The report is published here in two parts. Part 1, download at the right.

Part 2 here

Appendices

Executive Summary

This report is the Housing and Business Development Capacity Assessment (HBA) for the Auckland region, as required by the National Policy Statement on Urban Development 2020 (New Zealand Government, 2022).

The HBA reports on the expected demand for, and currently enabled supply of, residential and business development capacity over the next 30 years to 2052.

Demand is based on Auckland Council’s March 2023 Population Projections, with the Medium series considered most likely. This shows continued growth with demand of approximately 200,000 additional dwellings over the next 30 years. Total population is expected to be lower than previous projections suggested (for example in the 2020 HBA, Auckland 2050 and 2021-2031 LTP), as the pause in growth due to closed borders and increased internal migration over the covid period is not expected to be made up in the future. The rate of population growth is also projected to be slightly lower. Consequently, the demand for residential and business capacity will be slightly less than previously planned for. However, there is reasonable uncertainty in any projection and a range of scenarios is provided, reflecting the current high level of uncertainty (the High and Low scenarios are approximately +/-100k dwellings either side of the Medium respectively).

The supply assessment is based on the Auckland Unitary Plan Operative in Part (AUPOIP) (2016), in the short term,1 Plan Change 78 as notified, which includes Auckland Council’s proposed response to the Medium Density Residential Standards (MDRS), and Policy 3 of the NPS-UD in the Medium Term.2 The long term includes the ‘white out’ upzoning in the Auckland Light Rail Corridor, the current Auckland Plan 2050 and FULSS (2017), which times the staging and release of Future Urban Areas. New timings suggested by the Draft Future Development Strategy 2023 are also noted given that these timings largely incorporate and reflect the expected availability of bulk infrastructure that are also utilised in this assessment.

The increase in plan-enabled supply from PC78 proposals (implementing MDRS on most residentially zoned sites in the urban area, and an increase in intensification opportunities in walkable catchment of rapid transit and centres) is significant. A high proportion of the additional plan-enabled capacity is also feasible. The 2021 housing assessment (based on pre-PC78 AUPOIP capacity) confirmed, at least at the general quantum level, that the then-current AUP was likely to be sufficient, so a more enabling planning system (i.e., PC78) adds to this existing sufficiency – particularly of dwellings, and particularly in those higher demand locations where PC78/MDRS has upzoned relative to AUPOIP. When considered against a slightly reduced projected future demand, and continued supply of housing over the covid period when population growth was negative and the existing housing shortfall substantially reduced, sufficiency is unlikely to be negatively impacted in aggregate. This aggregate assessment masks current and expected short-term feasibility challenges, and the ongoing challenge of providing infrastructure in locations that were not enabled prior to PC78 (and therefore not expected) to accommodate significant growth.

Similar to what was found in the 2021 Housing Assessment, below the aggregate/regional level, a number of potential insufficiencies and challenges exist. The challenges identified in the 2021 Housing Assessment around the affordability for low-income households in a market driven planning and assessment system remain, and may increase with strong rises in the costs of many other goods and services and interest rate rises. Interest rate rises are doubly impactful as they affect both mortgage repayment costs and the price and affordability of all large ticket items bought with debt – including the extremely expensive infrastructure required to service growth (some of which has not been previously planned for) and address existing level of service issues and future challenges.

Given both existing infrastructure and infrastructure funding resources are scarce and expected to remain so, choices about where to allocate them to best enable development will be required. Especially as the planning system provides more choice and is therefore less useful at giving direction on where and when development is likely to occur. We expect this reduction in the utility of land use planning for predicting development patterns to result in infrastructure spending being directed towards areas with existing high demand and a greater likelihood of take up. Conversely, this will also reduce the ability to support the creation of new areas that are less well located, have lower demand and where the likelihood of take-up is more speculative as these locations will now be competing with many better located and higher demand areas. This challenge may also extend to locations where housing need is high, but likely realisation rates are low.

We also find that there are potential differences between housing demand and plan-enabled supply at a finer spatial level, in two generalised locations under two different spatial demand assumptions. Firstly Stats NZ: if the distribution of demand is considered at the local board (LB) level, in accordance with the 2022 Stats NZ LB projections, there may be shortfalls in outlying areas (as greenfield land supply slows in response to funding challenges and the ability for demand to locate in more first choice locations), and that greenfield demand will be met in relatively more central existing urban areas where there is now more capacity. Secondly, land value: conversely, if demand is closer to the pattern indicated by land values, then there are likely shortfalls in areas close to the city centre and demand will be displaced and need to be met in existing urban areas slightly further out.

These quite different patterns of potential demand and the sufficiency and infrastructure issues they generate reflect high level trade-offs inherent in strategic land use planning.4 Land use scenarios used to date for regional planning, and indicated to continue under PC78 as notified, indicate a development path somewhere between these two contrasting demand alternatives, which suggests trade-offs remain between the financial constraints affecting bulk infrastructure on the fringe and regulatory constraints affecting plan enabled capacity nearer to the city centre. This results in a pattern where growth (without addressing one or both of these issues) is likely to be largely focussed into the middle and outer suburbs where enabled supply is generally high, take up is market feasible (as demonstrated post AUP), there is proportionately more land available, and is not particularly constrained by infrastructure. The financial challenge for infrastructure provision remains significant and, given that long-lived infrastructure is debt-funded, rising interest rates and reduced willingness to invest (due to council financial pressure to minimise rates increases as a burden on current households) will constrain uptake in some locations. Lower forecasted demand (relative to previous growth rates) will also increase the per capita cost of already committed infrastructure and will inevitably (and appropriately) lead to changes through project rescoping and timing reconsideration.

The current cycle of interest rates, inputs cost increases, and house price declines also signal expected short-term feasibility challenges for developers. These challenges have been forecast for some time, and consenting numbers are now slowing, but they remain high relative to historic rates. Significant increased potential for supply could further decrease expected prices, putting additional pressure on feasibility of projects already at the margin – especially those reliant on price and cost levels seen near the peak in 2020-2021. However, this forecast short-term impact (like the rapid rise in prices over the preceding covid period) is more a function of macro-economic issues (inflation, interest rates, etc.) rather than a response to conditions arising from planning constraints or infrastructure provision.

We note that increased availability of developable land and abundant infrastructure is a necessary condition, but insufficient in and of itself, to induce profit motivated developers to address demand from very low-income households whose income is insufficient to cover build costs, let alone land. To address this segment of the housing market, many other supporting actions will be required.

In summary, the Auckland Region has more than sufficient “reasonably expected to be realised” housing capacity in aggregate to meet the forecasted demand (plus competitiveness margin). However, future population growth may not follow the same patterns as historic growth, especially now that brownfield development opportunities are more plentiful. How this growth eventuates will directly impact which sub-regional areas are likely to suffer from any potential shortage of capacity due to infrastructure constraints, which are expected to reduce over time particularly closer to the centre – these central areas are also expected to see more growth over time. And, as noted above, regardless of which spatial growth patterns materialise, it is unlikely that market-led development alone will address the demand of very low-income households without specific targeted action.

For business capacity, the story is quite similar. At this time, Auckland has more than sufficient aggregate business capacity to accommodate projected growth in business and jobs over the short, medium, and long term. However, as with housing capacity, there are some areas of the city and some activities that are projected to have shortages of business land to meet the currently estimated future needs. Intensification as the city continues to grow, and more central locations become more desirable, will affect the suitability of some areas for some existing uses. This could place pressure on businesses that require lots of land as central land, in particular, becomes more valuable. Specific business activities, particularly land extensive ones (light industry, large format retail) will need additional land provision to meet their specific suitability requirements practicably. These issues warrant monitoring to ensure a well-functioning economy and urban form. ...

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List of appendices

Appendix 1. Business sufficiency assessment. Auckland HBA – Business assessment. ME Consulting, August 2023
Appendix 2. Property developer survey
Appendix 3. Supply inputs, assumptions, and methodology
Appendix 4. Workflow for the model for dwelling demand
Appendix 5. Demand for dwellings based on ACMar23 low and high projection
Appendix 6. Transport infrastructure assessment to support development capacity. HBA Assessment of Auckland Region. Transport Assessment. Commute Transportation Consultants

Data files

Auckland Council, October 2023