Unlock land supply – Productivity Commission

The Productivity Commission’s “Using Land for Housing” draft report, which was released today, makes 38 recommendations on what could be done to better enable New Zealand cities to house their growing populations.

Commission chair Murray Sherwin said the limited availability and high price of land is a concern when housing is becoming difficult to access for many, particularly in Auckland.

“Land supply is a critical first step to address housing affordability. Our fast-growing cities need to be able to grow up, and out.

“Without unlocking land supply, any efficiencies made elsewhere in the construction chain are only likely to flow on to higher land prices, rather than cheaper houses.”

The housing market needs to provide a greater range of dwelling types and size to meet changing demand, he said.

“But land use regulations often constrain the production of small, affordable dwellings, both in built up areas and on the fringes of our cities. High land prices encourage the production of larger, more expensive housing.”

This, in turn, contributed to difficulties for property buyers, overcrowded houses and preventable disease.

“Land supply shortages are a drag on the economy, hurting labour productivity and economic growth. Addressing land supply can make a huge contribution to New Zealand’s social and economic wellbeing.”

The report’s recommendations to improve the supply of land for housing include:

• Allowing large cities to undertake integrated spatial planning as an alternative to current statutory planning mechanisms;
• Removing a number of costly regulations that prevent the efficient use of land for housing - such as minimum parking requirements, mandatory balconies for apartments, and minimum apartment sizes;
• Increased application of user charges, particularly for water services, and the removal of prohibitions on tolling and congestion charges;
• Greater use of targeted rates to fund growth-enabling infrastructure;
• Removing the exemption that means that the government currently doesn’t pay council general rates on Crown-owned land;
• Identifying and pursuing opportunities to use Crown and local authority land in high growth cities that is suitable for residential development; and
• Establishing an urban development authority to assemble sites, master-plan large residential developments, and partner with the private sector to deliver them.

Sherwin said the challenge, particularly for Auckland, was huge.

Currently, Auckland has a shortage of 32,000 dwellings and that number will keep growing, yet the city’s largest development at Hobsonville will deliver around 3,000 new homes, he continued.

“Auckland needs the equivalent of another 11 ‘Hobsonvilles’ on the ground right now, and a further four developments that size each year to keep up with demand.”

In order to deliver on that scale, assembling land parcels to enable efficiencies in land development and construction was necessary, he said.

“A public urban development agency could play a valuable role in bringing sites together and partnering with private sector developers to redevelop land within cities and build new suburbs on the edge of cities.”

Keeping land supply locked down is harmful, Sherwin added.

*Submissions on the report – which can be read here – can be made to the Commission by 4 August. The final version of the report is due to government by 30 September.