Wellington City Council

 
 
Wellington City Council
TPG PLANNING
                                                        STRATEGIC PROBLEM SOLVING FOR INNOVATIVE OUTCOMES
REPORT TO:




Wellington City Council


Wellington City Housing and Residential Growth Study:
Final Planning Assessment and Recommendations


September 2014
Wellington City Council
Table of contents
   E X E C U T I V E S U M M A R Y ..................................................................................................5
   1.      I N T R O D U C T I O N ................................................................................................... 16
   2.      C O N T E X T U A L O V E R V I E W ................................................................................. 17
   2.1     RESIDENTIAL PLANNING ...................................................................................................... 17
   2.2     HOUSING AND HOUSING AFFORDABILITY AS PLANNING ISSUES ....................................... 17
   2.3     CENTRAL GOVERNMENT REFORM ...................................................................................... 17
   3.      H O U S I N G D Y N A M I C S ........................................................................................ 19
   3.1     WELLINGTON METROPOLITAN CONTEXT ........................................................................... 19
   3.2     A BRIEF HISTORY OF RESIDENTIAL DEVELOPMENT IN WELLINGTON CTY .......................... 19
   3.3     CONTEMPORARY HOUSING MARKET.................................................................................. 25
   3.4     EXISTING HOUSING STOCK .................................................................................................. 29
   4.      D E M O G R A P H I C P R O F I L E A N D T R E N D S ...................................................... 36
   4.1     POPULATION AND HOUSEHOLD FORCES ............................................................................ 36
   4.2     DEMOGRAPHIC DRIVERS ..................................................................................................... 36
   4.3     TENURE TRENDS .................................................................................................................. 36
   4.4     SOCIAL AND ECONOMIC DRIVERS FOR CHANGE ................................................................ 37
   4.5     LOOKING FORWARD OVER THE NEXT 10 – 20 YEARS ......................................................... 37
   4.6     POPULATION AND HOUSEHOLD GROWTH ......................................................................... 38
   5.      E X I S T I N G P L A N N I N G F R A M E W O R K ............................................................. 40
   5.1     STRATEGIC SETTINGS........................................................................................................... 40
   5.2     WELLINGTON CITY DISTRICT PLAN ...................................................................................... 41
   5.3     WELLINGTON CITY HOUSING ACCORD................................................................................ 43
   5.4     WELLINGTON CITY LONG-TERM PLAN ................................................................................ 44
   5.5     METROPOLITAN PLANNING FRAMEWORK ......................................................................... 44
   6.      H O U S I N G V I E W P O I N T S .................................................................................... 45
   6.1     DEMAND SIDE PREFERENCES – THE HOUSING SURVEY ...................................................... 45
   6.2     SUPPLY SIDE VIEWPOINTS – THE DEVELOPER SURVEY ....................................................... 48
   7.      L A N D S U P P L Y ....................................................................................................... 51
   7.1     EXISTING DEVELOPMENT PATTERNS .................................................................................. 51
   7.2     LAND AVAILABILITY AND DEVELOPMENT CAPACITY .......................................................... 53
   7.3     INFRASTRUCTURE CAPACITY ............................................................................................... 56
   7.4     IMPACTS AND PERFORMANCE OF PLANNING CONTROLS .................................................. 56




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Wellington City Housing and Residential Growth Study
Wellington City Council
7.5      DEVELOPMENT AND REDEVELOPMENT OPPORTUNITIES .................................................. 58
   8.       WHAT’S HAPPENING IN AUCKLAND AND DOES IT MATTER TO US?
            ................................................................................................................................... 62
   8.1      BACKGROUND TO CHANGE IN AUCKLAND ......................................................................... 62
   8.2      HOUSING AFFORDABILITY IN AUCKLAND............................................................................ 62
   8.3      THE AUCKLAND PLAN AND PROPOSED UNITARY PLAN ...................................................... 62
   8.4      HASHA ACT AND AUCKLAND HOUSING ACCORD ................................................................ 64
   8.5      DISCUSSION ......................................................................................................................... 65
   9.       P L A N N I N G T O O L S A V A I L A B L E ....................................................................... 66
   9.1      DISTRICT PLAN ..................................................................................................................... 66
   9.2      WELLINGTON HOUSING ACCORD ....................................................................................... 66
   9.3      STREAMLINED RESOURCE CONSENT MODELS .................................................................... 66
   9.4      MELBOURNE GROWTH AREAS MODEL ............................................................................... 66
   9.5      LAND DEVELOPMENT AGENCY ............................................................................................ 67
   9.6      FINANCIAL INCENTIVES ....................................................................................................... 68
   9.7      REGULATORY INCENTIVES ................................................................................................... 68
   9.8      REGULATING HOUSING AFFORDABILITY ............................................................................. 68
   9.9      STIMULUS PROJECTS ........................................................................................................... 69
   10.      C O N C L U S I O N S A N D R E C O M M E N D A T I O N S ................................................ 70
   10.1 ADDITIONAL DEVELOPMENT CAPACITY REQUIRED ............................................................ 70
   10.2 PRIMARY RECOMMENDATIONS .......................................................................................... 71
   10.3 SECONDARY RECOMMENDATIONS ..................................................................................... 76
   10.4 CONCLUSIONS ..................................................................................................................... 77
   B A C K G R O U N D M A T E R I A L .................................................................................................. 79

FIGURES

Figure 1: Wellington City and neighbouring territorial local authority areas
Figure 2: New Zealand Company Plan for Wellington 1840
Figure 3: Wellington Waterfront 1868
Figure 4: Te Aro housing 1940
Figure 5: Seatoun Tunnel in the 1920s
Figure 6: Arrival of the first train at Johnsonville
Figure 7: Northern Motorway under construction in the 1960s
Figure 8: Churton Park (2014)



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Wellington City Housing and Residential Growth Study
Wellington City Council
Figure 9: Mt. Victoria (2006)
Figure 10: Central city apartments (2014)
Figure 11: House price trends New Zealand main urban centres
Figure 12: Housing affordability in selected urban centres
Figure 13: House price trends in Wellington metropolitan and constituent local authority areas
Figure 14: Housing affordability in the Wellington metropolitan area
Figure 15: House price by distance from Wellington CBD
Figure 16: Housing stock by age and location in Wellington City’s sub-districts
Figure 17: Housing stock by type in Wellington City communities
Figure 18: Standalone and multi-unit housing development in Wellington City by period
Figure 19: Housing by no. of bedrooms in Wellington City
Figure 20: Stand-alone and multi-unit dwellings in Wellington City’s sub-district
Figure 21: Dwellings by no. bedrooms in Wellington City’s sub-districts
Figure 22: Dwellings by no. bedrooms and dwelling type in Wellington City
Figure 23: Average dwelling value by type and community in Wellington City
Figure 24: Dwellings by no. bedrooms and Wellington City sub-district
Figure 25: Urban Development Strategy growth management concept
Figure 26: Summary of development sector expectation of future dwelling demand in Wellington City
Figure 27: Summary of development sector expectation of future dwelling construction in Wellington City
Figure 28: New dwelling construction and earthworks on a steep site in Wilton (2013)
Figure 29: Vacant residential lots for sale in the Wellington metropolitan area (December 2013)
Figure 30: Housing New Zealand owned lots in the Strathmore area
Figure 31: Underutilised development potential in Strathmore area
Figure 32: Figure of greenfield expansion areas in the Proposed Auckland Unitary Plan
Figure 33: Tranche 2 of Auckland’s special housing areas
Figure 34: Demonstrating the proposed approach to new medium density zonings and transition zones



TABLES

Table 1: Forecast id© household projections by Wellington City sub-district
Table 2: Statistics New Zealand Medium Growth Projections
Table 3: Summary table of territorial local authority planning documents (Wellington metropolitan area)



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Wellington City Housing and Residential Growth Study
Wellington City Council
Table 4: Dwelling completions in Wellington City by type 2008 - 2012
Table 5: Dwelling completions in Wellington City by broad area 2008 - 2012
Table 6: Dwelling completions in Wellington metropolitan by constituent local authority area
Table 7: Vacant sections in the Wellington metropolitan area by constituent local authority area
Table 8: Assessment of forward development capacity in the Wellington City District Plan




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Wellington City Council
Wellington City Housing and Residential Growth Study
Wellington City Council
EXECUTIVE SUMMARY
INTRODUCTION AND CONTEXT
This report has been prepared by The Property Group Limited (“TPG”) for Wellington City Council
(“Council”) as an input into existing planning workstreams including preparation of the Wellington City
Urban Growth Plan (“urban growth plan”) and ongoing review of of the District Plan. In turn it will also form
an input into Council’s 2015 – 2025 Long Term Plan (“LTP”). All of these workstream are relevant to
decisions about where new housing should be constructed over the next 10 – 20 years, and what forms of
housing should be encouraged. To address these needs Council asked TPG to undertake analysis across
three distinctive work areas:
        Housing forces – analysis of the demographic and other forces shaping future housing demand and
         supply in Wellington City, to include population and household projections (disaggregated to
         community level), tenure trends, labour market impacts and residential development trends.
        Housing preferences – consultation with key stakeholders (developers, housing providers and
         decision makers) and selected housing consumers to better understand the drivers and housing
         preferences of those people most affected by Council housing policy settings.
        Planning and regulatory – analysis of issues relevant to spatial planning and residential growth
         management including land supply, the effectiveness of existing planning settings, and the impacts
         of Resource Management Act (“RMA”) reform.


WELLINGTON CITY’S HOUSING CONTEXT
Residential zoned land comprises approximately 75% of all urban zoned land in Wellington City. Further,
residential activity is encouraged in other urban zonings, notably the central city zone (“Central Area”) and
suburban “Centre” zones. For this reason Council’s approach to residential planning is a central
component in urban growth management.
In recent years housing, and more specifically housing affordability, has become a dominant issue in the
New Zealand planning scene. Nationally the debate has been driven by issues in Auckland, and more
recently Christchurch. In both these centres house prices have risen sharply in recent years, in Christchurch
as a result of the earthquakes. In Wellington too this has long been recognised as an issue by Council.
Housing affordability problems are regularly linked to the Resource Management Act (“RMA”) and planning
and the current National-led government has been active in reform of the RMA since coming to power in
2008. Primarily the reform has been directed to a “business friendly” approach where applicants can
approach RMA processes with greater certainty.
An underpinning rationale in this is a desire in government to release more land in order to reduce land and
housing costs. Other initiatives, outside the RMA and planning, are also being pursued in an effort to arrest
rising house prices in Auckland (and to a lesser degree elsewhere). Notably and recently was the Reserve
Bank loan to value ratio (“LVR”) initiative requiring homebuyers to hold equity equating to 20% or more of
the purchase price.




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Wellington City Housing and Residential Growth Study
Wellington City Council
Wellington City sits within the broader Wellington urban area and housing market. For the purpose of this
study we have defined this area as the five major urban councils – Hutt, Upper Hutt, Porirua and Kapiti
Coast. Although located at the southern end of this conglomeration Wellington City acts as the fulcrum,
providing the majority of employment (primarily in the CBD) and supporting the most expensive housing
market. The four other council areas support some employment of their own but each play dormitory roles,
with residents commuting to Wellington City for work in substantial numbers.
The impact of these dynamics on the urban geography is that Wellington City is the most densely
populated and expensive place to live in the urban area, with comparatively few greenfield development
opportunities. The market has responded over time with substantial infill development in established
suburbs and apartment development in the central city. This contrasts with the dominant low density
nature of development in the neighbouring cities. Wellington City’s natural geography, hemmed between
the harbour and steep hills, has also played a central role in creating this density and land scarcity.




                House price trends in Wellington City, Auckland urban and Christchurch urban
                                  Source: Quotable Value (www.qv.co.nz)
Whilst rising house prices and declining housing affordability have been identified as a national issue the
effects have been felt most keenly in Auckland and Christchurch (where the earthquake has substantially
reduced the supply of housing). By comparison Wellington City and the broader Wellington urban area has
experienced only slow price growth over the last 5 years. However, Wellington City remains one of the
least affordable urban areas in the country.




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Wellington City Housing and Residential Growth Study
Wellington City Council
Housing affordability in selected New Zealand urban areas
                                   Sources: MBIE (2013), Demographia (2013)
As we have already described higher house prices in Wellington City are a function of economic geography
as much as anything else, and our further work has demonstrated that the most expensive suburbs in the
metropolitan area are almost exclusively located in Wellington City, and in general house prices decline
with distance from the Wellington CBD. In itself this information does not point to a Wellington City land
supply problem because there are no obvious, new development fronts available and because the city acts
as the epicentre of the metropolitan employment housing market. This is a basic function of urban
economic geography that is observed in metropolitan areas worldwide. Notwithstanding, there are tangible
benefits to providing an ongoing land / housing supply in closer proximity, within Wellington City.




                                    House price by distance from Wellington CBD




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Wellington City Council
Wellington City Housing and Residential Growth Study
Wellington City Council
WELLINGTON CITY’S EXISTING HOUSING STOCK
The City’s existing housing stock can be summarised as follows:
        At the end of 2013, Council’s residential database listed about 72,000 private residential dwellings
         within urban-zoned areas, not including student accommodation and housing associated with
         other uses.
        The Wellington housing portfolio had a total value of around $34 billion, and a land value (including
         vacant land) approaching $15 billion.

        The 72,000 dwelling units consumed about 32,000 hectares of land, not including roads, parks and
         other residential infrastructure.

        About 5,000 hectares of subdivided residential land was either vacant or under development at the
         end of 2013.

        In total, the City’s residential zones make up about 75% of Wellington City’s urban area.


WELLINGTON CITY’S DEMOGRAPHIC PROFILE AND KEY TRENDS
Based on preliminary results from the 2013 Census, we estimate that Wellington has a population of
around 200,000, living in about 74,000 households:
        In 2013, family-with-children households (including single parent households) made up only 36% of
         all Wellington households.
        In almost all of Wellington’s 31 neighbourhoods and communities, family-with-children households
         (including sole parent families) make up less than 50% of all households.

        This reduces to 20% for the CBD, Te Aro, and city edge communities.
        Single person or couple households now make up more than 50% of all Wellington households.
        Group households (two or more unrelated people living in the same dwelling) make up about 12%.
        Between 2011 and 2031, Wellington’s population is projected to increase by about 30,000 (16%) to
         230,000. The total household count will increase by about 14,000 (20%) – see further detail in
         Section 3.6 below.
        Single person and couple-only households are expected to make up about 66% of net household
         growth.
        Family households with children will increase by about 3,000 (20%).

        Multi person households (10%) and other households will make lesser contributions.
Growth has slowed since considerably since 2006, however, which means that Council’s current
community-based growth projections can no longer be relied upon for detailed planning purposes. This is a
matter that we suggest Council look further into. For now we have adopted Council’s official figures but
also considered them alongside Statistics New Zealand figures, and made planning recommendations on
the basis of that growth is likely to occur somewhere in the range between the two.




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Wellington City Council
Other key patterns and trends include:
        An ageing population with the consequential impact of smaller household sizes.

        Declining rates of home ownership and associated increase in rental households.
        Ongoing increases in professional employment, particularly in the CBD (this even despite public
         service restructuring and the global financial crisis).
Over the forseeable future household and population growth rates in the City are expected to be steady
with projections indicating Council needs to be prepared for 750 – 1,100 new dwellings in the city year on
year for the next twenty years.



                   Wellington City Sub-District                           New households
                                                                             2011 – 2031
                   Central City and Fringe                                           6,586
                   Northern Suburbs                                                  3,206
                   Southern Suburbs                                                  2,253
                   Eastern Suburbs                                                   1,484
                   Western Suburbs                                                   1,436
                   Total Wellington City                                            14,965

                       Forecast id© household projections by Wellington City sub-district


WELLINGTON’S EXISTING PLANNING FRAMEWORK
Council’s approach to urban development is to encourage a “compact city” by targeting most new housing
into the existing urban area. Aside from identified greenfield growth areas in the north of the city,
development is generally to be contained within the outer green belt, and within this area encouraged
around suburban centres and a “growth spine” running from Johnsonville to Kilbirnie. The primary strategic
document governing this approach is the Urban Development Strategy (“UDS”) adopted by Council in 2006.
Key aspirations of the UDS include:
        An approximately even split of new housing into greenfield areas, existing suburbs and the central
         city.

        Providing for Wellington’s greenfield growth on the northern fringe.
        Concentration of 60% of new housing onto a growth spine running through the established
         area from Johnsonville to Kilbirnie.

        New housing and employment into and around suburban centres.
The plan is well conceived in terms of applying the compact city philosophy to the Wellington City context
in a well-founded, area specific manner. The UDS encompasses the previously adopted Northern Growth
Management Framework (“NGMF”) (2003) and the subsequently adopted Centres Policy (2009). This



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Wellington City Housing and Residential Growth Study
report forms part of Council’s strategic review of the UDS and the development of a new “urban growth
plan” which will supersede both the UDS and the Transport Strategy.
Underneath of but critical to this strategic direction is the district plan, Council’s regulatory planning
document. As the first district plan prepared under the Resource Management this became operative in
1999 based on a laissez-faire approach to land use and development typical of the period. Urban design
guidelines were a key innovation in the plan but otherwise it adopted an effects based approach and was
relatively simple in its conception. Since that time a number of plan changes (PC38, 56 and 72 in particular)
that have been implemented to reflect the strategic directions adopted in the UDS, NGMF and Centres
Policy.
Council’s long term planning under the Local Government Act governs asset management and capital
expenditure and has been closely aligned with regulatory and strategic planning, particularly since the
adoption of the UDS. This has manifested in such things as road and stormwater upgrades and public
improvements in key centres.
A powerful new planning tool at Council’s disposal is the Wellington City Housing Accord recently agreed
with central government. This operates under the Housing Accords and Special Housing Areas Act (“HASHA
Act”) and enables Council to identify areas where resource consent and rezoning processes will be
substantially streamlined to provide greater certainty to developers.
It is also important to remember that the City forms part of a broader urban area. The Wellington Regional
Policy Statement (“RPS”) and Wellington Regional Strategy (“WRS”) prepared by the Greater Wellington
Regional Council together set out a high level planning framework for the Wellington metropolitan area
which encourages urban intensification and nodal development. Notwithstanding, the direction set out is
broad, and there remains firm reliance on the individual territorial councils to control development and
planning within their jurisdictions through their strategic documents and district plans.
This report forms part of Council’s strategic review of the UDS and the development of a new “urban
growth plan” which will supersede both the UDS and the Transport Strategy.


VIEWPOINTS RESEARCH
Some key findings from our housing consumers survey included:
        At least 50% of respondents would actively consider living in more compact housing to stay in their
         preferred location and 25% would consider living in an apartment.
        80% of all those surveyed said they would prefer to stay within the same neighbourhood or general
         area that they currently live in.

        About 50% of our sample also placed a high priority on access to local shops, cafes and restaurants,
         health and social services.
        About 30% had made trade-offs to live in their chosen location, including paying more for housing.
        Only 12% had serious concerns about current or future housing affordability.

        A growing proportion of housing stock in the CBD and Wellington’s southern and eastern suburbs is
         being utilised for rental housing.



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Wellington City Housing and Residential Growth Study
    ‘Empty nester’ older singles and couples make up a growing proportion of owner-occupier housing
         in the city’s western and inner-northern areas.
Some key findings from our housing developers survey included:

        Respondents were generally supportive of Council’s Central Area planning rules, but believed more
         could be done to promote compact housing forms in the Inner and Outer Residential Zones.

        Restrictions on infill housing introduced by PC56 were seen to be out of alignment with what the
         market wanted, and minimum lot sizes acted as a substantial brake on comprehensive
         redevelopment.

        There is a view amongst some within the development community that not enough land is
         available for housing, and that the larger sub-markets are dominated by only a few players.

        Suburban areas on the fringe of the central city will experience an upsurge in intensive housing
         development, reflecting the increasingly diverse population in these areas, and the fact that lower-
         density housing development is no longer viable in these areas.

        Developers are prepared to adapt to the changing demographics of Wellington’s housing
         marketplace.
        Household growth (coupled with demand growth) in the inner city is changing the form of housing
         that can be delivered within reasonable commercial parameters.


LAND SUPPLY AND DEVELOPMENT CAPACITY
Through our research we have brought together data of different types and sources to arrive at a view
regarding land supply / development capacity in the City. This has included review of data from the
neighbouring territorial local authorities also to ensure that a metropolitan perspective was taken. Data
reviewed included the five urban territorial local authorities own data regarding land supply (2013); spatial
assessment of housing prices and affordability; and the incidence of vacant of vacant sections. Whilst these
paint a general picture of sufficient land supply and development capacity across the broader urban area
Wellington City faces some specific challenges in terms of unlocking land for residential development:
        A substantial proportion of the greenfield supply is held in the ownership of two land owners and
         they are releasing vacant lots / new homes to the market at slow rates and overall Wellington City
         is playing a subordinate role in the delivery of new greenfield housing lots in the broader
         metropolitan market (see Figure 29 below).

        The majority of recent dwelling completions (approx. 80%) have occurred within the existing urban
         area of the city and some of these areas present significant cost and consenting challenges for
         developers and some sites tightly held by passive investors – on this basis we believe that the real
         forward supply of infill and central city land is likely to be substantially less than the figures
         represented (which set out the development capacity within the district plan).

        Some land is constrained by steep topography and requires costly earthworks and engineering to
         develop. Such sites will only be developed by parties with no immediate need to realise a return,
         where a number of units can be developed to make projects viable, and in the worst cases when




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Wellington City Housing and Residential Growth Study
engineering technology becomes more affordable.
Our overall assessment of the land supply / development capacity in the City is as follows:

        In greenfield areas a forward supply of land in excess of 20 years exists.

        In the central city a supply of development capacity in excess of 20 years exists.
        In established suburbs we estimate in the order of 10 years forward supply exists for infill
         development.
In respect of established suburbs and infill we have come to our estimate based on a combination of the
following factors.

        The generally constrained nature of infill land.
        The suppressing effect of passive landowners (i.e. no intention to sell or develop).

        The existing strict infill planning regime in the district plan.
        The current pattern of broadly dispersed, small scale infill indicates that infill development
         opportunities are limited.
More roundly our view is that there is currently no land supply problem in the broader metropolitan area
but there is definite pressure within established areas of Wellington City.


WHAT’S HAPPENING IN AUCKLAND AND DOES IT MATTER TO US?
Auckland is experiencing rapid growth and inward flows of investment that are unprecedented in New
Zealand. As a result house prices are increasing rapidly and housing affordability reducing year on year.
Reduced capacity in the development sector following the GFC, artificially constrained land supply, and
labour shortages exacerbated by the Canterbury earthquakes have further contributed to increasing prices.
Against this background some bold steps have been taken including local government amalgamation;
adoption of the Auckland Plan; the signing of the Auckland Housing Accord; and notification of the
Proposed Auckland Unitary Plan. Amongst all of this comes more streamlined resource consent processes
and a significant release of new land and development capacity.
The picture in Wellington is altogether different. Population and household growth is steady, but slow, and
house prices have been stable since 2008. Further, given the stark differences between Auckland and
Wellington simple application of “the Auckland solution” is not appropriate for Wellington though lessons
can be learned from the groundbreaking initiatives occurring there.


PLANNING TOOLS AVAILABLE
To stimulate residential development and create new development capacity, for which there is a
demonstrated need (particularly in existing suburban areas), Council has a range of tools at its disposal.
These include:
         Promoting changes to the district plan.
         Utilising the Wellington Housing Accord to promote development in strategic areas.



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    Forming a Council land development agency to consolidate strategic land parcels to catalyse the
          market to deliver significant brownfield redevelopment.

         Remitting or exempting development contributions in strategic areas to catalyse private housing
          development.

         Strategic investment in infrastructure and the public realm to catalyse private housing
          development.


CONCLUSIONS AND RECOMMENDATIONS
Wellington City’s residential history and recent planning initiatives tell an interesting story of steady growth
and gradually diminishing land and capacity for new development. Central in all of this is the city’s position
in a spectacular but constrained setting between the harbour and hills. Easier development opportunities
exist in the cities to the north which form part of the same urban conurbation. This broader urban setting
and housing market is important to recognise – Wellington City does not exist in its own bubble.
Nevertheless Wellington City is forms the epicentre of the broader metropolitan market, and prices,
demand and land scarcity are all at their peak within the city’s boundaries. This is demonstrated by house
prices and affordability indexing which indicate Wellington City is experiencing a land squeeze that its
neighbours to the north are not.
Growth is not rampant, and the stakes not as high as in Auckland, but our view is that Council should be
opening up new development capacity. The city is approaching a level of maturity and constraint where a
passive “effects based” regulatory approach alone will not be sufficient to maintain a reasonable forward
supply of development land.
The primary constraint is currently in the established suburban areas in the city where we believe the real
forward supply of development capacity is in the order of 10 years only based on projected growth rates.
Our research indicates that current and future demand for housing in these areas is strong, and the
development sector willing to provide it subject to feasible development opportunities being available and
enabling regulatory planning controls.
By comparison greenfield and central city development capacity is healthy (20 years plus supply) and this is
reflected in our planning recommendations which focus primarily on the existing suburban areas.
Notwithstanding, it is important that Council maintains a balanced approach and we have also made
recommendations aimed at increasing development capacity in greenfield areas.
Overall, we recommend a suite of regulatory and non-regulatory mechanisms:

        Encouraging more efficient (i.e. denser) development in greenfield areas.
        Encouraging site development that consolidates yard areas for future infill.
        Investigating areas for modest greenfield expansion on the urban fringe.
        Evaluating Council’s reserve portfolio for potential residential rezonings.
        Further residential medium-density upzonings around suburban centres.

        Relaxation of infill controls in transition zones around medium-density zones.



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    Adjustments to district plan policy to explicitly support development of individual sites to their full
         permitted potential.

        Adjustment of policy and rules to explicitly support the adaption of large homes into multiple
         dwelling units.

        A Council land assembly function which consolidates strategic development sites.

        Reduction and removal of development contributions to incentivise development in strategic
         locations.

        Strategic use of the Housing Accord to incentivise development appropriate locations through
         streamlined planning processes.
        Working with Housing New Zealand to facilitate redevelopment of the Strathmore area.




            Demonstrating the proposed approach to new medium density zonings and transition zones
                                 (location chosen for illustrative purposes only)



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The recommendations are made as broad principles and further, detailed work is required to fine tune the
individual proposals. We recognise that there are inherent tensions in some of the proposals (e.g. rezoning
reserve land) and that some will not be pursued. However, we believe all are reasonable proposals in-
principle and deserve individual investigation. Further, we believe that in order to materially increase
development capacity in the city a number of these initiatives need to be adopted.




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Wellington City Council
Wellington City Housing and Residential Growth Study
1.       INTRODUCTION
This report has been prepared by The Property Group Limited (“TPG”) for Wellington City Council
(“Council”) as an input into existing planning workstreams including preparation of the Wellington City
Urban Growth Plan (“urban growth plan”) and ongoing review of of the District Plan. In turn it will also form
an input into Council’s 2015 – 2025 Long Term Plan (“LTP”). All of these workstream are relevant to
decisions about where new housing should be constructed over the next 10 – 20 years, and what forms of
housing should be encouraged. To address these needs Council asked TPG to undertake analysis across
three distinctive work areas:
        Housing forces – analysis of the demographic and other forces shaping future housing demand and
         supply in Wellington City, to include population and household projections (disaggregated to
         community level), tenure trends, labour market impacts and residential development trends.

        Housing preferences – consultation with key stakeholders (developers, housing providers and
         decision makers) and selected housing consumers to better understand the drivers and housing
         preferences of those people most affected by Council housing policy settings.
        Planning and regulatory – analysis of issues relevant to spatial planning and residential growth
         management including land supply, the effectiveness of existing planning settings, and the impacts
         of Resource Management Act (“RMA”) reform.
This report is informed by analysis undertaken in these three work areas, including iterative consideration
of the issues arising from each in order to arrive at fully informed recommendations for Council. It focuses
on needs within Wellington City, whilst recognising that the City and its housing market operates within a
metropolitan context. The granularity of the research is finest within the City, but important macro-scale
analysis of the broader metropolitan area has also been undertaken to ensure findings are meaningful and
in context. This is particularly the case with regards to the City’s residential land supply, which cannot be
considered in isolation from its hinterland.
The study is also primarily focused on market-housing and does not include an assessment of future social-
housing needs. However, it does explore housing affordability issues in detail and many of the
recommendations about strategic land use and regulatory planning are as relevant to social-housing as
they are to market-housing.




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2.        CONTEXTUAL OVERVIEW
2.1       RESIDENTIAL PLANNING
Residential zoned land comprises approximately 75% of all urban zoned land in Wellington City. Further,
residential activity is encouraged in other urban zonings, notably the central city zone (“Central Area”) and
suburban “Centre” zones. For this reason Council’s approach to residential planning is a central
component in urban growth management.



2.2       HOUSING AND HOUSING AFFORDABILITY AS PLANNING ISSUES
In recent years housing, and more specifically housing affordability, has become a dominant issue in the
New Zealand planning scene. Nationally the debate has been driven by issues in Auckland, and more
recently Christchurch. In both these centres house prices have risen sharply in recent years, in Christchurch
as a result of the earthquakes. Other centres, notably Wellington and Queenstown, have also been
identified as unaffordable. In Wellington this has long been recognised as an issue by Council. Housing
affordability problems are regularly linked to the Resource Management Act (“RMA”) and planning, notably
in the following ways:
         Costs and delays in RMA processes generally (e.g. resource consents).
         Lack of certainty.
         Insufficient availability of urban zoned land (particularly in Auckland).
         Development contributions.
Direct resource consent costs, the cost of delays (notably developer’s holding costs) and land scarcity have
all been identified as impacting on the price of housing delivered to the market. In response government
has adopted a supply side approach by promoting greater supply of zoned land for development, whilst
some councils (notably Auckland Council) have attempted to address affordability through district planning
regulations requiring a proportion of new developments to be set aside as affordable units. These matters
are addressed in detail in subsequent sections of this report.


2.3       CENTRAL GOVERNMENT REFORM
The current National-led government has been active in reform of the RMA since coming to power in 2008.
Primarily the reform has been directed to a “business friendly” approach where applicants can approach
RMA processes with greater certainty. Two rounds of amendments have been enacted (2009 and 2013)
resulting in the following broad level outcomes:

         Reduced scope for trade-competitive submissions.
         Presumption towards non-notification of resource consents.
         Reduced ability for councils to “stop the clock” and request information from applicants in resource
          consent processes.
         Creation of a national consent authority for proposals of national significance (the Environmental



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Protection Authority / “EPA”).
        Streamlined consenting processes for consents of differing scales.

        Greater onus on the quality of plan making by councils.
        Delaying the legal weight of rules until council level hearings are complete.
Further reform is proposed but has been delayed because the Māori and United Future parties withdrew
their support for some of the more ambitious elements. Among the proposals in the reform package are:
        Changes to the high level principles of the RMA encouraging efficiency and an “overall balanced
         approach” to decision-making.

        A national planning template to simplify and standardise RMA planning documents.
        Consolidation of regional and district plans into “unitary plans”.

        A requirement for councils to provide a ten year forward supply of urban land.
Many of the proposals have emanated from concern about land supply and resource management practice
in Auckland, and Auckland has been the subject of further, locally specific reform. This has included
legislative amendments for a mandatory spatial plan, an Auckland unitary plan, and a housing accord
developed under new legislation. The housing accords initiative has recently been expanded to other parts
of the country and an accord signed covering Wellington City and is fully explored in Section 5 of this
report.
Underlying all of this is a desire in government to release more land in order to reduce land and housing
costs. Other initiatives, outside the RMA and planning, are also being pursued in an effort to arrest rising
house prices in Auckland (and to a lesser degree elsewhere). Notably and recently was the Reserve Bank
loan to value ratio (“LVR”) initiative requiring homebuyers to hold equity equating to 20% or more of the
purchase price. The Auckland situation is discussed in more detail in Section 8 of this report.




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3.       HOUSING DYNAMICS
3.1      WELLINGTON METROPOLITAN CONTEXT
Wellington City sits within the broader Wellington urban area and housing market. For the purpose of this
study we have defined this area as the five major urban councils – Hutt, Upper Hutt, Porirua and Kapiti
Coast. Although located at the southern end of this conglomeration Wellington City acts as the fulcrum,
providing the majority of employment (primarily in the CBD) and supporting the most expensive housing
market. The four other council areas support some employment of their own but each play dormitory roles,
with residents commuting to Wellington City for work in substantial numbers.




                  Figure 1: Wellington City and neighbouring territorial local authority areas.
The impact of these dynamics on the urban geography is that Wellington City is the most densely
populated and expensive place to live in the metropolitan area, with comparatively few greenfield
development opportunities. The market has responded over time with substantial infill development in
established suburbs and apartment development in the central city. This contrasts with the dominant low
density nature of development in the neighbouring cities. Wellington City’s natural geography, hemmed
between the harbour and steep hills, has also played a central role in creating this density and land scarcity.


3.2      A BRIEF HISTORY OF RESIDENTIAL DEVELOPMENT IN WELLINGTON CTY

3.2.1 Early beginnings and natural forces
Wellington City had its beginnings in 1839, when the first settlers were embraced by the natural harbour
and protecting hills. The New Zealand Company had long regarded the harbour as an ideal location for its
first commercial settlement, to be named Wellington in recognition of the Duke of Wellington’s strong
support for the company's colonisation principles.
The City actually began life at Petone, near the mouth of the Hutt River but, after a series of floods had




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carried away the original settlers’ makeshift homes, a decision was soon made to relocate to more elevated
land at Te Aro. The New Zealand Company’s legal claim to some of the land it occupied was debateable, but
it wasted no time in marketing the ‘new’ Wellington to prospective colonists.
By August 1840, Wellington’s had its first ‘spatial plan’, prepared by William Mein Smith ‘…Captain of
Artillery and the Company’s first Surveyor General’. The plan contained 1,100 lots averaging 1 acre,
sandwiched between Mounts Albert and Victoria, and the Tinakori hills. Most lots were to be allocated by
ballot to fee-paying colonists, who were promised extra farming land outside the settlement once they had
cleared their original lot.
The original plan still dictates much of Wellington’s inner-city skeletal form, and perhaps explains the
questionable logic behind some of Wellington’s steepest streets.




                             Figure 2: New Zealand Company Plan for Wellington 1840
By the end of 1840, Wellington had a colonial population of about 1,200 settlers and 800 Maori. The
European population had grown to 4,750 by 1864, effectively displacing the formerly-resident Maori
population. By 1857, a small but regionally-significant commercial centre had established itself on
reclaimed land next to Plimmers Ark, and waterfront facilities had been upgraded to accommodate
overseas trading vessels.
The Wellington settlement had also begun to take on a more permanent look, but not before absorbing
lessons from the 1855 earthquake, which put paid to notions of the settlement becoming a facsimile of
British architectural styles. Timber, not bricks and mortar, was to remain the main building method well
into the 20th century, for rich and poor house builders alike.




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Figure 3: Wellington Waterfront 1868



3.2.2 From Settlement to Capital City
Despite its increasing importance as a regional centre, Wellington’s financial future was not assured until
1865, when Parliament and Central Government administrative functions were relocated from Auckland to
Wellington. Public administration became even more centralised in Wellington after the abolition of the
Provinces in 1876.




                               Figure 4: Te Aro housing 1940 (Photo: Bruce Orchison)
Wellington’s elevation to the nation’s Capital did much to lay the foundations for the city as we know it
today. Between 1865 and 1900, Wellington’s population had increased tenfold to almost 50,000, fuelled by
exponential growth in Government expenditure and a flood of new British migrants. Wellington became




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New Zealand’s busiest port during this time, and quickly replaced Dunedin as New Zealand’s pre-eminent
financial centre.
The residential impact of such rapid growth was initially managed through an early form of infill housing.
The large plots envisaged in W.M. Smith’s plan were subdivided into progressively smaller lots – size largely
dependent on topographical considerations and social class.
Areas which had seen only limited development were ‘reimagined’ into denser housing areas – perhaps
best illustrated by older parts of Newtown, and residual pockets of original housing in Mount Cook and Te
Aro.



3.2.3 Eliminating the barriers to physical growth
By the end of the nineteenth century, an extensive public works programme had begun to connect
Wellington City with its neighbouring (mainly rural) boroughs to the east and west. The founders of
Miramar and Karori had long seen residential subdivision as a pathway to prosperity, and had prepared
subdivision plans as early as the 1870s, in anticipation of Wellington spilling over the Te Aro basin’s natural
barriers.




                                         Figure 5: Seatoun Tunnel in the 1920s
By the time the Karori Tunnel was completed in 1900, Wellington had a thriving commuter culture.
Continuous improvements to the city’s public transport system (both land and sea) allowed workers to
travel freely between home and the CBD – and in some cases, home for a midday meal.
By 1910, Wellington’s tramway systems ran all the way to Miramar and Seatoun, aided by improvements to
waterfront roads leading to Kilbirnie and the Watts peninsula, and completion of the Seatoun Tunnel and
Miramar cutting. Local government amalgamation was also a feature of this period, with Karori and
Miramar both being absorbed by Wellington City by 1921.
In 1940, Wellington City’s population had grown to almost 120,000, and the City was again pursuing
opportunities to expand its residential capacity. Improvements to the northern rail corridor in the 1920s
and 30s accelerated residential development in the northern suburbs.



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Figure 6: Arrival of the first train at Johnsonville (New Zealand Rail publicity photo)
The foundations for Wellington’s first ‘car-dependent’ suburbs had also begun to be laid, with construction
of the Centennial Highway, an ambitious project that included massive improvements to Ngauranga Gorge
and the Hutt Road in the early 1940s.
Construction of Wellington’s urban motorway system in the 1960s and 1970s effectively eliminated travel-
based constraints on housing. By car or by public transport, Lambton Quay was 30 minutes away from just
about anywhere in the City.




                          Figure 7: Northern Motorway under construction in the 1960s



3.2.4 To the suburbs and back
Between the 1950s and 1970s, the suburbs continued to grow - both in size and as a proportion of
Wellington’s total housing stock. A sluggish start to housing construction in the immediate post-war period
gave way to a new housing boom in the 1960s and 70s.
New housing in the suburbs became more accessible to low and modest-income family households, thanks



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to low-cost housing loans for families and expanded state rental programmes. Closer to the City, social
housing was being built for older residents displaced by change, and other low-income non-family
households, including Council’s own Arlington and Central Park complexes.
Overall, however, the population’s contemporary preference for suburban living served to diminish the
residential importance of the inner city. Housing stock in the city’s heart made way for growth in
commercial and government activity. Flat areas around the CBD periphery (Thorndon, Te Aro, Mount
Victoria and Mount Cook) became home for Wellington City’s light industrial and warehousing activity.




                                              Figure 8: Churton Park (2014)
Those pockets of housing that remained within W.M. Smith’s original city boundary became even more
sharply differentiated by privilege and location. Older established suburbs like Wadestown and Roseneath
remained popular with professionals and more urban-focused family households, while lesser- cost housing
areas became ‘zones of transition’ for Wellington’s new migrant populations and the City’s growing tertiary
student population.




                                               Figure 9: Mt. Victoria (2006)




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Since the 1980s we have witnessed a reversal of sorts. Continued population growth has put greater
pressure on Wellington’s transport infrastructure. Arguably, it takes longer in 2014 to travel from suburb to
city than it did in 1984. The inner city itself has become a more attractive place to live. Gentrification and
other reinvestment has improved the quality of much of the housing stock. More people are now choosing
to stay in the inner city, and appreciating the character of older refurbished housing or (more recently)
apartment-style living.




                                       Figure 10: Central city apartments (2014)


3.3      CONTEMPORARY HOUSING MARKET

3.3.1 National and metropolitan house prices and housing affordability
Whilst rising house prices and declining housing affordability have been given national attention, their
effects have been felt most keenly in Auckland (see Section 8 for further detail) and Christchurch where the
earthquake has substantially reduced the supply of housing. Recently, the impact of rising house prices in
Auckland and Christchurch (together comprising more than 40% of the national population) has been to
paint a picture of rising house prices across New Zealand generally, when in fact many areas are
experiencing only slow price growth or even static prices.
Certainly the Auckland and Christchurch markets are very different to Wellington which has experienced
only slow price growth over the last 5 years. In this context it is interesting to note that in 2008 Wellington
City and the Auckland Council area had an almost identical average house sale price (approximately
$500,000). However, by 2013 the Auckland figure had risen to almost $700,000 whereas the Wellington
figure was approximately $525,000 (see Figure 11 below). The substantial price growth in Christchurch
following the 2010 and 2011 earthquakes is also shown.




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Figure 11: House price trends in Wellington City, Auckland urban and Christchurch urban
                                   Source: Quotable Value (www.qv.co.nz)
Using government’s method for assessing housing affordability (an index based method of median house
prices and median household income) Auckland is “severely unaffordable” with a figure of 6.7, and
Wellington is also severely unaffordable but with a lower score of 5.8 (see Figure 12 below). Based on the
current buoyant market in Auckland and flat market in Wellington we expect the two figures to further
diverge into the foreseeable future. To put affordability into a national context the figure also shows
affordability figures for Christchurch, Tauranga – Western Bay of Plenty and Napier – Hastings.




                      Figure 12: House affordability in selected New Zealand urban centres
                                   Sources: MBIE (2013), Demographia (2013)



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Turning to the Wellington metropolitan context Figure 13 below demonstrates that house prices are
significantly higher in Wellington City than other parts of the Wellington metropolitan area (around 20%
higher than the metropolitan average and 50% higher than each of the other cities). However, the figure
also demonstrates the interconnected nature of the housing market across the metropolitan area because
although the individual cities have different price points the prices themselves move in parallel trajectories.




           Figure 13: House price trends in Wellington metropolitan and constituent council areas
                                   Source: Quotable Value (www.qv.co.nz)




                             Figure 14: House affordability in Wellington metropolitan
                                    Sources: MBIE (2013), Demographia (2013)




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Figure 14 addresses the metropolitan context. This shows that even taking into account adjustments for
household income (which are highest in Wellington City) Wellington City is the least affordable in the
metropolitan area. However, even within Wellington City there are varying patterns of affordability and do
we warn against using these figures in isolation.



3.3.2 Wellington metropolitan urban economic and geographical issues
As we have already described higher house prices in Wellington City are a function of economic geography
as much as anything else, and our further work has demonstrated that the most expensive suburbs in the
metropolitan area are almost exclusively located in Wellington City, and in general house prices decline
with distance from the Wellington CBD (see Figure 15 below).




                              Figure 15: House price by distance from Wellington CBD


In itself this information does not point to a Wellington City land supply problem because there are no
obvious, new development fronts available and because the city acts as the epicentre of the metropolitan
employment housing market. This is a basic function of urban economic geography that is observed in
metropolitan areas worldwide.
Notwithstanding, the pattern of high prices has social and economic implications that necessitate further
investigation. Whilst the outer cities play key dormitory functions for Wellington City workers there are
tangible benefits to providing an ongoing land / housing supply in closer proximity, within Wellington City.
Land supply issues are considered in greater detail in Section 7, but this basic urban geographical context is
of central relevance to the information contained in that section.




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