Urban densification: Auckland’s lessons for Sydney to tackle the housing crisis

The Transport Oriented Development State Environmental Planning Policy (TOD SEPP) has commenced. NSW Department of Planning, Housing and Infrastructure recently finalised the planning controls within 400 metres of 18 train stations. These are the first tranche of 37 stations identified for higher density housing. Higher density housing (up to 6 storeys) will be enabled in locations deemed suitable. (i.e. within 400 metres of identified stations and town centres). 

Whilst a novel approach for Sydney, it follows the example set by Auckland. Who enacted major planning changes over the last decade to boost housing supply and address affordability. To understand how things may evolve here, let’s consider the New Zealand experience. 

Permitting wide-scale medium density 

2016 was a big year for New Zealand. Their National Olympic team achieved a record medal haul at the Summer Olympics in Rio. Parliament also legislated to upzone three-quarters of Auckland’s residential land. Under the Auckland Unitary Plan (AUP) this created permits for medium density housing. 

New housing completions rose, and housing typologies diversified in favour of the ‘missing middle’. This included medium density housing (terraced houses and small unit blocks). In the five years to 2016, new Auckland dwelling starts averaged 6,300 per annum. With less than half (22%) being units or townhouses. In the five years post-2016, dwelling starts averaged 13,100 per annum. With 46% being units or townhouses (Figure 1). 

Figure 1: New Dwelling Starts, Auckland Region (2004-2024)

Source: Stats New Zealand (2024). “Construction starts. All forms of construction. Permits. Regional” Available from: https://www.stats.govt.nz/insights?filters=Information%20releases 

Permitting high density opportunities in TODs 

In 2020, there was an even better showing from New Zealand’s Olympic team in Tokyo. And like 2016, NZ Govt put the National Policy Statement on Urban Development (NPSUD) in place. A direct response to a Productivity Commission report on ‘Upzoning Land for Housing’. The Govt’s Urban Growth Agenda program was to improve housing affordability. As well as dismantling barriers towards improving land and infrastructure supply. 

This moves prioritised TOD by requiring Auckland and other large cities to zone land for high density residential developments. This included a minimum of 6 storeys within 800 metres of rapid transit stations. This pushed the residential supply pipeline to even greater heights. With new dwelling starts peaking at over 21,000 dwellings in 2022. Of which 74% were townhouses and apartments (Figure 1). Since then dwellings starts have been impacted by inflationary cost pressures. 

Sydney’s TOD SEPP resembles this Auckland initiative as it faces similar issues. Residential prices levelled off after the AUP changes. And whilst prices rose rapidly post-Covid, they have subsequently fallen again (Figure 2). This is in stark contrast to the experience in other western cities like Sydney.

Rental prices in Auckland have continued to rise. But the rate of growth in the five-years post-2016 was a third lower (19%) than that in the five years pre-2016 (28%). Since 2023 rental price growth has accelerated again. This suggests other structural trends at play. 

Figure 2. Median Aggregated Rent & Sale Prices, Auckland Region (2004-2024) (NZ$)

Source: Ministry of Housing & Urban Development. (2024). “Auckland. Aggregate. Median Price” Available from: https://catalogue.data.govt.nz/organization/ministry-of-housing-and-urban-development; New Zealand Tenancy Service (2024). “Rental Bond Data”. Available from: https://www.tenancy.govt.nz/about-tenancy-services/data-and-statistics/rental-bond-data/ 

Putting downward pressure on the Cost of Production 

Another outcome of Auckland’s planning changes has been to shift the housing building focus from Auckland’s fringes to central and inner suburbs. The proportion of new permits in these areas rising from 65% (2015) to 85% (2020)¹. This follows the changes in AUP and NPSUD. Both of which enabled the permissibility of higher densities. But this has placed downward pressure on land costs (Figure 3).

Figure 3. Price Cost Ratio*, Auckland Region (1993-2023)

Source: Ministry for the Environment. (2024). “Price Cost Ratio”. Available from: https://huddashboards.shinyapps.io/urban-development/ *The Price Cost Ratio compares the extent to which construction or land costs contribute to house prices.

Conclusion: Assertive densification  

Auckland’s approach has yielded some results. It has enabled greater housing supply in a compact development form. It has benefited homeowners, renters and the construction industry alike. It represents taxpayer value-for-money by concentrating development where it is cheapest to service. It has prompted better environmental outcomes by lowering energy consumption. As well as facilitating non-fossil fuel powered transport options. Auckland’s housing costs are still too high and more action is needed. But the government’s bold approach to unlock wide-scale supply has helped. 

Sydney’s acute housing crisis demands similar assertive action to fill the missing middle. Densifying existing urban areas close to public transport makes sense. As existing infrastructure has spare capacity and household demand is at its strongest. Densification decisions must be protected from the vested interests of local NIMBYs. Especially when Housing affordability is of strategic importance to all city residents.

It is not a panacea but the finalisation of the 18 stations is Sydney’s first step in the right direction.

1. Urban infill in Auckland: An additional house to the rear of the existing property.
McCracken, M (2023): “Defining urban intensification in Aotearoa”

2. New townhouses: Some of the denser family homes built in Auckland since planning changes