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Goff housing

AucklandJune 13, 2017

Phil Goff’s Housing Taskforce report is a really big deal and here’s why

Goff housing

To fix the housing crisis in Auckland, mayor Phil Goff put most of the key players in a room and locked the door. Good plan. And guess what? They’ve produced a really good report, full of good ideas and provocative proposals, says Simon Wilson. Now we’ll see who really wants to fix Auckland’s housing problems.

The report of the Mayoral Housing Taskforce, out today, is only 48 pages long but it’s full of big, bold ideas and what’s more, mostly they’re very doable. And it’s a consensus report. Builders, developers, bankers, designers, politicians, government officials and council officials: they’ve all signed up.

Of course it’s still fraught with political risk. There will be trenchant debate around the council table and between the council and the government. Because, despite the participation (as “active observers”) of four government departments, the report doesn’t so much close the gap between Auckland and Wellington as throw down a challenge to Bill English, Steven Joyce and their cabinet. It says yes we can. We can build a lot more houses a lot more quickly than we are doing now, but you guys in the government and on the council have to wake up. It says yes we can, we can build a lot more affordable houses, but again, you politicians have to get way smarter and way more committed to making it happen.

There are 33 specific proposals which the report says should be “investigated” and/or trialled and/or scaled up. Many of them are to do with ramping up the construction industry itself, while others address political and economic factors that have been holding us back. Among the more exciting:

Tax property owners who benefit from growth in services

Prepare for jargon: land-value uplift should be captured with a targeted rate. To understand that, think of the sites of the new City Rail Link stations, or the likely route of a light-rail line down Dominion Rd. The nearby properties will become more valuable because there will be far more people around: retailers will have more customers; property owners will be able to build denser housing and commercial blocks. So why not make them pay higher rates?

Overseas, this process of capturing land-value uplift is used to fund the very developments that create the extra value. Genius? Blindingly obvious, you might think. The CRL could have been at least part-funded like that, and it still could be. But to date neither the government nor the Auckland Council has entertained the idea. Why not?

True, there’s an immediate problem with the proposal: during construction the affected properties have a really tough time, because customers are driven away. You can see that happening right now on Albert St with the CRL. But that’s fixable: if you want companies to pay for the privilege of being on a soon-to-be-more-valuable site, you have to help them through the difficult phase when it’s all being built.

The taskforce threw down the gauntlet on this and recommended a trial in 2019 and full introduction in 2021. Your move, Auckland Council.

Sunshine after the rain? Mayor Phil Goff’s plan to fix the Auckland housing crisis is full of big, bold ideas

Tax land bankers

Currently, rates are set according to the capital value of property: essentially, the value of the buildings on it. This allows speculators to buy land they know will be developed one day, and not do any of that development but just sit on it as its value rises. It’s called land banking, and it’s an insidious way for just a few people to become rich by distorting the property market.

If the council changed to a rates system based on land values speculators would have no incentive to land bank. It’s not a wildly exotic idea: Hamilton switched to land value rates just a couple of years ago.

The taskforce does not recommend this, but says it should be investigated.

Let the council borrow more money

Auckland Council can’t borrow more money right now because it is near the limit of its allowable debt-to-revenue ratio. If they exceed that they will lose their AA credit rating, which would create all sorts of problems including their having to pay more for existing debts. Meanwhile, the government has funding available, in the Housing Infrastructure Fund, which the council can’t touch because it would lose that AA rating. Crazy? It sure is.

The taskforce has recommended that the government adjust the rules so the council will not be penalised for borrowing more. This is likely to happen: an announcement is due shortly.

Add to the council’s funding sources

The taskforce recommends that congestion charging (on traffic entering the city centre) be trialled. More pressure on the government here: it’s their call.

Make building consents easier

Currently, the council faces court action over $600 million of problems related to the leaky building crisis. It focuses the mind. Council consent officers are now very cautious about what they approve.

Fair enough, they’re safeguarding our rates. But that caution is also a barrier to progress. The council has been trialling a process called Consenting Made Easy, and the taskforce recommends this be rolled out to the whole city asap.

Part of it is simply a matter of streamlining. A big part of it is ensuring that consent officers don’t shy away from innovation. New building processes, especially modern prefabrication, could be immensely significant in holding costs down, but consenting officers have to keep up with innovation in the construction sector.

And part of it is about introducing a warranty and insurance scheme for building projects. This would move responsibility away from the council and onto the builders, and through them onto their insurers. Similar schemes already work well in Britain and various Australian states, which begs the question: why aren’t we keeping up? Both government and council need to act on this, but seriously: bring it on.

Housing in Orakei, in Auckland’s Eastern Suburbs.

Communities are critical 

The taskforce says the council needs to engage much more with local communities. Hallelujah to that. Nimbys are everywhere because we are all nimbys. If the council doesn’t effectively engage local communities, from the outset, guess what. There will be organised opposition, which may or may not be reasonable but it will very often be effective.

Council has to get way better at genuine community consultation.

The buggers at the banks

The taskforce report is not without weaknesses. The first concerns the banks.

Banking regulations and, even more, the policies of the banks themselves, both need an overhaul. New Zealand banks, most of them, are Australian banks, and they make profits in this country at record levels. Currently, though, when they sneeze in Australia we catch cold and shrivel up here.

That’s a major problem, because the lack of access to finance is quite possibly the single biggest barrier to scaled up construction of housing. Builders and developers just can’t raise enough money.

Banks were involved in the taskforce (especially through the BNZ) but its report has little to say on their role, apart from proposing that the impact of banking regulations be investigated. More work needed there, and the government has to take the lead.

What about the Unitary Plan?

Above all, says the taskforce, there has to be a focus on building a lot of homes, especially affordable homes, and building them quickly. “Develop at scale and build through the dips”, is how they put it.

At the launch of the report taskforce member Stuart Shepherd, an economist and infrastructure specialist, suggested that construction should focus on the areas where “the most homes can be built the soonest”.

Does that make sense? On the face of it, yes. But how does it impact the Unitary Plan? Shepherd says it doesn’t change the overall focus on building a denser city, but is a “sequencing issue”. He means that if it’s easier to build in new greenfields areas on the far-flung edges of the city, good, do it now, and come back to the more complicated issues of putting more housing into the inner suburbs at a later date.

That seems, at best, naive. It will always be easier to build where there are no nimby objections, but the outcome, if that’s all that happened, would be a sprawling blighted housing wasteland. The council has to engage in the hearts-and-minds battle about why a denser city will be a better city for everyone and there’s no good time to have that battle except now. It needs to be waged today, and tomorrow and the day after that.

Better than all the bits

The politics of this are pretty challenging. Mayor Phil Goff’s taskforce has produced a report that appears to move far ahead of the position in which the government is stuck. Which is: fretting about barriers to progress; bleating about how much it’s already doing. The taskforce makes it clear that so much more could be done.

The cold hard fact is this. The city needs 14,000 more homes every year for the next 30 years. Last year the council consented 10,000. Of those, only 7000 are actually being built. We do not have a problem that’s being managed. We have wretched failure.

The central argument of the taskforce is that we need to build at pace and scale, and keep doing it for years to come. It’s identified a series of barriers to that and proposed ways to overcome them.

And the beauty of the report lies, in the end, not in its specific recommendations, though they are important and numerous, but in what it signifies: a commitment among the disparate parties to fix this thing. Consensus decision-making for real outcomes.

The council used a similar process in 2015-2016 to address the future of the port, and got a similar outcome: consensus agreement on an exciting way forward. Sadly, that report seems at risk of being forgotten. The report of the Housing Taskforce cannot be allowed to suffer the same fate.

The government has been challenged: free the council – and fund the council, and ensure it can be funded – to enable the smart, efficient and creative development of much more housing. The council has been challenged: become the leader in all this.

The mayor stands in front of it all. Now he has to win council and government support to make it happen.

The Spinoff Auckland is sponsored by Heart of the City, the business association dedicated to the growth of downtown Auckland as a vibrant centre for entertainment, retail, hospitality and business.

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