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Good morning all.
Simmering tensions between Auckland Council and the Government over who pays for the infrastructure needed for tens of thousands of new houses broke out into the open yesterday, threatening to stall new greenfields housing developments around Auckland.
Auckland Council announced it had essentially suspended approving new greenfields Special Housing Areas (SHAs) unless the Government stumped up more funding to help pay for infrastructure. The Government hit back with complaints about a reduction in the Council’s own infrastructure spending plans and a warning it could over-rule the Council and start directly approving the SHAs itself, as it can under the Act.
Meanwhile, fresh Barfoot and Thompson figures on house sales in Auckland showed the median price rose more than NZ$1,000 a day in April to NZ$753,500 (up 20% from a year ago) and the supply of homes for sale fell to mid-2000s boom levels. Economists predicted yet more increases in house prices on continued record high net migration, no changes to tax or foreign buyer settings and a still-growing supply shortage of over 25,000 houses.
Penny Hulse began the day on Morning Report by defending the Council’s decision to suspend the approval of 3 new Special Housing Areas near Huapai in North West Auckland (first disclosed in my weekend column ) until the Government helped fund public transport and other infrastructure.
«This isn’t a major stoush with Government, but we’re saying ‘let’s look very carefully at the funding that’s needed to build the North West Bus Way and to provide public transport to this area’,» Hulse said.
She said residents in West Auckland had said further consideration was needed to sort out congestion on the North Western Motorway «to make sure the people already living there aren’t hugely impacted by thousands more houses.»
«This is not saying there will never be any extra development there. It’s just not in the short term, so we need to get around the table with the Government and work out how we work through this.»
Hulse said the Council was working with the Government on a Transport Accord for Auckland. «That’s probably the area where there’s the most tension,» she said, pointing to the Government’s rejection of the Council’s ideas for a Motorway toll or a fuel tax and its reluctance to accept the Council’s plan for a NZ$100/ratepayer/year transport levy.
«The relationship between the Government and the Council has been quite good on the Housing Accord, and it’s quite appropriate for us on Council’s behalf to stand our corner and ground for the people of Auckland, which is what we’re doing on this.»
‘No more greenfields’
Then later in the afternoon the Council issued a statement spelling out in more detail how it wanted future SHAs to be in brownfield areas, «rather than greenfield ones which are rural and therefore require much more – and costly – infrastructure.»
«The council’s Auckland Development Committee last month decided it wants SHA proposals to have at least 50 houses or be exemplars of the desired outcomes and objectives of council’s housing strategy,» it said.
Hulse said in the statement the Council had already approved 84 SHAs from 300 requests.
«But now we are half way through the Housing Accord period we need to become even more targeted in our selection of development sites with the best outcomes for Aucklanders,» she said.
«As a council we are doing everything we can to speed up the building process but it’s absolutely imperative central government takes Auckland’s housing crisis seriously and commits to funding the vital infrastructure required.»
Hulse said the Council would now focus on brownfield sites which had good infrastructure service, «but we still need central government help to shore up the funding for roads and water and electricity supply.»
“Otherwise the cost of growth will be borne by Auckland ratepayers. Developer contributions only cover some of the costs of new subdivisions, the rest downstream are covered by ratepayers and those ratepayers do not want larger rate rises,» she said.
Auckland Council said it was working with developers on 56 pre-applications for SHAs for more than 4,700 new sites and homes and had either approved or was considering 169 consent applications for more than 2,280 new sites and/or dwellings within SHAs.
But it said another 45 SHA requests, including the three deferred, were still being considered and would be determined by the results of discussions with the Government about infrastructure.
Smith warns Council; Key more conciliatory
Nick Smith then warned that the Government had the power to over-ride the Council on approving SHAs, although this was unlikely.
«I would remind you that the government also has the power to create special housing areas without the approval of the Auckland Council if they choose to overplay their cards and demands for money,» Smith said.
«The legislation makes plain that the government’s strong preference is to work in cooperation with the Auckland Council and to work on these issues together. Those arrangements are still robust but ultimately, if the Auckland Council overplays its cards, the legislation does make provision for the government to create SHAs without the approval of the Council,» he said.
Smith was then asked how far away from full intervention the Government was:
«I remain very confident that the relationship’s robust and that we are working these issues through. The questions that have been raised today were raised privately at our accord meeting last month. We’ve got our officials beavering away on them. I remain confident that we will not have to use the over-ride powers for creating special housing areas, but I simply note that they are there in the event that the Council tries to overplay its hand in trying to gain additional resources for government for meeting some of those infrastructure challenges.»
John Key was more conciliatory and downplayed the prospect of a full intervention, saying it was unlikely, and Smith later agreed with that.
«I think it’s useful for us to sit down with Auckland Council and talk to them about it, but you do need to have that infrastructure that backs up that housing,» Key told reporters in Parliament on his way into Question Time.
«You do need those roads, you do need those schools – and we wouldn’t allow a special housing area to go ahead unless it actually could service the population that lived there,» he said.
‘Lower Council infrastructure budget’
However, it was clear from comments from Simon Bridges, Smith and Bill English that the Government was concerned about what it saw as a reduction in the Auckland Council’s planned spending on transport infrastructure in its announcements last week.
«That is a bit of a concern. My understanding is the squeeze around the debate on Auckland’s Budget that it has been reducing some of that infrastructure spend, and that’s why it would be a difficult ask to be telling the taxpayers of Invercargill that they, the taxpayer, have to fill the hole of where the Council itself has been pulling back some of its infrastructure spend,» Smith said.
Bill English said the Council appeared to have cut back its infrastructure budget, «at at time when the city is under pressure to grow — in the announcements last week.»
«My understanding is their local roading budget is substantially reduced. They’ve been able to reduce their forward requirement for debt by reducing their spending on infrastructure,» English said.
«They and the Government realise that things need to move faster than they have. I hope that their budget isn’t going to be sand in the wheels of that process,» he said.
Simon Bridges was also critical of Council’s decision to reduce its infrastructure spending plans.
«If you look at what the Council’s spending, in fact, on the Mayor’s preferred plan at the moment to be spending less than they have in previous years so there’s an aspect here where the Council’s rhetoric, at least in the leadership, doesn’t match the reality,» he said.
In other financial and economic news…
Prices fell another 3.5% to a six-year low on Globaldairytrade’s auction overnight overnight. They have now fallen 24% since March 3 and have more than halved since the beginning of last year as easing drought concerns increased supply in New Zealand and production ramps up in Europe after the removal of export quotas.
Whole milk powder prices fell 1.8% to US$2,386/tonne, while skim milk powder (SMP) prices fell 7.5% to US$2,048/tonne.
«It’s a buyers market for SMP at present with strong competition between NZ and European suppliers who are operating in the Asian and Middle East markets,» said NZX Agri’s Susan Kilsby.
«A better than expected end to the 2014-15 milk production season means NZ dairy companies still have some current season product to sell, while European milk production is heading towards its seasonal peak,» Kilsby said.
The Reserve Bank of Australia cut its Cash Rate by 25 basis points to a record low of 2% yesterday, but surprised markets by dropping its easing bias and talking about encouraging trends for household demand. This meant the New Zealand dollar actually fell almost a cent against the Australian dollar to 95 Ac despite the widening of New Zealand’s interest rate advantage to 1.5%.
Quote of the day:
Bill English on the fiscal implications of a 20% rise in Auckland house prices:
«We subsidise over half of all rentals in New Zealand and those kind of price increases would probably flow through to rents, and we would end up paying out more in subsidies.»
Number of the day:
314 – The number of homes sold by Barfoot and Thompson for more than NZ$1 million in April, which was double the number of homes sold for less than NZ$500,000 in the month.
Coming up…
Labour force data is due at 10.45 am and is expected to show continued annual employment growth of over 3% and a drop in the unemployment rate to around 5.5% from 5.57%.
Source: Hive News
