Prospects for
Residential Infill
and Intensification
in Tauranga City
November 2012
Prepared by:
Andrew Mead, Andy Ralph, Frazer Smith, Ayvron Greenway, Karen Marjoribanks & Lucy
Ullrich, Tauranga City Council
Liz Davies, Western Bay of Plenty District Council
Independent advice and peer review:
Martin Udale and Devon Nel, Cranleigh
Members of the SmartGrowth Property Developers Forum
Table of Contents
1.
Executive Summary...................................................................................................... 4
2.
Purpose ....................................................................................................................... 16
3.
Background ................................................................................................................. 17
3.1
3.2
3.3
3.4
3.5
3.6
3.7
3.8
3.9
3.10
4.
Residential Infill Assessment .................................................................................... 30
4.1
4.2
4.3
4.4
4.5
4.6
5.
The Difference between Residential Infill and Intensification .................... 17
The Study Area ............................................................................................... 17
Infill and Intensification Development Trends ............................................. 17
Development in EUA relative to Total Residential Development ............... 19
Current Infill and Intensification Growth Expectations .............................. 20
Comparison of Past Trends to Future Projections ..................................... 22
Recent History of Infill Planning Provisions in Tauranga .......................... 23
Recent History of Planning Provisions for Intensification in Tauranga.... 24
Housing Affordability ..................................................................................... 27
Relationship between Infill/Intensification and Greenfield Development . 28
Introduction..................................................................................................... 30
Methodology for Assessment of Infill Potential .......................................... 30
Results............................................................................................................. 31
Comparison of Infill Assessment Results with SmartGrowth Forecasts . 32
Financial Viability of Infill Development ....................................................... 32
Findings for Residential Infill ........................................................................ 33
Residential Intensification Assessment ................................................................... 34
5.1
Introduction..................................................................................................... 34
6.
Residential Intensification – A Building Communities Perspective ...................... 35
7.
Residential Intensification Assessment – Literature Review ................................. 36
7.1
7.2
7.3
7.4
7.5
7.6
7.7
8.
Residential Intensification Assessment – Case Studies & Interviews .................. 44
8.1
8.2
9.
Analysis Undertaken ...................................................................................... 36
Supply Side ..................................................................................................... 36
Summary of Supply Side Constraints .......................................................... 37
Demand Side ................................................................................................... 37
Summary of Demand Side Drivers ............................................................... 38
Suggested Responses to address Demand/Supply Side Issues............... 40
Summary of Suggested Responses in the Literature ................................. 40
Planning Framework Case Studies .............................................................. 44
Local Interviews.............................................................................................. 44
Assessment of Financial Viability for Residential Intensification.......................... 46
9.1
9.2
9.3
9.4
Introduction..................................................................................................... 46
Financial Viability Methodology / Data Inputs ............................................. 46
Modelling Results ........................................................................................... 51
Assessment of Financial Viability................................................................. 55
2
9.5
9.6
Overall Financial Viability Findings .............................................................. 61
Intensification in Greenfield Areas (including Retirement Villages) ......... 63
10.
Long-term Trade-offs between Infill and Intensification ......................................... 65
11.
Conclusions for Infill and Intensification ................................................................. 66
11.1
11.2
12.
Implications of Conclusions for Other Workstreams.............................................. 70
12.1
12.2
13.
Residential infill .............................................................................................. 72
Residential intensification ............................................................................. 72
Recommendations ..................................................................................................... 74
14.1
14.2
15.
Residential infill .............................................................................................. 70
Residential intensification ............................................................................. 70
Options for the SmartGrowth Update ....................................................................... 72
13.1
13.2
14.
Residential infill .............................................................................................. 66
Residential intensification ............................................................................. 66
Residential infill .............................................................................................. 74
Residential intensification ............................................................................. 74
Appendices ................................................................................................................. 76
3
1.
Executive Summary
Purpose
The purpose of this report is to reassess the prospects for residential infill and intensification in
Tauranga City given:
 The prominent role it is currently expected to have in accommodating the sub region’s
future population growth.
 The benefits that residential intensification can offer.
The report provides a robust evidence basis for decisions about residential infill and
intensification in Tauranga City through the SmartGrowth Update.
Background
Both residential infill and intensification result in increased residential densities (a greater
number of dwellings per hectare). For the purpose of this report, residential infill refers to a
situation where an existing property is subdivided into two (or more) lots to a minimum density
of one dwelling per 325m2 net in accordance with the proposed Tauranga City Plan. Generally
the existing house on the property is retained and a new house is built on the new lot that is
created. This form of development is characterised by small allotments (often less than
400m2) with detached houses.
Residential intensification on the other hand relates to the comprehensive redevelopment of a
property or properties that almost always involves the demolition or removal of the existing
dwelling(s). Intensification is characterised by higher densities than residential infill and
housing typologies such as duplexes, townhouses, terraced housing and apartments.
Dwelling units are typically attached to each other in a single building. Residential
intensification may often require the assembly of neighbouring properties into one
development block to provide sufficient site area to accommodate this form of comprehensive
development.
This report is primarily focused on residential infill and intensification development in the ‘older’
parts of the Tauranga City. This area is defined as the established urban area at 1990 (EUA).
It excludes the greenfield urban growth areas that were rezoned for development from the
1990’s onward such as Papamoa, Bethlehem and Wairakei (the second and third generation
urban growth areas) and future planned urban growth areas like Te Tumu (fourth generation
urban growth areas).
Historical development trends in the EUA show a reliance on infill development and the
subdivision of remaining rural land. There has been relatively little residential intensification (it
has average approximately 5-6% p.a. of sub regional growth over the last 16 years once
adjusted for dwellings used as holiday homes and tourist accommodation which do not
accommodate Tauranga’s permanent residential population.
In addition, residential
intensification development has been in decline since 2001 which is the beginning rather than
the end of the recent property boom and well before the Global Financial Crisis which began in
2007. The ‘Leaky Homes Crisis’ amongst other things may help to explain this.
Residential infill and intensification is expected to accommodate 25% of the sub region’s
growth to 2051 in accordance with the BOPRC Regional Policy Statement. This would require
intensification to deliver about 19% of this 25%. This would be about 300 to 400% greater
than the recent trend for residential intensification.
To deliver the anticipated amount of intensification, it is estimated that about 3,000 existing
dwellings would have to be demolished or removed over the next 40 years. This is equivalent
to about 1.5 times the number of dwellings in the suburb of Matua.
Residential infill
Research undertaken
An assessment of the remaining infill potential in the EAU of Tauranga City was undertaken.
This assessment began by determining the theoretical development capacity in accordance
with the rules of the proposed City Plan. Once this was established, development constraints
like the location of existing houses on-site, steep banks and flood prone land were assessed to
reduce the theoretical development capacity down to the actual potential for infill development
that exists.
Conclusions
The amount of infill development allocated in the 2011 SmartGrowth growth projections
appears to be reasonable in light of the infill development potential that still exists and ability
for this type of development to be delivered.
There is no reason to suggest that the infill growth projections need adjustment through the
SmartGrowth Update although the adverse effects of infill development on the long-term
delivery of residential intensification raises the policy question of whether the anticipated
amount of infill development and the relative ease of undertaking infill development (compared
to residential intensification) is desirable.
Options for the SmartGrowth Update
Multiple options were not been identified. The status quo is considered to be the only realistic
option at the current time.
Recommendations
Recommendation 1: It is recommended that the residential infill projections are retained as
they currently are through the SmartGrowth Update; these being 6% of projected sub regional
growth to 2051 (approximately 3,350 additional dwellings).
Recommendation 2: It is recommended that ways to address/minimise the adverse affects of
residential infill development in delivering residential intensification in the long-term are
assessed and reported back as part of wider work on residential intensification recommended
to occur post the completion of the SmartGrowth Update.
Residential intensification
Benefits of residential intensification
Compared with ‘typical’ greenfield residential subdivisions, residential intensification has the
potential to deliver better community outcomes such as:
 Reduced traffic congestion and vehicle emissions
 Minimising the loss of productive rural land to urban expansion
 More efficient use of existing infrastructure
 Reduced infrastructure investment requirements and funding challenges in greenfield
locations
 More efficient and economically viable public transport system
5
 Location of more people closer to existing recreation and community amenities like parks
and reserves, and libraries
 Increased opportunities for social interaction
 Offering a greater variety of housing choices.
This is one of the main reasons why there is a focus on residential intensification as part of the
SmartGrowth Strategy Update.
Research undertaken
The following work was undertaken in relation to residential intensification:
 Assessment of the benefits of residential intensification compared with other forms of
development (e.g. ‘traditional’ greenfield subdivisions)
 Literature review focusing on the market supply and market demand side challenges to
delivering residential intensification successfully. This includes identification of potential
responses to these challenges that were identified in the literature.
 Planning framework case studies – focusing on the approach that is being taken to
residential intensification in Hamilton and Wellington.
 Interviews with local developers, builders, architects and real estate agents on their
opinions in regard to residential intensification in Tauranga.
 Assessment of the financial viability of different forms of residential intensification (small lot
detached houses, duplexes, two to three level townhouses, three level apartments and four
to six level apartments) from the perspective of a developer. This assessment was done
using financial viability model incorporating the costs of development to determine minimum
required indicative sales prices for developments to proceed. Cost inputs were sourced
independently and peer reviewed by local developers.
The term financial viability refers to whether development would be sufficiently profitable for
a developer to be willing to undertake and for project finance to be secured for any
particular development. This is an important consideration for the SmartGrowth Partners
as financial viability is integral to the delivery of the overall SmartGrowth Settlement Pattern
and it will ultimately be a major factor in determining things like how much residential
intensification is delivers, where and what form it takes.
 Considering the trade-off between short term gains through infill subdivision against the
potentially much larger long-term gains from residential intensification. Continued infill
development in established suburbs is likely to make comprehensive redevelopment to
medium and high densities more difficult in the future for a number of reasons.
 The potential to deliver more intensive forms of residential development in greenfield urban
growth areas.
Conclusions
General
This report outlines a number of significant challenges to delivering residential intensification
through the literature review, case studies, local interviews and financial viability assessment.
The key message to take from this is that it is difficult to successfully deliver residential
intensification.
Political support/leadership is a critical element to delivering the right environment for
residential intensification to be delivered. This includes both the sub regional vision
(SmartGrowth) and the delivery of the right planning framework (City Plan) as well as the
potential for Councils to take a more active role in delivery.
6
One of the main factors is that the drivers of intensification that exist in large cities like
Auckland, especially severe traffic congestion/long commuting times from greenfield areas,
are largely absent in the sub region.
One of the other general constraints specific to Tauranga is the lack of any substantial
‘brownfield’ redevelopment sites in the city that are ‘ripe’ for development. As a result, delivery
of residential intensification is reliant on redevelopment of the suburban residential
environment which is typically more difficult or the redevelopment of large community
amenities like the Tauranga Racecourse or a golf course for medium density housing which
would not be straightforward nor supported by all of the community.
Financial Viability
Smaller scale types of residential intensification (houses/duplexes on small lots and
townhouses/terraced housing) are expected to be deliverable at lower prices than larger scale
apartment projects.
Despite this, there are financial viability challenges associated with the cost of delivering all
forms of residential intensification. Because of this, residential intensification will primarily be
targeted by developers to the upper end of the market which means there will be a limited pool
of buyers. These financial viability challenges are exacerbated by the substantially lower cost
of both existing housing stock and new houses in greenfield developments which make these
forms of housing more attractive to many customers.
To demonstrate the financial viability challenges the following table outlines the indicative
additional cost of a variety of different three bedroom residential intensification products
compared to a three bedroom dwelling in a greenfield subdivision. It considers multiple
options/configurations for apartments, townhouses and duplexes and small lot houses which
are explained more fully in the body of the report.
Indicative sales prices difference between $425,000 three bedroom greenfield product and three
bedroom residential intensification
Price difference for intensification product types (incl. gst)
Three
bedroom
apartment
(option 1)
Three
bedroom
apartment
(option 2)
Three
bedroom
townhouse/
terrace
(option 1)
Three
bedroom
townhouse/
terrace
(option 2)
Three
bedroom
house/
duplex
(option 1)
Three
bedroom
house/
duplex
(option 2)
Intensification price
$555,000
$565,000
$550,000
$500,000
$460,000
$480,000
Intensification price
difference
$130,000
$140,000
$125,000
$75,000
$35,000
$55,000
% difference
+63%
+66%
+62%
+47%
+35%
+41%
The next table summarises the outcomes for the four factors used in the report to assess the
financial viability for residential intensification using a simple red, orange, green ‘traffic light’
approach. Red being a poor outcome, orange – moderate to average, and green being good.
7
Summary of financial viability of residential intensification
Viability factor
Rating
Comment
Relative cost
Red
Significantly more expensive than
comparable product in greenfield
subdivisions and existing housing
stock
Affordability
Red
The majority of households would not
be able to afford residential
intensification product due to incomes
being too low
Likelihood of viability improving
Orange
The future is inherently uncertain but
there is nothing obvious ‘on the
horizon’ that would improve viability
Likelihood of meaningful local/central
government policy interventions
Orange
Possible but would require large
investment and much more
‘interventist’ policy approach
Even if the land cost component was removed through central or local government
intervention, sales prices would not be ‘affordable’.
Lower household incomes in the sub region compared to areas like Auckland, Wellington and
even Hamilton exacerbate the challenge of delivering residential intensification.
Because of these factors, even with an enabling planning framework for residential
intensification in the suburban environment it is difficult to see infill and residential
intensification combined accommodating 25% of the sub region’s long-term residential growth.
To deliver 25% of the sub region’s growth, past intensification development trends would have
to increase by 300-400% assuming that infill development delivers the expected 6% of sub
regional growth.
The areas where it is likely to be most viable are where people will be prepared to pay the
premium required. This is likely to be primarily in areas very close to the harbour/coast, areas
with extensive harbour or sea views, and amongst areas of generally high quality housing.
The following areas (or at least parts of them) are the primary areas that would meet this
criterion in the EUA:
 Coastal Mt Maunganui
 Mt Maunganui North
 Omanu
 Otumoetai
 Matua
 Cherrywood
 Bureta
 Pillans Point
 The Avenues
Addressing the challenges – the planning framework
The current City Plan Suburban Residential Zone does not provide sufficient opportunity to
deliver the level of residential intensification expected by the SmartGrowth growth projections
and the BOPRC Regional Policy Statement, even if it was financially viable. This Zone reflects
community expectations for the suburban environment that have been expressed in various
ways to Council over a long period of time.
8
A more enabling planning framework is required if anything resembling the expected amount
of residential intensification is to be delivered. This planning framework needs to align with
market drivers for intensification. This is likely to require:
 Provision for small to moderate sized redevelopment opportunities across all or most of the
EUA (i.e. the Suburban Residential Zone)
 Provision for medium to large scale redevelopment in some parts of the EUA (i.e.
identification of specific areas, or specific criteria that would have to be met)
 Provision for medium to high density development in greenfield areas.
This is consistent with the messages from the literature review and the staff understanding of
the general approach Auckland is looking to take.
Delivering a more enabling planning framework in the EUA would primarily require
reconsideration of the Objectives, Policies and Rules of the Suburban Residential Zone, and it
may also require some tweaking of provisions in other Zones such as the City Living Zone or
the Commercial Zone.
A focus on small to moderate sized development across the wide suburban area would be
sound urban planning policy for a number of reasons such as:
 This type of development is likely to deliver the most affordable type of residential
intensification product
 It is more consistent with the character and scale of suburban areas than larger
developments
 A wide area would provide a greater number of potential development sites that are ‘ripe’ for
development (e.g. sites with low improvement values)
 It would allow a wider range of living environments to be built, allowing a wider range of
housing needs to be met
 There is a market for people who wish to “age in place” and would consider downsizing into
more intensive developments if they were located in their existing communities
 It is more responsive to what the market is likely to be able to deliver
 It may only have an incremental effect on existing infrastructure.
To deliver a more enabling planning framework would involve a significant amount of
community engagement and further research into issues such as infrastructure capacity;
culminating in substantial plan change process. In terms of community engagement,
meaningful discussions along the lines of the City Living Zone process would be beneficial.
Past experience proves that it may not be easy to achieve widespread community acceptance
to planning rules that enable residential intensification. It may be easier to achieve this
acceptance if:
 The changes to the planning framework provide for development in most or all of the EUA
(as opposed to targeting particular areas/communities) as this will share responsibility over
the whole city and residents in particular areas may not feel that they are being ‘picked on’ or
‘singled out’
 The changes to the planning framework provide for small to moderate size redevelopment in
most areas more in line with a suburban environment, character and scale
 The rate of change to existing neighbourhoods is expected to be incremental over a long
period of time rather than more significant and more immediate
9
 Community engagement is more comprehensive e.g. the ‘place-based’ approach that was
successful in the City Living area.
In terms of greenfield intensification, minimum density requirements (whether 15 dwellings per
hectare or something different) should ensure that when higher densities are achieved (e.g.
through retirement villages) they are not offset by lower than minimum densities in traditional
subdivisions with no net increase in density above the minimum required for the whole urban
growth area. Please note that the Property Developers Forum does not agree with this
statement.
Despite the obvious challenges, consideration should be given to the potential for large sites
like the racecourse or a golf course to be redeveloped for medium to high density
development. This could involve partnership with central government and its agencies like
Housing NZ.
Addressing the challenges – determining the role of local government
There are a range of roles that the SmartGrowth Partners (especially TCC) could play in
delivering residential intensification; from a ‘passive’ regulatory role through planning policy, to
an ‘active’ role through direct provision of housing or investment in development projects
through arrangements like joint ventures and PPP’s. These options are not fully understood
and should be further assessed.
Determining the role of local government in the sub region in delivering intensification would
logically involve wider consideration of the costs and benefits of this form of development vs.
the alternate, which is greater reliance on greenfield development. This would help to
determine whether a valid case exists for local government investment/spending in this area.
Addressing the challenges – what role will central government play?
This is another area which is not fully understood. Central government involvement is likely to
mainly be in the area of social housing provision and funding although there may be significant
policy differences between a National or a Labour government. Another opportunity would be
the use of Crown land for development. Further liaison with central government to determine
its role would be advisable.
SmartGrowth Intensification Targets
Given the trend of reducing infill and greenfield development in the EUA, both the absolute
amount and the percentage of residential development that will be delivered in the EUA in the
future will decline unless there is substantial expansion in the amount of residential
intensification.
The percentage of residential development delivered through residential intensification in the
last 16 years would need to be increased by 300-400% to achieve the 25% requirement for
residential infill and intensification combined in the SmartGrowth Strategy and the BOPRC
Regional Policy Statement.
If the SmartGrowth partners took an active role in the delivery of residential intensification, it
would assist in helping to achieve the targets.
Given the multi-faceted challenges of delivering residential intensification and the fact that the
SmartGrowth Partners will not control whether it is actually delivered by the private sector,
consideration should be given to a more flexible approach to residential intensification targets.
This might be in the form of two separate targets:
 The first an evidence based target that is agreed as being realistically deliverable by the
market, taking into account the planning framework that is intended to be put in place and the
10
likely involvement of local and central government in assisting with the delivery of residential
intensification
 The second an aspirational target consistent with a ‘compact city’ approach and the benefits
of residential intensification.
This twin target approach would allow a degree of realism, while still outlining the desired
vision for the future. At this stage it is too early to determine what a realistic evidence based
target might be.
Prospects for medium and high density development in greenfield areas
Aside from retirement villages, the overall prospects for higher densities than already expected
in greenfield urban growth areas than currently planned is not great. For example, population
projections for Te Tumu already include significant provision for medium and high density
housing. In other areas, achieving 15 dwellings per hectare may be a challenge as outlined in
recent RPS and City Plan yield discussions. As such, if less intensification occurs in the EUA
than planned it appears unlikely that it would be offset by intensification occurring in greenfield
urban growth areas instead.
Options for the SmartGrowth Update
Residential intensification
The following options have been identified for the SmartGrowth Update:
 Option 1: Retain status quo intensification growth projections
 Option 2a: Adopt revised intensification growth projections through SmartGrowth Update
 Option 2b: Adopt revised intensification growth projections post the SmartGrowth Update
The pros and cons of these options are assessed in the table below:
11
Option 1: Status quo
Option 2a: Revise through
SG Update
Option 2b: Revise post the
SmartGrowth Update
Explanation
Retain combined infill and
intensification growth
projections of around 25% of
total growth.
Intensification projections
would be reduced downward
by a yet to be determined
amount through the SG
Update process in 2013.
Revision of intensification
projections would not occur through
the SG Update. An action would be
added to the SG Strategy noting
that this revision would occur in the
future. This would sensibly be
timed around the availability of
population projections from the
2013 Census and the timing of
other revisions to the Settlement
Pattern being made for ‘Generation
5’ greenfield urban growth areas.
Pros
 Consistent with current
SG Strategy, concept of a
‘compact city’ and the
benefits of intensification
e.g. reduced infrastructure
costs.
 Given research findings
reduced intensification
growth projections would
align with a more realistic
growth scenario
 Given research findings reduced
intensification growth projections
would align with a more realistic
growth scenario
 It would allow consideration of
intensification growth projections
to be packaged with
confirmation of the rest of the
settlement pattern ensuring
alignment between
intensification and greenfield
growth projections
 Provides sufficient time to
understand what the challenges
of delivering residential
intensification mean in terms of
the quantity that is likely to be
achievable
 TCC may need to undertake
significant engagement with the
community if conclusions in this
report are accepted, as well as
considering significant Plan
Changes
 Population growth rates will
affect residential intensification;
sensible to align new population
projections with decisions on
intensification
Cons
 Significant risk that this
amount of intensification
will not be delivered due
to multi faceted
challenges
 Insufficient time to
undertake all of the work
required to develop
realistic intensification
growth projections
 If growth projections were
misaligned with likely
growth outcomes this
would compromise TCC’s
ability to plan accurately
for things like
infrastructure upgrades
 Absence of revised growth
projections would make
any adjustment now less
accurate.
 The final settlement pattern
would not be available until after
the Smartgrowth update was
completed
12
Recommendations
It is recommended:
a) That as a matter of principle the SmartGrowth partnership remains committed to
the vision of a compact urban form which reflects the benefits of intensification
b) That the updated SmartGrowth Strategy provides for an enabling planning
framework for intensification to be delivered through other planning instruments
c) That the updated SmartGrowth Strategy provides for an approach to
intensification which is supported from a development viability perspective
d) That the updated SmartGrowth Strategy acknowledges the challenges involved in
making intensification work and that strong political leadership will be required to
progress intensification aspirations
e) That the updated SmartGrowth Strategy acknowledges that in order to
successfully deliver intensification, strong levels of collaboration and engagement
will be required amongst the partnership and with the community
f)
That the current SmartGrowth projections and targets for residential
intensification are retained in the updated SmartGrowth Strategy and that further
detailed assessment is completed following the update to determine a revised
target which is aspirational yet not unrealistic nor unachievable
g) That staff are directed to prepare and report back on a work programme which
would identify appropriate actions to be included in the updated SmartGrowth
Strategy in order to identify and confirm a revised target. The work programme is
expected to include:
 Undertaking a capacity/likely uptake assessment for residential intensification to
determine updated residential intensification growth projections. This would require
a range of different scenarios being considered based on various interventions in
terms of what type of planning framework is put in place and how active the
SmartGrowth Partners are in delivering residential intensification; as well as
consideration of the potential for higher density developments in greenfield areas.
 Fully exploring and taking account of any potential capacity in all of the existing
nodes and corridors prior to confirming any policy shift
 District Plan implications
 Identification and development of a Tauranga specific ‘best practice’ model for
community engagement around change in urban form, including careful
consideration of the language that is to be used. It will address the benefits of
intensification and will also include clearly articulating the consequences of not
delivering residential intensification (e.g. more greenfield development,
transportation issues) so that informed choices can be made.
 Consideration of communication methods and other mitigation measures to reduce
potential negative community perception of residential intensification
 Consideration of mitigation measures to reduce potential negative social outcomes
of residential intensification
 Consideration of whether the SmartGrowth Partners are willing to take an
active/leadership role in delivering residential intensification such as opportunities
for funding and partnerships with developers, the ‘third’ sector (e.g. Tauranga
13
Community Housing Trust) and communities. This will include a full assessment of
costs and benefits.
 Consideration of the cumulative effect of lower yield from intensification, greenfields
and existing urban growth areas growth areas on the overall impact in terms of
additional land requirements
 Consideration of providing property data held by Councils to developers through a
web based tool to enable identification of sites that might be ‘ripe’ for
redevelopment
 Better understanding of the role that central government might play in assisting
cities to deliver medium to higher forms of housing density
 Consideration of possibility of redeveloping large sites like the Tauranga
Racecourse or a golf course for residential intensification and other potential sites
such as the commercial area in the early avenues
 Consideration of whether further research is required into housing preferences
similar to the work that was done in Melbourne and Sydney referenced earlier in
this report.
 Consideration of how (if at all) to address the adverse effects of infill development
on delivering residential intensification in the long-term
 Consideration of the potential value of having both an evidence-based realistic
intensification target and a higher, more visionary target.
 More in-depth consideration of the ability to deliver higher densities in greenfield
areas to offset the possible reduction of residential intensification targets.
 Remaining informed and aware of leading research and practice in delivering
residential intensification, such as the Resilient Urban Futures research being
undertaken by the University of Otago.
It is noted:
That the approach to residential intensification suggested in this report of ‘scattering’ or
‘pepper potting’ throughout the suburban environment with mainly small to moderate sized
developments (mainly less to 10 units) is significantly different to earlier SmartGrowth
intensification zones approach e.g. the Greerton and Arataki Smart Living Places proposals.
That the approach to residential intensification suggested in this report would not preclude the
development of dedicated residential intensification areas in the future, however the report
suggests that these areas will occur as a result of being supported from a development
viability perspective as opposed to a targeted zoning approach to specified areas.
Implications of This Research for Other SmartGrowth Update Workstreams
There are a number of possible implications that this research has for other parts of the
SmartGrowth Strategy.
Residential infill
Short-term infill development is likely to create greater challenges to delivering intensification
in the long-term.
Residential intensification
Urban limits and flow on impacts including infrastructure
If less intensification is delivered, additional greenfield land would be required to accommodate
population growth based on current population growth assumptions. This would affect urban
14
limits, timing and staging of different areas, the protection of productive land, the transport
network, infrastructure investment, infrastructure funding and the location and quantity of
business land. If the population growth assumptions are reduced downward in the future,
additional greenfield land may not be required. Even if additional greenfield land was required
this would not be required for some 20 to 30+ years given the large supply of land still
available in zoned and planned urban growth areas.
Based on a ‘business as usual’ scenario for residential intensification of 5-6% of the sub
region’s total residential development instead of the assumed 19% there would be a shortfall
of 7,000 dwellings. In this was instead to be delivered by greenfield development at 15
dwellings per hectare this would require approximately 460ha of additional net developable
land. This is very much a worst case scenario as by doing this such as establishing an
enabling planning framework for residential intensification historic intensification trends should
increase in the future.
This possibility should be factored into future infrastructure projects which are currently being
assessed such as the Tauriko Upgrade Study of SH29 because land around SH29 is one of
the potential locations for future residential (and industrial) development.
Transport network
If infill and intensification does not occur as currently projected and is replaced with greater
greenfield development, this would have adverse consequences for the transport network due
to longer trip distances and increased reliance on the arterial network, including State
Highways. This would indicate that the transportation challenges identified in the Tauranga
Urban Network Study (TUNS) may actually prove to be greater and more immediate e.g.
congestion issues and upgrade requirements.
Infrastructure funding
If lower intensification is delivered, it may compromise the funding of the Southern Pipeline
which relies on development contribution funding from intensification to repay a large portion
of project debt. This issue could be resolved if additional land in the Southern Pipeline
catchment was released for residential development to offset reduced intensification. Land
around SH29 is again a potential location that would satisfy this criterion.
Housing affordability
Because of the cost structure of delivering residential intensification, it is not likely to assist in
resolving current housing affordability challenges in the sub region.
City Plan
Although outside the scope of the SmartGrowth Strategy / SmartGrowth Update, it is worth
reiterating that if the recommendations of this research were adopted, it would create
significant work for TCC in delivering an enabling planning framework for residential
intensification. This would involve community engagement, consideration of infrastructure
servicing and funding and a major City Plan change process. This would have substantial
resourcing implications for TCC.
15
2.
Purpose
2.1.1
The purpose of this report is to reassess the prospects for residential infill and
intensification in Tauranga City given:
2.1.2

The prominent role it is currently expected to have in accommodating the sub
region’s future population growth.

The benefits of residential intensification can offer compared to greenfield
development such as:
o
Reduced traffic congestion and vehicle emissions
o
Minimising the loss of productive rural land to urban expansion
o
More efficient use of existing infrastructure
o
Reduced infrastructure investment
challenges in greenfield locations
o
More efficient and economically viable public transport system
o
Location of more people closer to existing recreation and community
amenities like parks and reserves, and libraries
o
Increased opportunities for social interaction
o
Offering a greater variety of housing choices.
requirements
and
funding
The report provides a robust evidence basis for decisions about residential infill and
intensification in Tauranga City through the SmartGrowth Update.
16
3.
Background
This section of the Report provides background information on residential infill and
intensification.
3.1
The Difference between Residential Infill and Intensification
3.1.1
Both residential infill and intensification result in increased residential densities (a
greater number of dwellings per hectare). For the purpose of this report, residential
infill refers to a situation where an existing property is subdivided into two (or more)
lots to a minimum density of one dwelling per 325m2 in accordance with the proposed
Tauranga City Plan. Generally the existing house on the property is retained and a
new house is built on the new lot that is created. This form of development is
characterised by small allotments (often less than 400m2) with detached houses.
3.1.2
Residential intensification on the other hand relates to the comprehensive
redevelopment of a property or properties that almost always involves the demolition
or removal of the existing dwelling(s). Intensification is characterised by higher
densities than residential infill and housing typologies such as duplexes, townhouses,
terraced housing and apartments. Dwelling units are typically attached to each other
in a single building. Residential intensification may often require the assembly of
neighbouring properties into one development block to provide sufficient site area to
accommodate this form of comprehensive development.
3.1.3
In the context of the SmartGrowth Strategy and its implementation, residential
intensification has been primarily expressed as the targeted redevelopment of
particular areas such as an area surrounding a town centre or neighbourhood
shopping centre, or an area proximate to a key arterial road / public transport route.
This has been referred to as the ‘nodes and corridors’ approach. While residential
intensification may take this form, it may also take a more organic form, such as the
‘pepper potting’ of medium to high density developments throughout the whole city,
both in residential areas and commercial areas.
3.2
The Study Area
3.2.1
This report is primarily focused on residential infill and intensification development in
the ‘older’ parts of the Tauranga City. This area is defined as the established urban
area at 1990 (EUA). It excludes the greenfield urban growth areas that were rezoned
for development from the 1990’s onward such as Papamoa, Bethlehem and Wairakei
(the second and third generation urban growth areas) and future planned urban
growth areas like Te Tumu (fourth generation urban growth areas). The EUA is
shown on the diagram in Appendix 1 as the first generation of urban growth areas.
3.2.2
While residential infill and intensification in the EUA is the primary focus of this report,
consideration is also given to the prospects of residential intensification in greenfield
urban growth areas where it can be factored into the planning framework from ‘day
one’.
3.3
Infill and Intensification Development Trends
3.3.1
Significant residential development has occurred in the EUA since 1990 in both
residential and commercial zones. The table below sets out the development that
has occurred between 1996 and 2012. This includes residential development in the
Commercial and the High Density Residential Zones as well as the Suburban
Residential Zone.
3.3.2
In the table, development is broken into three categories: residential infill, residential
intensification and greenfield. The residential infill and residential intensification
17
categories are self explanatory. The greenfield category refers to the development of
large sites inside the EUA that were previously undeveloped (i.e. rural land) like
Bayfair Estate and Urban Ridge. It does not refer to development in the greenfield
urban growth areas zoned and planned for after 1990.
Table 1: Residential development in the EUA from 1996 to 2012
Additional Dwellings
Growth Type
1996-2001
2001-2006
2006-2011
2011- 2012
Total
Total (%)
Infill
1,585
784
483
101
2,953
50%
Intensification
705
639
353
15
1,712
29%
Greenfield
777
279
167
39
1,262
21%
Total
3,067
1,702
1,003
155
5,927
100%
Average p.a.
613
340
201
155
370
Source: TCC building consent data
3.3.3
The table shows that infill development has provided the greatest share of additional
dwellings in the EUA. This is followed by intensification (site redevelopment) and
then greenfield development.
3.3.4
It should be noted however that the intensification category includes approximately
1,000 dwellings, mainly apartments and townhouses, in the Mount Maunganui North
high density residential and commercial zones (i.e. the general area between Blake
Park and Mauao). This is about 60% of the total amount of intensification that has
occurred. Many of these dwellings are managed apartments or holiday homes and
do not accommodate the city’s permanent resident population. As such, the table
above overestimates the recent role of intensification in accommodating the WBOP
sub region’s population growth.
3.3.5
In this regard, the 2006 Census indicates that approximately 70% of dwellings in the
Mount Maunganui North census area unit are permanently occupied. On this basis
300 of the 1,000 dwellings built in the general Mount Maunganui North area are not
likely to accommodate Tauranga residents. If the table above was adjusted to reflect
this, it would reduce the total amount of additional dwellings delivered in the EUA
from 5,927 to about 5,600, and it would change the relative shares between infill,
intensification and greenfield to 52%, 25% and 23% respectively.
3.3.6
The table above shows a steep reduction in the amount of all forms of residential
development in the EUA between 1996 and 2012. From 2007 onward this would at
least partly be explained by the effects of the Global Financial Crisis (GFC) on the
local real estate market which has affected all forms of residential development (not
just residential infill and intensification). There are however other reasons for the
reduction in development in the EUA. These are outlined in the following paragraphs.
It should be noted that residential development in the EUA reduced sharply from
2001 onward which was at the beginning, not the end of the recent property boom.
3.3.7
The main reason for the reduction in the amount of residential infill is likely to be
because many of the ‘easy’ sites to subdivide have already been developed. It is
very likely that the rate of development of residential infill will continue to decrease
over time due to the reduced availability of sites for development. This is further
discussed in Section 5 of the report.
18
3.3.8
In addition to the GFC, the reduction in the amount of residential intensification is
likely to be influenced by factors such as:

The ‘leaky homes’ crisis which has particularly tarnished the image of medium and
high density residential products

Recent falls in apartment valuations, in some cases below replacement cost

The unavailability of mezzanine finance for developers due to the collapse of most
finance companies

Risk adverse mortgage lending criteria by banks for multi unit housing (although
there are recent signs that banks are starting to ease criteria for this type of
lending)

Construction and land cost increases

Reduced availability of development sites (e.g. most of the readily developable
sites in the High Density Residential Zone at Mount Maunganui North have already
been developed (especially the defined area where high rise development is
permitted).
3.3.9
The reduction in the amount of greenfield development in the EUA is simply the result
of there now being very few vacant developable land parcels remaining. While there
are a few parcels still to be developed, this form of development will not be able to
continue to supply a substantial amount of new dwellings in the EUA over the
SmartGrowth time horizon to 2051. Multiple Maori ownership of a large portion of the
remaining development blocks in the EUA raises further questions about the nature
and extent of development that will occur.
3.3.10
The trend of reducing residential infill and greenfield development in the EUA points
to an overall reduction to both the absolute amount and the percentage of residential
development that will be delivered in the EUA in the future unless there is substantial
expansion in the amount of residential intensification.
3.4
Development in EUA relative to Total Residential Development
3.4.1
The following table sets out the total amount of development in the EUA that has
occurred between 1996 and 2012 as a percentage of both the total amount of
residential development that has occurred across both the whole of the TCC District
and the whole sub region (TCC and WBOP Districts combined).
Table 2: Comparison between development in the EUA and total residential development
Additional Dwellings
Growth Type
1996-2001
2001-2006
2006-2011
2011-2012
Total
(1996-2012)
Total in EUA
3,067
1,702
1,003
155
5,927
Total (TCC District)
6,684
5,823
3,500
658
16,665
Total in EUA as a % of
total (TCC District)
46%
29%
29%
24%
36%
Total (WBOP sub region)
8,529
7,680
4,948
813
21,970
Total in EUA as a % of
total (WBOP sub region)
36%
22%
20%
19%
27%
Source: TCC and WBOPDC building consent data
19
3.4.2
The table shows that the percentage of development being delivered in the EUA has
significantly reduced between 1996 and 2012 (it has nearly halved). As a result,
residential development in greenfield urban growth areas plays a greater role in
accommodating the city’s population growth now than it did in 1996.
3.4.3
Further breakdown of development in the EUA into the residential infill, intensification
and greenfield categories as a percentage of total residential development is provided
in the table below.
Table 3: Breakdown of development in the EUA as a percentage of total residential development
in TCC District and the sub region
% of Total Residential Development
Growth Type
Compared to total
growth in:
1996-2001
2001-2006
2006-2011
20112012
Total
(96-12)
TCC District
24%
13%
14%
15%
18%
Sub region
19%
10%
10%
12%
13%
TCC District
10%
11%
10%
2%
10%
Sub region
8%
8%
7%
2%
8%
TCC District
12%
5%
5%
6%
8%
Sub region
9%
4%
3%
5%
6%
TCC District
46%
29%
29%
24%
36%
Sub region
36%
22%
20%
19%
27%
Infill
Intensification
Greenfield
EUA Total
Source: TCC and WBOPDC building consent data
3.4.4
Residential infill development as a percentage of total residential development
reduced significantly from the 1996-2001 period to the post 2001 period. It has
remained relatively constant since 2001.
3.4.5
Residential intensification development as a percentage of total residential
development remained relatively constant between 1996 and 2011. The substantial
fall in the 2011/12 year may be an outlier resulting from the small one year sample
size. If the substantial amount of intensification development used as holiday homes
or managed apartments was taken out of the above table because it does not
accommodate resident population it would reduce intensification from 8% to about 56% p.a. of the sub region’s total residential development over the last 16 years. This
compares to the BOPRC Regional Policy Statement target up to 2051 of 25% for
residential infill and intensification combined which would require residential
intensification of about 300 to 400% more than the current amount.
3.4.6
Greenfield development in the EUA reduced significantly from the 1996-2001 period
to the 2001-2006 period as the result of large developments like Bayfair Estate and
subdivision of the former Baypark motor racing circuit coming to completion combined
with the limited amount of other sites available for development. The percentage of
this form of development has remained reasonably constant since 2001.
3.5
Current Infill and Intensification Growth Expectations
3.5.1
It is fair to say that the current SmartGrowth projections for residential intensification
are not based on any substantive analysis on the ability of this type of product to be
delivered. They are more the result of the amount of growth that was left over after
20
allocation to identified greenfield urban growth areas and infill development. They are
also:

An expression of the desire to achieve a more compact and sustainable city where
the loss productive rural land to urban development is minimised

Based on an expectation that the aging population would result in additional market
demand for residential intensification.
3.5.2
The table below sets out the current 2011 SmartGrowth population projections for
residential infill and intensification in the EUA from 2011 to 2051.
These
SmartGrowth projections were adjusted in 2011 in response to changes in the global
and national economies and recent actual development trends in the sub region.
They were agreed by SmartGrowth in September 2011 and form the basis of the
2012-22 Long Term Plan growth assumptions of the three partner Councils.
Table 4: 2011 SmartGrowth Population and Dwelling Growth Projections
Additional occupied dwellings
Additional population
2011-51
increase
% of sub
regional
growth
% of
Tauranga
City
growth
2011-51
increase
% of sub
regional
growth
% of
Tauranga
City
growth
Sub region
51,700
100%
133%
113,500
100%
134%
TCC District
38,800
75%
100%
84,700
75%
100%
TCC infill
3,100
6%
8%
6,900
6%
8%
TCC intensification
9,800
19%
25%
19,300
17%
23%
Source: 2011 SmartGrowth growth projections
Note: Figures have been rounded to the nearest 100. Infill includes development of remaining greenfield sites in the EUA.
3.5.3
Residential infill and intensification together are currently expected to accommodate
more than 30% of the growth expected in the TCC District in the 40 years to 2051
according to the 2011 SmartGrowth population projections. This equates to about
12,900 additional occupied dwellings.
3.5.4
To deliver this would require more than 12,900 dwellings to be built for two reasons.
Firstly, because of unoccupied dwellings; at the 2006 Census 10% of the dwellings in
Tauranga were unoccupied. Secondly, for intensification, existing dwelling(s) are
almost always demolished or removed perhaps at a ratio of one dwelling for every
four new dwellings built.
3.5.5
Using these assumptions, to achieve 12,900 additional occupied dwellings would
require approximately 16,900 new dwellings to be built (13,500 intensification units
and 3,400 infill units). Put another way, to achieve the current SmartGrowth
intensification projections, it is likely that close to 3,000 existing dwellings would have
to be demolished/removed to accommodate redevelopment over the next 40 years1.
This is equivalent to approximately 1.5 times the number of dwellings in the suburb of
Matua.
3.5.6
The remainder of the development expected in Tauranga City between 2011 and
2051 is planned to be accommodated within the second (e.g. Bethlehem and
Papamoa), third (e.g. Wairakei and Pyes Pa West) and fourth (e.g. Te Tumu)
generation greenfield urban growth areas. It is expected that most development in
these areas will be in the form of detached houses in ‘typical’ residential subdivisions.
However it is likely that there will also be some medium to high density developments
1
Additionally, there would be natural replacement of some of the existing housing stock over this period.
21
in these areas including retirement villages and possibly some townhouses, terraced
housing or apartments in proximity to high amenity areas like the coast.
3.5.7
Some of the key growth management principles of the SmartGrowth Strategy have
been incorporated into the operative Regional Policy Statement (RPS). This includes
the target that infill and intensification accommodates 25% of the WBOP sub region’s
population growth up to 2051. District Plans are required by law to “give effect to” the
Regional Policy Statement. It should be noted that the 25% RPS allocation to
residential infill and intensification is slightly higher than the 23% of population growth
allocated to residential infill and intensification in the current 2011 SmartGrowth
growth projections (see previous table). Through the peer review process members
of the Property Developers Forum have commented that the RPS infill and
intensification requirement is out of sync with what is occurring and market
economics.
3.5.8
It should be noted that the while residential intensification is expected to deliver 19%
of the sub region’s additional occupied dwellings from 2011 to 2051, this is an
average across this 40 year period. In the earlier years of this period residential
intensification is expected to be less than 19% and in the later years it is expected to
be more than 19%. In other words, there is a continual upwards expectation in the
amount of residential intensification expected to 2051.
3.6
Comparison of Past Trends to Future Projections
3.6.1
As noted earlier in the report, residential intensification development that has
occurred over the last 16 years as a percentage of total residential development in
the sub region is 300 to 400% less than what would be required to deliver on the
current residential intensification growth projections. This is shown in the table
below.
Table 5: Difference between intensification growth projections and continuation of historic trend
(% of development)
20.00%
18.00%
Av. % of total growth in sub region
16.00%
14.00%
12.00%
Historical % (last 16 years)
Av. expected over next 40 years
10.00%
8.00%
6.00%
4.00%
2.00%
0.00%
2011
2016
2021
2026
2031
2036
2041
2046
2051
Year
22
3.6.2
The following table provides a similar assessment based on the number of additional
residential intensification units that are expected compared to the number that have
been delivered on average of the last 16,11 and 6 year periods respectively
compared to the average number expected over the next 40 years in accordance with
the 2011 SmartGrowth Projections.
Table 6: Difference between intensification growth projections and continuation of historic trend
(no. of residential intensification units)
300
Av. no. of residential intensification units p.a.
250
200
Historical no. units (last 16 years)
Historical no. units (last 11 years)
Historical no. units (last 6 years)
Av. no units expected over next 40 years
150
100
50
0
2011
2016
2021
2026
2031
2036
2041
2046
2051
Year
3.7
Recent History of Infill Planning Provisions in Tauranga
3.7.1
An average of 325m2 gross per section/dwelling was previously the minimum
permitted subdivision/density standard for infill development in Tauranga since 1997.
On this basis a 650m2 section has been subdividable. Because an average of 325m2
was required, not a minimum of 325m2 for each section, a number of sections were
created smaller than 325m2 and in some cases smaller than 300m2.
3.7.2
Through the recent Tauranga City Plan review, the provisions for residential
development in suburban areas have been altered in response to amenity concerns.
The main changes to the permitted standard are:
3.7.3

A minimum of 325m2 net is required for each section/independent dwelling unit

The area of a site that is solely used for the purpose of providing access to the site
is excluded from the minimum site area calculation (i.e. a change from gross to net
site area)

A maximum 45% of a site can be covered by buildings (i.e. the house, garage and
any other building).
These amenity-based changes have resulted in raising the minimum land area
required to deliver infill development as a permitted activity. Consequently there are
some properties that previously were developable as a permitted activity, but are no
longer. This was considered as part of the TCC City Plan review process where a
number of resource management factors were weighed up in coming to this outcome.
Research undertaken for this report in the Greerton, Otumoetai, Mount Maunganui
North and Omanu areas concluded that the changes to the planning rules explained
23
above has reduced the potential number of residential sites in the EUA that could be
subdivided as a permitted activity by only 2-3%.
3.7.4
The small impact of the revised planning rules on the amount of subdividable sites in
the EUA is likely to be the result of the historic subdivision pattern which originally
was mainly in the form of lots of 800m2 or greater. Because of this there are few sites
in the EUA around 650 or 700m2 which are the sites most likely to be affected by the
changes to the infill subdivision rules.
3.7.5
There are more sites in the range of 650 or 700m2 in the second and third generation
urban growth areas like Welcome Bay, Ohauiti, Papamoa and Pyes Pa West which
are outside of the EUA. The changes to the subdivision rules may theoretically have
more impact in these areas. However because these areas were developed
relatively recently (from the early 1990’s) staff understand that most subdivisions are
likely to have restrictive covenants in place that prevent further subdivision2. In
addition, ‘improvements’ on site are likely to be too new and too valuable to justify
infill subdivision and houses are often sited such that they would have to be
moved/demolished to allow subdivision to occur.
3.7.6
Through the peer review process for this report, members of the SmartGrowth
Property Developers Forum have expressed their view that the City Plan maximum
site coverage (45%) and minimum site area (325m2 net not gross) are negating
opportunities for infill development.
3.8
Recent History of Planning Provisions for Intensification in Tauranga
Draft Smart Living Places Strategy
3.8.1
To respond to the SmartGrowth Strategy (2004) in which intensification corridors and
locations were identified on Map 2, the draft Smart Living Places Strategy was
prepared in 2007 by TCC. It was proposed to be the overarching strategic document
for the delivery of residential intensification within Tauranga City. The draft Strategy
was focused on providing for residential intensification to occur in nodes around
commercial centres and key transport routes. It was released for public comment
along with detailed proposals for Greerton and Arataki which had been identified as
the priority areas for consideration.
3.8.2
The proposal for Greerton envisaged redevelopment of existing residential properties
in an area of approximately 53 hectares centred around the Greerton shopping centre
on Cameron Rd and Chadwick Rd. A mixture of townhouses, terraces, apartments
and mixed use development was proposed ranging in height from 10 to 18 metres (35 storeys). 813 dwellings were located in the redevelopment area at the time of the
2006 Census. It was calculated that this would increase to approximately 1,800 when
redevelopment was complete; an increase of approximately 120% i.e. 2.2 new
dwellings for each existing dwelling which would either be demolished or removed.
3.8.3
The proposal for Arataki was reasonably similar in nature to Greerton. It envisaged
redevelopment of existing residential properties in an area of approximately 77
hectares between Oceanbeach Rd, Concord Ave and Maunganui Rd centred around
the Bayfair shopping centre and Girven Rd. A mixture of townhouses, terraces,
apartments and mixed use development was proposed that ranged in height from 10
to 22 metres (3-6 storeys). 891 dwellings were located in the redevelopment area at
the time of the 2006 Census. It was calculated that this would increase to
approximately 2,360 when redevelopment was complete; an increase of
approximately 165% i.e. 2.65 new dwellings for each existing dwelling.
2
These covenants may in some cases only last for a fixed period of time.
24
3.8.4
Open days were held in both locations. 319 informal submissions were received; of
these 43 related to Greerton and 276 to Arataki. Informal hearings were held from
the 18 to 20 March, 2008, where about 60 people took the opportunity to address
elected members directly.
3.8.5
In addition to submissions specific to the Greerton and Arataki proposals, there were
a few submissions on the draft Strategy document itself questioning the intensification
approach in general as an appropriate planning policy, and raising concerns about
things like the social impacts of intensification.
3.8.6
Within the submissions there were a wide range of points made.
summarised below:
These are
Against intensification as a means of growth management
 That the Council should look to plan for more greenfield growth areas and not
encourage intensification within the established, suburban areas of the city.
 That, if there was to be intensification, then it should be by increasing the density of
greenfield areas rather than established areas.
 Concentrated intensification created a “construction zone” for many years that was
not acceptable to residents.
 SmartGrowth’s approach should be revisited.
Central area logical for intensification
 That Council should fully explore the CBD area, not around suburban nodes.
 CBD area should be a priority.
Scale and intensity was far too great
 The draft implementation plans shows a long term redeveloped form of building
scale and intensity that is not in keeping with either Greerton or Arataki nor
suburban in character and that this is inappropriate.
 The existing character and amenity of intensification areas would be compromised.
 Arataki and Greerton are family orientated areas of good, affordable housing for
young and old, with good access to facilities. They should be allowed to continue
that way.
 That the Residential A Zone [now the Suburban Residential Zone] should be
allowed to redevelop naturally within existing planning provisions.
Social impacts of intensification
 That the project had not studied the social impacts of intensification nor given
sufficient weight to those affected in the existing community. Intensification, over
time, would lead to irreversible social consequences such as “slum housing”,
transient people, poor quality development and inadequate facilities to address
increased density of people.
 That there is a lack of planned reserves, lack of detail on social facilities and poor
open space ideas in the proposals.
Traffic/infrastructure effects of intensification
25
 That increasing housing density and mixed use would substantially increase traffic
congestion and place constraints on the existing infrastructure that could not be
easily addressed.
 That the proposed new road links (at both Greerton and Arataki) had a significant
impact on local residents, are not necessary, or are unaffordable.
Viability of Smart Living Places proposals
 That there are significant question marks about the financial viability for developers
of delivering the Smart Living Places concepts in Greerton and Arataki to the
market profitably.
Support for intensification
 That intensification is part of a larger growth management issue for the city and
encouraging it in and around established commercial centres, and even along main
transport corridors to support public transport, is sensible for the long term.
 That some parts of the city had to change to accommodate forecast growth, and
the city should not just keep spreading out into farmland
 If housing density was to increase then the quality of medium to higher density
development needed to improve, and Council needed to lead that.
3.8.7
In May 2008, Council considered a report on policy direction and submission
responses in relation to Smart Living Places. Council decided not to proceed with the
draft proposals for Greerton and Arataki and instead directed staff to focus on the
CBD and immediate surrounding residential areas as a priority. Council also
provided direction that future possible intensification around commercial centres and
main roading corridors in suburban locations like Greerton or Arataki should be
smaller in scale.
3.8.8
While this is TCC’s current policy position, the capacity to deliver residential
intensification in the other nodes and corridors currently identified for residential
intensification in the SmartGrowth Strategy is not fully understood and warrants
further work to provide a robust evidence basis for future decision-making (i.e.
deciding whether to retain the current approach to delivering residential intensification
or moving to a different approach). This would include considering the likely market
demand and willingness of the development industry to build housing at higher
densities in areas adjacent to commercial centres and along key transport corridors.
Wairakei Urban Growth Area
3.8.9
The Wairakei urban growth area has recently been rezoned for residential
development. In the majority of the residential zone ‘traditional’ greenfield subdivision
is expected. A small amount of medium density residential development is expected
in three neighbourhood centres and the Wairakei town centre.
3.8.10
This is quite different to earlier plans for Wairakei in which substantial medium and
high density development and mixed use development was envisaged to the extent
there were more than twice the number of dwellings than is now expected.
3.8.11
Because of concerns TCC staff had about the ability of this scale of intensification to
be delivered in Wairakei, property consultant, Neil Gray was asked to consider the
issue. In his report SmartGrowth Residential Intensification in Tauranga City
(October 2009) he concludes that the staff concerns were well founded.
3.8.12
In response to the Neil Gray report, TCC and the developers in Wairakei agreed to
reduce the expected residential densities back to an average of 15 dwelling per
26
hectare which is slightly high than most subdivisions in Tauranga over the 1990’s and
2000’s which were generally in the range of 10-12 dwellings per hectare. The 15 per
hectare requirement in Wairakei was reduced further through the TCC City Plan
review.
Tauranga City Plan Review – Residential Zones
3.8.13
A new Zone called the City Living Zone has been delivered through the recent
Tauranga City Plan review following extensive engagement with the affected
community prior to the formal proposal being adopted as well as architectural input
and consideration of development viability. The zone provides opportunities for
medium density residential and mixed use development on a similar scale to that
proposed in Greerton and Arataki within the residential neighbourhoods immediately
surrounding the CBD. This new zoning was generally supported (or at least not
opposed) by residents and property owners in the affected area. The medium density
opportunity that now exists in this area has yet to be taken up by any developers. It is
expected that development change would occur reasonably slowly over time, rather
than dramatic, quick change.
3.8.14
Through the peer review process, member of the SmartGrowth Property Developers
Forum have expressed a view that the City Living Zone rules are too prescriptive and
restrictive with 4+ pages of Restricted Discretionary Standards and Terms and
Matters of Discretion. Non compliance with these leads straight to a Discretionary
Activity status.
3.8.15
The proposed City Plan also provides for small scale intensification in the Suburban
Residential Zone in the form of secondary independent units on sites greater than
500m2. These units are limited in size to two bedrooms and they must be directly
attached to the principal dwelling or garage (i.e. secondary to the principal residential
dwelling).
3.8.16
Under the proposed City Plan the traditional suburban residential areas are Zoned
Suburban Residential. In this Zone development density is 1/325m2 net site area
with higher density development being a discretionary activity. The Proposed City
Plan however provides policy guidance on a case by case basis in relation to the
development of comprehensively designed medium density development in
appropriate locations - e.g. areas of comparatively higher amenity – this amenity
might be views, open space or community focal points such as commercial centres
and appropriate locations in the transport network.
3.8.17
Members of the SmartGrowth Property Developers Forum are of the view that the
City Plan rules for medium density Comprehensively Designed Development are too
prescriptive and restrictive with 1.5 pages of subjective Controlled Activity, Matters of
Control and Conditions. Non compliance with these leads straight to Discretionary
Activity status.
Tauranga City Plan Review – Commercial Zones
3.8.18
Medium and high density residential development is also provided for in the
commercial zones in the city, including in the City Centre Zone. Substantial
residential development (mainly apartments) has been built on some sites in the
commercial zones in the city centre and Mt Maunganui North. A smaller amount of
residential development has occurred in the commercial zones in Papamoa.
3.9
Housing Affordability
3.9.1
Housing affordability has become a major nationwide issue in recent years as the
result of the property boom of the mid 2000’s. In general terms, both the current
housing stock and new houses have become much more expensive in dollar terms
27
as well as relative to household incomes. This has resulted in fewer households
owning homes and more households relying on the rental market.
3.9.2
A report titled Housing Stock and Housing Demand was prepared by TCC staff in
November 2009. This report outlined the housing affordability issue from a Tauranga
City perspective using data from the 2006 Census and other sources. This report is
currently being updated.
3.9.3
The Housing Stock and Housing Demand report identified that current household
incomes in Tauranga mean that by far the largest demand for property is in the less
than $400,000 category. This has been confirmed by the developers and the building
companies Tauranga City Council worked with in the Wairakei development feasibility
project who consistently said that achieving price points for house and land packages
below $400,000 was required to achieve substantial sales volumes in Tauranga.
3.9.4
The report noted that despite 63% of existing properties in Tauranga City having a
capital value of less than $400,000, the number of new homes in this price range is
decreasing rapidly. Only 34% of properties built in the last five years had a capital
value less than $400,000.
3.9.5
The market reality is that if residential infill and intensification in Tauranga City is
going to accommodate a significant share of the sub region’s population growth it
must be able to be delivered at price points that are affordable in light of the incomes
(and equity) of the sub region’s current and future residents. Price points must also
be competitive against other offerings (new house prices in ‘greenfield’ subdivisions
and the existing housing stock). The table below (from the Wairakei development
feasibility project) indicates the likely prices that new housing stock could be delivered
in this greenfield area.
Table 7: Likely Range of House Prices in Wairakei (incl. gst)3
House and land cost (incl. gst) by dwelling floor area
Section
size
Section
price
(incl. gst)
120m2
140m2
160m2
180m2
200m2
2 bedrooms
2-3 bedrooms
3 bedrooms
3-4 bedrooms
4+ bedrooms
300m2
$120,000
$340,000
$360,000
$380,000
n/a
n/a
400m2
$135,000
$355,000
$375,000
$395,000
$420,000
$440,000
500m2
$165,000
$385,000
$405,000
$425,000
$450,000
$470,000
600m2
$190,000
$410,000
$430,000
$450,000
$475,000
$495,000
700m2
$210,000
$430,000
$450,000
$470,000
$495,000
$515,000
Source: Assessment of Development Feasibility for the Wairakei Urban Growth Area, Martin Udale and TCC staff, November
2010.
3.9.6
A comparison between these house prices and indicative house prices for
intensification development is presented later in this report.
3.10
Relationship between Infill/Intensification and Greenfield Development
3.10.1
The amount of infill and intensification product that is delivered is likely to directly
affect the amount of greenfield development that is required. Each infill or
intensification dwelling means that one less dwelling is required in a greenfield area to
accommodate a certain amount of population growth.
3
These dwelling sizes are typical of what has been built in the recent past. This is scope in the future to
reduce the dwelling size which would have an impact on reducing the end cost.
28
3.10.2
Because residential infill and intensification development is located in the established
parts of Tauranga City it can make use of existing infrastructure investment and
capacity.
While some infrastructure upgrades will be required over time to
accommodate these forms of development, the overall infrastructure costs are
inevitably much lower than they are for greenfield development. Consequently,
residential infill and intensification has the potential to ease Tauranga City Council’s
and the wider WBOP sub region’s financial challenges associated with managing
growth if it can be successfully delivered in substantial volumes, as the current growth
projections assume.
29
4.
Residential Infill Assessment
4.1
Introduction
4.1.1
This section summarises the additional dwelling potential that exists for infill
development in the EUA in Tauranga. It is based on a report titled SmartGrowth Infill
Assessment, Tauranga City which was prepared by TCC staff in September 2012.
The full report is attached as Appendix 3.
4.1.2
To reiterate, infill development is defined as development of additional dwelling units
that complies with the 325m2 minimum site density controls for the Suburban
Residential Zone in the proposed City Plan.
4.2
Methodology for Assessment of Infill Potential
4.2.1
The methodology employed was to assess each property in detail in four of the 23
Census Area Units (CAUs) that contain land zoned Suburban Residential in the EUA
for infill development potential, as well as the infill development potential of all of the
properties in the whole EUA theoretically capable of accommodating 10 or more
dwellings (which essentially picks up the remaining potential for ‘greenfield’
subdivision development in the EUA).
4.2.2
Due to the extensive amount of work that would have been involved it was not
possible to assess each of the 23 CAUs individually. The four CAUs chosen are
representative of the character of the wider EUA. The results from the four CAUs that
were assessed were then applied to the other 19 CAUs using two different
approaches which gave very similar results. These two approaches are outlined in
the detailed report (Appendix 3). The location of the four CAUs that were assessed is
shown in Figure 1.
4.2.3
The four CAU’s assessed were Mount Maunganui North, Omanu, Otumoetai North
and Greerton. These are the same CAU’s selected for a comparable exercise in
2008, and such an approach allows some consistency of information and ability to
compare results over time.
4.2.4
The assessment of infill potential involved identifying a theoretical additional dwelling
potential for each property and then considering development constraints like steep
slopes and flooding risk areas to determine the realistic potential number of additional
dwellings that could be developed. The realistic potential was further assessed into
three categories – high, medium and low as follows:
 High Potential – Easy to gain access; Limited existing site development in the
developable area; Minimal impact on existing dwelling(s); Site exceeds 325m2
multiplier by a large margin (eg: 900m2 plus rather than 650m2).
 Medium Potential – Moderately easy to gain access (may require moderate
clearance of existing vegetation and/or construction such as fences, carports,
sheds); Moderate existing site development in developable area; Moderate impact
on existing dwelling(s); Site partially compromised by nearby surroundings (eg:
next to railway line, high traffic route); Small portion of developable area subject to
identified constraint (eg: steep land, coastal hazard, flood hazard); Site exceeds
325m2 multiplier by a moderate margin (eg: 750m2 plus rather than 650m2).
 Low Potential – Difficult to gain access (narrow and/or requires demolition of
detached carport or garage); Extensive existing development in developable part of
site; High impact on existing dwelling(s); Site compromised by adjacent
surroundings (e.g.: next to railway line, high traffic route); Steep land; Large portion
of developable area subject to identified constraint (eg: steep land, coastal hazard,
30
flood hazard, protected tree etc); Site just exceeds 325m2 multiplier by a small
margin (e.g.: 655m2).
Figure 1: Tauranga City – Location of Four Census Area Units Assessed
Source: SmartGrowth Infill Assessment, TCC, 2012.
4.3
Results
4.3.1
The research came to the conclusion that an estimated 7,800 additional dwellings in
the Suburban Residential Zone within the EUA could be delivered through infill
development. The table below breaks this down into the high, medium and low
potential categories.
Table 8: Infill potential
Infill potential rating
Potential additional infill dwellings in EUA
% of properties
Number of properties
High
37.2%
2,900
Medium
34.6%
2,700
Low
28.2%
2,200
Total
100%
7,800
Source: SmartGrowth Infill Assessment, TCC, 2012.
Note: Numbers rounded to the nearest 100.
4.3.2
The yield estimate of 7,800 potential additional dwellings assumes that all of these
sites will be developed to the maximum yield in the Suburban Residential Zone (as a
permitted activity). This is unlikely, even in the long-term as a range of factors will
drive peoples’ housing decisions. A range of yields is calculated in the table below
based on a percentage uptake. For example if 50% of this opportunity was realised a
further 3,900 dwellings (approximately) would be delivered.
31
Table 9: Infill development scenarios
Infill development scenarios based on % delivery of development potential (additional dwellings)
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
800
1600
2300
3100
3900
4700
5400
6200
7000
7800
Source: SmartGrowth Infill Assessment, TCC, 2012.
Note: Numbers rounded to the nearest 100.
4.3.3
It is noted that there is additional potential for infill within the Suburban Residential
Zone via the “secondary independent dwelling” provisions recently introduced through
the Tauranga City Plan review. This potential has not been quantified as it is too
early to determine likely update of this development opportunity.
4.4
Comparison of Infill Assessment Results with SmartGrowth Forecasts
4.4.1
The current 2011 SmartGrowth growth projections for Tauranga City from 2006 to
2051 allocate approximately 3,350 additional dwellings to be delivered through infill
development in the EUA. The 3,350 dwelling allocation accounts for 44% of the
estimated potential infill yield of 7,800 dwellings, and 66% of the potential infill yield
rated of “medium” or “high” potential. The SmartGrowth infill forecasts appear to be
reasonable and achievable taking a long-term view and considering that there is
‘potential’ for much more than this to be delivered, although the peer reviewer’s
opinion is that the SmartGrowth infill growth projections are likely to be at the high
end of the take up scenario.
4.5
Financial Viability of Infill Development
4.5.1
The financial viability of infill development refers to whether it is profitable. Because
every property is different and there are numerous ways in which infill development
can occur it is not possible to be definitive on this issue. For example:
 Some infill projects may be undertaken by ‘mums and dads’ while others by small
scale developers;
 Some infill projects may simply involve subdividing and selling the new allotment(s)
while others may involve subdivision and then construction of a new house.
 Some infill projects may not even involve subdivision in that a second house is built
on a single allotment.
 Some infill projects are undertaken to be retained for the rental market while others
are owner occupied.
4.5.2
All of these factors, and others, affect the costs and revenues involved and thus
whether development is profitable.
4.5.3
In a general sense infill development is likely to result in the most affordable form of
new housing because it is generally the cheapest way of creating new sections and
the houses that are built tend to be relatively small in size and therefore cheaper to
construct than larger houses. These cost factors are positive in terms of financial
viability. In addition, the type of ‘cottage builder’ who often delivers these types of
developments typically operates on lower margins and has less capital tied up in the
project, which helps drive the lower end cost of this type of development.
4.5.4
In addition to this, it is often possible to relocate existing houses onto infill sites due to
a lack of covenants that typically restrict this from occurring in new subdivisions.
Relocating an existing house can be significantly cheaper than building a new house
although there is a limited supply of quality relocatable houses.
4.5.5
Despite the relatively low cost of this form of development, one factor that needs to
be taken into account is the loss of value to the house that already exists on-site as
32
the result of factors such as a driveway going down the side of the existing house and
the loss of the backyard. This has the potential to affect the financial viability of
development in some circumstances. Historical observation would indicate that it has
not been a major constraint in actual delivery of infill development.
4.5.6
In an overall sense, the financial viability of infill development is likely to be
reasonably good in many cases where it is a development option which is the same
conclusion drawn by Neil Gray in earlier work for TCC4. This is likely to be especially
true in areas where property prices are higher because sales prices and rents are
higher.
4.6
Findings for Residential Infill
4.6.1
The following conclusions can be drawn on infill development:
 Topography and other development constraints do have a significant impact on real
potential versus theoretical potential. These constraints are greater in Tauranga
than Mount Maunganui. In most instances these constraints would be prohibitively
costly or impractical to overcome.
 The infill allocation in the current 2011 SmartGrowth growth projections appears
realistic and achievable.
 Rules are in place to allow the delivery of the expected level of residential infill
development in the Proposed Tauranga City Plan (although the members of the
SmartGrowth Property Developers Forum that peer reviewed this report do not
agree with this statement).
 A change from gross to net site area has a minimal impact on the number of sites
available for infill development, and is not a material regulatory constraint in the ‘big
picture’ for accommodating sub regional growth (although the members of the
SmartGrowth Property Developers Forum that peer reviewed this report do not
agree with this statement)..
 Historical trends indicate that the rate of development of additional dwellings in the
EUA through residential infill will continue to fall, as opportunity decreases for
“easy” infill development.
 The financial viability of infill development is not likely to be a major obstacle to
achieving the infill development projections.
 The infill development that is likely to occur in Tauranga over the next 40+ years
based on the current planning framework will result in greater fragmentation of land
which is likely to act against a full intensification model that relies heavily on
amalgamation of existing properties.
4
SmartGrowth Residential Intensification in Tauranga City, Neil Gray, 2009.
33
5.
Residential Intensification Assessment
5.1
Introduction
5.1.1
The residential intensification assessment considers the likely prospects/potential for
residential intensification to deliver additional dwellings in Tauranga City. The focus
is on intensification in the EUA as this is where most intensification is expected in the
current SmartGrowth Strategy. Consideration is also given to the prospect of
residential intensification in greenfield urban growth areas.
5.1.2
The assessment is broken into the following sections:
 Residential Intensification – A Building Communities Perspective
 Review of national and local trends on residential intensification
o
Literature review
o
Planning framework case studies
o
Local interviews
 Assessment of the financial viability of residential intensification
 The long-term trade-off between infill and intensification
 Residential intensification in greenfield urban growth areas
34
6.
Residential Intensification – A Building Communities Perspective
6.1.1
Appendix 2 contains some research setting out a wider view on residential
intensification than much of the rest of this report which focuses on the challenges of
delivering residential intensification. Appendix 2 contains the following:
 Consideration of the wider costs and benefits of residential intensification;
concluding that there are significant social benefits and other benefits of
intensification compared with other forms of residential development like ‘traditional’
greenfield subdivisions. These benefits include:
o
Reduced traffic congestion and vehicle emissions
o
Minimising the loss of productive rural land to urban expansion
o
More efficient use of existing infrastructure
o
Reduced infrastructure investment
challenges in greenfield locations
o
More efficient and economically viable public transport system
o
Location of more people closer to existing recreation and community
amenities like parks and reserves, and libraries
o
Increased opportunities for social interaction
o
Offering a greater variety of housing choices.
requirements
and
funding
 Recognition that while residential intensification can potentially also have its
problems such as negative noise effects and reduced private indoor and outdoor
space, many of these issues can be addressed through good design.
 Consideration of appropriate areas and scale for residential intensification
concluding that small scale developments in a number of areas is likely to be more
attractive to different market segments than the targeted ‘nodes and corridors’
approach that SmartGrowth has previously been working to.
 Consideration of housing preferences, concluding that the prevailing view that most
people aspire to a detached house on a large section may not be as strong as
perceived. Further research in the area of housing preferences is recommended to
better establish housing preferences once constraints like household income are
taken into account.
 Consideration of effective ways of minimising community resistance to residential
intensification; concluding that the key is to meaningfully engage with the
community.
 Acknowledgement that it is unlikely that the development sector by itself will be
able to meet residential intensification targets thus that there may be a role for
Councils to work more actively (e.g. through joint ventures) in the delivery of
residential intensification. In particular, a joint venture/partnership approach with
developers, housing trusts and/or Maori may be able to attract central government
funding, reduce project risk and ensure that the desired form of residential
intensification development was delivered.
35
7.
Residential Intensification Assessment – Literature Review
7.1
Analysis Undertaken
7.1.1
A literature review was undertaken of recent publications (2007 onward) relating to
the implementation of intensification initiatives within New Zealand and in Australia.
This section of the report summarises the key points from the literature review. The
full version of the literature review is attached as Appendix 4.
7.1.2
The 2007 to 2012 period generally reflects the most recent research undertaken in
response to issues arising from the “first round” of attempts, in the last decade, to
deliver intensification on the ground within New Zealand and Australia. A specific
focus has been on New Zealand cities who have undertaken intensification initiatives
namely Auckland, Hamilton, Tauranga and Wellington.
7.1.3
All these cities are undertaking intensification in response to similar growth issues to
Tauranga and within the same legislative and regulatory context. Like many of the
publications relating to the Western Bay of Plenty much of the material reviewed has
been commissioned to consider the results of the “first round” of intensification
initiatives, to identify issues arising and to make recommendations to address these
issues. This therefore makes them the most relevant publications to be considered in
the context of any review of the intensification approach (by way of this SmartGrowth
Update) in the Western Bay of Plenty sub region.
7.1.4
A large amount of the literature reviewed related to identifying factors affecting both
the supply side and demand side of the medium density housing market and the
identification of barriers to the establishment and uptake of this housing density/type.
Much of the literature has been prepared after uptakes of medium density
opportunities provided for through intensification policy have been lower than
predicted.
7.1.5
As well as identifying the barriers to medium density housing many of the reports go
one step further and make recommendations in relation to various mechanisms to
address barriers identified.
7.1.6
Some of the reports were critical of the previous approaches to intensification within
district plans on the grounds that they were based on a theoretical planning approach
rather than a market approach. The premise of much of the literature was that
medium density housing opportunities in plans would be more successful if they were
based on an understanding of the market and the drivers of the market. The “market”
was viewed in terms of both the supplier (the development sector) and in terms of the
potential buyers/renters (demand) with variations in terms of the emphasis given to
each.
7.2
Supply Side
7.2.1
The literature review identified a number of supply side constraints to the uptake of
intensification opportunities.
7.2.2
These supply constraints were largely identified by “market” suppliers i.e. developers
(by way of surveys or direct interviews). The constraints as viewed by the “market” in
terms of consumers largely fell on the demand side of the intensification equation.
7.2.3
Many of the constraints were identified in more than one of the reports. Based on this
a consistent message of supply side constraints to be addressed has emerged.
36
7.2.4
In noting this, some of the constraints identified are beyond the influence of local
government to directly address, such as the availability of project finance.
7.3
Summary of Supply Side Constraints
7.3.1
The following were identified as Supply Side Constraints:

Project Finance - More intensive forms of housing are subject to stricter financial
lending criteria (including a proven developer track record, high levels of presales)
and this increases the “risk” for developers (including new developers entering the
market) undertaking this form of development which may make such development an
unattractive option.

Land – The redevelopment of established residential areas for more intensive forms
of housing often requires the amalgamation of land parcels to create an economically
viable development site. This process can be difficult, time consuming and costly
(including the write off of the existing investment on site) and creates uncertainties
and holding costs for potential developers. Other forms of development such as infill
or greenfield development are seen as an easier development option5.

Construction Costs - Construction costs (including costs of materials and labour)
are generally high in New Zealand. In addition construction costs for some forms of
more intensive forms of housing such as apartments (requiring steel and concrete
construction and “commercial builders”) are higher than for other developments that
can be built in wood or tilt slab by the smaller builders who typically build suburban
homes. In addition the construction timeframe for apartments is longer than for stand
alone dwellings.

Planning – Planning controls for more intensive forms of housing were seen as being
too complex, requiring too much detail, too lengthy and involving too many people in
the consent process, including neighbours who might be opposed to proposed
development. The costs and uncertainty of the planning process itself along with
development contributions were also identified as a deterrent by developers6.

Infrastructure – The potential need to upgrade infrastructure to support more
intensive forms of housing and the funding (including development contributions) and
timing of such upgrades was also identified as a deterrent.

Price Point Differential – One of the outcomes of the combination of land,
construction and planning costs is that the eventual medium density product is either
on a par price wise, (or in some cases), more expensive than the offers of the lower
density stand alone dwelling market. In these situations it was reported that it was
likely the market would purchase the latter.

Developer Capacity – The capacity of the development community in terms of
current development models and companies having the skills or economies of scale
to deliver more intensive forms of housing was identified as being questionable.
7.4
Demand Side
7.4.1
The research on the demand side of the medium density housing market was
generally more focussed on the potential buyers or renters of medium density
5
Although it did not come through in the literature that was reviewed, members of the SmartGrowth
Property Developers Forum note that in the existing urban area the land values have already been
largely uplifted through subdivision.
6 The SmartGrowth Property Developers Forum would like to emphasise its agreement with this point, in
their view controls are too complex and delays with planning requirements mean that developers won’t
pursue opportunities.
37
housing options rather than focused on what would drive developers to enter the
medium density housing market.
7.4.2
Primary research, both qualitative and quantitative, into the preferences of buyers
was a feature of much of the literature reviewed. The authors acknowledged at the
outset that overall preference was for a detached dwelling with a section (with this
aspiration often linked with cultural expectations). There were characteristics of such
housing, which participants identified if replicated in medium density housing
developments could increase uptake of these housing options. In addition the
authors introduced the concept of “trade offs“ noting that in the real world the “cultural
dream home” was becoming unaffordable and that potential buyers and renters
acknowledged that medium density options might be a potential option if desirable
characteristics such as private open space could be traded for public amenity and
open space in the surrounding locality.
7.5
Summary of Demand Side Drivers
7.5.1
The following were identified as Demand Side Drivers:

Impact of “cultural dream home” aspirations and negative perceptions of higher
density housing – There is a cultural preference within New Zealand for stand alone
dwellings. In contrast medium density housing is seen in a negative light.

Impact of previous poor examples of higher density housing – The negative
perception of medium density housing has been reinforced by the leaky homes issue
and the poor examples of medium density housing.

Impact of housing affordability – Rising house prices for traditional detached
dwellings and sections may provide a “push” towards more intensive forms of housing
if there is enough of a price differential between these forms and standalone housing.
However literature suggests that more intensive forms of development are on a par
price wise with detached dwellings or more expensive 9especially in areas where
people want to live)7.

Impact of demographic changes – The increase in the number of smaller
households due to the aging baby boomer generation and a decrease in average
household sizes (due to delayed family formation, ‘empty nester’ couples, couples
without children and single person households) could increase the demand for smaller
houses and multi unit housing.

Desirable attributes of medium density housing – location, development and
dwellings – Identifying the desirable attributes of housing (including location,
development type and desirable attributes of dwellings) in relation to market segment
demand and incorporating these into more intensive forms of housing could lead to a
greater market up take.

Access to finance – Banks have typically been requiring a standard 20% deposit, and
larger deposits for some apartments which are seen to have a greater risk profile
(although recent some banks have recently announced a loosening of lending criteria
for apartments/multi unit housing).

Tenure – The increase in the number of households renting could lead to greater
investment in multi unit housing or rentals of parts of houses, loft spaces etc. However
supply side factors such as financing and industry capacity may constrain such growth.
7
The SmartGrowth Property Developers Forum note that it is not just literature that suggests more
intensive forms of residential development are on par or more expensive than detached dwellings.
Market evidence and market economics confirms this.
38

Tax Policies – The current tax system makes housing an attractive investment and
increases housing demand but this has the effect of increasing house prices and
affects the affordability of housing8.
8
The SmartGrowth Property Developers Forum disagree that tax policies make housing an attractive
investment e.g. there are now minimal depreciation areas / allowances.
39
7.6
Suggested Responses to address Demand/Supply Side Issues
7.6.1
Just as the supply side constraints are interrelated, many of the potential responses
are interrelated, with changes identified in many circumstances as a “package”. For
example the creation of a regeneration authority who would provide finance,
compulsorily acquire land, provide planning provisions that provide for intensification
and certainty of grant of consent without third party rights applying [in NZ scale,
funding and government appetite are constraining factors].
7.6.2
Potential demand responses are also interrelated such as producing good examples
of medium density housing and “selling” the benefits of these to market segments
such as empty nesters, who have the potential to take up medium density housing
options as part of their decision to down size, and to provide for those options in
locations that appeal to this sector of the market.
7.6.3
Identified theoretical responses for each “individual” constraint that are identified in
the literature reviewed are outlined below with the proviso that no single “response”
on its own will address all the constraints.
7.7
Summary of Suggested Responses in the Literature
7.7.1
The following theoretical responses were suggested in the literature. They are not
necessarily relevant or appropriate for Tauranga’s specific circumstances or within
the direct influence of the SmartGrowth Partners. Suggested responses which the
SmartGrowth Partners may have some direct influence over are highlighted grey.
Impact of Economic Outlook
 In a strong economy there is greater confidence in the housing markets, more
house sales and ability for households to pay more (due to low unemployment).
Finance
 Improved regulation of both the development and finance sector could return
confidence and development finance to the property market.
 Demand could increase if there were favourable conditions for housing investment
compared to other investment opportunities.
 Tax policy settings and capital gain potential.
 Exploration of new forms of financing, such as housing associations, land trusts
that are not dependent on finance companies.
 Focus on smaller scale and terrace or town house style developments rather than
large scale developments.
Land9
 Identify intensification areas in market desirable locations e.g. close to the CBD,
schools, areas with views or near harbours and other amenities.
 Use of economic feasibility assessments looking at land and capital values, site
constraints (e.g. existing development on sites and costs of removal of this for
redevelopment).
Although it didn’t come up in the literature that was reviewed, the SmartGrowth Property Developers
Forum notes that consideration should be given to government owned / controlled land opportunities
(e.g. Housing NZ land) and also land that is not zoned residential.
9
40
 Identify locations viewed as desirable by the potential buyer/renter including life
stage factors such as “aging in place” (the desire by empty nesters and early
retirees to stay in their familiar neighbourhood) and downsizing in suburban areas.
 Develop a set of criteria which would assist a “scan” of the environment to identify
land suitable for development including feasibility indicators of the ratio of land to
capital costs, age of existing housing as a potential redevelopment indicator,
demographics of residents in the area, amenities in the area with an emphasis on
open space and on connections to transport and daily household needs,
infrastructure capacity and upgrades planned.
 Combine all such material into a “spatial information platform” (GIS based) and
make it publicly available to enable exploration of opportunities, including by private
investors.
 Identify a number of locations for intensification to meet the needs of different
market segments i.e. both inner city locations and in suburban areas.
 Consider mechanisms to address fragmented land holdings. These could be
compulsory acquisition, (by authorities or regeneration authorities); making central
or local government land holdings available for medium density public/private
development; the development of incentives for both developers and or landowners
to undertake amalgamation of land holdings.
 Try new planning approaches that emphasise large block or multiple lots and
promote the amalgamation of lots.
 Move from a focus on targeted intensification areas to a widespread policy focus on
intensification across the city with appropriate criteria.
Construction
 Promote forms of medium density housing such as terrace housing or other semi
detached types more akin to those produced by “domestic” scale developers.
 Try modular building techniques which could be produced off site and transported
to site; can create economies of scale and design gains due to volumes10.
Planning11
 Councils take a lead role in lifting people’s perceptions or understanding of what
intensification (medium density) looks like and the benefits that it can offer.
Mechanisms to do this include design guides, promoting of policy/community
discussions around intensification and its benefits generally, and computer imaging
of what a redevelopment area might look like and what the various types of
dwelling (e.g. terrace, duplex) would look like as a counter balance to existing poor
examples.
 Early engagement of the affected community in the intensification process as a
partner to provide for better community understanding and engagement with the
intensification process.
 Councils take a lead, through Council-led master planning exercises for each
intensification area targeted for growth and to provide certainty to ensure that
master planning is quickly transferred into planning provisions and backed up by a
public investment programme.
10
The SmartGrowth Property Developers Forum notes that modular off-site building requires significant
scale to make a price difference and that it can also limit product choice.
11 Although it didn’t come up in the literature reviewed, the SmartGrowth Property Developers Forum
note that Councils should provide clear acceptable guidelines to developers and that Council should
provide assistance as opposed to taking a lead.
41
 Aim for high quality intensification/medium density housing to address the negative
perceptions created by past poor quality examples. This includes a focus on the
surrounding neighbourhood qualities as well as on the individual developments or
dwellings and the delivery of community facilities, parks and reserves ahead of
development.
 Enable a variety of medium density options (by way of housing types) across a
range of locations to appeal to a wider range of market segments such as empty
nesters, retirees, smaller households.
 At the site development or dwelling level, assist developers through the use of clear
standards; design guidelines; provision of free advisory services and assistance
with survey and design; pre application meetings to enable issues to be discussed
ahead of actual applications; staff case managers.
 At the consent level, urban design panels could assess the design of developments
where planning provisions were not met or guidelines are to be interpreted.
 Consider incentives for developers undertaking medium density development
including rule bonuses for good urban design or fixed consent fees to provide more
certainty of costs for owners and developers undertaking intensification projects.
Infrastructure
 Identify infrastructure upgrades required for intensification areas and ensure these
are incorporated and coordinated in relation to council’s infrastructure investment
programmes.
 Waive/reduce contributions in intensification areas where existing reserve and
infrastructure capacity could cope with the effects of further development.
 Consider development fees and levies waiver in target growth areas for a specific
number of new dwellings to stimulate development.
 Use rating differentials to capture some of the increase in value associated with the
change in zoning regulations for the public good and use the revenue to assist in
providing the infrastructure and amenities required to support and encourage
intensification.
Developer Capacity
 Enable smaller developments of terrace housing or similar in a greater variety of
locations and on potentially smaller development sites to provide for small to
medium density developers to enter and operate in the medium density housing
market.
 Consider council advisory assistance in design and planning processes for these
small to medium developers.
Price Point Differential
 A change in the type of medium density development from apartments to terrace
housing or similar and a greater variety of locations and development sites could
lead to a reduction in the price point differential between medium density
developments and stand alone dwellings12.
 Potential for a modular volume building approach to medium density developments
to reduce costs.
12
The SmartGrowth Property Developers Forum notes that there is market resistance to terraced
housing on 200-300m2 sections in Tauranga – this may however work in time. It also notes that current
planning rules do not assist or promote the provision of terraced housing.
42
Affordability
 Focus on methods to secure a price point differential, between standalone houses
and multi unit, medium density housing13.
The SmartGrowth Property Developers Forum notes that this statement is unclear and doesn’t really
mean anything as there is no identification of what sort of price differential and what methods could be
used to achieve it.
13
43
8.
Residential Intensification Assessment – Case Studies & Interviews
8.1
Planning Framework Case Studies
8.1.1
Case studies have been undertaken to outline the approach to delivering residential
intensification in Hamilton and Wellington. These are attached in full as Appendix 5.
8.1.2
Hamilton’s approach to intensification is to look at rezoning specific areas around the
city centre and in other suburban locations for medium density redevelopment. In
addition, they are zoning some medium density areas in greenfield urban growth
areas. This is currently being progressed through their District Plan review.
8.1.3
Wellington’s approach is similar to the Smart Living Places proposals for Greerton
and Arataki whereby the area around an existing suburban town/neighbourhood
centre is rezoned for more intensive residential development. The two ‘areas of
change’ as they call them are Johnsonville and Kilbirnie. The Johnsonville proposal
generated significant public opposition and has been appealed. The Kilbirnie
proposal is now operative.
8.1.4
While the case studies provide a good summary of the planning approach that
Wellington and Hamilton are taking to the issue, it is too early to determine whether
the two respective approaches will be successful in terms of the actual delivery of
residential intensification product.
8.1.5
Consideration was given to undertaking case studies for Auckland and Christchurch.
Auckland is undergoing significant change at the moment due to the formation of the
‘super city’. While Auckland Council has identified a significant reliance on
intensification in its spatial plan, there is not yet any detail as to how this would be
delivered in terms of a planning/zoning framework. It is understood that Auckland
Council plans to permit medium density development in much of its EUA with suitable
planning controls.
8.1.6
The planning framework for intensification is similarly uncertain in Christchurch due to
the recent earthquakes, making it unsuitable at this time for a case study.
8.2
Local Interviews
8.2.1
As part of the SmartGrowth Update research programme into residential
intensification, interviews were undertaken with local developers, builders, architects
and real estate agents on their opinions in regard to residential intensification in
Tauranga. 3 developers/builders, 2 architects and 6 Real Estate agents working
within the Tauranga area were interviewed. Their feedback is outlined in Appendix 6.
8.2.2
Some of the key points from these interviews were:

Generally standalone housing was favoured over attached housing

Many people had negative perceptions about medium density housing

The main market for intensification would be 1-2 person households such as
‘empty nesters’, the elderly and young couples

Areas where medium density development would work best would be Mt
Maunganui, the Avenues and the wider Otumoetai area

Council needs to provide the planning framework to allow intensification to occur

The price point of intensification product is generally unfavourable compared to an
established house in an established neighbourhood.
44
8.2.3
There are a number of similarities in the opinions of the interviewees to the themes of
the literature review. However as it is a small survey and is qualitative caution needs
to be applied to how much emphasis/importance is attached to its findings.
45
9.
Assessment of Financial Viability for Residential Intensification
9.1
Introduction
9.1.1
This section assesses the financial viability of delivering residential intensification in
Tauranga.
9.1.2
The term financial viability refers to whether development would be sufficiently
profitable for a developer to be willing to undertake and for project finance to be
secured for any particular development.
9.1.3
In terms of residential intensification, it would be easy to consider that local authorities
should not be concerned about financial viability issues and that they should leave it
to the domain of the developers community. However the financial viability of
residential intensification will ultimately determine how much residential intensification
takes place, even if all the other ‘ingredients’ for its success are in place e.g. a
planning framework that supports residential intensification. For this reason,
development feasibility is integral to the delivery of the overall SmartGrowth
Settlement Pattern and it should be a major consideration in determining things like:
 How much residential intensification is likely to occur;
 Where it is expected to occur; and
 What form it is likely to take.
9.1.4
Understanding the likely future of residential intensification will allow TCC to better
plan for infrastructure upgrades and to address funding challenges for existing
projects that have been built on the expectation of large scale residential
intensification occurring such as the Southern Pipeline.
9.2
Financial Viability Methodology / Data Inputs
Project Team
9.2.1
A project team was set up comprising of:
 Tauranga City Council staff.
 Independent property development expert Martin Udale in an advisory and peer
review role.
9.2.2
In addition, the project team worked with two members of the local development
community with expertise in medium and high density residential development to
ensure that the approach taken to assessing the financial viability of residential
intensification was sound, robust and relevant to the local context. As the result of
this engagement the overall approach was endorsed but slight changes were made
to some specific financial modelling assumptions and data inputs. The developers
involved are supportive of delivering residential intensification.
46
Financial viability model
9.2.3
To assess the financial viability of residential intensification development a
development feasibility model was built. This Microsoft Excel spreadsheet based
model includes all of the costs associated with more intensive forms of residential
development and determines what sale prices would need to be achieved to allow a
project to proceed in various parts of Tauranga. It is not a detailed feasibility model
but it is sufficient to provide good reliable outputs for strategic planning purposes.
Samples of the model are attached in Appendix 7.
9.2.4
The base model, and the majority of the inputs to the model, were provided by Martin
Udale. This financial modelling approach is the same as would be adopted by the
private sector (and their funders e.g. banks) when assessing these types of projects.
The model itself and the inputs used in the model were reviewed and approved by the
two local developers involved in this project.
9.2.5
As mentioned earlier, the financial viability approach was adopted because (unless
something drastic occurs) there will be a reliance on the private sector to deliver the
vast majority of residential intensification product (and new housing in general) in the
sub region. If there is insufficient profit and/or excessive financial risk in delivering
this form of development then a) project finance will not be forthcoming and b)
developers will not wish or be able to proceed. As such, financial viability is critical to
the delivery of residential intensification.
Different Types of Residential Intensification Modelled
9.2.6
To provide a comprehensive view of the financial viability of residential intensification,
four different types of residential intensification were modelled. These were:
 4-6 level apartment buildings
 3 level ‘walk up’ apartment buildings
 2-3 level attached townhouses / terraces
 Redevelopment of two full sites for small detached houses/duplexes
9.2.7
The 4-6 level apartment building option was based on the following assumptions:
 Assumed to require a land area of approximately 1,000m2
 Assumed to have 24 apartments total although this number can vary
 24 apartments equates to one dwelling per 42m2 of site area
 Assumed a mix between 1, 2 and 3 bedroom apartments
 1 bedroom apartments assumed to be 42m2 plus balcony
 2 bedroom apartments assumed to be 70 to 80m2 plus balcony
 3 bedroom apartments assumed to be 102 to 120m2 plus balcony
 In addition to apartment areas, 8% of floor area was added for common and
circulation areas
 Assumed one underground (or partly underground) carpark per dwelling (2 are
currently required under the City Plan)
 Assumed 20% of site area is for driveway use
 Assumed 40% of site area is for landscaping use
9.2.8
The 3 level ‘walk up’ apartment building option was assumed to have the same
characteristics as the 4-6 level apartment building set out above aside from a
47
reduction in the number of apartments to 12 (which again can vary). 12 apartments is
one dwelling per 83m2 of site area.
9.2.9
The 2-3 level attached townhouse / terraced housing option was based on the
following assumptions:
 Assumed to have 10 dwellings although this number can vary
 Assumed to require a land area of approximately 1,600m2 (for 10 dwellings)
 This equates to one dwelling per 160m2 of site area
 Assumed a mix between 2, 3 and 4 bedroom townhouses
 2 bedroom townhouses assumed to be 105 to 115m2
 3 bedroom townhouses assumed to be 140m2
 4 bedroom townhouses assumed to be 160m2
 No internal common areas
 Assumed internal single garages for 2 bedroom townhouses and double garages
for 3 and 4 bedroom townhouses
 Assumed 30% of site area is for driveway use
 Assumed 25% of site area is for landscaping use
9.2.10
The option of redeveloping two full sites (i.e. two 800m2 sites) for small detached
houses or duplexes was based on the following assumptions:
 Assumed land area is 1,600+m2, model works on 1919m2 which relates to an
actual site with this type of development potential
 1919m2 is almost adequate to accommodate 6 dwellings based on current 1/325m2
standard (it equates to one dwelling per 320m2 of site area)
 Up to 7 dwellings were modelled
 7 dwellings would equate to one dwelling per 274m2 of site area14
 2 bedroom houses assumed to be 105m2
 3 bedroom houses assumed to be 140m2
 Assumed internal single garages for 2 bedroom houses and double garages for 3
bedroom houses
 Assumed 28% of site area is landscaped
9.2.11
Photos showing examples of each of the four forms of residential intensification
considered in the financial viability modelling are shown in Appendix 8.
Key Modelling Assumptions
9.2.12
Existing planning constraints that may affect the ability to secure resource consent for
these types of projects in some parts of the city were ignored.
9.2.13
It was assumed that there would be no financial or other contribution from third
parties such as local or central government i.e. all costs would be borne by the
developer.
The peer reviewer’s opinion is that at 7 dwellings this is a ‘tight’ development and is not likely to be
representative of what will generally be delivered. They do acknowledge that it is taken from a ‘real life’
current development proposal in Tauranga.
14
48
9.2.14
Cost assumptions were conservative/modest and generally toward the middle or
lower end of the range that was considered to be reasonable.
Cost Inputs
9.2.15
Cost inputs into the development equation were broken down into the following
categories:
 Land purchase (including legal costs, insurance, rates, maintenance (e.g. mowing)
and site clearance costs if applicable)
 Construction costs (dwellings, garages and (common areas if applicable)
 Driveway construction
 Landscaping
 Consultants and project management
 Council fees (e.g. building and resource consent costs)
 Local and citywide development contributions
 Marketing and advertising
 Selling costs (i.e. real estate agent commission and conveyancing costs)
 Funding / interest costs
 Development contingency
 GST.
9.2.16
The cost inputs used for each development scenario are summarised in the following
table. As demonstrated in the table, the cost inputs were tailored specifically for each
form of development.
49
Table 10: Cost inputs for financial modelling
Unit of measurement
4-6 level apartments
3 level ‘walk up’
apartments
2-3 level attachment
townhouses / terraces
Redevelopment of two full
sites for small detached
dwellings
Capital value
$400,000 to $1m
$400,000 to $1m
$600,000 to $1m
$600,000 to $1m
- dwelling area
m2 rate
$2,200
$2,000
$1,500
$1,25015
- common area
m2 rate
$1,500
$1,500
n/a
n/a
- garage
m2 rate
$800
$800
Included in dwelling
construction
Included in dwelling
construction
Driveway construction
m2 rate
$75
$75
$70
Included in dwelling
construction
Landscaping
m2 rate
$30
$30
$30
$30
% of total construction
costs
10%
10%
10%
3%
Per dwelling
$3,000
$3,000
$3,000
$3,000
- Tauranga
Per dwelling
$3,061
$3,061
$3,061
$3,061
- Mount Maunganui
Per dwelling
$0
$0
$0
$0
- One bedroom
Per dwelling
$3,755
$3,755
$3,755
$3,755
- Two bedrooms
Per dwelling
$4,882
$4,882
$4,882
$4,882
- Three + dwellings
Per dwelling
$7,511
$7,511
$7,511
$7,511
Cost item
Land purchase
Construction costs
Consultants/project management
Council fees
Local development contributions
Citywide development contributions
Marketing/advertising
Per dwelling
$3,000
$3,000
$3,000
n/a
% of total costs
3.5%
3.5%
3.5%
3.5%
Interest rate
8%
8%
8%
8%
Contingency
% of total costs
10%
10%
10%
2%16
GST
% of total costs
15%
15%
15%
15%
Profit margin
% of total costs
Minimum 20%
Minimum 20%
Minimum 20%
Minimum 10%
Selling costs
Funding/interest costs
15
16
Members of the SmartGrowth Property Developers Forum suggest that this should be closer to $1,400/m 2 for small detached dwellings (say two bedrooms).
The peer review suggested that this may be on the low side but it has been retained at this level based on the input from the local developers.
9.3
Modelling Results
9.3.1
The outcomes of the modelling for each of the five scenarios in terms of indicative
sales prices are set out below. They include some sensitivity testing regarding land
purchase costs and, in some scenarios, different development densities.
9.3.2
In all cases the results shown are for the Tauranga side of the harbour. At Mt
Maunganui prices would be $4,000 to $5,000 less because there are no local
development contributions in this area.
4-6 Level Apartment Buildings
9.3.3
The table below sets out indicative sales prices from the financial modelling that
would be required for apartments in a 4-6 level apartment building for development to
achieve a 20% margin after finance costs but before tax, which is the minimum for
financial viability. The high number of units in this type of development requires an
increase in the number of sales and therefore additional financial risk and
development timeframes. This implies greater project risk (compared to a smaller
development) and the potential that even high margins that assumed would be
required.
Table 11: Indication sales prices: 4-6 level apartment building
Bedrooms
Floor area
Indicative sales price required (incl. gst)
$400,000 site
cost
$600,000 site
cost
$800,000 site
cost
$1,000,000 site
cost
1
42m2
$225,000
$230,000
$235,000
$240,000
2
70m2
$370,000
$380,000
$390,000
$400,000
2 plus study
80m2
$425,000
$435,000
$450,000
$455,000
3
102m2
$540,000
$555,000
$570,000
$580,000
Large 3
120m2
$635,000
$655,000
$675,000
$680,000
Note: Prices rounded to the nearest $5,000.
9.3.4
The increase from $400,000 to $1m in site purchase cost has only a modest 7%
increase to the required sales price because the increased cost is spread over a large
number of units.
9.3.5
The following table provides an indication of where the required 1,000m2 of site area
is likely to be available in the EUA at various site purchase costs. It is based on a
general understanding of the local real estate market rather than any substantive
analysis.
Table 12: Indication site costs in Tauranga
$400,000 site
cost
Area/Suburb
$600,000 site cost
$800,000 site cost
Tauranga
Tauranga
Tauranga
Tauranga

Brookfield

Matua

Matua


Bellevue

Otumoetai

Otumoetai

Judea

Pillans Point

Pillans Point

Merivale

Cherrywood

Cherrywood

Gate Pa

Avenues

Avenues

Greerton
Mt Maunganui
Mt Maunganui
Mt Maunganui

Northern Mount

Northern Mount


Omanu

Omanu
Arataki
$1,000,000 site cost
Harbourside/
harbour view
properties at
Matua, Otumoetai,
Pillans Point and
Avenues
Mt Maunganui

Coastal Mount
3 Level ‘Walk Up’ Apartment Buildings
9.3.6
The table below sets out indicative sales prices that would be required for apartments
in a 3 level apartment building for development to achieve a 20% margin after
finance, but before tax.
.
Table 13: Indicative sales prices: 3 level apartment building
Bedrooms
Floor area
Indicative sales price required (incl. gst)
$400,000 site
cost
$600,000 site
cost
$800,000 site
cost
$1,000,000 site
cost
1
42m2
$220,000
$235,000
$245,000
$260,000
2
70m2
$370,000
$390,000
$410,000
$430,000
2 plus study
80m2
$420,000
$445,000
$470,000
$490,000
3
102m2
$535,000
$565,000
$595,000
$625,000
Large 3
120m2
$630,000
$665,000
$700,000
$740,000
Note: Prices rounded to the nearest $5,000.
9.3.7
In this scenario the increase in site purchase price from $400,000 to $1m has a
greater effect on sales prices, lifting the required sales price by 18%. This is because
the increased site purchase price is spread over a smaller number of dwellings. It
demonstrates the importance of achieving density in keeping development costs and
prices down.
9.3.8
The earlier table showing the likely availability of sites at the various prices is relevant
to this scenario.
9.3.9
Indicative apartment prices are very similar to the 4-6 level building example with a
land price at $400,000 or $600,000. However at higher land costs, apartment prices
for the three level building are greater than in a 4-6 level building in this example.
This is because the high land costs per unit outweigh the slightly lower per m2
building cost for a three level building.
2-3 Level Attached Townhouses/Terraces
9.3.10
The table below sets out indicative sales prices that would be required for an
attached townhouse / terraced housing development of 10 units on two adjoining
800m2 sites to achieve a 20% margin after finance, but before tax.
52
Table 14: Indicative sales prices: 2-3 level attached townhouses/terraces
Bedrooms
Floor area
Indicative sales price required (incl. gst)
$400,000 site
cost
$600,000 site
cost
$800,000 site
cost
$1,000,000 site
cost
2
105m2
$365,000
$390,000
$415,000
$440,000
2 plus study
115m2
$400,000
$425,000
$455,000
$480,000
3
140m2
$485,000
$520,000
$550,000
$585,000
4
160m2
$555,000
$590,000
$630,000
$670,000
9.3.11
It should be noted that the $400,000 site purchase cost option has been put in for
comparative purposes but that it is unrealistic to expect that land would be available
anywhere in Tauranga at this price given that the modelled development requires
1,600m2 of land. Even the $600,000 site cost option is unrealistic in most areas
(including all of the more ‘desirable’ parts of the city which is where property prices
might be able to support this type of development).
9.3.12
Dwelling prices are likely to be on par or slightly cheaper than the three level
apartment scenario. Floor areas are larger than the apartments but this is primarily
the result of the internal garages being included in the floor area of the dwellings.
9.3.13
In this scenario the increase in land price from $400,000 to $1m has a significant
effect on sales prices, lifting the required sales price by 21% to retain the required
profit margin. Like the three level apartment scenario, this is because the increased
land price is spread over a relatively small number of dwellings. This again
demonstrates the importance of achieving density in keeping development costs and
therefore end sale prices down.
9.3.14
To this end, a scenario was run with an increase in density from one townhouse per
160m2 to one townhouse per 100m2 i.e. an increase from 10 to 16 townhouses. The
results of this are set out in the following table.
Table 15: Indicative sales prices: Denser 2-3 level attached townhouses/terraces
Bedrooms
Floor area
Indicative sales price required (incl. gst)
$400,000 site
cost
$600,000 site
cost
$800,000 site
cost
$1,000,000 site
cost
2
105m2
$345,000
$360,000
$375,000
$390,000
2 plus study
115m2
$375,000
$395,000
$410,000
$430,000
3
140m2
$455,000
$480,000
$500,000
$520,000
4
160m2
$525,000
$545,000
$570,000
$595,000
9.3.15
Overall the increase in density would allow dwellings to be priced around 10% lower.
These are the lowest prices of the intensification scenarios modelled thus far in the
report but it would be difficult to describe these prices as being ‘affordable’.
9.3.16
The following table provides an indication of where the required 1,600m2 of site area
would likely to be available at various site purchase costs noting that a larger site
area is required compared to the apartment scenarios. It is based on a general
understanding of the local real estate market rather than any substantive analysis.
53
Table 16: Indicative site costs in Tauranga
Area/Suburb
$400,000 total site
cost
$600,000 total site
cost
$800,000 total site
cost
$1,000,000 total
site cost
$200,000 per site
$300,000 per site
$400,000 per site
$500,000 per site

Land is not
available at this
cost
Tauranga
Tauranga
Tauranga

Merivale

Greerton

Otumoetai

Gate Pa

Judea

Matua

Greerton
(maybe)

Brookfield

Cherrywood


Bellevue

Pillans Point
Judea (maybe)


Otumoetai

Avenues
Brookfield
(maybe)

Matua
Mt Maunganui

Bellevue (maybe)

Cherrywood

Omanu

Pillans Point


Avenues
Northern
Mount?
Mt Maunganui

Inland Arataki
(maybe)
Mt Maunganui

Arataki

Omanu
Redevelopment of Two Full Sites for Small Detached Houses/Duplexes
9.3.17
The table below sets out indicative sales prices that would be required for the
redevelopment of two adjoining 800m2+ sites into seven detached dwellings /
duplexes to achieve a 10% margin after finance, but before tax. The required margin
is lower in this example because the risk, uncertainty and scale associated with this
type of development are lower.
Table 17: Indicative sales prices: Two sites development of detached houses/duplexes
Bedrooms
Floor area
Indicative sales price required (incl. gst)
$400,000 site
cost
$600,000 site
cost
$800,000 site
cost
$1,000,000 site
cost
2
105m2
$275,000
$310,000
$345,000
$380,000
3
140m2
$370,000
$415,000
$460,000
$510,000
9.3.18
It should be noted that the $400,000 site cost option has been put in for comparative
purposes but that it is unrealistic to expect that the required site area would be
available anywhere in Tauranga at this price given that the modelled development
requires 1,600m2. Even the $600,000 site cost option may be unrealistic.
9.3.19
Dwelling prices are likely to be significantly cheaper than the apartment and
townhouse scenarios, especially if land costs between $600,000 and $800,000 are
achievable. Again though, it would be difficult to describe these prices as being
‘affordable’, especially for three bedroom houses.
9.3.20
In this scenario the increase in site purchase price from $400,000 to $1m has a
significant effect on sales prices, lifting the required sales price by 38% in order to
achieve the required profit margin. This is because the site purchase price is spread
over a small number of dwellings. It again demonstrates the importance of achieving
density in keeping development costs and therefore prices down.
9.3.21
If the modelled seven dwellings was considered to be too intensive due to it being
substantially below the current one dwelling per 325m2 requirement (at 1/247m2), the
development would have to be reduced to six dwellings which itself is slightly below
54
the 1/325m2 density (at 1/320m2). The table below sets out the change to the
indicative sales prices that would be required if this occurred.
Table 18: Change to indicative sales prices by reducing density from 7 to 6 units
Bedrooms
Floor area
Change to indicative sales price required (incl. gst)
$400,000 site
cost
$600,000 site
cost
$800,000 site
cost
$1,000,000 site
cost
2
105m2
+$5,000
+$10,000
+$15,000
+$15,000
3
140m2
+$5,000
+$10,000
+$20,000
+$20,000
9.3.22
The earlier table showing the likely availability of the required site area at the various
prices for townhouses is also relevant to these scenarios.
9.4
Assessment of Financial Viability
9.4.1
The next step is to take the indicative sales prices and determine the extent to which
intensification is likely to be financially viable. The approach that has been adopted to
do this is to consider the following range of factors:
 The likely price of residential intensification product vs. the price of both greenfield
housing product and existing housing stock (the relative cost), including whether
there is likely to be a willingness to pay a premium for residential intensification
product
 The likely price of residential intensification product vs. incomes in Tauranga
(affordability)
 The likelihood of the financial viability of residential intensification development
outcomes improving in the future
 Potential policy measures to reduce costs and prices
Price Comparison against Greenfield Development and Existing Housing Stock
9.4.2
The table below comes from the work undertaken in 2010 by TCC on the feasibility of
greenfield residential development in the Wairakei urban growth area. It sets out
likely house and land prices in that area as a basis to compare the indicative prices
for different forms of residential intensification. Costs of residential subdivision
development and residential construction have not significantly changed since that
work was done in 2010. The table is also reasonably consistent with the cost of
house and land packages in new subdivisions in Tauranga.
Table 19: Indicative house and land costs in Wairakei
Section
size
Section
price
(incl. gst)
House and land cost (incl. gst) by dwelling floor area
140m2
160m2
180m2
200m2
2 bedrooms
2-3 bedrooms
3 bedrooms
3-4 bedrooms
4+ bedrooms
120m
2
300m2
$120,000
$340,000
$360,000
$380,000
n/a
n/a
400m2
$135,000
$355,000
$375,000
$395,000
$420,000
$440,000
500m2
$165,000
$385,000
$405,000
$425,000
$450,000
$470,000
600m2
$190,000
$410,000
$430,000
$450,000
$475,000
$495,000
700m2
$210,000
$430,000
$450,000
$470,000
$495,000
$515,000
Source: Assessment of development Feasibility for the Wairakei Urban Growth Area, Martin Udale and TCC staff, November 2010
55
9.4.3
The next table compares two bedroom dwelling prices between greenfield
development and residential intensification.
9.4.4
For greenfield development a 120m2 house on a 300m2 section is used for
comparative purposes. This has a price of $340,000.
9.4.5
For residential intensification the following options are used for comparative
purposes:
1. Two bedroom apartment in 4-6 level apartment building of 70m2 based on land
cost of $600,000 for the development
2. Two bedroom apartment in 3 level apartment building of 70m2 based on land cost
of $600,000 for the development
3. Two bedroom townhouse/terrace of 105m2 based on land cost of $800,000 for the
development
4. Two bedroom townhouse/terrace of 105m2 in a more intensive development based
on land cost of $800,000 for the development
5. Two bedroom house/duplex of 105m2 in a seven unit development based on land
cost for the development of $800,000
6. Two bedroom house/duplex of 105m2 in a six unit development based on land cost
for the development of $800,000.
Table 20: Indicative sales prices difference between $340,000 two bedroom greenfield product
and two bedroom residential intensification
Price difference for intensification product types (incl. gst)
1. Two
bedroom
apartment
2. Two
bedroom
apartment
3. Two
bedroom
townhouse/
terrace
4. Two
bedroom
townhouse/
terrace
5. Two
bedroom
house/
duplex
6. Two
bedroom
house/
duplex
Intensification price
$380,000
$390,000
$415,000
$375,000
$345,000
$360,000
Intensification price
difference
+$40,000
+$50,000
+$75,000
+$35,000
+$5,000
+$20,000
% difference
+12%
+15%
+22%
+10%
+1%
+6%
9.4.6
The next table compares three bedroom dwelling prices between greenfield
development and residential intensification.
9.4.7
For greenfield development a 160m2 house on a 500m2 section is used for
comparative purposes. This has a price of $425,000.
9.4.8
For residential intensification the following options are used for comparative
purposes:
1. Three bedroom apartment in 4-6 level apartment building of 102m2 based on land
cost of $600,000 for the development
2. Three bedroom apartment in 3 level apartment building of 102m2 based on land
cost of $600,000 for the development
3. Three bedroom townhouse/terrace of 140m2 based on land cost of $800,000 for
the development
4. Three bedroom townhouse/terrace of 140m2 in a more intensive development
based on land cost of $800,000 for the development
5. Three bedroom house/duplex of 105m2 in a seven unit development based on land
cost for the development of $800,000
56
6. Three bedroom house/duplex of 105m2 in a six unit development based on land
cost for the development of $800,000.
Table 21: Indicative sales prices difference between $425,000 three bedroom greenfield product
and three bedroom residential intensification
Price difference for intensification product types (incl. gst)
1. Three
bedroom
apartment
2. Three
bedroom
apartment
3. Three
bedroom
townhouse/
terrace
4. Three
bedroom
townhouse/
terrace
5. Three
bedroom
house/
duplex
6. Three
bedroom
house/
duplex
Intensification price
$555,000
$565,000
$550,000
$500,000
$460,000
$480,000
Intensification price
difference
$130,000
$140,000
$125,000
$75,000
$35,000
$55,000
% difference
+63%
+66%
+62%
+47%
+35%
+41%
9.4.9
The tables above demonstrate that both two and three bedroom dwellings are likely
to generally be cheaper in greenfield developments (new subdivisions) than in
intensification developments, especially three bedroom dwellings17.
9.4.10
The additional cost of intensification product is likely to make greenfield product or
existing housing stock (which is generally cheaper again compared to new greenfield
product) more attractive to much of the housing market.
9.4.11
This is especially true in the current environment because:
 Housing affordability is a significant challenge especially for low and middle income
households and, because of this, price is an important consideration in most
household’s housing choices
 More intensive housing options will simply be beyond the financial means of most
households; part of this is due to significantly lower incomes in Tauranga compared
with Auckland and Wellington and even Hamilton.
 Typically existing housing stock and new greenfield houses are larger in size and
have larger sections than intensification product (i.e. you get/perceive more value
for your money)
 The drivers of intensification that exist in large cities like Auckland, especially
severe traffic congestion/long commuting times from greenfield areas, are largely
absent in the sub region.
9.4.12
To illustrate the point about the high cost of intensification housing product being a
barrier to its uptake, the following (summarised) table from the November 2009
Housing Stock and Housing Demand report by TCC is set out below. It shows that
the majority of sales (83%) are for property with values less than $500,000 whereas
most intensification product, especially three and four bedroom product, would have
to be priced above $500,000. It should be noted that this table is currently being
updated based on more recent data.
17
Compared to greenfield development, part of the reason why three bedroom product would appear to
be much more expensive than two bedroom product is likely to be the simple method of pricing used in
the financial modelling for intensification which does not take into account that two bedroom dwellings
are more expensive to build than three bedroom dwellings on a per m 2 basis. In reality the tables above
are likely to underestimate the price difference for two bedroom dwellings and overestimate the price
difference for three bedroom dwellings. Nonetheless, the broad conclusions are still valid.
57
Table 22: House sales from 2006/7 to 2008/9 by capital value
Capital value
No. of sales
% of sales
<$300,000
3,198
30%
$300,000 to $400,000
3,538
33%
$400,000 to $500,000
2,145
20%
$500,000 to $600,000
963
9%
$600,000 to $800,000
596
6%
>$800,000
340
3%
Total
10,780
100%
Source: Housing Stock and Housing Demand, TCC, 2009.
9.4.13
The relatively high cost of more intensive housing product also means that rents
would have to be much higher than the current market rents in Tauranga to justify
property investor involvement in these types of projects. This issue was considered
in some depth in the Wairakei financial viability project and the unfavourable
conclusions reached on this issue in that report would be greater in regard to
residential intensification because of higher prices for intensification product.
Price Comparison against Household Incomes
9.4.14
The following extracts from the November 2009 Housing Stock and Housing Demand
report outline the income constraints of Tauranga residents in regards to housing.
 “64% of households in Tauranga have a household income of $70,000 or less.
 A standard affordability benchmark is: households can afford to spend 30% - 35%
of total gross income on rent or mortgage.
 A household with annual gross income of $70,000 would need $132,000 deposit to
buy a $400,000 home.”
“Table 2 shows the amount of deposit required to purchase a house within the
standard constraint that only 30% - 35% of household income should be spent on
housing costs.”
Table 2 : Housing Affordability
Household Income
House price
Maximum Loan
Deposit Required
Monthly payment
% of income on housing
50,000
70,000
70,000
70,000
90,000
90,000
300,000
105,000
195,000
300,000
268,000
32,000
350,000
268,000
82,000
400,000
268,000
132,000
400,000
360,000
40,000
500,000
405,000
95,000
1,333
32%
1,867
32%
1,867
32%
1,867
32%
2,400
32%
2,400
32%
Assumes interest rate of 7.5% & 30 year mortgage term
9.4.15
What this shows is that incomes in the sub region are in most cases insufficient to
sustain the higher prices associated with residential intensification (or other types of
relatively high cost housing). As such, the intensification market would mainly rely on
existing residents and migrants with sufficient equity to afford the higher prices and
the small pool of households with high incomes.
58
Likelihood of Financial Viability Improving in the Future
9.4.16
The future is inherently uncertain and there is no way of accurately knowing whether
the prospects for residential intensification may significantly improve in the future,
which is a possibility.
9.4.17
One way in which viability could improve is if household incomes increase at a
significantly faster rate than the cost of delivering these types of projects. High
income growth is a goal of both central and local government, but will not necessarily
be achievable. In recent years, income growth rates have significantly lagged behind
increases to housing costs. If high income growth was achieved, this would positively
affect the whole housing market, not just residential intensification.
9.4.18
A best case scenario would be for high income growth to be combined with factors
that make residential intensification more desirable e.g:
 Lower costs for delivering residential intensification e.g. through new construction
methods
 Significantly higher transport costs in terms of fuel prices or time (traffic
congestion).
9.4.19
There is no evidence to suggest that these things will occur in Tauranga to the extent
required to have a meaningful impact on the market for residential intensification.
Fuel prices have risen significantly over the last decade and are projected to keep
rising in the future. However the indicative additional cost of $35,000-$140,000 (plus
mortgage interest costs) for a three bedroom residential intensification dwelling would
buy a substantial amount of fuel, even if fuel prices continue to increase. As such,
rising fuel prices may not be a major factor in driving residential intensification.
9.4.20
Overall there is nothing foreseeable that will significantly change the market for
residential intensification in Tauranga.
Policy Measures to Reduce Prices
9.4.21
The financial modelling already assumes the following favourable assumptions:
 An enabling planning framework is in place with low cost, risk and consenting time
 Development contribution charges ranging from a minimum of $4,300 (incl. gst) for
a one bedroom dwelling in Mount Maunganui to a maximum of $12,200 (incl. gst)
for a three bedroom dwelling in Tauranga. The charges are modest and reducing
them further would not allow the market prices of residential intensification to
reduce substantially. Based on a $400,000 dwelling price, the above charges
represent between 1and 3% of the total price.
9.4.22
The major cost inputs for residential intensification projects are land costs and
constructions costs. Dealing with construction costs first, these are outside the
influence of the SmartGrowth Partners. Construction costs are determined largely by
construction methods, productivity, labour costs and material costs. While there may
be innovations in construction methods that reduce costs in the future or productivity
gains that do the same for example, this equally may not occur. In recent decades
constructions costs have been increasing at a faster rate than CPI inflation.
9.4.23
Provision of land for intensification development is one area where the SmartGrowth
Partners (mainly TCC) and/or central government could play a role in reducing costs.
This could be through the provision of land at no cost or a lower than market cost.
This should be further considered not just in the context of reducing costs and prices,
but also taking into account the wider benefits of intensification over greenfield
59
development such as reduced infrastructure costs. If Councils or central government
were to play an intervention role, then it must ensure that any decrease in project cost
is reflected in the end sales price, not increased developer margin.
9.4.24
It is important to note that there are no ‘brownfield’ sites in Tauranga that could be
developed which is a significant constraint on delivering residential intensification.
‘Brownfield’ development especially of old port areas has delivered / will deliver
significant residential intensification in cities like Melbourne, Sydney and Auckland
(e.g. Viaduct Harbour, Wynyard Quarter and the former Mount Wellington Quarry site
– Stonefields).
9.4.25
While Council / central government provision of land offers some potential, it is
unlikely that this would have a meaningful effect on delivering the nearly 10,000
additional dwellings through intensification which are currently expected. There
would need to be an active programme of buying more land and/or making available
large existing sites like the Tauranga racecourse or golf courses for residential
development at a reasonable cost. Development of large sites like the racecourse
would have significant challenges but is worthy of further consideration at this stage
and is supported by the SmartGrowth Property Developers Forum which also
supports looking at land that is currently not residentially zoned (e.g. commercial land
in the early avenues)18.
9.4.26
There may also be a role for local/central government to play in assembling land
parcels for development by the private sector as the significant costs and risks of
doing this are one of the challenges to private sector delivery of residential
intensification.
9.4.27
Even if site purchase costs were completely removed, new dwellings in intensification
developments would still not be ‘affordable’ for many households. The following
tables set out indicative prices for the two apartment building scenarios and for the 10
unit attached townhouse scenario based on a land cost of $0. Realistically the
provision of land by either TCC or central government at no cost is unlikely.
Table 23: 4-6 level apartment building
Bedrooms
Floor
area
Indicative sales
prices (incl. gst)
1
42m2
$210,000
2
70m2
$350,000
2 plus study
80m2
$400,000
3
102m2
$510,000
Large 3
120m2
$600,000
Table 24: 3 level apartment building
Bedrooms
Floor
area
Indicative sales
prices (incl. gst)
1
42m2
$195,000
2
70m2
$325,000
2 plus study
80m2
$370,000
3
102m2
$475,000
Large 3
120m2
$560,000
18
They also support considering the relocation of the Tauranga Airport to free up land for residential
development.
60
Table 25: 2-3 level attached townhouses/terraced housing
Bedrooms
Floor
area
Indicative sales
prices (incl. gst)
2
105m2
$315,000
2 plus study
115m2
$340,000
3
140m2
$415,000
4
160m2
$475,000
Summary
9.4.28
The table below summarises the outcomes for the four factors used to assess
financial viability for residential intensification using a simple red, orange, green ‘traffic
light’ approach. Red being a poor outcome, orange – moderate to average, and
green being good.
Table 26: Summary of financial viability of residential intensification
Viability factor
Rating
Comment
Relative cost
Red
Affordability
Red
Likelihood of viability improving
Orange
The future is inherently uncertain
but there is nothing obvious ‘on the
horizon’
Likelihood of meaningful local/central
government policy interventions
Orange
Possible but would require large
investment and much more
‘interventist’ policy approach
9.5
Overall Financial Viability Findings
9.5.1
The outcomes of the financial modelling are not ‘black and white’ in the sense that it
can be concluded that various forms of residential intensification are either financially
viable or not. Rather the modelling shows that for residential intensification to be
delivered successfully it will have to be able to command a premium price (both for
owner occupiers and for renters) significantly above the price of most comparable
existing housing stock and most comparable new housing in greenfield subdivisions.
9.5.2
This find is consistent with and supported by:
 The low amount of residential intensification delivered in Tauranga historically
 That residential intensification has been focused mainly in the coastal Mt
Maunganui area where a premium price can be secured, often related to holiday
accommodation
 Similar financial modelling previously undertaken by Neil Gray for Tauranga19.
Financial modelling undertaken for Hamilton 20 in 2010 indicated that prices for
attached townhouses and medium to high rise apartments would have to be
significantly higher than is suggested in this report
 The actual market price of new residential intensification offerings in places where it
is being delivered (like Auckland).
19
20
SmartGrowth Residential Intensification in Tauranga City, Neil Gray, October 2009.
Hamilton City Intensification Report, Harrison Grierson, August 2010.
61
9.5.3
This implies a number of things:
 That some residential intensification will be financially viable because some
households will be willing and able to pay the premium price.
 The areas where it is likely to be most viable are where people will be prepared to
pay the premium required. This is likely to be primarily in areas very close to the
harbour/coast, areas with extensive harbour or sea views, and amongst areas of
generally high quality housing. The following areas (or at least parts of them) are
the primary areas that would meet this criterion in the EUA:
o
Coastal Mt Maunganui
o
Mt Maunganui North
o
Omanu
o
Otumoetai
o
Matua
o
Cherrywood
o
Bureta
o
Pillans Point
o
The Avenues.
 Concepts like intensification around neighbourhood and town centres and along
arterial roads/public transport corridors are sensible from an urban planning
viewpoint, but will not necessarily align with market drivers for intensification and
therefore may not be successful. Planning policy has to align with market reality.
This was found in Auckland when the location of residential intensification between
2003 and 2008 was assessed. It was found that “…much multi-unit development is
outside the identified centres, often in areas with poor access to local services and
public transport” and that “General accessibility and amenity value, including
access to parks, beaches and views, appear to be important locational factors for
developers and property buyers”21.
 Because of the relatively high cost of delivering residential intensification product
combined with household income and equity constraints, even with enabling
planning provisions that allow developers to align their developments with market
demand, it is unlikely that the current SmartGrowth intensification targets of 19% of
additional dwellings in the sub region will be met based on known information.
 Residential intensification is most likely to take the form of small to moderate scale
development rather than medium to large scale developments. This means that
the most prominent intensification development form is likely to be small
houses/duplexes on small sections or attached townhouses/terraced housing
rather than apartment development. This implies a larger number of projects and
the need to allow intensification to occur across all or most of the EUA in order to
provide a sufficient number of suitable development sites to deliver a meaningful
amount of development.
 There is some potential for Councils or central government to provide a leadership /
investment role in the provision of residential intensification. This has the potential
to assist the delivery of some product, but it is unlikely that there will be sufficient
public resources available to make a meaningful difference in delivering the current
SmartGrowth intensification targets. The first step to achieving more residential
intensification is to put in place an enabling planning framework that is aligned with
market drivers22. As experience with the Smart Living Places project proves, this
21
Urban intensification in Auckland: Are we growing smarter?, Brenna Waghorn, 2011.
The SmartGrowth Property Developers Forum would specifically like to note its agreement with this
statement.
22
62
will not necessarily be easy. Although compared to Smart Living Places it may be
easier if this planning framework:
 Was developed using meaningful public engagement
 Provided for development in most or all of the EUA (as opposed to targeting
particular areas/communities who may feel they are being ‘singled out’ or ‘picked
on’)
 Generally provided for small to moderate size redevelopment in most areas more
in line with a suburban environment
 Envisaged incremental change to neighbourhoods over a long period of time
rather than more significant and immediate change.
9.6
Intensification in Greenfield Areas (including Retirement Villages)
9.6.1
Thus far this report has focused on intensification in the EUA. Given the challenges
identified, it is worth asking whether a lower level of intensification in the EUA could
be offset by residential intensification in current and future urban growth areas.
9.6.2
As mentioned earlier in the report, plans to deliver large scale medium and high
density residential development and mixed use development in the recently rezoned
Wairakei urban growth area were scale back by mutual agreement of TCC and
developers to little more than typical greenfield subdivision development due to
substantial concerns about whether it could be viably delivered to the market.
9.6.3
Historically, retirement villages or similar developments (e.g. incorporated societies
and community titles) have been the only medium to high density development form
that has occurred of any note in Tauranga’s urban growth areas. There are a
significant number of large retirement villages located and under development in
greenfield areas. Due to their typically large footprint, retirement villages will continue
to develop in greenfield areas as the cost and availability of land in the EUA is
generally prohibitive. Given the impending increase in the retirement aged population
associated with the ‘baby boomer’ generation, the rate of development of retirement
villages is likely to increase for the next 10 years or more.
9.6.4
There will also be opportunity for other forms of medium to high density development
in greenfield areas, especially in areas of high amenity. In this regard, the coastal
strip from Papamoa to Te Tumu is likely to offer the most opportunity for this form of
development due to proximity to the beach and the possibility of sea views. Typically
though, the lack of amenity (e.g. parks, shopping, community facilities, schools and
doctors) during the formative stages of the development of greenfield areas means
that if medium to high density development is to occur, it is likely to do so once an
area is largely developed and is more mature.
9.6.5
The cost of medium and high density development in greenfield areas is likely to be
similar or slightly lower than in the EUA. Land costs are likely to be lower but this will
be offset, at least to some extent, by higher development contribution charges.
9.6.6
Aside from retirement villages, the overall prospects for higher densities in greenfield
urban growth areas than currently planned is not great. For example, population
projections for Te Tumu already include significant provision for medium and high
density housing. In other areas, achieving 15 dwellings per hectare may be a
challenge as outlined in recent RPS and City Plan yield discussions. As such, if less
intensification occurs in the EUA than planned it appears unlikely that it would be
offset by intensification occurring in greenfield urban growth areas instead.
9.6.7
Notwithstanding this, it is appropriate to provide for medium and high density
residential development in greenfield areas through provisions such as:
63
 An enabling planning framework
 Local development contributions charged on a per hectare basis (as it is in
Wairakei) to reward higher density in the form of a lower per unit cost.
9.6.8
The Property Developers Forum also notes that consideration should be given to
intensifying land on the fringe of Tauranga and other towns such as rural residential
land e.g. a move from rural residential densities to standard residential subdivision
densities.
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10.
Long-term Trade-offs between Infill and Intensification
10.1.1
Continued infill development in established suburbs is likely to make comprehensive
redevelopment to medium and high densities more difficult in the future because:
 The supply of suitable large sites decreases because of site fragmentation as infill
subdivision occurs
 Amalgamation of land parcels will be required which is time consuming, costly and
risky
 Land input costs will be higher because of higher improvement values.
10.1.2
As such there is a policy trade off between the short term dwelling gains from infill
development and the potentially much larger long-term dwelling gains from residential
intensification.
10.1.3
There are two general ways in which this could be addressed. The first would be to
restrict or prevent infill development from occurring in all or parts of the EUA,
especially the areas where residential intensification is likely to be most viable in the
future. This would require changes to the City Plan which would inevitably be
challenging as this would remove existing development rights.
10.1.4
Conversely a better policy approach may be to put in place an enabling planning
framework for residential intensification throughout the EUA. This would at least
allow property owners and developers choice when considering development options.
At the moment, apart from in the City Living Zone, choice is realistically limited to
doing nothing or to undertaking an infill development permitted under the City Plan.
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11.
Conclusions for Infill and Intensification
11.1
Residential infill
11.1.1
The amount of infill development allocated in the 2011 SmartGrowth growth
projections appears to be reasonable in light of the infill development potential that
still exists and ability for this type of development to be delivered.
11.1.2
There is no reason to suggest that the infill growth projections need adjustment
through the SmartGrowth Update although the adverse effects of infill development
on the long-term delivery of residential intensification raises the policy question of
whether the anticipated amount of infill development and the relative ease of
undertaking infill development is desirable.
11.2
Residential intensification
General
11.2.1
This report has outlined a number of significant challenges to delivering residential
intensification through the literature review, case studies, local interviews and
financial viability assessment. The key message to take from this is that it is difficult
to successfully deliver residential intensification.
11.2.2
Political support/leadership is a critical element to delivering the right environment for
residential intensification to be delivered. This includes both the sub regional vision
(SmartGrowth) and the delivery of the right planning framework (City Plan) as well as
the potential for Councils to take a more active role in delivery.
11.2.3
One of the main factors is that the drivers of intensification that exist in large cities like
Auckland, especially severe traffic congestion/long commuting times from greenfield
areas, are largely absent in the sub region.
11.2.4
One of the other general constraints specific to Tauranga is the lack of any
substantial ‘brownfield’ redevelopment sites in the city that are ‘ripe’ for development.
As a result, delivery of residential intensification is reliant on redevelopment of the
suburban residential environment which is typically more difficult or the
redevelopment of large community amenities like the Tauranga Racecourse or a golf
course for medium density housing which would not be straightforward nor supported
by all of the community.
Financial Viability
11.2.5
Smaller scale types of residential intensification (houses/duplexes on small lots and
townhouses/terraced housing) are expected to be deliverable at lower prices than
larger scale apartment projects.
11.2.6
Despite this, there are financial viability challenges associated with the cost of
delivering all forms of residential intensification. Because of this, residential
intensification will primarily be targeted by developers to the upper end of the market
which means there will be a limited pool of buyers. These financial viability
challenges are exacerbated by the substantially lower cost of both existing housing
stock and new houses in greenfield developments which make these forms of
housing more attractive to many customers.
11.2.7
Even if the land cost component was removed through central or local government
intervention, sales prices would not be ‘affordable’.
66
11.2.8
Lower household incomes in the sub region compared to areas like Auckland,
Wellington and even Hamilton exacerbate the challenge of delivering residential
intensification.
11.2.9
Because of these factors, even with an enabling planning framework for residential
intensification in the suburban environment it is difficult to see infill and residential
intensification combined accommodating 25% of the sub region’s long-term
residential growth. To deliver 25% of the sub region’s growth, past intensification
development trends would have to increase by 300-400% assuming that infill
development delivers the expected 6% of sub regional growth.
11.2.10 The areas where it is likely to be most viable are where people will be prepared to
pay the premium required. This is likely to be primarily in areas very close to the
harbour/coast, areas with extensive harbour or sea views, and amongst areas of
generally high quality housing. The following areas (or at least parts of them) are the
primary areas that would meet this criterion in the EUA:
o
Coastal Mt Maunganui
o
Mt Maunganui North
o
Omanu
o
Otumoetai
o
Matua
o
Cherrywood
o
Bureta
o
Pillans Point
o
The Avenues
Addressing the Challanges
Planning framework
11.2.11 The current City Plan Suburban Residential Zone does not provide sufficient
opportunity to deliver the level of residential intensification expected by the
SmartGrowth growth projections and the BOPRC Regional Policy Statement, even if
it was financially viable. This Zone reflects community expectations for the suburban
environment that have been expressed in various ways to Council over a long period
of time.
11.2.12 A more enabling planning framework is required if anything resembling the expected
amount of residential intensification is to be delivered. This planning framework
needs to align with market drivers for intensification. This is likely to require:
 Provision for small to moderate sized redevelopment opportunities across all or
most of the EUA (i.e. the Suburban Residential Zone)
 Provision for medium to large scale redevelopment in some parts of the EUA (i.e.
identification of specific areas, or specific criteria that would have to be met)
 Provision for medium to high density development in greenfield areas.
11.2.13 This is consistent with the messages from the literature review and the staff
understanding of the general approach Auckland is looking to take.
11.2.14 Delivering a more enabling planning framework in the EUA would primarily require
reconsideration of the Objectives, Policies and Rules of the Suburban Residential
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Zone, and it may also require some tweaking of provisions in other Zones such as the
City Living Zone or the Commercial Zone.
11.2.15 A focus on small to moderate sized development across the wide suburban area
would be sound urban planning policy for a number of reasons such as:
 This type of development is likely to deliver the most affordable type of residential
intensification product
 It is more consistent with the character and scale of suburban areas than larger
developments
 A wide area would provide a greater number of potential development sites that are
‘ripe’ for development (e.g. sites with low improvement values)
 It would allow a wider range of living environments to be built, allowing a wider
range of housing needs to be met
 There is a market for people who wish to “age in place” and would consider
downsizing into more intensive developments if they were located in their existing
communities
 It is more responsive to what the market is likely to be able to deliver
 It may only have an incremental effect on existing infrastructure.
11.2.16 To deliver a more enabling planning framework would involve a significant amount of
community engagement and further research into issues such as infrastructure
capacity; culminating in substantial plan change process. In terms of community
engagement, meaningful discussions along the lines of the City Living Zone process
would be beneficial.
11.2.17 Past experience proves that it may not be easy to achieve widespread community
acceptance to planning rules that enable residential intensification. It may be easier
to achieve this acceptance if:
 The changes to the planning framework provide for development in most or all of
the EUA (as opposed to targeting particular areas/communities) as this will share
responsibility over the whole city and residents in particular areas may not feel that
they are being ‘picked on’ or ‘singled out’
 The changes to the planning framework provide for small to moderate size
redevelopment in most areas more in line with a suburban environment, character
and scale
 The rate of change to existing neighbourhoods is expected to be incremental over
a long period of time rather than more significant and more immediate
 Community engagement is more comprehensive e.g. the ‘place-based’ approach
that was successful in the City Living area.
11.2.18 In terms of greenfield intensification, minimum density requirements (whether 15
dwellings per hectare or something different) should ensure that when higher
densities are achieved (e.g. through retirement villages) they are not offset by lower
than minimum densities in traditional subdivisions with no net increase in density
above the minimum required for the whole urban growth area. Please note that the
Property Developers Forum does not agree with this statement.
11.2.19 Despite the obvious challenges, consideration should be given to the potential for
large sites like the racecourse or a golf course to be redeveloped for medium to high
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density development. This could involve partnership with central government and its
agencies like Housing NZ23.
Determining the role of local government
11.2.20 There are a range of roles that the SmartGrowth Partners (especially TCC) could play
in delivering residential intensification; from a ‘passive’ regulatory role through
planning policy, to an ‘active’ role through direct provision of housing or investment in
development projects through arrangements like joint ventures and PPP’s. These
options are not fully understood and should be further assessed.
11.2.21 Determining the role of local government in the sub region in delivering intensification
would logically involve wider consideration of the costs and benefits of this form of
development vs. the alternate, which is greater reliance on greenfield development.
This would help to determine whether a valid case exists for local government
investment/spending in this area.
What role will central government play?
11.2.22 This is another area which is not fully understood. Central government involvement is
likely to mainly be in the area of social housing provision and funding although there
may be significant policy differences between a National or a Labour government.
Another opportunity would be the use of Crown land for development. Further liaison
with central government to determine its role would be advisable.
SmartGrowth Intensification Targets
11.2.23 Given the trend of reducing infill and greenfield development in the EUA, both the
absolute amount and the percentage of residential development that will be delivered
in the EUA in the future will decline unless there is substantial expansion in the
amount of residential intensification.
11.2.24 The percentage of residential development delivered through residential
intensification in the last 16 years would need to be increased by 300-400% to
achieve the 25% requirement for residential infill and intensification combined in the
SmartGrowth Strategy and the BOPRC Regional Policy Statement.
11.2.25 If the SmartGrowth partners took an active role in the delivery of residential
intensification, it would assist in helping to achieve the targets.
11.2.26 Given the multi-faceted challenges of delivering residential intensification and the fact
that the SmartGrowth Partners will not control whether it is actually delivered by the
private sector, consideration should be given to a more flexible approach to
residential intensification targets. This might be in the form of two separate targets:
 The first an evidence based target that is agreed as being realistically deliverable
by the market, taking into account the planning framework that is intended to be put
in place and the likely involvement of local and central government in assisting with
the delivery of residential intensification
 The second an aspirational target consistent with a ‘compact city’ approach and the
benefits of residential intensification.
11.2.27 This twin target approach would allow a degree of realism, while still outlining the
desired vision for the future. At this stage it is too early to determine what a realistic
evidence based target might be.
23
Please note that the SmartGrowth Property Developers Forum supports this but notes that the options
detailed in this paragraph would be challenging and would take time.
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12.
Implications of Conclusions for Other Workstreams
This section deals with the possible implications that this research has for other parts of the
SmartGrowth Strategy.
12.1
Residential infill
12.1.1
Short-term infill development is likely to create greater challenges to delivering
intensification in the long-term.
12.2
Residential intensification
Urban limits and flow on impacts including infrastructure
12.2.1
If less intensification is delivered, additional greenfield land would be required to
accommodate population growth based on current population growth assumptions.
This would affect urban limits, timing and staging of different areas, the protection of
productive land, the transport network, infrastructure investment, infrastructure
funding and the location and quantity of business land. If the population growth
assumptions are reduced downward in the future, additional greenfield land may not
be required. Even if additional greenfield land was required this would not be
required for some 20 to 30+ years given the large supply of land still available in
zoned and planned urban growth areas.
12.2.2
Based on a ‘business as usual’ scenario for residential intensification of 5-6% of the
sub region’s total residential development instead of the assumed 19% there would
be a shortfall of 7,000 dwellings. In this was instead to be delivered by greenfield
development at 15 dwellings per hectare this would require approximately 460ha of
additional net developable land. This is very much a worst case scenario as by doing
this such as establishing an enabling planning framework for residential intensification
historic intensification trends should increase in the future.
12.2.3
This possibility should be factored into future infrastructure projects which are
currently being assessed such as the Tauriko Upgrade Study of SH29 because land
around SH29 is one of the potential locations for future residential (and industrial)
development.
Transport network
12.2.4
If infill and intensification does not occur as currently projected and is replaced with
greater greenfield development, this would have adverse consequences for the
transport network due to longer trip distances and increased reliance on the arterial
network, including State Highways. This would indicate that the transportation
challenges identified in the Tauranga Urban Network Study (TUNS) may actually
prove to be greater and more immediate e.g. congestion issues and upgrade
requirements.
Infrastructure funding
12.2.5
If lower intensification is delivered, it may compromise the funding of the Southern
Pipeline which relies on development contribution funding from intensification to
repay a large portion of project debt. This issue could be resolved if additional land in
the Southern Pipeline catchment was released for residential development to offset
reduced intensification. Land around SH29 is again a potential location that would
satisfy this criterion.
Housing affordability
70
12.2.6
Because of the cost structure of delivering residential intensification, it is not likely to
assist in resolving current housing affordability challenges in the sub region.
City Plan
12.2.7
Although outside the scope of the SmartGrowth Strategy / SmartGrowth Update, it is
worth reiterating that if the recommendations of this research were adopted, it would
create significant work for TCC in delivering an enabling planning framework for
residential intensification. This would involve community engagement, consideration
of infrastructure servicing and funding and a major City Plan change process. This
would have substantial resourcing implications for TCC.
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13.
Options for the SmartGrowth Update
13.1
Residential infill
13.1.1
Multiple options have not been identified. The status quo is considered to be the only
realistic option at the current time.
13.2
Residential intensification
13.2.1
The following options have been identified for the SmartGrowth Update:
 Option 1: Retain status quo intensification growth projections
 Option 2a: Adopt revised intensification growth projections through SmartGrowth
Update
 Option 2b: Adopt revised intensification growth projections post the SmartGrowth
Update
13.2.2
The pros and cons of these options are assessed in the table below:
72
Table 27: Options assessment
Option 1: Status quo
Option 2a: Revise through
SG Update
Option 2b: Revise post the
SmartGrowth Update
Explanation
Retain combined infill and
intensification growth
projections of around 25% of
total growth.
Intensification projections
would be reduced downward
by a yet to be determined
amount through the SG
Update process in 2013.
Revision of intensification
projections would not occur through
the SG Update. An action would be
added to the SG Strategy noting
that this revision would occur in the
future. This would sensibly be
timed around the availability of
population projections from the
2013 Census and the timing of
other revisions to the Settlement
Pattern being made for ‘Generation
5’ greenfield urban growth areas.
Pros
 Consistent with current
SG Strategy, concept of a
‘compact city’ and the
benefits of intensification
e.g. reduced infrastructure
costs.
 Given research findings
reduced intensification
growth projections would
align with a more realistic
growth scenario
 Given research findings reduced
intensification growth projections
would align with a more realistic
growth scenario
 It would allow consideration of
intensification growth projections
to be packaged with
confirmation of the rest of the
settlement pattern ensuring
alignment between
intensification and greenfield
growth projections
 Provides sufficient time to
understand what the challenges
of delivering residential
intensification mean in terms of
the quantity that is likely to be
achievable
 TCC may need to undertake
significant engagement with the
community if conclusions in this
report are accepted, as well as
considering significant Plan
Changes
 Population growth rates will
affect residential intensification;
sensible to align new population
projections with decisions on
intensification
Cons
 Significant risk that this
amount of intensification
will not be delivered due
to multi faceted
challenges
 Insufficient time to
undertake all of the work
required to develop
realistic intensification
growth projections
 If growth projections were
misaligned with likely
growth outcomes this
would compromise TCC’s
ability to plan accurately
for things like
infrastructure upgrades
 Absence of revised growth
projections would make
any adjustment now less
accurate.
 The final settlement pattern
would not be available until after
the Smartgrowth update was
completed
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14.
Recommendations
14.1
Residential infill
14.1.1
It is recommended that the residential infill projections are retained as they currently
are through the SmartGrowth Update. These being 6% of projected sub regional
growth to 2051.
14.1.2
It is recommended that ways to address/minimise the adverse affects of residential
infill development in delivering residential intensification in the long-term are assessed
and reported back as part of wider work on residential intensification recommended to
occur post the completion of the SmartGrowth Update.
14.2
Residential intensification
It is recommended:
a) That as a matter of principle the SmartGrowth partnership remains committed to
the vision of a compact urban form which reflects the benefits of intensification
b) That the updated SmartGrowth Strategy provides for an enabling planning
framework for intensification to be delivered through other planning instruments
c) That the updated SmartGrowth Strategy provides for an approach to
intensification which is supported from a development viability perspective
d) That the updated SmartGrowth Strategy acknowledges the challenges involved in
making intensification work and that strong political leadership will be required to
progress intensification aspirations
e) That the updated SmartGrowth Strategy acknowledges that in order to
successfully deliver intensification, strong levels of collaboration and engagement
will be required amongst the partnership and with the community
f)
That the current SmartGrowth projections and targets for residential
intensification are retained in the updated SmartGrowth Strategy and that further
detailed assessment is completed following the update to determine a revised
target which is aspirational yet not unrealistic nor unachievable
g) That staff are directed to prepare and report back on a work programme which
would identify appropriate actions to be included in the updated SmartGrowth
Strategy in order to identify and confirm a revised target. The work programme is
expected to include:
 Undertaking a capacity/likely uptake assessment for residential intensification to
determine updated residential intensification growth projections. This would require
a range of different scenarios being considered based on various interventions in
terms of what type of planning framework is put in place and how active the
SmartGrowth Partners are in delivering residential intensification; as well as
consideration of the potential for higher density developments in greenfield areas.
 Fully exploring and taking account of any potential capacity in all of the existing
nodes and corridors prior to confirming any policy shift
 District Plan implications
 Identification and development of a Tauranga specific ‘best practice’ model for
community engagement around change in urban form, including careful
consideration of the language that is to be used. It will address the benefits of
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intensification and will also include clearly articulating the consequences of not
delivering residential intensification (e.g. more greenfield development,
transportation issues) so that informed choices can be made.
 Consideration of communication methods and other mitigation measures to reduce
potential negative community perception of residential intensification
 Consideration of mitigation measures to reduce potential negative social outcomes
of residential intensification
 Consideration of whether the SmartGrowth Partners are willing to take an
active/leadership role in delivering residential intensification such as opportunities
for funding and partnerships with developers, the ‘third’ sector (e.g. Tauranga
Community Housing Trust) and communities. This will include a full assessment of
costs and benefits.
 Consideration of the cumulative effect of lower yield from intensification, greenfields
and existing urban growth areas growth areas on the overall impact in terms of
additional land requirements
 Consideration of providing property data held by Councils to developers through a
web based tool to enable identification of sites that might be ‘ripe’ for
redevelopment
 Better understanding of the role that central government might play in assisting
cities to deliver medium to higher forms of housing density
 Consideration of possibility of redeveloping large sites like the Tauranga
Racecourse or a golf course for residential intensification and other potential sites
such as the commercial area in the early avenues
 Consideration of whether further research is required into housing preferences
similar to the work that was done in Melbourne and Sydney referenced earlier in
this report.
 Consideration of how (if at all) to address the adverse effects of infill development
on delivering residential intensification in the long-term
 Consideration of the potential value of having both an evidence-based realistic
intensification target and a higher, more visionary target.
 More in-depth consideration of the ability to deliver higher densities in greenfield
areas to offset the possible reduction of residential intensification targets.
 Remaining informed and aware of leading research and practice in delivering
residential intensification, such as the Resilient Urban Futures research being
undertaken by the University of Otago.
It is noted:
14.2.1
That the approach to residential intensification suggested in this report of ‘scattering’
or ‘pepper potting’ throughout the suburban environment with mainly small to
moderate sized developments (mainly less to 10 units) is significantly different to
earlier SmartGrowth intensification zones approach e.g. the Greerton and Arataki
Smart Living Places proposals.
14.2.2
That the approach to residential intensification suggested in this report would not
preclude the development of dedicated residential intensification areas in the future,
however the report suggests that these areas will occur as a result of being supported
from a development viability perspective as opposed to a targeted zoning approach to
specified areas.
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15.
Appendices

Appendix 1: Location of the Existing Urban Area (EUA)

Appendix 2: Residential Intensification: A Building the Community Perspective

Appendix 3: SmartGrowth Infill Assessment

Appendix 4: Literature Review

Appendix 5: Case Studies

Appendix 6: Summary of Local Interviews on Residential Intensification

Appendix 7: Samples of Financial Model

Appendix 8: Photos of each Form of Residential Intensification
76