Unitary Plan's housing numbers a pipedream – Alexander

Chances of Auckland fitting an extra 422,000 houses in the city in the next 25 years are minimal, says BNZ economist Tony Alexander.

The Unitary Plan provides capacity for the houses to be built by 2041 but Mr Alexander says it requires a volume of building work that previously took 161 years to achieve.

He says the Unitary Plan’s aim for 422,000 new houses will need a building rate 2.5 times what it has been over the past quarter century.

“Traditionally, only about 80% of consents issued actually add to the housing stock but let’s assume 90% for such a massive construction push.

“Total consents issued for the next 25 years will need to be 470,000 or an average of almost 19,000 per year. The average for the past 23 years has been 7500."

Mr Alexander says Canterbury is a case in point. Building consents issued for the past 23 years have been 3730 annually. The number issued since construction started ramping up post-quake in early-2012 has been 5500 a year over the past four years.

“This is only 1.5 times the long-term average. Auckland needs 2.5 times its long-term average.”

He says more than that, the recommendation from the Unitary Plan’s government-appointed independent hearings panel is the construction of an extra 131,000 houses over the next seven years.

“This works out at about 146,000 consents or almost 21,000 a year compared with 9434 in the year to May and an average 5422 over the past seven years.

“House construction will need to be about 3.8 times the level of the past seven years, 2.8 times the level of the past 23 years, or average 2.2 times the level of the past year,” Mr Alexander says.  

He says the proposed Unitary Plan may well technically provide scope for the construction of an extra 131,000 houses in the next seven years and 422,000 in the next 25 years if adopted as is but it can’t be achieved unless migration policy is changed to radically boost builder inflows.

“That target looks highly unachievable unless we invite a few of the tens of thousands now unemployed migrant construction workers in Middle Eastern countries to help out – for more than the $US324 a month they earn in the likes of Saudi Arabia.

“Given that the pressure is on the government to cut migration because of the perception in some quarters that migrants are contributing to the housing issue, this is very unlikely.

 “Auckland house construction will rise but growth will not meet population increase requirements, let alone address the existing and worsening 40,000 unit shortage,” Mr Alexander says.

He says house prices will continue to rise though, with various elements probably contributing to a flattening in about 18 months’ time.

Mr Alexander expects more efforts next year from the Reserve Bank to ration mortgage lending to those with the biggest deposits and the highest incomes.

Even so, he says house building is going to get stronger and this is reflected in the most recent ANZ Business Outlook Survey where a net 52.2% of respondents said they expect to see higher levels of residential construction in the coming year.

This was near double June’s net 28.6% positive, and above the 19-year average of 25%.

And it is not just the residential part of the construction sector experiencing strong growth. Commercial construction is also growing strongly. In June consents worth $739 million were issued and for the year to June the total was $6.1 billion. This was a 15% rise from last year and well up from $4.1 billion two years ago.

Meanwhile, six days of debate and decision making starts at Auckland Council’s development committee on Wednesday. The councillors have to decide whether to accept or reject the recommendations from the hearings panel.

If recommendations are rejected, councillors must come up with an alternative based on the evidence presented to the hearings panel and then back it up with a cost-benefit analysis.

Many councillors believe it will be almost impossible to make any changes and the recommendations will just be rubber stamped at the final ratification by the council’s governing body.

There have already been threats of legal action if the unelected Independent Maori Statutory Board members are allowed to take part in the decision making as the board made hundreds of submissions to the Unitary Plan hearings and Democracy Action says it is totally conflicted. 

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