Hard work on housing starts now

Jason Krupp
Insights Newsletter
27 May, 2016

Last week saw a rare conjunction. Almost all the political parties agreed that Auckland’s artificial rural urban boundary had to be lifted to free up land for housing development. This kind of alignment is rarely seen astrologically, let alone in an adversarial political system.

It was an overdue but welcome development, but it does not solve the problem by itself. That is because there is still another major housing hurdle to overcome in Auckland: infrastructure.

Auckland Council is largely responsible for providing the core infrastructure needed to prepare land for housing. Unfortunately the city’s ability to do so is constrained by high debt levels and high levels of disgruntlement over recent local tax hikes. The reality is that unless policymakers come up with smart ways to solve this problem, lifting zoning restrictions will do little to increase the supply of housing in Auckland.

The good news is that there are plenty of options. One solution that we have long advocated for is a Municipal Utility District (MUD). This is a mechanism whereby developers use bonds to self-fund housing infrastructure, which are then serviced by targeted residents over a 30 year term. Another option is a municipal bond, a debt facility that works in much the same way as a MUD but without the developer raising the debt. Both of these mechanisms have been used in the US to fund the growth of cities without unfairly burdening taxpayers or constraining housing development.

The bad news is that there is no free, or for that matter quick, lunch. In an ideal world, developers would be freed from the restrictions of zoning, but not so much that they pave over prime agricultural land or areas of high environmental value. New funding tools need to be carefully integrated with the broader planning framework, and lots of thought needs to be given to how new infrastructure meshes with existing utilities networks. This is where the hard policy work on housing starts in earnest.

This may seem like a depressing thought, particularly for a Friday, but I would argue the opposite. Three years ago, when the Initiative first proposed abolishing Auckland’s growth boundary, the idea was written off as impossible. Today it is mainstream.

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