Herald on Smith on RMA
Here is an extract from today’s New Zealand Herald editorial, which focuses on Nick Smith’s announced changes to the RMA:
The Labour Party has expressed some guarded support for the procedural improvements though it is probably right that they will make little difference to housing affordability.
Building costs are too high in New Zealand, for reasons identified by the Productivity Commission long ago. The time and cost involved in consent hearings and appeals is one, council restrictions on the supply of residential land is another. But it is doubtful that supply improvements can make more than a marginal difference to house prices in a market of practically insatiable demand.
Dr Smith produced a commissioned study based on the perceptions of developers, who estimated that regulations under the RMA were adding $15,000 to the cost of each house in a subdivision and $30,000 to an apartment. The apartment figure reflects height restrictions among other things. Height limits are fiercely supported by most people, at least for their own neighbourhood. The RMA’s protections are not widely recognised; critics living in pleasant, leafy places should be careful what they wish for.
The editorial, and Labour, are correct, as I showed in my post on this yesterday. Smith’s changes, if implemented with amazing success and spread across the entire housing market without any friction at all, could lead prices to fall, one off, by around $10,000. Which would mean that instead of needing 8.2 times the median household income to buy the median Auckland house, now you would need 8.03 times.
In the Demographia survey, this would improve Auckland’s position from 9th most unaffordable major market in the world to a new position of – wait for it – 9th most unaffordable major market in the world! Exactly the same ranking.
That is how little Smith’s reforms matter – Auckland’s major market ranking would not move an inch.
The Herald’s other point about high-rise apartments in leafy suburbs is a good one. Per unit apartment costs in high-demand areas line Parnell would certainly be lower if the developer could build 30 or 40 stories of apartments there, right. And the homeowners of Parnell hate the RMA and its requirements for consent before making a greenhouse, right? But I’m willing to bet the homeowners of Parnell aren’t at all in favour of having their tomatoes’ sun blocked by a series of large apartment blocks. Dilemma, dilemma.