The coalition government’s Going for Housing Growth (GfHG) policy announced on 4 July 2024 is another attempt at trying to fix the housing crises through stimulating housing production by reducing barriers. The policy builds on/replaces at least four other attempts at trying to stimulate housing supply through zoning reform:
1. NPS-UDC 2016 – national direction to positively plan for housing growth
2. RMA changes 2017 - amendments that modified section 31 to include reference to housing capacity / supply
3. NPS-UD 2020 – introduced the concept of well-functioning urban environments, which is really more about well-functioning land and housing markets
4. MDRS 2023 – mandatory requirements around more capacity is suburban areas and intensification of centres and rapid transit stops.
The intention of the GfHG is apparently to ‘flood the market’ with development options. Whether this will lead to a flood of new houses or a drought of new houses is unclear. You would have thought that after four (not very successful?) attempts at trying to solve the housing crises through zoning reform, a different solution would be looked at.
Figure 1 shows the number of dwellings added per 1000 new residents between 2018 and 2023, by city, based on census data. While there is no set number that determines if there is an under or oversupply of housing relative to population growth, you would have thought that anything above 500 new dwellings per 1,000 new residents is pretty good going. Yet the housing crises persists.
Figure 1 housing production per 1000 new residents, 2018 to 2023
There are some larger laggards in the housing production profile (such as Tauranga/Western Bay of Plenty) which may deserve some sort of targeted intervention, but otherwise the census data suggests a responsive housing system. It is, however, a system that is not easy to manipulate to produce a housing surplus (over-build).
Note that Wellington City (not region) is not in the graph as it lost residents between 2018 and 2023 but added some 4,000 dwellings. It should also be remembered that the new dwellings will not all be occupied by new residents. Many new dwellings will be absorbed by existing residents as average household sizes reduce.
If you then compare housing production between 2018 and 2023 with house price increases over the same period, you get Figure 2.
Figure 2: Housing production versus house price growth, 2018 to 2023.
While it is easy to look at the outliers of cities that either saw high house price growth and below average housing production or the reverse (lower house price growth and high housing production), the main story is the grouping of towns and cities in the middle. Average housing production but increased house prices.
Given this context, there are three points in the housing announcement that I want to look at. I will leave out the minimum apartment size and optional balconies as a bit of a distraction (got everyone going on about shoe box apartments while the big-ticket items got less attention).
1. New Housing Growth Targets introduced for Tier 1 and 2 councils, requiring them to enable 30 years of feasible housing capacity in their district plans, using ‘high’ population growth projections. Government is investigating options to require councils to plan for 50 years of growth (up from 30).
What is ‘feasible’ in 30 years time, let alone 50 years time? Who knows? I guess the detail of what is feasible is not really at issue. Its more about having a large bucket of capacity. Rather than push out planning horizons (to 50 years) to create a bigger bucket, would a better strategy be to set a ratio between expected demand and plan-enabled capacity. If expected demand is 50,000 dwellings over the next 30 years, then plan enabled capacity should be three times that demand, or 150,000 dwellings, or something similar. This would avoid the need for endless recalculating what is ‘feasible’.
A danger is that a lot of fake capacity will be generated – lots of capacity in one corner of the city, well away from the NIMBYs, not where demand is. To counter this tier 1 councils are expected to enable appropriate levels of density across their urban areas, having regard to demand and access to different services. In fact a good spread of housing options across a city may be more important than the aggregate picture.
Perhaps there needs to be a focus on neighbourhood level outcomes, rather than city or district wide targets. Cities need mixed density, mixed income neighbourhoods with a good sprinkling of mixed uses and open spaces in these neighbourhoods. As city’s expand outwards and upwards, new neighbourhoods should develop and redevelop. Some neighbourhoods will need to shrink as climate change accelerates. Time of use charging for use of roads may lessen demand for far flung neighbourhoods but increase demand for closer in neighbourhoods. There is likely to be a lot more shuffling around of housing demand and capacity within cities. City-wide housing targets don’t really get to grips with the changes needed in urban form.
2. Councils prohibited from imposing rural-urban boundary lines in planning documents (but can still have rurally zoned land).
I presume that plans can also still have ‘no go areas’ in rural areas - areas where urban expansion would have negative impacts and should be excluded. If there is no ability to impose a rural-urban boundary, then there is likely to be a need to review various overlays and precincts where avoidance policies should prevail. Most notably this should be around coastal environments where the National Coastal Policy Statement applies, but also highly productive land. Natural hazards are the other obvious example where policy needs to be strengthened before Rural-Urban boundaries are removed.
Who pays for the resulting expansion of infrastructure? This bit is critical. The GfHG ‘fact’ sheets say that a wider range of funding sources can be used to meet medium-term infrastructure requirements including a levy under the Infrastructure Funding and Financing Act 2020, a development agreement, or through central government funding streams. None of these are new tools, they do not widen the pool of available methods.
The Minister’s speech says that the government will work towards embedding an effective “right to build” on city fringes, on the condition that the infrastructure costs of new development are covered and growth pays for growth. Exactly what bits of growth have to be paid for is not clear – motorway and rail line extensions, trunk sewers, regional parks ?? These types of infrastructure are super expensive and occur in big lumps, not small add-ons or extra capacity here or there.
The policy will also say that Councils would not be able to turn down a development on the grounds that perceived demand isn’t there, or that the infrastructure costs are too high.
The last bit about not being able to turn down urban expansion because costs are too high is a bit confusing, given talk that growth must pay for growth. I guess the idea is that all infrastructure costs get totted up and a bill sent to the developer and their funders. If that is too much for the developer/funder/subsequent owners, then the development doesn’t go ahead because demand evaporates. But you can already hear the calls that affordable housing cannot be delivered if all costs have to be recovered.
So, some mixed messages there and nothing very concrete.
3. Tier 1 councils must:
a) enable appropriate levels of density across their urban areas, having regard to demand and access to different services.
b) deliver housing intensification along 'strategic transport corridors' (e.g. key bus routes).
c) directly offset any housing capacity lost due to reasons such as ‘special character’ elsewhere.
At some point I think there will be a big debate about density and where to put it. Density around amenity rather than transit-orientated density, for example. The announcement could have said that density should be increased within walking distance of the coast – in Auckland at least this would have been a sure winner in terms of feasible capacity (but a vote looser of monumental size!).
There is a link with plans for ‘time of use’ charging for motorists. Increasing or reducing transport costs faced by households will change their location preferences. In theory, higher charges should see households shift closer to work. But it may also spur on hybrid working patterns. There may be a rebirth of the importance of the ‘local’.
The principle of an off set for lost capacity is good, but like environmental off sets, the off set needs to be real and be in close proximity to the lost capacity. Otherwise will the off set capacity be on the other side of town where nobody wants to live? No mention of City Deals, but perhaps this is what the off-sets could be tied to – investment in areas that need a helping hand to regenerate and redevelop. The national party website says a $1 billion fund for Build-for- Growth incentive payments for councils that deliver more new housing will be established. The funds should be directed to promoting intensification rather than expansion.
At some point it will also be necessary to find room to rehouse all the people who live in flood prone areas and areas subject to coastal inundation, as climate change takes hold, and retreat (managed or otherwise) occurs. In addition will be finding replacement space for all of the coastal reserves and open spaces that will gradually be eaten away by rising sea levels.
4. Tier 1 and 2 councils must enable activities such as cafes, dairies, and other retail across their urban areas, and especially in areas where Tier 1 councils are required to enable six or more storey developments. Industrial-type activities can still be kept away from housing.
Talk of mixed uses often elicits concerns about town centres being hollowed out, with mainstreets left with empty shop fronts. Perhaps a reasonable concern if mixed uses just end up being a series of unconnected strip malls – groups of 4 to 6 shops side on to the street with parking out front. There is a big difference between mixed uses associated with old tram routes through the Isthmus and new arterial roads like Lincoln Road in Waitakere.
I think mixed uses are good and helpful and more should be enabled as areas intensify. But their layout and design need to be carefully controlled – perhaps maximum car parking rates should apply so demand is based on the amount of passing foot traffic, rather than reinforcing car dependency. Mixed use buildings should be built close to the street edge and ideally span from side boundary to side boundary, with access to rear parking. Ideally, the mixed uses are the ground floor of the new apartment blocks to be built, not stand alone 'mini-malls. Some strong urban desig guidance is needed.
