Government plan cuts red tape, but housing shortage persists
The government’s plan to allow “super-sized granny flats” without building consent marks a real shift in housing policy.
As part of its resource management reforms, the exemption could add 13,000 homes over the next decade – an attempt to give “families more housing options.”
While this move removes regulatory hurdles, experts caution that incremental reforms won’t solve New Zealand’s deepening housing crisis.
The initiative is part of a broader reform of housing-related planning rules under the Resource Management Act (RMA), with the government also proposing a new National Environmental Standard (NES) for Granny Flats to simplify the consent process in residential, mixed-use, rural, and Māori purpose zones.
Small gains in big housing problem
At first glance, 13,000 extra homes seems promising. But when compared to the country’s current consenting rate of 40,000-50,000 dwellings annually, these granny flats only amount to a 2.6% increase in supply, according to Timothy Welch (pictured), senior lecturer in urban planning at the University of Auckland, in a recent analysis published on The Conversation.
In Auckland, which bears the brunt of the housing shortage, around 300 such units might be added each year – a drop in the ocean.
“This represents genuine progress in reducing regulatory barriers,” Welch said. “But the scale of the housing crisis means we have to ask whether incremental reforms can deliver meaningful change.”
Building one isn’t cheap
Adding a basic 70-square-metre granny flat will cost between $200,000 and $300,000. With site prep, connections, and legal requirements, total costs lean toward the high end, Welch’s analysis found.
At today’s interest rates, a $250,000 loan translates to around $480 per week. While rents could reach $500-$600 in cities, that’s only viable in ideal conditions. For homeowners with equity, it’s a sound investment. But for renters and lower-income households, this “solution” is mostly out of reach.
“This dynamic illustrates a persistent challenge in market-based housing solutions: policies intended to improve affordability often primarily benefit those with capital to deploy,” Welch said.
Infrastructure can’t keep up
Granny flats also require full residential water, wastewater, and stormwater infrastructure – services already buckling in cities like Auckland, Christchurch, and Wellington. Vacuum sewer systems in Christchurch are stretched; Auckland’s combined sewer network overflows in storms; and Wellington’s pipes can barely meet current demand.
“Adding thousands of dispersed infill units to stressed networks poses genuine engineering challenges that funding alone cannot solve,” Welch said.
Parking will also tighten, as the policy removes minimum parking rules, but most Kiwis still own cars – 837 per 1,000 people, according to national stats.
Global models offer caution
California saw a surge in granny flat permits after a 2017 law change – from 1,000 in 2016 to 13,000 in 2019 – but only 60% were actually built due to costs and infrastructure issues.
In Australia, secondary dwellings were approved but under-delivered. Only 13-23% of eligible properties added them. Closer to home, Auckland’s Unitary Plan has led to 300-400 consents per year – but it’s unclear how many are built.
“Allowing one-storey detached 70-square-metre units without building consent may increase this modestly. But they are unlikely to dramatically accelerate production given persistent cost and capacity constraints,” Welch said.
Gains go to existing owners
While the policy reduces paperwork, the real winners are existing homeowners. They’ll get new development rights without public tender, a form of wealth transfer.
“Granny flats typically add roughly their construction cost to property values, providing capital gains alongside rental income potential,” Welch said.
Renters might benefit slightly – these units are 20–30% cheaper than full homes – but the impact for families needing larger spaces is minimal.
Design rules further limit potential: one-storey, standalone buildings with two-metre setbacks reinforce a low-density aesthetic rather than encourage meaningful urban intensification.
“Units could share walls and services, and two-storey designs that use less land could be permitted. Instead, the granny flat exemption favours the one configuration that maintains suburban aesthetics while delivering minimal extra housing,” Welch said.
A modest response in a bigger reform agenda
The policy exemplifies a familiar pattern in New Zealand’s housing approach – acknowledging the crisis but offering limited reform, Welch said.
While it’s a step forward, meaningful supply gains would come from embracing medium-density developments already standard overseas. Up to 180,000 more households could be housed through true urban densification.
“The exemption reduces bureaucratic barriers, enables some additional housing and gives property owners new options,” Welch said. “The question isn’t so much whether the new policy should be embraced. But rather whether the government is willing to complement it with larger changes the housing crisis demands.”
Welch’s analysis first appeared on The Conversation. The analysis can also be found on RNZ.
