The Government has ordered councils not to allow greenfields housing developments to sprawl out into highly productive farmlands, but also wants councils to open up more land for housing. Its default position is that the burden of increasing available land for houses should be taken up by densification of 'brownfields' land, rather than 'greenfields' land.
That would make sense if Governments of both flavours supported that order with funding streams and debt headroom to help councils afford the extra infrastructure and to build up the public transport networks necessary to make densification work. But that is not happening.
Instead, the Government is simply ordering councils to allow more densification, without adequately funding the public transport or allowing for the NIMBY-fueled political backlash that is now consuming councils from the political ground up. It is magical thinking of the highest order and is now playing out as councils reject or subvert the order earlier this year to allow three three-storey townhouses as of right on any suburban section.
This creates an awful Catch 22. Not allowing councils to build ‘out’ or helping them much to build ‘up’ is a recipe for yet more land price appreciation captured by today’s land owners. This comes at the expense of future renters locked out of the home ownership they need to build stable families and finances, and keeps them paying the world’s most expensive rents.
This worsening of the ‘not much up’ and ‘not much more out’ doctrine is all because median-voting and home-occupying multiple home-owners refuse to allow their capital gains to be taxed, and refuse to allow their governments to borrow to fund the sufficient building of new homes. They know the higher debt means slightly higher interest rates, which would depress the values of their land in any future surge needed to capture tax-free gains for themselves and their children.
The NIMBY-flavoured voters, who also vote in council elections at much higher rates than young renters, are also able to amplify the naturally passive-aggressive ‘quiet quitting’ approach of councils on these Government orders in favour of densification. They also oppose the rate increases and higher local debt needed to fund the infrastructure.
The end result is yet more of the same widening of inequality and the creation of a two caste society: the families of home owners and the rest, who can only hope for stable and prosperous futures in New Zealand if they marry into that top caste.
Here's the NPS-HPL to go with the NPS-UD
This has been in the policy wonk works for over two years and now the definite statement is out. The Government formally issued its National Policy Statement for Highly Productive Land (NPS-HPL) yesterday, which will force councils to “map and manage highly productive land to ensure it’s available for growing vegetables, fruit and other primary production, now and into the future.”
It is designed to encourage intensification of housing and block sprawl, especially with the development of lifestyle blocks. The problem for housing supply with this policy is it stops the easiest and most in-demand form of housing development, which is greenfields.
Home buyers and developers prefer to buy house-and-land packages because they know they’re a potentially much more profitable investment, given the much larger, leveraged, tax-free gains on land value escalation in recent decades than any other assets. For example, section prices in Hamilton rose 656% between 2001 to 2019, a recent Treasury study found.
Councils will be in two minds about this one. This policy supports their reluctance to zone for greenfields, given the extra infrastructure costs councils often have to bear in lengthening water and roading networks and building new parks and public facilities. They’d prefer brown fields development, but the problems there are intense too, given strong political opposition to intensification from the NIMBYs who vote at much higher rates in council elections than young renters.
‘You must do this, but we won’t help much’
This policy emphasises just how hemmed in councils feel by Government edicts to enable more land supply for housing, but also force the infrastructure costs and political risks down to them. This is also being done without Government sharing any of the GST and income tax revenue benefits of population growth, or allowing councils to borrow beyond the current limits set by the Treasury-run Local Government Funding Agency (LGFA), which are designed to retain the AA+ sovereign credit rating.
Councils feel they can’t grow out and the can’t grow up, but they are being ordered to by a ‘boss’ who also makes them pay the political and financial costs, without sharing the benefits or taking the pain of having more debt, higher interest rates and (therefore) lower asset prices. For councils, this is another ‘lose-lose’ policy edict that underlines the magical thinking around housing supply throughout Government at all levels. That thinking is that housing supply can grow through densification mostly, and without increasing debt much.
Neither is either true or possible with the current political dominance of low-debt and low-rates NIMBYs at council level and low-debt and low-rates politics at national level.
The magical thinking that’s supposed to reassure and distract
The end result is the impression the Government wants to do something about increasing land supply for housing, but the reality is councils are not allowed to growth either ‘up’ or ‘out’ enough to increase housing supply to improve housing affordability. This continued shortage is then weaponised by the current tax settings that reward owner-occupiers with massively leveraged and tax-free profits on land price appreciation.
In the end though, this disguised policy of enabling median-voting homeowners to get richer through land price appreciation is rewarded in central and local elections by re-elections of those supporting the status quo, or at least those promising to block densification, higher debt and higher rates.
The losers in this scenario of a defacto refusal to acknowledge the reality of what’s necessary to massively increase brownfields housing supply are young renters locked out of home ownership (unless their parents already own property) and any climate emissions reduction hopes.
In effect, median voters and the politicians that court them are choosing continued low debt, low interest rates and more tax-free gains on land price appreciation over affordable and healthy housing for the half of our children growing up in expensive and often unhealthy private rentals.
Those poor children and their parents won’t be able to afford to buy the fresh vegetables produced on that land.
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