I was appalled to read the article in the March edition of The Orchardist deploring the loss of high quality rural land to “urban creep” and applauding the “Smart Growth” planning rules of the Bay of Plenty local governments.
The article failed to mention that Smart Growth is now well recognised as the main cause of perhaps the most serious social problem facing New Zealand today, namely the extremely high price of housing relative to New Zealand incomes.
International surveys by the OECD rank housing in New Zealand as some of the most expensive in the world, relative to incomes, while New Zealanders have to spend more of their income on housing than do the citizens of any other developed country except Greece.
A well-recognised measure of the affordability of house prices is the so-called “median multiple”, comparing the median house price in an urban area with the median household income in that urban area. And “affordable housing” is regarded as involving a median multiple of around 3 – in other words, where the median house price is around three times the median household income. That’s where house prices used to be in New Zealand, and still are in many major US cities, such as Houston, Atlanta, Dallas, and Pittsburgh.
Today, the median multiple in Auckland is around 8, and in Tauranga/Western Bay of Plenty around 5. In the third quarter of 2014, a survey by Demographia found that the median house price in Tauranga/Western Bay of Plenty was close to $400,000, and in Auckland over $600,000. By contrast, the median house price in Houston at that time was around US$200,000, or about NZ$265,000.
These high house prices and related rents put enormous pressure on the budgets of most families – certainly all families on low incomes – and are a major cause of over-crowding.
And the cause of these high “house” prices? The New Zealand Productivity Commission did a major study on this issue, published in 2012. The Commission found that there was no single cause of the problem, but overwhelmingly the main cause was the policy of local governments in restricting the availability of land for residential development. If a buyer has to pay $400,000 for 400 square metres of bare land in a distant suburb of Auckland (the equivalent of $10 million per hectare), they are unlikely to build a $100,000 home on it, and in no time the selling price for house plus land is $700,000 and more.
Dr Arthur Grimes, one of New Zealand’s top economists and for many years the chairman of the Reserve Bank’s board, did a study a few years ago showing that the price of land just inside the so-called Metropolitan Urban Limit which surrounds Auckland was between eight and 13 times the price of land just outside that Limit, depending where on the perimeter one did the comparison. The Productivity Commission found a similar effect of the urban limit.
I don’t have comparable figures for Tauranga, but I don’t have the slightest doubt that Tauranga’s so-called Smart Growth policies restricting the land on which houses can be built is having a similarly disastrous effect on the price of land – and therefore on the price of houses – in Tauranga.
So let’s be clear: “protecting high quality land from urban development” is having disastrous economic and social effects.
Actually, what is absorbing “high quality land” is not “urban creep” but the enormous expansion of lifestyle blocks, as the March article noted. That article quoted research by two Landcare scientists which found that in the Bay of Plenty “lifestyle blocks have consumed at least 16% of the region’s top quality land, with urban growth taking a further 1%”. Ironically, part of the reason for such an expansion in lifestyle blocks is the very planning rules designed to “protect” rural land – by preventing subdivision into, say, one hectare blocks, people who just want to plant a few fruit trees, or graze a few sheep, are obliged to buy a lifestyle block of five or ten hectares.
New Zealand is among the most under-populated countries in the world, with just 4.5 million people in a country somewhat larger than the United Kingdom. “Urban New Zealand” uses just 0.7% of our total land area. There is no excuse for residential land being as expensive as it is.
The March article in The Orchardist quoted the president of Te Puke Fruitgrowers Association, Ross Bawden, who deplored the conversion of high quality horticultural land in West Auckland into suburbia and noted that while fruit and vegetables could be shipped into Auckland from “far off regions such as Gisborne… at some point cognisance must be taken of the wisdom of growing food in the area that it is to be consumed in”. What an extraordinary comment from somebody representing an industry which is overwhelmingly based on shipping its production to the far side of the world!
The article also quoted Horticulture New Zealand expressing concern about “urban sprawl” as “threatening food security”. If our major markets started worrying about having to ship food in from overseas, New Zealand would be up the creek without a paddle!
As an orchardist, I regret it when high quality horticultural land goes under asphalt, but as I drive to my orchard on the far side of Pukekohe, I pass few orchards and lots of cattle and sheep grazing. On the North Shore of Auckland, there is no high quality horticultural land to protect for miles north of the Bridge.
If we support the restrictive zoning policies of many of our local governments, we should recognise that we contribute to one of New Zealand’s most serious social problems.
Copyright © 2024 Don Brash.