The National Party would allow cities to opt out of the Medium Density Residential Zone law it co-created with the Labour Party, but would require them to zone for 30 years of growth.
Housing spokesperson Chris Bishop announced the new policy on TVNZ’s Q+A on Sunday morning, after Christopher Luxon told a community rally he had “got the MDRS [medium density residential standards] wrong” this week.
Luxon, who is also the member for Botany, was party leader when the bill passed its final reading in December 2021, but not when the law was written and first introduced.
Deputy leader, Nicola Willis was the driving force on the National side behind the bipartisan housing accord and said in her speech that “concessions on both sides have made this a more enduring piece of legislation”.
That prediction does not appear to have panned out, as the new party leader has ordered a partial turnaround less than 18-months later.
Bishop said they had only confirmed the new policy in the past few days, after Luxon's public comments were made, but denied they were making it up on the fly.
“Policy is an iterative process, right. There's a lot of work that has gone into this. A lot of academic research, a lot of consultation with the people that know what they're talking about to try and come up with a very ambitious package”.
He also denied it was a reversal of the policy his party had co-created and supported until this week, describing it instead as “a refinement”.
“The law currently says you have to allow essentially the three by three across vast swathes of suburban New Zealand, we're saying to councils: you can pick and choose where.”
Going for growth
The new policy allows councils to opt-out of the MDRS entirely, provided they zone enough land for 30 years’ of housing demand “immediately”.
Bishop said this zoning was likely to include converting more farmland on city fringes into suburbs and building ultra-densely on transport corridors such as train lines and bus routes.
National would protect rules requiring councils to zone for six storeys in areas around rapid transit lines and expects local authorities to choose to go much higher to meet targets.
This could mean protecting single family homes in some suburbs while building massive, tall apartment buildings near train stations and main roads.
If councils fail to meet demand targets, the central government would reserve the power to intervene and impose appropriate zoning rules.
“They will have to meet that demand by either doing greenfields or doing density. And, if they don't do it, we will do it for them,” Bishop said.
A policy document shared with the media did not say how long councils would have to complete their zoning plans before the central government intervened.
For reference, Auckland worked on its Unitary Plan for over three years before it was passed in 2016.
Carrot & stick
To get councils moving faster, National would dangle a billion-dollar carrot under the noses of city councillors in the form of performance incentives.
Councils would be paid $25,000 for every dwelling consented above the previous five-year average from a capped $1 billion fund. This is intended to trigger a zoning race.
The policy document said Auckland would have been eligible for a payment of $152 million last year, while Tauranga would have received nothing.
Finally, a National government would also reform infrastructure laws to make it easier for developers to get the infrastructure to build new suburbs on farmland.
These new developments could have targeted rates and levies, meaning home buyers would pay higher taxes to cover the cost of new infrastructure. Central financing tools would be provided, so that cities could borrow money without crippling city balance sheets.
The policy document said the MDRS rules were “a well-intentioned attempt” to add to the housing supply, but had not “proven fit-for-purpose”.
This is a stark contrast to what Willis, then National's housing spokeswoman, said about the law when voting for it in December 2021:
“It will allow people to add more housing to existing residential areas and to add the kind of housing that first-home buyers can more readily achieve—that is apartments, townhouses, smaller dwellings,” she said.
“Only by building more houses and building more affordable houses in the places where people want to live, will we be able to truly restore the idea of an egalitarian property-owning democracy”.
Under the new National Party policy, councils will be able to either implement the MDRS rules as they currently stand or opt out and choose to increase housing growth elsewhere.
Density pricing
High-density zoning laws have been critical in cooling Auckland housing costs, which are now growing more slowly than the rest of the country.
This progress has been due to the Unitary Plan passed in 2016—as the MDRS has not yet taken full effect—and the National Policy Statement on Urban Development set in 2020.
Matthew Maltman, a data analyst and economist who writes a blog called One Final Effort, said the Unitary Plan has been associated with a big increase in new houses being built.
Research by Auckland University’s Ryan Greenaway-McGrevy and Peter C.B. Phillips found upzoning led to around 20,000 new dwellings being consented over a five year period to 2020.
“This impact is equivalent to 3.78% in the city’s dwelling stock, and effectively doubles the rate of housing construction prior to the policy change,” they wrote.
Rents have grown more slowly than the national average and it is now cheaper to rent a house there than in Wellington.
Similarly, house prices in Auckland have increased about 20% since 2016, while prices in the rest of the country have increased by 70%.
“This is supportive of the theory that more elastic housing supply means that demand side factors (such as interest rates) have less of an impact on prices,” Maltman said.
The Medium Density Residential Standards—which overrides local councils and permits three stories and three dwellings in most residential lots—aimed to expand on this success and force these free-market planning rules onto other cities.
Maltman said the policy was estimated to add around 75,000 additional dwellings over the next five to eight years.
All about those votes
While lower income people in outer suburbs seem willing to tolerate this kind of transformation, wealthy voters in central suburbs have often successfully blocked higher density builds.
The ACT Party, which until 2020 was only in Parliament thanks to voters in the Epsom electorate, has opposed the MDRS from the start, despite it being a market-led policy.
Party leader David Seymour said he wanted housing standards that allowed more intensification but with rules that were “sympathetic to existing neighbourhoods and property owners”.
Luxon’s rethink on the MDRS might be a reflection of Act’s recent success among voters which have traditionally been dependable National supporters.
The small-government party held only one seat in parliament for the nine years prior to 2020, when it was able to take advantage of weakness in both National and New Zealand First.
Now, it is on track to scoop up 11% of the vote in 2023 and grow its number of seats to 15, having made inroads with both rural voters and suburban conservatives.
Chris Bishop, on TVNZ’s Q+A, denied the policy was about winning votes back from the Act Party and said National was serious about solving the housing crisis.
He said house prices should be roughly 4 times the median household income—the current national average is more than 7 times—but NZ couldn’t have a price crash to get there.
Instead, he wants household incomes to climb faster than house prices and bring that multiple down over the coming decades.
“I acknowledge that housing got out of control under the last National Government, but here's the thing: it's worse now,” he said.
Also see: Is the bipartisan attempt to boost urban housing density the right way to go?
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