KiwiBuild killjoys wrong on two counts

No, it won’t. This policy is really about collapsing the artificially inflated price of urban land, especially in Auckland.

As long ago as 2013, the Productivity Commission pointed out that ‘‘pressure on land prices has been particularly acute in Auckland and land now accounts for around 60 per cent of the cost of an Auckland house, compared to 40 per cent in the rest of the country’’.

The value of land just inside the Auckland boundary was ‘‘almost nine times greater than the value of land just outside the boundary’’.

Chew on that, those who argue that rural land is more ‘‘valuable’’ than urban land.

Since then, Auckland land and house prices kept rising, reaching an average sale price of about $1 million.

That upward march has faltered recently, only thanks to sheer unaffordability.

Lower house price inflation may also reflect expectations that the new Government’s policies will reduce immigration, increase housing supply, and put a spoke in urban land values.

While there’s not much sign of the first of those, and KiwiBuild – the second – is only just starting to be visible, the third –blowing up the rural-urban boundary (or RUB) – is essential to more housing supply emerging.

Ironically, removing the RUB may have its most profound effect within existing urban boundaries.

It should encourage owners of undeveloped city land to stop ‘‘banking’’ it, a practice that adds to the shortage of land available for – as opposed to zoned for – immediate development, pushing values high.

The fear of sprawl comes from a widespread misapprehension that developers seeking to use land outside the RUB can expect local and central government to pay for the roads, water, sewerage, parks and other essential services those new developments would require.

Not so. Build outside the boundary and those costs will be borne by the developer.

In other words, the incentive to build inside the existing urban envelope improves – especially if land banking is less attractive and more city land becomes available at a more affordable price.

Add in some rules that encourage housing density – such as KiwiBuild buying smaller, more affordable dwellings off the plans and investing in high-capacity public transport corridors – and the stage is set for denser, more affordable, more liveable cities. Let’s hope it works.

BusinessDesk