Medium-density housing the key to a sustainable economic future

Although a relatively new residential building design type, medium-density housing (MDH) is already an established feature of the New Zealand residential building landscape, and medium-density housing is being constructed in increasingly larger numbers throughout New Zealand, especially in our larger urban areas.

What’s more, looking ahead, the demand for this sort of housing is set to increase, especially in regions that are experiencing high population growth. Given this scenario it’s important that we have a good understanding of what’s driving the demand for medium-density housing as well as the ability of the construction, finance and insurance industries’ to enable the ongoing and increasing supply of medium-density housing in New Zealand.

Successful cities are our economic growth engines
A successful city is one that will attract and retain increasing concentrations of people, with all their skills, to become a power house of the higher-value economic activity that cities tend to generate for driving the growth that a country needs.

In New Zealand, however, not all cities are created ‘equal’ so to speak when it comes to driving such growth, as is all too obvious from the dominance of Auckland on the country’s urban and economic landscape. In fact, not only is Auckland already by far the biggest, most populous city in the country but it’s also projected that it will absorb as much as 60% of New Zealand’s future population growth.

So it’s crucial that our cities, but especially Auckland, function effectively.

Urban viability depends on the right sort of housing
Unfortunately, one of the most important elements for attracting people to a city, namely housing – specifically good-quality housing in the right location that is affordable for the first-home buyer – is something lacking in our cities, particularly Auckland.

Not only has the supply of new housing not kept pace with the growth in population, thereby pushing up house prices and rents, but the supply of new housing has also not matched the type of housing needed, and its location.

In Auckland in particular, the provision of medium-density housing in the more central areas has not been adequate.

Why the historical lack of medium-density housing?
Of course, there are a number of obvious reasons that have led to this limited supply of smaller, more affordable, medium-density housing in our cities.
– Medium-density housing projects tend to be logistically and physically more complicated than the traditional stand-alone constructions.
– In areas of high population growth, the corresponding rise in the cost of both land and construction makes it difficult to build affordable housing.
– There are greater regulatory and financial risks associated with developing medium-density housing.
– Compliance with the stipulations of the Building Code is more complicated in the case of medium-density housing, especially in regard to clauses pertaining to structure, durability, fire, weather tightness, and acoustic and thermal design.

All of this, together with the resulting stress on households in the form of economic pressure, transportation issues and less choice when it comes to housing options, puts enormous pressure on any city but especially a city like Auckland to be able to function properly and continue to be a driving force of the country’s economic prosperity.

The role of medium-density housing and KiwiBuild
Reflecting the increasingly important role that medium-density housing will play in New Zealand’s urban future is the KiwiBuild programme.

KiwiBuild is the new government’s housing and urban development programme that is aimed at providing at least 100,000 affordable homes for first-home buyers. The focus will be on delivering the much-needed smaller, more efficient, medium-density housing in the right locations for ensuring the creation of thriving, sustainable urban communities.

However, the challenges we discussed earlier will need to be sorted quickly and effectively if, on the one hand, the New Zealand residential construction industry is going to be able to deliver on the government’s KiwiBuild programme – and, on the other hand, keep our cities viable and functioning sustainably.

Remaining a viable player in the New Zealand construction industry
Managing risk in any construction business is crucial for the long-term health of the business. Bonded NZ specialises in underwriting all sorts of risk insurance. So, if, for example, you need to take out insurance on a construction project that you’re working on, then get in touch with the team at Bonded NZ for a professional and informed discussion about the options open to you for protecting your construction business.