Image: Tina Tiller

WellingtonMarch 7, 2024

The case for why Wellington should keep character areas

Staff writers

Image: Tina Tiller

Cherie Jacobson is part of a group of Wellington heritage professionals who submitted on the District Plan. She spoke to The Spinoff about why she wants to keep character areas in the inner suburbs.

The Spinoff: For those who don’t know, could you explain the difference between character and heritage?

Both character and heritage have been protected by the District Plan for many years. The definition for heritage comes from the Resource Management Act as “natural and physical resources that contribute to an understanding and appreciation of New Zealand’s history and cultures.” They can be sites or areas, including wāhi tapu, or structures. Character is defined in the District Plan as “a concentration of common, consistent natural and physical features and characteristics that collectively combine to establish the local distinctiveness and identity of an area, and that contribute to a unique ‘sense of place’.”

The difference seems to be between one building or structure being recognised for its heritage values versus a whole street or area. But in practice, heritage and character can be pretty indistinguishable. For example, in Wellington groups of commercial buildings have been made heritage areas (like Cuba Street), but groups of houses have generally been made character areas. I’ve been working in the heritage sector for five years and I still find the system difficult to understand. For example, many people don’t realise that if a place is listed by Heritage New Zealand Pouhere Toanga, it’s not automatically protected. What matters is the recognition of a building or site in a local authority’s district plan, which dictates how it’s protected. This is why the District Plan is so important. Many people I work with agree that New Zealand’s heritage system could do with an overhaul but, for now, we’ve got to work with what we’ve got.

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Why do you feel character areas are important for Wellington?

Wellington’s character areas are one of its most distinctive aspects – think of iconic images of Wellington and there’ll be a collection of wooden houses on Matairangi Mt Vic. Many Wellingtonians feel a strong connection with these neighbourhoods, which are built on a human scale that encourages interaction at street level.

I want to make it clear that I’m not against increasing the density of our city. No one can deny we need more housing and I welcome more development in my own suburb. However, it feels like heritage and character have become a scapegoat for the complex challenge of housing supply in Wellington – and sometimes conflated with poorly maintained rentals. I’m not naive to the experience of living in cold and mouldy houses in Wellington, anyone who has flatted in the city will have their stories to share. But I’ve also lived in two very well maintained early 20th-century Wellington houses; one in Newtown and the other in Northland. Both had insulation, heating, and responsive landlords/property managers which made a big difference. The state of any house is the responsibility of the person who owns it. The cliché “they don’t make them like they used to” is true for many of these houses, they were built with sturdy native timber and hard-wearing materials. Modern houses have a lifespan of 50 years, some have cladding and joinery that is designed to last for just 15 years.

We have lost so many of our heritage places – stretching back to the earliest human occupation, not just colonial structures. Through character areas we have an opportunity to protect some of what remains and the stories these areas tell about the development of the city and the people who lived here. These areas have been protected for a reason, it seems shortsighted to think we know best at this moment of time, because once they’re gone, they’re gone.

three houses with sky behind them. they are pretty victorian terraces but looking at them you feel almost certain that they are cold, expensive, and damp. it's just a vibe — Photo: Getty Images

Character protections, by definition, are restrictions aimed at stopping homeowners from demolishing and developing their homes, which makes it hard to put higher density townhouses or apartments in those areas. How do you think Wellington should balance the need for more homes and intensification with protecting character?

We should improve the operation of character area protections rather than getting rid of them. The District Plan rules protecting pre-1930s housing in the inner suburbs don’t rule out development, they just mean you need to get consent to develop. The Council could make it easier and cheaper to apply for that consent.

They could look across the Tasman where the cheapest planning permit in the City of Melbourne is about 1/10th of the deposit Wellington City Council requires. Notification of permits so that the public can have a say is also commonplace (the latest data says almost 40% of permits in Victoria were notified compared to less than 1% in Wellington) and hearings are not always required. It was interesting to see Melbourne named by The Spinoff as one of the cities that the “creatives, students, hipsters and yo-pros” aspire for Wellington to be like. The City of Yarra (an urban local authority in inner Melbourne which includes suburbs like Collingwood, Abbotsford and Fitzroy) has focused its land-use policies on protecting heritage and character, while accommodating growth and change in strategic redevelopment sites and precincts. Approximately 70% of properties in the city are included in its Heritage Overlay.

People have been quick to blame character areas and heritage protection for the lack of housing development in Wellington. But one of Wellington’s big developers, Willis Bond, appeared at the District Plan hearings to say that availability of land isn’t the problem, the cost of development is. That’s backed up by the availability of land in the CBD and surrounding areas that’s crying out for more intensive development: 2018 research found that 20% of the CBD is at-grade car parks or parking buildings, while underdeveloped car yards line Kent and Cambridge Terraces.

Character areas currently apply to 88% of land parcels in the inner residential zone. The council’s proposed District Plan suggested shrinking character areas from 306 hectares to 85 hectares, retaining only the most authentic and best-preserved streets. What did you think of that proposal?

It’s far from agreed that the Council’s proposed 85 hectares covers Wellington’s most authentic and best-preserved streets. That proposal relied on analysis by one company using a methodology that other heritage experts took issue with.

Even if that 85 hectares does cover the best of the city’s residential character, the panel found that intensification immediately surrounding those areas would have a “Swiss cheese” effect, with tall buildings right next to or in the middle of character areas, reducing the concentration of features that contributed to the creation of a character area in the first place.

What did you think of the independent hearings panel’s recommendation to expand character areas back up to 206 hectares? Does it go far enough?

I respect the skills and experience the panel brought to its role – these weren’t people randomly picked off the street, they have significant experience in urban planning, heritage and other relevant areas. Their recommendation of 206 hectares would enable the intensification required over the next 30 years while avoiding that Swiss cheese effect. The group of heritage professionals I’m part of submitted in favour of retaining the original 306 hectares, but we know the city needs increased density so we accept the recommendation as a necessary compromise to achieve the required outcome. Everyone who has engaged in this process agrees that Wellington needs more housing. Everyone wants a vibrant, thriving, more accessible, intergenerational city. Lots of people look longingly to international cities full of heritage and density.

I find it really frustrating that right from the draft Spatial Plan the city’s housing challenges have consistently been portrayed as Boomer Nimby vs Millennials and Gen Z, old versus new. It’s a simplistic characterisation that ignores the complexity of the situation, the nuances of the debate and its evidence.

What do you hope will happen in the council’s District Plan meeting on March 14?

I hope the Council will endorse the recommendations of the panel, which also reflect the recommendations of Council staff following the initial public consultation on the draft District Plan. I hope they’ll take a balanced approach and see that the protection of heritage and character is not incompatible with density, nor is it the main reason for the high cost or constraints on supply. A ‘leave it to the market to fix’ approach is not realistic. I really hope that we can move past this factionalism because I can’t see how a city whose residents are constantly pitted against each other can work successfully towards a positive future.

Keep going!

OPINIONWellingtonMarch 7, 2024

Great news: building new housing makes old housing cheaper

Stuart Donovan

Guest writer

Does new housing improve affordability? Economist Stu Donovan breaks down an important but controversial question.

Wellington City councillor Iona Pannett recently suggested new apartments in her neighbourhood of Mt Victoria wouldn’t improve affordability, because they were priced at $1 million and had “gentrified” the area. In another instance, Heritage New Zealand’s central region director Jamie Jacobs told Re: News replacing heritage buildings with new housing wouldn’t help first home buyers because the underlying land was expensive, so presumably any new housing would be, too.

Comments like this crop up regularly in discussions about housing, such as when people complain that new developments will just result in “luxury” apartments. Unfortunately, the views expressed by the likes of Pannett and Jacobs fundamentally misunderstand the important contribution that new housing makes to affordability for three reasons.

The first reason is that the price of new housing needs to be compared to other housing in the same area. In many neighbourhoods in Auckland and Wellington, for example, even new housing with a price tag in excess of a million dollars will be more affordable than the average dwelling in that same area. According to OneRoof data, for example, the median dwelling price in Mt Victoria is $1.2 million. By this measure, million dollar apartments are relatively affordable.

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The second reason is that a simple comparison of prices doesn’t tell you much about quality. And new housing tends to be of a higher quality than existing housing simply because it is, well, new. Research from the US estimates that the capital value of houses depreciates at 2% per year even when allowing for maintenance. Accounting for this capital depreciation is especially important in Wellington because persistently low rates of building have left the city with a relatively aged housing stock. If we assume an average $1.2 million house in Mt Victoria was built in 1980 and has capital improvements worth $400,000 today, for example, then its new price today (adjusting for depreciation) might be closer to $1.8 million.

The third and most crucial reason is that new housing improves affordability far beyond the actual houses themselves. How? Well, new housing creates a series of vacancies whose effects ripple out over the city. People who can afford it move into the new houses, freeing up their houses for others. The vacancies that result from new housing help to put downward pressure on prices for everyone, even the people that choose to stay put where they are.

To put in simpler terms, imagine a hypothetical city in which there are 100 households with varying income levels. Then a developer comes along and builds ten new “luxury” homes in the city, which are purchased and occupied by the ten wealthiest households. This is, I think, the sort of “nightmare scenario” that looms large in the minds of people like Cr Pannett when they conclude that new housing doesn’t help with affordability.

The problem with this conclusion, however, is it ignores that the ten wealthy households have likely vacated their old homes, which then become available for other households. When these vacancies are taken up by other households, then there are another ten empty homes available for others to occupy. And so on, and so forth.

The process by which new housing creates vacancies that ripple out across the wider city is sometimes called “filtering” or “moving chains”. And the moving chain process is not merely a hypothetical theory proposed by a defunct Brisbane-based economist. Over the last decade, moving chains have been the focus of a large number of urban economic studies.

A recent study from Sweden, for example, considers how the effects of new homes varies with income. Although new homes tend to be occupied by wealthy people, like in our hypothetical city above, the authors find that the people who occupy the recently vacated homes are less wealthy than average. They also find that, in locations with higher housing construction rates, every income group enjoys better access to newer housing and more space. Another recent study from the US found new builds improve housing affordability for middle- and low-income households, even in the short run: “The effects are diffuse and appear to benefit diverse areas of a metropolitan area.”

A third study from Helsinki, Finland finds new housing “triggers moving chains that quickly reach middle- and low-income neighborhoods and individuals.” To illustrate these effects, the authors show that every 100 new houses in central locations results in 60 vacancies in zip codes in the bottom-half of the income distribution, with 29 of these in zip codes that are in the bottom-quintile of the income distribution. The authors conclude that new housing “is likely to improve affordability outside the sub-markets where new construction occurs and to benefit low-income people,” even when the new housing is priced at prevailing market rates.

Of course, this is not to suggest that all new housing will have the same effect. Evidence suggests that new housing makes a bigger contribution to affordability in cities with low vacancy rates and when the new housing is centrally-located. One possible explanation for the latter finding is that centrally-located dwellings are a viable alternative for more households, possibly because they’re accessible to jobs, education, and friends or family. This explanation seems to support policies that would allow more new housing in central locations.

Although the contribution of new housing to affordability is not immediately obvious, I think it’s intuitive when you account for location, quality, and these wider ripple effects. To use an analogy that may be even more intuitive: We wouldn’t measure the contribution of new cars to affordability based on their price. Indeed, new cars are expensive because they’re new!

And, if we were to turn off the tap on the supply of new cars, then older cars would quickly become more expensive. This is exactly what happened as we emerged from the pandemic, when global computer chip shortages pushed up the price of new cars and quickly fed through into higher prices for second hand cars. Similar market dynamics apply to housing.

The situation that Wellington now finds itself in, where even very old and low quality houses are relatively expensive, is a major problem and the direct result of a decades-long failure to build sufficient new housing. To start to turn this around, Wellington now needs to build a lot of new houses – even houses that might appear, at first glance, to be relatively expensive.

Stuart Donovan is a senior fellow for Motu Economic and Public Policy Research in Wellington. Stuart currently resides in Brisbane with his family and three worm farms. Stuart does not own property in Wellington, but he would consider doing so if prices were to fall.