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Assignment 1

Assignment details

Course Urban Economics CONS7817

Assignment number Auckland Housing Affordability Problem

Due date and time 11th April 11.59pm

Delivery TurnItIn

Semester 1a

Lecturer John Boon

Student / Group details

Name(s) Jack Irons

Student ID(s) 1403371

Student declaration

I confirm that:
 This is an original assessment and is entirely my
own work.
 Where I have used ideas, tables, diagrams etc. of
other writers, I have acknowledged the source in
every case.
 This assignment has not previously been submitted
as assessed work for any academic course.
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Student signature(s) J. Irons

Date of signature 8th April 2016

Auckland’s Housing Affordability Problem

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Assignment 1 - Cons7905
Urban Economics

Cover Letter

Dear Associate Professor John Boon,

Please find attached my report outlining Auckland’s housing affordability problem,

its causes and possible solutions, as per your brief on 20/02/16.

I look forward to hearing back from you and discussing next steps OR helping you
action your instructions on preferred next steps.

Should you require any further explanation on any aspect of this report please
don't hesitate to contact me.

Yours Sincerely,

Jack Irons
April 2016
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Executive Summary

This purpose of this report is to critically evaluate Auckland’s housing affordably

problem, its causes and possible solutions. For the purpose of this report the
following issues will be discussed:

 Affordable housing
 Auckland’s housing problem
 The extent of Auckland’s housing problem
 Possible solutions

The first section has discussed the definition of affordable housing. Affordable
housing is developed to meet the needs of families and individuals in a certain
financial bracket. This allows them to make realistic mortgage repayments that are
no greater than 30 percent of their gross income.

The second section has discussed the extent of Auckland’s housing problem.
Auckland has a huge issue in regard to the affordability of housing. Most house
averages well exceed an average household income which places home owners in
a financially stressful position. The higher range of property values is caused from
the highest price that individuals are willing to spend. There are many factors that
have an effect on the level of demand in the property market. These include
demographic influences such as; domestic relocation or migration, external
migration and biological rise or fall all impact the level of demand within a city.
Land values aside, currently in Auckland City it costs up to 30% more than it ought
to. New Zealand’s current housing market situation is equal to that of Sydney,
Melbourne and San Jose. Placing our affordably bracket fourth in the world.

The third section has discussed the causes of Auckland’s housing problem.
Auckland’s present housing affordability issue is compelled by the marketplace.
There is a large amount of demand on the Auckland property market as Auckland
is considered a world class place to live and had high paying jobs. This is pushing
up the need for affordable housing as demand continues to grow. Long term
planning needs to be implemented to facilitate the high levels of demand. The
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threatening issue is to equalise the elements impacting housing demand while

ensuring that it has not deteriorated property affordability.

The final section has discussed the potential solutions to address the housing
affordability problem in Auckland. The Auckland Council recognises purchasing
and renting property is one of the most difficult problems those living or wanting to
live in Auckland face. Supply and affordability remain to be a factor that gives many
no options but to often result to purchasing a poor quality older home or have a
lack of choice in rental housing. The Auckland council has been continually
developing ways to report property issues throughout Auckland and has opted to
tackle the issue head on.

Table of Contents
1 Introduction............................................................................................................ 1
2 Definition of Affordable Housing..........................................................................2
3 The Extent of Auckland’s Problem........................................................................3
3.1 Housing Affordability Ratings...................................................................................................4
3.2 Market Regulation......................................................................................................................4
3.3 Affordability issues....................................................................................................................5
3.4 Social And Economic Risks And Consequences.......................................................................5
3.5 Why Housing Affordability Matters..........................................................................................5
4 The Causes of Auckland’s Problem......................................................................6
4.1 The Root Causes........................................................................................................................6
4.2 Town Planning...........................................................................................................................7
4.3 Demand Side Drivers.................................................................................................................8
4.4 Increased Building Costs............................................................................................................9
4.5 The Impact of External Events.................................................................................................10
4.6 Drag and Ratchet Factors.........................................................................................................10
5 Potential Solutions...............................................................................................11
5.1 Currently Being Implemented..................................................................................................11
5.2 Planned But Not Implemented.................................................................................................12
5.3 Other Solutions That Could Be Considered.............................................................................12
6 Conclusion............................................................................................................ 14
7 References............................................................................................................ 15
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1 Introduction

This report will elaborate and identify Auckland’s housing affordability problem, its
causes and possible solutions. This issue is current and has caused a lot of
concern for many households throughout the Auckland.

This report is divided into five parts, and will cover the following:

1. The definitions of affordable housing.

2. The extent of Auckland’s housing problem.

3. The causes of Auckland’s housing problem.

4. Potential Solutions:
i. Currently being implemented throughout Auckland
ii. Planned but not yet implemented within Auckland
iii. Other solutions that could be considered

5. Conclusion – a summary of the situation and my own reasoned

opinion as to whether the problem is likely to be solved within the
next decade.

The reason for this report is that affordability housing has created much discussion
and debate throughout Auckland recently. I intend to breakdown certain aspects as
listed above in order to identify the processes that need to be changed in order to
address this issue.
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2 Definition of Affordable Housing

According to the proposed Auckland Unitary Plan, dwellings are required to be
vended or rented. This is required to be at an amount that means families on 80 to
120 percent of the average domestic revenue for Auckland spend no greater than
30 percent of their gross revenue on rent or mortgage repayments (Council, 2016).
This amount defines the affordable housing bracket.
Affordable housing can be examined through the following selected processes:
 Median Multiplier - The Median Multiplier of revenue calculates the
reasonable price of residential properties through relating the median
transaction value of residential properties within a certain suburb, to the
median yearly revenue of the occupants within that region. The Median
Multiplier process describes affordable as the median household value in a
suburb ought to be the normal yearly salary of individuals multiplied by 3,
within in that particular suburb (Chaston, 2015). The Median Multiplier
revenue gauge varies from a ratio which portrays 3:1 as ‘Affordable,’
through to relations which show to be ‘Moderately Unaffordable,’ to
‘Seriously Unaffordable,’ and lastly ‘Severely Unaffordable’ (Demographia,
2016).

 Residual Method - The Residual Method measures a homes typical or

standard costs initially, followed by calculating the outstanding residual sum.
This sum is used to conclude the total amount that they are able to afford to
use on their home. If they simply use the residual quantity on their property,
then that particular situation is reasonable or deemed affordable. When a
household has to outlay more than the residual total, then in that case the
property is not affordable. The Residual Method can be of value as it clearly
distinguishes amongst diverse categories of households and their
expenditure (Demographia, 2016).
 Ratio Method - The Ratio Method investigates the proportion of a homes’
total revenue that is invested into their property, and is calculated on the
notion that if a family or individual spends too much of their salary on their
property, it will result to leaving them with not have sufficient capital left for
other expenditures, and could most likely endure from so called property
tension and anxiety (Treasury, nd).
Housing choice is a response to an enormously multifaceted set of financial,
social, and emotional impulses. For instance, certain households might decide to
spend additional on housing because they feel they have enough money to,
whereas others might not have an option.
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3 The Extent of Auckland’s Problem

There is no denying that Auckland presently has a housing affordability

predicament. The average house value in urban Auckland is almost ten times
larger than the average household income. As stated above, preferably it would
not surpass a ratio of three to one. This surge in house prices has hugely favored
a great number of households and landlords throughout Auckland who previously
purchased property in the Auckland region (Parker, 2016).

Figure 1: (Crockers, 2016)

As shown in Figure 1 above, the average sales price for Auckland has increased at
a far greater rate than other main cities throughout New Zealand from 2008
through till the last quarter of 2015. In 2015 alone, Auckland has seen a rise of
$112,000 on the average sales value in 2014, creating nearly half of the growth
witnessed in the previous 4 years (Crockers, 2016).

Figure 2: (REINZ, 2015)

As illustrated in Figure 2 above, which compares Auckland’s median sales values

from the past three years it is evident that the average residential sales value has
increased at a steady rate. This rate has augmented rapidly and experts aren’t
seeing this train derail any time soon.
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3.1 Housing Affordability Ratings

Figure 3: (Demographia, 2016)

Demographia International have developed a method of regulating cities into

housing affordability brackets, as seen above in Table ES-1. New Zealand is
currently equal to Sydney, Melbourne and San Jose with a median multiple of 9.7.
This places them fourth to highest after China (Hong Kong), as seen in Figure 4
below.

Figure 4: (Demographia, 2016) Figure 5: (Demographia, 2016)

3.2 Market Regulation

The residential property marketplace is controlled in a variety of different means
comprising of:

 Certifying of all contractors

 Regulation of funding organisations
 Certifying of property agents
 Reserve bank regulator on borrowing amounts
 Development rules
 Construction guidelines and procedures

(Boon, 2016)
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3.3 Affordability issues

It is understandable that the higher range of property values is directly caused from
the highest price that individuals are willing to spend. In this situation, for an
individual on a stable income, this is driven by influences such as:

 The total figure the bank is prepared to loan an individual

 The interest rate an individual has to spend when repaying their loan
 The amount an individual is earning
 An individuals’ certainty on their current job position

(Boon, 2016)

3.4 Social And Economic Risks And Consequences

If house prices continue to rise at the rate they are currently increasing at,
comparative to incomes, then the following penalties and threats will become more
substantial:

 A loss of public synchronisation - a progressively publically divided city, with

a segregation between those already in the housing market and those who
are unable to enter.
 Macro economic unpredictability and variability caused through rapid house
value deflation
 Amplified unemployment as companies reposition their production or office
space to other more inexpensive cities nearby such as Tauranga or
Hamilton, and even transnationally, such as Australia.
 More households are crowding to try save on rental costs

This would affect homeowners in an undesirable way and would transform

Auckland into a city that many would find undesirable (Parker, 2016).

3.5 Why Housing Affordability Matters

According to the Housing Affordability Report, published in March 2012, the home
ownership rate spiked at about 75% in the early 1990s but has currently relapsed
to around 65%. Housing affordability demands are exceptionally unmistakeable
throughout the Auckland region. Due to the fact Auckland’s population is expected
to continue to grow exponentially this adds extra pressure. This amount is
estimated to surpass all other cities throughout New Zealand, taking into account
approximately half of all new residential dwellings, in the next 20 years. (New
Zealand, 2012).

Throughout Auckland the challenge of housing affordability is severe among those

on lower incomes and younger couples. With this being said the signs of
unaffordable housing is now apparent further up the income scale. Families that
previously would have moved from leasing into purchasing their own home cannot
afford to acquire an ordinary home, and leasing affordability is becoming a large
issue for those earning between $50,000 to $70,000 in Auckland. (New Zealand,
2012).
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New homeowners pay a much greater proportion of their salary on property

expenses than they ought to. Correspondingly, tenants are paying enlarged rental
expenses reflective of the increased financing expenditures in turn funded by
property-owners (Demographia, 2016).

4 The Causes of Auckland’s Problem

4.1 The Root Causes

Auckland’s present housing affordability issue is compelled by the marketplace.

This indicates that the demand to recreate the housing supply which aims to
facilitate an estimated one million more individuals over the following 30 years
within the Auckland region (Parker, 2016).

The two fundamental root causes that provide Auckland City with excessive
demand are as follows:

 Demand - Individuals expect Auckland to be a fruitful and outstanding city in

up coming years. They are effectively purchasing land now in order to earn
profit in time to come. Furthermore, the demand of housing throughout
Auckland exceeds supply.
 Rigid resource and extreme costs - Producing new dwellings is not fast and
is an expensive process (Parker, 2016)

From the period of August 2014 and August 2015 average house values
throughout Auckland enlarged by roughly 20% from $635,000 to $765,000 (REINZ,
2015). Auckland’s house values have increased to extremely high values
comparative to earnings and in relation to tenancies. The average residential
property value in urban Auckland is currently nine to ten times larger than
Auckland’s average family revenue of about $80,000 per year (Parker, 2015).

The increase in property prices has subsequently helped a great amount of

property owners throughout Auckland. Conversely, it raises massive barriers to
individuals who wish to own their own property. These extraordinary values also
offer dangers to the broader market from a considerable price decline. The positive
summary is that with resilient and cautious administration, these problems can be
abolished in the extended future (Parker, 2015).

4.1.1 Driving Prices – High Demand

Demand to own property in Auckland is currently extremely sort after. This is driven
by the factors that Auckland provides a world-class standard of living and also
provides high paying jobs. Although Auckland is only a minute city on a global
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scale, the prospect that it is growing exponentially draws many families and
individuals within its boarders.

Auckland city has to be transformed, transmuting themselves from an inhabited

city to a metropolitan area. For the economy to alter our perception and to allow
this change to take place, it is essential that terrestrial values are established and
made high. Research obtained by Chris Parker, chief economist of Auckland
council, discovered that exclusive of increase, Auckland’s property values are
about a third overestimated. Additionally, present housing values are
understandable if Auckland can build up inner residential areas and the price of
constructing new dwellings can be reduced in the near future (Parker, 2015).

4.1.2 Driving Prices – Limited Supply

Prices have been driven upwards due to lack of properties and an increase in
demand. An important issue that needs to be focused towards in Auckland is
supply. Due to the fact the development of homes is a moderately slow and costly
process, long term planning needs to be implemented to facilitate the high levels of
demand. According to Chris Parker, he states that this concern can be facilitated
through the implication of new planning rules. (Parker, 2015).

The main purpose of the new planning rules is to guarantee that individuals can
decide on where they are living and working, without conceding other metropolitan
significances. The issues that the new planning rules needs to consider are
community areas, heritage, substantial government owned facilities, and the
natural environment. The threatening issue is to equalise all of these elements at
the same time as not deteriorating property affordability.

New planning rules would provide greater methods of allocating new development
space or redevelopment. Parker mentioned in his latest article that if new planning
rules were to be developed, focusing specifically on cost effective redevelopments,
Auckland could house far more individuals. He also mentioned that currently
smaller townhouses low-rise apartments are finding to be too costly for developers.
Zoning restrictions on undeveloped land, and also the price of materials and labour
can limit the ability to extend the city (Parker, 2015).

4.2 Town Planning

One of the greatest factors that has negatively affected Auckland’s housing
predicament is the constraints that are in place as a result of Town planning. Town
planning places many limitations to the design and other factors such as building
setbacks on site, and height and relation to boundary restrictions. Through placing
constraints such as these it has ultimately reduced the total amount of residential
properties being constructed and also the amount of homes that are permitted on
each section (Sherwin, 2012).
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Limited town planning constraints have consequently decreased the possibility for
Auckland to achieve and provide enough dwellings to meet the excessive
requirement for dwellings. This has caused led to low housing supply and high
demand, which signifies precisely the motive for an intensification in property
values triggering Auckland’s housing affordability problem (Sherwin, 2012).

4.3 Demand Side Drivers

Global investigation advocates say that the subsequent factors in variable
arrangements have an effect on the level of demand in the property market.

4.3.1 Demographic Influences

Figure 6: (REINZ, 2015)

A rise or fall in population most commonly amounts to a rise or fall in the ultimate
need for housing. This increase in population can originate from various amounts
of causes:

 Domestic relocation or migration; which occurs when individuals change

locations within a nation.
 External migration; which occurs when individuals move from another
country into a new country or decide to move from that country into another.
According to RBNZ (as cited in Boon, 2016) which advises that external
migration is distinctively the largest motive for a rise property value.
 Biological rise or fall; which occurs when there is an inequity amongst births
and deaths within the current population.

4.3.2 Interest amounts

Interest rates ought to be significantly influential towards property values. As
borrowing charges grow, property values should as a result reduce the amount
individuals are allowed to borrow. Having said this, in the last few years it has
become more common for individuals to borrow larger amounts, due to the fact
they are able to sell their previous property at a much higher price than what they
paid for it (Boon, 2016).
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4.3.3 Inflation
An increase in construction expenses often results to surges in the total amount of
new dwellings being constructed, but doesn’t seem to be strongly connected to
complete market value amounts. The effect of typical inflation as calculated by the
Consumers Price Index (CPI) on house values is tougher to establish as the CPI
has a substantial amount of property expenditures rooted within it. Because of this
it has become difficult to distinguish whether or not residential construction costs
are tainting the overall CPI or whether or not the CPI is tainting residential
construction prices (Boon, 2016).

4.3.4 Financial factors

Income levels are a significant factor that effects the level of demand in the
property market. The more individuals are receiving as income, will directly relate
to the total amount they will be willing to spend on their house, which will result in
overall higher property prices (Boon, 2016).

4.3.5 Employment Rates

Understandably, unemployment rates have a noticeable effect on the housing
market throughout Auckland. This is due to the fact that the greater number of
individuals that have a healthy paying job, the more individuals there are who are
able to buy their own home.

4.4 Increased Building Costs

Land values aside, currently in Auckland City it costs up to 30% more than it does
to construct a comparable house in Australian cities. This surge is caused from the
increase and higher costs of building materials throughout New Zealand. Due to
the size and demand comparable to larger cities, not much can be done about
these market features, which directly reflects consumer desires and New Zealand’s
minuteness. (New Zealand, 2012).

With this being said however, manufacturing efficiency is flat-lining, which provides
hope that there is a significant scope for upgrading and development. The NZ
Building and Construction Sector Productivity Partnership was founded in 2010.
This combined manufacturing and ministry enterprise, has a variety of plans and
proposals already taking place involving a services progression scheme. (New
Zealand, 2012). This partnership is also designed to support smaller organizations
to increase their administration exercises, their business procurement procedures
and the way they interact and collaborate with sub-contractors. (New Zealand,
2012).

4.5 The Impact of External Events

The Auckland housing market is quite often affected from large one off external
occurrences. Over the past 40 years the following external events have effected
the affordability of the housing market and construction costs throughout New
Zealand, causing owners to struggle to make repayments and acquire the property
that they desired.
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 Sub Prime Loans – originated recently as American funding organisations

decided to lend enormous numbers of property mortgages, regularly with
concentrated repayment for a preliminary phase, to individuals who were
hardly capable to meet the opening sums. Once the preliminary phase has
finished and the individuals have had to start producing payments on
regular marketplace conditions, it has become to difficult for them to do so.
This situation occurred countless times throughout America, which caused a
domino effect throughout Europe as the banks weren’t receiving the
repayments that were expected from their clients, and had subsequently
moved those funds elsewhere (Boon, 2016). Due to the fact these
occurrences are ‘one off’ it is difficult to establish their impression and
display the influence of upcoming incidents into marketplace forecast
representations (Boon, 2016).
 The establishment of Goods and Service Taxes throughout New Zealand in
1985. The establishment of GST generated a rise of 7-8% in the price of
building new properties, which has now increased to 15% (Boon, 2016).
 The Asian economic disaster which occurred in 1997 (Boon, 2016).
 The global fall of stock markets during 1987 (Boon, 2016).
These occurrences of external events have both short and long lasting
repercussions on a nations economic stability.

4.6 Drag and Ratchet Factors

As New Zealand continues to become more culturally diverse the need for housing
in Auckland continues to increase. Two factors that can be referred to are; drag
and ratchet.

 Drag - When the demand for housing can’t catch up in order to meet the
need for housing. The effect this has is that house prices increase
drastically.
 Ratchet - When people sell their property in order optimize their capital gain
when property values increase. This creates a more fluid market place.
However, when property values decrease people tend to not sell their
property.

5 Potential Solutions
5.1 Currently Being Implemented
The Auckland Council recognises purchasing and renting property is one of the
most difficult problems those living or wanting to live in Auckland face. Supply and
affordability remain to be a factor that gives many no options but to often result to
purchasing a poor quality older home or have a lack of choice in rental housing. It
is this issue that has caused the Auckland Council to act in accordance to ensure
that they tackle this housing challenge (Council, 2016).
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While the Auckland Council doesn’t construct houses directly, they do play a major
function in facilitating housing by the following methods:

 Delivering and illustrating direction through the Unitary Plan

 Endlessly looking to provide faster building consents for clients
 Offering development and expansion opportunities
 Making it their duty to ensuring that all infrastructure and services are set in
place for proposed developments
(Council, 2016)

During 2013 the Auckland council and the government authorised the Auckland
Housing Accord to immediately begin to increase the amount of new
dwellings. According the this report they are currently they are on the right path to
deliver on the contract's goal of complying almost 40,000 new dwellings in three
years. Nearly 20,000 dwellings have attained building consent between 2013 and
the end of 2015. The amount of properties being constructed will increase even
quicker with the commencement of the 2015/2016 building period (Council, 2015).
The Auckland council has recognised the importance and demand of housing
throughout Auckland. It is because of this that they have developed a fast tracking
process for building consents which was instigated early this year. Individuals will
be allowed to submit both resource and building consents on the internet by mid
2016. The fast-track procedure will allow up to 20 per cent of the total resource
consents to be administered to within two weeks. In certain instances, building
consents that have been methodically detailed and have undertaken a thorough
pre-application meeting are administered to inside one week (Council, 2015).

Government Grants such as KiwiSaver are designed to assist first home buyers
into the property market. KiwiSaver is a controlled and optional occupation
centered savings enterprise. Its main objective is to assist individuals and families
with their saving goals for superannuation and to purchase their first home. It's
intended to be a worry free procedure so it's simple to uphold a consistent savings
scheme over time. Once individuals have decided to join, payments are removed
from their wage at the amount of either 3%, 4% or 8% (they decide on the
amount). This amount is then invested on their behalf in a KiwiSaver scheme
(KiwiSaver, 2016).

5.2 Planned But Not Implemented

The Auckland council has been continually developing ways to report property
issues throughout Auckland and has opted to tackle the issue head on. The
Housing Action Plan focuses on prospective metropolitan property allocation,
special housing areas, the Auckland Plan, the Proposed Auckland Unitary Plan,
and encouraging superiority city design. Chris Parker has recently released a
financial report called ‘Housing supply, choice and affordability - Trends, economic
drivers, and possible policy interventions.’ This document identifies why Auckland
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has an issue when It comes to property affordability, and the procedures that need
to be completed to resolve the problem. It will also notify and update the council’s
continuing plan for accomplishment. (Parker, 2015).

The Unitary Plan is an additional way that the Auckland council is preparing
Auckland for triumph over this issue. The proposal will guarantee that Auckland as
a city can achieve its financial and property desires, while guarding and developing
what local residents prize the most. More importantly, it will regulate what can be
constructed, answer questions regarding how to develop a more durable and
compressed city, and how to uphold and preserve the natural marine environment.
The Unitary Plan is developing and a robust reassurance process with the
Independent Hearings Panel to ensure that it develops and realigns issues to
support the need for progression (Parker, 2015).

5.3 Other Solutions That Could Be Considered

Freeing land and constructing thousands of houses will not solve the housing
affordability predicament within Auckland city, says one specialist. Laurence
Murphy, previous Lecturer of Housing at Auckland University, says a
transformation such as this will just end up with property developers undertaking
the same thing that it has continually been completed, which is purchasing
sections at their capital value, and then constructing houses to ultimately sell for
the highest value achievable (Murphy, 2015).

With the median house value still being greater than $850,000 and increasing,
almost all of the newly built properties would still be exceedingly costly for low-
income individuals, and freeing up a greater number of sections and constructing
more dwellings to reduce prices is naive, says Professor Murphy. Alternatively, he
says, some consideration needs to be targeted towards delivering inexpensive
housing. With small interest rates, increasing incomes, hundreds of thousands of
individuals immigrating to the city each year, continual developments to the city
which are all creating increase in demand (Murphy, 2015).

Property investors can not construct more affordable properties as they have to
contest to purchase houses. The objective to escalate the amount of homes by its
self isn’t sufficient. The individual that offers the greatest amount for the property
will acquire it. Releasing vacant sections is not the remedy, as developers, they
require a healthy margin to surpass the expenses and risks associated with the
process. Because of this, investors find it challenging to construct affordable
properties.

Auckland's affordable housing zones have requirements demanding investors to

include some houses at a cost that is less than the average price in the particular
suburb. Currently there is nothing preventing affordable houses being sold at
exorbitant prices due to the high demand of property in Auckland. According to
Professor Murphy, “If you’re going to include affordable housing, there is an
argument that it should be retained as affordable housing” (Murphy, 2015).
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The introduction of capitol gains tax would directly decrease the high demand from
investors. New procedures such as this would help retain record of offshore
investors in specific, to assist Inland Revenue to accumulate tax owed.

Another solution that should be considered is for the council and government to
encourage individuals to purchase homes within condensed housing zones, or for
investors to construct developments within compacted housing areas. As a result,
this could promote diversity throughout sort after areas by offering concentrated
living incentives as an inducement for constructing reasonably priced properties.

As well as this another solution that should be considered is to alternate ownership

models widely available. A ‘rent to buy’ arrangement can often be an outstanding
opportunity for individuals or families who desire but are not economically
equipped to purchase their own home. A ‘rent to buy’ contract provides individuals
with the opportunity to get their funds in control (by increasing their recognition
rating and saving cash for a deposit, for instance) at the same time as securing the
property that they desire. With this being said, to ensure that this ownership model
works, prospective purchasers must be certain that they will be equipped to make
the acquisition when the tenancy period finishes. Or else, individuals would have
spent large costs on rental payments, with zero to display once completed (Folger,
2016).

Lastly, another solution that should be considered is how the New Zealand
government should develop houses in large scales to ultimately reduce costings
and allow more families and individuals the ability to own their own home. Labour
have continually backed, and have expressed the need for this process within
Auckland. This proposal would allow the government to act as the developer,
removing large developers’ margins as well as reduced construction costs. These
costs can be saved through using off-site manufacturing, wholesale purchasing of
construction resources and diminishing contractors margin by using large-volume
tendering.
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6 Conclusion
In conclusion the Auckland Council is currently one of main influences when it
comes to property throughout Auckland City; others include the Reserve Bank, the
government and property developers. One of the most significant projects that
were developed in the 2012 Housing Action Plan was to build a significant amount
of affordable homes in special housing areas such as Hobsonville Point.
According to calculations developed through the median multiplier of revenue
gauge, as displayed in figure 5 above, Auckland scored a 9.7 and was deemed
severely unaffordable. Due to these findings, many individuals and families are
inserting enormous amounts of their total revenue into repaying their bank loans.
Increased building costs have made it hard to build efficient and affordable housing
throughout New Zealand.
Increased levels of migration throughout Auckland has caused for high demand in
recent years. This is due to the fact that Auckland currently offers a greater number
of opportunities than other parts of the nation.
Auckland council needs to continue to develop ways of speeding up the consent
process to met the high demand.
Over time Auckland will continue to experience robust development. Auckland has
the potential to be one of the most liveable cities in the world however, change
within the New Zealand property market needs to occur in order for housing to be
affordable for the average earning citizen. For this to be achieved, a more complex
understanding of the Auckland housing market needs to be developed.
In Auckland’s current housing circumstance this relationship could understandably
shape the affiliation that already occurs with the government’s Auckland Policy
Office and the Auckland Council.
Finally, it is my opinion that the Auckland council would most probably find it easier
to achieve their long and short term goals if the cities financial growth capabilities
that are among side the governments objectives, were amalgamated. This should
include the following:
 Land usage development and scheduling
 Amalgamating this with infrastructure development and asset administration
 Taking the natural environment into consideration when constructing in
metropolitan areas
 Community improvement and expansion
 Jack Irons - 1403371 15
Assignment 1

7 References
I acknowledge that a substantial amount the content and ideas have been drawn
from PowerPoints made by Associate Professor John Boon (Unitec Institute of
Technology)

Wikipedia (2016). Afordable Housing. Retrieved February 29, 2016, from

https://en.wikipedia.org/wiki/Affordable_housing

Council, A. (2016). Auckland Unitary Plan. Retrieved February 29, 2016, from
http://www.aucklandcouncil.govt.nz/EN/planspoliciesprojects/plansstrategies/unitar
yplan/Documents/Section32report/2.21%20Affordable%20housing
%20v3%202013-09-18.pdf

Parker, C. (2015). Chief Economist delves into Auckland housing. Retrieved March
17, 2016, from
http://ourauckland.aucklandcouncil.govt.nz/articles/news/2015/10/chief-economist-
delves-into-auckland-housing/

New Zealand Productivity Commission (2012). Cut to the Chase - Housing

Affordability Report March 2012. Retrieved March 17, 2016, from
http://www.productivity.govt.nz/sites/default/files/Cut%20To%20The%20Chase
%20Housing%20-%20Final%20Report%20Single%20Pages.pdf

Demographia (2016). 12th Annual Demographia International Housing Affordability

Survey: 2016. Retrieved March 17, 2016, from
http://www.demographia.com/dhi.pdf

Parker, C. (2016). Housing supply, choice and affordability. Retrieved March 17,
2016, from
http://www.aucklandcouncil.govt.nz/EN/AboutCouncil/businessandeconomy/Docu
ments/housingsupplychoiceandaffordability.pdf

Council, A. (2015, September 29). In depth: What’s fuelling Auckland’s house

prices?. Retrieved March 17, 2016, from
http://ourauckland.aucklandcouncil.govt.nz/articles/news/2015/10/in-depth-what-s-
fueling-auckland-s-house-prices/

Murphy, L. (2015, July 20). Make developers provide affordable housing. Retrieved
2016, from http://www.business.auckland.ac.nz/en/about/news-and-media/nz-
herald-brand-insights/2015/make-developers-provide-affordable-housing.html

Folger, J. (2016). Rent-To-Own Homes: How The Process Works. Retrieved 2016,
from http://www.investopedia.com/articles/personal-finance/100714/renttoown-
homes-how-process-works.asp

Chaston, D. (2015). Median Multiples. Retrieved 2016, from

http://www.interest.co.nz/property/house-price-income-multiples
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Assignment 1

Treasury, T. (n.d.). Affordability of Housing: Concepts, Measurement and

Evidence. Retrieved 2016, from http://www.treasury.govt.nz/publications/research-
policy/wp/2006/06-03/02.htm

KiwiSaver (2016). KiwiSaver in a nutshell. Retrieved 2016, from

http://www.kiwisaver.govt.nz/new/about/summary/