Local Government New Zealand (LGNZ) warns central government’s sweeping decision to allow more densification across the country’s main centres won’t help fix the housing crisis.
LGNZ, a lobby group for local government, says a lack of funding for infrastructure to support new development remains a key impediment to getting houses built. Hence, it’s doubling down on its call for the Government to stump up with more cash for infrastructure, or enable councils to broaden their revenue sources.
LGNZ president Stuart Crosby argued the brownfield development the Government wants to unleash by urgently tweaking the Resource Management Act "is exactly where the infrastructure costs are highest, and where council balance sheets are most stretched".
Housing Minister Megan Woods and Minister for the Environment David Parker defended their position, saying central government is already providing local councils with ample funding through a range of avenues, and won't put more cash on the table.
The legislation that could prompt densification
The Government, backed by National, is proposing to enable three dwellings, three storeys high, to be built on most residential sites in Auckland, Hamilton, Tauranga, Wellington and Christchurch without resource consent.
Currently, district plans typically only allow for one home of up to two storeys.
The proposal is for local councils to adopt new densification rules, known as Medium Density Residential Standards, by August 2022. Exemptions will apply for natural hazards and heritage for example.
The standards could also apply in Whangarei, Rotorua, New Plymouth, Napier Hastings, Palmerston North, Nelson Tasman, Queenstown and Dunedin, if the Government decides the housing need is acute enough.
The details are yet to be ironed out as the Resource Management (Enabling Housing Supply and Other Matters) Amendment Bill goes through the parliamentary process.
However, the bill says councils can “amend or include new financial contributions policies in their district plans” to help cover the cost of infrastructure that may be required to incorporate the new standards. In other words, councils can pass costs on to land owners and developers.
The ease at which councils will be able to do so, without deterring development, is yet to be seen.
Charles Ma, who's doing a major development at Drury, has already publicly complained about Auckland Council proposing to increase Development Contributions to cover infrastructure costs from between $11,000 and $18,300 per dwelling to $84,900.
Central govt providing funding... on its terms
Woods noted the Government is considering bids by councils, iwi and developers for $1 billion worth of grants, made available via the Housing Acceleration Fund, to pay for infrastructure to support housing.
Kāinga Ora - Homes and Communities received more than 200 applications, with funding requests totalling $5 billion. It's now doing due diligence on a shortlist of 80 applicants. While Kāinga Ora is administering the fund, the Ministers of Finance and Housing will make final investment decisions.
On the transport front, the Crown is providing Waka Kotahi - NZ Transport Agency with a $2 billion loan, which will contribute towards its 2021-24 National Land Transport Programme being 44% larger than the 2018-2021 programme.
Despite being plagued with problems, the Government has allocated $8.7 billion towards its NZ Upgrade infrastructure programme.
As at June, it had committed to spending another $2.4 billion on contracted infrastructure work, further to setting up a group led by Crown Infrastructure Partners to seek out shovel-ready public and private projects to support the sector in the face of Covid-19.
And importantly, the Government is dangling billions of dollars in front of councils to incentivise them to support a proposal to centralise the management and ownership of the country’s drinking, storm and wastewater assets.
A number of councils, including Auckland Council, are digging their heels in when it comes to these “three waters” reforms; the housing densification proposal being seen by some as another example of Wellington riding roughshod over them.
Why don’t councils issue more debt?
The Local Government Funding Agency (LGFA), which raises debt on behalf of 71 of the country’s 78 local authorities, in June last year lifted the debt cap it imposes on councils.
In the years to June 2021 and 2022, authorities with credit ratings of ‘A’ or higher will be able to take out debt three times (300%) the value of their revenue. Previously this net debt to revenue ratio sat at 250%. From 2023, the cap will taper back to 280% by 2026.
As at June 2020, Auckland Council had the highest net debt to revenue ratio of 196%. Wellington City Council sat at 128%, Christchurch City Council 121%, Hamilton City Council 137% and Tauranga City Council 203%. See a table in this story for the other councils' positions.
The LGFA is still collating data for the year to June 2021.
LGNZ spokesperson, Jason Krupp, maintained 250% of revenue was high by international standards.
However, Infrastructure Commission chair and former Reserve Bank governor, Alan Bollard, earlier this year told interest.co.nz he believed local councils were largely to blame for New Zealand’s infrastructure deficit and they could make better use of their balance sheets.
Final concerns aired by Local Government NZ
Commenting further on the proposal to allow more houses to be built on sections in cities, LGNZ’s Stuart Crosby said, the Government needs to ensure it “doesn’t unleash unintended development outcomes - urban form endures for a long time, making it difficult and costly to undo mistakes”.
“This reform needs to be worked through within the context of the system-wide reform that’s going on right now. Local government is severely stretched with three waters reform, Covid-19 civil defence work, the future for local government review and the resource management reforms,” he said.
Labour and National worked away on the bill to enable more densification without properly consulting local government (or the Green Party, whose co-leader, Marama Davidson, is an Associate Housing Minister).
Crosby said, “Unless we start working in partnership better, coordinate our collective resources carefully, and share thinking earlier, we’re all going to drop the ball on the current reforms, let alone anything new that gets thrown at us. This puts massive additional risk in the system.”
35 Comments
Government and RBNZ should now only focus in promoting and supporting housing sector as like it or not everything in NZ is related to housing being only economy in NZ.
Housing was important but John Key gave a new dimension to it and Jacinda Arden under her leadershipusing coronavirus took it to a different level.
So now everyone has right to ask for their pound of flesh, why should council be left behind.
Tiny nation, thanks to politicians have turned the basic need - housing into speculative chip and this lady our current Prime minister begged for votes to get power to solve instead......
Well given the that a good number of councils are loaded up with left side councillors, Labour mayors & cohorts, and have been building this up for quite some time, the present government has virtually been able to steadily gain the common ground by stealth. all march to the same tune don’t they.
And how has Aucklands drive for "density" gone? Rural Urban Boundary has been one of the biggest drivers of high property prices (by artificially causing a shortage of land), which have flowed on through the rest of the country. So, we have central and local Governments creating restrictions the screw up market forces. They then blame the market when their interference fails. As it invariably does.
Take the Auckland council. Want to build trains. But don't have the population density to make them work financially. Decide to go ahead anyway. Bring in RUB denying planning permission for anything outside the RUB (other than in a staggered way over many years), with the view to force subdivision and therefore population density. And lo! Shortage of land and houses drives prices up because of demand. Of course no one could have seen that coming. One of the objectives was "Dramatically accelerate the prospects of Aucklands children and young people". Yeah right. If you are not falling about laughing, you should be.
One of the problems with your reckons is that there is more than enough land for further housing within the rural-urban boundary for decades more demand for housing in Auckland.
A second one is that when infrastructure costs are accounted for there is very little difference in the cost of land within or outside the rural-urban boundary.
"One of the problems with your reckons is that there is more than enough land for further housing within the rural-urban boundary for decades more demand for housing in Auckland."
This point was argued under UP process - it turned out the Council had applied housing zoning settings to public reserves and playing fields and often in suburbs with minimal public transport infrastructure or space for schools to support thousands of new infill houses. Plenty of other cities in the world offer street after street of housing with no public green spaces and if people want that badly enough, they should move to those places instead of ruining what is left of the Auckland we grew up in.
I'd rather we intensify the development on the land we can already develop before we cannibalise green spaces that we can never bring back.
Your logic holds if we were had actual economies of scale, and had maintained the existing infrastructure to even an adequate level, and simple infrastructure projects didn't cost more than the GDP of the entire country.
Taking Wellington as an example they need however many billion to upgrade the pipes. The fact that there may be more people to pay that in the future doesn't change the fact they need the money now, needed to do the work a decade ago, and that all of that is just to upgrade to the current population, not the 3x population growth now expected.
If you allocated the extra 2,000 dwellings from green zoned land you'd still need to upgrade the existing pipe...and then extend the pipework to cover the are of the new dwellings. Your analogy only works if the alternative to building is not to build (which, to be fair, seems to be what councils are actually trying to do through imposing exceedingly onerous zoning laws.)
"saying central government is already providing local councils with ample funding through a range of avenues, and won't put more cash on the table. "
I must admit I'm not aware of this funding through a range of avenues. Why not spell it out?.
The infrastructure also overlooked is schooling. A relative who has a child at primary school mentioned to me that about a year ago the board? or principal requested funding for additional class rooms. The funds have been approved but not released. The principal is not prepared to dip into other school funds to start the building process off. The principal's comment is dealing with the MoE is a nightmare. Comes back to inept ministers and politicians.
It would be useful if any other commentators are aware of this situation.
Isnt this change just paving the way for super charged immigration?
Most of the townhouses going up in Auckland suburbs now are cheap, ugly builds that will not age well
Further houses will be put up quick smart by small time developers on budgets. We are not creating a more liveable space to grow up in.
We don't need 100k townhouses that will age poorly and create squalor and congestion issues. There are not 100k families currently living in cardboard boxes.
We don't need more pressure on already stretched infrastructure. Isn't our piss poor hospital system the reason we are still stuck in lockdown? We already have Water shortages. How long until the power is turned off?
We need to keep immigration at a minimum and fix the mess we already have. Starting with our credit bubble.
We need to create a society where people can actually afford and want to reproduce. Currently nz has a declining population. Creating more squalor doesn't address this.
1) no more immigration until we develop synergy with our climate and energy needs.
2) push more of our business/commerce out of main centres. We need more liveable options out of main centres.
3) fix our infrastructure first. Starting with our health system.
Indeed, plans for more mass immigration certainly look to be driving this push for densification. People are going to start seeing ugly three story complexes built right up against their boundaries, blocking out the sun, putting more cars on the congested streets and so on. This is a disaster in the making.
so all can now see both labour and national endorse mass immigration, and Act and the greens and you have all the parties in agreement on one of the highest levels in the OECD.
it seems that it is the only economic policy that they believe in the keeps wage inflation low and growth at the expense of GDP and the training and upskilling of the local population
According the data in the source you included, in 2019, which is the the year in the database homepage, NZ actually has bank average migration from other countries, less than many European countries (such as Nordic countries and Germanic countries), considerably less than Canada and about the same compared to the UK and Aus. Just saying. It seems that the developed world is of the opinion that immigration is the right response at presence, and that there is actually global competition to attract skilled immigrants.
Desperate knee jerk reaction by government unable to contain rampant housing crisis. This will make infrastructure costs dearer by spreading round intensified development instead of concentrating in targeted areas where infra can be supplied most efficiently. And where are the builders coming from to build this rubbish? - when you could build better designed housing with higher margins, why would you stoop to build these boxes with their lower margins. This will create slums and enforce further inequality.
At least the "junk" villas were(are) infinitely 'do upable' being wood framed on piles. Yes, we have learned to adore them, being inner suburbs, an element of style, and readily convertible to meet today's expectations. Not sure the cardboard modern 2 stories on concrete and polystyrene, on tiny sections, will translate into tomorrow's needs,...let alone be of a style and livability that,.."we will get to love"!
Time will tell?
It's obvious that the govt is not providing councils with ample funding for infrastructure let alone in in a simplified form that ensures funds are spent on infrastructure.
An increase in development contributions from $11,000 and $18,300 to $84,900. So at the stroke of a pen an extra $66,000 to $73,900 is added to the price of a house because the govt is too tight to actually provide adequate funding for the infrastructure required for the building driven by decades worth of immigration.
The immigration controls held by central govt that local govt have to provide for without adequate govt funding.
Leaving the last person standing - the house purchaser to pick up the tab.
The credit bubble is only covering up the fact that govt surpluses have been at the expense of NZ's standard of living. Had previous govts (and this one) spent money on needed infrastructure when it was needed we would be infinitely better off.
And what is even worse is that the council wonks who have put out proposals to increase development contributions so dramatically, are telling us that "the developers will pay,...and that house prices will not be affected"!
What planet do our bureaucrats live on? Experience tells us that this relatively modern concept of asking new residents to pay up front for infrastructure (beyond that provided by the subdivision developers) has simply morphed into just another tax which wont necessarily be spent on the infrastructure required by the particular subdivision. More probably it will just be used to fund the ever increasing council overheads...particularly the thousands of bureaucrats on salaries most private citizens just dream about.
Councils are like teenagers. You give them money, they waste it. You give them more money along with some advice about how to spend it wisely. The blow that money too. You start to ration the money, telling them they can't seem to spend it sensibly, they start whining and yelling and telling you you're stupid and don't know anything. So you cut the money off and say 'Get a job', they then get ahold of a credit card and go and buy and expensive piece of art...
The ' four Wellbeings' - social, cultural, environmental, economic - are partly to blame here. The first two are munny-pits but get Councillors re-elected reliably. The last two - meh....too hard, no votes in 'em, dominated by anal engineers and po-faced professionals, both anathema to the luvvies....
Some addtional funding can easily be achieved by removing the massive cross subsidy car drivers receive via ratepayer payments of about 50% of local roading costs.
Road users do not pay anything like their full costs (including exernalities) towards the transport system.
Yes, local government is right to be concerned about the implications of this announcement.
Another of those 'devil is in the detail' announcements.
Some of the matters that need to be resolved in the detail are:
- increased capacity for wastewater and water supply across a whole city, as this increased intensification could occur anywhere, it is not limited to identified areas where infrastructure works can be concentrated;
- similarly, providing public transport, cycling and walking across the whole city, in anticipation of increased intensity occurring in an ad hoc fashion across the city, implications for roads as well;
- and expanded schools, hospitals and such like (the infrastructure list goes on ....);
- ensuring quality of housing and good design for people - not just in terms of warm and dry, but also in terms of room for gardens and private recreation areas, reasonable privacy and sunlight, etc., disabled access, character of the neighbourhood - ensuring good design is very hard to do with permitted activity status for this increased intensity;
- dealing with the increased demand for local parks and recreation areas;
- the loss of even more urban trees - urban trees are important to creating a micro-climate and reducing the heating effects from climate change, plus for local biodiversity;
- increased permeable surfaces equals increased surface runoff, water quantity and quality issues for the stormwater system;
- capacity of construction industry to build.
The absence of any National Policy Statement on Urban Design does not help.
The displayed lack of understanding and simplistic ideas of Labour and National MPs doesn't help.
Nor does the simplistic but very likely inaccurate assertion in the press release about most of the urban area being only zoned for single unit residential development as a permitted activity.
Many other part of the world manage to successfully live with higher densities. I'm sure we will manage.
The main problems are:
a) Costs councils shouldn't be paying for - i.e. the transport cross subsidy I noted above above
b) Councils arent forced to go through cost/benefit assessments on all their spending & end up building vanity projects
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