Smith says National Policy Statement on urban land development set for release on Thursday; Could be operative by October; Smith defends developer contributions and dismisses proposal for targeted rates to service infrastructure bonds

Smith says National Policy Statement on urban land development set for release on Thursday; Could be operative by October; Smith defends developer contributions and dismisses proposal for targeted rates to service infrastructure bonds

By Bernard Hickey

Building and Housing and Environment Minister Nick Smith has foreshadowed the release of a National Policy Statement (NPS) for urban land development on Thursday.

The NPS has taken on extra urgency and importance after Prime Minister John Key used his post-Budget address to say it would force the Auckland Council to release more land and was a key part of the Government's housing supply strategy. See my article on Key's comments on Friday here.

Smith told reporters before the National Party's Parliamentary Caucus meeting that the NPS was now at the printers and he expected to announce it on Thursday after briefing local Government leaders. He said he aimed to formally publish the NPS in June for one month's consultation in July, before making it operative by October.

Smith said the NPS would not force a re-write of the Auckland Unitary Plan, which is due to be presented to the Auckland Council in the last week of July and then agreed (or not) and notified by the Council by August 19.

"The key feature of a National Policy Statement is that in the event that a Council decided to shift away from the Independent Hearings Panel and it was not able to meet the requirements of the NPS -- effectively it's a buttress to the work that the IHP has been doing," Smith said.

He would not release details before Thursday, but Key said on Friday the NPS would direct Councils to release land if land prices were rising too fast. Finance Minister Bill English has also indicated the NPS may be linked to housing affordability thresholds such as house price to income multiples, as was done in the Government's Special Housing Areas legislation.

Smith said a lot of the NPS' policy workings had been influenced by the work of the Independent Hearings Panel (IHP), which is currently finalising the Unitary Plan to present to Auckland Council.

He said the NPS would help Councils around the coordination of infrastructure, but would not give details.

The Auckland Council has pushed back at Government talk about loosening up rural-urban boundaries and forcing land releases, arguing it cannot afford the infrastructure costs associated with new land releases. The Council is up against its borrowing limits for a AA credit rating, which it is required to keep by the Government-mandated Local Government Funding Agency. Ratepayers in established areas such as the Eastern and Northern suburbs have also been opposed to any debt increases that would increase their rates to pay for roads and pipes and footpaths in new developments in the likes of Drury and Albany.

Smith rejects targeted rates

Smith also rejected proposals championed by Labour Housing Spokesman Phil Twyford and others for Councils to surmount their infrastructure funding challenges by launching infrastructure bonds or special funding vehicles paid for with targeted rates. See more on Twyford's plan in my May 18 article.

Smith said developers should continue to have to pay development contributions and that the targeted rates/infrastructure bonds proposal was simply a funding reshuffling that did not make homeowners better off. He said any lowering of upfront housing costs through lower development contributions would be offset by higher rates bills over the long run.

"In the respect of the debate about the payment for infrastructure. It's fair and proper that the cost of infrastructure associated with land development rests with the developer. If the developer is able to get all the financial benefit of new sections, but doesn't have to fork up for the cost of the sewerage and the water and the footpaths and the drainage, then we are really giving him a free ride, because he is able to profit hugely from the value of the sections, but not do any of the work or pay for any of the costs of the infrastructure," Smith said.

"Nor should we pretend that we're helping housing affordability if we simply shift the costs from the developer to a targeted rate or an infrastructure company. If I've got a new home owner who has currently got the cost of a mortgage and the cost of their rates, and you're going to fund that infrastructure with either infrastructure bonds or a targeted rate, all you're saying to that home owner is 'yes your mortgage might be less because your home was less expensive,' but you've now got this new bill for an infrastructure company for those infrastructure bonds, or a new targeted rate," he said.

"Actually, that's shifting the deck chairs, not fundamentally improving housing affordability. If you're lowering the price of the land, but giving that family an extra cost and bill for infrastructure, this has all been tried before."

'Disastrous example at Waimea Village'

Smith referred to an experiment in his own Nelson electorate where the infrastructure for Waimea Village in Richmond was funded separately from the Council.

"I've got a disastrous incident in Richmond of the Waimea Village separately funding the infrastructure (and) the infrastructure company then winding up those costs over time. That completely turned into a community disaster," Smith said.

"I don't completely rule out new ideas, but I'm interested in ideas that will make a real difference to housing affordability, not shift the costs and just kicking down the road with the sorts of problems we had at Waimea Village at Richmond where some of these ideas were tried and failed awfully."

Smith said the biggest winners from targeted rates and infrastructure bonds would be land bankers and developers, not home owners.

"Some of the cute ideas around shifting the costs and creating new bills for home owners or targeted rates for infrastructure, may reduce the capital cost of the home, but just leave that home owner with a lesser mortgage to pay, but another bill to pay each week in paying for that infrastructure, and in my view you need to be satisfied that that's going to make the homeowner overall better off and is not just a clever exercise in accounting."

Smith repeated that the NPS would partly answer the argument from Auckland Council that it could not afford new greenfields infrastructure.

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11 Comments

If, as has been reported, the trigger to require the release of land is when the median house price to income ratio exceeds 10, then this measure is not adequate. A ratio of 10 is severely unaffordable and all it is going to do is consolidate these unaffordable prices across the country! We need to getting prices back down to $400,000 for a new 3 bedroom home as the government pointed out was reasonable and now being achieved in Canterbury. Following my initial happiness that the government might at last be going to do something useful, it appears that it was all just more smoke and mirrors to make it appear that they were, while in reality the are just spinning their wheels.

On a deep level people know 'lack of supply' is not the thing that has driven auckland prices so high.

It's all been speculation

Rents reflect any real shortage. Manawatu rents up 24% has a bigger shortage of actual houses vs. Ppl wanting to live there.

Why do developers not see a solid pipeline of demand? Because they know the shortage myth is overblown and know if large scale building occurs at same time as the speculative demand evaporates (can happen overnight) then they'll be stuck with houses they can't sell.

I largely agree. Certainly I'm not sure extra houses in Pokeno will satisfy demand in the inner suburbs.

Doesn't matter what developers see or don't see they have to buy land from someone first. That someone knows if that if this developer doesn't buy at this price another one is coming along soon.

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The government has been very clear with its statements to date that only desires to reduce the rate of price increase to "single digits", not bring prices back to anywhere closer to reality.

In other words, as Winston would put it, to aspiring homeowners: "Get Stuffed".

I wonder if the NPS on housing will include central government commitment to more selective immigration?

Observing the reactions of assorted parties (ACC councillors and staff, developers, banks, lawyers et al) is gonna be an amusing afternoon.

Bring popcorn.

This is going to be so good. Are they selling tickets?

Note that it sounds from this report that Smith is choosing the fast-track method under RMA s 46A (1)(b). This will relieve him of the burden of appointing competent people to a Board of Inquiry to not only conduct the public consultation thoroughly and fairly but also add their own ten cents worth on what they think of the draft.

Nick will be the prosecution, the defendant and the judge all in one go.

Note that Parliament is not invited to this party. Especially not those quislings: the Maori Party and United Future. Actually the National backbenchers won't even get a sausage roll out of this one. Inner circle of Cabinet only.

I thought English and Key welcomed Twyford's initiative. Smith now seems to be contradicting that. Smith also does not seem to answer the key questions around how to pay for the extra infrastructure required for the big influx of houses the government seems keen to insist on. By the government's own rules the Council cannot borrow any more. Does the government intend massive rates increases across the city? Separately his logic seems to suggest that targeted rates would not reduce section prices on the urban limit. I strongly suspect they would. Smith wants all Auckland ratepayers to pay for landbankers to make extreme profits.

Perhaps the Council will have to sell off some of its assets to fund new infrastructure projects.....

What is the purpose of a council if they cannot deliver adequate infrastructure? Glitzing up the asset column while maxing out the debt and unable to deliver the basics is pretty much failure in my books......

Is the minister serious. Farce. If serious listen to nezealanders now n do not wait till next year where you will as is year of election but am sure than by that time no nz will be interedted in you