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Government wants to 'flood the market' to make houses more affordable - how will that work?

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06 July 2024, 10:13 PM

Government wants to 'flood the market' to make houses more affordable - how will that work?

Housing Minister Chris Bishop has told real estate agents that the government wants to "flood the market" with opportunities for housing development.

It has agreed to a range of changes that would free up land for housing, and, the government hopes, make housing more affordable.

Here is what is planned and how it might work.

Housing growth targets for tier one and two councils

Tier one (places like Auckland, Wellington, Christchurch and Tauranga), and tier two (places like Whangārei, Rotorua, New Plymouth, Dunedin) councils will have to "live zone" for land with enough feasible development capacity to cater to 30 years of housing demand at one time.

Live zoning means the land can be used under a plan that is already in effect, not planned to become available in future - feasible development refers to being commercially viable for a developer to undertake the work.

Infometrics chief executive Brad Olsen. Photo: RNZ / Samuel Rillstone

A wider range of funding sources will be able to be used to meet medium-term infrastructure requirements.

Prescriptive rules will be set for councils to determine how much capacity they need, such as requiring that they use "high" demand projections rather than more cautious estimates.

Infometrics chief executive Brad Olsen said it could be difficult for councils to allow for 30 years' worth of development when the infrastructure was not yet there.

"But equally the infrastructure wasn't there beforehand either, so at least with the more permissive options, it will force a greater need to develop infrastructure at a greater pace over time."

New rules requiring cities to be allowed to expand out

Councils will not be able to impose rural-urban boundary lines in their planning documents, but they will still be able to have rurally zoned land.

Ministry officials are also looking at options to improve councils' future development strategies, potentially requiring them to plan for growth over 50 years, not 30.

Strengthening of intensification provisions in the National Policy Statement on Urban Development (NPS-UD)

Tier one councils will have to enable "appropriate" levels of density across their urban areas, and they must deliver housing intensification along "strategic" transport corridors like major bus routes.

They must also offset, with more development elsewhere, any capacity they lose due to deciding some areas are "special character" and should not be intensified.

Housing Minister Chris Bishop.

New rules require councils to enable mixed-use development

Tier one and two councils will need to allow things such as cafes, dairies and other retail in urban areas.

Industrial activities will still be able to be kept away from housing.

No minimum floor area and balcony requirements

It will be up to developers, not councils, how big apartments have to be and whether they have a balcony.

Bishop said these requirements could significantly increase the cost of new apartments and reduce the supply of lower-cost apartments.

He said evidence from 2015 showed in Auckland, balcony size requirements pushed up the cost of an apartment by $40,000 to $70,000 per unit.

AUT professor John Tookey. Photo: https://www.aut.ac.nz/

Bishop told the Real Estate Institute that people complained about shoebox apartments.

"I agree that they won't be the right housing solution for everyone. But do you know what is smaller than a shoebox apartment? A car or an emergency housing motel room."

AUT professor John Tookey said there would be questions around how far the rules were relaxed. "We might have to draw a line and say there needs to be toilet facilities separated off, for example."

"What do we sacrifice on the altar of lowest cost?"

MDRS is made optional

The MDRS was the bipartisan agreement between National and Labour that was designed to allow for more density - enabling houses up to three-storeys without a resource consent.

All councils currently required to implement the MDRS will have to vote on whether they retain, alter or remove its standards from their areas.

If they remove or alter the MDRS they need to implement their housing growth targets, the intensification changes to the NPS-UD and the mixed-use provisions.

What will it mean for house prices?

Olsen said the plan would make a difference.

"We spend a lot of time talking about how awful the housing market is, how bad affordability is, I don't know if that's going to change immediately but I certainly feel more optimistic about the outlook for the future and that feels like a big thing to say."

He said New Zealand had failed horribly at trying to dictate terms to the housing market, to the country's' "utter detriment".

"Anything that will create more housing is a good thing, full stop."

Tookey said it would probably lead to more apartments being built, if the new rules made it more profitable for builders to do so.

But he said the availability of more affordable apartments would not necessarily make other types of housing more affordable.

"We're assuming they're all competing in the same marketplace, and they're not. People who want to buy a standalone property on a quarter-acre aren't going to be competing in that space, anyway."

Olsen said if apartments were what people needed, more would be built.

"It shouldn't be up to us whether that's good, bad or otherwise."

Tookey said, for prices to fall, there would need to be more homes available than there was demand for them - and there was no guarantee that builders and developers would rush to build houses before there were sufficient buyers because it would reduce their margins.

"The way in which government could ultimately change the game is by using the power of the public purse to procure and build the right sort of houses in the right sort of places... Even if you went for 10,000 homes in a particular location you could actually get houses built ahead of the market."

Corelogic head of research Nick Goosall said the changes were welcome.

"It's the right thing to do."

He agreed that any development would still need to stack up for builders and developers to make use of the new rules.

"It will take some time for them to have a major impact on the market. It's definitely the right thing to do to say you can build in more places, make it more available, make it more palatable. As that demand comes, as it becomes more affordable, we'll start to see them build off the back of that."