Housing affordability: Are financial barriers caused by holding costs significant for greenfield residential development in New Zealand?

Abstract

Over rent years it may be readily demonstrated that increasing prices being paid for residential accommodation in new housing estates have done little to assist the housing affordability problem. A critical question to be asked is whether this might simply represent profiteering by developers, or are there genuine increases in underlying cost structures to an extent that force developers to pass theses costs on? Moreover, are such costs actually passed on, and to whom? As to the nature of these costs, are developer infrastructure contributions - regularly cited as the most significant contributor of planning or development costs – all-pervasive? Or, are there other non-financial barriers - such as inconsistent planning requirements, development assessment procedures, and conflicts between developers and local councils – emerging as almost equally significant impactors? Research conducted over recent years in Australia suggests that whilst in many cases it may be true that development contributions for infrastructure represent the single largest planning related cost, their existence also impacts the holding cost equation. Such findings - recognising the significance of holding costs - have underpinned a diverse range of planning reforms in Australia, including systematic enhancements intended to reduce administrative requirements, system complexity and timeliness. In short, it has seen the instigation of replacement organisations, and the implementation of new systems and procedures all designed to reduce “red tape”. It is apparent that most of these reforms directly address the invasive impacts of holding costs - which can be established as a potentially formidable financial barrier, even though they typically present in a less visible form (since they typically stem from issues revolving around uncertainty, timeliness and inconsistency). This paper examines whether similar operating scenarios exist in New Zealand and moreover, are the financial benefits arising from such planning reforms and intervention transplantable in this Tasman neighbour?