A housing assessment for the Auckland region has been completed to show the projected supply and demand for housing over the next 30 years.

The Auckland Council Housing assessment for the Auckland region is required by the National Policy Statement on Urban Development 2020.

The assessment covers Auckland’s urban environment and examines whether there is sufficient development capacity to meet the projected increase in demand for housing as the city’s population grows.

It shows that across Auckland there is sufficient plan-enabled development capacity and feasible development capacity under the current market conditions to cater for growth and the projected demand for housing over the next 30 years.

However, it also identifies that the delivery of affordable housing at pace and scale will be an ongoing challenge and that this is strongly influenced by many other complex factors outside of the role of territorial authorities.

The full Housing assessment for the Auckland region is available here. (Download pdf on the right)

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Executive summary

In August 2020, the National Policy Statement on Urban Development (NPS-UD) came into effect with the purpose of boosting the competitiveness of the housing and urban markets as a mechanism to improve access to affordable homeownership through better planning decisions. As part of evidence-based decision-making, the NPS-UD requires that the Auckland Council develop a Housing and Business Development Capacity Assessment (HBA) that provides information on the demand and supply of housing and business land, over the short, medium, and long-term, and the impact of council’s planning and infrastructure decisions.

The NPS-UD is prescriptive in nature and shares commonalities with its predecessor, the National Policy Statement on Urban Development Capacity (NPS-UDC) 2016, but does not provide details for implementation. The NPS-UD differs from its predecessor in that it provides space for users to refine the terminology used and develop appropriate assessment methods, tailored to the context of individual territorial authorities.

Since the adoption of the Auckland Unitary Plan (AUP), Auckland’s annual dwelling supply has reached an all-time high, and the latest consenting data from the council and Stats NZ shows this increase continuing. This HBA is the latest in a long series of housing and business development capacity supply monitoring work for Auckland, and aims to meet the requirements of the NPS-UD. It builds on previous monitoring work by analysing the impact of housing supply on housing affordability, that is, it assesses affordability through the lens of ordinary home buyers who are experiencing increased difficulty in entering the housing market. However, there are aspects that are not included in this HBA and are left for future assessments and research.
The key findings and implications of this HBA are summarised below.

Development capacity

1. Total net infill development capacity is 101,649 dwellings and the total net redevelopment capacity is 909,179 across Auckland’s urban zoned land. If all suitable sites are all redeveloped to the maximum as enabled by the plan, Mixed Housing Urban and Mixed Housing Suburban combined could provide 678,851 additional dwellings or 75 per cent of the total net redevelopment capacity.

2. If development potential is maximised, Franklin and Howick local boards provide 28 per cent (28,310 dwellings) of the total net infill capacity. The combined areas of Henderson-Massey and Howick have the potential to supply 23 per cent (210,556) of the total net redevelopment capacity.

3. To identify capacity that is commercially feasible, two capacity scenarios are used – the maximum percentage of profit yield and the minimum priced dwelling units scenarios. Approximately 840,000 dwellings are commercially feasible for the maximum percentage of profit yield scenario, where the average sales price is $1.66 million and terrace housing comprise most of the feasible typology. Under the minimum priced dwelling scenario, about 1.4 million dwellings are commercially feasible, where the average price is $1.04 million with an average floorspace of 107 square metres. Apartments and terrace housing comprise over 84 per cent of the feasible dwellings tested under the minimum priced dwelling scenario.

Infrastructure-ready

1. Water supply, wastewater, and stormwater infrastructure, at a network (bulk) infrastructure level, is broadly adequate to cater for projected growth over the short, medium, and long-term. Land transport capacity is not included in this HBA and ongoing work to develop land transport assumptions will be included in the next HBA.

2. The initial assessment of the bulk water supply and wastewater networks indicates that of net plan enabled capacity, 57 per cent is infrastructure ready in the short-term, 77 per cent in the medium-term, and 99 per cent in the long-term.

3. Although constraints exist within the existing networks, projects funded through the Long-term Plan and identified in the Infrastructure Strategy will continue to unlock further development capacity across the region. This assessment is not required to, and therefore does not, take into account local infrastructure requirements (which is usually developer built), and may play a significant role in enabling growth in specific areas.

Competitiveness margin

1. The expected level of residential demand plus the relevant competitiveness margin over the next 30 years ranges from 332,000 to 384,000 dwellings. It is anticipated that the short-term (including 20 per cent margin, year 0-3) growth is approximately 36,000, the medium-term (including 20 per cent margin, year 3-10) growth ranges from 88,000 to 104,600, and the long-term (including 15 per cent margin, year 10- 30) growth ranges from 200,000 to 207,000.

Demand and sufficiency of capacity

1. The primary objective of the NPS-UD is to test the sufficiency of development capacity to meet growth demand over the next 30 years. The HBA findings have identified both the plan-enabled development capacity and the feasible development capacity are sufficient to meet the projected growth demand plus competitiveness margins. It is acknowledged that some development capacity is infrastructure constrained at the bulk network level which the council is addressing though planned investment in the Long-term Plan and Infrastructure Strategy.

2. Delving deeper in the housing demand-supply paradigm, this HBA uses the concept of intermediate market households as a benchmark to assess the affordability aspects of the competitive market due to the influence of the NPS-UD (i.e., greater releases of land capacity). The intermediate households consist of private renter households and the level of income required to affordably pay the mortgage on a dwelling purchased at the lower quartile dwelling sale price. Required income is $132,300 for a sales price of ($770,000) (Mitchell 2019, 2020).

3. Two additional demand scenarios are constructed to provide detailed analyses for the short and medium-term – the likely and the high-growth scenarios over the next 10 years. Relative to 2021, in 2026 and 2031 about 41,000 and 77,000 additional households will demand a dwelling under the likely scenario; and, about 58,000 and 110,000 in the high-growth scenario.

4. In 2021 intermediate households numbered 97,156 and 104,128 households for the likely and high-growth scenarios respectively. By 2031 there will be approximately 9600 additional intermediate households demanding a dwelling under the likely scenario; and, about 32,600 in the high-growth scenario.

5. To assess the sufficiency of affordable housing development capacity, five supply scenarios are constructed to represent the whole spectrum of the housing market. At one end, the Upper-range and Mid-range scenarios reflect existing housing stock delivered at prices capped at $1.6 or $1.35 million, respectively. Then the Minimum-priced, Full-spectrum and Conditional-affordable scenarios represent relatively more affordable conditions.

6. Simulations of the supply scenarios and a sample of households reveal a large discrepancy between the distribution of prices of new dwellings (deemed as commercially feasible) and the incomes of households. For the Upper-range scenario, a large share of households cannot afford to buy a dwelling. Out of the 6000 additional feasible dwellings, only 392 would be bought (rate of take-up of 6.5%). The average price of bought dwellings is $1.56 million and the average income of the buyers is $214,000. For the rest of the scenarios, it is observed that the lower prices result in a greater rate of take-up where even lower-income households (earning approximately $60,000) manage to become homeowners. However, the traded dwellings’ floorspace is on average 62 square metres, (representing an average sized one-bedroom apartment) and the bulk of buyers correspond to couples or couples with children.

7. A metric of the effectiveness of affordability policies could be defined by how long it would take to halve the size of the intermediate market (to 48,578 households). Under the core assumptions of the NPS-UD, that halving would occur within a generation (18 years) only if the rate of growth of the supply of affordable housing (dwellings priced at $770,000 or less) is 25 per cent annually. For the same halving to occur within a decade, the rate of growth should be 45 per cent annually. If the rate of growth of affordable housing is equal to household growth (2.2%), the mathematical model fails to find a finite solution. Thus, the lowest rate of growth admissible to find a finite solution is five per cent which implies at least 124 years for the halving to occur.

Key conclusions

1. The AUP has enabled a vast amount of housing development capacity within the existing urban area and much of the capacity is commercially viable under the current market conditions.

2. That being said, it is likely that any affordability improvements influenced by the NPS-UD assumptions could be concentrated on households earning well above Auckland’s median income.

3. Realisation of the commercially viable capacity at an affordable level becomes uncertain because of the discrepancy (or incompatibility) between the high prices and the purchase power of households. That is, a dwelling may not be realised unless there is someone who can pay for it.

4. More dwellings entering the market does not imply that lower-income households will be able to buy a dwelling. Market efficiency is still achieved, the market remains competitive, as intended in the NPS-UD, but the social outcome is increasingly harder to achieve as revealed by this HBA.

5. The HBA then shows that on a yearly basis, the capacity reasonably expected to be realised could be negligible or at least incompatible to a large share of the population represented in the form of intermediate households.

6. Housing capacity and supply are only parts of the equation. While providing an enabling planning policy environment is fundamental to create greater development potential, there are many other dimensions of complexity out of the scope or control of territorial authorities that may have a greater impact on affordability and competitiveness. The NPS-UD could have an impact on prices over time as more supply enters the markets, enables capacity in accessible locations and provides the opportunity to revisit planning provisions and zoning. However, overall, any improvements on affordability for intermediate households (or any other target groups earning below the median income) are likely to be small, if not negligible, until intervened via other means to deliver housing by volume and at pace.

Auckland Council, July 2021