By GRAHAM HAWKES

Will a recommendation to ease the shackles binding Auckland’s Metropolitan Urban Limit one day be recognised as one of the ‘nuggets’ Prime Minister John Key said might emerge from the 2025 Productivity Taskforce’s deliberations?

Probably not, despite the fact that the person who made the recommendation is currently the chairman of the board of The Reserve Bank and a lead researcher with Motu, the Government Research Agency specialising in housing and related issues.

Dr Arthur Grimes’s presentation to the Taskforce said expansion of the Auckland urban area is roped in by the MUL, but intensification is curbed by planning restrictions, community opposition and the lack of suitable sites.

He also points to the relationship between house prices and prices for residential land in the greater Auckland area.
The price of houses in Rodney during the 10 years to 2005 rose 131 per cent, but the cost of residential land rose 315 per cent.
In Auckland city, the comparative rises in prices were 115 per cent and 335 per cent respectively, and in Waitakere, they were 115 per cent and 286 per cent.

He says this relates directly to the fact that ‘urban activities’ are not permitted outside the MUL and this is rigorously enforced.
Dr Grimes says the risk is that Auckland’s development is being stifled by high house prices caused by the trade-off of housing affordability versus sprawl. While the effect of current policy choices is to make houses more expensive, Dr Grimes says Auckland is in fact ‘land-rich’.

He points to the fact that land around the Northern Motorway, for instance, could be used to provide housing that would help to lower the cost of new housing. In addition, infill housing should be made easier by addressing RMA and other regulatory issues.
Commentator Owen McShane from the Centre for Resource Management Studies says Dr Grimes’ background means he is well aware of the link between excessive house prices, excessive borrowing against inflated assets, increasing inflation, the consequent high interest rates, and the over-valuation of the New Zealand dollar.

“Surely, the Prime Minister, the Minister of Finance, and the Minister of Economic Development should read this presentation and jump on it as one set of recommendations to implement immediately,” Mr McShane said in a report from the Centre.
Partly drawing on experience in land development, he adds that another factor contributing to high land costs is high compliance costs. 

“The following are real figures.Someone living in Kaiwaka in Northland, trying to create a section on which to build a house for retirement, has to make the following payments to council before the council will issue the title:

·      a 5 per cent reserve contribution estimate − say $10,000.

·      a roading development contribution − $9795

·      consent processing fees (just gone up) $2500

·      challenge to consent conditions $600

“Then the following works must be completed prior to issue of title:

·      a double street crossing; estimate based on neighbour’s costs − $30,000.

Total pre-title compliance costs: $53,000.Then there are professional fees to be paid to provide the necessary information to council.

·      Surveyors’ fees −­­ estimate $6000.

·      Planning consultancy fees − say $5000. 

“Planning consultancy fees vary greatly depending on the nature of the application. They may be as low as $3500. But the council has chosen this time of recession to increase Reserve Contributions from 5 per cent to 7.5 per cent − a 50 per cent increase, presumably to compensate for the fall in property prices. So this would raise the estimated reserve contribution to $15,000.

And so a new lot in the tiny town of Kaiwaka has to carry approximately $65,000 in compliance costs. That does not include the cost of the land.

“And these costs add nothing to the value of the property. In Houston, Texas, a fringe section costs $US30,000 − in a city of over five million with the fastest economic growth and highest employment growth rate in the US.The difference pays for a lot of air tickets and moving costs.What are we doing to New Zealand families?” Mr McShane asks.