Is increased housing density the answer to Auckland’s supply issue?

The price of land is driving Auckland’s high house prices and this means intensification of housing in city-central areas is necessary, according to the Auckland Council’s new chief economist. 

Housing density has been one of the most hotly debated issues to arise from the supercity’s proposed unitary plan.

Angry opposition from some communities meant the council watered down the plan’s original intensifications rules and the issue is now before an Independent Hearings Panel.

However, in his first quarterly newsletter, Chris Parker has argued that Aucklanders have to accept there has to be trade-offs in order to solve the city’s housing crisis.

“Aucklanders need to understand the nationally significant risks involved in not allowing intensification of areas close to the city centre.”

Two significant features of the Auckland housing market are the high cost of land, which drives house prices higher, and the comparatively affordable rents, but the disconnect between them can’t last, Parker said.

“The housing market is signalling the need to use existing land differently, to allow intensification. If land use regulations prevent this, then land will become less valuable and the risk of a major price correction becomes more real.”

Intensification means land owners can get a greater yield by having more dwellings on a site and, in Parker’s view, allowing land to generate more cashflow closes the disconnect between land prices and rents.

“More dwellings per site in the central area will ease the housing supply and house price issues because more dwellings share the cost of land.”

Doing this would mean less risk of land price collapse and it would also reduce the risks to the national economy and the financial sector.

Yet the plan’s proposed rules didn’t appear to allow for enough opportunities to intensify areas close to the city centre, he said.

“Intensification doesn’t have to be a dirty word. By being a design-led city, Auckland can build value into intensification, and look and feel like a truly global city.”

Parker added that the chances of big rent increases in Auckland are slight.

“Rents are dependent upon income and Auckland competes for loose-footed people who could move to Australia or elsewhere in New Zealand for a better deal.”