Fervent building consent issuance and increasing effort from policy-makers to boost housing supply have been tasked with reducing New Zealand’s estimated 50,000 home shortfall.
Now, the new policy is set to see up to three homes of three storeys built on most sites across New Zealand’s tier one council regions without the need for resource consent, under a new Intensification Streamlined Planning Process (ISPP).
These changes are expected to be in action by August next year.
The move is expected to increase housing supply across Auckland, Hamilton, Tauranga, Wellington and Christchurch by a minimum of 48,200 additional dwellings over the next five to eight years, however, experts say the new announcement is no silver bullet to our issues with supply.
“Planning reform in and of itself is not enough to solve the problem unless it fixes the infrastructure funding challenge,” Stuart Crosby, President of Local Government New Zealand (LGNZ) says.
The local government lobby group says the council has worked closely with the Government on urban planning reform, and through a variety of processes, it has been clear a better planning system is necessary to unleash urban development capacity.
CHALLENGES FACING THE CONSTRUCTION SECTOR
Independent economist Cameron Bagrie expects that while the rules are doubtless to boost housing supply, to what degree is still uncertain given persistent challenges facing the construction sector.
Approximately 70 percent of all building materials used in New Zealand are imported from offshore, a worryingly high number given current supply chain disruption and the rising cost of shipping.
Internationally we are facing a shortage of timber and steel, while locally skilled labour is in short supply.
As border restrictions across the ditch ease, employers are also increasingly concerned about the potential for tradespeople to look for opportunities beyond New Zealand, given comparatively high wages and labour shortages in Australia.
Despite policy changes like the Unitary Plan in Auckland encouraging intensification by rezoning fringe locations, securing the funds necessary to create new infrastructure continues to be a pain point for councils and local developers.
Parks, water systems and roading are all vital foundations for communities that are not addressed by the new policy.
The LGNZ says this lack of funding for critical infrastructure remains a key impediment to boosting our housing supply.
“LGNZ recognises the funding central government has made available through the (3.8 billion) Infrastructure Acceleration Fund but noted it is a one time intervention. It still leaves the politically problematic rates system to pay for infrastructure long-term, which is the real constraint.”
The organisation says local government, already stressed by the pressures of the pandemic are now grappling with three waters reform, resource management reform and civil defence work, while community groups, Iwi and the private sector are tapped out.
MIGRATION SHIFTS THE DIAL
While new rules are set to add more houses to our biggest cities, the supply-demand imbalance has been acutely felt across the regions, with median prices outside Auckland in October rising 23 percent year-on-year and prompting some to wonder whether we’re heading for a two-tiered marketplace.
Bagrie says internal migration between New Zealand’s cities and throughout the regions continues to be a key theme impacting housing supply, and therefore prices.
He says the City of Sails has lost some 35,000 people to other domestic areas in the last three years.
“In 2019 and 2020 this loss was more than offset by net external migration gains but 2021 saw border closures hit external migration, with Auckland suffering a small population loss.”
“I suspect the internal migration departure trend from Auckland will increase over 2022 with demand for housing pushed into the regions, he says.
Affordability constraints in our biggest city, paired with an increasing pursuit of lifestyle opportunities and more flexible working conditions for professionals continue to drive urban Kiwis into the regions.
So too do extended lockdown measures and the growing cost of compliance.
When asked about the impact of tightening credit conditions on developers’ ability to borrow to produce new homes, Bagrie says inflation is having a conflicting impact.
“Material shortages pushing out delivery times means a slower supply side response, and the rising cost of goods and services through inflation will take some projects into uneconomic territory,” he says.
“Inflation will continue to boost the value of existing stock too,” he says.