Government should lease Crown land for housing

Housing Minister Nick Smith is moving forward on using Crown-owned land to build around 600 homes in Auckland.

He hopes to have the first of the properties ready to occupy in 2017, and at least some of them will be priced at or below $550,000 to make it easier for first-time buyers to enter the market (median Auckland house prices are $720,000 according the the Real Estate Institute).

These new homes are to be built in Massey East (200), Manukau (60), Avondale (60) and Hobsonville (280) – they will be a mixture of detached, terraced and apartments.

However, it appears the land —  owned by the taxpayer — will be sold by the Government to developers with some form of covenant to prevent it from being landbanked. But why does the land have to be sold at all?

A starting price of $550,000 for a home will include the cost of the land. But what if the cost of a plot of land was taken out of the equation? If the Government were to hold on to it, then any house price could be substantially reduced.

Yes, the homeowner would have ongoing ground rent payments to the Government, but the cost of entry to owning a home would be lowered. If  Smith really wants to see affordable homes being built, he needs to consider this option before selling off valuable land to developers.

Meanwhile, the future of housing in Auckland appears to be mainly in the hands of apartment builders as consents for these types of property reached a seven-year high in April.

According to Statistics New Zealand, building consents were issued for 467 apartments with all of them to be built in the Super City.

“Consented apartment numbers often fluctuate, but have returned to historical average levels in the last couple of years, following four low years,” says Neil Kelly of Stats NZ.

“Consents for houses and townhouses are also at historical average levels, while retirement village consents have reached record highs over the past year.”

Though the top-line figures look good, the underlying trend is not so positive. In April, 2112 new dwellings were consented across the country, that’s up 1.4 per cent from the same month last year. However, the seasonally adjusted number fell 1.7  per cent in April compared with March, and — says Stats NZ — the trend is easing.

The Reserve Bank wants lenders to increase their risk weightings on rental property loans to landlords, saying they are high-risk borrowers. This, says the NZ Property Investors’ Federation, could make rental property loans more expensive and lead to higher rents.

Results from the Reserve Bank’s stress testing of the NZ banking system, released late in 2014, showed that trading banks could withstand a 50 per cent house price fall in Auckland and 13 per cent unemployment without breaching capital requirements, says the Federation.