Productivity Commission to launch inquiry into how councils regulate land supply for housing

Productivity Commission to launch inquiry into how councils regulate land supply for housing

By Bernard Hickey

The Productivity Commission has been asked to launch a formal Inquiry into the way councils regulate to make land available for housing. It will also look at the way councils plan and fund local infrastructure such as water systems and transport.

The Commission said the Inquiry would build on its wider 2012 Inquiry into housing affordability, which was the touchstone for the National Government's push over the last 18 months to speed up consenting and improve land supply for housing.

"The Commission has been asked to examine and compare the rules and processes of local government to identify leading practices in planning and taking decisions about making land available for housing, and providing for necessary infrastructure. It has also been asked to look at models adopted by cities overseas that might provide valuable lessons for New Zealand," Commission Chair Murray Sherwin said.

“Our inquiry into housing affordability identified constraints on the supply of land as a major driver of New Zealand’s housing affordability problems. This new inquiry will delve deeper into how councils take decisions about making land available, as well as decisions about increasing the capacity for housing in existing urban areas through rules around such things as subdivision and intensive development," Sherwin said.

“Capacity for more housing is not the single answer for housing affordability, but it is an essential component of a policy response, especially where demand for housing is outstripping supply."

The Inquiry would look for those Councils that made enough land available to meet demand and detail those processes for other authorities.

“We expect that the range of approaches used internationally and in New Zealand will provide valuable lessons for local authorities making decisions about land for housing," he said.

Water and transport too

The terms of reference were published on the Productivity Commission website. It will publish an issues paper to outline the approach, the context and a list of key questions to be addressed. It would seek submissions and the final report was due by September 30 next year.

The terms of reference and a letter from Bill English provide more detail on the Inquiry, including that it should look for information on absolute and relative performance and make recommendations on planning and funding of water and transport infrastructure.

Reaction

Labour Housing Spokesman Phil Twyford said the Government's need for more research "beggars belief."

“People need houses and they need the Government to take action now, not waste another year or two with yet more research," Twyford said, adding a Labour Government would publish a National Policy Statement on affordable housing.

"It will give clear direction to councils that they must increase land supply for residential development and speed up consenting,” Twyford said.

BusinessNZ said it welcomed the inquiry in a critical area.

“Not only because of the pressing need for more affordable housing, but also because of the impact on the wider economy of spiralling house prices,’ BusinessNZ CEO Phil O’Reilly said.

“Hopefully it will shine some clarity on the very complex rules and requirements that have been adopted by some councils,” he said.

BusinessNZ wanted an expectation councils would actively make provision for land for new housing and simplify zoning and land supply rules.

Local Government New Zealand President Lawrence Yule also welcomed the inquiry.

"The overall legislative and regulatory framework at both a central and local government level is cumbersome and does not enable agile planning, a factor highlighted in previous enquiries,” said Yule.

“One aspect of particular interest to local authorities is the release of land to the market for development.  Currently, local authorities cannot control when land is released.  We need to look at the incentives associated with this," he said.

(Updated with BusinessNZ reaction, LGNZ reaction, Labour reaction)

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The ToR makes Interesting reading.  Especially the structural/governance bits:
 
"The Commission would be expected to provide information on absolute and relative performance, identify leading practices, and make recommendations to improve performance with respect to:
(i) policies, strategies, outcomes and processes for urban land supply, including the provision of infrastructure;
(ii) funding and governance of water and transport infrastructure
(iii) governance, transparency and accountability of the planning system;
(iv) the implication of leading practice for the range of laws governing local authority planning;
(v) involvement and engagement with the community. "
 
MUD's ahoy???  I sense a Submission coming on....

This will plug the yawning gap the Productivity Commission left in its previous report.
 
At first read the ToR ticks most of my boxes. I would have liked more explicit examination of the development industry itself and the degree to which certain practices such as land-banking are simply a response to council actions or are an endemic feature of the development process. The previous report probably startled more than a few when it showed how dysfunctional our building supplies market is. So it makes sense to shed some light on development as well.
 
As well as waymad's quote above look also at a couple of snakes the govt have tossed into the room. There appears to be knives out for over-consultation, monopolisation of infrastructure provision and the total mess councils have made of what was once world-leading legislation; the Resource Management Act.
 
PS who knew Paula Bennett was Local Government Minister now? This govt changes its LG Minister more often than its underwear.

FYI updated with BusinessNZ welcoming the inquiry.
Many thanks too Waymad and Kumbel for useful comments on the Terms of Reference.
cheers
Bernard

FYI updated with LGNZ view, including an interesting hint about wanting to deal to land bankers.
cheers
Bernard

Ha ha Dynamo would be proud. 'Hey, what's that over there?'

are other investors in for breaking too, or just those in land banking?

The inquiry into housing affordability supposedly looked into all aspects of house prices although I don't recall there being much discussion of speculation or other investment-related topics. This inquiry is very specifically looking at council practices with respect to planning and development.
 
I know LGNZ would like land banking to be on the agenda but it isn't explicitly in the ToR and I would be surprised if it got more than a token mention.

FYI updated with Phil Twyford's view:
Labour Housing Spokesman Phil Twyford said the Government's need for more research "beggars belief."
“People need houses and they need the Government to take action now, not waste another year or two with yet more research," Twyford said, adding a Labour Government would publish a National Policy Statement on affordable housing.
"It will give clear direction to councils that they must increase land supply for residential development and speed up consenting,” Twyford said.

Twyford is kind of right but the real problem is a layer or two below where he is looking so a quick fix risks missing the mark completely. After all the Special Housing Areas are a quick fix.
 
And I would remind Twyford of a couple of Labour's quick fixes:
 

  • the Building Act 2004 put out as a quick fix to leaky buildings now gives us building projects where the cost of consenting outstrips the cost of works
  • The Animal Control Act 2004 which requires owners to spend hundreds on micro-chipping chihuahuas in case they bite someone's leg off

 
Neither would get my award for world leading regulation.

You have to be very wary of Chihuahuas, I saw one kill a Great Dane once, it got caught in its throat and the Great Dane choked to death.

These are fairly broad terms of reference. And the Productivity Commission has over a year to deliver its report so it is reasonable to expect that the report will be wide-ranging. The government does seem to be putting in a couiple of gentle nudges which are quite interesting. I suspect that they have learnt a lot from their experiences with Auckland's SHA's.
 
Mind you we all told them what those experiences would be right at the start. Some people like to learn the hard way.
 
Reading the tea leaves fo the ToR may I suggest:
 

  • It's all about AKL - with some Bay of Plenty, Queenstown, Greater Christchurch thrown in for good measure. Expect the Commission to spend most of their time pulling AC planners to pieces
  • Limiting planning objectives. There is a bland comment about planning's "social objectives"impacting the availability and cost of housing. The term "range of objectives" is repeated 2 paras later - it's important.
  • Perhaps a recognition that forcing councils to put in hard plans ranging in length from10-30 years also restricts their flexibility to respond to changing needs.
  • A worry that consultation has been captured by special interest groups (including the NIMBY's perhaps)
  • The RMA is more or less safe but ti looks like someone has finally recognised that it is the use councils make of the legislation not the law itself that is the real issue
  • Look for a shakeup in how network infrastructure is funded, built and managed. 

 
The last point has the potential to reshape local government in a way that we have not seen since 1876 and the abolition of Provincial Government. If the Commission digs deep enough they will find that restricting land supply has little, if anything, to do with planning theory. They will find planners are the front-line troops for the engineers and councillors. These groups are highly incentivised to keep rigid control over the extension of core infrastructure with a single aim: to prevent or minimise any impact from growth on the rates of current ratepayers.
 
Look for the resurrection of independent, regional infratructure "companies". Something like Auckland Transport and Watercare Services but on an even bigger scale. Councils still "own" their infrastructure but almost every aspect of planning, building and operation is handled by the independent trust/company/board. If you put the boundaries in the right places you could merge bits of NZTA into these entities and take away a lot of today's silliness.
 
 
 

Excellent points, Kumbel.  For a comparison, think about the provision of the 'three waters' - mainly Council delivered and controlled) with the provision of gas, telecommunications and electricity.
 
Somehow (I am sure that Magic must come into it somewheres) customer demand for these commodities is met:  the infrastructure is built, maintained, updated and individual service contracts are the norm.  Connection fees are transparent and alternatives (off-grid power is a prime example, as are two tin cans with a string between them) are legal.

Disagree slightly. There is no way of knowing whether what I pay to Spark or Elgas is fair. But, the great discipline for them is that I can choose to go elsewhere. And we need yet another regulator to keep an eye on the transmission charges I pay for electricity as there is no real alternative.
 
But what is very true is that because the last three industries are not obssessed with transgenerational equity they don't mind making a profit off this year's customers so that they can invest in more infrastructure now to be ready for tomorrow's customers. That one tiny accounting tweak - the difference between a balanced budget and one that generates a profit - is the main reason houses are unaffordable in Auckland and Christchurch.
 
It makes me weep.

Whoever going to be on that commission panel should act as a “mystery shopper” to Auckland Council and see how many hoops he/she has to jump through to get a simple building permit, And he/she should also be prepared to hand over his/her arm, leg, kidney and may be a new born as council fee.

Sorry CM. The ToR explicitly rule out looking at building consent processing. Fun though that would be too.

I'd get started on another sacrificial victim soon, CM.  Or just buy a goat.  Councils are simultaneously grasping, impoverished and extravagant - a bit like the Catholic Church just as Gutenberg hit them where it hurt.  
 
And this Commish, as Kumbel notes, may well lead to a partial Dissolution of the Monasteries.......there's certainly an appetite for a spot of Iconoclasm.....

Good Start but they also need to closely examine why building materials are so dissproportionately high compared with other countries

economies of scale.  NZ too small and distant.  Labour's idea of buying in bulk has some merit in theory but wouldnt like to see them try and implement it.
 

No not really, the high prices are driven by monopoly bahaviour.  Take Elephant Plaster board for example; it used to be cheaper than Gib (and more superior), until Commerce Commission slapped a heavy tarriff on it because of Fletcher's complain.  

As a simple thought to be tossed into the mix, how's this:
Separating uses (e.g. by zoning etc) causes commuting.
Not original (swiped from Jim Kunstler's 'Geography of Nowhere' now re-issued in e-book form for a fiver - a good primer) - but oh how true.
 
Another, related, non-original thought from the same source (I'm paraphrasing here - be kind):
If one set about trying to build the sort of small-town, community-filled, urban form of yore, one would quickly find that it's now illegal to do so.....
 

Lovin' this comment stream. And I don't always say that about all comment streams.
cheers
Bernard

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