Queenstown – 100% Purely full

The focus and debate lately has been on Auckland, which is bursting at the seams with population growth and an average housing market topping $1m. However, there is one area of the country that is facing an even bigger affordability crisis – the Queenstown-Lakes District. 

Challenges and opportunities
Queenstown is the jewel in our tourism crown; the gateway to our 100% Pure brand. The international tourism spend there topped $1.18b in 2015, plus a bit more in terms of the local market. 

The Queenstown-Lakes district population is 28,700; 13,150 of which live in Queenstown itself. Almost one third (4,000) of the town is Brasilian, making up the lion’s share of the town’s tourism workforce. 

However success comes at a price – a median house price of $910,000 for example. And with an average household income of $79,000, that gives a price to income multiple of 11.58 – higher than that in Auckland and the highest of anywhere in the country.

As a result, many workers in the booming tourism industry are struggling to find somewhere they can afford to live, and many businesses are scrambling to find ways to hold on to staff. One local service station is building accommodation on top of the carwash to house its workers. NZ Ski offered staff accommodation in Cromwell (60 km away) with free transport, but according to locals only a handful of people have taken them up on the offer. After all if you are working in Queenstown for lifestyle reasons, why would you want to live in Cromwell?

The brand new Remarkables Primary School is on a stunning lakefront site, yet it is already full; the library is now a classroom, and a PE shed has become the library. There are also increasing traffic problems around the airport in Frankton and getting into Queenstown proper. 

To grow or not to grow?
The locals are debating the solutions to these quandaries. One of the questions is whether to grow or not to grow? 

Some of the locals think they should be focusing on the premium end of the tourism market rather than getting more bums on seats. After all, there are plenty of other places for the tourists to go in New Zealand. But that would require some sort of tourism strategy, which the Government seems to resist. 

Others accept that Queenstown will continue to grow, but they want that growth to be truly sustainable in an economic, social and environmental sense. It is now cost effective for communities to be more self-sufficient; minimising use of water and waste and and generating their own renewable energy. These all require an up front investment, but they pay off in economic terms, not to mention environmental ones. Climate change is a major threat to the length of the ski season as the Europeans are discovering; there is now 50% less snow in Chamonix than in the 1970s. 

Which is the right way forward for the district? It is hard to know. What is clear is that whichever path forward the area chooses, they would be better off than under the status quo. So many resort towns like Queenstown grow like topsy, only to end up killing the golden goose by destroying the very reasons that people flock there in the first place. 

Solutions
There are some obvious solutions to Queenstown’s woes, but as is often the case the best ideas are politically unpalatable. Some solutions lie within the hands of the locals, but many do not. 

The Government’s solution to the traffic problem is to build more roads, but we know in the long run that only begets more cars. Buses or smaller shuttle vans are clearly needed to ease congestion, but they need funding from somewhere. Currently it costs $8.50 for the 7km journey from Frankton (where the airport and main shopping centre is) to Queenstown. Yet car parks in the centre of Queenstown are a mere $2.50 per day. One simple solution to the congestion problem is obvious; car parking fees need to be more expensive than the bus. I doubt any mayoral candidate is running on that ticket. 

The standard response to the housing problem is also to build more houses. However, new greenfield development would increase traffic problems and put the incredible scenery at risk. Instead, existing development should be made a bit denser through the use of infill housing or ‘building up’. We need demonstration projects to show how development can be done sustainably to provide an example for everyone. 

The trouble is that simply building more houses belies the true problem. On Census night in Queenstown, 40% of houses were unoccupied. This compares to a New Zealand average of 11%. Unlike Auckland, Queenstown (and Wanaka) truly do have a ‘ghost houses’ problem, mostly because of wealthy outsiders buying holiday homes here. As a visiting Australian architect pointed out at a seminar over the weekend, there is no housing shortage in Queenstown Lakes, there is a housing efficiency problem. Queenstown and Wanaka are at risk of becoming another Aspen, where most of the houses are empty and the workers have to commute in from satellite towns to service the rich and famous. 

Of course new technology could help encourage people to make better use of accommodation and transport (such as Airbnb or Uber), but this will only go so far in changing behaviour without providing the incentives to do so.

A major driver of the ghost homes phenomenon is the tax loopholes around housing. A capital gains taxalone won’t solve this problem, instead a Comprehensive Capital Income Tax is needed. If all houses are taxed the same as a bank deposit, that would provide a strong incentive to make sure the housing stock is used efficiently. 

The issues facing Queenstown Lakes District are certainly difficult, but they are not that different to those we face in the rest of the country. However, we have to get them right there, otherwise we risk exposing our 100% Pure brand. Solving these problems will require some innovative thinking, but not everything is within the hands of the local people. The Government will either have to step in, or grant the local authorities more powers over the issues they face.

You can hear more from architect Timothy Hill, one of the speakers at the Queenstown seminar over the weekend here

Geoff Simmons is an economist working for the Morgan Foundation. This post first appeared on Gareth's World.

Tune into NBR Radio’s Sunday Business with Andrew Patterson on Sunday morning, for analysis and feature-length interviews.

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