The Auckland Special Housing Accord: Success?
Auckland's Special Housing Accord will wind up at the end of September. When the final numbers are tallied we can expect Auckland Council and the government to declare the exercise an overwhelming success. After all, at the end of March this year they were allegedly 99% on target. What say we don't want to just take their word for it? How should we judge the Special Housing Accord? In raw numbers residential housing construction has increased each year over the last three years but is it good enough?
Why the Accord and Special Housing Areas?
Had the government and Auckland Council been low-key about the Accord it may have been judged for what it is: a mitigation against the worst effects of notifying the Proposed Auckland Unitary Plan. But they talked it up and the public have every right to judge it as a solution to Auckland's housing crisis.
When the government forced the councils of the Auckland Region into amalgamation the biggest task was always going to be merging the seven regional and district plans into a single unitary plan. What the government may not have foreseen is the quirk of the RMA that when a district plan is released in draft form to the public it gets hard to make any further changes on the fly.
The Special Housing Accord and the legislation allowing the creation of Special Housing Areas created a shortcut for standard suburban developments to get a subdivision resource consent without the palaver of a plan change. That way the PAUP could take its lengthy statutory course while land continued to be converted from mainly rural use to housing.
However at the launch of the Accord both the government and Auckland Council were happy to imply that red tape was the reason for low construction rates and that removing red tape would unleash pent up activity. They promised a rosy future.
Auckland Council's vision was 13,000 new dwellings per year for 30 years. But the Housing Accord with the government was very careful not to promise dwellings but more on that later.
Auckland Construction Performance
Figure 1 below shows building consents issued for new dwellings in Auckland from 1999 to 2016.
There is no doubt that housing construction has picked up during the Accord but that was almost inevitable given the starting position. In 2011 Auckland experienced its lowest rate of residential building for years. The rate of issuing building consents in 2008-9 (when adjusted for population) was less than a quarter of what it had been in 2003-4. In part the GFC was to blame but so too was the country's net migration outflow. In some respects the pressure was well off the Auckland housing market. But not in all respects.
Auckland's Housing Need
We think of Auckland needing to add new dwellings to accommodate a growing population but the city also has a chronic occupancy problem. Broadly speaking there are, on average, 20% more occupants in an Auckland dwelling than anywhere else in the country. So Auckland has to over-build to cope with a growing population and to allow existing residents in over-crowded situations to spread out.
Opinions vary wildly on the size of the shortfall. When they were drawing up their Housing Action Plan in 2012 Auckland Council thought the shortfall was about 20-30,000 dwellings. The BNZ's Tony Alexander subsequently calculated the number at about 70,000. At the time of the 2013 census 50,000 new dwellings would have brought Auckland's occupancy rate back into line with the rest of the country.
But Auckland Council must have judged the pressures to not be too severe when they published their Housing Action Plan in December 2012. They set an annual target of 13,000 dwellings to be completed every year for 30 years. This would not only meet the needs of annual population growth but whittle away the deficit as well. But it would require Auckland to treble its construction rate instantly.
Figure 2 shows how well Auckland has actually met those two needs. Whenever the line is above zero new residents are being housed and some of the shortfall is being eliminated. When it is below the line over-crowding is getting worse. This one graph tells the simple story that the housing situation has been getting steadily worse in Auckland since 2008.
The Housing Accord Performance
The Housing Accord has a three-year life. The following table shows the targets it set itself and what has actually happened.
As I said at the start Auckland Council and the government will still declare success because they gave themselves a very soft target to meet. They did not promise actual buildings that someone could walk into and occupy; they promised the environment in which that could happen: i.e. sections where the required building could happen. So they count building consents issued but they are also allowed to count sections that have been nominally created by having a resource consent for subdivision granted. So, a bare paddock can be counted as an increase in housing supply because the owner has consent to subdivide it one day.
Counting consented or potential sections is quite misleading. Developments can lie idle for years, decades even, after consent to subdivide has been given. Having got through the most time-consuming and frustrating part of the development process, developers will wait until market conditions are right before they put the bulldozers to work. Currently the rewards for doing nothing with land are higher than taking the risky step of developing and selling sections. So we shouldn't be surprised if the flurry of activity to get areas consented for subdivision (which, after all, is a property right that increases the value of the land holding) is not matched by a flurry of construction.
The Verdict
If it was only about mitigating the effects of notifying the PAUP we might think the Housing Accord was better than nothing. As a significant solution to the housing crisis it is clearly a flop. I would be prepared to cut the process some slack since it required the construction industry to (unrealistically) double production within a year. But the numbers are trending the wrong way. We are seeing plateauing when we needed to see upwards heading curves. And the biggest problem is that the plateau is only about 66% of where it needs to be every year for the next 30 years.
Possibly, just possibly, it turns out red tape wasn't the real problem.
*** Donald Ellis, formerly a management consultant and a local government executive, comments from time to time on local government matters
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