‘Landbankers’ hit back after mayor’s threat
Wellington’s mayor says he plans to penalise ‘‘landbankers’’ who are fuelling the city’s housing shortage, but one developer has hit back, saying the city council’s lengthy consenting process is partly to blame.
Justin Lester had some stern words yesterday for two developers who, he said, were sitting on close to 490 hectares of undeveloped land on the city’s fringe, which had the potential for 2750 new houses.
But it was revealed shortly after that his council had chosen not to support a proposal to build 147 homes in the suburb of Grenada Village, because it wants the land for business and industrial use.
Last month, The Dominion Post revealed Wellington had been unable to build houses fast enough to keep pace with its population growth since 2003, leaving it 3590 dwellings short of what it needs.
At a State of the City breakfast yesterday, Lester took a swipe at two ‘‘major landbankers’’ whose sections had enough capacity to meet 14 years of demand for greenfield sections.
The council would come up with measures to deal with the problem over the coming months, he said. These would include targeted rates and levies for anyone holding land over a certain period of time, making it more expensive for the owner to do so.
‘‘I want to signal ... we will look at every available option, including financial incentives or penalties, to ensure our city has the pipeline of new homes it needs.’’
Lester did not name the developers he was singling out, but it is understood they are Guy and Rodney Callender, and the Woodridge companies, which include Woodridge Homes.
Guy Callender said he had put in at least 520 consents for sections and earthworks during the past year and he was working on 270 of those, as well as building a reservoir.
It could take up to three years before a house was built, and at least one of those years was taken up with getting consents, he said. ‘‘I’m disappointed. I don’t think Justin understands how long the process [from consenting to building] actually takes.’’
Callender, whose company Hunters Hill was set to undertake the Grenada Village development, said he was told a week ago that council officers would not be supporting it, after consents were lodged in September.
A council spokesman confirmed this. But when asked for comment, Lester said the situation was about to change because he would be supporting the development. ‘‘I need this to happen. We created the special housing area to allow this to happen.’’
Woodridge Homes owner Wayne Wright did not go into details about what he was doing with his land, but said no-one could accuse his company of landbanking. ‘‘We are building houses as fast as we can.’’
Lester said the council had worked on improving the consenting process. A rates moratorium, cheaper consents and a one-stopshop for quicker processing had been successful in seeing more sections consented.
But owners were not putting any dwellings on them, he said. ‘‘There are about 250 sections that still don’t have houses on them.’’
Meanwhile, Lester said the council’s projected rates increase this year would be an average of 3.3 per cent, down from a forecast 5.1 per cent.
It was possible that residential rates could drop further before being finalised in the middle of the year, but that would depend on a revaluation of buildings and homes in late May or early June.
Wellington Chamber of Commerce chief executive John Milford said the projected increase was a positive outcome considering the cost of the November earthquake threatened to push it higher.
But Taxpayers’ Union executive director Jordan Williams said the rate hike was a ‘‘slap in the face’’ to Wellington ratepayers, given it was 21⁄2 times the rate of inflation.
Trying to sell a 3.3 per cent rate hike by saying ‘‘at least it’s not 5.1’’ was ‘‘a sneaky bait and switch’’ that would fool no-one.
Wellington Mayor Justin Lester is right to point to landbanking as one of the major causes of the housing crisis. Whether he can do much about it, though, is another matter.
Lester is frustrated that two major landbankers own nearly 500 hectares of land on the city fringe. His officers tell him that this is enough for 2750 new homes, or enough to meet an estimated 14 years of demand for greenfield sections.
He says the council will develop ‘‘specific measures’’, including financial incentives or penalties, to make sure the city has the new homes it needs. It’s refreshing to hear the mayor publicly identify one of the causes of our housing problems. But even Building and Construction Minister Nick Smith has sometimes spoken out against landbanking. It’s much harder to put a stop to it.
The problem is that in times of rocketing house prices it makes perfect economic sense for a developer to sit on land rather than develop it. Far better to let the prices keep on rising and to make a bigger profit later. This is what has been happening for years now.
Smith himself once said it was ‘‘offensive’’ that an investor in Auckland could buy land in 1995 for $890,000 and put it on sale in 2016 for $112 million. ‘‘The biggest problem in Auckland is the issue of landbanking,’’ he said.
Smith’s approach to the problem was to rely on the special housing areas in Auckland, which allow for faster consents for large housing developments. Developers can face a ‘‘use it or lose it’’ clause which penalises them if they don’t lodge consent applications. His critics, however, argue that this rule doesn’t guarantee house completions.
And that, it seems, is the problem with landbanking. It is merely a symptom of a deeper malaise, and fixing it might require radical changes.
It remains to be seen what one city council can do by way of encouraging or scaring developers into building more affordable houses.
Some such as economist Arthur Grimes have suggested that the Government should use the Public Works Act to buy land for housing. This is a reasonable suggestion, draconian though it might seem. The housing crisis is so serious that radical measures of this sort have to be considered.
The National-led Government, however, with its deep allegiance to the rights of property, and a natural sympathy for the business class, would never accept such a proposal.
Nor would it feel much sympathy for other proposals such as the idea that local body rates should be based solely on land value rather than capital value. The effect of this would be that an empty section would have the same rates burden as a section with a house on it. This would provide a stiff incentive to develop the land and not ‘‘bank’’ it.
The Morgan Foundation, meanwhile, touts its comprehensive capital income tax, which would provide an incentive to develop the land immediately rather than retain it for an untaxed capital gain.
With all this, the radical proposals gain strength just as the Government demonstrates that its much more tentative policies are failing.
Landbanking is a major part of the housing crisis.