By Bernard Hickey
Prime Minister John Key has upped the ante in the Government's battle with the Auckland Council to free up more land for housing, saying a new National Policy Statement in the next fortnight would direct Councils to release land as a matter of law.
Responding to Council concerns that it could not afford the NZ$17 billion infrastructure bill to provide the roads, public transport, water and sewage pipes to underpin that housing, Key said the Auckland Council may need to look at selling assets.
Key used his flagship post-Budget luncheon address to a Trans Tasman Business Council audience in Auckland to increase the political heat on the Council ahead of its decision on the Unitary Plan due on August 19, and to deflect some of the political heat building up on the Government around Auckland's housing supply shortages.
Key described the Metropolitan Urban Limit put around Auckland in 1992 as an "utterly failed experiment" that increased land prices from NZ$100,000 per section to NZ$450,000 per section now.
Key said the solution to Auckland's housing supply shortages and high land prices was to release enough land to meet demand, and he pointed to how land releases in Christchurch had stopped land prices rising and was starting to reduce rents.
"Because we had CERA (Canterbury Earthquake Recovery Authority with special powers) and because we had Commissioners in there with ECAN, and we could go out there and release a lot of land, we did exactly that and a lot of homes got built in Christchurch," he said.
"So what's going to happen in the next week or two, is the Government is going to issue a National Policy Statement on urban development. What that does is it says to the Councils right across the country, but different conditions where the pressures are greater, so different conditions in Auckland, is that the NPS have to be met and they have a link to economic issues," he said.
"So in other words, what is the land price vis-a-vis the demand that's in the economy. And if the land price is going up too quickly, they have to amend their plans to release enough land. And if they don't do that they'll breach the law," he said, referring to the way the Courts had given the deciding weight to an NPS in the King Salmon case in an RMA dispute.
'There will be no debate'
"It quite clearly shows you the courts think the NPS take precedents over other things. It will mean if land prices keep going up and there is not enough supply, what will ultimately happen is the developer will go along and say I want to zone this residential and if the Council say 'no' and the developer takes the Council to court, the developer will win. That's where it's going. And the same thing is going to happen in commercial land as residential land," he said.
"There won't be a debate about whether they release more land. They'll be releasing more land."
Key pointed to the price of a house and land package for a three bedroom house in Christchurch being NZ$400,000.
Key said the challenge for the Government was to make sure it funds the infrastructure that supported the release of the land.
"The Government is continuing to look at what the roading and transport demands are in Auckland to see whether it's meeting all those requirements, in the same way we looked at the CBD rail tunnel, where we said 'yep' that has to be funded by the Government," he said.
Later, Key told reporters there would be a number of factors within the NPS that would need to be met, but he declined to say whether it would include a house or land price to income multiple, or some sort of land price escalation clause. However, he repeated that rising land prices would lead to more land release.
"Certainly the desire and the economics around someone land banking will be substantially reduced," he said.
'Council should look at its balance sheet'
He said the Government was happy to step up and support the funding it's share of the infrastructure needed to support house building on this land, "whether it be schooling or roading."
"The Government may well have to invest more money in Auckland over time to support that infrastructure," he said.
Challenged again on how Auckland Council will be able to pay its share given it is up against it's debt limits, Key said: "In the end Auckland Council has its responsibility, its balance sheet, and its challenges it needs to meet, but it can't just put its hand up and say it's all too difficult any more than the Government can."
Key said debt was not the only way for the Council to fund its share of the infrastructure. Asked if they should sell assets, he said: "They might do."
67 Comments
If you thought Nick Smith's squirrelly attempt last year to defraud Auckland iwi of their right of first refusal on Crown land was good this will be spectacular.
For a start ignore the NZ King Salmon reference. There is no news that a National Policy Statement has the force of law. It's written in the RMA that NPS and Regional Policy Statements have the same legal status as regulation. It is also written that NPS and RPS may not contain rules only objectives, policies and methods. So I can't wait to see what they actually come up with by way of a draft NPS. The chances of it being unlawful or ineffective are pretty good.
Then there's the next fun part: the disruption. First off, the government can't just declare an NPS they have to go through the whole consultation process which will take time. Once it is finalised all councils in the country will have to rewrite their district plans to make sure they align with the NPS. In the case of Auckland they will have to suspend the PAUP process, then review it in light of the NPS, then go through some or all of the consultation again. Mountains will form and erode away again to the sea. The sun will burn out and finally we will have a plan for Auckland.
Then finally the only people who will be able to enforce these provisions of the NPS will be developers who are aggrieved by specific decisions of AC. As Dale Smith says developers will want to be well rewarded for having to take all the risk and expense of a doubtful trip to the courts. So expect section prices to go higher as a result.
Neither a lawyer nor a planner so take what I say with a grain of salt. But on the assumption that politicians never tell the whole truth I like to check up on a few things for myself. It's amazing what you discover in legislation, court judgments, Ten Year Plans and the like.
I am convinced that the Nats are trying to find a sneaky way to make it easier to pillage the country boost the economy by weakening planning processes. They had wanted to amend the RMA and weaken its purpose but they couldn't get the numbers. So now they have an opportunity to use the NPS method to see if they can override the main legislation via the back door. An NPS doesn't have to go through Parliament; it becomes official by an order-in-council issued by the G-G on the advice of his or her ministers.
It's no accident that JK referenced Environmental Defense Society v. New Zealand King Salmon and ors. Because it made it to the Supreme Court the judgement will be highly influential if not definitive. In this case the majority of the Court placed weight on the contents of the Coastal Policy Statement possibly at the expense of considering the overall intent of s5 of the RMA where the purpose of the legislation is spelled out. The Nats may well be hoping they can repeat this with a National Policy Statement.
I am really hoping Andrew Geddis will weigh in once the draft NPS is released. He usually posts at pundit.co.nz.
Not necessarily for the land bankers, if you've owned land for 20 years then sure it will allow land to be monetised.
But there has been plenty of land banking in the past few years and a large land release could leave many of these short term land bankers (speculators) under water.
Making all the right sounds. How lets see the action. The restriction on land limits has always been the elephant in the room. Lets have a shake up of the council as well . Don't we pay them to get things done. They haven't been doing their job and all that happens is a talk fest and the government has finally had enough as has most Aucklanders.
In the end Auckland Council has its responsibility, its balance sheet, and its challenges it needs to meet, but it can't just put its hand up and say it's all too difficult any more than the Government can."
Or Mr Key could simply turn off the Immigration tape...poof problem solved. Bet his mates are drooling at the assets needed to be sold off.
Praise where it is due. Well done John Key.
There is a lot more that you need to do.
- Tax structure at many levels
- Anti competitive behaviour in the building suppliers. - Force BRANZ to adopt reasonable international building material standards and give the Commerce Commission the mandate and teeth to get stuck into them.
It will not burst,try some travelling? There are lots of fully functioning countries with 15 to 25 times our population,in similar land area. Already there is nearly a third locked up in conservation estate,which will always be there. We could easily aim for 30 million. Think of Auckland being a real city of 5 million, not a nothing place ,as it is now. Every regional city at 2 to 3 million, regions as federal states,in a federated system. We would not be bleating about poor neighbour Australia by then, or so concerned about international dairy prices either, when our whole dairy putput was consumed locally.
Jimmy, Why do we want 30 Million? If you want to live in a bigger city move to Sydney. Have you parked on the Auckland motorways recently, they are nearing capacity, remove the MUL and in 12 months you will have gridlock.
And dont bleat to me about public transport, it only functions where you have concentrated populations either in large European cities or dense satellite townships. Those potato heads at the Auckland Transport Blog completely ignore this fact.
i would not be quoting CERA as the best thing to sliced bread to people from christchurch,
its simple slow immigration for awhile until auckland can catch up, he wont do that because he has dollar signs in eyes with the money that can be made selling aucklands assets
While quoting CERA may or may not be a good idea, the fact is there is a lot of land in Christchurch that is being developed or has the green light to be developed. This is keeping the lid on house price rises and as the focus of the rebuild changes away from residential to commercial I suspect house prices will stagnate or maybe even fall and rents will continue to fall - especially if rebuild workers start to leave the city as work disappears.
Can anyone tell me what residential land is being developed in Christchurch City that wasn't already zoned for development before the earthquakes? Anyone? Anyone? Bueller?
It's possible CERA used its emergency powers to bypass RMA processes but I can't think of any examples off the top of my head. They did insert some rules in the replacement District Plan to make central city residential development easier but there isn't much of that going on. Regional councils play no part in opening up land apart from drawing lines on a map to prevent use of certain areas. So the govt-appointed commissioners at ECan have played no part in house prices stabilising.
A better explanation than the government riding in on its white charger to save the day goes something like:
- there was great pressure on housing immediately after the earthquakes (obviously)
- not only were residents displaced from their homes but half the adult male population of Ireland turned up for the rebuild
- for the first two years houses basically couldn't be built because the insurance companies wouldn't insure new dwellings
- luckily, because they have historically had to cope with high rates of growth, the Waimakariri and Selwyn Districts had large buffers of buildable land on hand and Christchurch residents are shifting there in droves
- as houses in Christchurch City have been repaired or rebuilt their owners have been able to shift back
- as houses in Kaiapoi, Rangiora, Pegasus, Rolleston and Prebbleton have been completed their owners have been able to shift in
- as rebuild projects wind down temporary construction workers have left
Et voila, pressure goes off, prices go down. Not exactly rocket science. The government's contribution? EQC, Southern Response, CERA and NZTA dragged the chain so that everything took longer than it had to. Not exactly Hall of Fame material.
I'm more intrigued by the timing of this announcement. This has all the hallmarks of a government caught in the headlights of public opinion - plainly they misjudged public opinion on rapidly rising house prices. I suspect that the poll from the other night showing 76% were concerned about housing ( and 61% of National voters) has spooked them.
While the Auckland Council may protest the infrastructure costs - what have they been doing the past few decades - doesn't appear to be planning.
Let's allook guess what the level of price increase will be to trigger this 'land release'.
My guess: 20% pa growth. A level we wouldn't see anyway for another 10 years as Auckland cycle has past its peak worth growth rates dropping already
So won't actually change anything.
Yeah saw English on the nation this morning and was pretty harsh on auckland council.
Key says courts will back the yet to be announced nps but what if the land is on a flood plane or is unknown and requires Geo analysis. There is already a ton of factors councils consider I guess this nps will for the first time add 'affordability' into the factors which is good but nothings free and it will come at a cost
Electon prep.sat on his Arse for 8 years and now he is trying to look like he is doing something.
Too little too late. Let's all hope common sense prevails and nz gets rid of the ex banker PM.
He will leave his legacy of nz having the highest house prices relative to incomes in the world and gdp per capita dropping since he got in office.
Do nothing government.
Lot of ass covering going on. JK obviously thought that public sentiment would be satisfied based on a "my house price is going up so I'm alright Jack" attitude. I think that there is probably a feeling of fear of what the externalities will be, even though the govt will not be in a position to understand the impacts in a worse case scenario.
More Supply of building sections, new houses .... [is the big answer]
To be met by increased Immigration, increased supply International students, more foreign buyers,,...
To be met by increased supply ....
Etc etc in a vicious circle
Oh yes, we are also now surprised to need more schools, hospital places, etc
Terrible people these speculators but they include people like me, retired pakeha simply rationalising houses, a legitimate need.
I may keep one back for cash flow, but either way first home buyers miss out.
We need an eternal supply of new houses just to make our society work, low cost housing is a good place to start in my opinion.
JC, no doubt about it, we have begged from the bankers since the start of the colony, still do.
My hope is that the questions of equitable access to housing will be back in parliament where the opposition can have some input.
I hope the parliamentarians make good use of the opportunity
Has anybody got the cojones to tell Key it's his policies which have caused the housing shortage? The massive increase in immigration numbers?
A liveable city is a city with green spaces, good public transport, and a vibrant cultural scene.
His strongarming the council, who are following the law with trying to design and implement a unitary plan, is going to turn this city into a nightmare.
Sure - we need more houses. Lots of them. but with that comes infrastructure, and to let the developers go ahead with building houses without looking at sustainable solutions for transport and waste, is incredibly short sighted and nearly criminal.
It's time JK started taking responsibility for causing this mess, instead of trying to put the blame on everybody else.
No National MP will dare to tell JK that the housing crisis in Auckland is the result of his own policies.
He is now like Muldoon, trapped in his own false beliefs and unable to face what he has inflicted on NZ.
His Crosby Textor advisors, PR Spin Doctors and Black Ops / Bloggers will only work on the marketing spin, not advise on actual policy for the good of NZ.
The issue will live on.
That of over priced property that is. Too many people now have too much skin in the game.
Every man and his dog in NZ thinks buying a couple of rentals is the way to early retirement.
Nat's are the only game in town for it continue, and they know it.
Imagine the howls of protest if policy changed against the established free lunch given to rental owners.
They would choke on their cheap chardonnay.
And poor people don't vote.
So a win/win for the Nats.
And you think the poor and dis-infranchised now in the future will just take that lying down from here on out?
How do you think those people will pay those ever increasing rents? They will need real jobs to go to.
I see this ending very very badly moa man. Violently even. Push enough people to breaking point and see what happens.
key and Muldoon are a like two peas in a pod, both have run up massive debts, both stopped forward funding of super, both made policy on the fly that the rest of the party did not know about.
all I need now is for key to appear on the news half cut calling a snap election and I will believe in reincarnation
Winston made it pretty clear in his post budget speech. And all the people who think Winston would support national next government would do well to watch it.
Key does not give a flying **** about the average kiwi. He does not care about reasoning. He has his own vision and agenda and if you work for a living you arent somebody that matters.
Surely regional development must be put in the equation for slowing housing demand in Auckland. Paying companies grants to move to Wanganui or Gisborne for example would be much cheaper than this massive infrastructure bill to make Auckland bigger and even uglier. Upgrading comms links around the towns in nz would make regions much more attractive to tech companies. And the house are already there at a fraction of the price of Auckland.
Apologies for double dipping in two articles but this is definitely worth the read:
The following link explains why the House market is moving up in the USA. Makes for interesting reading and draws many parallels with our own crazy housing market...
https://nz.finance.yahoo.com/news/housing-market-horror-story-isn-101500...
Taken from the article.
"This divide has tremendous implications for the country.
First of all, home values remain one of the few ways for lower-income families to gain wealth in America. If they don’t want or don’t feel they can get a mortgage, we have to find other wealth-building strategies.
Second, the continuing trend toward the luxury market could create a price spiral that eats away at affordability, especially if mortgage interest rates rise.
Third, housing groups could continue to push to “open the credit box” when that isn’t the problem, exposing those vulnerable families willing to buy a home to more risk. And finally, the economy won’t expand as much if residential housing is a mere playground for the rich."
Sound familiar?
And of course we can't forget ...
"The situation is far worse in the rental markets, where affordability is at a point of crisis."
Deja-Vu
Here we go again - Governments never learn
In the 1990's the government shoved the causes of what would become the leaky-homes saga down council throats. The Councils then became gun-shy of litigation and the consequences of the fall-out. Then the Government walked away from it
Now here we go again - Government shoves its latest program down the throats of councils
http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11647416
Governments never learn
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