Labour on financing new housing infrastructure

The parliamentary Labour Party has been showing signs of being serious about proposing steps that would, as they see it, unwind the structural impediments that keep urban land prices high and slow down the construction of new housing. Their housing spokesman (and campaign chairman) Phil Twyford has indicated that Labour wants to get rid of the artificial urban limits around cities, especially Auckland, and even managed a joint op-ed with the New Zealand Initiative on that.

Welcome –  and no doubt genuine –  as it all is, I’m still somewhat sceptical about what it will mean in practice.  Any Labour government is near-certain to require the support of the Greens, not known for their support for such flexibility.   And Labour or Labour-associated mayors lead our three largest cities, but there has been little sign of those Councils or mayors leading the way in freeing up urban land supply.  There is a great deal councils could do if they wanted to.  And even if they ran into legal challenges under current legislation, they could still be laying down markers as to the likely direction of reform when Labour returns to national office.

Last week Phil Twyford was out with another interesting idea in the same broad area –  very long-term infrastructure bonds paid back by targeted rates – which again garnered public support from the New Zealand Initiative.  Twyford sketched out his idea in an op-ed in the Herald, and also gave a substantive interview on it to, who covered it in an article here.  A reader with ties to the Labour Party suggested that I might like to write about it.  My interest in the details of local authority finance is, sadly, quite limited, but I’ve been mulling over what to make of the proposal for the last few days.  Is it really a proposal that, if adopted, might make a useful difference?

One difficulty in reaching a strong view is that the idea is no more than sketched out at the moment, and many of the details could matter quite a lot.

Some have argued that New Zealand should introduce, or allow, the sort of model used in many parts of Texas –  Municipal Utility Districts –  where developers of new residential areas outside existing city limits can form an incorporation, with its own governance structure, which in turn borrows to finance infrastructure developments and the provision of utilities such as water, sewerage and even parks.  The bonds are then serviced by user charges and property taxes on the properties within the specific district.    The New Zealand Initiative has written favourably about them (reported here), and I found an interesting recent Texan newspaper article that captured some of the colour/flavour of these sorts of vehicles.    Whatever the merits of these schemes –  and there seem to be some downsides too –  they aren’t what Twyford and the Labour Party are proposing.

There are some real issues they are trying to address.  As Twyford notes

The council is up against its debt ceiling and last week put the brakes on large-scale housing projects in Kumeu, Huapai and Riverhead until more progress is made on roads, stormwater and the like.

When the population of a city is growing as rapidly as Auckland’s, the existing debt ceilings are almost certainly flawed.  There is a huge difference in the amount of debt, relative to (say) current revenue, that should prudently be taken on in a local authority region  with no population growth than in a region that is seeing 2 or 3 per cent population growth per annum.  We saw this at a national level when New Zealand and Australia were rapidly developing prior to World War One.  Overall government spending as a share of GDP was much lower than it is today, but debt levels (again as a share of GDP) were much higher –  in excess of 100 per cent.  It wasn’t a problem, and markets didn’t see it as a problem.

Some of the current problem then seems to arise from a reluctance to use targeted rates, to ensure that purchasers of the new properties bear the cost of the infrastructure involved in developing those properties.  Development contribution levies presumably go only part of the way.  If owners – present or future –  of the newly-developed sections bore the full cost of the infrastructure it isn’t clear what (economic) reason the Council could have for standing in the way of future residential developments. Planners’, bureaucrats’, and politicians’ visions as to what the city “should” look like are quite another problem –  and not one that Twyford’s proposal seems to address at all.

Twyford describes the problem this way

Developers under current rules have to finance infrastructure within a subdivision and are levied by the council for a share of the cost of connecting to the wider roading and water systems as well as parks.

Many developers struggle with the sums of money involved and it adds cost and delay to projects.

But it isn’t clear that the issue here is really infrastructure finance.  Developers need to finance all the costs of bringing properties to market, including covering both the delays that are perhaps inevitable in complex projects, and those brought on by the regulatory approvals processes.  The largest chunk of those costs typically wouldn’t be the infrastructure (I’d have thought) but the unimproved value of the land  (recall that urban and peripheral urban land prices are really what are sky-high).  And property development is risky –  even though the Reserve Bank’s LVR restrictions weirdly exclude new construction, new developments are where far and away the greatest risks lie.  Lend on an existing house in Mt Eden and the risks are far lower than lending on a new development in Huapai.  Sections might sit unsold, or undeveloped for years.  New houses might do so too –  there was plenty of that in Dublin after the boom ended.

There has been talk recently of banks becoming more cautious about lending for new construction –  perhaps partly from their own reassessments of risks, and partly at the prompting of parents, in response to APRA’s nudges.  Broadly speaking, that seems to me quite welcome.  Banks make their own credit judgements and sometimes they will be less willing to lend than the authorities might like.  It is, of course, the money of their shareholders they are putting at risk.

But Labour talks of central government becoming a fairly large scale provider of finance.

Labour’s plan is for infrastructure within a development, as well as the connections to the wider networks, to be financed by 50-year bonds.

Instead of the developer picking up these costs and loading them on to the price tag of a new home, the bonds could be issued by a government agency – perhaps a specialist infrastructure unit within the Treasury.

Bonds issued in this way would be the cheapest finance available, taking advantage of the Government’s ability to borrow more cheaply than anyone else.

The plan seems to be for the government to issue long-term bonds, with the government standing behind the bonds, and then to on-lend the proceeds to developers, tied to specific projects.  The bonds, in turn, would be serviced by targeted rates levied by local councils on properties within that development.

It all sounds fine when everything goes well (most things do), but here are a few of my problems/concerns:

  • should we be comfortable with Treasury officials making loans to individual developers, with all the risks of political cronyism in the allocation of credit over time?  At very least, lending would need to be done at much more of an arms-length from elected politicians (as, say, when the government provided loans through the Housing Corporation or the Rural Bank),
  • on what basis would we think that Treasury officials –  or even those of a more independent agency –  are better placed to evaluate and monitor residential property development projects than banks and other private providers of development finance?  Who has the stronger incentive to get it right?
  • isn’t there a high risk that the weakest projects will tend to gravitate towards the government provider of finance (strong projects, strong developers, will typically be able to get on-market finance?).  Isn’t that incentive greatest towards the peak of housing booms, when more conservative private lenders might start to pull back from the funding market?
  • how is cost-control ensured?  If developers can simply shift any cost blow-outs into mandatory targeted rates over the next 50 years, doesn’t that materially weaken incentives to bring projects in on time on budget?
  • what is the proposed legal structure?  Only Councils can levy and collect rates, targeted or otherwise.   Are they, or the developer, legally liable for the borrowing from the government?  Developers can and do go out of business quite quickly.  Councils don’t –  but then don’t the debt ceiling concerns cut in again? And can councils credibly (or legally) commit to maintaining a whole series of specific targeted rate for the next 50 years?    (And what are the protections for the property owners against arbitrary changes in these localised targeted rates?)
  • and what happens if the project fails?  If, for example, population growth slows up and a half-completed development lies idle for the next couple of decades.  Will the owners of the land have to pay the targeted rate anyway and, if so, how resilient is this likely to prove politically?

It seems to me that the proposal is meant to have two main attractions:

  • part of the development cost –  infrastructure costs –  are financed at a lower (government) interest rate, and
  • the headline cost of a new house would probably be reduced.

But in substantive terms, neither is really that much of a gain.   The cheaper government financing cost is only available –  in Twyford’s own words –  because the government’s credit risk is protected by the use of targeted rates.  But money that the government has first claim on isn’t available to service other obligations. The infrastructure bonds might well be rock solid, but the rest of any borrowing people had taken out to finance a new property would be just that much riskier.  Incomes don’t rise, and servicing the infrastructure bonds would have first call on what income there was.  Banks would presumably take that into account (including in deciding how much, and at what margin, they will be willing to lend).

And if the headline cost of a new house is reduced, so what?  If I have a choice between paying $700000 for a new house, or paying $600000 for the house and then having to service $100000 of infrastructure bonds issued by the government to cover the development costs of the house, it doesn’t make much difference to me.  If the infrastructure bonds really were 50 year ones, the annual servicing burden might be a little lower than otherwise.  Then again, New Zealand already has the highest real interest rates in the advanced world, so the notion of paying those high rates for that long might not be overly attractive.

And thus I suspect Twyford is wrong about a possible third benefit.  He argues

Reduce the infrastructure component of the price of a new home, and you’ll reduce not only new house prices but eventually prices across the whole market.

That’s unlikely.  If I’m looking at a $700000 house (with no targeted rates), and comparing it to that new house in the previous  paragraph, changing the financing pattern for the new house isn’t likely to change much about what I’d be willing to pay for the existing house.   Of course, if the policy really did increase the flow of new supply of houses and developed land, there would be benefit in lowering the prices of existing properties.  But simply lowering the headline cost of a new house (while loading an equivalent amount into infrastructure bonds) won’t change that.

In many respects, I’m sorry to reach a negative conclusion.  It is great that the Labour Party is looking for ways to make a difference to the housing market, not just for a few months but permanently  (and it is a disgrace that we’ve had 15 years of increasingly unaffordable house prices under both Labour and National-led governments).  And, of course, this isn’t the only (or probably even the main) component of their housing plan

Fixing the housing crisis and managing Auckland’s growth needs sustained reform on many fronts. Labour will build 100,000 affordable homes, tax speculators, and set minimum standards to make rentals warm and dry. We will free up the planning rules by relaxing height and density rules around town centres and on transport routes, as well as replacing the urban growth boundary with more intensive spatial planning.

But I’m sceptical that the infrastructure bond proposal is a suitable response to a serious constraint or that, even if the governance and monitoring concerns could be overcome, that it would make much difference to house and urban land prices.

If they wanted to consider a bold initiative, how about promising that any private land within 100 kms of Queen St could be built on to, say, two storeys without further resource consents?  With a similar policy –  perhaps 50 kms circles  –  for Hamilton and Tauranga, it would seem much more likely to make a real difference in lowering land prices –  the biggest financing issues not just for developers, but for ultimate purchasers.    There are other pieces of the jigsaw, but changing the rules that underpin expectations of future potential land values is probably the biggest component of the problem.

Throw in a sharp cut in the immigration residence approvals target –  not mostly to solve the housing problem, but because there is no evidence New Zealanders are gaining from the large scale non-citizen immigration  – and properties in or near Auckland would be much more affordable really rather quickly.










32 thoughts on “Labour on financing new housing infrastructure

  1. Perhaps the problem is more basic than Labour see – that much of the “infrastructure” is unnecessary. Centralised wastewater plants, complicated roads with a kerb then car parking then another kerb. Endless roundabouts, cycle lanes. double footpaths, wide lanes, bus lanes, stormwater swales and wetlands, filtered sumps, monitored pump stations. overcapacity drains, excessive fire hydrants, Rolls Royce everything. Even underground power is 10 times the cost of overhead – and I don’t see many houses in Parnell or Remuera being discounted because of the power poles round the place

    When you look at old beach resorts and what passes for infrastructure there – you can see how it can cost very little at all.


    • When Auckland has to build a Whanganui every year the infrastructure question is a little more complicated that doing it ‘beach resort style’.

      Even if immigration was significantly cut back as Michael asks for -Auckland and our other centres still need tens of thousands of new houses -this requires some sort system for infrastructure provision.


      • Actually with a residence approvals target of around 10-15K pa, there would be little or no trend population growth. Population would still be growing right now – the NZ outflow is unusually low, but if it eventually returns to trend – we’d be basically flat. The person per dwelling numbers suggest more houses are needed now in Akld (ie there is a backlog to clear), but that is less clear in most other centres.


      • The trend of no/low net NZ citizen migration away from NZ is based on a lack of global opportunities and in particular because kiwis are no longer getting high paying jobs in Australian mines….. This doesn’t seem likely to change in the near future. So why assume that the trend of kiwis leaving NZ will resume? Further how much of the NZ citizen migration trend has related to expensive housing in NZ? If housing was cheaper in NZ -which is the intent of these reforms -this might make NZ more desireable for kiwis who would otherwise have left?


      • I think it is mostly just that Aus unemployment is a bit higher than usual at the moment (historically that tends to be the key cyclical driver). It may not resume, but wages in Aus are still around 40% higher than those here. certainly, fixing NZ housing might make it less attractive to leave for some but……when will that happen?!


      • Actually it won’t make a difference because its the 4 million tourists this year that needs to be fed and serviced. We simply do not have enough locals to do those jobs. 40,000 work permits issued which equates to 40,000 people need to be housed, so cutting back immigration targets do nothing to the actual physical numbers of people. A good example would be the Goldcoast. Permanent residence population is only 500,000 which is only a third of Auckland but they have more gleaming apartments and more mega shopping malls significantly taller and more available houses than Auckland because they also entertain 12 million tourists a year.


      • Actually 9 million tourists if you include domestic tourists. Goldcoast’s 12 million includes domestic tourists.


    • Yet……There are new technologies for more localised infrastructure provision for -sewerage, storm water, fresh water, waste management, electricity generation…… Private developers using something like a MUD system are more likely to be innovators in this field than traditional/conservative Councils.


  2. Interesting analysis Michael. A few comments.

    1.Is NZ’s immature private financial system any better than a government created ‘infrastructure bank’? Currently the private sector lenders or at least the major banks -if they are too conservative in their lending practices to developers -if they under lend and there is less housing supply than demand -they benefit by rising prices in the existing housing stock. What are their incentives to get it right -in the real world -not some artificial mind game of perfect competition?

    2. The private sector financial system seems to be prone to following the economic cycle -lending more in booms, cutting off lending in busts. This boom/bust cycle has decimated both the construction industry and developer finance in NZ -2008 being the most recent -with long term implications for investment, productivity etc in the industry. Would not a secure longer term focused ‘infrastructure bank’ that was able to ‘see through’ these cycles be beneficial?

    3. A municipal bond lending treasury unit could be tasked with evolving to a New Zealand version of the independent MUD system -their job could be to move towards creating a mature financial system for new housing supply. This is not going to be created overnight by the private sector. It needs some sort of government involvement, partnership with industry, regulation, trial and error etc. Michael this movement towards independence could address some of your concerns of cronyism.

    4. Michael I agree with you the greatest risk in this proposal is that a developer mis-calculates the demand for their development (like Mangawhai Council did with their sewerage scheme) -they borrow a lot of money in municipal bonds -build a lot of infrastructure -the market doesn’t buy it -thus there are very few end households paying the targeted rates -the developer can’t pay the targeted rates on their unsold proportion of the development over the long-term -they go bankrupt and the bonds are defaulted on.

    In response I would proposed a two-tiered lending arrangement. The Treasury Unit can issue (and roll-over) short-term, high interest rate bonds to developers at the beginning of the development process which the developer can then exchanged for long-term low interest rate bonds at the end of the development process -when the majority of houses are in end-user ownership. I think this would reflect the changing nature of development risk. The long-term low interest bonds could be issued to the developer on a pro-rata basis as the development is sold to the end households -or as certain proportion milestones are reached.

    I believe this would also have the benefit of encouraging developers not to over supplying the market. They would be encouraged to actually gauge the unmet demand and only supply that. Thus supply would be much more responsive to demand. It would encourage developers -new house suppliers -to get in,supply what people want and get out as quickly as possible. Hopefully this would decrease the damage of housing boom/bust cycles.

    I think this business model should lead to cost savings, but I agree with you Michael, the major benefit for housing affordability is the ability to access out of sequence land at rural prices. This freedom of entry for low cost providers will eventually mean an ‘anchor’ is set pricewise -affecting the whole urban house market -not just the price of new houses.

    5. Re: “If they wanted to consider a bold initiative, how about promising that any private land within 100 kms of Queen St could be built on to, say, two storeys without further resource consents?” Quite frankly Michael this is nuts -if supply is massively opened up but there is no consideration on how the built environment infrastructure will be provided -then the lowest common denominator development will occur -this will be ribbons of houses built either side of existing rural roads. This is what happened in the UK pre WW2 -the outcry against it being a significant factor in creating Greenbelts through the 1947 UK Town and Country Act -which started this whole housing crisis nonsense.

    What is needed -and all those Labour led Councils that you criticise Michael are struggling with this -is how to negotiate with a tightwad central government that does not want to pay for infrastructure or give Councils the taxation power to do it themselves (I really think a big part of NZ’s urban planning problems is too much Scottish blood). What is needed is some generosity with regard to infrastructure and city building spatial provision.

    In my opinion municipal bonds and targeted rates is a positive step in the right direction for this process.

    P.S NZ’s housing affordability and peak home ownership problems track back to 1991 -not the beginning of the Helen Clark government.


    • Brendon

      Just quickly for now – might come back in more depth later – yes, i totally agree that our housing affordability problems date back at least to 1991 (but again the RMA and associated legislation didn’t divide materially on party lines, so my basic point is that parties of both stripes bear the responsibility. Having said that, the sharpest increases in real prices date back to 02/03.

      You dismiss my 100km radius suggestion as “nuts”. Not suggesting it is perfect, but it is about freedom/choice, and I’m not suggesting developers shouldn’t have to provide infrastructure. As importantly, my radical suggestion had two strands – take out the immigration-fuelled population pressure and there won’t be much new building going on anywhere for long.


      • The 2 level building concept. Nothing wrong with that. Its already being offered in the Unitary Plan. Most of the new zoning under the Unitary Plan does offer, 2nd dwelling. 2nd dwelling allows an additional dwelling as long as it is attcahed to the main dwelling. It can be completed at the cost of a firewall, a new kitchen and toilets and shower. Can be upstairs, downstairs or alongside but can’t be strata titled but offers a home and income or two rentals. This is different from the minor dwelling concept.

        The other is the mixed housing suburban concept, also offered under the Unitary plan. You have have terraced housing or units stacked. All depends on the design.

        Auckland is already stretched from Leigh to Pukekohe which does already mean more than 50 km stretched either way, in total 129km stretch as it is.100km takes you to Huntly which no one wants to live there.


      • I’m sure I recall you telling me a year or so ago that huntly should just be treated as outer Auckland, and pointing out how affordable houses were there?!

        Re your point on the two storey building, yes that is fine for the land zoned appropriately, but there will be lots of land in the 100km radius that currently isn’t zoned residential at all. It is the credible risk of new land being brought quickly to market that acts to hold existing urban land prices down.


      • Huntly already exists. Even you decide to change Auckland’s fringe boundary to include Huntly it does not change the fact that it is just too far away from Auckland and is just too long a drive.


      • I think that was the point i was making a year ago. But i wouldn’t necessarily expect many more people to want to live there, but it keeps the option/competition open, which drives land prices nearer the city back down.


    • Brendon,

      In my read of financial systems worldwide, the only thing worse than private banking systems is govt ones (akin to Churchill on democracy and the alternatives). The private banks are far from perfect – altho i was a bit puzzled at your description of the system as “immature” – but they’ve done pretty well over a long period (and, like their mostly Aus parents, came thru the 2008/09 experience unscathed).

      Do banks have a vested interest in higher (rising) land prices? Perhaps so, at least when it comes to existing properties – rising collateral value is better than falling value. But then, as we agree, the land use regs are the real obstacle to materially lower, and stable, house/land prices so it seems unlikely that banks are holding back development credit to keep land prices up. what they may, reasonably, worry about is some evidence suggesting that land use restricted markets are more prone to bigger booms and eventually very nasty busts.

      Your two tier model is an interesting one, although perhaps it is just the old market-oriented economist in me that finds it puzzling that high risk lending for the development phase would be a natural business for govt, or one where it would be easy to manage the risks adequately no matter what the good intentions. Any thoughts on how to get round the adverse selection problem, of the riskiest development projects being keenest to seek govt finance (and in aggregate the projects get riskier as the cycles move towards their end)?


      • Michael I think NZ’s and even the Australaisan banking or financial system is immature because it does not have specialised infrastructure lenders, like they have in the US.

        Also reports on the ground is that bank lending to commercial developers in NZ have dried up due to the Australian banking regulator getting scared about oversupply in the Australian market.

        The question for NZ is how do we go from here -where we a have a lack of systems to responsively supply affordable housing -to a better place where we there is responsive supply? How do we make a systemic jump to a structure that provides affordable housing -especially if we are going to tie our hands behind our backs by insisting governments cannot take any active steps in the process?

        I don’t believe competitive markets spontaneously burst into being. It takes the right ingredients…. culture, institutions, good laws, leadership….

        What changes does NZ’s finance system need to make to play its part in providing affordable housing to NZ?

        The finance system is just a tool, as is the free market, that society uses to meet its needs. If it isn’t working as well as it should -well a democratic country can change it……

        P.S. Responsive housing supply is not just needed for immigration fueled population growth. In the past strong income growth meant strong growth for bigger homes i.e. housing is a normal good. In theory that could happen again even in the absence of population growth. Also it is almost certain that in the future -even when NZ’s population has stabilised -that many houses will be destroyed by natural disasters and we will need systems in place to ensure affordable rebuilds. So cutting immigration by itself is not an answer to this housing crisis or future crises.


      • ok, i see what you mean about “immature”. not the term I’d use, but agree that those lenders aren’t present (presumably for a reason, perhaps some mix of regulatory – most inftrastructue by choice being directly govt financed – and market factors).

        I do note the ambivalance that tends to come through, perhaps esp from people on the centre-left about finance. Often the concern is that “banks” lend too much – hence support for eg RB controls on this that and the other – but at times a concern about not lending for the right purposes. Perhaps it is true – banks, no more than any human institutions, aren’t perfect – but my own predeliction is to start from better understanding the reasons for the patterns of voluntarily chosen behaviour we observe.

        Re your PS, yes of course i agree. I’m fully supportive of winding back the entrapping web of regulation, and would favour that even if we had zero population growth. But much of the angst at present is the result of the interaction of intense population pressures in some places with land use regulation. And without population pressures, the infrastructure financing issues – the focus of Twyford’s idea – become altogether less pressing.


      • Also Michael

        To answer your question about adverse selection. The answer is we need specialised lenders who can confidently assess development risk. We also need good regulators to ensure the various market players are doing what they are meant to do. Perhaps an infrastructure version of the Electricity Commission?


      • On its own, I don’t think that is a sufficient answer. Specialised private sector lenders will, rightly, turn away the most risky projects. The concern is that those people will end up at the door of the public lender, claiming the gaps in the market for finance are holding back housing supply. It is difficult to get the governance and incentives right to avoid the perennial trap of govt lenders getting persuaded to take on these particularly high risk projects.

        Liked by 1 person

    • But the option to live in Huntly already exists. You don’t have to change any boundaries. Huntly is there. You can see it. Huntly has houses. Competition already exists on the fringe. It does not change the fact that there is no transport links. Still boils to the lack of infrastructure. I would happily live in Huntly tomorrow if a tran link exists. The rail lines are there but there is no station. I have a 5000sqm lakeside property in Huntly. No one wants it.


  3. My concern is that the ‘targetted rate’ becomes part of a structure where the borrower ends up getting tax deductions for the whole amount even though it represents principal and interest.


    • interesting point. I suppose there would be ways round it – some allocation method between principal and interest – but, realistically, it probably wouldn’t happen, and would just become deductible (for investors) as existing rates are.


      • Absolutely there are policy fixes. But you may find that councils/developers enthusiasm for the targetted rate idea evaporates once it has the same tax consequences as a secured loan. Which in substance is all it is.


      • Entirely agree about the character of the deal. I can see it being attractive to developers, but I’m not at all sure what is in it for councils, or potential homeowners (as i noted, adding some secured first charge debt just slightly reduces the credit quality of the rest of the debt)


  4. Michael I am just thinking this through. Assuming there isn’t market failure in the finance market and the cost of housing falls though effectively a government subsidy aka cheaper finance would this be captured within Obegal in the same way a grant would? It were done through tax it would be a tax expenditure but is there a balance sheet equivalent? Or is it simply opportunity cost?


  5. Presumably the Crown would have to charge some sort of risk and admin margin, ideally enough to cover cost of capital. if so, gross debt would rise, net debt would be unchanged, and there would be some small gain to net operating revenue, at least most years (probably not when the great property bust come and polticial economy risks crystallised and some of the debt was written off)


  6. How did NZ plan/finance/execute the post WW II housing developments? Any basic lessons there?

    Think I’ve asked before: ‘how many’ houses are we short? And do the folk currently short a house get first dibs on the new supply? Or should investors -having banked equity gains – be allowed to bid for new stock?

    But perhaps it is an issue of “homes” not houses assuming that home ownership leads to better communities….which almost implies a wider public policy framework.


  7. Much of the post WW2 housing was financed by govt – first home buyers got typically 90% finance thru HOusing Corp (State Advances) and could only use it to buy a newly-built home. But the other key factor was that land use restrictions were not particularly tight, so it was easy to build new houses – and the initial infrastructure was often quite basic.

    As to number of houses short, who knows. One can run scenarios, esp for Akld, where the number of people per house has increased quite a bit, with from memory anything up to 40000 houses short. In most of the rest of the country it is much less clear there is a physical shortage.


  8. No matter how you try and fund the infrastructure required, it will remain too large to build. It boils down again to how far Auckland already stretches. Travel distance from Leigh up north to pukekohe down south is 129 km. In between are the Waitakere ranges with hundreds of kauri trees and 57 sacred and heritage mounts. These are all exclusion zones under the Unitary Plan. Vast areas are subject to a visual height limits called the viewshaft. The nature of these viewshaft restrict building levels to less than 4 levels.

    I have a apartment dwelling building site rezoned under the Unitary Plan. I went to Prendos for a concept Plan. The quote to just complete a concept Plan was $25,000. The first thing they said was, stick to 2 level terrace houses because the build requirements for a 6 level build was far too cost prohibitive on a 700sqm site. The $25k cost just for.concept Plan stopped me in my tracks.


  9. Hi Michael

    As a developer my view is that the problem isn’t funding the developers share of any infrastructure cost. This is simply a cost of production. Removing or reducing that cost won’t reduce the eventual sale price of the finished product, the market sets that price. Removing the cost of developer contributions to development would make more projects more viable from the developers point of view but again, wouldn’t change the affordability issue, however it may increase the supply of housing or it may just increase the margin the developer makes on the project (hooray!).

    Making more land available on the outskirts of a city has been long recognised as using up valuable productive land with more and more food production capacity being put under concrete and roading.

    Auckland in particular has plenty of scope for housing within it’s own current boundaries. It’s called going up and living differently than we have in the past. The new Unitary Plan, as poorly constructed as it is, has opened up huge opportunities to provide new housing in an urban environment whether we like that or not.

    The question about funding infrastructure growth is not about sprawling further out with ever increasing need for new infrastructure but about redeveloping existing infrastructure in order to take on new demand when we intensify the city by going up.

    How that is funded should be dealt with at a central and local government level through long term planning and infrastructure spend in line with growth expectation but never in conjunction with each developer. That would bog down development and create an even greater bureaucratic nightmare than we have already.

    Better to keep it simple, build the infrastructure and just invoice the developer a fair share of the cost and then pass the balance on to the overall ratepayer who will benefit by a growing and better balanced living environment.


    • Interesting perspectives thanks Murray. My own bias is towards being neutral being “going up” and “going out” – so long as the respective costs are roughly correcly allocated we shouldn’t be trying to push people into one style of living rather than another.


      • Yes I agree, probably most people would prefer to live in a single house and section although there is an increasing number that love the urban lifestyle, especially the young and even some old baby boomers like myself.

        The problem for Auckland is that if it wants to meet housing demand under that scenario, the housing demand over the next 40 years would mean we need additional land roughly equivalent to infilling the entire Manukau Harbour. Hence the Unitary Plan encouraging upward growth. Given the constraints of land supply it’s the only significant answer to this issue.

        The trick now is to encourage those developers who want to design attractive, sustainable, affordable multi unit housing that people will love to live in and that encourages good communities. There is a growing number of developers doing this now (which is great as there’s quite a lot of cheap rubbish as well) and we should see more great living environments that are based on growing urban communities as it’s pretty well the only solution unless we want to use up valuable land in ever widening sprawl in poorly utilised land use, more roads, more traffic, longer commute times and so on.

        Of course we could also do as you suggest and reduce immigration stresses and take our collective breath about all of this. As you’ve been pointing out though, successive governments over the last few decades don’t seem to be taking this tack so we’d better have a good plan in place as NZ is an increasingly popular destination for international buyers who will be quite happy to set the market price from an international perspective rather than a local one.


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