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'Compact cities cult' blamed for high house prices

Published: 5:09AM Monday June 10, 2013 Source: Fairfax

Too much focus on compact cities has restricted suburban growth, pushing up house prices, a new report suggests.

The Priced Out study, released today, suggests local government has to fix a situation it caused that led to the present housing affordability crisis.

In the report, released by business and independent public policy organisation The New Zealand Initiative, former government minister Michael Bassett and Luke Malpass question why the supply of new houses never responded to the skyrocketing demand from the 1970s onwards.

They conclude much of the blame lay with local government bodies joining the "compact cities cult" and being very restrictive in zoning policies that would free up land for development.

"Having compact, dense inner cities is fine but often that is prioritised at the expense of urban development. Most people want to live in suburbs."

Mr Malpass rejects the notion that extending city zones might eat into land needed for farming, noting that less than 1 per cent of the country was built upon, far less than in other countries.

These policies and their high levies, taxes and consent fees seemed to indicate local authorities gave little thought to how they affected house prices, he says.

"Councils are very different, but councils have limited ways of making money and certain councils have used housing as a way of subsidising a large amount of activities."

Yet with councils having to bear the brunt of the leaky building costs, the consequent rise in construction oversight was understandable, he adds.

Wellington City Council housing portfolio leader Iona Pannett questioned whether evidence against compact cities took into account today's housing needs.

Current council planning policy balanced out making land for development available while keeping infrastructure costs down. "We've got enough growth for about 20 years - that's quite a lot."

The city council's development levies were relatively small when compared to other local authorities, while consent fees were in line with other city councils.

"Council consenting fees as a proportion of the overall costs is really tiny - it really is about materials and land costs."

Ms Pannett said the levy would also be reviewed shortly, and a broad overview of housing in the capital would be released at the end of the year.

Much of the report supports policies the present Government put in place to address housing affordability. Housing Minister Nick Smith announced a review of council development levies in February and measures to encourage council to rezone land out of city limits for new housing after the release of the Productivity Commission housing affordability inquiry last year.

Dr Smith said while he could not comment on the report specifically, he welcomed any thoughtful contributions to the "huge challenge" of home affordability.

Mr Malpass also notes that the peak of new homes in the 1970s was fuelled by government welfare policies after World War II that subsidised and promoted house construction.

"The New Zealand Government basically printed money for about 50 years to pay for those policies, which is why no-one is really considering them now."

The report acknowledges that several other factors fuelled increased prices - notably a rise in expectations and new standards around house size, insulation and double glazing.

Wellington was named the fourth-most affordable region in New Zealand, behind Manawatu, Hastings and Waikato, in a 2012 survey.

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