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Looking ahead – the next ten years

by Felicity Wong
The Wellington City Council is preparing to release its draft long term plan – budget for the next 10 years. Some early consultation with stakeholders and partners indicates the priorities Wellingtonians have for Council expenditure (“investment”).

Predictably the clear priority so far is to fix the pipes which frequently geyser in Wellington and for which accountability has yet to be taken. Yesterday’s announcement that an extra $40 million for pipe maintenance will be in the long term plan is a good start.

Residents’ next priority is affordable housing and modern public transport, along with an accessible city and the provision of libraries, halls and venues, and maintained parks and recreation areas. Good basic stuff on everyone’s “must have” list.

Infometrics Report

To set the scene for its expenditure plans, the Council recently commissioned an updated report (January 2021) from Infometrics about Wellington’s population, economy, and housing needs. The report has some sober reading about the macro economic outlook for New Zealand in light of COVID with unemployment to increase later this year and “ripple through communities”.

Nonetheless, the economic outlook for Wellington city is not so bad. The city provides most of the region’s jobs but the wider region provides much of the housing so any unemployment figures tend to show in the regional centres. This economic outlook is relevant for predicting migration post COVID, and the city’s future housing needs.

Migration, Infometrics reports, is the biggest factor in Wellington’s population growth. While net migration flows spiked in late 2019 and early 2020, they came to a standstill with closed borders. Infometrics nonetheless predicts an increased Wellington population of 26,200 by 2030, “assuming borders are fully open in 2022” based on an increase in Wellington’s population of 1% annually from 2025. That’s predicted on a labour market shortfall of jobs in Wellington pulling in migrants and assumes, what Infometrics calls, “positive work visa conditions”.

Over the past 20 years Wellington’s population has varied in annual increases of between 0.5% and 1.5%. Sustaining a 1% annual increase is based on Infometrics’ two assumptions: fully open borders in 2022 and “positive work visa conditions” for migrants. Is there room for doubt? Troubling is the data note in the council’s LTP paper about its use of long term population figures that “do not consider potential impacts to assumptions stemming from covid-19.”

Housing Demand

Infometrics adds another factor into predicting housing demand – the shrinking size of households. Infometrics report a relatively large average household size of 2.5 in 2020 for Wellington given its larger population of 20-29 year olds (students and young professionals) who flat in groups. That offsets a general decline in household size, driven by increased life expectancy which means people are living independently for longer; an aging population which means older households make up an increasing share of city households; and a reduction in family size resulting from couples having children later, having fewer children or not having children at all. The decline in average household size means more homes are needed to house the same population.

Infometrics predicts that 1.2% of housing is additionally required annually in Wellington to meet both population growth and the trend to shrinking households, along with the shortfall already apparent.

Housing Value & Supply

Infometrics reports that housing is still overvalued relative to incomes. A fall in value is possible over the longer term given high levels of residential construction and the likelihood of rising mortgage rates, however the underlying shortage and the government’s desire to avoid falling house values mean Infometrics finds it “hard to see substantial decrease in house prices”.

The city’s under supply of houses, Infometrics reports, is related to “topographical and infrastructural constraints”. Infometrics believes it “won’t be solved overnight” and expects Wellington house prices to “outperform National house price growth” (be even more expensive) in the coming years.

There is however a reportedly big increase in housing supply currently being constructed. Consents peaked in 2019 and 2020 with several major new apartment buildings consented. Infometrics expects consents to average about 1,100 per year over coming years, reflecting the level of consenting in 2018, underpinned by strong population and employment growth. Even if household confidence were to “tank” in the coming year, Infometrics says this level is sustainable given housing shortfall and favourable credit conditions.

Infometrics predicts capacity for new dwellings “to increase on the back of the district plan review”. The uptake of this “additional zoned land” will be tempered by construction sector capacity and the cost of alternative development in the broader region. In short Infometrics expects a strong level of new dwelling construction in the city over the coming decade.

Space and Population

Space in Wellington has always been limited and population predictions consistently over generous. In 1965 Bill Sutch predicted Wellington’s regional population would be 600,000 in 2000, and include a Porirua population of 185,000, Ohariu Valley of 30,000, and Kapiti of 55,000. (It’s now only 445,000, 55,000, about 200, and 56,000 respectively). He was right about Kapiti but missed the mark for Porirua and Ohariu Valley.

Against that background Sutch said Wellington had to ration its limited space. He drew attention to the planned inner city motorway taking 75 acres of land between Thorndon and Mount Victoria, questioning that loss of “Wellington history” to serve the needs of only 250 acres of central city (bounded by Bowen St, The Terrace, Ghuznee St, Kent Tce and the waterfront).

This year the debate about space for housing will come to a head with the District Plan review especially given the priority expressed for the Council to achieve this through its long term plan. With the $billions needed for pipes there’s unlikely to be much investment in increasing the Council’s own housing stock, given the need for substantial investment to make its existing stock warm, dry and resilient, which it isn’t.

55 years ago Sutch predicted no room for manufacturing in Wellington, and only light services that required workers but not much floor space to remain; warehouses and storage would need to go around the airport or Aotea Quay; the merchant functions of Cable St could go elsewhere he said while Harbour and Council land could become a park with high quality hotels nearby. Oriental Bay would become high density residential and he predicted walking around the waterfront from there to the railway station.

His 1965 warning that an additional 30 acres of parking would be needed to accomodate the 40,000 cars expected to enter the city by motorway has been an ongoing challenge. Sutch’s prediction about getting cars out of the central shopping area is also now mooted. He called for mixed use with residential, shopping and offices together “ like in Europe”.

While many of Sutch’s predictions came to pass in terms of Wellington’s urban form, he didn’t get the population right in part because the predicted motorway linking Ohariu Valley to Aro St was effectively opposed, and the mass rapid transit link between Paremata and the Hutt Valley was not built.

We might question whether Infometrics has got its predictions right too recalling that StatsNZ has also predicted a lower population growth rate for Wellington. It’s important because the Council will use those figures to borrow more and spend on infrastructure and in its District Plan Review, planning for massive “upzoning” to accommodate the predicted increased population.

Rates and Social Licence

Folk who want affordable housing will expect the Council to “enable” it to be provided (by Kainga Ora or the private sector) through zoning. Without greenfield areas that means upzoning in existing suburbs and in the inner city, already Wellington’s largest suburb.

Caution is required. Expected population increase sets off the National Policy Statement on Urban Development which requires the Council to upzone our suburbs, placing even more “Wellington history” at risk.

Some Wellington Councillors say “sunlight and amenity cannot be guaranteed for existing home owners”. At the same time they will soon ask ratepayers for increased contributions. If ratepayers cannot rely on Councillors for their sunlight and amenity, and Council has mishandled stewardship of failing infrastructure, the social licence for Councillors to set rate increases will be in doubt.

16 comments:

  1. Claire, 5. February 2021, 9:33

    Felicity thanks for that. Interesting how high population forecasts never come to pass but those numbers are relied on for raising money.

     
  2. Helene Ritchie, 5. February 2021, 9:55

    Another informative contribution Felicity.
    I note in particular your last sentence, “If ratepayers cannot rely on Councillors for their sunlight and amenity and council has mishandled stewardship of failing infrastructure, the social licence for councillors to set rate increases will be in doubt.”

    I would perhaps go even further to say that if the social contract which councillors have with us is and will continue to be so lopsided and broken, that drastic action will need to be taken by us.

     
  3. Toni, 5. February 2021, 13:56

    Shame on any of our elected representatives who are prepared to accept that “sunlight and amenity cannot be guaranteed for existing homeowners” as the city develops. No doubt they would not be so blasé if it impacted on them. If this is what Wellingtonians can expect then WCC better start bracing for a huge public backlash, and even more distrust in the council.

     
  4. Michael Gibson, 5. February 2021, 14:14

    This is superb stuff!
    Re the last paragraph, it was disturbing that Wellington Councillors say “sunlight and amenity cannot be guaranteed for existing home owners”.
    This is the first I’ve heard that they have rejected my written (and oral) submission on the subject.
    Re Frank Kitts Park, I trust that the Long-Term Plan won’t stick to the figure of $30m which they suddenly mentioned when the subject last came up. Also that they will not be proceeding with a Garden Of Remembrance (which is the name that the Environment Court said was to be used instead of “Chinese Garden.”

     
  5. Ray Chung, 5. February 2021, 15:14

    Great, well reasoned and researched article thanks Felicity! One question that I’d like to ask though is why do you think mortgage rates will increase in time? Everything that I’ve read indicates that they’ll continue to decrease, hence making it easier for borrowers to take out larger mortgages.

    It seems to me that councillors appear to be well-aware of the financial pressures on ratepayers yet the same select group of them have no compunction about continuing to find ways of spending more on their own vanity projects that will cost millions.

    There are those who are blindly accepting of the NPS on Urban Development and are pushing to get greater intensification in the CBD and suburbs. To hear that they have little concern for residents’ existing “sunlight and amenities” is particularly disturbing.

    Our residents association have asked the WCC to justify their projected population growth expectations and predictions for Wellington but they have yet to respond.

     
  6. Wendy Armitage, 5. February 2021, 17:27

    Excellent article Felicity! Extremely disturbing to note there are elected representatives who accept that “sunlight and amenity cannot be guaranteed for existing home owners”. Surely this is essential for sustainable and healthy living environments?

     
  7. Claire, 5. February 2021, 19:13

    Michael I can attest I have heard from the horses mouth that our sunlight and amenity cannot be assured. Also our group presented an alternative plan that added taller buildings to our commercial strip. Sparing the cottages and villas. This has been rejected as did not satisfy the DPS NPS. Yes Helene what are our rates affording us if not sun and amenity.

     
  8. Blaire, 6. February 2021, 11:38

    Good article, given the clear lack of suitable space to build in the city, why are we not looking to drastically improve PT (higher speed and/or more express trains) to the outer regions where there is copious amounts of suitable space to build and grow. Yes we will still need to do something in the city as well, but at least it would help alleviate the pressure and means we can do it properly and not turn wgtn into legoland. A lot of people dont even want to live in the city, but due to their work residing there and very limited/archaic transport options, ultimately means they have little choice, hence the problem we now face.

     
  9. Conor, 7. February 2021, 19:32

    A few errors here.
    The first is that the council will have to spend far more money if it doesn’t upzone than if it does.
    Second, building consents for Wellington in 2020 actually decreased: https://www.stats.govt.nz/information-releases/building-consents-issued-november-2020
    Third, expected population growth doesn’t set off the NPS-UD. Wellington as a tier 1 city has to abide by it’s mandates.
    Finally, the main reason Wellington’s population is no larger is because a coterie of landbankers and others sitting on vast untaxed gains have made it extremely hard for anyone to build any new homes anywhere. People can’t live in a Flat White.

     
  10. Ray Chung, 7. February 2021, 21:55

    Conor, I’ve gone through the NPS-UD and it’s not a law and hasn’t been debated nor through any select committee approval. It’s up to the individual city councils whether to adopt what has been suggested by the Labour Party or to come up with an alternative. As you’ll no doubt know, there are councillors who will blindly follow their Labour/Green party ideology and have said that the NPS-UD is a fait accompli and should be just converted to become our Spatial Plan without understanding what Wellington needs and how effective would any of this be? You make the statement about landbankers and others sitting on untaxed gains. I’m guessing you’re talking about property investors? It seems to me that property investors get disparaged all the time but if they weren’t investing in houses, where would the rental property come from? Before you ask, I don’t have any rental houses and just have the house that I live in. I agree with you that there’s not enough land to build more houses but don’t believe that squashing more people into medium and high density housing is desirable as that’ll just lower their quality of life although I also accept that some people like small apartments with no gardens or space and that’s fine too.

     
  11. D'Esterre, 7. February 2021, 23:27

    Many thanks, Felicity, for this excellent piece.

    The final paragraph says to me that the social contract between Council and ratepayers is broken. If Councillors aren’t prepared to go into bat for us the ratepayers (as ChCh City did, I’d point out), why on earth are we electing them?

    And how can WCC expect us to pay more rates, when it won’t protect the assets we currently have, and has failed in its duty to look after infrastructure?

    It’s impossible to avoid noticing the punitive tone on the part of WCC and other advocates, when the issue of sunlight and amenity is discussed. It’s as if such people think that we homeowners deserve to have our access to these things crimped, just because we have the temerity to wish to protect them. Or even just because we live in the hill suburbs. It’s bizarre and incomprehensible.

     
  12. Felicity Wong, 8. February 2021, 0:28

    The NPS-UD requires a Housing and Business Capacity Assessment based on expected population growth. As a tier 1 city Wellington will also need to have a Future Development Strategy completed in co-ordination with the other four regions. Accurate population forecasting is critical for those NPS-UD tasks. (Consents info reports Infometrics’ material.)

     
  13. Conor, 11. February 2021, 7:38

    Ray – the relevant law is the RMA.

    I’m mostly talking about homeowners, but as to property investors, the build to rent sector in Wellington is virtually nonexistent, so they have no impact on housing supply.

     
  14. Claire, 11. February 2021, 10:38

    Conor we have a new build to rent complex with forty apartments to be completed in six months. Also there is the old building converted to apartments and run by the WCC. And three more coming by another developer. This is by far the most sensible thing to do. Much less climate intrusion than finding sites for new builds. The RMA trumps the DSP and will take two years to revamp.

     
  15. Roland Sapsford, 15. February 2021, 20:03

    Conor – do you have any evidence to support your claims that the RMA and existing home owners have much at all to do with the supply of new housing?

    Wellington has a vast amount of land which could house people currently vacant, used for car-parking, or occupied by low-quality single and double storey commercial buildings. Much of this could easily be developed to 3-5 storeys (or higher) under existing rules.

    Why do you think none of this has been developed for housing?

    Secondly, why do you think there has been no significant development on land that has been “upzoned” for decades, such as Adelaide Rd?

    Third, have you every looked at the distribution of property values around Wellington? Clue: its very different from Auckland.

    Fourth, why do you blame homeowners for the lack of a build to rent sector?

    Go well.
    Roland

     
  16. Mike Mellor, 16. February 2021, 22:50

    Ray C: the NPS-UD has been approved by the Governor General (the highest power in the land) under section 52(2) of the Resource Management Act 1991, and it includes a “list of things that local authorities *must do* [my emphasis] to give effect to the objectives and policies of this National Policy Statement” (para 3.1).

    What makes you say that it’s not a law, and suggest that it’s not a fait accompli? The facts appear to indicate otherwise.

     

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