Bernard Hickey calls for a change in incentives for Councils rather than imposing central government control to free up housing supply and affordability

Bernard Hickey calls for a change in incentives for Councils rather than imposing central government control to free up housing supply and affordability
To fix council foot-dragging, change their incentives says Bernard Hickey

By Bernard Hickey

The councils in our biggest cities are increasingly seen as one of the big roadblocks for economic growth.

This week's drama in Christchurch around building consents is symptomatic of the tensions building between central and local governments over the inability of New Zealand's biggest cities to grow quickly and affordably.

This wasn't just an earthquake issue. The problems in Auckland are not that different.

The Reserve Bank is also worried about how the lack of affordable housing supply is helping create the risk of a housing bust that shakes the stability of the banking system.

It is on the verge of clamping down on the growth of low deposit loans in an attempt to slow the rise in house prices.

It has even threatened higher interest rates that would slow economic growth generally if this housing supply blockage can't be removed.

Developers, builders, renovators and potential home buyers are champing at the bit.

They are often frustrated and angry about the time it takes and the costs for consents to be issued.

The increasing tendency of councils to load a bigger share of infrastructure costs onto developers at the margins rather than spread it thinly across ratepayers through general rate increases is particularly maddening for developers and buyers of new homes.

It's almost as if the councils are actively trying to stop growth.

Bill English's recent comments to a Wellington audience about Auckland's planning delays indicates the tone of the thinking in this apparent tussle between central government and local government. "We cannot let 20 planners sitting in the Auckland Council offices make decisions that will wreck the macro economy. We cannot let that happen, and we won't let that happen," he said.

So what could be done sustainably to 'unblock' the system and change what is seen as a culture biased against growth?

The initial indications in the Christchurch situation and with legislation allowing a central government over-ride for consents is for an old style intervention from the centre to 'take control of the problem.' Such centralised decision-making on such finicky and inherently local problems could actually backfire and further slow down the process.

What if the incentives were changed?

Currently councils don't really benefit from population growth because they have to pay for the roading, sewage and water infrastructure that goes with that growth, but are not compensated through the rates system.

The current rates system actually discourages growth and has led to the sorts of limits on growth seen with the Metropolitan Urban Limit.

It has also led to massive development levies designed to avoid the politically painful rates increases that ratepayers have become tired of over the last decade.

Instead, what if councils received grants based on population growth and the income growth of that larger population? That would change the incentives and encourage growth from the ground up.

That's how many councils and local governments in continental Europe operate and they have much more affordable housing with a more positive approach to growth, even with plenty of regulations around building sizes and types.

Perhaps the government should be looking at changing these financial incentives for councils, rather than swinging a large hammer down from on high to crush the opponents to growth.


This article was first published in the Herald on Sunday. It is used here with permission.

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Good article Bernard and the sort of incentives for local councils that you talk about is what occurs in Germany and look at their real house prices since the 1970s compared to the UKs.

Actually, Brendon, I give it an F.
This is unacceptable, from a man who has had every opportunity to get informed, over a long period. The same weekend, this appears int he ODT -
"Business as usual ''is not an option'', Dr Janet Stephenson says"
. "Prof Lloyd says it is impossible to know what future Dunedin should be preparing itself for through its energy strategy.
Peak oil means peak economy, a concept which economists are slow to grasp, he says.
Because the physical evidence points to a long-term global decline in economic growth it will be increasingly difficult to implement solutions".
But Bernard Hickey knows better. Just like that. Not only that, but you probably can't ping his piece to the Press Assiociation, because it's an 'opinion'. Does make me wonder about journalism, though: does he think he knows more than Prof Lloyd, perchance?

That's an intersting media article.
First you have the Mayor talking "up" what an energy strategy needs to proactively plan for;
He points to a global low-carbon goods and services market that is expected to be worth NZ$3.8 trillion by 2050, the 55% increase in green services and products Copenhagen exported in the five years to 2009, and the estimated 14,000 new jobs added to London's economy through carbon-reduction initiatives.
And then you have Prof Lloyd, the energy specialist (i.e. trained academic) saying this is what it needs to plan for; 
Prof Lloyd believes Dunedin needs to become as self-contained as possible in energy and food production and water supply.
World of difference between the two, eh!

The former is well less clueless than many (just listen to the Green's they push the former), the latter is most accurate...without cheap copious transport energy the former simply isnt possible...even by 2050 there wont be any oil at least on a scale of supporting an economy....

Please, please, please explain how making people pay twice as much for houses will help them adapt to an energy shortage.  

Housing is a bubble, it will its moot.

 "....that shakes the stability of the banking system". What stability?
The whole system is utterly dependent on the property bubble not imploding....even a slight implosion would destroy the weakest bank....which begs the question...why are we not allowed to see the real data that exposes which bank is most at risk????

Grants to Councils with high population growth.  Who from?  Taxpayers from all over the country?  Enough of that already, Tunnel, loop, Tunnels, and various things such as higher limits on accommodation allowance.
Remember the productive powerhouse in this country is not Auckland.
There is a case for the costs to be borne by the locality.  If Auckland can't even afford it's own expansion, why should it be encouraged with subsidy.  If the true cost fell where it was incurred, then there would be diffferent incentives for decisionmaking.

Taxes do not 'belong' to central government and they do not have to 'subsidise' local areas. Locals could elect for some of their taxes to go to local authorities rather than Wellington.
In Finland where I lived I needed to state which municipality I belonged to and X cents in the Euro of PAYE tax went to that Council. You could do the same for petrol tax. Then you would have local taxes paying for local amentities.
No need for the national taxpay to pay for local amentities, whether it be rural roads or Auckland rail loops or Christchurch rebuild for that matter.

High growth areas, whether from population movement or income growth will generate more economic activity for that local area so if the Local Council have more of their own taxes then they can afford to provide the infrastructure (roads, public transport etc) needed to accomadate that growth.

Petrol taxes are currently returned to the cities/districts where the petrol is sold (.i.e  it is based on how much pretrol is sold in a district not how many people live there). It's not a big amoubnt but it is something.

Kumbel I did not know that. I know Auckland's Super Council asked to raise petrol tax to fund more transport infrastructure and Wellington turned them down. How much of the petrol tax goes to the local authority where the petrol was sold? Is it all of it, or does Wellington still get some? I assume Wellington would get at least the GST component.

It's tiny. From memory less than 1% of all the taxes collected.

Yes, but don't forget - central government funds (in most cases) 50% of local road costs and 100% of state highways using that petrol tax.
I think the petrol tax Auckland Council wanted to levy (and is likely to do so in future) would be a targeted fund (only Aucklanders taxed by way of geographic location of the petrol stations) and all the revenue collected would 'stay' in Auckland.
I prefer road tolls to petrol taxes however because people generally make decisions about where to live and work taking into account the cost of road tolls - whereas petrol taxes don't have the same effect.

Road tolls do not have a good history. Google Turnpikes. All the US road toll companies of previous centuries went bankrupt. Again the problem is public goods. I really recommend you look that up and think about it.
Where road tolls can work is as a congestion control measure. This is what Singapore do. So the tolls do not pay for the infrastructure. But the tolls are set so that the motorway does not become congested/ remains free flowing. The tolls can vary depending on use.

Where road tolls can work is as a congestion control measure.
That's my meaning - I agree that roads rarely pay for themselves (prior to someone going bust anyway), in other words they cannot usually be built based on a pure user-pays model.
Tauranga harbour bridge was a positive/successful example however.
No I like tolls as a means of revenue gathering - that whilst gathering the revenue also serve to ease congestion problems.  Double benefits.

And closer to home, the much-touted Sydney Cross City Tunnel PPP wound up getting a bailout from the NSW Govt.

I was just reading some data on roading per person in cities, which would seem to have some relevance to this

KH, you are wrong about Auckland.  Productivity in the Auckland region is about one-third higher than the rest of the country.  

..sorry mate you are the one who is wrong Auckland only accounts for 35% of GDP which is in line with its population.In fact considering much of this is in the form of ticket clipping/financial services it produces very little apart from some manufacturing and relys on the rest of the country to support it in its current state

Odd comment Kleefer.  Can you tell me the source 'productivity' is described on a local basis.
Other sort of figures.  Auckland port predominates in imports.  The others are net exporters and the further the south one goes, the more predominant exporting is.
Or.  Rural exports, Urban imports.

Very good questions Bernard. Some other observations - The foundations for all this NZ local govt nightmare is called the RMA 1991, yes 1991, a Bolger National government. The law had been drafted by the 4th Labour Loons in their dying chaotic days and the Nats just lazily and foolishly passed it into law. They, Nats, now try and rewrite history and blame Labour for it: they have been ' hoist by his (their) own petard'.
Also, Councils have been pocketing "Development" levies for donkey's years and spending money on hero parades, car races and pagan festivals.

1991 also gives you a quinella in the form of the Building Act which introduced the Building Code and up-front consenting

Acquiring new capital is the single biggest problem faced by councils large and small. There are no simple solutions but that doesn't mean we shouldn't look at all the options. A few brief comments:

  • I think we did practice way more capitation before the Reorganisation of Local Government (TM) of course we also had 66% top marginal tax rates
  • Currently rural roads are subsidised to the tune of about 50% by NZTA including both capex and opex
  • The government periodically subsidises projects like small town water and sewerage
  • No matter how many development contributions and financial contributions developers are charged it does not seem to truly cover the costs of growth which leads to:
  • The pressure in high growth areas is from existing ratepayers on elected members angry about above average rates rises
  • Having said that Selwyn and Waimakariri manage to maintain very high levels of growth even while Christchurch is floundering

This is one of those rare occasions where I find myself agreeing with Hugh P:  size really does matter. There is an inverse relationship between council size and effectiveness and efficiency. You always need to remember that Councils are really 40 different businesses under one roof. The formal methods of reporting lines and committee-based decision-making don't work at all. Relationships and informal lines of communication count for way more. Obviously the bigger the council the harder it is to get those informal channels going.

I have been out to Rolleston, Rangiora and go past Kaiapoi regularly and although these places are small enough to get around quickly, to go anywhere else there is a major congestion problem. I think if nothing is done about, which the Councils certainly cannot afford to, then it is only a matter of time before the Selwyn and Waimakariri Councils get demands from existing ratepayers to limit growth within the regions. And of course the reason these places are growing so much is that Christchurch rate payers cannot afford to grow/ have chosen to limit growth in the form of urban growth limits.

This is one of the most ill informed articles I've ever read from you Bernard. Take this statement as an example; 
It's almost as if the councils are actively trying to stop growth.
You must be joking! Were that the case and were council planners so all powerful as you imply - then Auckland would not have the traffic problems it does; Kapiti wouldn't have had to install 3 (or is it 4 .. I can't keep count!) sets of traffic lights in the last three years along Kapiti Road where there previously were none. Queenstown would still be the quaint, relaxing and stunningly beautiful place it used to be; Kaipara District Council wouldn't be broke through upgrading a sewage system in an attempt to increase the population at Maungawhai; the existing holiday highway out of Auckland would still suffice with some congestion through Orewa only; and the list goes on.
The simple fact of the matter is the cost of growth can't be met by anyone. Initially it was met by ratepayers and that became unsustainable; so then it was met be developers and that became unsustainable and so now you are suggesting it be met by taxpayers .. well I don't need to tell you how that will work out.
What's the solution?  Stop growing. Stocktake what we have and determine how we can afford to maintain it.  Redistribute the burdens of over-capacity. Reconfigure plans toward more sustainable lifestyles and practices. Learn to say no. 

Kate you argued in full circle. Initially disagreeing with Bernard that Councils do not have a policy to stop growing and then by the end you were saying the solution is to stop growing.
The reality is NZ is a moderating well off country but is massively centralised. The vast majority of taxation and spending is controlled by Wellington. And for decades they have chosen not to spend it on needed local amentities. Also Wellington does not let Local Authorities tax their own residents to solve local problems like congested or inadequate transport infrastructure.
Given this situation Local Authorities only option is policies like urban growth limits that stop growth like what Bernard and you both argued.

But the full circle was indeed intended. My point being, Bernard is way off the mark thinking council's want to stop growing - quite the opposite!!!  How many times I've heard this or that elected official telling us that with more ratepayers (i.e. population growth) there will be a greater number to share the rates burden .. the implication being rates should go down with higher population growth. BUT THEY NEVER DO. Councils don't spend the thousands on economic development that they do because they want to de-populate!!!  Quite the opposite.
I could cite hundreds of examples of council activities undertaken to ENCOURAGE population growth.  That is their modus operandi.  For some unknown reason they all see more as good - until it isn't (as pdk would say).
NZ generally needs to consolidate, do a stocktake and work with what we've got.
I don't see urban growth limits as "stoping growth" - what's slowing growth is it's cost - and all Bernard is talking about is who pays for that cost.  The urban boundary planning concept suggests that development should pay.  Any landowner on the urban boundary can apply for a private plan change to have the land redesignated from rural to urban - and if they are prepared to pay to get the big infrastructure to the subdivison door and cover the costs of the increased capacity on the feeder networks - THEY CAN.  Nothing in the legislation stops them.  It's exactly why the RMA has a private plan change provision.  Developers can build anywhere they bloody well like.  Why don't they simply do that?  Because of the cost!!!!!!!! 
Those fighting planning imposed urban limits are fighting a "who pays" argument. Simple as that.  I suspect no 'collective' can afford to pay - not in the long run.
We all criticise low income/no income families who add children despite the fact that they do not have the self-sufficent means to raise them.  Why do we not apply the same logic to society at large?

Ok Kate. But it is not the developer who pays. They are just the middle man. The end consumer pays. That being those who do not own property. The system you describe is a nice transferance of costs from property owners to non property owners. Nice. Really really fair.

Yes, developers are the middle men and they pass on their costs to the end consumer (i.e. property purchaser). In many cases, peripheral landowners choose not to seek private plan changes as they understand the end consumers would not be prepared to bear the costs of user-pay development on the periphery. Hence they want the urban limit lifted, the land re-zone for residential development and the local authority to then bear the costs of infrastructure to the door and beyond (i.e. back to the centre).
How are you suggesting the current regime transfers costs to non property owners?
If you mean by way of potential purchasers - well, yes. Which is why potential purchasers should consider moving to a city/region where such network infrastructure (water, wastewater, stormwater, roads) is not presently running at or over capacity.  That is why house prices in these area are generally lower than in the centres where infrastructure is stretched and it is why rates inflation in these areas will likely also be lower than in the areas where infrastructure is stretched. 
New infrastructure costs I believe have outpaced the rate of inflation for many years and are likely to continue to do so given energy/resource constraints/scarcity.

The system you describe, which seems to be a good description of what exists, transfers costs to non property owners by raising the price of property.
I think the major cost that New Zealand's bigger centres are struggling with is transport related rather than sewerage, water, parks etc. As you say these places have reached capacity with their existing systems and need to upgrade. The problem is who pays, local government cannot afford to, property developers cannot afford to and would it be fair for just new residents to pay for a major city wide transport upgrade that benefits existing residents too? This all comes down to the how public goods (non rival, non excludable) should be provided in New Zealand.
Costs for this sort of infrastructure is increasing faster than inflation, but that is true of some other public services like healthcare and we find the money for that. Government spending on transport is way smaller than spending on the big three, education, social welfare and health. So the last body that could afford it is central government by either funding it directly or by transfering some taxation power down to local authorities. But they are relunctant to do so.
So some Councils like Christchurch just tighten up their urban limits and transfer the cost elsewhere. To the property poor and to neighbouring councils. See my description of what is happpening in Selwyn and Waimakariri further up in this thread.

I think the major cost that New Zealand's bigger centres are struggling with is transport related rather than sewerage, water, parks etc.
Well transport is the most 'visible' of the infrastructure problems but I wonder whether the more critical one which might plague urban environments in the future is stormwater.  Overloaded and poorly maintained stormwater systems are a huge threat for our hilly suburbs.  I think we'll start seeing lots more slips in urban areas if climate change scenarios pan out. It is also not unusual for folks to dig their own sumps to get water to drain more quickly in their yards and this just adds to the risk problems.
Actually it's quite interesting - as councils are busily flagging fault lines, SLR and flood threats on LIMS - when indeed risk to life in terms of slips has recently proven to be the deadly one with a few narrow escapes as well.  

Bernard and Kate are both right. It is like councils want to discourage growth except that they don't.
Few people realise that the RMA, by default, is permissive. The fundamental priniciple of the Act is that everything is allowed unless there is a good reason not to (for environmental reasons). There is no better proof than to look at the contortions Dunedin City had to make to turn down the application to build a 28 story hotel on the waterfront. I doubt there is a single ratepayer in Dunedin who wants that structure there but the Council had to resort to a technicality to say no. And the Environment Court files are full of cases where developers have had council planning policies and decisions overturned. Councils really can't stop growth using planning measures.
They can slow it down considerably through their plans for infrastructure provision (see my comment below). For many reasons you just can't point to a successful history of private infrastructure provision in New Zealand even though it is perfectly legal to do so. So councils have the whip hand and can exercise it to some degree. Why?

  • Elected members worry about three things when it comes to re-election prospects: rates, rates and rates.
  • Fragmented core infrastructure development causes rates rises for existing ratepayers
  • The incentive is to slow down and thereby attempt to aggregate development (and development contributions) to minimise the impact on ratepayer/voters.

All spot on - it is extremely hard to decline anything under the RMA and indeed the National Government intend to make saying yes faster and less costly with the EPA.  Frankly, ought to get a planner and a builder to collaborate in writing all these urban-problem related articles.
I do find it quite funny when, for example, the Whangamata Marina folks - who set out to do something that was not envisaged nor permitted within the plan - blame the councils/Maori and anyone else who wanted to defend the existing legislation (i.e the plan) for the costs and inconveniences they suffered in thwarting local planning law.
Well not funny actually, given what locals were saying would happen to the Whanga wave as a result of the dredging does indeed seem to have happened.

PS Brendon.
Think of an urban boundary in the NZ RMA planning context as drawing a line on a map and saying 'beyond this line it's user pays'.
It's as simple as that.  That is how the private plan change provision works.
In most planning jurisdictions one simply cannot develop the other side of the line and hence they have arguments about where the line should be - rather than whether there should be a line or not.

Bridging the gap between core infrastructure development and its full utilisation would be one very effective way of speeding things up.
Core infrastructure (wells, sewage ponds, arterial roads, mains pipes etc) is developed in a 'lumpy' way and is designed to last for a very long time. With suitable maintenance most of this stuff will last many decades and, in some cases, over 100 years. Councils look at projected growth over 20-30 years when they design new infrastructure. In most cases they build big now in anticipation of meeting future demand. Only problem is it has to be paid for today and this these works are very expensive. Councils do try every method to aggregate as many private developments as possible to accumulate capital so that today's ratepayers do not have to bear too much of this cost.
But there is still a timing gap that has to be paid for. Currently the simplest and fairest way is through debt-funding. Then the councils find themselves criticised for carrying high levels of debt as though they failed some kind of moral test. They can't win.
Mechanisms such as retropective development contributions or cheap/free bridging finance would certainly allow councils to speed development along.

All true.  And this is interesting;
Mechanisms such as retropective development contributions or cheap/free bridging finance would certainly allow councils to speed development along.
Pretty much the Greens suggestion about printing money to pay for Chch rebuild - just another mechanism to make something unaffordable today - look like it will be affordable tomorrow.
Best way in my mind to speed development along relates more to first identifying those areas where existing infrastructure has spare capacity combined with a re-write of building/planning regulations to provide incentives by way of lower costs to build in areas of spare infrastructure capacity.

I would hate to think I would ever advocate money printing as a solution. These are just alternative financing mechanisms to spread out the lumpiness of costs thereby reducing the political impacts.
Best way in my mind to speed development along [is]... to provide incentives by way of lower costs to build in areas of spare infrastructure capacity.
And this is it. Most of the components of this suggestion are very nearly there today except that councils are culturally incapable of making it work. Along with some creativity around financing I would wave my magic wand to have:

  • councils being hard-nosed about where they are providing infrastructure and where not
  • providing procedural incentives to developers to develop inside these outline development areas
  • speeding applications to develop outside these zones but refusing point blank to provide infrastructure or to take over failed developments

Today councils provide an implicit guarantee to developers that they will take over and fix up any botched infrastructure scheme.

Half-time score - 70:0
TeamGrowthMachine - versus - TeamNewZealand

Who is playing on what team? I'm a bit confused.
If you want as many people as possible to be able to afford to buy a home and travel on uncongested roads or public transport are you Team NZ or Team growth?
And if you want you house values to go up as much as possible is that Team NZ or Team growth?

Will be intersting to know!  I wondered the same.
For the record: I'm on this team:
If you want as many people as possible to be able to afford to buy a home and travel on uncongested roads or public transport.

Great we have two on our team : )

you advocate outward growth and equate that growth with afordability?

Me too!

Correct me if I'm wrong, I get the sense you are located in Christchurch and your comments reflect that. I look at these comments through unbiased eyes because I am not located in either place. Comments that I do make reflect a consideration of an overlay of all the proposals on top of a current Auckland overlay. Growth in Auckland will simply not achieve your "affordable" housing
Kumbel outlines all the issues very clearly.
If Auckland grows outward, the costs of providing infrastructure to the external expansion, under current methodologies are borne by the new residents who shift into the new suburb. At present-day costs, and imposing the full on-cost immediately, the cost of new housing in new estates will be, by definition, un-affordable.
If Auckland, chooses instead, to grow upwards, the imposition of expanding any expandable (up-gradeable) (sewerage, power, phones) infrastructure is an on-cost to existing residents in order to accomodate the population expansion. It's un-affordable now. It must by definition, be less affordable tomorrow. Then there is the un-expandable infrastructure such as roading which is at crisis point now. Growth upwards equates to a reduction in quality of life for the current incumbents.
Growth will not work
Shifting population growth away from Auckland to Hamilton and Whangarei, might.

I have to go to work in a minute so just quickly. My major push is for more decentralisation. I believe that will lead to more even growth around the country. In places like Hamilton or Christchurch where I am from. That will take some of the demand away from Auckland, which will help house prices. I like Kumbels last link about Perth and how that is not happening in any city in NZ because Central government controls state highways and rail.

Iconoclast can I assume you live in Wellington where the use of words like 'overlay' are in common use. You say you are unbiased because you are not from either place, being Christchurch and Auckland? But maybe you have lived Auckland because most of your comment was about Auckland.

The essential sub-text buried in this article is where Bernard says:
"The Reserve Bank is worried the lack of "housing supply" is creating the risk of a housing bust that risks the stability of the banking system"

What that says, it is the councils who are creating the bubble, that, if it bursts, it's the banks who go down .. Wolly, up-thread, is right on the button .. again

You can almost be assured that any action required to prevent the bubble will be too late. The bubble will occur, which means it will also burst. That is likely the end game for the New Zealand economy.

Bernard - what were you thinking posting this piece? All this and with pdk, waymad, PhilBest and Huey obviously all out in the garden still tidying up after the storm.

I thought something was missing.... Good call Kumbel

Central government still has its hands on the biggest urban growth levers of them all: the state highway network and the rail network. Auckland, Wellington and Christchurch will go with the highways. End of story.
See also my comment at the end of this

I agree and IMHO we will keep going around in circles on this whole housing, infrastructure mess untill we transfer those levers to local control in Auckland, Wellington and Christchurch.

Fantastic link, really interesting information about the growth of Perth.

Interesting article Bernard. I would go one step further and remove councils from the building consent process entirely. The whole system needs a major overhaul.
NZ needs a centralised and automated (online) process for building and resource consent. When I built my house in 2010 Wellington City Council required triplicated paper copies of everything for the consent application. It felt like a step back into the dark ages. Yet  they were unfailingly incapable of  finding the latest version of my plans when anything needed discussing. It took over a year to get my building consent. And they charged me $9000. And that was probably on the cheap side, as other councils charge way more and take way longer.
$9000 x ~20,000 new builds a year in NZ means $200m+ in annual fees that our councils suck in and digest just for building consents. It's obscene. A coherent national body with a decent IT system could be run for a fraction of that. 
And they could issue consents in a timely manner. As each application (from wherever) would be processed in turn, you wouldn't get the horrible regional disparities like Christchurch is seeing now. It's madness for the consent team in Christchurch to be overworked with a long queue whilst other council's consent teams twiddle their thumbs with not much to do.

This whole thing is indeed a symptom of over-centralised transit policy and financing. It seems those cities round the world with the worst traffic problems are the ones which have little or any say in their transport infrastructure.
One of the last policies enacted by the Clark Govt was to devolve petrol tax levying to the regions, only for Prostetnic Vogon Joyce to re-centralise it. And Joyce et al had the cheek to label the red team nanny statist.

If there is any debate over what councils spend other pepoles money on, then you need look no further than One News tonight, where some jobsworth with the title of Arts Centre Chief Excecutive in ChCh, thinks it just grand to spend $290m whilst pepole are still living in unheated garages.

You have hit the nail on the head moa man – it’s the fact that council is spending the money. You only have to see how they spend the money and what on to see it is very inefficient in time and money. One of the benefits of the Auckland Super City was meant to be efficiency and lower council costs – so how is that working out? Christchurch is another classic example. There is so much non value added cost in the system and they are wedded to these inefficient systems that they could not change even if they wanted to, and they don’t want to, because of course one person’s non valued added cost (waste) is another man’s revenue. Expecting council to suggest anything different than the status quo and oversee any change is like expecting a junkie to stop shooting up and oversee their own rehab.

You two may be interested in how I have tried to tease some of this out at The City State (here). Since I wrote that WCC scored a massive fail by ignoring their own CEO's advice to be careful about how they decided to spend ratepayers' money.

[The purpose of local government is] to meet the current and future needs of communities for good-quality local infrastructure, local public services, and performance of regulatory functions in a way that is most cost-effective [my emphasis] for households and businesses.

Unfortunately Kumbel, you could drive a bus through this legislation and while it is far more prescriptive than previous legislation it will still take a number of precedent setting cases to sort it out (are stadiums and convention centers meeting the ‘need of local public services?’). And is 'most cost-effective' based on what time frame and by what method ie capital and/or operational costs?

Nice blog Kumbel. I reckon the amendment to the LG purpose was largely window dressing by the Minister to imply CG was 'listening to the people' in terms of control on LG spending. But if you look to S14 of the amended Act you find the very same SD/wellbeings statement survived;
See S14(1)(h);
Hence I think any challenge mounted on a "core" infrastructure type (i.e. say social infrastructure like a stadium etc) basis would fail but the "cost-effective" issue is not one I had contemplated before.  Interesting.
Do you think we'll ever get any case law, however? hasn't got the amended Act up yet. If you look at the actual amendment act you see that it specifically dumps the word "well-being" from s(14)(1)(h) - thank god.
I thought it was window dressing too until I thought about how decision-making processes had to change to comply with the new wording. It's not writtten down anywhere but it is good practice when staff put up a report to accompany an agenda item that it contains information about how the proposal complies with any relevant legislation, plans , strategies etc.
In this case the report should address how the Wellington City councillors could know that (i) there is a current and future need for the building and (ii) that the proposal was the most cost-effective option for providing that functionality. I haven't read the report but from what I have seen in the media I think the WCC CEO couldn't answer those two questions and was urging caution. In addition to costing out the engineering works WCC actually needed to identify at least one other option and conduct proper market research to find out what Wellingtonians thought of the proposals.
If  ratepayers were happy to keep the building for cultural reasons and could bear the rates impact then they had no problem. But the media reports seem to indicate the councillors were quite happy to make a decision without any facts that would ensure they were complying with the new legislation. That would have been OK in the "well-beings" era but no longer. And it doesn't have to go to court, the Property Council should simply refer the matter to the Auditor-General. She will do a better, faster job than the courts. The decision may be non-binding but councils take the recommendations of the OAG very seriously.

That's interesting - I just assumed given the purpose had been amended accordingly, that the online version contained all the amendments.
Interesting about the suggestion re the OAGs office. Both them and the Ombudsman's office are so very over-stretched at the moment.  And, from what I gather, requests for additional funding haven't so far come through at the level needed.

Good to have you back. Thought you had been blown out to sea. Please note a rare compliment from me to you earlier in the thread.

Hugh is right that giving Local Authorities access to more taxpayers money has dangers. They are wilfully ignorant of economic matters, especially about affordable housing. If we want local institutions that can solve local problems of unaffordable housing and congested transport systems then they have to be a lot more responsible than they are now.

Bernard's point is that councils foot-drag because of the up-front funding required to provide infrastructure to new developments. I would have thought they were being more than responsible about not stiffing current ratepayers to provide a free-ride to newcomers. I am always in the market for specific examples of of irresponsibility.

Yes Kumbel – because they persist in using the equivalent of dinosaur waste water technology (which they inherited, but still do not know any better) it causes growth to be concentric and very expensive. This requires them to deliberately let demand build up to ensure supply take up. Get it wrong like Kiapara and your stuffed, but even if you get it right the costs are still high. This pent up demand is one of the reasons for higher prices. Using a system that causes concentric growth limits land (irrespective of a MUL or the size of it) and so highlights which land to land bank and, further increases land cost. Using this method and you will always get high council costs and high land prices, the result being high section prices. And if you use a different technology, which allows non centric development, then you get a different result – namely lower development costs, lower land prices and funnily enough lower section prices. Take your pick.
And of course we are all in the market for specific examples of irresponsibility – every time we buy a section or house under the present system.

Kate makes the point above that, as long as you don't want to connect up to council services, you can legally develop what you want where you want (within reason). I would welcome a development that uses innovative approaches to services but there are some realities:

  • You have to get consents for water extraction and waste water disposal from the Regional Council same as a territorial authority
  • You have to do the same water quality monitoring as TA's and supply your results the public health department at the DHB
  • you have to create some kind of body corporate to own, operate and maintain this infrastructure and have some legal means to collect the revenue required to do this

Remember the developer wants to cut ties as soon as possible so purchasers will be on their own pretty quickly.

Agree – but having done this in Texas, and to a degree in NZ (plus there are other NZ examples), the main factor in making it happen, or not, is council mindset (both managerial and councilor). Everything else is relatively easy to comply with.

Dale I have a question. What transport wise connects a large MUD, say something that was the size of a small town -10,000 residents with the rest of Texas? Is it a multilaned motorway? And who pays for it?
Here in NZ you would be lucky to get a sealed road. The local council would struggle to provide that because most of funding comes from Central Govt and they are reducing funding while costs are rising faster than inflation.
Maybe that is why Coucillors and managers are negative about new development?

Hi Brendon – Finance comes from the same place that the cities would obtain it, which can be from various sources depending on what country you live in. The developments internally are self-funded, and since the costs of land and developing are so much lower, the developer does have extra money to put towards externals. Also, and in particular in NZ, we have a well-developed tar sealed rural roading system due to our significant rural economy. This roading system has plenty of capacity.
Also mobility has increased, without the need for vehicles to supply that mobility, ie the use of internet etc. which utility companies supply and charge for (no subsidies like vehicles). Because of this vehicle use is falling, plus it is also changing the pattern of road use so road capacity has been increased.
And what you are describing is a town (not a dormitory suburb) large enough be self-contained, just like cities think they are (but they are not). Roads leading into a city are more important to supply the needs of that city, than they are to show off the benefits of the city to the supposed wide-eyed rural community. Most suburban commute time is between suburbs, not between suburb and central hub, and is also quicker. Christchurch is a good example how it has gone about its business without a CBD, and seriously damaged suburban roads.
One of the main reasons councils are negative for expansion is that they require the growth to happen in already serviced areas (higher density) because those serviced areas are or shortly will be, badly in need of repair and replacement, the money of which was never collected, or if it was has been spent on other things. Of course it helps if they belief higher density is better for everyone anyway.

Dale I just ask because I recently saw some statistics showing the US has 6 times the amount of motorways per capita than NZ. Was wondering what impact this has on new developments and who provides all this infrastructure.
Especially interesting given Kumbel statement that Perth has added a 'city' the size of Christchurch onto itself in the last 20 years by putting a motorway north with rail in the median strip. Creating new townships with a herring bone pattern of radial transport links.

OK I am really curious. If you lodge an application to subdivide outside a serviceable area, you produce all the designs and consents to prove you can go it alone, what grounds do councils use here to turn down the application?

Hi Kumbel – for two main reasons, if council deem that your solution is not in their best interests, ie goes against smart growth ideology and an obvious reduction in waste, which to them is revenue, then they can slow down the process enough through various methods especially through the planning gain process and ‘approved subject to’ list.
And secondly, because of this, PLUS the over inflated price developers have had to pay for the land and the extra risk/profit margin that this causes, developers try to push the envelope to ensure a more viable development which then gives council a legitimate reason to object. After all if you are going to be hung for a lamb, you might as well steal a sheep. It’s a vicious circle, with the no winners at the end of the day, but the big loser is the land/house purchaser.

Would the Pegasus development north of Christchurch be an example of a new residential development outside of a serviceable area. That ECan and other Councils? objected to it. Planning was delayed by something like a decade which ultimately sent the company into bankruptcy.

I think a lot about Pegasus. Bearing in mind it is now onto its 4th owner it did start its life as an almost self-contained town. You can pretty much dig a hole anywhere in that area and get good quality water and theres' enough room for stormwater disposal. Once they actually got started the developers were pretty keen to vest all the assets back to Waimakariri District.  Fortunately for them WDC had recently spent a fortune amalgamating all the sewer systems in the eastern part of the district and connecting Pegasus via Woodend was feasible.
In terms of objections I don't think WDC put up many objections but eCan fought a ludricous rear-guard action right through the Environment Court on the basis that it was too far out of Christchurch and would be wasteful on petrol or something.
Sadly the original promoter died about the time the case was clearing final objections. It's had a number of owners since. You could argue that planning delays meant they missed some of the bubble but ultimately its just market forces and the scale of the development by NZ standards that are probably doing for the successive owners.

I am not certain of all the ins and outs but I think CCC was against Pegasus too and since then they have bound Waimakariri and Selwyn Councils with the Greater Christchurch Urban Development Pllan. So if anything the next 'Pegasus" would have even more institutional barriers against it. I can't see any developers going up against the Canterbury Councils, even if they legally were entiled to do so. The Pegasus experience shows how unprofitable that approach is. Maybe this government will clear some barriers, not so convinced though. I sometimes think all this ruckas they have created about housing affordability, consents etc is about finding someone else to blame when something goes wrong.

Yes, Pegasus is an interesting case study. Perhaps Pokeno is the next up along the same vein;

I think CCC has been irresponsible in not relaxing/removing the urban boundary post earthquake, given the loss of 10,000 + houses. That fact alone gauranteed a massive house price boom in Canterbury. A transferance of costs to people without property and to the neighbouring councils of Selwyn and Waimakariri. And for PDK I cannot see anything energy effient about this process.

CCC, post-earthquake, is probably not the best example. Trying to limit outward expansion of infrastructure while still repairing existing stuff probably looks responsible internally. It is only recently that government has formally committed to funding to infrastructure repair. 
The silly stuff in Christchurch comes from CIAL protecting its flight path and eCan protecting water quality. Both stop CCC expanding west.

The Christchurch example is an extreme case, but it shows our local institutions can only cope with business as usual. Even when the facts change they can't. It is not a good sign of the quality of NZ governance institutions.

100% agree. Councils are like cruise ships: they take a long time to change direction. Where listed companies think in terms of quarters, householders think in terms of years, councils think in decades. Nature of the beast.

Add Key's ambulance at the bottom of the cliff defence of Brownlee's contribution.
Prime Minister John Key has defended Earthquake Recovery Minister Gerry Brownlee over the Christchurch consents debacle after suggestions he should have been asking questions sooner.
Labour MP Clayton Cosgrove said Brownlee, who was given sweeping powers after the Canterbury earthquakes, either failed to ask the right questions or ignored warnings of the looming crisis.
But Key this morning rejected that.
"I don't think so," he said. "On the advice I've had the assurances we always got from Christchurch was things were under control.
"I think it was the Government that actually started getting more worried and the Ianz [International Accreditation New Zealand] ultimately pulled the pin."
Key also attempted to hose down the scale of the problem after Building and Construction Minister Maurice Williamson yesterday acknowledged the Government had no idea how many building consents issued by Christchurch City Council might be illegal.

And it just gets more hilarious, by the hour. Read more
Solid Energy won't be bailed out with money from the partial sale of state owned assets, the Government insists.
Prime Minister John Key today denied the Government was looking to use $100 million from the sale of Mighty River Power shares as part of a rescue package for Solid Energy after the State-owned coal miner got into financial strife.
If the Crown has to make a capital injection if that's what it decides to do with Solid Energy to try and resuscitate it, then yeah it can go and do that. But it's not going to come out of the mixed ownership money."
Is that funny money as opposed to real money, Mr Key?
Maybe it's time to revisit Gareth's article entitled:  Beleaguered SOE Solid Energy won't say who holds NZ$95 million worth of its debt?

Bit of a concern here... Hugh's last name is incorrectly spelt on that post.
Are we reading the genuine Hugh?

On TV3 Cambel showed this woman.
She lived in the North Shore and it took her 45 minutes to get to work.
The point being put forward by the Cambel show was
"People should be able to live and work wherever they like - Even it they home and job are miles apart - and the whole of NZ should then have to pay for a nice motorway so they can get to work quicker".
No mention of "why dont you get a job closer to home OR why dont you live in an apartment in town. so you dont have to travel.
So Bernard
Let people build further and further out from their work and we can all pay for a nice motorway to get them to work quicker
Thanx Bernard i could do with the exra expence.