The Government’s proposed national policy statement on urban development capacity will require councils to ensure land supply for housing & business keeps pace with growth, but partners at law firm Berry Simons say Environment, Building & Housing Minister Nick Smith is targeting it wrongly.
Berry Simons expressed immediate concern about some of the assumptions underpinning the proposed policy statement and its effectiveness to address Auckland’s housing crisis, and followed that up on Friday with a suggestion that the NZ Government should study the impact of overseas investment on house prices, as the Canadian Government had decided to do.
The proposed policy
Dr Smith said on 2 June: “This new policy is about tackling the long-term root cause of New Zealand’s housing affordability problems. Insufficient land supply in Auckland has seen median section prices rise from $100,000 in 1990 to $450,000 now – an increase of 350%. In the same time, building costs rose 78% and the consumer price index 71%. The high section price compounds the affordability problem because the built home will also be highly priced.”
Submissions on the proposed policy statement close on Friday 15 July.
It would require councils to:
- provide sufficient land for new housing & business to match projected growth in their region, city or district plans
- monitor & respond to housing affordability data, building & resource consent data, and value of land on the urban boundaries
- take into account the difference between planned & commercially feasible development capacity, and provide for over-supply to ensure competition (20% short to medium-term, 15% long-term)
- co-ordinate their infrastructure and ensure their consenting processes are customer-focused
- recognise the national significance of ensuring sufficient land is available over local interests.
Dr Smith said: “This policy is about a culture change to support development that connects planning decisions to economics, ensures plans are regularly updated and recognises the national importance of housing.
“This urban development policy is carefully nuanced to the different growth pressures across New Zealand’s towns & cities. There are requirements for all urban areas, but the analysis & directions become greater for medium-growth areas (between 5-10% in a decade) and most demanding in high-growth areas (over 10% in a decade).
“This new urban development policy is part of the Government’s systematic dismantling of Auckland’s metropolitan urban limit. The first step was providing for special housing areas that enable developments to be approved in the interim, contrary to Auckland’s old plans & rules. The second step was the fast-track process for a new unitary plan, to be completed in September. The third step is the Resource Management Amendment Bill that adds new specific functions for councils to provide development capacity, and this proposed policy provides detail on how this is to be done.
“This policy reform process has been based on the comprehensive work of the Productivity Commission, with its high level report on housing affordability in 2012 and its detailed work on the land supply problem in 2015.
“New Zealand’s decline in housing affordability & ownership is decades old and there are no instant or easy fixes. This systematic reform of our planning system is an important component of the long-term solution. This work is complemented by a wide range of other initiatives, such as KiwiSaver HomeStart, changes to tax law on property investment, increased investment in building apprenticeships, Resource Management Act reforms before Parliament, using surplus public land for growing housing, better utilisation of Housing NZ land & building regulations reform.”
Dr Smith said the intention was to finalise the policy and for it to take effect in October, in conjunction with the Resource Management Act changes & Auckland’s new unitary plan.
Questions for government & council
Berry Simon partner Andrew Braggins said: “While the proposed policy statement contains a number of laudable objectives, it is sadly at least 3 years too late and it will not alter Auckland’s housing supply for at least 2 years, if not longer. Worse, if Auckland Council considers that it will be ‘business as usual’ under the national policy statement, then we probably will not see any meaningful change in Auckland’s housing supply.
“To the extent that the proposed policy statement proceeds on the simplistic assumption that rising house prices & a shortage of affordable housing in Auckland is caused by a lack of land supply rather than a demand for housing that outstrips supply, the thinking underpinning the proposed policy statement is flawed and risks misdirecting government & council resources from addressing the real issues. At least 3 key points are worth making:
“The first is that made recently by an economic commentator who said: ‘Freeing up land is one thing. We need houses that are affordable for lower income people.’
“Central government must know – but does not seem to be prepared to admit – that the lack of availability of houses for New Zealanders is not due to lack of supply but rather to demand – that a very large number of both existing housing stock & those being built are being snapped up by overseas investors – young & low-income New Zealanders are simply unable to compete.
“Reports that 46% of all new mortgages in May were to investors are consistent with what we see in the market, that the bulk of special housing area houses are being sold to investors, often overseas investors.”
Wide evidence of foreign buyers
Law firm partner Simon Berry said: “We are consistently seeing that a large proportion of special housing area houses are being sold, generally off the plans, to overseas investors. The same goes for the existing housing stock – I recently heard of an example of an overseas investor purchasing 55 residential properties in a single week. The Government’s scrutiny of the market has overlooked these basic facts – unwittingly or otherwise – but all real estate agents & resource management practitioners know full well that this is happening every day.”
The lawyers’ second point was aimed at the council: “It is equally clear that Auckland Council did not pay nearly enough attention to urban land supply issues when preparing the proposed Auckland unitary plan and, while they might now be undertaking many of the assessments required by the proposed national policy statement, they are only doing so because they were directed to by the independent hearing panel charged with hearing submissions on the plan. In the meantime, the development capacity provided by the plan is well short of what Auckland needs – an issue already acknowledged by Auckland Council when it sought to introduce the out-of-scope zone changes into the plan.
Infrastructure delaying special housing areas
Third, the development of many special housing areas in Auckland is being delayed by a lack of infrastructure. The release of further land will simply not deliver the infrastructure needed to service new development – this is a matter that needs to be carefully planned by the council & its key CCOs, Watercare & Auckland Transport.”
Mr Braggins added: “Not a single new dollar in the recent Budget was allocated to Auckland’s transport infrastructure – but adding new zoned land without infrastructure & the funding to service it is only likely to distract Auckland Council & the Auckland CCOs from providing infrastructure to existing zoned land & special housing areas. This is likely to slow everything down. It’s hard to see what they can do that they haven’t already done without more money.
“No doubt the Government’s reluctance to face facts is due to the contribution that overseas investment makes to the economy. However, they should think twice before they act under this proposed national policy statement and address the other factors that they should know are the root cause of the problem.”
Canada studies role of foreign capital
The lawyers said that, like Auckland, the Canadian cities of Toronto & Vancouver were facing soaring house prices. Over 90% of all detached homes in Vancouver were worth over $C1 million.
“Unlike New Zealand, however, the Canadian Government is prepared to recognise that, although the issue is complex, the major influx of foreign capital into Canada in recent years is playing a significant role in that country’s housing affordability crisis. It has therefore set aside funds to analyse the extent to which this influx of foreign capital is responsible for the rapid price increases.
“To his credit, the Canadian prime minister obviously does not see the evidence of overseas capital contributing to increasing house prices as being ‘diddly squat’ as our housing minister does – nor is he content to simplistically blame Canada’s planning legislation, the existence of green belts or lack of land supply. Demand from overseas investors is clearly a major part of the issue.”
National policy statement summary
Resource Legislation Amendment Bill 2015
A way forward for national direction
International approaches to managing development capacity
BERL research: Business land: problems & causes
Cabinet paper: Approval for public consultation
Cost:benefit analysis of policy options
Regulatory impact statement
Report summarising submissions made during the first stage of consultation
Productivity Commission inquiry: Using land for housing
24 June 2016: Fairgray works through the question: Who’s really the house price villain?
23 May 2016: Is it really a faraway boundary that’s raising inner-city house prices?
11 December 2015: Planning system is next Productivity Commission target
10 August 2015: Council has forthright message for Government on land for housing
19 June 2015: Key points from land for housing report
19 June 2015: Commission looks behind high land prices
7 October 2013: From strawberry fields to urban zones
6 April 2011: Transformation projects get council endorsement, but only in principle
8 March 2010: Council says 435ha MUL shift will create 30,000 jobs
22 May 2009: Waitakere councillor takes swipe at ARC over procrastination
6 March 2009: Council approves design guidelines for Massey North & Hobsonville industrial areas
3 September 2006: Draft business land strategy endorsed, final version out soon
27 March 2005: Waitakere wants 3 MUL expansions in growth plan
2 March 2004: Residential land supply falls below minimum threshold
2 March 2004: Vacant business land capacity falls 26% in 5 years
Attribution: Berry Simon releases, ministerial releases.