It’s demand stupid! Housing affordability in Auckland has very little to do with supply and a lot to do with demand; from rampant, out of control immigration in particular, stoked with speculative fever, fueled by easy, irresponsible bank lending and up to $10B pa of laundered money.
The failure of the Auckland Council to agree to submit new plans for intensification of certain additional areas of Auckland is a red herring. It assumes increasing density of housing and more townhouses and apartments will make housing more affordable. It won’t. If it did Hong Kong and Shanghai would be cheap instead of twice as expensive as Auckland. It will make more expensive townhouses and apartments. The crazy valuations of the land underneath the buildings will preclude low cost building on top of it. None of them be “affordable” to low income households. National, Labour and others talk about $500,000 “affordable” homes like the ones recently built at Hobsonville. What planet are they on?
It is generally accepted that 25-30% of income towards housing, rent or mortgage, is the maximum for an average household to not be in financial stress. Borrowing $450,000 (assuming you can raise a $50,000 deposit to begin with) means $550-600 pw in repayments. Plus rates. Plus insurance. Plus maintenance. That requires a net income of around $2000 pw or $100,000 pa. Demographia says housing should be 2-3 times household income to be rated affordable, and over 5 times is severely unaffordable. Yet the gross median household income in Auckland was $77,500 pa. Even if a couple with several children were able to claw most of their tax back with WFF it would still only leave them about $8-900 pw to pay rates, insurances, food, clothing, utilities, school fees, run vehicles…..and remember with medium, half of all households earn less than this, some substantially so, and many do not have children so cannot claim WFF.
Clearly two people on low income, let alone minimum wage, have no hope of saving a deposit, or even if they could, of affording the mortgage on an “affordable” house, apartment or townhouse in Auckland no matter how densely they are built. Nor can a single person on $40-50,000pa. They cannot even afford a 40m2 shoe box apartment now. Many cannot afford rent by themselves. What these people need is “affordable” 2 brm apartments of around $150,000 or 3 brm dwellings of around $200,000. Yet changing the Unitary Plan in Auckland will not facilitate this. Speculators have already bought up property in proposed areas and along transport routes in the expectation of rezoning and revaluations of their land upwards.
No the only way Auckland prices will return to affordable is a crash to levels seen in 2000 or a massive government acquisition of city fringe land at rural prices and a colossal social housing programme with sales to low income buyers only and bans on foreign and investor sales. Immigration must also be substantially reduced. Instead we have National, Labour and to a certain extent the Greens wishing to perpetuate high prices and maintain the status quo. It guarantees speculators capital gains and landlords tenants. If intensification won’t reduce prices to affordable levels for low income people, what is the point?