TGC director George Hercus said it was a business decision for his company to not build any more townhouses in the coastal hazard zone — which covers most of the lowest-lying parts of South Dunedin, predicted to become increasingly flood prone.
The risks of inability to sell and future reputational damage were too high, he said.
Properties could become "unlivable, uninsurable".
The move has been welcomed by local community leader Eleanor Doig, who said townhouses in South Dunedin had been nicknamed "mushrooms" because they were "white, tall, springing up all over the place and spreading like a blight."
She had contacted the council and asked "what the hell they were doing" allowing dense building in an area that will increasingly flood.
"It is craziness — there should be a moratorium on their development."
People in the area didn’t want them because it was "daft" in the face of rising waters. It also changed the dynamics of South Dunedin as they were rented to couples, not families.
Mr Hercus said TGC, which has already built several groups of townhouses in the southern part of the city, relied on selling "off-plan" before building and was "less likely to be able to sell homes [in the coastal hazard zone], so it was a business risk".
He didn’t want to be stuck with land and a profit-losing project.
Rising waters was going to be an issue regardless of mitigation measures, Mr Hercus said.
The council buying land, such as Forbury Park recently, potentially to create space for water, was still a band aid solution, albeit a solid one.
He questioned the sense of townhouse developers building anywhere in New Zealand where there was increasing risk of flooding or sea incursion.
"All of those homes at some stage will be uninsurable, I would imagine."
Mr Hercus said land for development outside South Dunedin was "hard to find" and there was a continued need for Three Waters infrastructure improvements.
He thought developers were building in lower parts of South Dunedin still because land was cheaper and because of the land shortage elsewhere.
"Price probably has a lot to do with it."
Developers needed less money to develop a plot, and could sell homes cheaper, maximising profit and buyer numbers.
Townhouses were popular among customers wanting a new build, said Mr Hercus, because stand-alone new homes had a $900,000 entry point and "first time buyers can’t afford that, so compromise on space".
The Otago Daily Times’ series on South Dunedin today reports on building in the area, including the replacement of two homes and a joinery business with nine townhouses on a Moreau St plot.
The development is between rugby player Ben Smith, Leigh Pickford, who owns the joinery, and Stewart Construction’s managing director David Grant.
Mr Grant said he gets "enjoyment from providing warm, dry homes" and there was some natural planting on the site.
The author of a report about making cities more resilient to climate change by making them more absorbent says townhouse developments are "particularly bad" for reducing permeable surfaces.
Kali Mercier, author of Sponge Cities and deputy director of the Helen Clark Foundation, said it was "good practice to leave space for trees and shrubs that are good at absorbing rainwater".
A recent report from GNS Science predicts South Dunedin will become increasingly flood prone as the sea and groundwater rises due to climate change.
The South Dunedin Future group, which is leading the preparation of a plan for the area by 2026, is considering 16 options, including more restrictive building regulations.
Since 2018 the Dunedin City Council’s district plan allows construction in a coastal hazard zone of new buildings containing residential activity on the ground floor if they are designed to be relocated in future.
As well as homes, civic and industrial development is under way within the South Dunedin coastal hazard zone, including a library and the redevelopment of the Hillside rail engineering works.
The council did not respond by deadline to a request to comment on townhouse building in South Dunedin.
