Are 13,000 new granny flats on the way? Not likely

Tuesday, 22 July 2025

Granny flats have been a talking point for Building and Construction Minister Chris Penk since early 2024.

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Government claims that granny flat building rule changes will lead to 13,000 extra dwellings and put a dent in the housing shortage, are a “fanciful projection”, an Auckland developer says.

Cutting red tape and lowering building costs to enable more development is a key part of the Government’s drive to address housing affordability and supply.

Making it easier to build granny flats, or minor dwellings, by removing the requirement for resource and building consents for structures of 70sqm or less was one of the Government’s first moves in its campaign.

Consultation followed Building and Construction Minister Chris Penk’s initial proposal, and legislation was introduced to Parliament earlier this year. It passed its first reading in May, and national direction followed.

At the time, Penk said the consent exemptions were expected to deliver about 13,000 more granny flats over the next 10 years. At a Master Builders event, he and Finance Minister Nicola Willis reiterated that figure, with Penk adding he was “bullish” on it.

Auckland property developer David Whitburn is not convinced the new granny flat rules will lead to 13,000 more of them.

But Auckland property developer David Whitburn, who has built more than 300 minor dwellings over the years, believes the number and the claimed impact was “a bit of a fanciful projection”.

The 13,000 estimate was about five times higher than it should be, as there were about 35,000 new dwellings consented each year nationwide, and minor dwellings made up fewer than 1% of them, he said.

“It’s a good idea to relax the rules as lots of people are interested in building one, but it has been painted as making a major change that will lead to a flood of new homes, and that’s not the case.”

One big reason was that people wanting to build a granny flat still had to apply for a project information memorandum (PIM) and a council could decline to issue one if the application did not meet requirements, he said.

“People will have heard ‘no consent’ and think it is a revolution, and that they can just forge ahead and build what they like up to 70sqm … It is not that simple.

“Most people don’t know what a PIM is, but you need one and you need to be aware of what it requires. Often, an application needs to be drawn up by an architect to meet the required level of information.”

A PIM application must have detailed information on the site and the proposed building work. That includes site plans, floor plans, scaled drawings, building dimensions, and information on potential hazards, storm and waste water disposal provisions, and vehicle access and parking.

The cost of a basic 60m² granny flat, including connection costs is in the mid to high $200,000 range.

Whitburn said councils might use PIMs to filter out minor dwellings because there were downstream impacts if such things as storm and wastewater were not properly planned for.

“There are site coverage rules for example, so you can’t build within two metres of your neighbour, and some general constraints - for good reasons, such as spread of fire protection.

“A lot of people don’t read the fine print on these things, but if too much site coverage is revealed in an application the PIM will be declined.”

Councils would also charge development contributions, and there would be other charges, such as WaterCare in Auckland, he said.

“That leaves me wondering how much in costs the new rules will actually save, given PIM requirements and professional fees.

“Maybe a bit on council and processing fees costs, perhaps $2000 to $7000, and less time spent waiting for consents and inspection will save some holding costs, but it won’t be much less all up.”

Builders have previously said it would cost around $200,000 to build a 60m² dwelling, but that would be for the house alone and once costs such as water and power connections were included the basic amount would be in the mid to high $200,000 range.

It would be chaos if there was a free for all of granny flat development, AUT’s John Tookey says.

Whitburn said many people thought the changes would mean carte blanche, and would save them tens of thousands of dollars, but they would not.

He was not alone in his views. AUT construction professor John Tookey said people might think the changes meant they would now be able to build whatever they wanted, but they would not.

“And it is misleading to present the changes as though people will be able to.”

There would need to be careful consideration of the cumulative effects of all the critical infrastructural loads servicing properties where minor dwellings were proposed, he said.

Those included such issues as provision of potable water, managing stormwater and wastewater, sewerage, on/off street parking, traffic volumes, schools, hospitals, and other services.

What happened would depend on how relaxed the rules ended up being, but they would not lead to a free-for-all for granny flat development, he said.

“There can’t be - that would be a recipe for chaos.

Infrastructure capacity and construction costs are the challenge for granny flat development.

“Councils need to consider whether there is a sufficient portion of horizontal infrastructure to support residents’ living conditions and lifestyle. That’s what planning is for.”

Tookey said in reality councils were likely to err on the side of caution in their announcements of zones suitable for new granny flats because of the infrastructural impacts.

The number of sections with appropriate space for a minor dwelling was also less than many would think, he said.

“Hence the outcome is unlikely to be a panacea for developing affordable housing in our cities. More likely it will be a measured additional option rather than a ‘go to’ across the country.'

University of Auckland senior urban planning lecturer Dr Timothy Welch said while the granny flat exemption removed important regulatory barriers, it was necessary to be honest about its limitations.

Adding 13,000 small units over a decade – just 2.6% more housing supply – would not solve a crisis of this magnitude, he said.

“With construction costs reaching $300,000, these units primarily benefit existing property owners who can access capital, not the young families and essential workers most in need of affordable housing.”

The real challenge was not just regulation, it was infrastructure capacity and construction costs, he said.

“Our water networks are already strained, and dispersed infill development only adds pressure. The policy's design constraints, requiring standalone single-storey units, deliver the least efficient form of density possible.”

The reforms should be embraced while acknowledging they were no substitute for the comprehensive urban development the housing crisis demanded, Welch added.