Affordable Housing in New Zealand

Central government considers that New Zealand has a shortage of affordable housing. Over the last few years there have been significant increases in housing costs, especially in major cities. This places home ownership out of reach for many New Zealanders.

One of the most important factors in the supply of affordable housing is the availability of land. Planning systems and land regulations imposed by central, regional and local governments affect the speed, efficiency and cost with which land is made available for housing.

The inquiry

The Government has asked the Productivity Commission (the Commission) to undertake an inquiry into the supply of land available in New Zealand. This inquiry has been instigated to understand if there is sufficient affordable housing to accommodate the population growth of some New Zealand cities.

Aims of the inquiry

The Commission will be investigating how effective Councils and central government are at making land available for development, both in greenfield and brownfield areas. It will also investigate more intensive use of land within existing city boundaries. To do this the Commission will assess the current planning systems and land regulations.

The Commission will identify Councils that are effective in making land available to meet housing demand, and inquire if the processes they use could be adopted more widely. The Commission proposes to do this through seeking submissions, and selecting certain Councils to study more closely.

Who should make a submission

This inquiry will be of particular relevance to anyone involved with land development.  This may include land developers, land owners, RMA lawyers, Councils, planning consultants and other experts.  If you are involved in land development, either as a developer, a regulator or a consultant, this is an opportunity to improve or influence the planning processes which control which land availability.

Current status of the inquiry

The Commission has released an issues paper, which identifies the parts of the planning process the Commission will investigate. This paper covers a very wide range of topics. Essentially the Commission intends to look at the whole process of land being made available for development. This covers how accessible rules and regulations are, how effective forecasting for housing demand is, the integration of planning frameworks, the effectiveness of pre-hearing meetings, the impact of development contributions, heritage issues, and covenants, to name a few.

The Commission is also seeking feedback on the success of recent initiatives to aid land availability, and comment on alternative methods of encouraging development.

Recent Initiatives

There have been some recent initiatives to develop land for affordable housing. Nationally, the Housing Accords and Special Housing Areas Act (HASHA) has been passed by Parliament for the purpose of facilitating an increase in land and housing supply. In Canterbury , the Canterbury Earthquake Recovery (CER) Act and the Land Use Recovery Plan (LURP) have been developed to assist in the recovery of the Christchurch’s housing stock, and identify areas suitable for further development.

The Commission is seeking comment on whether there is evidence that these initiatives have resulted in more land being made available for housing, or allowed more land to be developed faster.

Alternative methods of encouraging development

The Commission is investigating alternative measures for encouraging development. The Commission is also interested in whether alternative approaches to funding infrastructure may assist in development.

Methods of encouraging development and preventing landowner holdout

The Commission observes that aggregating smaller parcels of land can provide significant scale economies for land development. Other counties have established Urban Development Agencies (UDAs) whose role it is to aggregate land into larger packages for development. Some UDAs have compulsory acquisition powers to prevent individual landowner holdouts.

The way taxes and rates are applied can also be used to encourage development. Often, landowners hold onto land in anticipation of future price rises. This impedes development. The Commission notes that a switch from local authority rates being based on property value to land value could encourage land improvement, and discourage the holding of unimproved land.

Encouraging infrastructure development

A barrier to land development can be infrastructure development. New infrastructure to support growth needs to be paid for and built before it starts to generate income through rates. This presents a funding issue for local authorities.

One option to assist with this challenge suggested by the Commission is Municipal Utility Districts (MUDs). In this structure, finance to pay for infrastructure is raised through the public sale of bonds. The MUD then has the power to levy and collect taxes on the properties in the MUD, which is used to pay the principle and interest on the bonds.

Another option the Commission would like feedback on is the use of betterment taxes. Betterment taxes tax the increase in land value which results from public infrastructure investment. Of course, to be effective, a betterment tax must be able to distinguish between the increases in value due to the building of infrastructure as distinct from general land price increase.

Infrastructure can also be constructed by a Council Controlled Organisation (CCOs), a company with 50% or greater Council ownership. These are typically more efficient and focused than the wider Council.

How to submit

Submissions may be lodged at www.productivity.govt.nz or emailed to Concealed for privacy. These submissions must be lodged by 22 December 2014. Further information on the inquiry can be seen here here.

Adderley Head is familiar with the issues the inquiry is considering, and can provide further detail. We are also available to assist in drafting and lodging submissions.

Disclaimer: This is a brief summary for information purposes only and is not legal advice

Posted on Tuesday 9th December, 2014 at 02:18 pm