Govt could run housing land supply - English

Finance Minister Bill English has threatened the Government could take over the role of ensuring an adequate supply of land for housing, if local councils fail to do so.

His comments follow publication of the 9th Annual Demographia International Housing Affordability Survey which shows the median house price in Auckland is 6.7 times gross annual median household income in the city.

Demographia, which covers 337 urban markets in the United States, United Kingdom, Canada, Australia, New Zealand, Ireland and Hong Kong, considers markets to be severely unaffordable when the median multiple - where the median house price is divided by the gross annual median household income - is 5.1 and over.

Christchurch is at 6.6, Tauranga-Western Bay of Plenty at 5.9, Wellington at 5.4 and Dunedin at 5.1.

Three metropolitan areas considered by Demographia to be "seriously unaffordable" are Palmerston North at 4.4, Napier-Hastings at 4.5 and Hamilton at 4.7.

In an introduction to the Demographia report, English said land had been made artificially scarce by regulation that locked up land for development.

That regulation had made land supply unresponsive to demand.

When demand shocks happened, as they did in the mid-2000s, much of that shock translated to higher prices rather than more houses.

"It simply takes too long to make new land available for development," English said.

He was worried a repeat of the mid-2000s demand shock might be starting.

As interest rates stayed below historic norms, expectations were shifting that those rates were here to stay, he said.

"As a result, demand for real assets has increased, observed in booming equities markets in 2012," he said.

"Demand for real estate is also increasing, with the median house price in Auckland recently exceeding the highs of 2007."

English said there seemed to be increasing awareness around the world that the planning pendulum might have swung too far.

"Land use regulations and intrusive development rules have consequences," he said.

An important political driver of urban controls was environmentalism, but that concern was misguided, English said.

"Cities are environmentally friendly places if the alternative to city living is high-footprint lifestyle in the country," he said.

"New Zealand has seen a proliferation of 'lifestyle blocks' outside cities in the last 15 years, which may in part be an unintended consequence of raising the cost of urban living."

On Radio NZ, English said the Government was focused on working with councils to get enough houses coming on to the market to meet demand.

Auckland Council was getting a "pretty clear message" from the Government, and from opposition parties "who've got plans which simply can't be executed unless they dramatically change the planning system", English said.

A new draft plan being produced by Auckland Council in March would be "an excellent opportunity to look at whether they have shifted their strategy to enable more housing".

Asked if the Government should take control of the land supply away from local government, English said: "That's a dramatic solution, and possible if the situation continues to get significantly worse, but, of course, government doesn't have the knowledge of the local circumstances in the way that councils have, and actually it doesn't have a mandate from local voters to make those decisions in entirety."

Labour has proposed building 100,000 basic homes for first-home buyers, focusing on Auckland, over 10 years.

Labour leader David Shearer said English's comment - that the planning system would have to be dramatically changed for opposition housing policy to go ahead - was "absolute nonsense".

He had seen affordable houses built for $300,000 to $350,000. Those included two to three-bedroom terraced houses with small backyards, while a stand-alone four to five-bedroom house would be "a bit more", and there could be savings with two-bedroom apartments.

If, instead of sniping at councils, the Government "actually went and talked to them, they would find out there is land available and they could get cracking on it", Shearer said.

City limits did not need to be expanded "straight away".

In its Auckland Plan, covering the area's growth for the next 30 years, the Auckland Council talked about "moving to a quality, compact Auckland".

It aimed to provide for 60 per cent to 70 per cent of total new dwellings inside the existing core urban area, with the remaining 30 per cent to 40 per cent of new dwellings in new greenfield sites, satellite towns, and rural and coastal towns.

Auckland deputy mayor Penny Hulse said the Demographia report was the "rhetoric we've been hearing for quite sometime".

"Their entire solution seems to be building houses on the fringe and putting people out there," she said.

But for people without much money the fringe was extremely expensive, without jobs, public transport, or community facilities nearby.

Also releasing land on the edges raised the question of who would pay for the necessary infrastructure.

English and the Demographia authors appeared to be listening to each other, rather than talking to councils, Hulse said.

Land was available now in Auckland for the building of about 15,000 houses.

Some land always needed to be available for growth. "What we don't agree with is the unplanned wholesale release of land which is going to cost the ratepayers a fortune to service," she said.

The unitary plan the council was working on now contained solutions to the issues English had raised. It would allow the building of more diverse, good quality homes in Auckland.

In parts of Auckland the building of new, stand alone houses costing $300,000 was "absolutely achievable", Hulse said.

A problem for the council was that because of changes the Government had made to the Resource Management Act, the council would not be able to use the unitary plan until all appeals and the rest of the legal process had been dealt with, which was not expected until 2016.

The council wanted the Government to allow it to introduce the unitary plan under the previous RMA rules, which would mean the plan would influence decisions once it was notified, which was due to happen in September.

Latest figures from QV show that house prices rose during the past year by 8 per cent to 9 per cent in North Shore, Waitakere and Manukau areas, while in the former Auckland City Council area they were up 11 per cent. Across most of Auckland values were well above the previous market peak of 2007, with the former Auckland city area up 14.7 per cent. When adjusted for inflation, values in the former Auckland city were equal to the 2007 peak.