By Bernard Hickey
Building and Housing Minister Nick Smith has announced a proposal for a National Policy Statement (NPS) on Urban Development Capacity that would require high growth Councils such as the Auckland Council to release 15% more developable land than it is forecast to need over the long term in an attempt to prevent a repeat of the quadrupling of land prices seen there in the last 25 years.
The much-trumpeted NPS is a tool the central Government can use under the existing Resource Management Act (RMA) to direct Councils to take certain factors into account when designing their regional and district plans. Smith said the NPS would 'buttress' the current process to complete a Unitary Plan for Auckland and avoid the need for Commissioners to be appointed if the Council failed to agree a plan to release enough land.
Smith said the NPS and the RMA gave the Government the power to direct changes to Auckland's plans if the Council did not agree a Unitary Plan in August that met its long term development capacity requirements. The Independent Hearings Panel (IHP) is due to release its proposed Unitary Plan for the approval of the Council by August 19.
Asked if the Government would appoint commissioners to run Auckland if the Council rejected the IHP's proposal, Smith said the NPS and the RMA gave the Government the power to centrally direct changes to Auckland's plans if a Unitary Plan was not agreed.
"There is no need for that action (appointing commissioners) given the very strong set of directive powers," Smith told a news conference where the NPS was released.
The NPS will be open for submissions until July 15 and Smith said the Government aimed to gazette the NPS to make it legally binding from October, which would line with the timing of the introduction of the Auckland Unitary Plan and changes to the Resource Management Act.
"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 per cent. In the same time, building costs rose 78 per cent and the Consumer Price Index 71 per cent," Smith said.
Here's the detail
The NPS requires that Councils have enough land in their city and district plans to match projected growth and that they monitor and respond to housing affordability data, building and resource consent data, and value of land on the urban boundaries.
"Councils would have to take into account the difference between planned and commercially feasible development capacity, and provide for over-supply to ensure competition (20 per cent short to medium-term, 15 per cent long-term)," Smith said.
The NPS would also require Councils co-ordinate their infrastructure and ensure their consenting processes were "customer focused" and recognise the national significance of ensuring sufficient land is available over local interests.
"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," Smith said.
The NPS was graduated so high growth cities (more than 10% population growth per decade) had tougher requirements than medium growth cities (5-10% population growth per decade).
The NPS made no mention of or changes to the infrastructure funding problem faced by high growth Councils that were unable or unwilling to raise more debt. It also did not abolish the Rural Urban Boundary.
Political reaction
Labour Housing Spokesman Phil Twyford said the NPS was a damp squib that was unlikely to make much difference in Auckland.
“The Government has been talking tough for the past few weeks. You’d think this was going to be the big gun, but its only Nick Smith firing blanks. The land-bankers and speculators will read the NPS and rub their hands with glee," Twyfor said.
“It fails the two crucial tests. It has nothing to say about how infrastructure will be financed, leaving Auckland ratepayers to wonder whether they will be left to pay the $17 billion cost of new infrastructure needed to support Auckland’s growth. “nd for all National’s huffing and puffing about getting rid of the urban growth boundary, it says nothing about abolishing the boundary and replacing it with a smarter way of managing urban growth," he said.
“The NPS sets up a bureaucratic system for assessing the projected demand for housing and business land, and measuring that against the estimated capacity of land and dwellings. If the development capacity falls short then the Council is expected to amend its plans to free up more land. “Where’s the promised game-changer? I’ll be interested to hear Auckland Council’s response, but I am pretty sure they will look at the NPS and say ‘no problem, we are already doing this’," he said.
“National has been blaming the RMA and Councils for expensive housing for the past 10 years. It has been a very long reveal, but this National Policy Statement is final proof that when it comes to the Government’s housing policy, the emperor has no clothes.”
(Updated with detail, reaction)
88 Comments
The interesting part will be the section that requires councils to provide infrastructure (defined as water, sewer, drainage, transport and passenger transport) as part of the definition of opening up land. The RMA has nothing to say about infrastructure provision and, currently, councils are not required to provide, say, the three waters to anyone. It's just a convention that they do.
So the big question will be whether Smith is able to effectively rewrite the RMA himself and get away with it.
Remember that because this is an NPS Smith makes all the decisions himself. Parliament won't see it and Smith will get the final version put into effect simply by getting the G-G to sign it. Smith has also chosen the fast-track method for the NPS process and appears to be getting his own Ministry (the one he directs) to conduct the public consultation and provide recommendations back to him. The default path is to appoint an independent Board of Inquiry but we won't be seeing one of those.
Once the NPS is put into effect there will be no appeal back to the relevant RMA Part 2 provisions because this NPS overrides them.
This Government is totally out of touch with reality as is blinded by vested interest and arrogance. The height is that Bill English is warning first time buyer instead of sending a stern warning to speculator (So called Investor) - WHY are they so obliged to please the speculators/overseas buyer - Has to be something that we do not know or is it that the government is sadist and enjoying the plight of the common men.
This is the governments response to Phil Twyford's UGB abolishment announcement two weeks ago.
Phil lays down two tests for the government.
"The government's imminent National Policy Statement with new directions for urban planning must deal with infrastructure financing and avoid encouraging speculation in undeveloped land", says Labour's housing spokesman, Phil Twyford.
http://www.scoop.co.nz/stories/BU1606/S00045/labours-tests-for-govts-ur…
I have written a housing affordability history article about how we got to this point, by the telling the stories of Hugh Pavletich, Alain Bertaud and Shamubeel + Selena Eaqub.
The title of my article is Housing: New Alliances, New Battlefields
https://makingchristchurch.com/housing-new-alliances-new-battlefields-e…
I think the government fails to respond adequately to the pressure coming from Phil Twyford combined with the longer more gradual build up of pressure for change from the public in how we keep our cities affordable.
Essentially this latest NPS continues the pattern of tinkering around the edge of possible solutions. A small marginal increase in land supply will not change the land banking dynamic -has the government learnt nothing from their failed SHA policy? Also the government has no new solutions for how to fund infrastructure for growth.
Surely the sign of madness is to keep doing the same thing and expect a different outcome?
The time it will take to make any impact is surely years away - that's if the land bankers want to develop their land.
Where is the back up legislation that forfeits all the land banked land unless high density development occurs forthwith??
The Nats just want to "play down" the whole housing issue - more steps need to be taken including foreign investors being required to only buying new high density housing. Come on JK.....you wasted $25M on the flag so why not put some teeth into this issue and provide decent legislation too??
Also the government has no new solutions for how to fund infrastructure for growth.
Sure they do - rates rises.
From CG perspective it makes all the sense in the world. They can't offer tax cuts at the next general election if they have to properly stump up for the burgeoning infrastructure bill that faces the AKL community in particular. For who knows what reason, they are against road tolls - so rates rises it is.
No doubt they've got their preferred mayoral candidate on board.
And there's the nub of it.
We have forgotten how much the MWD were the nation's city builders, not the patchwork of cities, boroughs and counties that festooned the map. But this government have made it plain that they will do anything but the one thing that we know to have worked in the past.
So it goes.
MWD profit certainly went down in Invercargill in 1972 on the only new subdivision development in town, after I broke their only local scraper in half....http://waymad.blogspot.co.nz/search?q=scraper
And, of course, MWD did not supply the gravel (contractors), lay the K&C (contractors), seal the roads thus created (contractors) etc etc. Bit of history re-writing going on, here. T'was always a public/private effort.
But I did enjoy my days on the old 3T series D7 - ah, nostalgia.
...great idea Kate, as a % of property values rates have bene declining at a remarkable rate. Hike them up to the same % of property value as they have traditionally been. This will then spread the wealth that has compunded tax free to current owners and allow those currently shut out a fairer chance to get in. And quite possibly drop property values.
Fat chance though.
Government knows very well what they are doing. This is just creating smoke screen to protect elite few in NZ and overseas. Each and every New Zealanders knows what is happening but the government. Even today's announcement - New Zealanders are able to see through the hollowness of the government. What the high up in government fails to understand is that you cannot fool all the time and this time their time is up
If the problem were just land availability this may be useful. However the government already released a lot of land in Auckland under it's special housing zones, and almost none of it had houses on it built, in the years since Nick Smith set this up. Perhaps it's time for a new housing minister, and government. This appears to me to be more of the same - that hasn't worked.
I agree on your targeted rates idea Kate. But there a lot of other issues. Most of this government's policies to date have INCREASED house prices - record high immigration, increasing amounts in the budget for accommodation subsidies and 1st buyer subsidies which push up prices; locking in foreign peoples' rights to buy NZ land through trade agreements with Korea and China etc...
There are many good policy options to make housing affordable on the demand and supply side, but this government doesn't want to apply them. I could give a long list. What we are seeing instead of good policy is stupid publicity stunts, like this NPS, like offering people $5K to move out of Auckland (with a total budget of only $750k), blaming councils when it is central government that's caused most of the problems.
It's totally outrageous! We're only just starting to see the tip of iceberg of the terrible social consequences of people not being able to afford housing - which for most people would be the biggest cost of their life anyway, except for tax. Now it's a totally humongous cost, hence the living in cars etc...
I totally agree - the housing crisis is largely driven by burgeoning immigration numbers - totally within central government's control. JK constantly repeats that mantra about Kiwi's returning home from Australia. What a joke - anyone walking down Queen Street could tell you the majority of new arrivals aren't returning Kiwis;
http://www.stuff.co.nz/national/education/79879029/diversity-brings-cha…
Migrant and refugee students are entitled to funding for up to five years beginning at $850 and $1250 per year respectively.
Personally, I resent paying this out of my taxes for migrants (as opposed to refugees .. very happy to assist refugees and they are very, very small in number) - especially given so many of our NZ born kids go without on so many levels.
OK,I'm going to be a bit of the odd one out here...I think the NPS is very good in many respects! It will help address land banking and speculation because it will require decent capacity, in fact it requires 'over capacity'...land banking and speculation is incentivised when there is a lack of capacity, it is disincentivised when there is a lot of capacity.
Like any market it all comes down to scarcity. Once you have a lot of capacity, obviously scarcity is dealt to.
Obviously, things are more complex than this, but this is important.
I just don't think it will become a reality in that respect Fritz for two reasons:
1:Councils are notoriously deaf and self interested, so it WILL take government forcing their hand via law and regulation
2: Say it works and then everyone who has taken out new/recent bank loans is staring down the face of negative equity due to a new push of supply......who's going to want that if you already have skin in the game?
I know my second point is highly unlikely to take place but.....is this 'undersupply' not also making a great deal of people rich on paper the last decade or so?
If I had a 3rd reason, it would be because plonker N Smith is involved. Anything the guy touches fails miserably
Well finally, a real piece of change that will have an impact on the housing crisis, not only for Auckland but the regions it is spreading to.
Hopefully now all these moaning prats on the interwebs will realise the issue is resolved and talk about the real issues of our country, like SBW playing for the Blues.
What does this mean ? - How does it get the Govt from A to Z?
Does it mean compulsory acquisition of land outside the urban area by the council and or the crown, followed by the council and or the crown inviting tenders from developers to develop the land on a time and materials basis (cost plus) (only), then becoming the "vendors" of the newly developed sections
Where is the money coming from for that
About the only way it can work - government will have to be the principal
The crocodile in the swamp is the $ millions of working capital that will be tied up for several years
Name a developer that would "buy" the newly released land, at market, undertake the development, make developer contributions (more up-front money) then sell the sections at an "affordable price" set by the council or the crown - yeah I can't see that happening somehow
See NBR today
NPS that lets it force local councils into making "affordable land" available for housing and business development (operative word is affordable - yet to be defined)
http://www.nbr.co.nz/article/government-sets-bar-auckland-unitary-plan-…
They might get the Salvation Army to do it
Olly sounds worried ( http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=116… ), so maybe it will work
Wouldn't be surprised if this is going to be the core issue of next years election. Can see it now - Winston as the agitator and King-maker with a Labour/Green coalition. Winnie's core issue will be turning immigration around. Labour will use the Greens as the devil's advocate to deliver uncomfortable housing policy. With the Nat's in opposition they'll get stuck into Labour as the economy goes roaring into recession like it was Labour's fault all along. But the next term is a likely poison chalice though for whoever is at the helm.
Nothing New. Everyone knows that Government is not trying to address the other important issue of speculation. Supply though important is not the only solution and also supply is a long term solution - which too is need but need of the hour at the moment together with supply is using other tools like land tax, removing tax benefits to investment property and check overseas buyer long with RBNZ measures like loan to income and so on. Next overseas data if done properly will confirm the percentage of overseas buyer. If government was serious in controlling the market should have used all tools with them instead just passing the blame on council and buying more time.This is giving more time to speculators to play around. Today read on news that Bill English is warning first time buyer to be carefully instead of warning speculators to be carefully that we are about to introduce measure to catch you. God save NZ from the current leaders who does not have the desire and will to solve the housing problem but somehow it seems have vested or hidden interest for it to run as a result using delaying tactic. This government is more concern about overseas buyer than their own Kiwi. Blind and deaf - sign of a arrogant government which has to go. They are playing with fire. Government is not able to read the restlessness and frustration of kiwi otherwise why would they be warning first time buyer (Adding fuel to fire) instead of so called Investor. Something is wrong somewhere but the government should before it is too late.
They are playing a very cunning long game. No interest in the long term consequences for NZ. They will revel in the mayhem their poison chalice causes and make *huge* long term political capital. Perfectly understandable (if reprehensible) behavior from Machiavellian politicians.
Many of those in main stream media would not have their jobs (particularly ones on TV) without already fitting a certain 'non questioning of the status quo' personality trait.
I can even name some that work for RNZ sadly!
It's that old dilemma they try to justify about 'not asking the hard questions, cause they want their "guest" to always come back' So... they go lightly on even the most obvious liars and charlatans that live off the public service gravy train.
Question* how is NZ benifitting from three years of record immigration? No answer.
how is NZ losing from 3 years of record immigration?
Overcrowding, Competing for Jobs, Tax payer funding infrastructure needed for population growth, housing shortage, rate rises, loss of productive land to housing, more people to share NZ's natural wealth, etc etc
says it all for me GDP per person falling, taxpayers expense growing faster than income, services going backwards'
Grant Robertson: Why, in the face of such poor per capita GDP, did he deliver a Budget that, in the words of the Westpac economist team, has a net reduction in the allowances for new operational and capital spending over the next 4 years?
Hon BILL ENGLISH: I do not know what the Westpac people are talking about, frankly, in relation to a net reduction, because, as the finance Minister I can tell you that all the numbers are going up—some of them a bit faster than might be absolutely ideal from a finance Minister’s point of view. I do not know how many times I have to explain to the member that the low per capita income is a function of the surge in population growth. We regard the surge in population growth as a success, not a problem—as success
If I was an opposition politician I would quit now. Whoever wins the next election gets a lemon.
The housing crisis is the tip of the ice burgh. The infrastructure needed for 180,000 immigrants in 3 years, that's 3 cities the size of Whangarei worth of infrastructure. Roading, sewerage, footpaths, energy generation and reticulation, a hospital etc etc...
The 17 billion dollars Auckland needs to service present subdivisions is a drop in the bucket of the total cost of population growth.
If NZ has 1 million taxpayers 17 billion is $17,000.00 per tax payer.
If I was a politician I would let National have the next election, they have set NZ up for the biggest financial disaster since Muldoon. But this one is going to be huge, its going to change our whole lifestyle. Sorry Kids, sorry grandchildren, I am so sorry it happened on my watch.
This will mean in about 2 years supply will increase. What is going to happen to prices in that time? And how many houses with this allow to be built? Do we have the labour available in NZ to actually ramp up the building. And as others have mentioned, infrastructure needs to come with these new developments. Are there plans in place for that, as it takes some time to build roads and lay services.
So a another 18 months of price increases while we wait for today's measures to make an actual impact.
By god we are so fuct. They really do not give a shit do they.
More supply side BS, Im watching premium north facing agricutural land being turned into suburbs around a country town (Pukekohe) that was not designed for a large population. It used to be a pleasant experience going into town but now, not so much.. sooo the sprawl continues.. good job government! keep packing them in.. the more people the better, I mean its not like we are an Island or anything and i love to be crowded, who doesn't.
One comment attributed to Nick Smith in this article on stuff* was that his measure of success of this plan would be to limit house price rises to no more than 10% per annum. They are effectively not even trying are they...
*http://www.stuff.co.nz/national/politics/opinion/80665253/urban-develop…. I was reading this whilst taking a break at work and swore so loudly when I got to that comment that the person in the office next door popped in to see if I was OK!
There is no room for Negative Equity or house price deflation allowed in the Perpetual Debt growth economic model these guys believe in.
I said it before and will say it again. Who would vote for negative equity IF that is in reality the only way out of this bubbly mess? Not many I suspect.
So.....a natural crash it must be and I think people are just hoping like hell that won't happen. Of course, the actual math paints a different picture just like it did in 2006.
The market will take care of the "housing crisis" sooner or later. We are in a seriously risky economic phase globally with many asset classes (real estate especially) priced though the roof while inflation is very low and incomes not increasing significantly. The government knows this. And is just stalling for time to allow the market to do what it always does: adjust. There will be no soft landing. And no matter what is done to legislate more land supply, there's just no infrastructure to support it, so it will not happen. What will change is the inevitable bust that follows a boom.
We are building more houses flat out - just not ones first home buyers can afford. Developers and land bankers are not to blame for acting rationally. But as soon as the market senses an oversupply or drop in demand, prices will adjust all by themselves.
Social housing must be provided for those in need. THAT is the government's job. The rest will self regulate.
Let's just wait and see rather than panic.
Entirely rational and sensible words that I would have believed 100% a couple of years ago. But at what point do you give up waiting. Being rational has cost some of us very very dearly.
The supply will NEVER catch up while they flood the place with immigrants, ignore foreign speculation, ignore money laundering, ignore the tax advantages for housing.
Auckland is no longer a viable place for my generation and its unlikely to meaningfully improve in a timeframe that will make any difference to our lives now. We are written off.
Consider the other possibility with global asset classes. The global monetary system is more likely to be let rip than have asset classes correct. We saw it in 2008. Engineered inflation will be the way out.
Despite NZ's unfolding financial catastrophe, main stream media like 'Paul Henry' pump National's politics as a success story.
NZ's younger generations who are losing their birth right to be trained into gainful employment and own there own home are just as likely to vote National as they can't see through the bias media.
If they do actually recognize that they have been shafted, they probably just won't vote at all.
Election next year.
The government has ZERO INTEREST in seeing any reduction in house prices going into an election.
If they were to bring in something to curb investors and the market started dropping this could spiral into a big correction so as far as the government are concerned
- they need to appear like they care,
- they need to appear as if they are doing something
- however their main goal is getting voted in next year and they have more chance of that with house prices rising that falling.
The increase land supply although good will take a long time to be reflected in prices so for the government its a win/win. They look like they are doing something and it wont impact the prices prior to the next election.
End of the day 3years for a government is too short as it reduces the amount of policies that are good for NZ and increases the policies that are good for votes.
8 years and 500k+ of average prices rises in Auckland approximately double the amount that Labour had during their term of 250k. The government has been a complete failure. Household Debt increasing 16bn or 8% a year is poor financial management by the Reserve Bank and will impact NZ stability in the long run.
Shame on Key and Wheeler. Two muppets in the House Price circus.
I think you're exactly right Joe Public. Nats want to appear to be doing something to help stabilise the market, but the reality is most of their policies boost house prices and delay stabilisation or correction. As you say, it's their political motivation - but this will have a terrible cost for NZ, and be a shameful legacy for JK.
One should use all platform to shame National government for their arrogant approach as media is toothlessin NZ. Our PM and his gang are giving statement which shows how insesenstive they are. Height of arrogance and god only knows why are they going so out of the way to please elite few NZ n their overseas bosses. Defintely have some vested interest or afraid of something otherwise how could the be so blind n deaf to what is happening around them. Why are they trying to defend housing bubble which all of NZ except PM n his gang is not ready to accept. Definitely something is wrong somwhere. I think a time has come to dtart a movement to shame government - not tgst we want to but we have to protect NZ socially n ecenomically.
Hi Joe Publice you are absolutely correct and time has come to use all social n media platform to expose government. Are thick skin so need real movement and if social movement can bring downfall of big dictaors world over why cant we in NZ which is a democratic country. Am sure is possible n will happen.Hate to see smirk on their face whenever they come on tv with insensitive comments. Karma. Justice.
Auckland has both an oversupply and an undersupply of land happening at the same time.
Auckland (Super City) has a 25% or so over supply of land. This oversupply is entirely exurban and people are willing to pay a higher price not to have that sort of commute, which is pushing up prices in Auckland.
Auckland (City) has a 50% or so undersupply of land. More than 50% of needed land supply has been cut from suburban development, creating a shortfall and driving up property prices.
Increasing land supply in Auckland (Super City) will absolutely not help, we can tell this because it has already been tried. Increasing land supply in Auckland (City) will help, we need to change the RUB.
Please see the wrticle publised in nz herald and support : http://m.nzherald.co.nz/property/news/article.cfm?c_id=8&objectid=11649…
Please see the wrticle publised in nz herald and support : http://m.nzherald.co.nz/property/news/article.cfm?c_id=8&objectid=11649…
Hi Rob007, we all know what is mentioned in the aricle. The question is how can new zealanders force tHE government to accept and act. New zealanders are so much struggling that a time has come to have people movement here in NZ as has hapened in other parts of the world. Looking for a platformoe or someone to be a voice of the common people of NZ. If national does not wake up now should be ready for people movement. It is only a matter of time. Need one trigger.
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