Bernard Hickey: Rich and comfortable must make way for young and poor

There have obviously been a large number of articles around housing and affordability of recent times and many make good points however this article stands out to me as it drifts around a little in my opinion. It does highlight some key issues but also seems to demonstrate the lack of in depth understanding of development that often permeates the housing debate and places a lot of the blame for a lack of progress on Council when the issue is far more complex. To be fair a Herald column doesn’t give you much space to fully debate an issue.

The first point I would make is that building consents generally follow resource consents and the problems lie earlier in the process of development. In our observation there are large numbers of sections and apartments in the pipeline that certainly won’t reflect in building consent numbers at this time but will do over the next 12 – 18 months as they are working through the consent and other processes. People’s expectations of time frames and what can be achieved in the development process are wildly optimistic and unrealistic, and expectations of the special housing areas (SHA) process are somewhat similar.

Which brings me to my main point and underpins the whole issue in my view which is that development and house building are being delayed more by capacity and financial issues in the industry (these are somewhat related) than by other factors. Council and consenting issues are a factor in this but not necessarily at the hub of the problem. We are currently struggling to find contractors to price several substantial projects as many have full order books for the next 12 months. On a recent tender where 6 contractors were asked to price a project 3 returned the documents citing too much work. We subsequently found two others to add to the mix only to have a further two withdraw. Of the 3 remaining 2 have said if they get the work they do not need any further work for the foreseeable future. These are substantial projects ready to go with consents in place and while we should get them off the ground it does not bode well for other projects that we have in the pipeline. The shortage of resource is also pushing prices up (20% plus over the past 18 months) and a lot of projects are sensitive to cost increases and can easily become difficult to fund.

Bernard makes comment about a dead cat bounce but I don’t see it. From our perspective the issue is largely one of capacity – there are simply not enough people to deliver what is needed. While there are soft spots in parts of the market the people I talk to suggest that our industry generally is overloaded. We are looking for 5 staff at present and fighting everyone else for the same people – Council included and there needs to be some realism introduced into the debate. You can put whatever legislation and time frames you like in place but if you don’t have and can’t get the resource to deliver you aren’t going to meet time frames – once again a capacity problem.

From our perspective I note that expectations of what can be delivered under the Housing Accord are somewhat unrealistic. We are involved in 6 Special Housing Areas and all but one is progressing well however only one has houses under construction. This is not through a lack of will on anyone’s part, it is simply that development is complex with a multitude of issues to resolve and the lead in to construction can take anywhere from 12 – 18 months and in some cases longer. In my opinion the Housing Accord is making a difference but it is not an overnight fix as legislation and new processes don’t and can’t fix the physical or financial problems that are holding most developments back.

Bernard Hickey makes the comment that developers are complaining of increased charges and development contributions from Council and this is probably the closest the article gets to the true problem in my opinion. However the reality is that there needs to be a massive spend on infrastructure to unlock development and without it you won’t see the level of development required. At present Council departments don’t have the budgets, resources or mandates to fix the myriad infrastructure issues that are holding Auckland back. Development is a commercial exercise in most cases and if there is any significant infrastructure issue a small development cannot stand the cost of the “fix” and the development stalls. Council, Watercare or Auckland Transport are frequently the only party that can stand this cost as they can distribute it over the wider development community or rate payer base through contributions or growth charges. However they simply cannot deal with the number of these issues that exist with the resources they have. There are also budgetary constraints and what they can do and were developers to take the pressure off Council and do the work Council can’t afford to reimburse them unless we a) increase Council debt, b) increase rates or   c) increase development contributions none of which are politically acceptable. Somehow this dilemma has to be resolved and personally I think Auckland would benefit more from a sensible targeted $2.4 billion spend on infrastructure over the next few years than from a rail tunnel. If the housing situation isn’t dealt with in Auckland the money might be better spent on improving rail to Hamilton or Whangarei as more and more people will be forced out of Auckland.

While somewhat peripheral a cheap and practical change the government can contribute is a review of the Public Works Act. This next comment is no way related to the battle referred to in Bernard Hickey’s article of which I have no knowledge however we frequently come across the situation whereby to fix an infrastructure problem we have to construct a pipe or road through an adjoining property. More and more there are claims of compensation from the adjacent owners that have no relationship to any inconvenience to them but rather to a desire to make huge profit for no effort. Increasingly this is stalling development. Council’s desire to get involved and use the Public Works Act is limited because the legislation is outdated, clumsy, onerous and frankly too slow. There needs to be a new mechanism put in place to help alleviate the blackmail practices that are increasingly pervasive. It could make a substantial difference if sensibly crafted and Council uses it.