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NZ housing 'severely unaffordable'

Published: 1:36PM Monday January 23, 2012 Source: Fairfax

  •  (Source: ONE News)
    Source: ONE News

An annual international survey on house prices is pointing to difficulties in the post-earthquake rebuilding of Christchurch as an example of failed urban governance and planning.

It also sees the establishment of the Auckland super city as a particular risk for New Zealand.

The eighth annual Demographia International Housing Affordability Survey looks at housing affordability in 325 urban markets in the United States, Britain, Canada, Australia, Ireland, Hong Kong and New Zealand.

A market is considered unaffordable where the median house price exceeds three times the gross annual median household income.

New Zealand as a whole had a figure, known as the median multiple, of 5.4. Auckland had 6.4, Christchurch had 6.3, Tauranga-Western Bay of Plenty had 5.9, Dunedin 5.2, Wellington 5.1, Palmerston North 4.1, Napier-Hastings 4.8, and Hamilton 4.8.

The survey described all of New Zealand's main centres as "severely unaffordable" and supports more relaxed land use planning rules than those prevailing in many of the cities it covers.

Co-author, and Christchurch resident Hugh Pavletich, said that for metropolitan areas to rate as affordable and ensure housing bubbles were not triggered, housing prices should not exceed three times gross annual household incomes.

For that to happen, new starter housing of an acceptable quality to purchasers, with associated commercial and industrial development, must be allowed on the urban fringe at 2.5 times the gross annual median household income of that market.

Pavletich believes the Christchurch earthquakes will before long lead to "profound" changes in urban governance and planning in this country and elsewhere.

The 2012 survey said recovery in Christchurch had been delayed because authorities had failed to release affordable fringe land.

A statement accompanying the survey said the "sorry situation" of Christchurch clearly illustrated the huge and unnecessary risks and costs urban markets had to endure, when urban governance and planning failed and housing became severely unaffordable.

Christchurch had already been "on its knees" in development and construction terms at the time of the first earthquake in September 2010, due to a seriously dysfunctional local authority that, in deliberately withholding fringe land supply, allowed a housing bubble to start in 2002.

The survey compared the 6.3 median multiple in Christchurch to the 3.3 in New Orleans, which was badly damaged by Hurricane Katrina in 2005.

New Orleans had been better positioned for recovery by its less draconian land use regulations, the survey said.

Discussing Auckland, the survey said that with nearly a third of this country's population, the city accounted for a far larger share of the national population than the largest metropolitan areas in most high income nations.

As a result, New Zealand's competitiveness depended on the performance of its largest city, Auckland, more than was the case in other nations.

Auckland was particularly at risk, because of the establishment of the super city, which the survey said was the only single local government with sole general purpose jurisdiction over a metropolitan area of more than a million people in the high-income West or Japan.

"The proclivity of planners at the predecessor Auckland Regional Council and now the super city has been strongly in favour of more restrictive land use regulation," the survey said.

"Because of its size relative to the nation and the lack of competition from jurisdictions within reasonable commuting distance, this is a particular risk for New Zealand."

In the introduction to the 2012 survey, Robert Bruegmann, author of Sprawl: A Compact History, said nothing affected citizens more directly than the home in which they lived.

The conclusion of Pavletich and co-author Wendell Cox, that land use policies in places such as coastal California, Britain and Australia had dramatically driven up the cost of housing, while less intrusive policies in places such as Houston had kept prices down, had been controversial, Bruegmann said.

"But I think it is fair to say that a growing number of people who have looked at the figures have tended to agree that a good many well-meaning policies involving housing may be pushing up prices to such an extent that the negative side-effects are more harmful than the problems the policies were intended to correct.

"These observers have also noted that measures that restrict land supply, slow growth in the immediate area where the policies are in place and push up housing prices can be very attractive to individuals who already own their own homes," Bruegmann, who is professor emeritus of art history, architecture and urban planning at the University of Illinois at Chicago, said.

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