Critical view of 400,000 new house need

The below is a contribution to this blog by William McKenzie (economist and RMA legal researcher). He writes criticising additional household growth projections used in finalising Auckland's unitary plan:

"A more realistic population projection is 700,000 – 800,000 increase over the planning period through to 2041 rather than 1 million, but as future household formation rates are uncertain this does not necessarily mean that the target of 400,000 dwelling units overall should be reduced...."   

The above is from the Unitary Plan Capacity for Growth Expert Conference Report 15 July 2015.

The assumption that 400,000 new dwellings will be needed in a period when the population is expected to increase by 700,000 to 800,000 is erroneous.  As noted on page 25 of the in the 22 July 2016 Independent Hearings Panel Overview of Recommendations Annexure 1 the household formation rate in Auckland has now reached  3.11 (the average number of persons/household).  This is due in large part to the housing patterns of those new to Auckland and the changing housing patterns of those not so new to Auckland.  On the balance of probabilities the rate will not drop below 3.0 in the next 25 years to 2041.

At page 48 of the Panel’s Overview of recommendations on the Proposed Unitary Plan it is stated;

 “The expert group on residential capacity supported the Council’s long-term demand forecasts that estimate a population in the Auckland region of around 2.5 million by 2041, (today’s 1.5 million plus a further 1 million) with demand for additional dwellings of around 400,000 over that period." 

However, as above, the expert group did not support the prediction of 1 million new residents, and the assumption of around 400,000 new dwellings flies in the face of the population growth the expert group did estimate and the expected occupancy rate range of 3.0 or above.

Taking the mid-point it can be expected that there will be around 750,000 additional residents in Auckland by 2041.  At at least 3 persons per dwelling, around 250,000 additional dwelling will be required, an achievable average of 10,000 new homes a year over 25 years.

 At page 51 of the Panel’s Overview it is stated;  "There are compelling reasons to ensure the Unitary Plan enables a development pattern that is capable of meeting residential demand over the long term and does not limit its focus to just the next ten years or so.  The first is that housing development is not readily reversible and generally has an economic life of at least 50 years, so that once an area is developed according to an existing land use plan, future plan changes to that area are unlikely to have any effect on capacity until it once again becomes economic for redevelopment. Thus it is important that the Unitary Plan is calibrated to demand over the long term, and not to just immediate concerns."

At least two points need to be made about the first reason.  Planning based on the best available estimate of population growth and dwelling demand for the period under consideration, the next 25 years, cannot be said to be "focus(ing) (just) on the next ten years or so" or “calibrat(ing) to just (meet) immediate concerns.”  The “long term” in the context of the Unitary Plan is 25 years, and no more.

Secondly, it is stated in the Panel’s Overview; ".. housing development is not readily reversible and generally has an economic life of at least 50 years, so that once an area is developed according to an existing land use plan, future plan changes to that area are unlikely to have any effect on capacity until it once again becomes economic for redevelopment."  However once land is developed or redeveloped such that house lot ownership changes from single to multiple ownership, further redevelopment to increase dwelling density is very difficult and often impossible.  Upzoning all the urban residential land in Auckland to allow for multiple ownership of existing sites, as the Panel recommends (even the single house zone allows for two dwellings in one house, and therefore two owners) means setting the land use pattern for existing residential urban land for at the very least 50 to 100 years, and in very many cases indefinitely.  This exceeds the Panel’s brief and is contrary to the purpose of the Resource Management Act which includes the “use (and) development of … natural and physical resources … while…sustaining the potential of (those) resources … to meet the reasonably foreseeable needs of future generations.”

An obvious option is to, as the Auckland Plan envisions, provide for the next 25 years,  i.e. a population growth of around 750,000 and the need for around 250,000 new dwellings; around 35% -  80,000 dwellings on greenfields, and around 65% - 170,000 within the existing urban area.  The latter can be achieved with, by the figures in the Panel’s report, 40,000 dwellings on Housing New Zealand land, 85,000 on business zoned land leaving 45,000 to be built on urban residential land upzoned to allow for the construction of apartment buildings.  This option would see the great majority of residential land in the urban area left in essentially its current state which would maintain, amongst other things, the current predominance of reasonably large lots in single ownership.

What would happen then in 25 years?  What needs will there be in 25 years that we can reasonably foresee now?  We can foresee with 100% certainty that in 25 years, (and in 50 years, 75 years e.t.c.) the 2041 generation will have to decide for itself how to accommodate whatever growth is estimated at the time, and that it will need to be able to make decisions about the use of Auckland’s urban residential land in order to do that.   The experience of intensification and growth in the period 2016 to 2041 will greatly inform Aucklanders of what is possible, and what they want.

By upzoning only as much land as is required in 2016, and extending the urban limit by only as much as needed, the 2041 generation will be able to decide how much more urban land (most of which would still be in single ownership) to upzone and how much more greenfields land to develop; with consideration of future generations in mind.

This is a pattern that could be followed for the foreseeable future.

A contribution by William McKenzie