high-density properties within a certain proximity.

“At this point, is it worth, as a society, preserving those character neighbourhoods when it comes at the cost of housing that costs 10 times incomes or more, forcing young families into these really long commutes where they don’t have time to spend with their kids?” he said.

“If you’re interested in preserving the heritage of a suburb, I’d suggest we focus on the people, and the kinds of people and kinds of families that make up those suburbs rather than the buildings.”

Peter Tulip, the chief economist for the Centre for Independent Studies, said the research showed that allowing for more buildings to be constructed resulted in a reduction in property prices.

“A substantial relaxation of planning restrictions would enable more construction and hence less expensive housing,” Tulip said.

“A standard rule of thumb is that every percentage point in the housing stock lowers the cost of housing by 2.5 per cent. So, a 5 per cent increase in housing stock would lower the cost of housing by 12.5 per cent.”

Meanwhile, Grattan Institute’s economic policy program director Brendan Coates said increasing the stock of homes across Australian major cities would reduce rental costs and property prices by at least 10 percent.

He noted that current planning laws heavily favour existing homeowners, and that prioritising heritage over supply would turn our cities into “living mausoleums”.

“There’s a trade-off: you can either accept more housing will be built that have good access to amenities … Or you accept your kids or your grandkids don’t have a home near where you live, and Australia as a society will be poorer than it should be because we fail to build the housing we need to accommodate our growing population,” Coates said.

“Heritage, for example, is an incredibly expensive way of protecting our memory of our cities’ history. You basically turn Australian cities into living mausoleums.”

Image: Getty Images

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