Former Reserve Bank governor Don Brash says Auckland Mayor Len Brown's plan to grow Auckland upwards, instead of outwards, will only make congestion worse.
Mr Brown recently launched the Auckland Council's draft plan, saying the city's residents don't want "unconstrained urban sprawl"
The Government disagrees, saying his plans for a compact urban footprint are killing Aucklanders' dreams.
"There's no question in my mind that we have to break through the stranglehold that the existing legal metropolitan urban limit has on land supply," Housing Minister Nick Smith said last week.
Dr Brash agrees, telling Firstline this morning the lack of land zoned for residential use is the "biggest single factor in putting housing beyond the reach of most ordinary Kiwis".
"We've seen $400,000 paid for eighth-of-an-acre sections in Flatbush," says Dr Brash. "That's not overlooking the sea in St Heliers or Mission Bay – it's an eighth-of-an-acre in Flatbush. Why is that? It's $8 million a hectare that works out.
"That's crazy, absolutely nuts."
He says the restrictions are "absurd", considering New Zealand's low level of urbanisation.
"Now if New Zealand had 20 percent of its land area urbanised, or 10 percent, you could perhaps understand the concern. But it's less than 1 percent – it's 0.7 percent."
Auckland's population is expected to grow by 1 million over the next 30 years, and the Auckland Council's plan calls for 70 percent of new dwellings built in that time to be located within current urban limits.
The plan says house prices will come down because new homes will take up less land, and more people will be living in apartments, but Dr Brash says prices will rise, regardless.
"The policy will make housing unaffordable for most ordinary Kiwis, but it also has very serious economic impacts. The Reserve Bank, for argument's sake, is toying with increasing interest rates at some point. They don't really want to do that because of the drought, but with house prices rising rapidly in Auckland, they're sort of fingering the trigger, if you like.
"Now the last thing we need at the moment is further increases in interest rates to push up the exchange rate."
One of the arguments against urban sprawl is that it makes public transport less efficient, and puts more people on the roads, causing congestion – but Dr Brash says the reverse is actually the case.
"We know that the most congested cities in the world, particularly those in Europe, are those with a very dense population. Density doesn't solve traffic congestion – it actually makes it worse.
"There's no benefit at all in the kind of policy which the Auckland Council is promoting."