'Go up' to tackle housing unaffordability

01:43, Jan 31 2009
LAND PRICE: The cost of purchasing space to build has been identified as the main factor in the 20 per cent drop in housing affordability since 1991, according to a report by building research group Branz.

Burgeoning land prices are affecting housing affordability, while developers are controlling ample supply, according to a report by building research group Branz.

The report pinpoints the cost of purchasing space to build as the main factor in the 20 per cent drop in housing affordability since 1991.

Section prices have risen 14 per cent since 2003, outstripping average wage increases of 2.7 per cent a year in the same period.

Exacerbating this were higher interest rates and construction costs.

Branz research strategy manager Chris Kane said the study showed that cheap housing options might not help as "the biggest unalterable part is the land package".

A limited supply of land was the obvious driver for the price rises.


"There is a lot of land available but it is locked up and not available to be developed yet," Mr Kane said.

Wellington City Council urban planning director Ernst Zollner confirmed there were huge tracts of land in Wellington zoned for housing - enough to cope with 50 years of growth.

"But that doesn't mean it's available. In Wellington the land is tightly held by a few men," he said.

The council had worked with the owners to get those properties on to the market - but there were other options.

For example, National Party leader John Key's suggestion that residential zoning should lapse if it were not developed was a good idea, Mr Zollner said. Another was to rate the land as residential to encourage development.

Massey University property expert Professor Bob Hargreaves said developers would resist making large amounts of land available as they would make less money selling it. Increased housing density was the logical path as urban sprawl - a costly, inefficient alternative - could be restricted.

Kiwis were, however, still hung up on the dream home ideal. "We're still wedded to living in the suburbs in stand-alone houses, so there has to be a change in our thinking."

The answer was to put three dwellings on a site now hosting one. "You are going up in the air to do that. Rather than sprawling out, you go up."

That concept worked for developers, too. "A big cost is putting in roads, so the more sections a developer can get for every metre of road, the more money you make."

Intensification in existing areas was also more sensible from a community cost perspective, Mr Zollner said. Developing peripheral land would not necessarily reduce affordability, as infrastructure costs could not be avoided.

"Employment is concentrated in a few places and the population is growing, so we are growing outwards. It is quite right that it should cost more because we have to build more motorways to get people to work."

Mr Zollner said local authorities were passing on those costs through development contributions, and that was added to the section price. "This report [considers just] one sliver of the affordability argument; there is so much more to it."

The Dominion Post