A plague on all the houses

21:31, Nov 30 2012
Flagstaff subdivisions
Flagstaff subdivisions: Hamilton builders erect framing.

Fifty-six sections sold the morning they became available in Rototuna two weeks ago. People slept in their cars to get a slice of land and some were still turned away. Alistair Bone looks at what's holding up land availability, why it costs so much and what the council and developers are doing about it. 

House prices are on the rise in Hamilton City - up more than 1.5 per cent in just the last month. REINZ figures for October show new digs within the city will cost you a median $338,000, $8000 more than last year. Politicians hear the pain of first-home buyers. But only if you live somewhere else.

National is designating 600 homes in the huge West-Auckland Hobsonville Point development as "affordable", a marker which, in the Auckland market, means they will be priced under $485,000. Labour has committed to building 10,000 houses in its first year in office, then 90,000 more in the rest of the decade if it gets the chance. They will be basic - priced under $300,000. Most will be in Auckland, the rest in other "unaffordable" areas such as Queenstown, Christchurch, Nelson, Wellington and Tauranga.

Despite a median house price not far from Nelson's and Christchurch's, and higher than Tauranga's, there will be nothing for Hamilton.

If prices are to come down here, the council and developers will have to do it themselves. The problem is they don't seem to get along.

Colin Jones has been in the real estate game in the region for 40 years. He represents two major landowners in the Peacockes area: a 740-hectare slab of grass just south of where Hamilton's current suburbs end. It's slated as the next big development for the city.


He lays the blame at the feet of the city leaders.

"Council has been the gatekeeper stopping development for the last 20 years. When you restrict supply and you've got demand, prices will rise. The council spent all this money on V8s, Claudelands, etc, and restricted the amount of infrastructure it was putting into the city. So it's taken forever for developers to get sections available for sale."

Mr Jones says someone who wants to develop land is usually looking at between three and five years of dealing with the council before work can start.

"I've got people who have got land out at Peacockes they have been waiting over 30 years to develop. The Housing Corporation bought it for affordable housing in the 1970s and exactly nothing has happened."

He says things are finally starting to move with Mayor Julie Hardaker and CEO Barry Harris at the helm. But despite a green light for the Peacockes development, it's not exactly humming along.

"All we've got is stage one around Dixon Road."

The council says it is not rationing land - it just can't afford to release it. Brian Croad is the general manager of city environments, Blair Bowcott is the chief of strategy and research. They say before any subdivision can be greenlit, it has to be supported with hellishly expensive infrastructure built outside its boundaries. So, for instance, prior to building the 10,000 houses planned for the second stage of the Peacockes subdivision, there will need to be a new bridge over the river coming off Cobham Drive by Hamilton Gardens. And a separate major new access road. And a big sewerage project.

The problem is the city has to build all the infrastructure first and hope the project goes ahead. And even if it does, it will be a while before council sees a return on its investment.

"We can't bankroll a hundred-million-dollar roading network to start [the subdivision] up without going into a lot more debt," says Mr Croad, "and that's what we used to do. But with the changes in the funding environment, to stay within the debt envelope, we can't do that any more."

The city has made some big financial mistakes and is paying for it now. Mr Croad says the new council is turning things around, but the $440m debt ceiling will be reached within a couple of years anyway without new costs being taken on.

Money is still being spent on infrastructure - on the much smaller stage one of Peacockes, in finishing off the work around Rototuna and at Rotokauri.

"We are targeting certain areas where we are saying it is better to finish off that particular area than to spend a considerably bigger amount to start a new one. We just can't afford to do that," says Mr Croad.

The planners say councillors acted on expert advice when they set the debt limit and were fully aware of the restraints they were placing on the city's growth.

There are some potential solutions. Developers already supply everything within the boundaries of a subdivision - roads, water, sewerage, phone, footpath and lights - but Mr Bowcott says there is the possibility of doing things faster if developers are also willing to pay for some of the major works surrounding the area. The council's door is also open to "commercial arrangements" if developers are having trouble finding finance in the current tight environment. He says the latter idea hasn't had much uptake, but there have been some talks about developers' paying more to see faster progress.

"For a long time in Hamilton," says Mr Bowcott, "sections sat there after they were approved because the developers didn't bring them to market. Because they couldn't make enough money out of them. And now the demand is here, the pressure is on."

What developers pay already is a major bugbear. Ian Patton has been making subdivisions since 1997. He is currently developing the Glaisdale project in Rototuna with 130 sections done and another 300 on the way.

"I can tell you the first 100k of your $450,000 house is made up of GST and contributions to the council. If Government are talking about affordable houses, they have just got to look at their navel. If you take an average residential section on the market at 200k - 30 per cent is tax, GST, development and council levies."

Mr Jones is on the same page.

"Developers don't have a problem with paying a development levy. What they do have is a problem with paying it into a big hole where there is no justification for the council's numbers. For residential, it is $24,000 to $32,000 per site. But the developer has provided all the infrastructure within the subdivision, so where's the 30 grand?"

The council says the development levy is to pay for things outside the boundary of the subdivision that have to be built to service all the new houses - for instance, the wide arterials of Resolution Drive and Wairere Road in the booming northeast. But there is some movement on the developers' concerns. The Development Contributions Policy is under review, with a newly transparent cost regime in place from July 2013. Bowcott says it's a very complex exercise, but the city is getting it done.

"We will be able to demonstrate the link between individual projects and the way their charges are arrived at."

He says it's unlikely, however, that the levy will decrease.

Mr Jones identifies density as another problem.

"Until the council starts to address affordable housing by having more affordable land within the city boundaries, [meaning] medium density, you are never going to solve the low-income housing requirements. In Europe, you have medium- or high-density housing around your commercial nodes."

Mr Jones says the Chartwell Square shopping area and Five Crossroads hub are ideal for medium- or high-density housing. Others point to land beyond Crosby Road on the far eastern border of the suburbs.

Mr Croad says when he first got to Hamilton, he went exploring. "I wanted to understand why there weren't lots of apartments in the CBD. As I walked and cycled around the area, it became immediately obvious that there were all sorts of housing choices within 10 or 15 minutes of the CBD."

Unlike many other places, Hamilton is so small and such a good geographic shape that anyone who wants to benefit from the CBD doesn't have to live right in it to do so. Meaning the demand for medium- and high-density housing isn't there.

Both Mr Croad and Mr Bowcott recognise that the city can't spread forever and that higher-density housing will happen at some point. The council already encourages it, with the development levy on infill housing set around a third of what builders pay on a new subdivision. The city believes there would be strong resistance to higher-density housing in Hamilton's near East, especially at the sort of heights that would make it affordable. Mr Croad says other places are open for business.

"You can go and build high-density housing in lots of places in the city right now: at the university, at Hillcrest. We want more apartment options in the CBD. There are no limitations in terms of council plans for that to happen now. It is [instead] about market uptake and demand."

The immediate problem for the planners is on a smaller scale, but no less polarising. Under the new Rototuna Residential Zone plan, garages will have to be set back behind the house, a window and a door must face the road and the occupants must be able to see the street. It is supposed to cut down on crime and make life better for everyone. But the issue has raised the ire of many potential homeowners, who complain about the possible loss of sun and the extra danger to children and on the general principle of council's just butting out of people's business.

Builder Glen Archer is general manager at Downey Homes. He says the company made submissions when the plan was on the council drawing board, but to no avail.

"We talk about affordability and all our plans were ready to go and nice and cheap to pick up, but none of our plans work now because they all have the garage at the front."

Driveways will have to be longer, possibly a significant cost with poured concrete about $70 a square metre. "None of the sections out there are really suited for this new design," says Mr Archer. "So it's a bit of a challenging old time."

Mr Croad is confident the issue will be sorted out and indicates council will be flexible on the new rule. The council's Urban Design Panel will provide design advice to developers free for the asking. He says the council is mindful of people's budgets and denies it is instituting an expensive gold standard for cash-strapped home buyers in the midst of a downturn.

"I think it is fair to say there are a number of developments in Hamilton over the last 10 or 15 years that no one is particularly proud of. And council said that's not good enough. Most of the owners are very happy that they have got a better development that didn't affect them financially to any great extent."

The planners are reading the letters to the editor and the news articles and hearing the complaints, but won't be stopping what they see as doing their jobs. "It is a bit of a journey and it will take time and there is no doubt it will be a bit controversial," says Mr Croad.

The builders and sellers bat away the old complaint that covenants - conditions that the developer imposes on home buyers - are also responsible for pushing prices up. East of the river, most of these stipulate a new home must be built on a subdivision and mandate what its minimum floor size can be. Some covenants elsewhere limit such things as the ownership of cats, certain breeds of dog, the age and type of vehicles that can be stored at the property, shooting and complaining about noise from farms and farmers. As far back as 2008, the Human Rights Commissioner was telling a Parliamentary committee that covenants were making ghettos for the rich. The point made by Mr Patton is that "the rich" seem to prefer it that way. His new scheme has its own set, which, he says, is pretty standard.

"You can't have a goat and a chook. You can't bring your Kenworth home and start it at three in the morning. The house has to be 140 square metres and built out of permanent materials. You can't have a second-hand house and take it in there on the back of a truck. I mean, if you had paid 200k for your section and 250k for a house and some guy goes and brings in a house from the Meremere power scheme, you'd be pissed off. It just protects everything."

He says minimum floor sizes and the need for a garage to now be attached to the house has pushed prices up, but not to a significant degree, amd most houses exceed the minimum standards anyway.

"Originally, Flagstaff had no covenants because it was developed in the early days by the Housing Corporation. In later years, they found it necessary to have covenants. There's been a case where a guy's built a big shed in the back and had a stock car in there, which he worked on three nights a week with all his mates."

Even after the developer moves on, any resident has a right to enforce an area's covenants against everyone else who lives there. But Mr Jones says it's not that easy.

"It's a lawyer's field day. If a person with deep pockets says to the developer and the rest of the property owners, Get stuffed, nothing is going to happen. Unless you have someone with equally deep pockets who says, Don't piss me off, I'm going to have you on. Then it's a stand-off."

Some property lawyers disagree, saying well-written covenants are easily enforceable, sometimes with just a letter to the transgressor.

Coincidentally, just a few hours before the Government announces it will be subsidising the Hobsonville Point homes, Mr Archer was pointing to it as a solution.

"If we think about density, we generally think about the quality not being high. Hobsonville Point has got density and quality and amenity. The solution in Hamilton is not what we've got out in the northeastern corner; the solution is smaller, multi-density complexes.

"So you've got three-storey apartments next to single-level houses. That's how we get houses affordable in New Zealand."

The planners say central government could help out, too. For instance, making old schools and facilities available for development, especially to help alleviate the shortage of council housing for the elderly. But there is no movement on this and Housing New Zealand hasn't targeted the city for some time. Hamilton will have to sort itself out. The planners expect they will get lots of help on that. The District Plan will be available for public submission from December 10.

"We're very happy to receive a bit of guidance on what we need to improve. And I'm sure that will happen," says Mr Croad.