The missing piece of the Auckland housing puzzle

One of America's biggest cities is approaching its housing challenges in a different way, writes Catherine Harris.

A boulevard in uptown Houston, where cars determine much of the city's design.
Catherine Harris

A boulevard in uptown Houston, where cars determine much of the city's design.

In Houston, Texas, there's no such thing as a housing shortage.

The state's biggest, blue-collar dominated city rolls out as much as is needed, and land is cheap. Real cheap.

A decent house that might cost more than a million in Auckland will set you back US$200,000 to $300,000 in Houston.

Tory Gattis of the Centre for Opportunity Urbanism - affordable Auckland house prices will involve pain.
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Tory Gattis of the Centre for Opportunity Urbanism - affordable Auckland house prices will involve pain.

Little wonder it is well on its way to becoming the US' third largest city.

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Houston-based Tory Gattis​  a senior fellow with a think tank called the Centre for Opportunity Urbanism, is a frequent blogger on city life, transport and development.

If there was no zoning and easier ways to pay for infrastructure, would it solve Auckland's housing crisis?
GLENN HUNT/AFR

If there was no zoning and easier ways to pay for infrastructure, would it solve Auckland's housing crisis?

Gattis explains that Houston doesn't just have land to spare, it has no zoning. Although land can have convenants, NIMBYs don't get much say.

"There are some controls within this sort of chaos, but most of central Houston is old enough that it doesn't have those deed restrictions, they've expired or whatever. So people will tear down a warehouse and put up apartments, they're tear down an old apartment and put up a tower."

This freedom is considered important, given Houston's rapid growth. People from all over the States are flocking there. 

Skyscrapers jostle with low rises in Houston, which has no zoning laws.
CATHERINE HARRIS/FAIRFAX NZ

Skyscrapers jostle with low rises in Houston, which has no zoning laws.

"In standard of living rankings Houston comes out close to top, thanks to low living costs and relatively high energy industry salaries," he says.

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Despite the lack of zoning, Houston isn't entirely unplanned. Cars are king in a city where air conditioning is the norm. So the city has ring roads on which many employers and 90 per cent of the population are based.

Crucially, the funding for the infrastructure of Houston's new subdivisions stems from developer-created entities called MUDs, or municipal urban districts.

MUDs raise finance, usually bonds, to pay for gas, power, sewage and water, and the landowner pays them back over the lifetime of the asset. 

It's a different method to New Zealand, where developers pay a large share of the infrastructure cost up front, sometimes shared with a council, and then pass it on in house prices.

Gattis admits the way Houston has developed is not everyone's cup of tea. It contrasts with older, more organic cities like New York which have to retrofit their planning needs.

But for many people migrating to Houston, the benefits outweigh the aesthetics.

It's hard to imagine such liberal planning coming to a city like Auckland, where the mere threat of suburban high-rises has residents up in arms.

Yet Texas is one of several locations the Productivity Commission has studied to see how other places handle their housing pressures.

The commission noted in a recent report, Using land for housing, that Auckland needed to free itself in a number of ways.  

It talked about the need for denser housing, and to loosen up Auckland's boundaries.

It warned Auckland Council and the Government's "Special Housing Areas" weren't working fast enough to meet the city's housing shortage.

And it also discussed the need to find new ways of funding infrastructure. 

The problem, the commission notes, is that local ratepayers are not usually keen to fund growth through their rates bill, and councils aren't keen to borrow.

So the commission suggests councils allow targetted rates, special rates that only affect a new development and are spread over a long period.

Not completely like MUDS, but in the spirit of them.

Productivity Commission chairman Murray Sherwin says if all ratepayers had to pay for expansion, it would skew the way the city should spread. 

"Unless you get the costs of growth falling where they need to fall, you won't get the right calls being made as to where people should be growing their populations," he says.

"For instance, the water authorities in Auckland tends to underprice a new connection, so in effect it's subsidising urban expansion, while the council says it wants greater density." 

On the other hand, Sherwin says, accommodating the extra needs of high rises and terracing in the inner city can be just as costly.

The cost of infrastructure is also a problem, going up faster than general inflation.

"We do expensive infrastructure in New Zealand compared to other countries...and we've been pushing up the standards so that also pushes up the costs," Sherwin says.

Phil Twyford, Labour's housing spokesman,says his party has come independently to many of the same conclusions as the commission with regards to Auckland.

He has concluded that the city will spread whether planners like it or not.

"The development pressures have leapfrogged over the city boundary to Pokeno, where you're getting massive residential development now."

But he is also a fan of denser housing, and "the key is infrastructure financing". 

The important thing he says to do it in a cost-efficient way. Getting the taxpayer to fund it is simply "subsidising expensive fringe development".

So is shovelling a good deal of it onto the price tag of a new home.

"You're funding infrastructure through mortgage bank rates which is crazy... It couldn't be more inefficient and inflationary. It makes houses much more expensive than it needs to be."

So Twyford says councils should be less afraid of putting a dent in their balance sheet and make more use of council or local government bonds "which is the cheapest form of borrowing, rather than paying it off through someone's mortgage".

He also believes in letting the home owner spread the cost over the lifetime of the asset. "That's important in terms of generational equity."

This gets us back to expanding cities and Houston's free-range zoning. Twyford is loathe to criticise the critics of density too much, saying democracy is at work.

He doubts Auckland could ever be deregulated to the point where NIMBYism was outlawed.

"I don't think it's our culture. I think people are quite strongly wedded to the idea that people should have a say in that sort of decision making.  But I think that it's time to strike a new bargain."

By that, he means government intervention, possibly in the form of a national policy statement, which would lay out for councils what boundary growth and density there should be. 

"There needs to be a new balance of the rights of existing residents to have a say over what goes on in their neighbour and the rights of people all around the country, and future generations to have access to affordable, decent housing in places where they want to live," Twyford says.

And Tory Gattis, watching the price of Auckland houses from afar, warns that if the city wants affordable housing, it won't be a painless process.

"The only realistic way to do it is basically they need house prices to flatten. Not dip, but not keep going up and up over time,. Inflation will naturally bring the ratio down into line. 

"It will take a couple of decades. Then allow enough supply that prices level out. They need to decline relative to inflation, certainly to wage growth. But you've got to allow enough supply to do that, and that's going to make a lot of people uncomfortable."

 - Stuff

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