Pressure mounts to force Auckland to open up land

Written By: - Date published: 1:57 pm, October 22nd, 2015 - 45 comments
Categories: auckland supercity, Economy, Environment, housing, sustainability, transport - Tags:

Bill English ordered the Productivity Commission do a Report on Housing in Auckland. Nick Smith is particularly excited by this statement from them:

The government should be allowed to force local authorities to release land for urban development in the face of rampant house-price inflation and current land allocation policies cause “a number of harmful social effects

 

Meanwhile the Serious Fraud Office (SFO) is investigating a large scale mortgage fraud:

Auckland’s property market and the scale of impending commercial developments represent a key environmental risk,” the SFO said in its 2015 annual report released this week. “We have invested significant resources into investigating a large-scale mortgage fraud involving highly organised teams of property developers, shell company directors, property valuers and lawyers.

Note, it doesnt involve builders or designers who are the ones with personal legal liability attaching to all their work (for ten years).

Last week a $50m apartment development was found to have passed every Council inspection despite shoddy workmanship and obvious failures.

Meanwhile the Bank that capped NZ as a “rockstar economy” has back-tracked somewhat:

HSBC has added New Zealand to a watch-list of nations it has concerns about, which also includes Malaysia, Indonesia and Norway.

In its latest Macro Health Check report, the bank flags concerns about rising house prices in this country, as well as our deep links with China – where growth is slowing – and tumbling dairy prices, according to the Bloomberg news agency.

“Although low-risk, New Zealand may be one to watch,” HSBC economist James Pomeroy is quoted as saying.

If the Government chooses to intervene in the functioning of Auckland, it needs to intervene to ensure ALL of it functions well. That includes public transport, sewerage and so forth. Picking and choosing will end in disaster. It also needs to explain why it continues to choose to let developers use shell companies, collect money, sell property, remove profit, close company and repeat, all while escaping genuine legal liability for projects they control and direct (financially at least).

IF developers were to be personally liable, as builders and designers are, we would see a drop off in development by some operators. Just as liability for builders and designers was intended to get rid of the cowboys.

There are some great developers out there. There are awful developers. From my work in the leaky home area I know of developers who budgeted and designed projects with the ten year limitation period in mind. They told me “we just spent enough to get us through the ten years”.

Section 393 of the Building Act 2004 provides that no court case dealing with building construction may be brought against a person, 10 or more years after the building was constructed.

Everything I see and hear in the Building Industry worries me. If anything has been learned from building over 100,000 leaky homes in Auckland, it is how to build to get past that period… and not much more by those who think only about maximizing their own profit.

The signs are all there. Those with vested interests will try to convince people that this is all isolated. I’m not convinced. Trouble lies ahead.

45 comments on “Pressure mounts to force Auckland to open up land ”

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  1. dukeofurl 1
    22 October 2015 at 2:17 pm

    “Release land for Urban development” – means rezone it for housing and vastly increase it value.

    The under supply is a deliberate move from the larger developers to restrict supply and drive up prices. Build a 300 lot subdivision a and then release it as 75-100 sites per year and watch the remainder raise in value right before your eyes.

    We can see some tardiness for the Special housing areas which were supposed to fast tracked – but that just came another ‘feature’ to boost the value for the owner before on selling to a developer- builder

  2. Draco T Bastard 2
    22 October 2015 at 2:27 pm

    The big problem with releasing more land that increases sprawl is that it costs a huge amount to get the infrastructure in place to support those houses and then the ongoing maintenance costs are sky high as well. these massive costs are going to come out of rates.

    Then there’s the fact that outlying housing costs a hell of a lot more to live in.

    So, if the Productivity Commission want to push rates up far faster than inflation and to cause poor people to be even poorer then they should push the delusional idea that more sprawl will lower prices…

    Oh, wait…

    • dukeofurl 2.1
      22 October 2015 at 3:14 pm

      WE have the ‘twin evils’ of high land prices AND high construction costs.

      The National party is chaffing at the bit to increase land zone urban( but not yet developed) and there was a bit of a whimper about high prices for construction materials , but that has gone away to be replaced with high inspection costs by Councils.

  3. mpledger 3
    22 October 2015 at 2:47 pm

    What does this incentivise?
    “The government should be allowed to force local authorities to release land for urban development in the face of rampant house-price inflation … ”

    It incentivises the developers to create as much inflation as they possibly can, by pushing the price of genuine sales through the roof, so that more land will open up for them to develop on .

    So, what will happen, a new house will sell at, say $1 mill – $200,000 below it’s real value – pass through a number of shell companies that the developer or their friends own and then sell for $1.5 mill to a genuine buyer. But look at all that inflation!!!! And the developers will cry out for more land.

    It’s an incredibly ill thought-out idea that will create appallying bad perverse incentives at a cost of rushed infrastructure builds.

    • tracey 3.1
      22 October 2015 at 2:52 pm

      If you look at the productivity commission board you get an idea of the particular world view they came at this from

      • srylands 3.1.1
        22 October 2015 at 3:03 pm

        It is a rational world view.

        Graham Scott and Murray Sherwin are eminent economists and were a top choice to oversee the inquiry.

        Hopefully the Government will move quickly to implement all the recommendations.

        • One Anonymous Bloke 3.1.1.1
          22 October 2015 at 3:10 pm

          Support from S Rylands is as good as saying it’s a corruption funnel.

          • tc 3.1.1.1.1
            22 October 2015 at 3:24 pm

            Exactly OAB as they’re going all out to plunder for the backers this term and lock in future govts as well as whoever end up attempting to sort out their dodgy supershity construct.

            Blinglish signalling future tax cuts after his smoke n mirrors layby ‘surplus’ is another sign they’re going all out for the .01%

            • tracey 3.1.1.1.1.1
              22 October 2015 at 3:26 pm

              Note that English ordered the report, but Smith will decide on whether to implement it.

            • weston 3.1.1.1.1.2
              22 October 2015 at 9:03 pm

              what got me was english saying that he MIGHT NOT have to borrow to fund the tax cuts !!

          • Draco T Bastard 3.1.1.1.2
            22 October 2015 at 3:24 pm

            +1

            Exactly.

          • tracey 3.1.1.1.3
            22 October 2015 at 3:25 pm

            One woman and the rest white chaps in suits. Probably just a coincidence.

          • Karen 3.1.1.1.4
            22 October 2015 at 6:03 pm

            +1 OAB

          • KJT 3.1.1.1.5
            22 October 2015 at 9:52 pm

            Economists, the new chicken entrails, and about as accurate.

            Bring back the Augeries, I say.

        • One Anonymous Bloke 3.1.1.2
          22 October 2015 at 3:13 pm

          As for the economists, can someone explain why presiding over NZ’s disastrous slide into inequality and homelessness is considered “good credentials”?

        • tracey 3.1.1.3
          22 October 2015 at 3:24 pm

          No, it is your (and their) world view. Neither rational nor irrational. Like Hooton you think that those that reflect your opinions must be rational and sane. An argument can be made for the opposite too.

        • tc 3.1.1.4
          22 October 2015 at 3:33 pm

          ’eminent economists’ i.e. more handpicked nact folk who know how to construct a prima facie argument that arrives at the outcome the hollowmen seek.

          Of course the govt will move quickly, it already is, that’s why it needs this strawman and probably their love of urgency to slam it through.

        • miravox 3.1.1.6
          23 October 2015 at 12:52 am

          It always amazes me how irrational it is to believe that [economic] rationalism can solve the dilemmas of being human.

          • One Anonymous Bloke 3.1.1.6.1
            23 October 2015 at 7:44 am

            August 1993 to March 1999 independent Chairman with role to set up the Electricity Market Company (EMCO) to establish a functioning
            wholesale electricity market. Led the development and implementation of the wholesale electricity market, which is the only market in the world that is not under the control of a government regulator.

            I guess Scott isn’t applying for any positions where honesty and self-awareness are valuable qualities then.

  4. Smilin 4
    22 October 2015 at 3:02 pm

    Shocking reality of graft and corruption disguised at huge expense to the tax and rate payers as development deemed necessary by govt spin and carry on as Auckland has always done.
    When the cost of food and all the other utilities really get out of hand then we will know theres no more room left in Auckland

  5. David Scott 5
    22 October 2015 at 3:27 pm

    Hmm HSBC is on *my* watchlist as a bank which deliberately aided people hide their wealth and avoid paying tax.

    Come to think of it, all banks are dishonest and greedy just some are worse than others.

  6. maui 6
    22 October 2015 at 3:33 pm

    I know of a council that makes development decisions based on a panel of 3 councillors, all chosen by the mayor. One of the people often chosen has strong links to real estate. How’s that for democracy…

  7. tc 7
    22 October 2015 at 3:37 pm

    “Last week a $50m apartment development was found to have passed every Council inspection despite shoddy workmanship and obvious failures.”

    Wow that supercity that Rortney and Shonky built is really delivering on its promises to the hollowmen isn’t it.

    • dukeofurl 7.1
      22 October 2015 at 6:08 pm

      I wondered about that.
      It seemed like an internal hit back at some inspectors not checking things they should.

      Is there corruption ? There are people from council facing charges relating to roading contracts.
      THis development is supposed to be a $50m so we could be looking funny business

      • Tracey 7.1.1
        22 October 2015 at 6:47 pm

        more likely not enough people to inspect.

        auckland city allocates about 45 mins for the final inspection, including travel time.

        • tc 7.1.1.1
          23 October 2015 at 7:11 am

          If you alert them to suspect activity they don’t even show up and BS about it being acceptable having never even visited the site.

          • Tracey 7.1.1.1.1
            23 October 2015 at 7:35 am

            That’s because they are too busy focusing on some agents that they don’t like. I know of one very qualified and well-versed on the BA and Code expert whose clients have been told that if they use him, expect long delays and fine tooth comb assessments. The bully mentality still exists at ACC. The developers know that to advance things they have to be sugaring and make out that the building officer is the brightest most knowledgeable person in town. Flattery can get you everywhere.

  8. tracey 8
    22 October 2015 at 3:50 pm

    “Social Housing Minister Paula Bennett has told community housing providers that they need to become sustainable businesses and not to depend on Government grants.”

  9. tracey 9
    22 October 2015 at 4:05 pm

    This government openly states there is no place for a social component to NZ society

    “”That will mean looking at ways to build your balance sheet and your financial capability, or forming a consortium to get it.”

    It could also mean working with iwi, other housing providers, larger financiers, or companies with experience in large scale asset management.

    “The Government has signalled that we expect providers of all sizes to be seriously looking at all options to build a sustainable business,” Mrs Bennett said.”

    Anything which can’t make a profit must go.

    • AmaKiwi 9.1
      22 October 2015 at 5:37 pm

      “Anything which can’t make a profit must go.”

      Except the National government.

      They can screw up the economy, destroy our environment, destroy the health and life style of the lowest paid, waste money on inefficient highway schemes, promote diabetes and alcoholism which our public health service will have to pay for, etc.

      Tracey, I think I misread your last comment. You meant anything which can’t make a profit for corporations at the expense of the NZ population.

  10. Ed 10
    22 October 2015 at 6:00 pm

    The proposal to force land to be released to housing once adjacent properties go over a certain level has some superficial appeal to anyone that doesn’t think. A bit of further thought gives the possibility of “land bankers” being rewarded for waiting – they then have an incentive to only put expensive into the first part of development, thereby ensuring that further land can be “forced”to be released – or just held again until prices rise . . . A developers dream! I wonder who owns a lot of land near residential boundaries? I suspect there are not many beneficiaries . . .

  11. weston 11
    22 October 2015 at 9:16 pm

    high time i think for a complete survey of all the arable land left in nz BEFORE we cover anymore of it in houses ….unless of course society is quite happy eating glasshouse food grown with artificial nutrient and token sunshine ?

  12. millsy 12
    23 October 2015 at 12:17 am

    Why not just build more state and social housing (the NZ Super Fund and ACC have ooodles of cash to pay for it), and bring back the housing subsidies of yore?

    Probably better than giving developers everything they want and hoping we get soaked in urine sometime in 2034.

  13. savenz 13
    23 October 2015 at 8:25 am

    The problem is not the land but the sky high price of building on the land. Building material monopolies, and high connection charges like $12k for transformers to connect to the electricity supply and $13k septic tanks and $12k water connection charges for metro water are all adding to the costs of building. It costs more per square meter to build here than Australian or the US.

    As many building charges are fixed charges it makes it a lot more expensive to build a small house compared to a larger one. So the new houses coming through are often large and unaffordable.

    New developments should be forced to sell 10% or more at an affordable level for social housing.

    Granny flats should be encouraged as they can exist with the existing houses. At present developers are often demolishing the existing house which has heritage value in favour of large unaffordable mansions. Over 20 years there will be no NZ kids left in some suburbs. Not sure where the elderly are supposed to live. Granny flats are useful with the older population were families can pool resources to live on the one site.

    Totally agree with…

    It also needs to explain why it continues to choose to let developers use shell companies, collect money, sell property, remove profit, close company and repeat, all while escaping genuine legal liability for projects they control and direct (financially at least).

    IF developers were to be personally liable, as builders and designers are, we would see a drop off in development by some operators. Just as liability for builders and designers was intended to get rid of the cowboys.

    The RMA reforms are just a dream for the government to pollute and have the rich get even richer and destroy our heritage even more than they are already doing so. Fancy getting rid of height to boundary and putting up a 12 story building on the waterfront blocking everyones views – at present you probably still can, but it makes it even cheaper to be a prick and wreck the neighbourhood for your own profit with the government’s proposed RMA.

    Land is not a problem in NZ and all the research shows that there are plenty of sections. People just do not convert them to build because of the cost of building which is the real problem. But that does not fit in with the governments ideology of cracking down on corrupt business.

  14. Grim 14
    23 October 2015 at 3:06 pm

    Leave Auckland alone!

    If the government really wanted to fix the Auckland housing crisis, they could simply remove the incentive to live in Auckland, why do people flock to Auckland? well paying jobs, or lack of jobs outside Auckland.

    Auckland house prices are what they are, forget trying to reduce prices by increasing supply, it does not help, those already in the market lose wealth, and those purchasing either have longer commutes with increased congestion, smaller dwellings or reduced infrastructure. This all increases strain on infrastructure placing additional costs on a council that can’t balance the books (you do realize that by 2020; 20% of your rates bill will go towards paying interest only on the council debt, no plan to pay the principle down)

    Create jobs and infrastructure in another location, no new houses in Auckland.