Council development levies, urban planning, building consent and inspection processes set to fall under Productivity Commission spotlight

By Alex Tarrant

Development levies, urban planning, and building consent and inspection processes are set to fall under the Productivity Commission's spotlight again as it begins an investigation into the regulatory powers of local government.

The Commission is being tasked by the government to look into the regulatory powers of local government and try to find what might be better regulated at central government level. Former Local Government Minister Nick Smith announced the inquiry as part of the government's package of local government reform, aimed at controlling rates rises and council debt.

During its current investigations into housing affordability and international freight costs, Commission chair Murray Sherwin said a central theme of the two areas was local government regulations. The local government investigation will also include a further look into council ownership and control of ports.

While the terms of reference for the investigation have not yet been set, Sherwin told interest.co.nz it would centre around the delineation of regulatory functions of central and local government.

“In the course of both the housing inquiry and the freight inquiry, inevitably you come across issues in local government," Sherwin said.

“Nick Smith at least was concerned about local government wanting to make regulations in a whole raft of areas, like turning their county into a GE-free county. There are areas where he was concerned that councils are starting to take decisions that are cutting across what he felt were national government decisions,” he said.

“We’ll see what the terms of reference are, but as I understand it, we’ll be asked to do a bit of a stock take of what councils are doing, how much of that is driven by requirements imposed on them by central government, and how much of it is driven locally.”

The war stories pour out

On Friday last week the Commission handed the government its final report into housing affordability. Finance Minister Bill English is set to table the report in Parliament in the next week or two. See our story on the Commission's draft report here.

Stemming from the inquiry into housing affordability, the Commission is set to investigate the regulation, control, and setting of development levies, urban planning, and administration of building consents and inspections.

“The war stories pour out when you ask builders and developers about their engagement with local authorities,” Sherwin said.

In the Commission's draft housing affordability report there was a large section about urban planning which essentially carried a theme that the task had become a whole lot more complicated beyond the traditional realm of urban planners, he said.

In terms of setting urban limits, there might not necessarily be anything more central government could achieve over local government. But urban planning was worth looking at.

“Now councils are being asked to deal with a whole raft of environmental, social and economic considerations as well as, ‘where should we put this bit of road’. It’s an issue of capability and incentives, and consistency across the nation," Sherwin said.

Across the country councils interpreted building regulations differently, meaning construction companies might be have to build the same house differently depending on where it was built.

“A company like Lockwood, which has been building good solid houses for 60 years, will tell you that, depending on which council they’re about to sell a house in to, they might be told ‘you need another brace there’ because that doesn’t comply with the building regulations," Sherwin said.

“It’s just different interpretations of the building codes. That gets pretty frustrating for some people. I think we’ve seen quite a lot of that. It’s been overcome a bit now, but the rules around putting up cellphone towers and so forth can be different in every jurisdiction,” he said.

“So what should be national, and what should best be determined locally. And what sort of philosophy underpins that – what are the principals that would lead you to making some judgements about that?”

Port ownership

In its current international freight costs inquiry, the Commission looked at council governance and ownership of port companies. The local government investigation would build on that, looking at different ownership structures, and the regulatory tools councils had with respect to ports.

“Councils, in our estimation, would do well to think really hard about what the objectives are that they’re trying to achieve in ownership of some of these entities, and then think really hard how to go about achieving that," Sherwin said.

“As that chapter showed [in the freight inquiry draft], there’s a whole lot of stuff they can do without ownership. They’ve got a lot of regulatory tools.”

Councils had both commercial and non-commercial interests in running ports. It was important that the commercial interests of a port ran tightly because the costs associated with not running a port commercially would be distributed right through the community.

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