Affordable Housing for our Future

Our city will not thrive and prosper if its citizens can’t afford a warm, dry roof over their head. So why aren’t both the public and the private sector doing more?

I find the growing equality gap in Auckland distressing. I grew up in South Africa so have seen firsthand what inequality does at an individual and societal level. The rapidly widening gap here in my adopted home is, in large part, being driven by the cost of housing. Auckland needs more affordable housing. And fast. We need to up the ante or we will continue to slide backwards into a future that none of us wants.

Poor quality housing contributes to societal inequality in South Africa.

Time has proven that the issue cannot be solved by letting the market do its thing. Government must intervene.

We Kiwis have some big questions to answer. The most fundamental of those is whether we view a warm, dry roof over our heads as a basic human right or a privilege. If it’s the former, then it is the job of government at both a national and local level to find ways to deliver it.

The second question is what do we mean by ‘affordable’ housing. We have no agreed national definition. Most people have a fuzzy notion that the term means ‘homes that normal people on a normal wage can afford to buy’. In New Zealand there is such a narrow focus on home ownership we often leave rental out of the debate entirely, but we are also in desperate need of homes that people can afford to rent. Many citizens of the world’s cities never own a home but live long, happy, prosperous lives in government or city-owned, rent-stabilised apartments.

As with most things, there’s a continuum. In most American cities ‘affordable housing’ means social housing, which is either short term emergency housing or long term subsidised rental housing for the vulnerable – the ‘projects’ in New York City, for example, which has a stock of around 200,000 deteriorating housing units and 270,000 families on the waiting list.

Deteriorating social housing stock in the 'Projects', New York City.

At the other end of the continuum is Vienna, a city which has had a priority focus on affordable housing for over a century. Rather than stopgap assistance for only the most vulnerable, public housing is intended as a permanent solution for a majority of residents and the city government owns and manages 25% of housing stock. A further 20% is built and owned by private developers but indirectly controlled through a city-regulated process. Private developers who collaborate with the city government to build affordable housing must allow the city to rent half of the new apartments to lower-income residents. The developer generally leases the remaining units to moderate-income residents, which has the happy benefit of the Viennese ‘projects’ avoiding the social issues, crime, exclusion and stigmatisation of the New York model.

Kids play on the roof of Sargfabrik Housing Estate in Vienna.

Kabelwerk: High density, high quality affordable housing in Vienna.

The cities that have become worldwide exemplars of how to crack the affordable nut tend to define ‘affordable housing’ broadly. (I’m thinking of Vienna, Singapore and Berlin). They include owner-occupied, rental and social housing in the mix. They deliver that mix through – by our standards – heavy government and city intervention on both the supply side and the demand side, from the planning framework to the construction process, to criteria around the sale or rental of the property.

By creating a large stock of affordable housing for their citizens which they are constantly adding to, these cities remove the ‘heat’ from the market. Private developers and home owners who are selling must compete with the government’s supply of well-designed, well-built and well-priced housing. This stops both purchase prices and rents following the ‘mainly boom/occasionally bust’ pattern of the Auckland market. Negligible housing cost inflation in turn discourages investors from punting on housing in search of a capital gain and further pushing prices up. Residents don’t need to sink their savings into a house and can accrue capital to invest in their own or someone else’s business. And so on, with the positive domino effects.

Wohnpark Neue Donau public housing, Vienna, by Harry Seidler.

It’s not all bad news at home, though. Bill English announced last month that the government would deliver 30,000 new homes to Auckland over the next 15 years by better utilising Housing New Zealand land. There are plenty of things that are right about this late but welcome initiative. Chief among them, the government is:

  • tackling the problem of deteriorating stock of social housing by replacing old homes built during the 40s-60s with new homes that will be warmer and more energy efficient.
  • increasing their stock of social housing for vulnerable Aucklanders as they go.
  • adding ‘affordable’ homes for sale into the mix so that Kiwis on an average income can get a foot on the precipitous Auckland property ladder.
  • increasing the supply of homes to the general market and creating diverse neighbourhoods rather than pockets of stigmatised social housing.
  • pouring investment into infrastructure and amenity in existing communities

I wonder why this announcement didn’t garner a lot more publicity. Is it because 15 years sounds like a long time to wait and we need action yesterday? It’s a good start, or more accurately, a good addition to the projects both Housing New Zealand and Auckland Council have had underway for several years. The two biggest of these are the Tamaki Regeneration – 7,500 new homes for Panmure, Pt England and Glen Innes, and Hobsonville Point – 4,500 new homes on the ex-Defence Force land in the city’s northwest.

Hobsonville Point will provide 4,500 new homes in Auckland's northwest.

AVJennings has been heavily involved in the development of Hobsonville Point since 2007. The company has been selected to develop three of the four precincts to get underway to date. Ultimately we will be responsible for delivering at least half of the eventual 4,500 homes. The government requires that we deliver 20% of those homes as ‘affordable housing’. In Hobsonville Point’s case this means that they are priced at no more than 75% of the Auckland median house price and are sold by ballot to buyers who meet the eligibility criteria.

To give you an example of the criteria, you can’t earn more than $120,000 p.a. as a household and you must own and occupy the house yourself.

In AVJennings’ newest neighbourhood, known as Buckley B precinct, we have upped our commitment to 30% affordable. On top of that we will deliver a further 50% of the homes below the Auckland median. I am not fishing for compliments here. This should not be the subject of a blog. An affordable component of 30% is standard practice in Europe. Given the current housing shortage, it should be the norm in Auckland rather than a noteworthy exception.

A compact 89m2 three bedroom home at Hobsonville Point.

Most developers are unlikely to come to the party willingly given that they and their close bedfellows in the construction industry are just as vulnerable to the boom/bust cycles as buyers. They will probably have to be ‘encouraged’ by way of planning regulations to deliver a significant proportion of any given development at a pre-set affordable price.

The benefit of government getting involved, even though affordability requirements make the developer’s job more onerous, is that those boom and bust bumps in the road  are smoothed by scale and a long and secure pipeline of work.

AVJennings’ development model shows how a public private partnership can work in the New Zealand context to deliver a mix of housing, including affordable. We work closely with HLC (a subsidiary of Housing New Zealand) to deliver entire neighbourhoods at the rate of over one new home a day. AVJennings manages the delivery of infrastructure as well as houses. We purchase the land for a precinct from the government at market rates and onsell it in ‘superlots’ (40 house sites) to our builder partners – a handful of New Zealand’s top building companies who we have selected for their ability to deliver at the scale and pace we require.

A minimum of 20% of Hobsonville Point's housing is reserved for first home buyers.

Hobsonville Point has mandated quality measures, so not only must the builder partners price at least 20% of their product below the affordable price cap, they are required to deliver the homes to the same quality standards as the rest of their offer.

Government and Council play their part by:

  • making the land available
  • creating the planning framework that allows for smooth and speedy consenting
  • mandating the affordable component
  • setting quality and sustainability measures for the homes and neighbourhoods
  • developing a masterplan that puts a thriving community first
  • providing high quality amenity
  • guaranteeing a long and secure pipeline of work

At Hobsonville Point the public private partnership is creating a suburb of exceptional quality. People recognise this and there is high demand for the product. The sustained demand gives builders confidence to buy more land, commit bigger teams and more resource. The pace of delivery can then speed up. A virtuous circle is born. We need more of it.

It was a huge disappointment to me and a massive blow to our ‘liveable city’ goals when the affordability quota was removed from the draft Unitary Plan. The proposal to require 10 percent of housing developments to be “retained affordable homes” was dropped, in the belief that other aspects of the plan better deliver affordable homes. Unfortunately, increased density and encouraging more efficient typologies such as terraced housing will not be enough to deliver the affordable housing the city needs. Construction costs are still rising and the majority of the city’s builders don’t have the resource to build at the combined scale, pace and quality we require to meet demand. Responding to the shortage requires the ‘excellence triangle’. The three points on the triangle are fast, good and affordable. As they say, it’s easy enough to achieve any two.

Market mechanisms alone cannot be relied upon to ensure a liveable city. Government intervention and regulation are needed to strike a balance between public interest and profit. The government, private developers and the public have to work together to achieve mutually satisfying outcomes.

The experiences of other cities demonstrate that it is possible to marry the policy objective of a warm, dry roof over every citizen’s head with commercial viability. We ought to be looking hard at successful models and adapting them for the local context. The lessons from overseas indicate that if we define affordable housing broadly, make it a top priority for our city, engage in some long term thinking so we can take the appropriate action in the short term, and stay flexible, ie be ready to adjust the levers and tweak the model in response to change, we can succeed. This teenaged city of ours with all of its latent potential can grow up, and grow up well.

Right now our report card for affordable housing reads, “must try harder”.

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