Putting enough land in New Zealand for future housing needs

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Auckland housing market.

Report by NewsroomPlus.com

Contributed by Stephen Olsen – part 1 of a series

Productivity Commission chair Murray Sherwin is a past taskmaster of presenting reports, and followed a reasonably tight set of talking points at a media briefing earlier today just ahead of the release of the Commission’s latest two-step production – a draft report simply titled Using land for housing.

With housing issues almost continually in the headlines since last year’s Election campaigning, and court action looming over the legality of the rights that can be exercised over public land in Auckland, the timing couldn’t have been more apt.

ProdComm
Productivity Commission chair Murray Sherwin talks to the Commission’s newly released draft report this morning. The report process is focused on the end goal of better ways to deliver an adequate supply of development capacity for housing. He’s joined at the top of the table by fellow Commissioner Dr Graham Scott, best known perhaps as a former Secretary to The Treasury from 1986–1993.

An economist who came to the New Zealand Productivity Commission after roles as Chief Executive and Director General of the Ministry of Agriculture and Forestry (now MPI) and Deputy Governor of the Reserve Bank of New Zealand among others, Mr Sherwin couched the evident “stresses and strains” around land and housing with a comment that in his judgement the issues are “not intractable”.

Having said that, and even though he termed current shortfalls as “not invevitable or insoluble”, a readymade soundbite from today’s briefing was that Auckland requires the equivalent of 10 Hobsonvilles (at 3,000 houses apiece) to level out supply and demand, with 3 or 4 more equivalents every year to keep pace with demand.

“Business as usual is unlikely to be enough,” said Mr Sherwin, adding that, for want of a better word, a more “aggressive” approach is needed, with, he implied, fewer disconnects between national interest and local interest.

He then moved straight to making mention of the potential for urban development agencies – a UDA or Urban Development Authority – to take a leadership and coordination role to achieve residential development at scale in both greenfield and brownfield settings, working in partnership with private sector developers.

Questions that followed from Bernard Hickey (Hive News, Interest.co.nz), Brian Fallow of the Herald, Nick Butcher of RNZ, Catherine Harris of the Sunday Star-Times and NewstalkZB pursued angles such as the recommendation that removal of the rating exemption on land owned by the core Crown, including land used for health and education purposes, be investigated.

As noted on page 269 of the draft report the rates revenue forgone by councils from all non-rateable land is not insignificant – totting up to about $180 million a year. The report states that “at the margin, this would make agencies think harder about whether maintaining their holdings is in the public interest”.

On a question from NewsRoom it was confirmed that such land holdings in the United Kingdom are subject to rates, and in Australia and Canada they are able to be transparently ‘tagged’ (more on that on page 267).

How much headroom councils have in terms of the debt they carry in undertaking an increase in supply of land for housing developments, and the standards set for that by the Auditor-General and others, was another question, along with a question about charging for infrastructure growth.

The answer from Commission officials present at the media briefing on the latter, was a view that infrastructure charges should more closely reflect the underlying costs, and that flat charges don’t send signals about where development is most efficient. For more on this, see page 221-222.

An old chestnut of a question that will no doubt continue to reappear, arose from a recommendation that local authorities should review minimum apartment size rules in their District Plans, with a view to removing them.

Aversion or otherwise to the construction of liveable ‘shoebox’ apartments is a problem for markets to solve said Mr Sherwin, with another official adding that the Building Act is the appropriate place to address issues like ventilation and light in apartments. For more on this, see page 120-122.

For a process that had as its terms of reference a request to undertake “an inquiry to assess and identify improvements in local and regional authorities’ land use regulation, planning and development systems” there is no getting around that this will be perceived as a report about and for the Auckland ‘crisis’.

By dint of a quick, unscientific but indicative keyword search, our dominant urban growth centre of the Auckland isthmus and surrounds features on more than half of the report’s 358 pages, Wellington a quarter of the pages, and Christchurch – surprisingly in many ways – less than 20%, followed by other ‘growth cities’ of Tauranga, Hamilton and Queenstown – in that order.

Murray Sherwin is right to say this is a process – following on in an almost linear sequence from the Commissions’ earlier 2012 report on Housing affordability and its 2013 Local government regulation report – that has “plenty of meat”.

With all manner of housing issues riding high in the headlines it is also some cause for comfort, as he pointed out, that the level of engagement in the process is high. Getting to the draft report stage alone has attracted more than 70 public consultation submissions – with a wraparound of 94 engagement meetings in New Zealand, 15 in Australia and a UK study tour to boot.

The challenge for the next round of submitters is no small one to mount – there’s the density of the report itself, and then 36 questions that beg allied pondering and responses.

In terms of timing the countdown for making a submission starts today, and is open till Tuesday 4 August.

A beginner’s guide to the draft report – Using land for housing

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As with all of the Productivity Commission’s professionally produced reports to date – it began operating on 1 April 2011 – this is no ‘once over lightly’ treatment.

At 358 pages long you will want to hold off hitting print on this draft report too quickly, and to help you get your head around the overall structure the device of a ‘Cut to the chase’ executive summary is made available – and there is always the media release to refer to as well.

Cutting to the numbers, there are 120 findings to digest, accompanied by 38 recommendations that have the potential to keep the following very, very busy:

  • Cabinet
  • Parliamentary law-makers
  • Territorial local authorities (local government)
  • MBIE – Ministry of Business, Innovation and Employment
  • Statistics New Zealand
  • CCOs: Auckland Transport, Watercare
  • Treasury

Here’s a ‘news you can use’ list of the Recommendations and the chapters they’re attached to:

Chapter 3: Integrated Planning

R3.1
Urban local authorities that wish to set design infill/intensification targets should ensure that their District Plans provide sufficient commercially viable development capacity.

R3.2
The Ministry for the Environment should explore the potential to develop an Urban Feasibility Model that New Zealand local authorities can use.

R3.3
High-growth territorial authorities should review their zoning rules for rural land, to ensure they provide the right balance of promoting efficient use of land for housing and minimising reverse sensitivity risks.

R3.4
Large land price differentials between different types of zones, such as those observed in Auckland, should be a trigger for local authorities to review the adequacy of their land supplies and zoning decisions.

R3.5
A new legislative avenue should be designed to focus spatial plans on activities that:

  • are of high importance to the functioning of cities and the provision of development capacity for housing (eg, land supply, infrastructure provision, transport services);
  • relate closely to the use of land or space and the management of negative externalities; and
  • are most efficiently dealt with at a local level and through local authorities.

R3.6
The new planning avenue should be voluntary to allow local authorities to choose the statutory planning mechanisms that best suit their circumstances.

R3.7
Future plans prepared under the new legislative avenue should be developed in partnership with the full set of central government actors whose services matter for the functioning of cities. Given the fiscal implications of greater central government involvement in spatial planning, both Cabinet and the relevant local authority should approve such plans.

R3.8
The new legislative planning avenue should include processes to encourage robust regulatory analysis and development, as section 32 of the Resource Management Act is designed to do.

Chapter 4: Supplying and releasing land 

R4.1
High-growth local authorities should express their land supply targets in terms of zoned and serviced land and report publicly on their performance.

R4.2
Local authorities should monitor and report on dwelling completions and net changes in the dwelling stock, relative to expected and actual population and household growth.

R4.3
The Ministry of Business, Innovation and Employment, Statistics New Zealand and territorial local authorities should work together to improve the quality of official statistics available from the building consent form as a priority.

R4.4
The Ministry of Business, Innovation and Employment, in conjunction with relevant local authorities, should inventory public land holdings in all high-growth cities to identify sites that could be used for housing.

R4.5
Local authorities should set policies for the publishing of and consulting on draft plan reviews or plan changes of interest to the wider community ahead of notification, unless compelling reasons exist for not doing so.

R4.6
The Ministry of Business, Innovation and Employment and the Ministry for the Environment should, once the work of the Auckland and Christchurch Independent Hearings Panels (IHPs) is complete, evaluate the IHP processes, with a view to deciding whether IHPs should become a permanent feature of the planning system.

Chapter 5: Regulations and approval processes

R5.1
Urban territorial authorities should remove District Plan balcony / private open space requirements for apartments.

R5.2
Once the Ministry of Business, Innovation and Employment has completed planned work on updating Building Code rules and guidance related to air quality, lighting, acoustics and access in multi-unit dwellings, local authorities should review minimum apartment size rules in their District Plans, with a view to removing them.

R5.3
Urban territorial authorities should remove District Plan minimum parking requirements, and make more use of traffic demand management techniques.

R5.4
Local authorities should undertake robust cost-benefit analyses before considering the introduction of building height limits, and should lift current limits where it cannot be demonstrated that the benefits outweigh the costs.

R5.5
Local authorities should review District Plan controls on the design and construction of buildings or dwellings that exceed standards set under the Building Act, with a view to removing them.

R5.6
The Government should introduce amendments to the RMA to clarify the role and importance of housing and urban environments.

R5.7
In reviewing their District Plans, local authorities should move more residential land-use activities into “permitted” or “restricted discretionary” status.

Chapter 6: Planning and delivering infrastructure

R6.1
When councils refer to the supply of land for housing, they should be clear about the readiness of land for building (eg, un-zoned but planned-for future zoning; zoned; zoned and serviced; zoned, serviced and consented).

R6.2
Councils should identify areas where there is existing infrastructure capacity and ensure that planning rules do not prevent intensification from occurring in these areas.

R6.3
Councils should prioritise the development of up-to-date asset management information systems. This should be supported by recruiting and developing staff with the skills and expertise needed to make effective use of these systems, and ensuring that the information from asset management systems is integrated into decision-making processes.

R6.4
Councils should pursue opportunities to make more efficient use of existing infrastructure assets including through greater use of user charges where this can reduce demands on infrastructure.

R6.5
Government should adopt the Local Government Infrastructure Advisory Group’s recommendation to amend the Land Transport Management Act to allow pricing on existing roads where there is a business case that enables effective network optimisation.

R6.6
Councils’ asset management systems should feed into decision making about optimal infrastructure standards. The data used to inform standard-setting should be shared openly with the development community.

R6.7
If councils determine that a good case to change infrastructure standards exists, then developments that already have consent should be exempt from the change. Alternatively, developers should be compensated for any additional costs incurred as a result of the change.

Chapter 7: Paying for infrastructure

R7.1
Evaluation of the financial prudence and reporting regulations should monitor how the regulations affect councils’ ability to provide infrastructure to support growth and review whether 15% is the most appropriate debt-servicing ratio for high-growth councils.

R7.2
Councils should include information in their development contributions policy about the relationship between dwelling floor area and the cost of providing infrastructure services. If smaller dwellings impose lower costs on the infrastructure network, this should be reflected in lower charges.

R7.3
The Local Government Act should be amended to make clear that developers may formally request that councils construct growth-enabling infrastructure, to be repaid through targeted rates on the properties that benefit from the infrastructure connections, and obliging Councils to consider such requests.

Chapter 8: Governance of transport and water infrastructure

R8.1
Auckland Transport and Watercare should amend their SOIs [Statements of Intent] so that they are aligned with the Auckland Plan and its target for new dwellings. The SOIs should include performance measures relating to the efficient rollout of new infrastructure to support an increased supply of new dwellings.

R8.2
Auckland Transport and Watercare should include performance measures in their SOIs that encourage greater coordination between CCOs [Council Controlled Organisations] and with Auckland Council, building on Auckland Council’s current review of CCOs.

R8.3
Watercare should change their approach to calculating infrastructure growth charges to better reflect the underlying economic costs of supply in different locations and for different types of dwelling.

R8.4
The requirement to consider development agreements that applies to councils should also apply to CCOs.

Chapter 9: Shaping local behaviour

R9.1
The Treasury, in consultation with the Department of Internal Affairs, should investigate removing the rating exemption on land owned by the core Crown, including on land used for health and education purposes.

Chapter 10: Planning and funding our future

R10.1
The Treasury should investigate the possibility of providing an exemption from the foreign investment screening regime for developers purchasing land, providing the land is developed into housing and resold within an acceptable timeframe.

R10.2
There is a place for a UDA to lead and coordinate residential development at scale in both greenfield and brownfield settings, working in partnership with private sector developers. Legislation would be required to establish and give powers (such as compulsory acquisition) to one or more UDCs in New Zealand.

* Stephen Olsen is an associate member of the Parliamentary Press Gallery. This NewsRoom_Plus contribution was prepared with assistance from Olexander Barnes and Sylvester Racule. 

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Selwyn Manning, BCS (Hons.) MCS (Hons.) is an investigative political journalist with 23 years media experience. He specializes in reportage and analysis of socioeconomics, politics, foreign affairs, and security/intelligence issues. Selwyn has extensive experience as a commentator and has provided live political analysis to a wide range of television and radio organizations broadcasting in New Zealand, Australia and globally including the BBC (Five Live, London) and BBC (World Service). He is currently a correspondent to Australia's FiveAA radio, and is a regular live-on-air panelist on Radio New Zealand's The Panel with broadcaster Jim Mora.

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