Keith Aldous (of Auckland-based We Subdivide) shoots from the hip. He’s aware of how the subdivisions that spread out from city centres into pastureland can become ugly and undesireable.

“There are numerous examples around Papakura and Papatoetoe in the south [Auckland] which look awful and they are not selling. They’re built quickly, cheaply, they’re not insulated properly and neighbours can hear each other.”

Aldous is pondering the changes to greenfield zoning rules that housing minister Chris Bishop announced at the Property Council Residential Development Summit earlier this year.

The changes relate to the National Policy Statement for Highly Productive Land (NPS-HPL), which was introduced by the last government to protect New Zealand’s highly productive soils.

The NPS-HPL protects a total of 15 per cent of the country’s landmass – an area nearly as large as Otago. Much of this protected land is around our biggest centres, and in Bishop’s view, the rules are impeding “growth busting to get out”.

“[We need to strike a balance] between how we protect our most productive land, and the development of more homes,” he stated.

In order to facilitate this, cabinet has removed the protected status of land with lower quality soil (classified as LUC-3 land), and opened it up for housing.

Gone is the previous government’s focus on intensification – Bishop wants New Zealand to grow up and out. To that end, government is also offering developers affordable finance to facilitate infrastructure for these developments.

The development phase of a project is often the riskiest – and private financiers reflect this by charging higher interest rates.

This being the case, National Infrastructure Funding and Financing (or NIFFCo) will be providing $100 million for low-cost financing of medium-sized greenfield developments over the development period.

NIFFCo will charge approximately what private financiers would charge for completed developments – saving developers money, which should be passed on to homebuyers.

But while the expansion of available land for housing makes sense in an theoretical sense – supply and demand, more houses, lower prices – Bishop’s plan is not without its flaws.

And some are concerned it may cause more problems than it solves.

‘They’re built quickly, cheaply, they’re not insulated properly and neighbours can hear each other’

Keith Aldous

Superlot suburbs

Development in greenfield around the edges of cities can be problematic. Subdivision at scale is often standardised – endless streets of identical houses. The funding available favours large developers – who create at scale.

Aldous points to Milldale, on the northern outskirts of Auckland city, as an example of bland suburban sprawl. And he feels that the development changes will favour mega-developers.

“It will be the same old story, five or six builders buying superlots and creating generic two-storey box-standard houses”.

Even though there are some nice properties being built, he says “developers also run into problems when there is no overall design concept.

“The builders just put their own spin on what they want to build and nothing flows between them. There needs to be careful consideration before any development takes place. There needs to be more overall master planning of suburbs.”

South Auckland-based Ray White AT Realty Group director and branch manager Tom Rawson foresees another issue – a glut of new homes that no one wants to buy or rent.

“We have ended up with hundreds of new homes in the rental pool, because developers can’t get the sale prices they want to make a decent margin,” he says.

He continues that taxpayers need to question why the government needs to fund developers at all? Is it because the banks won’t?

“Developers have probably been lobbying for this, saying the banks won’t lend them money and they need cheaper finance. For this type of funding to work (and address affordability) it has to be economical for developers to to buy the land, design, provide the services, build, finance and sell the properties.

“At the moment it isn’t. And that’s true. But the banks aren’t lending the money because they see many greenfield subdivisions and developments as risky.”

Bigger developments on greenfield land have more risk. Infill developments in the city are seen as less risky as they are proven.

Easier access to land

Canterbury-based construction expert Mike Blackburn has a different take. He says that anything that makes it easier, cheaper, faster and simpler to bring houses to the market is a good idea. But he wonders if the $100 million allocated to funding will go far enough.

“One of my clients spent $500,000 just on an application to the local council for a 150-200 lot subdivision. That is $2,500 per section before a bulldozer even gets to the site. And that cost goes on the retail price of the house when it is completed.

“Developers spend that sort of money upfront in the hope they are going to get their developments across the line. If for whatever reason they don’t, then that money is just gone.”

He also questions whether developers will want to go through government scrutiny for their projects.

“Obviously sticking your hand out for any sort of loan from the government will come with a series of hooks regarding transparency and accountability for delivery.”

Nevertheless, Blackburn says that a significant percentage of the population don’t want to live in medium-density, multi-unit apartment or terraced complexes (he points to the thousands of unsold two-storey terraced houses around the country).

Having access to more land could be a great selling point.

“There is significant demand for greenfield developments, which is why fringe towns, such as Darfield and Amberley, are becoming popular because buyers can get a good size section with a backyard at a competitive price, within a 30-40-minute drive of Christchurch CBD. “[The changes] will give confidence to the industry, and with a bigger pipeline of land coming through, it will boost supply and keep prices down.”

‘There is significant demand for greenfields developments, which is why fringe towns, such as Darfield and Amberley, are becoming popular because buyers can get a good size section with a back yard at a competitive price’

State of play

NIFFCo has started working on a pipeline of medium-sized developments and says it will announce projects when transactions have “a high certainty of proceeding”.

At this stage only a small number of developers have made inquiries to NIFFCo about the funding and it will work with them to establish whether their developments are suitable for the funding.

Any additional funds above the $100 million will be subject to future ministerial decisions.

The agency says the new tool makes the cost of new infrastructure more transparent, while ensuring it falls primarily on the property owners who benefit across generations.

It’s useful to take the changes in context. In 2019 Auckland Council’s then chief economist David Norman said developing greenfield land was eye-wateringly expensive and had to be staged.

The (then) Future Urban Land Supply Strategy allowed for the staged development of about 140,000 greenfield dwellings over 30 years, with an estimated cost of council-provided water infrastructure and central government-funded transport infrastructure at $21 billion (or about $140,000 per dwelling).

Developers contributed typically about a third of the cost.

This is where NIFFCo’s loan will help developers. The lower-cost financing over the development period will be at rates similar to what private financiers charge for completed developments.“This support will bridge the financing gap and help ensure that new homes continue to be built in areas where they are needed most,” a NIFFCo spokesperson explained.

How the funding works

The $100 million is being made available through National Infrastructure Funding and Financing (NIFFCo) for low cost financing of medium-sized greenfield developments – about 1,000 to 2,000 houses.

Under the new Greenfield Model, NIFFCo will lend to selected developers through Special Purpose Vehicles (SPV) at competitive interest rates for water and bulk transport, community and environmental resilience, infrastructure (eg roads, stormwater, public transport, cycleways and flood-protection design, consenting and delivery costs), to allow a project to progress.

Once the development is completed, the debt will be refinanced to private markets and the funding will ultimately be repaid by future homeowners through an annual levy based on factors such as land area, value and use.

The levy will be capped, but homeowners will know in advance how much they will need to pay and over what timeframe. When the property owners sells, the requirement to pay the levy will shift to the new owners. The levy ends once the infrastructure is paid for. Bishop claims the lower funding interest rate will mean an average saving of $10,000 per house.