“we  have seen the enemy, and them is us…”. Pogo, (1972)  ”

There is a serious rental accommodation shortage in earthquake ravaged Christchurch. But the real question is : can more be done to speed up the adjustment processes so that the current affordability crises and shortages don’t last unnecessarily long?  Yes.

Here’s the problem in a nutshell. Tens of thousands of  households, owners and renters,  have been directly displaced by earthquake damage to land and property. Many times  more are affected  by smaller scale but still significant repairs on their properties. Members of these households  need and demand  rental accommodation for periods from several weeks up to several years as repair work on their properties is undertaken or while they await the construction of new homes (and until residential household insurance markets come on line again to facilitate financing and construction of new dwellings that could be a long time). There is also a growing influx of workers and their partners/families arriving to help rebuild the City, Lyttleton and other surrounding suburbs , all of whom  are and will be looking for decent accommodation, to buy or to rent. Rents for residential accommodation in “safe” green-zone areas have already risen,  steeply,  in response to this  shortage. These rent rises  mean that the impact, for good (landlords) or for ill (tenants), are  felt across the entire City, Lyttleton, Banks Peninsula  and the Canterbury region, not just by those in earthquake damaged areas. While the  the poor and those on fixed (low) incomes are , as usual, disproportionately  affected, the problem of finding decent affordable accommodation close to familiar schools, family, and work places,  has made the rental accommodation crisis reach deep into the pockets and lives of the middle and upper income classes.

Other  communities around the world,  when with faced serious shortages of affordable rental accommodation,  have looked to the reform of their local zoning by-laws as one possible solution, notably Vancouver, BC. (See my post Accommodation Shortages in Christchurch – Lessons from Vancouver)  A  very simple modification to our existing zoning regulations  along the lines that have been adopted in Vancouver would go a long way to increasing the supply of rental accommodation in the desired residential living areas within Christchurch,  Lyttleton Harbor and the satellite towns of Christchurch. Think thousands of additional bedrooms, living rooms, kitchens, bathrooms, toilets, fenced yards  in prime residential areas near to existing schools, parks, shops, and other  amenities that make Christchurch (still) an attractive place to live and work; all fully insured,  privately financed and built quickly within the next year. How? Simply permit secondary suites in existing and new residential dwellings in Christchurch.

A secondary suite is a self-contained dwelling unit that has been created “within” a larger principal dwelling. A secondary suite typically has its own bedrooms, kitchen, living areas, bathroom, toilet and entrance and often shares the main dwelling’s yard, parking area, storage space, laundry etc . In Vancouver, no ownership nor subdivision is permitted for secondary suites , but there is an active and  growing market for “laneway houses”, smaller self contained houses or cottages carved out of land  on back sections in the prime residential areas of Vancouver, a market only recently created  since the legalising in 2009 of this sort of subdivision of the standard residential lot in Vancouver. Both of these policies could help Christchurch, but I will only address secondary suites in this article.

While tens of thousands thousands of secondary suites have been built in existing larger and older houses in established residential areas of Vancouver  for decades – mostly illegally until 2004 – almost half of all new residential homes being built now contain one or more secondary suites. The economics of this change are overwhelming. On the supply side, both younger and older households need a mortgage helper of some sort in a city where a decent house in a decent area will run between $800k  to over $2 million. $300 rent a week ($15k a year) for a typical 1 or 2 bedroom secondary suite goes a long way to both getting and being able to pay off a mortgage for  young singles or couples trying to live the dream of owning their own home. The rental income, and the social companionship, from secondary suite tenants also works well for older, retired seniors or widowers on low pension incomes, enabling them to continue to live in  their own homes in areas near the shops, parks  and transport they are familiar with. (I speak from experience here – my mother, recently deceased at 93, and on a paltry pension, had 3 basement borders each paying $100 a week, enabling her to live for the last 30 years of her life in the prime residential  area  of Vancouver (Dunbar) where she had lived since the 1950s). When it comes time to sell, houses with (legal) secondary suites typically command a 10%+ premium on a sale price.  On the demand side students, young professionals, solo parent families on limited incomes, new immigrants to the City from across Canada or across the world, older seniors on fixed retirement incomes all want to live in desirable residential regions close to universities, schools, parks, shops, public transport, etc., at rents they can afford. City planners and regulators like it: more high rise apartments and tenements in marginal regions that become tomorrow’s ghettos and today’s eyesores are not wanted by planners in Vancouver, but secondary suites in prime residential areas  are. Provincial and federal government politicians actively promote secondary suite policies  as part of “smart growth” strategies for their cash strapped municipalities. Win-win for all concerned it seems.

But these legal secondary suite markets, and the political systems that enable and facilitate them,  are conspicuously absent in Christchurch or Lyttleton Harbour .

The current Christchurch and Banks Peninsula district plans  do have provisions for internal secondary suites in residential areas, but only under extreme restrictions that effectively negate their personal and financial viability. The regulations  label any sort of “secondary” self contained living accommodation unit as a “family flat” whether internal or external.  The typical by-law describes and prescribes a  “family flat” as a maximum 70 sq m or thereabouts self contained accommodation unit that  has to be used by only immediate family and to be removed when that immediate family is no longer using it. The  policy is enforced – to the extent it can be – by a $5000 lien registered (at your cost) against the property’s title, therefore  requiring your mortgagor’s permission. Draconian search,  enter , and dismantle privileges are given to local council enforcers in case of a suspicions/complaints by any neighbour! No wonder legal family flats are few and far between, even if “illegal” ones abound!

But the nuclear-family based sociology and conservative paternalistic  local body politics  that guided those who developed the original family flat regulations have long since passed their due date.  For example, during the last few decades the market for nominally  “short term” accommodation for student or immigrant home-stays , for holiday and visitor accommodation, or for bed and breakfast style accommodation has flourished throughout the country . These activities are perfectly legal  “residential activities” in any residential area in almost every NZ city, to the benefit of both landlords and renters . Christchurch and Banks Peninsula planners don’t care as long as there no more than four paying tenants in these sorts of arrangements, policies mirrored by  Inland Revenue, who don’t even require such small scale “residential landlords” to report the income they receive as long as it doesn’t exceed $230 a week per “homestay” border or visitor. Flatting arrangements in residential areas between non-family members who are friends, acquaintances, co-workers, fellow students, etc have been prevalent in New Zealand for decades. Accommodation  is let, sublet, shared, and rented, all in a variety of ways by non family members, to everyone’s benefit. Nobody really cares about family or non family members …except if you are deemed to have a secondary suite, a so called internal “family flat”, and then city planners do care, a lot.

What makes a complex of bedrooms, living areas, bathrooms, laundries, garages and kitchens “secondary” as distinct from “primary”? Follow Alice down the rabbit hole to find out. The rabbit hole is the sequence of bureaucratic categories in the Christchurch and Banks peninsula district plans  that are used to control and regulate who can do what on residentially zoned land.

In a residential area, City and Banks Peninsula plans dictate that there can be  only one “dwelling”  on a piece  of  land that meets the minimum land area requirement. Otherwise a resource consent is necessary, perhaps as a “controlled activity” but more often as a “discretionary” activity or simply a “prohibited activity” . But what is a “dwelling” and what  makes a “dwelling” primary or secondary? The answer is more bizarre than you can possibly imagine. A residential  dwelling can in fact contain a second (or third or fourth or…)  bedroom, bathroom, toilet, shower, games room, library/study, entertainment room, laundry (sometimes), living room, dining room ,  deck, garage space etc , indeed as many as one can afford or fit on the land, subject to building consent requirements.  But a residential dwelling can have only one “kitchen”. And what exactly is a  kitchen? In the  words of the planning documents a kitchen is an enclosed space with a sink,  a bench top and cooking facilities. In practise, many living and games/entertainment rooms, studies as well as what are conventionally called kitchens, have built in benches,  cupboards, sinks, refrigerators and “bar” or light eating type facilities. So, it  really comes down to “cooking facilities”. And what is deemed to be a cooking facility in these days of portable , plug and play appliances: benchtop ovens, slow cookers, toasters, kettles, microwaves, blenders, sandwich makers, bread makers, electric frypans, etc.? I couldn’t get a definitive credible answer on this question from planners or legal experts. But …if you violate the law and have to “remove” a kitchen  to comply with the city plan, operationally you only need to remove the fixed cooking facilities, the oven and the hobbs top.

The tail is wagging the dog here. The plain fact is that you can have as many or as few “primary” or “secondary” bathrooms, bedrooms, living areas, garages, toilets, showers, decks etc as you want. You can rent, share, or give away your bedroom, bathroom, toilet, games room, back yard, garage, ….  to almost as many friends, family, co -workers , home-stayers, tourists, new immigrants, visitors of any gender, nationality , age or creed ….  as you want (up to four paying visitors – but who is really counting?). But woe if you don’t want to cook for them and provide them with their own oven and hobbs top! In that one case, if you have a second fixed oven and a hobbs that , and only that,  will turn your “house”  from one dwelling in to two dwellings!

Stop and let the inanity of this “put the item in a bureaucratic tick-box” policy sink in. Second hobbs and oven equals a second residential dwelling. Definitely a “categorical leap” as the philosophers would say. When you strip away the pretentious language about having second dwellings on residential lots and get down to the operational meaning of the rules you find that you need to make a full Resource Consent application to do a simple task any decent tradesperson can do – install an oven/hobbs properly in an existing house. Of course, on the advice of City planners and your planning consultant you would never ask for a Resource Consent hearing to install your oven/hobbs. Not just because the time and financial cost is likely to be 10 times as much as the cost of your oven/hobbs, but primarily becasue it will be a waste of time and money. Your application will surely be turned down since residential activities as defined in the planning documents only permit one dwelling per residential lot, by fiat from the planning documents!! Catch-22! But go for it with a bathroom, bedroom, living room, toilet, deck, garage, sleepout, games room, study,….

Unfortunately the one opportunity that has been taken by the central government to deal with the accommodation problem in Christchurch – the Canterbury Earthquake Resource Management Act Permitted Activities  Order of 2011- did absolutely nothing to deal with this anachronistic regulatory zoning problem. It simply passed the buck back to the City Planners and developers by not challenging existing restrictive planning laws and  by shrink wrapping the one good idea they had – let new external residential accommodation units be built in the city on existing residential land – in a web of regulations  that make it both prohibitively costly and undesirable to actually put extra accommodation units in place.

Two restrictions stand out as completely unnecessary: namely that (1)  all such “accommodation units” have to be completely removed from the land and the land returned to its original state  by  2016  and that (2) any such accommodation can only legally be used by and only by residents directly affected by the earthquake. Who in their right mind would invest $100k to $200k in a new external residential dwelling unit, even if they could get insurance and financing (which they can’t) , when rental returns would have to be recouped within only 4 year period and also when the potential rentals and tenancies  from new workers or those being indirectly displaced via high rents are excluded by law!  I have been told by local city planners that the 2011 Order simply “does not apply” to internal accommodation units – ie adaptations/conversions of the existing residential housing stock in Christchurch – because   those cannot be “relocated” when 2016 rolls around.

How foolish are these myopic and unnecessary policies about internal or external secondary suites for residential properties? It’s really a matter of demand and supply. Give a solo parent or family with small kids, young single professionals, older retirees, or migrant trades persons and their families, a self contained two bedroom apartment attached to an existing, beautiful home in a pristine residential area close to schools, parks and restaurants/shops  – think Ilam, Merivale, St Martins, Burnside, Sydenham, Riccarton, Beckenham, Cashmere, Lyttleton, Governors Bay, Diamond Harbour, Addington, St Albans , etc – and the demand soars. And from Vancouver’s experience, so does the supply. The economic logic is compelling. An established couple whose children have moved on, with a four – six bedroom home in a prime residential area could spend perhaps $10,000- $40,000 adding in separate kitchen, bathroom, laundry, and/or living space to their existing home. Their insurance company is happy to extend their existing policy to the new extension – completely the reverse of any other form of new residential construction in Christchurch.  An unfurnished unit in a desirable area might be rented for between $200-$300 a week, more for a furnished unit. That’s between $10k and $15k return a year on a $10-$40k investment! And of course that rental income stream and insurance on the underlying asset keeps the banks happy lending on such small scale projects.

To the scare mongers who would cry that such a change would lead to the destruction of local family residential neighborhoods in “old” pre-earthquake Christchurch , I can only say, get real. It’s already perfectly permissible in the City and Banks Peninsula plans to have in any and every residential house up to four paying guests for tourists, visitors, home stay, etc no matter whether they have a family connection or not, no matter whether they stay a week, a month or a year. Do you really think that by asking them to cook for themselves you are going to destroy neighborhood values? Just what interests are you paternalistically trying to protect in a City trying to re-invent and rebuild itself? Moreover, visit Vancouver, year after year rated in the top 3 most desirable cities to live in in the world . The beauty and social diversity of the wide range of residential neighborhoods in Vancouver testifies to the power that a properly (less) regulated market in secondary suites has for helping to solve rent crises and accommodation shortages.

There are a few nice features of the new Christchurch City temporary accommodation scheme that permits the construction of an “accommodation unit”. An accommodation unit is  “a structure of no more than 150m² in gross floor area for the purpose of providing temporary residential accommodation. The unit may include facilities normally associated with residential accommodation such as a kitchen, living area, bathroom, toilet and bedrooms. Accommodation unit may also include a campervan or caravan.” There is a fast tracking system for getting pre construction advice and approval in 3 to 5 days  – for free. Of course all building consents need to be in place…but this isn’t necessarily a big hurdle for a well designed and well constructed unit.

The problem is that  “earthquake related” accommodation units are surrounded by a host of ancillary use constraints and regulations that strangle the (apparent)  intentions behind the scheme …: eg whatever faciltiies are constructed  must be temporary,  one-storey,  relocateable,  used only for accommodation by and for   households directly dislocated by the earthquake, and removed when their temporary need has dissipated or when CERA instructions say so or when CERA is disbanded four years away in April 2016. Consider the financial incentives induced by these regulations:

I estimate the cost of putting a 70 sq metre modern two bedroom “accommodation unit” below my garage out in my home in Governors Bay at around $110k with a separate access drive.  I wouldn’t  have any trouble at all complying with ALL of the requirements spelled out in the  check sheet P033 . We  have a large site with well established trees, unbelievable view , the street is quiet, the school is nearby, we’re in the green zone, ….I could go on and on but the long and short of it is we live in a beautiful place.

However, I do not have any specific persons in mind who might be displaced from their homes who I would be able to accommodate – a requirement to comply with the new regulatory policy. Instead I am thinking of temporary (long or short term) rental for people/ families who actually are displaced or for workers who would be employed in the rebuild of the city or Lyttleton Harbour. The current regulations and their implementation prevent me from doing this becasue how am I to verify whether any particular long or short term tenant is actually displaced from their home by the earthquake. And why do I care? For example with rising rents and expiring leases many people/families will be “displaced” and need places to rent – after all there IS a housing shortage! But these people wouldn’t qualify. Moreover, workers, their partners, their families wouldn’t qualify under these rules either!!

I reckon demand would be pretty strong though, given the shortage of decent rentals in good places in Christchurch:  say $300 a week for a furnished modern warm self contained accommodation unit. That’s not  a bad rate of return on a $100k investment – except for the fact that it wouldn’t last for any longer than 4 years becasue of the “parameters” of the temporary residential housing policy.  Why  would I ever invest $110k knowing that in 4 years I’d have to remove the “temporary accommodation”?

So…what do we conclude: willing buyers , willing seller but the transactions that would help alleviate accommodation shortages for the next few years are effectively stymied by inadequate regulations . Multiply this 1000 fold and you’ll see why “temporary”  inadequate approaches to zoning regulations – ones that don’t challenge the existing order – are a real bottleneck for dealing with rental accommodation shortages.

The plain fact is that the new  temporary accommodation orders, while well intentioned, simply avoid the underlying regulatory problems that limit the development of small scale private investments that could do plenty to alleviate our city’s accommodation problems. It’s just old wine in a new wineskin  – CERA and the city managers say we’ll facilitate something for you but then enclose it in a shrink wrap agreement that precludes it being used!

The temporary accommodation order itself  would have been  redundant had the zoning and development regulations been tweaked to permit residential activities to have secondary suites, as in Vancouver and many other Canadian municipalities – something that I am arguing in my other posts..