New National Policy Statement paves the way for more affordable housing

Introduction

The newest tranche of RMA national direction seeks to ensure that sufficient land is freed up for urban development when required. It enables urban growth (both up and out) and provides for well-functioning, liveable cities that meet the housing demand of our growing communities. The direction comes in the form of the National Policy Statement on Urban Development (NPS-UD), which was gazetted on 23 July 2020 and takes effect from 20 August 2020.

The NPS-UD builds on many of the existing requirements for greater development capacity provided by the NPS on Urban Development Capacity 2016 (NPS-UDC). However, the NPS-UD broadens its focus and adds significant new content.

The NPS-UD makes up one of the five pillars of the Government’s wider Urban Growth Agenda (UGA). We’ve touched upon some of the other UGA pillars in our recent articles on the creation of Kāinga Ora and the Infrastructure Funding and Financing Bill.

Application of the NPS-UD

As the name suggests, the NPS-UD applies to urban environments. This means any area of land which is (or is intended to be) both predominantly urban in character and part of a town of at least 10,000 people.

For the purpose of implementation, New Zealand’s urban environments are split into three tiers and the councils that are responsible for these areas are classified within the same tier:

  • Tier 1 being the cities of Auckland, Hamilton, Tauranga, Wellington and Christchurch (and their wider urban areas irrespective of local authority boundaries) which are already large in size and are predicted to have a high rate of growth;
  • Tier 2 being a list of eight cities and their wider urban areas that are thought to be of medium growth; and
  • Tier 3 being all those urban environments not listed as Tier 1 or Tier 2.

Certain directives in the NPS-UD only apply to councils within Tier 1, or Tier 1 and 2.

What does the NPS-UD do?

The NPS-UD recognises the importance of having well-functioning urban environments, and of providing sufficient housing for all New Zealanders. It directs councils (particularly Tier 1 councils) to loosen their urban planning rules to provide for varied development, both upwards and outwards, in order to achieve this important goal.

In broad overview, the NPS-UD contains objectives and policies in four key areas:

  1. Evidence for good decision-making
  2. Strategic planning for growth;
  3. Making room for growth in RMA plans; and
  4. Processes for engaging on planning.

In order to correctly predict and strategically plan for growth and to make good decisions during this process, Tier 1 and 2 councils must commission or complete housing and business development capacity assessments (HBAs) and future development strategies (FDSs). Tier 1 and 2 councils did have to make HBAs under the previous NPS on Urban Development Capacity 2016, and Tier 1 councils had to complete FDSs. However, the new NPS-UD has “beefed up” the required contents for each document and extended the FDS obligations to Tier 2 councils.

HBAs must be completed at least once every three years in time to inform resource management plans and council long-term plans prepared under the Local Government Act 2002. HBAs should also be used as a basis for councils to create FDSs.

Tier 1 and 2 councils must create FDSs every six years and update them every three years. These FDSs involve long-term planning to produce a strategy that shows how and where these councils will provide for future development.

In addition, the NPS-UD makes it mandatory for councils to implement their findings from the abovementioned strategic planning process by:[1]

  1. making planning decisions that bring about competitive land and development markets, in order to bring down the cost of housing;
  2. determining whether the required development capacity is reasonably expected to be realised; and
  3. notifying the Minister for the Environment if they have insufficient development capacity in the short, medium or long term.

Other changes that will interest residential property developers are the directions to remove certain overly restrictive rules that affect inner-city urban development. These directions allow for taller apartment buildings in certain hubs and “flexibility with parking, rather than compulsion”[2].

The first of these changes is the direction that Tier 1 councils should allow for apartment buildings of up to six storeys high in areas where housing is in high demand or in places that are within walking distance from existing or planned public transport. There is however some “wriggle room” for councils built into this direction in the NPS-UD, which allows councils to disregard the six storey minimum if other “qualifying matters” are present such as heritage values, open spaces and the need to give effect to other national policy statement.

A second is the requirement for all councils to abolish minimum car parking requirements for developments from their plans within 18 months. This policy is aimed at freeing up extra space and resource for additional housing in place of carparks, while giving developers the flexibility to include carparks if they consider that this would be an attractive option for buyers.

Summary

Prior to the NPS-UDC 2016, it was optional for councils to carry out future urban demand predictions. This has contributed to widespread housing unaffordability as councils set aside insufficient land to be developed for residential purposes, and too few houses were built as a result.

The NPS-UD now adds several extra layers to the mandatory requirements from the NPS-UDC 2016 that require councils to gather evidence and predict future urban demand. This will help unlock extra capacity for urban development and ensure that this development is well-functioning and liveable for our communities.

The practical influence of this national directional may not be noticeable until five to ten years down the track. However we can expect that the NPS-UD, in combination with the other initiatives in the UGA, will help bring about significant changes to housing supply and affordability over the medium to longer term.

If you have any questions about the NPS-UD please get in touch with one of the Adderley Head team.

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

[1] From Ministry for the Environment. 2020. Introductory guide to the National Policy Statement on Urban Development 2020

[2] Bill McKay on Radio New Zealand National’s Nine To Noon, 27 July 2020

Posted on Friday 31st July, 2020 at 09:19 am