637_ These graphs illustrate that about 28% of all households pay more than 30% of their gross income on housing, and that the problem is considerably worse for certain types of households. Specifically:
638_ A way of illustrating the size of the housing problem spatially is by applying the Median Multiple Measure (MMM) Housing Affordability in Auckland. The MMM takes the annual Median Household Income (MHI) and divides it by the Median House Price to obtain a measure of dwelling affordability relative to annual MHI. It is generally agreed that if the Median House Price is less than three times the annual MHI, it is ‘affordable’. If the Median House Price is more than three times the annual MHI, it is considered ‘unaffordable’. Map 11.1 shows housing affordability in Auckland. For Median House Price, average capital values in 2006 have been used as a proxy and annual MHI figures are from the 2006 census. In 2006, the annual MHI was approximately $64,000 – in 2012 annual MHI is approximately $72,000.
639_ Map 11.1 clearly shows that, in most areas, housing is unaffordable for people on the MHI of the area. So although there are areas where housing is less expensive, it is still unaffordable for the median income households in those areas. The areas shaded in light brown are unaffordable, and those in red are very unaffordable for local households on the MHI. There are no shaded areas in yellow, which means that there are no affordable areas for local households on the MHI based on the data available. Grey hatching indicates areas where MHI is more than $100,000 and the ratio of affordability cannot be accurately calculated because of the way data is collected. However, some households in this category will also find their local area unaffordable.
640_ For example, two employed people want to buy a house in the area where they have grown up. One is a qualified early childhood care worker with a salary of $45,000 p.a. and the other is a carer for older people working part-time, on a salary of $20,000 p.a. Their combined household income is $65,000. They want to buy a 3-bedroom house as they have three children. To economise on space, two children will share a bedroom. However, a house price in the lower quartile in this area is approximately $350,000 to $400,000, which is more than four times their combined income, and they would need a deposit of $60,000.
641_ Similarly, a nurse earning $80,000 and his/her partner are looking for a 2-bedroom dwelling (as they want to start a family), near the hospital because of shift work. The value of the dwelling could be $500,000; more than six times the nurse’s salary, and would require a deposit of $100,000.
642_ Another way to look at housing affordability is to consider the number of people in paid employment trying to buy their first home. In Auckland, it has become more difficult to buy a home in the lowest quartile of house prices, when one or even two people are in paid employment. Research on the Auckland Region Housing Market showed that between 1996 and 2009, the number of people in paid employment unable to buy a home in the lowest quartile more than doubled, from 36,720 households to 77,110.64 This was measured when lending criteria included a 10% deposit. Now, the deposit required has increased to 20%, making home ownership even more difficult. If we apply the Median Multiple Measure to the number of projected households in Auckland, the housing problem will worsen. Table 11.1 illustrates household incomes and housing affordability from the 2006 census.*
* See Table 11.1 note
* Notes to Table 11.1
• The first column is 2006 data on income bands from the census.
• The second column is the 2006 income data updated approximately to 2010 figures.
• The third column is the per cent of households in each income band, according to the 2006 distribution of households.
• The final column is the maximum house price that the various household bands could buy at a house price to income ratio of four (normally house price to income ratio of three is considered affordable), based on the 2010 income figures.
643_ This analysis indicates that if future households have a similar income profile to households in 2006, then of the 400,000 future households in 2040, only about 30% will be able to afford a house over $400,000 (in 2011 dollar terms). Another 30% will need a house in the $275,000 to $375,000 price range. There will be 40% who probably cannot afford to buy a house, but will need affordable rental accommodation. This would mean that:
|Additional households which would need a home in the $275,000 – $375,000
|Additional households which would need an affordable place to rent, because they are not able to buy a home
644_ Current median-priced homes are in the order of $450,000. A substantial number of dwellings need to be offered in the mid-priced range, if housing affordability is to be improved. This analysis provides only estimates, but it does give a strong signal of the severity of the problem in Auckland. The Auckland Region Housing Market Assessment Report also concluded that even households earning the median household income are being locked out of home ownership65. This indicates that households which fall within the band of 80% to 120% of the median household income, are likely to need some sort of subsidised home ownership. The private sector undertakes the vast majority of housing development in Auckland, and this is appropriate. However, given these figures, and the depressed state of the development and construction sector at present, it is clear that public action will be required to encourage developers to build affordable homes within mixed tenure, mixed income communities.
645_ Between 1991 and 2006 home ownership in Auckland declined from 74% to 64%. This decrease is similar to the figures for all New Zealand, which fell from 74% to 67% over the same period. Rates of home ownership are much lower for Pacific people and Maori than other groups: in 2006, 25.8% of Maori and 21% of Pacific people in Auckland owned, or partly owned, their own homes compared to 55.8% of Europeans and 36.7% of Asians.* Although more people are choosing to rent long term, home ownership remains part of the New Zealand culture; it is an important barometer of household wealth creation, savings, standard of living in retirement, and intergenerational wealth. In New Zealand, investment in housing has proved a particularly attractive alternative to the share market (see Figure 11.4).
* These figures are for individuals, not households.
646_ The rental market does not currently provide the security and amenity households need. On average, tenants move every 2 years compared with every 5-6 years for home owners. This is costly and can adversely affect health, schooling, and work. Legislation, subsidies and other mechanisms should be explored to encourage large-scale rental investors to offer longer tenure options for rental accommodation.
647_ The shortage of social housing for the most vulnerable is also a serious issue. The official New Zealand definition (Statistics NZ) of ’homelessness’ includes rough sleepers, people moving between temporary shelters (such as refuges, or the homes of friends and relatives), people in caravan parks, and people living in temporary accommodation without their own bathroom or kitchen. There are about 160 to 320 rough sleepers in the city centre. There is a serious lack of emergency housing in Auckland, especially for women, young people and Gay, Lesbian, Bisexual, Transgender and Intersex (GLBTI) people. This gap must be filled, to ensure adequate emergency housing across all population groups. More urgent, multi-agency collaboration is required, such as the Auckland Homeless Action Plan, in which the Auckland Council is a partner. The Council will seek central government support in dealing with homelessness and in adequately resourcing agencies dealing locally with homelessness issues.
648_ Given this situation, state housing (social housing provided by central government through Housing New Zealand Corporation (HNZC)), plays a critical role. HNZC is the major provider of social housing, and a significant landlord in Auckland with around 30,600 properties. Over the next 5 years, HNZC intends to buy, lease, and sell properties in areas of high demand and reduce the concentration of state housing in areas of lower demand. Auckland, particularly the south, is acknowledged as an area of high demand. HNZC intends to add up to 1,400 new state homes in Auckland in the next 5 years. This is welcome. However, given the current and future scale of the housing crisis in Auckland, a much larger increase in social housing is required. The Auckland Council also supports decentralised, community-based HNZC support services as a vital service for HNZC tenants and others in housing need. These services should be part of a network of community hubs (see Chapter 1: Auckland’s People).
649_ The community housing or ‘third’ sector is still very small in New Zealand. Generally this sector has focused on the households HNZC cannot accommodate, the most vulnerable, and those with special needs. However, this sector could be a major provider of affordable housing.
650_ Recently, central government established the Social Housing Unit, which is responsible for investing in social housing projects and building the capacity of the community housing sector. Its aim is to create a more diverse and responsive sector, and increase the pool of affordable homes provided by that sector.66 This is in recognition of the community housing sector’s potential to be a major provider of affordable housing. There are many models overseas of shared equity schemes and other forms of assisted home ownership delivered through the community sector. The New Zealand Housing Foundation has a successful social enterprise model, making housing affordable for low- to median-income households in a sustainable way.
Box 11.2 Tamaki Transformation Programme
The Tamaki Transformation Programme (TTP), led by a joint initiative involving central government, the Auckland Council and the local community, began as an opportunity for community renewal through the modernisation and redevelopment of state housing stock in Tamaki (broadly comprising the suburbs of Glen Innes, Point England and Panmure).
The Tamaki population of approximately 17,000 is projected to grow to 26,000 by 2031. There are 5,000 households, of which Housing New Zealand Corporation (HNZC) owns 56% of the housing stock.
The TTP is a 15- to 20-year regeneration initiative aimed at transforming Tamaki into a thriving, prosperous place to live. Goals include increasing the number of houses, reducing high unemployment, and raising educational levels, skills and income.
The Government, together with Auckland Council, has established an Interim Tamaki Transformation Board (ITTB) and is working to set up an urban regeneration development entity (URDE). The Tamaki area is an ideal location for intensification: it is close to Auckland’s CBD (13km), has good accessibility to the eastern railway line, is near the Tamaki Estuary, and has many single dwellings on large sections that could be redeveloped.
It is envisaged that over 20 years an URDE could almost double the number of housing units through optimising land use and existing housing stock, and private housing development. The number of social housing units would not reduce, but could be managed by HNZC and third sector providers. A number of broader social outcomes could be delivered. The URDE would be actively involved in economic development and support Tamaki residents to obtain skills, knowledge and employment opportunities, and dramatically reduce benefit dependency.
The TTP could be a model for other regeneration initiatives in Auckland over the 30-year life of this Plan.
651_ The Auckland Council has land holdings across Auckland, which can be leveraged in different ways to improve affordability. The Council already directly provides 1,480 units of social housing for low-income, older people, and regards facilitating affordable housing as part of its mandate. Through the Housing Strategic Action Plan, the Council intends to increase its own housing stock and, in consultation with partners, will adopt a 30-year target for new council housing.
652_ There is significant scope for the Auckland Council to work with central government and other agencies to increase the supply of housing for low-income people and develop more mixed tenure, mixed income communities. The Tamaki Transformation Project (see Box 11.2), an initiative of urban regeneration integrated with economic and social development, is one of several potential models for other areas that may not be attractive to the market without intervention. However, the well-being and stability of existing communities must be protected during redevelopment, by tenants being relocated within their own communities, where possible.
Box 11.3 Principal tools available to the Auckland Council to improve housing affordability
Land and assets
Some options being considered are:
- leveraging Auckland Council-owned land and assets through partnerships, joint ventures and similar participation in redevelopment authorities
- Council-led development.
Planning and regulation
In addition to providing sufficient unconstrained development capacity, options include:
- reviewing regulatory and assessment processes to provide a simplified, speedier and less costly consent process
- through the Unitary Plan and Local Area Plans, requiring developments to provide a mix of dwelling sizes and types
- fast-tracking developments and/or mitigating development contributions and consent fees for developments to increase the supply of a particular type of housing, or ease overcrowding in targeted areas
- providing density bonuses as an incentive for affordable housing
- auctioning of development rights to landowners. This would reduce the uncertainty associated with development, and therefore reduce overall costs, and create a mechanism for an ordered release of land*
- considering other options such as betterment levies, which capture for the community a proportion of the uplift in value that accrues to individual developers as a result of a change of use or development. Local or central government could choose to assign a proportion or all of the revenue collected to subsidise affordable housing; in the same way, it could decide to assign the revenue raised to another community good.
* There is precedence for land auctioning in the Resource Management Act (1991) where Part VII of the Act details a coastal tendering process for the release of coastal land for development
653_ The Auckland Council is exploring how it can use land and other assets as a catalyst for partnerships that could increase the supply and choice of affordable housing. The Council also has a range of planning and regulatory tools it is examining to determine the impact they have on housing affordability. (See Box 11.3).
654_ The quality compact urban form established in this Plan should increase overall affordability through higher-density living, better use of land and economies of scale, reduced construction costs, and targeting house sizes more directly to the households requiring them. It can also reduce transport costs by making public transport connections easier, and encouraging mixed-use development that co-locates housing and jobs (see Chapter 10: Urban Auckland).
655_ An overall increase in housing which outstrips any increase in numbers of households, or an increase in land supply or overall decrease in construction costs, is likely to lower overall housing prices over time. For example, a $700,000 house might be reduced to $600,000. However, this will not help the 32% of Auckland households who can only afford to buy a house in the $264-$374,000 price range (for 2010 prices see Table 11.1). They would still be unable to purchase a home or finance the ongoing housing costs, as they could not save the required deposit or secure a mortgage. Ways must be found to significantly reduce development and construction costs and significantly increase the supply of housing in the $260,000 to $375,000 range; for example, reducing construction times and providing small lots with strict guidelines for well-designed, smaller housing.
Auckland Council commits to working with others to urgently investigate and use the whole range of possible housing development vehicles, policy and regulatory tools, that would increase the supply of affordable housing in Auckland.
656_ The Auckland Council will urgently develop a Housing Strategic Action Plan to deliver the high-level directions on housing in the Auckland Plan. The Auckland Council will actively explore all the mechanisms within its statutory mandate that will contribute to increasing the supply of affordable housing and improve housing affordability. This will require collaboration with central government, the development sector, the community housing sector, iwi and others to develop practical solutions. The Council will advocate to central government to improve access to first home ownership.
Explore all options to reduce homelessness, in partnership between the Auckland Council, central government and the community sector.
657_ An increase in the supply of affordable and social housing will benefit Maori, who feature disproportionately in lower-income brackets, and as state housing tenants. However, establishing papakainga, including housing, is an important cultural aspiration for iwi. (see Chapter 2: Auckland’s Maori). All parties must work together to remove barriers and support the development of papakainga, including papakainga housing, on both traditional and non-traditional Maori land and general land.
Support Maori to achieve affordable, healthy and sustainable housing which meets their specific needs.
658_ Pacific peoples are also amongst the lowest income groups. They often live in extended families, and have the highest incidence of overcrowding. They also make up a significant proportion of state housing tenants. The adverse impacts on health, education and family well-being are well documented (see Chapter 1: Auckland’s People). The former HNZC Healthy Housing programme particularly benefited Pacific peoples, as it built, converted or extended homes to provide more bedrooms and communal areas for larger families. The principles of the project, and Pacific design, should continue to be reflected in HNZC’s new buildings and renovations, and be encouraged in the private sector. The Auckland Council will also investigate solutions such as minor household units or modular housing, to ease overcrowding and increase choice. To date, government home ownership schemes have had limited success with Pacific communities. Home financing schemes also need to be flexible and culturally appropriate for Pacific peoples.
Increase housing supply and choice that meets Pacific people’s specific needs.