Artificial Boundaries Work Against Land Supply

Media Release

18 May 2016

Artificial Boundaries Work Against Land Supply

“The Metropolitan Urban Limit and the Rural Urban Boundary are barriers that were introduced to prevent sprawl. Unfortunately, manipulating market behaviour through highly interventionist policies has resulted in the perverse effect of land supply being starved over the years.”

Those are the words from Property Council Chief Executive Connal Townsend who says the decision on where the market should and should not build ought to be left to market forces.

“When considering the supply side, developers need to be able to freely determine where demand is likely to occur. Currently, an artificial boundary is restraining demand to within that boundary, even though there may be significant demand outside of it.

“We remain advocates for greater density, but as tools the Metropolitan Urban Limit and the Rural Urban Boundary have failed demonstrably.”

Mr Townsend says the while the Auckland Unitary Plan will not have a Metropolitan Urban Limit, the fact that the Rural Urban Boundary is likely to be retained is a concern.

Mr Townsend says he agrees with Labour Party MP Phil Twyford that the Rural Urban Boundary has created an artificial scarcity of land with land inside the boundary costlier than land outside it.

“The Rural Urban Boundary is a barrier to entry into Auckland’s land market which will continue to distort market behaviour. An artificial boundary that chokes land supply is counter intuitive.

“As part of our involvement in the Auckland Unitary Plan Independent Hearings Panel process, our members have assisted significantly in putting together the Auckland Council Development Capacity Model, which is a powerful model that provides projections of how many houses the Auckland Unitary Plan rules enable to be built, where and whether those developments are feasible.”

Mr Townsend says this is the kind of tool Auckland needs in determining where bulk infrastructure is needed most to synchronise with where the market is likely to build. He adds this is a salient point given the ACDC Model complements the requirements around development capacity in the Resource Legislation Amendment Bill 2015.

Mr Townsend agrees with Mr Twyford in that we need to rethink the way infrastructure is financed.

“We know that paying development contributions through targeted rates over a number of years is workable. And, we already have the Local Government Funding Agency which more and more councils are starting to make use of. That is a good start but we need to build onto that and look at alternatives. Central Government assistance is needed in looking at private funding options for infrastructure

provision, out of sequence servicing of our future urban areas, as well as in reducing councils’ costs when it comes to hedging risks.

“Auckland’s land supply issue is at a crisis point, which is creating a multiplier effect. This is evidenced in the sharp increases in other cities’ houses prices.

“Needless to say, we are looking forward to Budget Day to see what expansionary fiscal policy initiatives the Government will announce to increase land supply in Auckland.”

ENDS

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