We warned you Nick: Auckland’s sprawl is a false economy

Auckland Council and Housing Minister Nick Smith are at loggerheads over the government’s Special Housing Areas – areas on the edge of the city identified for fast-track development. The government wants more houses built but the council is putting the brakes on development until they know how the additional transport costs will be funded.

We warned this was going to happen six months ago. Sprawl might make for cheaper land, which means cheaper houses but it doesn’t reduce costs overall. It creates far bigger costs – transport being the main one. This cost falls on existing ratepayers. Auckland Council – on behalf of its ratepayers – is rightly saying it doesn’t want to foot the bill for government policy.

Sprawling suburbs will not reduce housing costs
Making new land available on the fringes of cities will not solve the housing problem in Auckland. Nor will it reduce poverty as the government claimed last year. Yes, rising housing costs are an issue but building new houses on quarter acre sections in Helensville merely shifts these costs from housing to transport. The people of Auckland will be no better off from this sleight of hand, as any savings in rent or mortgages will get spent on roads, petrol or bus tickets.

Auckland Council is right to speak up
Auckland Council has tried to force development ‘up not out’ – pushing higher-density housing over new suburbs. But they haven’t found the job easy, because many in Auckland’s swanky inner suburbs don’t want higher-density housing near them. The age-old NIMBY problem again. Except in Auckland it comes with a twist – in most cities the high-density houses are in the inner city, the expansive estates further out. But because we’ve been so slow out of the blocks anticipating and dealing to the agglomeration abomination that Auckland’s become, those inner-city plots are all taken by the PM and others.

Instead of helping Auckland Council deal with that issue, the government stomped in over the top of them by creating Special Housing Zones that will only worsen Auckland’s sprawl. To make matters worse, they have stymied all attempts by Auckland Council to generate funding to improve public transport – such as tolls. This means that, ultimately, ratepayers will have to pick up the added costs, as they have to shell out for the added infrastructure and transport costs that this sprawl will generate. The government is effectively running up a tab at the bar and asking the council and ratepayers to pay it.

Auckland ratepayers should not pay for government policy
Auckland Council is right to speak up, and ratepayers should get behind them with the message that they aren’t going to pick up the bill for sprawl. There are good reasons for this – successful public transport systems overseas focus on providing a high quality, cheap service for short trips. Spending large amounts of money subsidising trips from Helensville to Auckland is a waste – in most countries in the world that trip would be viewed as a long distance trip between cities. Councils should make it clear that new suburbs will not be the priority for their investment, and any rational ratepayer should back that stance.

Of course ratepayers are part of the problem – the same people that stand to lose from sprawl are the ones opposing development in the city. House owners in the central city need to swallow their pride and accept that high-density housing – if done well – can bring all sorts of benefits. A major one is future proofing – a major new report shows that denser cities have far lower carbon emissions.

Instead of spending their money on new suburbs, Councils could calm ratepayer concerns by focusing their investment on making areas of high-density housing very liveable. Councils need to ensure that high-density housing areas have the best services in terms of parks, access to shopping and cafés, and transport. They also need to ensure the high-density housing itself is high quality to avoid repeating the mistakes of the shoddy apartments that went up in the 1990s.

Once people see that high-density housing can actually be a very pleasant way to live, attitudes will shift. After all, high-density housing is a way of life for the majority of people living in the most liveable cities in the world.

Government policy is the true problem behind the housing bubble
Ultimately the government’s tax policies are the real driver behind the housing bubble. House prices have been driven by demand rather than supply factors primarily. And, because every rational investor in housing knows that, they just keep speculating that the government won’t do anything about it. It’s a no-brainer for people with means to keep buying houses – well beyond one’s accommodation needs.  To remove that problem, we need a tax on the effective income received from capital – not a lily-livered, exemption-riddled capital gains tax as previously suggested by Labour and still pushed by the Greens, and certainly not negligence on that front as the Nats have shown. A Comprehensive Capital Tax is required together with a review of the RBNZ policy of risk weighting on mortgage lending.

Entrepreneur and philanthropist Gareth Morgan posts at Gareth's World.

Read also: Tax change — but not CGT — the right pin to pop Auckland’s housing bubble