Among his proposals to fix the Auckland housing market when he became the Housing Minister in 2017, Phil Twyford talked about removing the urban growth boundary in Auckland as a way to bring down the cost of land.
Auckland isn’t the only city to have such a boundary (which is now known as the Rural Urban Boundary – or RUB – in the Auckland Unitary Plan) but it’s the city in which the difference between land prices in urban and non-urban areas is most pronounced. According to property data company Valocity's director of valuation innovation, James Wilson, land accounted for 60 percent of the cost of an Auckland property, ten years ago, compared to around 40 percent for the rest of the country – and that figure has headed north since then (excuse the pun). The reason for this, so the theory goes, is that the artificial stimulus to prices is created by having an arbitrary line which limitsgrowth. Put simply: if there’s a finite, or limited, supply of something, it will generally cost more.
The numbers certainly seem to bear this out. As recently as last week, in a OneRoof article, Valocity figures showed the suburbs where the value of the land overwhelmingly outweighs the value of the houses that sit on them – noting that, of the more 1700 New Zealand suburbs examined, there are 43 suburbs where the average value of the land represented 80 percent or more of the total council valuation. All were in Auckland bar one (Wellington's Oriental Bay). Admittedly, none of these suburbs were anywhere near the Auckland RUB – but you could mount an argument to say that they’re the result of a knock-on effect from the urban boundary where land prices escalate as you get closer to the central city. Indeed, it’s worth noting that even ten years ago the price of land just inside the Auckland boundary was nearly 10 times higher than land just outside the boundary.
So should we just abolish urban boundaries in the cities and towns where they exist? Would this simple act bring down land prices as Phil Twyford believed it would?
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Perhaps. But as with most things, it’s not quite as simple as it appears.
Firstly, it’s worth noting that enforced urban boundaries such as the Auckland RUB actually serve an important practical purpose. They provide certainty around which rural areas should remain rural, over time; they allow infrastructure providers to plan for growth (new roads, pipes and utilities, and so on) with a high degree of certainty; and they constrain the environmental impact of urban sprawl. So removing them, altogether, might help to reduce land prices on the fringes, but it would do so at the expense of rural and environmental certainty and would create a nightmare for infrastructure development.
But what about expanding rural boundaries rather than removing them altogether? This would certainly address the issues raised by infrastructure developers but would probably still upset rural communities and environmentalists. Both groups seeing any further incursion into rural areas as something to be strongly resisted. It’s also worth noting that the price of land, as a percentage of the cost of a housing development, isn’t really a big issue in any of the towns and cities with urban growth boundaries, outside Auckland. Not yet, at least.
And even in Auckland, where this stuff is an issue, there’s a strongly held view that expanding the growth boundary would actually have the opposite effect to that which was intended, and that the land within the newly expanded boundary would quickly increase in value to match that of land within the old boundary.
For me, however, the most compelling argument against any rash decision to remove or expand the Auckland RUB is the reality of just how much land is still available for development within the current boundary. Right now, there is still capacity for up to 137,000 additional dwellings in areas within the RUB, as identified in the Unitary Plan, more than enough for our needs over the next 20 years.
For all of these reasons, removing or expanding urban boundaries, in any of our cities, is something which should be done carefully and after extensive consultation, not as the quick-fix equivalent of ripping a plaster off a wound. We don’t yet know what new Housing Minister Megan Woods plans to do in this space, but, as with all things housing related, let’s hope that common sense, rather than naïve populism, is the order of the day.
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