Getting 4000 homes on the first KiwiBuild site at Mt Albert may not be as difficult as some people are making out, and it could be a godsend for the banks

By Greg Ninness

The Government’s plan to build 3000 – 4000 affordable homes adjacent to the Unitec campus at Mt Albert in Auckland has not been out of the headlines since it was announced two weeks ago, but so far the only dirt that’s been moved for the project has been the mud being slung by its detractors.

The project is the first stage of Labour’s KiwiBuild scheme, which aims to build 100,000 affordable homes over the next 10 years, so it was inevitable that such an ambitious policy would be drawn into the political mire.

The main claim made by those opposed to the scheme is that the site is too small to accommodate 3000 – 4000 homes, and more recently, that if that many homes were built, they would probably be so small that the banks would be reluctant to provide mortgages to people wanting to buy them.

So how do the numbers stack up?

It could be next year before definitive plans for the project are finalised, but what we do know is that much of the planning for urban densification in Auckland has been based on providing low-to-medium rise terraced housing or apartment blocks 3-5 storeys high.

So it’s probably a reasonably safe bet that that type of housing will form a significant part of the Mt Albert project.

Because the government wants to keep the housing affordable for first home buyers, individual properties are unlikely to be large, but that doesn’t mean they need to be tiny either.

If you assume a basic footprint of 50 square metres per unit in blocks that are three levels high, you would be able to get a 100 square metre, two bedroom unit on two levels, with a 50 square metre one bedroom unit above or below it, on 50 square metres of land.

Parking could be in the basement.

Using that template, 3000 units (1500 x I bedroom and 1500 x 2 bedroom) would require 75,000 square metres of land.

If 4000 units were built, split evenly between one and two bedroom units, they would take up 100,000 square metres.

The entire site covers 29 hectares or 290,000 square metres.

 So under the above scenario, the buildings would occupy between 26% and 34% of the entire site, or roughly a quarter to a third.

If the height of the buildings was increased to five storeys, which would allow say 2 x 2 bedroom units and 1 x 1 bedroom unit per 50 square metres, then the amount of land needed for the buildings would reduce to 50,000 square metres for 3000 units and 66,700 square metres for 4000 units, or between 17% and 23% of the entire site.

Therefore the idea of fitting 3000 to 4000 units may not be as much as a stretch as some people have been making out and they would not need to be shoeboxes.

Nor would they be slums.

There are plenty of good quality two bedroom apartments already built in Auckland that are under 100 square metres, and plenty of one bedroom ones that are less than 50 square metres.

And when they come up for re-sale they tend to be bought more by owner-occupiers than investors looking to rent them out.

Which means there’s already a proven demand for this type of property in Auckland, and it is increasingly gaining acceptance among home buyers.

But what about the banks – would they be willing to provide mortgages to people wanting to buy them?

You bet they would.

We know that because they already are.

Individual banks may from time to time tighten their lending criteria for apartments, but provided they have a minimum floor area of 40 square metres and aren’t leaky, leasehold or being purchased as an investment, then in most cases standard mortgage lending conditions will apply.

If 3000 units are built and the average amount buyers need to borrow to purchase one is $450,000, that’s potentially $1.35 billion in new mortgage lending for the banks from this one project.

If 4000 units are built that would grow to $1.8 billion.

The banks will be falling over themselves to shovel it out.

You can receive all of our property articles automatically by subscribing to our free email Property Newsletter. This will deliver all of our property-related articles, including auction results and interest rate updates, directly to your in-box 3-5 times a week. We don’t share your details with third parties and you can unsubscribe at any time. To subscribe just click on this link, scroll down to “Property email newsletter” and enter your email address.