Christchurch Council Irresponsible On Housing Issue

Hugh Pavletich
Performance Urban Planning

31 May 2013

The Christchurch recovery has been exceedingly slow, mainly because the city is rated “severely unaffordable” with housing priced in this year’s 9th Annual Demographia International Housing Affordability Survey ( www.demographia.com ) at 6.6 times annual household earnings (based on median multiple - data 3rd Qtr 2012).

With persistent Council induced inflation, housing is now an astronomical 7.0 times household earnings in Christchurch and will continue to inflate, until land supply and infrastructure issues are dealt with.

Normal housing markets do not exceed 3.0 times annual household incomes.

Little wonder then that in a TV One Colmar Brunton poll 3 December 2012 "Govt should act to lower house prices - poll" , 62% of all and 75% of young New Zealander’s are demanding the Government allow the provision of affordable housing.

Responsible politicians at both central and local level are responding to this public demand.

This is why North American cities that have had to deal with natural disasters, such as New Orleans, Joplin, Tuscaloosa and just recently Oklahoma (where housing is at between 3.0 through 3.5 times annual household incomes) have a greater capacity to recover than Christchurch.

Put another way, Christchurch currently cannot afford to recover.

Christchurch is a poor city, with its median household income just $55,000 and a woeful $45,000 in the east. The east is generally regarded as the poorest of any major metro area throughout Australasia.

It is no surprise then that most people, in the flight to affordability, are leaving Christchurch for the adjoining counties of Selwyn and Waimakariri and other destinations throughout New Zealand and Australia.

Around 80% of the major Australian metros are now more affordable than Christchurch and Auckland – with the gap widening (refer Demographia Survey Schedule 2 www.demographia.com ).

The residential building consents tell the story.

Within a The Press article by property reporter Liz McDonald mistitled  "Record approvals see building costs soar" , over the past 12 months, there were 1,600 new residential consents for Christchurch City, 939 for Selwyn County and a staggering 1,196 for Waimakariri County.

The base populations must be factored in when discussing consenting numbers, with Christchurch around 370,000, Selwyn 43,000 and Waimakariri 50,000.

The consenting rate per 1000 population per annum these past 12 months were 4.3 for Christchurch, 21 for Selwyn and 22 for Waimakariri.

Therefore over the past 12 months roughly 5 times more residential construction on a population basis, occurred out in the adjoining counties.

Christchurch is being splattered all over the Canterbury Plains, because the Christchurch Council has lost control of its costs. The unnecessary disruption costs in social and economic terms are enormous.

Christchurch is barely building above replacement levels for obsolete stock in a normal market (3/1000), let alone one that is supposed to be in recovery.

Soon after the first earthquake events 4 September 2010, the Authorities at both central and local levels should have focused on ensuring the Christchurch consenting rate got up to in excess of 10 units  per 1000 population per annum. Around or above the 3,700 consents annually mark.

They should have dealt with land supply and infrastructure financing issues immediately. It was well known by the time of the first earthquake events, what needed to be done in  addressing these issues.

Recovery Minister Gerry Brownlee had chaied Parliaments Commerce Committee Housing Affordability Inquiry through 2007 / 08.

Historically, through a normal building cycle, prior to politicians and planners wrecking the pricing / performance of the industry these past couple of decades, New Zealand’s building cycles would oscillate through 5 and 6 units per 1000 population per annum.

Australia, with its generally higher population growth, would oscillate through 7 and 9 units per 1000 population per annum.

And importantly, supply affordable housing in the process, without the political dramas and agonizing we have had to “endure” these past few years !

The consenting rate in Australia is currently a little above 7 units per 1000 population per annum (it needs to be closer to 9), while New Zealand (and remarkably still Christchurch) is languishing at just 4. Auckland with its much higher population growth even worse at slightly below an appalling 3 / 1000.

The urban fringes are the essential inflation vent.

Sadly, because Councils have lost control of their costs and are engaging in strangling land supply to mask their incompetence, the values of raw fringe land have been artificially inflated in to the stratosphere.

Rural land throughout New Zealand is in the order of $10,000 through $40,000 per hectare.

Councils have artificially pumped it up on the fringes of their urban areas, so that tiny Rolleston it is north of $500,000 per hectare, Christchurch a million bucks plus and Auckland two million bucks plus.

To add insult to injury, infrastructure is inappropriately financed as well.

Councils are treating this currently as just another revenue rort … whatever it takes to keep their ever expanding bureaucracies well fed and watered.

Little wonder then the sections / lots on the fringes of Christchurch cost more than what North Americans pay in affordable markets for completed starter house and land packages.

If Christchurch was a normal markets, new fringe starter sections / lots should be at or below $50,000 each with completed house and land packages around $1,000 per square metre ALL UP.

A 150 square metre new starter home for around the $150,000 mark … a 200 square metre one around the $200,000 mark and so forth.

The Government is committed to dealing with these issues. It belatedly recognises that Christchurch must be allowed to recover

Following the release of the Productivity Commission report earlier in the year, Deputy Prime Minister Bill English made the Governments intentions clear October, where the focus is on (a) land supply (b) infrastructure financing (c) process and (d) construction costs (access via www.PerformanceUrbanPlanning.org ).

The focus of this year’s Budget is very much on housing, with the first reading of the Housing Accords Bill that evening, and hearteningly, with the support of the Labour Opposition.

The following day Local Government New Zealand publicly expressed its support for the Governments initiatives, in dealing with these serious issues.

Remarkably - for reasons only known to itself, it appears the Christchurch City Council has concerns about the Governments housing initiatives, fearing it will lose control.

Although the Councils thinking appears extremely confused, it does in broad terms support the Governments sorely needed initiatives

Lois Cairns reports in The Press “Housing Bill Challenged By Christchurch City Council” that Councillor Peter Beck is more concerned about a loss of democracy, rather than affordable housing.

Surprising for a former Church Minister and Labour supporter who “sells” himself on being concerned about the poor and disadvantaged.

Sadly, Councillor Beck has had no role to play whatsoever in affordable housing issues and does not appear to have any knowledge of elementary urban economics.

There would be merit in Councillor Beck discussing these issues with people having expertise in these issues.

Deputy Prime Minister Bill English has made the Governments position extremely clear, in that Government must have these reserve powers to reluctantly intervene, if Councils fail to meet their responsibilities, in allowing increasingly affordable housing to be built.

Councillor Peter Beck and others involved with Local Government, without any knowledge of these issues (and how most importantly, Councils got in to this mess), need to understand that Councils do not have the right to deny people the opportunity to affordable housing.

Councillor Beck needs to understand, or have it explained to him, that housing is a basic human right.

No “if, buts, maybe’s” about it.

ENDS

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