Government officials warn plans to allow for more housing intensification in the country’s main centres could be hampered by property owners using legal instruments to prevent development on their land.
The Government has committed to changing the Resource Management Act to enable landowners to build up to three homes of up to three storeys on most sites in Auckland, Hamilton, Tauranga, Wellington and Christchurch without resource consent. Conditions apply.
The Ministry of Housing and Urban Development and the Ministry for the Environment largely support the decision, which is also backed by National.
But, in a regulatory impact assessment on the proposed law change, they warned, “Development covenants and cross leases can act as a barrier to intensification by restricting future land use and making delivery of affordable housing difficult or costly to comply.
“These agreements can limit housing height, subdivision, density, rentability and choice of building materials, and lock in low density housing, often for perpetuity.
“They can be relatively easy to establish and can be difficult to revoke without agreement of all interested parties…
“[I]t is plausible well-resourced property owners, resident associations and developers may use covenants to limit housing intensification. This could limit the expected benefits of enabling intensification.”
The officials said they only have limited evidence on the extent to which the use of covenants is currently a barrier to development. Accordingly, they couldn’t comment on the extent to which they may be used more when the new density rules take effect in August 2022.
But they said, “The Government plans on undertaking work in this area to get a clearer estimation of the scale of the problem and the need for any further intervention.”
Bell Gully law firm partner, Andrew Beatson, was wary of the implications “further intervention” could have on property rights. He maintained this could significantly erode the “well-understood principle of freedom of contract”.
Beatson said the scale of the problem would need to be large enough that the Government could “fully” justify changing the way covenants are applied to property titles.
CoreLogic NZ head of research Nick Goodall didn’t believe the use of covenants would materially affect the intent of the law change - to allow for more intensification.
He noted capacity constraints, preventing home building, is a much greater impediment in the short to medium-term.
See this story for more on the proposed law change, this story for more on concerns raised around infrastructure needed to support intensification, and this story for more on the impact the policy will have on land prices, written on the back of the interview below with Minister for the Environment David Parker.
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