What Nick Smith does't seem to know about Auckland housing

The Auckland Council is directly challenging the Government’s explanation for the city’s housing crisis.

The Government’s mantra — emphasised in last week’s National Policy Standard on Urban Renewal — is that the Auckland Council has been slow to grant building consents and that it has not been willing to allow greenfields development on the city fringes.

But in a presentation on Wednesday evening to the Auckland Employers and Manufacturers’ Association (EMA),  the city’s Chief Executive, Stephen Town, produced figures to show that the problem was much more complex than that.

Mr Town told the EMA that the city needed 13,000 new houses a year to meet population growth, largely being driven by immigration.

Last year the Council granted 9000 building consents.

But only 6000 homes were actually built.

 His figures square with others from people close to the ground in the Auckland housing market who say that the capacity of the building industry is a major obstacle to building houses in Auckland.

Mr Town told the EMA that the Council was not actively trying to seek overseas builders with the capacity to build houses in Auckland on a  much larger scale than any New Zealand company could deliver.

He said that Auckland Council already had consented subdivisions and special housing areas that could accommodate 94,000 houses — or seven years supply at the current rate of demand.

That by itself would seem to be the answer to the Auckland housing crisis which raises the question as to why the Government would propose trying to force the Council to provide even more land.

And Mr Town dismissed the frequent claim from the Government that the consenting process takes too long and discouraged development.

“95% of all consent approvals are being delivered within statutory timeframes, and group home builders are on a five-day clock with standard plans,” he said.

“Approvals take about 10% of the time to build – that means 90% is in the hands of the land developer and builder,”  he said.

What this suggests is that Housing Minister Nick Smith has either not known of these figures or ignored them. 

Both he and Local Government Minister Sam Lotu Iiga told the press conference they called last week to mark the release of the National Policy Standard on Urbane Renewal that the single biggest problem stopping the constriction of affordable homes was the inability of Councils, Auckland in particular, to release enough land.

But Mr Town’s figures suggest that the problem is actually the inability of the building industry to build the homes.

But it’s not just lack of supply that is driving the Auckland market.

Demand is inflated there too.

Core Logic head of research, Jonno Ingerson, said earlier this week that investors were now back buying homes in Auckland, which was boosting prices there again.

“This re-acceleration of Auckland coincides with investors jumping back into the market in a big way,” he said.

“ Investor activity eased a little in late 2015 in response to the regulatory changes from 42% of sales in mid-2015 to 40% by year end.

“But it didn’t take them long to see that little had changed, and investor activity has now surged back to a new record high of 46% of all Auckland sales.”

But yesterday both the ANZ and Westpac Banks said they would clamp down on investment lending by no longer lending to overseas residents for investment properties while  New Zealand residents with overseas income would be subject to a 70% loan to value ratio.

At the same time the Reserve Bank, in its Monetary Policy Statement yesterday also argued that land supply was the problem in the Auckland housing market.

“While we have seen some growth in housing supply, it has not kept up with the population increase – especially in Auckland,” the statement said.

“Residential investment is expected to rise substantially over the next year, and increase as a share of the economy.

“Even so, this increase is constrained by land availability and productive capacity in the sector.

“House price inflation is likely to persist in the near term.”

POLITIK understands that the Auckland Council plans to mount something of a campaign to reinforce the idea that there is enough land available for housing in Auckland, but there is not enough capacity within the construction industry to build the required houses.