Land is the raw component needed to operate a business as a developer.
Sourcing sites in any market is critical but it becomes a more difficult task in the type of hot market that currently besets New Zealand.
Several things in that scenario happen to land and development sites;
- more become available,
- the pricing represents the aspirational returns envisaged by sales agents and as competition increases,
- sites are bought with little or no due diligence and that imparts risks that an otherwise more thorough process might negate.
Land comes in many guises; small infill sites, allowing generally single storey development, inner city urban sites, often for multiple townhouses or low rise apartments. Some are greenfield and some brownfield, and the remainder, generally are sub divisions.
The key hurdle here in NZ is securing ‘Resource Consent’ or in common parlance, planning permission.
That is derived from legislation, often criticised (with good reason) called the Resource Management Act.
Most of the assessment rules for any scale of development fall within the ambit of what is called a ‘Restricted Discretionary Activity,’ which is planning speak for wholly subjective assessment by the council of every aspect of the development.
It provides them with a right of veto, based upon, sometimes less than rigorous scientific or planning rationale.
It is here they get to ‘comment’ on issues such as aesthetic design, typology (both mix and layout) and have at their disposal a raft of legislated and codified planning and environmental standards. It can be a difficult process to navigate, given adhering to every rule is a big ask and the degree to which departure or infringement is permitted is never really known until it is challenged.
Whilst not directly related to the land issues, it is none the less a consideration that any developer should be bear in mind when assessing the viability of a development and a good understanding of the act is really a prerequisite for any developer here. If you wanna play the game, you gotta know the rules!
Given the degree of subjectivity that accompanies this part of the consent process, it is no surprise that unpredictable outcomes occur. There are effectively no precedents, so existing departures can’t be relied upon.
Critically, gaining consent requires assessment only of the potential negatives that any development might create. Positives do not come into the equation!
Regardless of the nature of the opportunity, the assessment of land remains broadly the same and whilst there are, as ever, numerous ways to skin this particular cat, the following is the rationale I adopt.
The first consideration is zoning. What is the land zoned for? Not all sites can be developed for high density townhouses or apartments and the council’s zoning for the site is the starting point. It also drives the land value.
Here in NZ although there are regional differences, the general categories are:
Urban; low density, possibly single houses only, on minimum section sizes of 500m2 upwards. Circa 40% site coverage
Suburban or suburban transition; low density but less restrictive, section sizes 300 – 400m2 similar site coverage to urban zone.
Medium Density; generally not governed by site coverage, but constrained by a combination of the other parameters listed below. This zoning allows townhouse and low rise apartment developments to occur.
Terraced Housing and Apartments, (THAZ) an Auckland specific zone that allows for up to 6 storeys and as much as 50% site coverage.
There are also the outliers, such as land subject to change of use (i.e. from industrial/commercial) or central city sites where significant height can be achieved.
They are all broadly constrained by different degrees of the same parameters, those being;
- Site coverage
- Unit size
- Height in relation to boundary (HIRB) or ‘recession planes’ as they are also known
- Set back
- Outdoor amenity space
- Parking requirements
- Access; for multiple units, a minimum sealed width will be specified within a greater width, the ‘spare’ width can be for pedestrians or planting.
To look at each individually;
Site coverage. Somewhere between 35% and 80% of the net area of the site can be covered by buildings; that can of course be replicated on however many storeys are allowed, giving the gross development area of the site.
Unit size; again, will vary but typically here, 1 beds are a minimum of 45m2, (if not least for funding/mortgage purposes) 2 beds, 60m2, 3 beds 90m2. Organisations such as the state housing provider have their own standards.
Height. Frequently an 8m limit with permissible breaches such as dormers or aerials but the Auckland THAZ allows for up to 16m depending upon the following –
HIRB; this constrains the build to being within an envelope (street facing elevation excluded) proscribed by a height at the boundary of either 3m, or for THAZ, 8m, and then within a line drawn at 45 degrees or 60 degrees from that point. It can be plotted by use of what is a type of protractor measuring tangentially at the boundary relative to the north – south axis. This can, and frequently does, nullify the permissible height limit unless the site is particularly wide.
Set back; the building can be no close than a specified dimension from the site boundary, often 2m on the flanks.
Outdoor space; depending upon the zoning, can be anything from 50m2 to 30m2 with minimum dimensions stipulated; for apartments, a minimum balcony size will be mandated.
Parking; very much zone dependent and may include a specified requirement for bike parking.
All of these constraints must be assessed at feasibility stage and it helps to have a good understanding of them before having to engage a team of consultants to make those assessments.
One of the key considerations that often goes un mentioned is the shape of the section. A site that is say 50m long and 20m wide (1,000m2) will provide ample room for 4 – 5 townhouses and a 3m access with large – ish gardens.
But to take a look at the constraints; taking 4m for the minimum depth of the garden, 6m for the depth of the house and 3m sealed driveway, 20 m is unnecessarily wide; the site could sit comfortably within a 15m width. The ‘additional’ 5m, whilst valuable, is really just garden space and won’t fetch the same $/m2 as built dwellings.
However, a wider site say, 24m allows two rows of houses, with a central driveway. For the extra 200m2, or 20% of the site area, the yield doubles and it would be well worth whatever extra cost is being asked to secure that wider site.
Generally, rectilinear sites are easier, depending upon the orientation and peculiar shaped sites can kill the deal completely.
Steep slopes present costs and challenges, but generally provide views not otherwise achievable; they do though require careful assessment and careful choice of builder.
The Geotech properties of the land will ultimately have a large bearing on the outturn cost, particularly for the high rise apartments and that can’t be readily assessed at the outset. It requires ground sampling and analysis and will be a risk that can hopefully be accommodated within the economics of the scheme.
Parking is often more about marketing the units than being a prescribed requirement but that is generally easily assessed and can, in the case of apartments, be supplemental to the unit price. Wellington and Auckland parking spaces for apartments are generally between $25k and $40k per space depending upon location.
It is a complicated process and I grudgingly accept it has to be or uncontrolled and unconstrained development would create some pretty poor (most social) outcomes, as occurred in the post-war boom of housing, a lot of which has been undone over the years.
That though, doesn’t mean these things can be measured with an elastic ruler as is often the case.
Both government and opposition here, are talking about repealing the RMA.
For me, it can’t come soon enough.