Affordable housing requires more than just a flood of land, Colliers researcher Alan McMahon says.
He was commenting on Finance Minister Bill English’s recent response to the Productivity Commission’s report.
“The land supply argument rests on the contention that developers will sell their product more cheaply if the cost to develop is reduced and there is more competition from other developers,” he says in his monthly research report.
“Currently, the most commonly sold dwelling in Auckland is a three-bedroom stand-alone dwelling. But the predominant type being built for sale is a four-bedroom stand-alone dwelling.
“Similarly, records of houses being rented show that more three-bedroom houses are rented in greater Auckland than any other type, except in the former Auckland city area, where two-bedroom dwellings are more common.
“The reason larger houses are continuing to dominate the new-build landscape is that they are the most profitable.
"Single-storey construction is cheapest and there are enough people in the market at any time to absorb the new houses being offered for sale.
"However, we can be pretty certain that the buyers of these large new houses are already property owners.
“It is not the responsibility of private property developers to provide affordable housing. Their job is to maximise profits. The vast majority of potential house buyers who can’t afford big new houses are not catered for at present to any significant extent.
“So the danger is that as new land is released, particularly greenfield sites some distance from urban nodes, it will be developed in a style and at a price point that only enables existing house owners to buy.
“These sites are well suited to this form of dwelling as the market will not find medium-or high-density housing attractive in these remote locations.”
Mr McMahon says it would be better to prioritise the release of brownfields sites close to urban nodes or to CBDs.
“Developers will not reduce their prices unless they have to.
"If the consequence of more efficiently processed resource consent applications is less overall cost and time to develop, then the initial impact will be that developers make more profit, and the secondary effect, perversely, may be increasing land costs.
“Relying on competition to reduce prices and increase choice in a market which looks to be chronically undersupplied for some years hence is optimistic.
"Decreasing development costs need to be accompanied by real and significant increased brownfield and greenfield land supply if this unintended consequence is to be avoided.”
Council or government ability to control these unintended consequences is through regulation, Mr McMahon says.
“In Auckland that is most clearly going to be via the new unitary plan.
"The balancing act facing Auckland Council, in particular, is to direct development toward providing choice and affordability through zoning while not unduly restricting developers’ ability to do their job.”
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