Legislation has been passed to speed up housing developments and spread the cost of infrastructure, but developers aren't (yet) queueing up to use it

Legislation has been passed to speed up housing developments and spread the cost of infrastructure, but developers aren't (yet) queueing up to use it
Phil Twyford

Labour’s housing and urban development spokesperson, Phil Twyford, is continuing to think big when it comes to ways of increasing the supply of housing.

Two significant pieces of legislation, which he spent much of his term in government designing, were passed in August.

The Urban Development Act sets out a new streamlined process for large-scale public or private urban development projects to go through. It gives the Crown entity, Kāinga Ora, a range of powers to make it easier for approved projects to get funded, consented and acquire privately-owned land if necessary.

The Infrastructure Funding and Financing Act creates a user-pays infrastructure financing model based on a pilot used at the Milldale subdivision in Wainui, Auckland. This enables developers to levy property owners over several years, making them cover some of the cost of the infrastructure they use.

These pieces of legislation create powerful tools to speed up development, but no developers have signed up to use them yet.

Twyford told interest.co.nz he was confident they would come in “due course”.

Limited use 

Asked why he hadn’t lined up a government development to go through the new consenting process to get the ball rolling and ease the concerns of those afraid of being Guinea pigs, Twyford said there wasn’t an appropriate project on the cards.

He said some developments, which might’ve been suitable, were too advanced to change tack now. These include developments at Unitec and Drury in Auckland, as well as projects (including KiwiBuild ones) at Northcote, Mt Roskill and Mangere.

Crockers Property CEO, Helen O’Sullivan, who spent a short time as KiwiBuild’s head of delivery, and is also a former Real Estate Institute of NZ and Ockham Residential CEO, agreed the powers in the Urban Development Act would’ve been useful at Drury.

She supported the legislation, but said it had limited application, as it required a developer to have a lot of land, large balance sheet, high risk tolerance and long timeframe.

She said it would take a while for developers to get their heads around the new process and consider using it.

Twyford believed a mixed-use housing development being scoped for near the City Rail Link station at Mt Eden was a possible candidate. He said the private sector could be contracted to deliver a development on the land, owned by the Crown and Auckland Council.

Furthermore, he saw scope for the Act to be used for housing developments along the Auckland and Wellington light rail corridors, should these projects eventuate.

He maintained it could also be useful in smaller, but more complex developments of say 150 dwellings, where infrastructure has to be reorganised, land titles amalgamated, zoning rules changed, etc.

Drury property owners might be levied

As for enabling developers to levy property owners to help fund local infrastructure, Twyford said it was “quite likely” this would be applied to a development at Drury.

He also reiterated comments made last year that Rotokauri in Hamilton and Tauriko in Tauranga were possibilities. But nothing has been locked in yet. 

Both interest.co.nz and Treasury have flagged concerns over the cost of the Milldale arrangement, which sees a special purpose vehicle set up to secure a loan, which is repaid by buyers of 4000 mostly residential sections. In most cases they'll be levied $1000 in their first year, with this cost increasing by 2.5% a year for 30 years.

Twyford said having a legislated process in place to replicate the Milldale model would make it cheaper.

Asked why local or central government didn’t simply borrow at a lower cost to fund infrastructure, rather than levying property owners, Twyford noted the government already invests a lot in "trunk infrastructure" - state highways, rail lines, electricity and water.

“But it’s very important for developers generally that they can wash their face in terms of carrying infrastructure costs," he said.

"Because if they can’t, and they rely on going cap in hand to the taxpayer or ratepayer to subsidise them, then maybe they [developments] shouldn’t be happening.”

Smoke and mirrors

O’Sullivan wasn’t a fan of the user-pays model, saying it was all "smoke and mirrors".  

She said it was costly and tinkered around the issue of how to distribute costs, when what is needed is an acceptance as a country that more investment is required.

O’Sullivan noted the distribution of costs was also complex, as the benefits of the infrastructure stretch beyond those who are levied.

She said it was one thing for owners of relatively up-market Milldale properties to be levied. But it was another to levy owners of lower-cost housing.

Overall O'Sullivan said: “Reforming our planning world is a huge undertaking. There’s no getting away from that. If you do it too quickly, you’ll get it wrong.

"I think the building blocks are there. There is still a lot of work to do. But I think the direction of travel is really positive.

"The sector has hugely long timeframes… For everybody’s benefit, it does need to get a really long-term focus.”

See this story for the latest on KiwiBuild and Government plans to underwrite developments more broadly. 

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32 Comments

Processes and models. All designed to nudge people's behavior accordingly. This is the world Kafka described.

There's a certain irony though. Japan is often thought of as a planned economy based on bureaucratic power. Nevertheless, when it comes to housing and development, they get shit done. However, NZers like to scoff at the 'centrally controlled' countries (in my experience) and think of our own little nation as the paragon of free markets and pragmatic capitalism (even though much does not get achieved).

Attributing shit being done in Japan to their centrally controlled government is dangerous. Is it other qualities of Japanese people that enables a centrally controlled government to perform? how those qualities would have played under a different system? we do not know.

The closet think that we have had on the impact of government on economy is Korean and German experience. Both countries relatively homogenous culturally and socially. Yet two different government systems produced completely different outcomes.

I personally think, that centrally controlled is dangerous to the extreme. Such government destroys the citizenship and you all become followers of authority. Even if this produces good economic outcome (which it wont) the price you pay as a society for that is way too much. On the other hand, you would need a government that is strong enough to 1) enable citizenship for less affluent member of society 2) maintain the rule of law 3) counter private profit seeking motives to a reasonable extent. What is the right balance for every society varies I suppose.

Good points. There is much to suggest that the central power in Japan has constrained the country in adapting to change. But my point was about providing for the basic need of shelter and infrastructure. This is something for which they have excelled.

My comment is also about how we see ourselves: we like to think we're adaptable to change (unlike Japan). Nevertheless, on the issues of providing shelter and infrastructure, it appears we have much to do. Is that because of not enough central power? Quite possibly.

"Asked why local or central government didn’t simply borrow at a lower cost to fund infrastructure, rather than levying property owners, Twyford noted the government already invests a lot in "trunk infrastructure" - state highways, rail lines, electricity and water."

Bullshit. Hundreds of thousands of migrants have been added to Auckland over the last two decades without a consummate rise in infrastructure support or transport. He himself is prolonging this with the dithering over rapid transit to the North West. The houses and the people will be there long before the infrastructure to support them is. Unsurprisingly, when it's time to play catch-up (after money has flowed to other regions for development, no less) It's suddenly 'user pays'.

OECD found in 2016 that out of 17.9% Auckland's productivity premium over the rest of the country, only a measly 2.2% could be attributed to agglomeration benefits (benefits from concentration of population and firms in cities and industrial clusters.

The US-model, in comparison, shows that doubling economic density increases productivity by 6%.

Agglomeration benefits in Auckland have been constrained by the failure of infrastructure investment and housing supply to keep up with population growth (see Chapter 3), which has resulted in growing traffic congestion (and water pollution) and rising house prices.

Poorly designed and provisioned-for cities tend to do that. Adding a few hundred thousand people and pushing living costs through the roof makes it even worse.

The architect of Auckland's destruction, John Key tactfully brushed aside questions over his inaction on infrastructure and housing.

The man believed that rising living costs were a myth because high migration numbers reflected New Zealand's economic strength and attractiveness as a place to live.
He probably wanted us to keep things unchanged until life in our cities became as unaffordable as in Delhi or Shanghai.

Soooooo lucky that Jacinda was elected and did something about it....

Wild how you want to pin the blame on John Key and not successive Labour-aligned councils who have strangled land supply or the Labour-led government who promised transformation and basically did nothing. Prices rose faster under Labour from 2000 to 2008 yet Auckland was almost totally neglected, with the notable exception of rail electrification. More money flowed out of Auckland than it received for infrastructure spending prior to 2005. There's decades of underspend to catch-up on - except now it's suddenly 'fend for yourselves' when Auckland urgently needs a catch-up.

Whilst constraining development through RMA, planning messes and promoting investment incentives towards sprawling inefficiencies.

Ever since the 70's, we have extended debt and the repayment horizons thereof.

So "This enables developers to levy property owners over several years, making them cover some of the cost of the infrastructure they use"
is just a duck-shove can-kick choose-your-metaphor. An attempt to offload immediate costs, onto some sucker's 30-year mortgage. Unrepayable mortgage, if what I write about is true.

Society increasingly cannot afford itself - everything from student loans to mortgages. Not enough planet to underwrite. Aprez nous le deluge.......

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"...it required a developer to have a lot of land, large balance sheet, high risk tolerance and long timeframe."

Well, look no further for the reason for the lack of uptake. Add to that the Gubmint's penchant for changing the rules mid-flight, cannibalising private prospects with the latest Public Project brain-fart (poster child, the PGF), and kow-towing to the noisy latest rent-a-crowd, and no developer is gonna touch the thing with the proverbial barge-pole.

A steady-state economy, operating within biophysical limits, eliminates the need for 'developers'. We've been blindly doing this since the Marx Brothers did Cocoanuts - they were trying to tell us something.....

Genghis Khan would have the developer do whatever he wanted if he wanted land for his army. The alternatives would not not have been pretty. Twyford would have been left at home with the women and children if he had been born in a different time and place.

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At times you have to feel a bit sorry for Mr Twyford, the self declared great redeemer pre 2017 but now a model of non performance. Don’t see as much of him as we did back then, but when I do can’t help but think of poor hapless Fozzie of Muppets fame. Used to feel sorry for him too.

If this is true.....
it required a developer to have a lot of land, large balance sheet, high risk tolerance and long timeframe.

Its dead in the water.
Good job Phil.
Doing what he always does.

He's just operating in the system that has been created for him. His disposition is to work within the system to make things happen. These people are usually good at climbing ladders in bureaucracies, NGOs, and companies like Fonterra. He's not there to dismantle or disrupt the system in any way, like most of them.

He doesn't have a clue.

So he needs people out there who the Greens will smack with a wealth tax?

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he has completely wasted his time on this effort, but made a good living out of it and can retire a wealthy man, unlike most of the population of NZ

That is what happens when a party has a total lack of depth.
In another three years we will get another Jacinda 'well let me point out....' excuse.

Yes. But National's depth is probably worse.

Re-phrase this slightly and we are nearly there.
it required a govt (not the usual developers) to have a lot of land, large balance sheet (govt), high risk tolerance(not govt) and long timeframe (might survive one govt to the next if initially successfully handled)

Of course, it was never going to work, and they were told at the time.

Their logic is nonexistent. They don't know what 'good' looks like. They think by doing more of the wrong thing, or doing the wrong thing quicker will somehow make it right.

What they are saying to a purchaser, is we are going to charge you the same as we were before, BUT also this new charge, which we will spread over a number of years.

They continually fail to understand basics like building volume in housing does not equate to more affordable housing if the cost of an individual house is more.

Why build houses when you can make more money by just buying and selling the existing ones?

Here's one being considered under a stream-lined process - perhaps its type of 'streamlining' predates the new legislation - not sure;

https://www.stuff.co.nz/dominion-post/news/porirua/118134539/fasttracked...

But look at what we end up with in terms of process - this fast-track looks to me like a means to silence objective science;

https://www.stuff.co.nz/environment/123035216/nature-will-be-the-loser-i...

What happened to the scheme offered by Westpac beginning 2019, assisted package of building prefab houses? Anybody know if it ever got going to any degree?

Phil Twyford should just be given 2-billion-dollars in cash each term to burn in a fireplace. This would be cheaper than having him in government.

That made me laugh. And almost cry.

Um, no, just think of the Dreaded C Emissions that would cause. Issue PT with a virtual $2b, and hand him a keyboard with a big red Delete key. For extra larfs, label that key 'Don't Press'....

Replace Phil Twyford with Labour/ Greens.

Phil Twyford had a policy within his Kiwibuild scheme to remove the Rural Urban Boundary of Auckland. Doing so would have allowed low risk development on a large number of small parcel holdings close to existing infrastructure. Simple, effective and easy to implement this policy was immediately attacked by Auckland Council.

Phil Twyford instead developed the steaming piles of... we have today.