Thursday, 3 October 2019

Wondering about the NPS-UD

Some slightly more structured thoughts on the draft National Policy Statement for Urban Development. Sorry again, another long post.

Given that:

  • fundamental reforms of the RMA have been announced;
  • the current NPS-UDC has yet to be fully embedded in planning documents;
  • there is a lack of alignment with the proposed NPS on highly productive land; 
  • a proposed national climate change adaptation strategy is soon to be prepared; 
  • there is a lack of any incentive for participants in urban development (developers, councils and residents) to change their behaviour and
  • the poorly drafted content of the NPS-UD;

There seems little point to the revised NPS.

In particular, there seems little point in progressing a revised NPS aimed at urban development ahead of the RMA reforms. The Government proposes that the RMA review focus on the ways the RMA interacts with other key legislation such as the:

  • Local Government Act 2002 
  • Land Transport Management Act 2003 
  • Climate Change Response Act, to be amended by the Zero Carbon Amendment Bill. 

The scope includes spatial planning which has the potential to make better and more strategic decisions about urban development and infrastructure over longer time frames.

A string of reports and analysis have continually highlighted that the fundamental issues facing urban environments extend well beyond the ambit of the proposed NPS-UD.  Issues associated with the funding and integration of infrastructure and responding to long run pressures like climate change are much more important to address.

What is needed is a fundamental resetting of incentives and constraints facing councils and communities, rather than further admonishments.

I also note that key policies on urban expansion (leap frog development) that may be included in the NPS-UD have not been drafted. Any policies relating to out of sequence urban expansion need to be formulated and tested through submissions. They should not, as a matter of natural justice, be included in an operative NPS-UD without this step.


Focus on major urban centres

The proposed NPS-UD suggests targeting the most directive policies to largest and fastest growing urban environments. To this end the concept of major urban centres is introduced.

There remains merit in targeting policies at fast growing urban areas, even if they are small in size. Fast growth puts pressure on plans and planning.  For example, Wanaka faces the same growth pressures as Queenstown. Cromwell is experiencing spill over growth from both areas and is facing equally hard choices.

There is no certainty that the major centres listed will remain fast growing into the future, yet the directive policies remain tied to these areas. Equally, there is a range of fast growing secondary centres that need some ‘encouragement’ to plan for growth on a collaborative basis. Examples are the Nelson-Tasman area and Napier-Hastings. These areas have similar growth rates to Hamilton or Tauranga, and may well be of similar size in 20 or 30 years time.

These ‘emergent’ urban centres are ones that will benefit most from early, comprehensive and forward looking spatial planning.  Unless there is a legislative direction to do so, then joint spatial planning is likely to be piecemeal.

At the other end of the scale, the definition of urban environments needs to be amended to prescribe a time period and to clarify the meaning of ‘concentrated’ to help determine where the cut off point for the NPS lies, for example:

Urban environment means an area of land containing, or intended to contain within the next 30 years, a concentrated single settlement or group of settlements which share physical services and infrastructure, of 10,000 people or more and any associated business land, irrespective of local authority or statistical boundaries.

Future development strategies (FDSs)

With the reduction in emphasis on ensuring sufficient ‘capacity’ through the new title of the Policy Statement  – NPS-UD- the purpose of Future Development Strategies needs to be reconsidered. The discussion document refers to spatial planning as being the intended direction for urban  planning. If that is the case, then the FDS policies should provide an appropriate structure. There seems little point to amend FDSs ‘as a step towards an integrated spatial planning framework’, when more fundamental reforms are around the corner.

Given that there have been constant calls for spatial planning to take a more central role in urban planning, there are a range of precedents to work from. For example the Royal Commission on Auckland Governance proposed a spatial plan with statutory weight that:

  • set an overarching strategic direction for the Auckland region;
  • integrated and aligned all decision making and planning;
  • would ensure implementation through the council’s plans and CCOs; and
  • facilitates the coordination of all actors involved in delivering the agreed strategic direction.


The matters set out in Seciton79 (3) and (4) of the  Local Government (Auckland Council) Act 2009 remain relevant:

(3) For the purposes of subsection (2), the spatial plan will—
(a) set a strategic direction for Auckland and its communities that integrates social, economic, environmental, and cultural objectives; and
(b) outline a high-level development strategy that will achieve that direction and those objectives; and
(c) enable coherent and co-ordinated decision making by the Auckland Council (as the spatial planning agency) and other parties to determine the future location and timing of critical infrastructure, services, and investment within Auckland in accordance with the strategy; and
(d) provide a basis for aligning the implementation plans, regulatory plans, and funding programmes of the Auckland Council.

(4) The spatial plan must—
(a) recognise and describe Auckland’s role in New Zealand; and
(b) visually illustrate how Auckland may develop in the future, including how growth may be sequenced and how infrastructure may be provided; and
(c) provide an evidential base to support decision making for Auckland, including evidence of trends, opportunities, and constraints within Auckland; and
(d) identify the existing and future location and mix of—
(i) residential, business, rural production, and industrial activities within specific geographic areas within Auckland; and
(ii) critical infrastructure, services, and investment within Auckland (including, for example, services relating to cultural and social infrastructure, transport, open space, water supply, wastewater, and stormwater, and services managed by network utility operators); and 
(e) identify nationally and regionally significant—
(i) recreational areas and open-space areas within Auckland; and
(ii) ecological areas within Auckland that should be protected from development; and
(iii) environmental constraints on development within Auckland (for example, flood-prone or unstable land); and
(iv) landscapes, areas of historic heritage value, and natural features within Auckland; and
(f) Identify policies, priorities, land allocations, and programmes and investments to implement the strategic direction and specify how resources will be provided to implement the strategic direction.

This seems a reasonable list. A requirement to provide some form of feasible development capacity could easily be incorporated into the above.

Having said that, without some form of reference and/or linkage to NZTA’s investment programme, and/or other centrally directed infrastructure like Kiwirail and educational and health services, then preparation and implementation of FDS is seriously weakened.

As spelled out in a Cabinet paper from 2009 on urban planning:

Because the planning framework comprises various pieces of legislation and is subject to various legal purposes, processes and criteria, there are no mechanisms to agree and then implement a consistent strategic direction across all plans and decision making. The problem is threefold.

First, no mechanism currently exists for agreeing a long-term, strategic direction for a region that takes account of the range of issues relevant to managing growth (e.g. affordable housing, infrastructure, supply and demand of business land) and integrates across broad objectives. While Council’s can voluntarily set an overarching strategic direction there would be no compulsion, or guarantee of what the scope of the direction would be.

Second, there is limited ability for the Councils to implement a strategic direction consistently through its plans and decision making. This is because there are currently no legislative linkages between any agreed strategic direction and the council’s plans.

Third, there is also no effective mechanism for engaging with and informing to give greater certainty to other parties (e.g. central government, the private sector, infrastructure providers) about the likely shape of future development. Therefore there is no basis upon which to target and agree the type, scale, timing or location of investment decisions, so as to better coordinate activities that are critical for delivering the strategic direction.

Until these issues are addressed, there seems little benefit from the changes proposed to the NPS. The 2009 reforms for Auckland did not make the Auckland Spatial Plan the dominant plan, as envisaged. The issues of legislative links, appeal rights, and the overall shape of the planning framework in the long-term was deferred to the then ‘urban work stream of Phase Two of the resource management reform process that is underway’. That process was never completed.

History would appear to about to repeat itself as issues of infrastructure funding and financing start to dog the implementation of urban redevelopment and the desire to speed up urban expansion.

National level direction about the features of a quality urban environment

The proposed objective and policies associated with ‘quality urban environments’ are not fit for purpose. The proposed qualities set out in Objective O2 are functions of urban areas, not qualities.

The quality of the urban environment (covering the built and natural environments) is critical to the long term success of urban areas and with this, society’s response to long running issues like mental health, obesity, crime and safety, as well as productivity and economic transformation. To reduce quality to a list of functions is a serious miss understanding of urban systems and how they work.

The discussion document recognises the wider role of urban quality and the dimensions involved, yet goes not further than saying that these wider dimensions would be noted in the preamble to the NPS.

The relationship between urban quality and urban amenity is unclear. Is the notion of ‘urban quality’ intended to replace urban amenity? The RMA doesn’t specifically mention urban quality. It does, however, define amenity values. The discussion document suggests that the NPS-UD would be used to help operationalise sec 7 of the RMA – the maintenance and enhancement of the quality of the environment. There is a significant overlap between amenity and quality and unless that overlap is clarified, then there will be substantial confusion.

If the NPS is to introduce the principle of urban environment quality, then it needs to do so in a meaningful way, for example, urban environments that:

  • encourages people to feel safe and give them a sense of stability
  • fosters a sense of community.
  • are designed so that walking, cycling and public transport are the natural and attractive options.
  • are places for people – places that are designed, built and maintained on the principle that people come first.
  • contribute to the quality of life and encourage healthy and sustainable lifestyles.
  • are places in which we want to live, work, bring up our children, and spend our leisure time.
  • are places, which promote economic success and allow people to share in rising prosperity, attracting and retaining successful businesses.


The NZ Urban Design Protocol is another attempt to define quality environments, yet the Protocol appears to be side-lined.

Proposals to clarify that amenity values are diverse and change over time

The NPS-UD proposes to add a requirement that in making planning and consent decisions, decision-makers must recognise that amenity values:

  • vary among individuals and
  • communities change over time.

How this requirement is to work in practice is not spelt out.

It is presumed that the policy is aimed at the amenity of urban environments, not rural environments.

Plans seek to provide an acceptable view on what constitutes ‘amenity’, given diverse views. While far from perfect, at least plans provide a reference point as to what constitutes amenity.  A requirement to take into account a variety of views around this reference point opens the door to competing views, both in the sense of a wider or narrower view of amenity. The clause is likely to be used by submitters claiming that the Plan’s assessment of amenity values is wrong, and that their individual views are not being taken into account. As a result, if anything the policy is likely to increase opposition to change.

The reference to communities changing over time provides no assistance, as the direction and shape of change is not known.

Rather than refer to individual tastes and changing communities, the real issue is that the bundle of amenities associated with different types of urban environments vary. Low density urban environments have a different set of amenities to those associated with high density environments. A transition occurs as one set of amenities gets replaced with another. That transition involves both the quality and design of development, as well as the nature and form of public resources in areas subject to change.

Sec 7 of the RMA requires that amenity values and the quality of the environment is maintained and enhanced over time. If the concern is that this is too often taken to mean a requirement to maintain what exists, rather than plan for a different type of urban environment, then the wording of Sec 7 of the RMA should be amended. For example:

In achieving the purpose of this Act, all persons exercising functions and powers under it, in relation to managing the use, development, and protection of natural and physical resources, shall have particular regard to:

the provision and maintenance of the bundle of amenity values typically associated with different forms and densities of urban and rural development.

If an NPS-UD is to be advanced then the NPS could usefully start to spell out what these different amenity values could be comprised of, rather than refer to the very open ended concepts.

Provide development capacity that is both feasible and likely to be taken up

Introduction of a further qualifier as to development capacity that has to be provided (feasible and likely capacity) opens up a significant methodological issue as to what is ‘likely’.  There appears to be no definition provided as to how the term ‘likely’ is to be determined.

There is reference in the discussion document to “Likely to be built, using as a starting point information about past development in building consent data”.  Reference to past development patterns would appear to entrench these past patterns, rather than be a positive move towards understanding future needs.

The discussion document suggests that these changes will require local authorities to allow more opportunities for development in local authority plans. This requirement is intended to recognise that only a portion of the development that is enabled will actually occur.

Introduction of the word “likely to occur” along side the concept of ‘feasibility’ supports the status quo. The two terms completely fail to understand that urban development patterns and demands are shaped by a wide range of pressures and forces, many of which are miss aligned and which fail to adequately manage future risks.

If the concept of ‘likely to be taken up’ is to be used, then the concept also needs to be applied to development that is not currently feasible, but which may become feasible over time. There are many cases where development is not considered feasible on simple financial metrics, but which is likely to occur in the future.

Requiring objectives, policies, rules, and assessment criteria to enable the development anticipated by the zone description

The change would require an assessment to ensure the objectives, policies, rules, and assessment criteria set out in district plans are individually and collectively consistent with the expected development for each zone as described in the zone description.
This proposed change appears to be trivial in extent.

Policies to enable intensification in the locations where its benefits can best be achieved

P6A is an important policy.

This set of policies is perhaps the most beneficial of the amended NPS. However they need further work. The proposed objectives and policies raise a range of issues:

  • P6A provides no definition of high density, yet this is the mandatory policy
  • Does high density mean high rise?  
  • Higher densities need to be accompanied by more attention to urban design – where is the relationship to quality urban design?
  • What about development in heritage areas, special character, volcanic viewshafts? Do they still stand or does the NPS override these due to it being a national policy?
  • Are high density residential developments going to be open to submissions and appeals?
  • The areas listed in P6A where high density should be enabled cover most parts of a city - for example areas with a 'high-demand for housing". This would apply to all of Auckland, for example.


The national planning standards provide for medium density and high density residential zones. Should these terms be referenced?

Medium density residential zone means areas used predominantly for residential activities with moderate concentration and bulk of buildings, such as detached, semi-detached and terraced housing, low-rise apartments, and other compatible activities.

High density residential zone means areas used predominantly for residential activities with high concentration and bulk of buildings, such as apartments, and other compatible activities.

For much of urban New Zealand, it is the 'medium' category that needs the policy support - two and three storey town houses and flats. High density zoning makes up only a small proportion of demand.

It is unclear how the intensification policies and the associated capacities and environments are aligned with the other changes signaled in the NPS. For example:

  • The emphasis on spatial planning
  • Intensification is often not seen to be feasible or likely, in terms of the policies on development capacities
  • Many people see the resulting amenity values as being alien to their consideration of what constitutes amenity (or for that matter quality). 


High density development needs a close relationship to open spaces and community facilities to help spark demand and to address issues of urban quality and liveability.

Access to jobs and services is important, but secondary. Locations for high density development need to be co-related with public transport networks. These need to be frequent services if they are to influence travel behaviour, otherwise high density development will mean very high car dependency. There needs to be a definition of frequent, for example:

Frequent services operate at least every 15 minutes with priority measures (e.g. bus lanes and signal priority) and are less affected by road congestion than if they operated in general traffic.

High density development can, and should, take a variety of development types. Some areas in a city are more able to absorb and accommodate the resulting changes in urban form. For example are areas adjacent to centres and corridors, where there can be a logical ‘stepping up’ in development density. Some landforms lend themselves to intensive developments.

There needs to be an explicit qualifier that enablement comes with a commitment to high quality urban environments.  For example:

P6A: Enable higher-density residential development especially in areas where there is, or intended to be:

  • suitable open spaces and community facilities
  • employment opportunities and services are easily accessible by existing or planned active transport and frequent public transport networks
  • the ability to absorb a variety of development densities and heights into the urban landscape, such as areas adjacent to centres and near important corridors, or where landforms help to manage transitions 

while:

  • avoiding areas of identified landscape value or special character or amenity that are incompatible with higher intensities of development; and
  • ensuring that the development contributes to high quality urban environments.

Policy providing for plan changes for out-of-sequence greenfield development and/or greenfield development in locations not currently identified for development

There are no specific policies proposed in relation to ‘out-of-sequence’ greenfield development. Only general statements are provided. I do not see how a binding NPS could be issued on the basis of the general statements provided.

There are two forms of out of sequence greenfields development:

  • Urban development that is signalled in a plan or strategy, and where the timing is controlled or managed in some way, but the development wishes to proceed more quickly than that indicated; or
  • Urban development that is not within an area that is signalled in any public plan as an area for expansion.

The linkage between this policy and the policies requiring or encouraging Future Development Strategies is unclear. There seems little incentive to complete a Future Development Strategy if such an enabling policy is available to be taken up at any point in time.

A fundamental issue with both scenarios is who will provide the infrastructure?  The discussion document refers to the following:

  • the full costs of out of sequence development (including on the wider network) should be met.
  • that the onus to provide infrastructure (including wider network considerations) should not fall on the local authority when not provided for by their long-term plan and/or development plan process. 

These conditions should be part of the above policy. Once land is zoned for urban development, then there is an implicit assumption that network services will be provided by public agencies. If councils (and other government agencies like NZTA and the Ministry of Education) have to face funding demands on multiple fronts, then there is the potential for significant inefficiencies in urban development.

For the planned, but not in sequence, development scenario other relevant funding issues are the extent to which the out-of-sequence development may frustrate or slow the uptake of already planned and sequenced development, where funding is already committed. For example development sequencing may support the early establishment of a new centre or employment area. Competition form an out of sequence development may undermine the feasibility of such development with a range of social and economic consequences, including less ability to contribute to the financing the infrastructure investment already made.

For urban development that is not in an area identified for future expansion, then a more comprehensive list of criteria are needed than that set out in the draft NPS-UD. There will be significant confusion as to how the policy should be applied alongside similar policies that already exist in Regional Policy Statements.

Limiting the ability for local authorities in major urban centres to regulate the number of car parks required for development

I support moves to reduce or eliminate minimum car parking requirements.  For many commercial developments, the issue is the desire to ‘over supply’ car parking (ie car parking well in excess of minimums) relative to the capacity and sustainability of the surrounding transport network. There is rationale to allow for the imposition of maximum on-site car parking requirements.

Enabling  Urban Development
The discussion document suggests that a more directive national direction tool could remove or replace rules (or the objectives, policies and rules in the case of a planning standard) for an urban area or particular zone that may unduly limit the type and form of development that occurs.
Examples of rules that are said to potentially disable quality urban development are:

  • height, or height in relation to boundary, which limit upward development 
  • density and subdivision standards, which constrain the size of properties or numbers of houses per property
  • private outdoor space, which may not respond to the potential to leverage public or shared outdoor spaces
  • site coverage, which limits the amount of a property that can be covered by buildings 
  • minimum floor areas/apartment sizes, which reduce the variety the market can offer. 

The very narrow definition of quality urban environments discussed previously becomes apparent in this section of the discussion document.

I would support an NES or National Planning Template that sets out the actual provisions that should apply to certain forms of  development. Higher density residential development is the obvious first candidate for such a template. There is no need to get worried about reflecting local issues, if it is accepted that redevelopment to higher densities than current involves a new set of amenities being delivered, rather than an old set being maintained. A national set of criteria would be a great help. I would recommend that MfE commence preparation of such a template, and introduce specific text, rather than seek to introduce very general criteria about what should be in or out via the NPS.

Thursday, 26 September 2019

Digging into the NPS for highly productive land.

The following are thoughts on the draft National Policy Statement for Highly Productive Land (see note 1).

Sorry for the long post, but like a lot of RMA stuff these days, the NPS raises some fundamental issues which are not well resolved. It feels like another (much needed) 'arm' is being bolted onto the RMA, but without much thought as to how it will all work.

Problem Statement

The discussion documents statement of the problem is that the lack of clarity under the RMA on how highly productive land should be managed means the value of highly productive land for primary production is given inadequate consideration, with more weight generally given to other matters and priorities.

The fact that highly productive land is not given particular consideration in the RMA is deliberate. As the M.E. cost benefit analysis notes, comparison of land use outcomes in financial terms at a single parcel level is heavily weighted toward favouring change away from productive farming. This is because the financial returns from residential and business uses are in almost all instances greater than those from productive farm activity using highly productive land, while the value of land for countryside living is usually several times that of land used for productive farming activity. That means there is considerable incentive for current (farming) landowners to sell land, because the value of the soil resource to the individual landowner is usually far less than the potential price to be gained by selling for countryside living or urban purposes.

The RMA was  designed to enable such market-based transactions to occur without interference from public agencies, as there are no adverse effects on the environment to be managed.  It is a resource allocation issue, rather than a resource management issue. Where the RMA does stray into allocation, it is for a public resource (like water), or a resource (like the coastline) which has a strong element of public amenity to it. Productive land is not a public resource, nor is one that has other public values attached to it.

Whether the RMA should be used to address an allocation issue is not straight forward. There is an argument that market-based processes for the allocation of highly productive land between competing land uses (houses versus vegetables, for example) do not correctly reflect the costs and benefits involved. Specific factors that may lead to a miss-allocation of highly productive land appear to be:

  • Cumulative loss – the tyranny of small decisions can see incremental loss that only becomes significant over time, when it is too late and a tipping point has been passed
  • Time inconsistent preferences – short versus long term, for example the needs of future generations
  • Externalities – activities like rural-residential development generate a reverse externality in that they expect productive activities to curtail their activities
  • Incorrect pricing – for example incorrect pricing of transport infrastructure can generate excessive urban expansion
  • Poor policy – for example constraints on urban intensification which then lead to urban expansion. 
  • Future use value – future generations should have an option to use the resource at some point in the future, whether that use is known or unknown. 

Public policy theory would suggest that these issues should be tackled one-by-one. If incorrect pricing of transport systems is the issue, then the remedy is amending transport costs (road pricing). Reverse sensitivity could be addressed by some form of no complaints covenants on new rural-residential lots.  There may well be substantial benefits from tackling the unnecessary loss of productive land through measures that support and enable intensification, rather than trying to stop urban expansion.

Even so, such an approach tends towards amending matters to be taken into account when deciding whether highly productive land should be used for non-primary production, rather than stopping the loss. That is, trade offs and choices are still made on a case-by-case basis, but within an amended framework. That amended framework may tip the balance away from some conversion of productive land to urban uses, for example, but will not stop it. It may just slow it down.

The wide range of issues involved in urban expansion, including infrastructure costs, transport costs, and a host of environmental and community factors mean that productive land values get ‘lost’ in any cost/benefit or multi-criteria analysis. Typically, if highly productive land is located on the edge of an urban area, then to avoid this, new greenfields development has to be located further away from the existing urban area, imposing high transport and infrastructure costs. These costs can quickly overwhelm productive soil benefits. Flat land is always easier to develop for housing and business than hilly land.

The RMA may be one means by which these full range of costs and benefits can be more explicitly addressed, but in so doing, it does start to drag the RMA in a direction that the Act is not well set up to deal with.

Sitting behind the NPS appears to be a more fundamental concern that because of the finite nature of the productive land resource, and the uncertainty over future national and global conditions,  there needs to be some ‘bottom lines’ drawn so as to maintain options for the future. While current generations may value housing over vegetables, for example, in the future circumstances may change and vegetables will be more valuable than houses. But if this is the case there is no way to convert houses to vegetable growing land. The inability to reverse changes is different to many other land use decisions where there is a degree of 'substitution' possible, as well as ‘reversibility’.

This is the concept of ‘future use value’, ie the value in retaining the option to use an environmental resource and its services in the future. This value can also be called a “bequest value”. Future use value is related to potential, but uncertain, future resource uses. The value is likely to be small in the presence of close substitutes (for example, vegetables could be imported from somewhere else). However if there are no substitutes, then future use value may be high.

To retain options for future generations is a reasonable and justifiable value-driven decision to make, but if so, it should be explicit. This is important as a value-driven decision to ‘protect’ a specific resource needs to sit clearly within the ‘effects management’ approach of the RMA.

It is therefore important that the problem statement better define the issues and concerns, as this will lead to better policy. In particular it may be that within the overall context of managing highly productive land, that there is a graduation of policy responses. For example:

  • LUC 1 and 2: Protection in all circumstances (bottom line)
  • LUC 3:  Case by case, but within a more expanded policy framework (better trade off).

However, a better ‘trade off’ type approach may require some structural amendments to the RMA (ie a different class of activity and an alternative to section 104).

Objectives of the NPS.

There are three objectives of the proposed NPS:

Objective 1: Recognising the benefits of highly productive land;
Objective 2: Maintaining the availability of highly productive land; and
Objective 3: Protection from inappropriate subdivision, use and development.

Good drafting practice suggests that the objectives should be re-cast as outcome statements, rather than be a statement as to an action. For example Objective 1 reads:

Objective 1: Recognising the benefits of highly productive land.
To recognise and provide for the value and long-term benefits of using highly productive land for primary production.

The objective reads more like a purpose statement.

This could be re ordered so it says:

The value and long term benefits of using highly productive land for primary production are recognised and provided for.

However, there is still ambiguity in the objective. The word ‘value’ is not defined, neither is ‘long term’. Is value an economic value, an ecological value or a societal bequest type value? What happens if primary production values drop over time (think lab produced meat).

The objectives do not read like RMA objectives. The RMA does refer to intrinsic values – the underlying or inherent value of the resource.

One option may be:

The intrinsic values of highly productive land are recognised and provided for when achieving the purpose of the Act.

Intrinsic value of highly productive land could then be defined to mean the actual and potential value of the land to support a wide range of intensive agricultural, food production and ecosystem services, now and into the future.

Not all highly productive land will be used for primary production, now or in the future. I should imagine that one approach to the Policy Statement will be to say that only x percentage of highly productive land will ever actually be used for primary production, and therefore there is a surplus that should be used for urban development, rather than sit idle. Objective 2 tries to tackle this issue, with its reference to ‘availability’:

Objective 2: To maintain the availability of highly productive land for primary production for future generations.

Perhaps more pointedly, the focus should be on the finite nature of the resource. This would better match the schema of the RMA, for example Section 7’s reference to any finite characteristics of natural and physical resources. For example:

Objective 2: The finite stock of land of high productive value is maintained for future generations.

Objective 3 will be the objective most tested through RMA processes. Objective 3 reads in full as:

Objective 3: Protecting from inappropriate subdivision, use and development 

To protect highly productive land from inappropriate subdivision, use and development, including by: 
• avoiding subdivision and land fragmentation that compromises the use of highly productive land for primary production; 
• avoiding uncoordinated urban expansion on highly productive land that has not been subject to a strategic planning process; and 
• avoiding and mitigating reverse sensitivity effects from sensitive and incompatible activities within and adjacent to highly productive land.

The discussion document states that Objective 3 provides direction to all decision makers to ensure highly productive soils are protected from “inappropriate” subdivision, use and development through avoiding certain types of development and adverse effects. This will help to maintain the availability of highly productive land for primary production (Objective 2).

The draft wording for Objective 3 provides an indication of what is “inappropriate”  (e.g. fragmentation, uncoordinated urban development) while leaving some flexibility for councils to determine this on a case-by-case basis. Case law has confirmed that reference to “inappropriate” within a provision means there may be appropriate development in particular circumstances.

Again good drafting would be to describe what is ‘inappropriate’  through a series of policies, rather than be determined through an objective. There are some difficulties in drafting the objective to cover off the circumstances as to what is inappropriate, for example:

  • The second leg (uncoordinated urban expansion that has not been subject to a strategic planning process) is somewhat hard to interpret. Uncoordinated development? Most urban development of any scale is coordinated by somebody. So is coordinated urban development that has not been subject to a strategic planning process ok?  Unplanned may be better than uncoordinated. 
  • The third leg’s reference to mitigation opens the door to a range of scenarios. 


If the intention is to better spell out what to achieve, rather than the broad term “incompatible subdivision use and development”, then the objective could be more pointed, for example:

Objective 3: Protecting from inappropriate subdivision, use and development 
Land of high productive value is protected from unplanned urban encroachment, and actual or potential use based on intrinsic values is not diminished by land fragmentation and reserve sensitively effects from incompatible activities.

This type of objective better accords with the ‘protective’ language of Section 6 of the RMA. But it is necessarily more directed at the specific allocation of a resource. It compares with Town and Country Planning Act:

(d) The avoidance of encroachment of urban development on, and the protection of, land having a high actual or potential value for the production of food:

Options

Three options to better recognise and protect highly productive land are identified:

  • A National Policy Statement for Highly Productive Land; 
  • National Environmental Standards for Highly Productive Land; and 
  • Amendments to the National Policy Statement on Urban Development Capacity 2016.

Whether the RMA is the appropriate tool to efficiently and effectively allocate resources between competing uses rather than manage resources is not questioned.

The discussion document notes that “another option considered was amending section 6 of the RMA to include the protection of highly productive land as a matter of national importance, similar to the Town and Country Planning Act 1977”.

The benefits of this approach are not discussed. Section 6 provides a ready framework for ‘matters of national importance’ to be addressed when plans are prepared and consents assessed. If a ‘bottom line’ type approach is to be taken, then amending section 6 of the RMA is the appropriate route.

The discussion document says that amendments to Part 2 of the RMA “would need to be considered over a longer timeframe as part of the wider review of the resource management system and would take many years to achieve the desired outcomes through RMA plan provisions and resource consent decisions. As such, this option was not identified as a key option at this stage but may be considered as part of future resource management reform”.

The more likely reason that Section 6 is not intended to be amended is the NPS is not seeking to impose a bottom-line, rather it is intending the provide an enhanced framework for considering trade-offs.

But stepping away from the Section 6 option introduces a range of complexities as to how plans are formulated and administered. The proliferation of national policy statements creates further confusion as to what weight they should be accorded and how they sit with regard to Part 2 and other statements.

Weight to given to National Policy Statements when preparing plans.

In theory, the requirement for plans to “give effect to” national policy statements means that national policy statements should be more than a “[list] of potentially relevant considerations, which will have varying weight in different fact situations”.

National policy statements translate the general principles in Part 2 into more specific objectives and policies, and should not require weighing up of their provisions against other matters covered by the RMA.  But if policies in national policy statements use varying language, with some policies being more prescriptive than others, then inevitably questions of weight come into play.

For example, proposed Policy 3: New urban development and growth on highly productive land states that “Urban expansion must not be located on highly productive land unless”:

a. there is a shortage of development capacity to meet demand (in accordance with the NPS-UDC methodologies and definitions); and 
b. it is demonstrated that this is the most appropriate option based on a consideration of: 
• a cost-benefit analysis that explicitly considers the long-terms costs associated with the irreversible loss of highly productive land for primary production; 
• whether the benefits (environmental, economic, social and cultural) from allowing urban expansion on highly productive land outweigh the benefits of the continued use of that land for primary production; and 
• the feasibility of alternative locations and options to provide for the required demand, including intensification of existing urban areas.

The matters set out leave open a wide range of possible outcomes, with protection of the land likely to be low on the list:

  • Urban expansion pressures occur because there is demand. The way that the NPS-UDC is crafted, there is always insufficient ‘feasible’ capacity, especially intensification. 
  • Cost benefit analysis struggles to address long term costs and benefits, let alone future use values. Discounting see future costs and benefits given lower values. There is no methodology to weigh the irreversible lost value of highly productive land for primary production.
  • Benefits to households from proximity to workplaces and services will almost always outweigh returns to primary activities from using productive land.  

At the very least, the use of term cost benefit analysis should be qualified. Multi-criteria analysis may be more appropriate to the wide range of issues involved, and the focus on judgements rather than calculations. Even so, what is being asked is a form of spatial planning, rather than resource management. Unless spatial planning outputs are somehow recognised in Section 74, then it may well be that the above policy arrives at a dead end.

Proposed Policy 6 - consideration of requests for plan changes – adds a further matter to the above list. It refers to the alignment of the request with relevant local authority statutory and non-statutory plans and policies relating to urban growth and highly productive land.

What weight is to be given to non-RMA plans?  RMA processes typically given little or no weight to plans that have not been tested via the RMA process. The criteria of whether the private plan change request aligns with relevant local authority plans and policies relating to urban growth, such as a structure plan for a particular area or a future development strategy to give effect to the NPS-UDC is supposed to provide a reason to decline the plan change. But a veto cannot be based on a document that sits outside the RMA and which may have not passed through an appropriate consultation process and/or been subject to significant scrutiny.

And what about resource consents?

The policy for assessment of resource consents is equally problematical to administer, given the overall emphasis of on the management of adverse environmental effects when assessing resource consents.

The policy provides no support for refusing consent to non-complying activities. In fact the policy would appear to rule out any form of ‘first principles’ decision that the application will generate effects that are more than ‘minor’.  Unless the loss of productive land can be identified as an effect that is more than minor, there will be little control over consents.

The policy further entrenches a case-by-case trade-offs type assessment, but without giving a high weight to the protection of highly productive soils.

Policy 7 refers to:

When considering an application for subdivision or urban expansion on highly productive land, consent authorities must have regard to: 
a. The alignment of the application with relevant local authority statutory and non-statutory plans and policies relating to urban growth and highly productive land; 
b. The extent to which the subdivision or development will impact on the existing and future use of the land for primary production; 
c. The practical and functional need for the subdivision or urban expansion to occur at that location; 
d. The potential for reverse sensitivity effects and proposed methods to avoid or mitigate potential adverse effects on, and conflicts with, lawfully established activities; and 
e. The benefits (environmental, economic, social and cultural) from the proposed activity compared to the long-term benefits that would occur from the continued or potential use of the land for primary production. 

The discussion document suggests that the intent of these policies is to ensure a simple economic argument that highly productive land is worth more as urban development does not out outweigh the benefits of the continued use of the land for primary production before any private plan changes request or resource consent application is approved.

What is being sought by the policy is a completely different assessment to that which is normally applied to resource consents.  It is an overall broad judgement type assessment of all the costs and benefits, not whether adverse effects are adequately avoided, remedied or mitigated. This type of ‘trade off’ type assessment is a major step away from current practice and will introduce a range of legal and methodological issues, none of which will be easy to resolve.

It may be more effective if the NPS (or an NES) introduced a separate set of ‘tests’ and ‘processes’ to assess the merits of proposed non-primary use of highly productive land, rather than seek to graft onto Section 104 a range of matters that do not relate very well to managing adverse effects.

Note 1: https://www.mpi.govt.nz/dmsdocument/36624-discussion-document-on-a-proposed-national-policy-statement-for-highly-productive-land


Wednesday, 18 September 2019

Climate change: warming up to the risks of global warming

Auckland Council has prepared a Climate Change Action Framework (Note 1). It is pretty tentative, given that some people think climate change presents an existential threat and the Council has declared an emergency. You could say that they are just warming up to the task of responding to the
risks of global warming.

Time to flip the 'action' switch? 
Here are some thoughts (which have formed the basis of a submission).

The stated purpose of the framework is to:
• increase Auckland’s resilience to the impact of climate change
• reduce emissions that cause climate change.

It appears that the framework concentrates on the actions to reduce (or at least not increase) emissions that cause climate change. Increasing resilience to the impacts of climate change (adaptation) takes less prominence. The focus on mitigation rather than adaptation is perhaps understandable given the urgent need to meet the 1.5 degree target set in Paris. When considering climate change, it is easy to get side-tracked onto adaptation while allowing emissions to continue to rise.

Yet reducing emissions requires national-level direction and international action, but adaptation has to occur at the local level no matter what level of emission reduction is achieved. Readying the city for the new climate reality is in many ways more challenging than slowing global warming itself.

The Framework

The framework does not provide sufficient direction on the key adaptation measures that need to be taken in respect to urban form. In particular is adaptation to:
increased natural hazard risks (flooding, sea level rise and coastal inundation and wildfire)
increased transport and energy costs for households and businesses as carbon becomes more fully priced.

11 key moves are identified in the framework, and the above two forms of adaptation are referred to in these moves. But 11 ‘key moves’ is a substantial number of moves, and too many to focus effort.

There does not seem to be a clear link to the climate change risk assessments that have been undertaken. The report: ‘Climate Change Risks in Auckland’ (note 2) appears to be a compilation of a number of separate assessments. The combined report does not appear to rank the individual climate risks in terms of the combination of risks and consequences. This then leaves open the question of which are the more important tasks, given limited resources.

The framework provides little guidance on how to deliver long term, sustainable adaptation. There will be immense pressure on Council to commit to short term, interim ‘fixes’ that help today's communities cope with rising risks, such as larger stormwater pipes and hard protection structures along coastlines, but which may amplify the consequences of future risks for future generations. 

The action plan does take a positive approach to what it acknowledges are major issues – there are both risks and opportunities with climate change. I agree that there is a danger in making the risks of climate change and responses to these risks too daunting to contemplate, and hence avoiding action. But there is also risk in implying that some form of acceleration of current plans and strategies is sufficient to deal with the issues present. The strategy should  better articulate the positive steps that need to be taken to help off-set (compensate for) the adverse effects of climate change on the city’s resources and its sense of identity.

Urban form

The implications of climate change for urban form are considerable.  Urban resources will come under pressure from the twin forces of a retreat from coastal areas and flood plains, and a reduction in the viability of peripheral, greenfield areas as carbon prices increase.

Yet the framework does not appear to acknowledge the scale of the task and the need to start to take preparatory actions now and, critically, who will face the bills.

The framework refers to: ‘Plan for a quality compact urban form that supports low carbon, resilient development’ under the heading: key move 3: Make development and infrastructure climate-compatible.

This action is not a new action. The Auckland Plan already envisages a compact urban form, as does the Auckland Unitary Plan (although there will always be debate over the extent of greenfields developments provided for under both plans).

So where is the added value in the action plan framework?

The added value would come from the strategy identifying the actions that should be taken now to start to lay the foundation for replacement of the urban amenities and resources that will be lost through climate change.

The strategy needs to acknowledge the funding and financing issues that are involved in developing these compensating actions.

Adapting  urban areas to hazard risks

Coastal hazards

NIWA’s latest assessment of coastal inundation risks (note 3) is that, for the Auckland Region, 12,610 residents and 7,296 buildings with an assessed replacement value of  $5.32 billion lie within coastal areas that would be inundated by a 1% annual exceedance probability sea level elevation event (storm surge) plus 1.2 m rise in sea level above present-day mean sea level.

With ever rising sea levels, any defensive strategy is ultimately a temporary measure. There is the question of where these residents and businesses will relocate to as coastal hazards increase. But more than just how to manage physical relocation of people and businesses is the bigger issue of the sense of identity of Auckland as a coastal city.

Coastal areas are one of the main sources of identity and sense of place for Auckland. The urban coastal areas of the city are the great 'melting pots' of Auckland. They are the places that people from all backgrounds use and interact with each other. Yet beaches and coastal reserves are all at risk of increased erosion and inundation.  The ability for coastal reserves and beaches to move inland as sea levels rise appears limited due to the adjacent housing and roading.  Council's estimate is that 850 ha (or 10% of total local park land area) could be exposed under 1 m sea level rise scenario, with a 50% increase to 1,280 ha under a 2 m sea level rise future. The future for this resource would appear to be one of gradually diminishing recreational values. The question then arises as to what and where are the replacement open spaces and recreational areas to those that will be lost? Does planning need to start now for a string of new open space areas that can offer compensatory values, and which are accessible to many people?  This will involve a major financial investment.

The city centre, port and Wynyard Quarter area are all vulnerable longer term to sea level rise and associated storm surge. Council’s estimate is that 0.5% of the Business-City Centre Zone may be affected by coastal inundation from a storm with a 1% probability of annual occurrence, but exposure jumps to almost 20% when combined with 1 m sea level rise and almost 50% when combined with 2 m sea level rise.

The recently released draft Auckland City Centre Masterplan does not appear to acknowledge the need for adaptation of urban form and public spaces in the face of these threats. There is no mention of climate change and rising sea levels. The ability for business activities in the City Centre to move 'inland' is possible given the potential to redevelop the higher elevations of the Queen Street valley and spread into the Newton / Upper Symonds Street areas.  What is questionable is the public money that is being spent on areas like Wynyard Quarter (and possibly the port area in the future). The long term sustainability of this investment must be questioned given the increasing risk profile.

As with coastal reserves and beaches, the moves to open up the central waterfront to people have had a major positive impact on how the city sees itself. Yet this new resource is at risk and the associated investment will potentially come to be seen as an example of the negative consequences of short term thinking.  Again, alternative, city identity forming projects are needed to replace that which will inevitably be lost

Stormwater flooding

In relation to stormwater flooding, NIWA’s assessment (note 4) is that in the Auckland Region, as of 2013, 118,172 people and 48,167 buildings with a replacement value of $27.6 billion lie within 1% AEP flood hazard areas. 

There are many floodplains in the city, and while many are relatively small, they nevertheless occupy a significant land area. As flood events increase in frequency and insurance becomes more costly to obtain, then there will likely be a move out of floodplains by many businesses and households. Many industrial areas are in floodplains. Businesses in these areas will need alternative locations to move to, for example, yet such alternatives are scarce.   On the other side of the coin, as land values drop in areas subject to flooding, then these areas will attract households and activities that have fewer financial resources to cope with hazards. This will create a moral dilemma as how to assist these activities, if at all. The Council’s risk assessment notes that "Responding to climate change requires fundamental changes in how we think about and plan for the future of our catchments, coastlines and communities. Some hard decisions will be required about the acceptability and affordability of sustaining human habitation and infrastructure". The sooner guidance is provided around what level of public support will be provided the better for all involved. 

As with coastal areas, there are many reserves, walkways and open space areas along stream corridors. These assets will also come under pressure from more frequent events.

Recipient areas for activities displaced from flood plains and replacement assets need to be identified.

Increasing urban running costs

Reducing emissions has to mean increasing energy and transport costs for households and businesses. Price signals are needed to reduce carbon consumption and shift demand to alternatives. Yet these alternatives will not be cheaper than current prices. In other words, households and businesses will face higher costs.  In response, they will likely seek out alternative locations that help to compensate for these increased costs. Urban densification, rather than expansion, is the classic response of households and businesses to increased costs. 

The framework acknowledges the benefits of more compact forms of urban development, but is silent on the potential scale of the adjustment needed. In particular would be the nature and extent of redevelopment of the existing urban area and the associated upgrade and replacement of existing infrastructure including three waters, transport and social and community facilities needed to cope with a significant migration of people and businesses from peripheral (and coastal and floodplain)  areas.  This infrastructure investment should be front loaded.  

Meanwhile compact development can increase the consequences of some climate change risks: 
Urban heat island effects will be exacerbated by more apartment type developments unless green space increases. 
Impervious area coverage could increase with compact development, and with it run off during storm events, unless actions are taken to retain and detain stormwater on-site.
Wildfire risks will increase in the future as droughts become more common. This is a growing risk for various residential areas on the edge of the city.  

Strategies are also needed to mitigate these risks. 

Notes:


2: http://www.knowledgeauckland.org.nz/assets/publications/TR2019-019-Climate-change-risks-in-Auckland-Arup-March-2019-final.pdf

3. https://www.deepsouthchallenge.co.nz/sites/default/files/2019-08/2019119WN_DEPSI18301_Coast_Flood_Exp_under_Fut_Sealevel_rise_FINAL%20%281%29_0.pdf

4. https://www.deepsouthchallenge.co.nz/sites/default/files/2019-08/2019118WN_DEPSI18301_Flood%20Exposure_Final%20%281%29.pdf 


Tuesday, 3 September 2019

Housing affordability and the draft NPS-UD (2)

More on the draft Urban Development National Policy Statement.

Most places are grappling with how to provide more affordable dwellings - dwellings that are affordable to buy or rent for households on low to median incomes. This is not just a New Zealand issue. Many developed countries face the same problem.

Not many new homes being built are in the affordable range. Currently, three to four bedroom houses in Auckland are being delivered at an ‘entry level’ price point of $700,000 to $1,000,000 including GST. This is variously because of the size of the house (floor area), the size of the section the house is on (land value), or construction costs (apartments).

While the symptoms of the problem of high house prices are all too clear and distressing, the underlying causes of the problem are harder to detect.

It is not totally clear why house prices have got so high and so far ahead of incomes, apart from saying the obvious: that demand must exceed supply. If that is the case, then the solution must be to increase supply. Which is basically the thinking behind the NPS-UDC and its proposed replacement.

But if supply lags demand, then why does Statistics NZ estimate that in June 2018 there were 1.74 million households in New Zealand and 1.87 million private dwellings? Private dwellings include occupied and unoccupied dwellings as of the night of the most recent census, and therefore include holiday homes and second homes.

This is a ‘surplus’ of over 120,000 dwellings. In 1991, this surplus was 55,000 dwellings. So  the surplus has grown, not shrunk.

Perhaps the houses are in the wrong area – too many in Gisborne and not enough in Auckland? Perhaps the number of households is lower than might otherwise be the case because too many people are having to live together in the same house because of high costs? Perhaps the 2018 estimates are too low or too high, given that the last solid reference point was the 2013 census? These are all possible explanations. What seems certain is that the percentage of owner occupied dwellings has dropped from 74% of all private dwellings in 1991 to an estimated 63% in 2018.

Granted, these are national figures. The Auckland Region appears to have a housing ‘shortfall’. But if there is a shortage of houses and home ownership is falling, then rents will be rising, right? Trends in rental prices are an important indicator of housing markets, as rents are a direct measure of demand for housing as a place to live, relative to supply.

Between 1998 and 2019, median rents in the Auckland Region have basically doubled. But rents have to be considered in the context of some sort of reference point.  One reference point may be inflation. According to the NZ Reserve Banks inflation calculator, a general basket of goods and services that would have cost $1.00 in 1998, now cost $1.51 in 2019. So rents have grown faster than inflation, which sounds bad.

But if we measure rents against household incomes, then things are not so different.

The following graph shows median weekly household income in the Auckland Region between 1998 and 2019 as calculated by Stats NZ. Also shown are mean weekly rents for the Auckland Region, as calculated by MBIE. The income information is collected as part of the Household Labour Force Survey each year during the June quarter. Only households where at least one member is within the 18- to 64-year age range have been included in this data. This rental data comes from MBIE’s tenancy bond database, which records all new rental bonds that are lodged each month.

As a share of total median household income, median rents accounted for 30% of income in 1998 and 29% in 2019.  So no change.

Maybe household income has had to rise to meet the higher rents - people have had to work longer hours, for example. Maybe as incomes rise, then rent as a proportion of income should drop.



And this is not to say that households on low to modest incomes do not face housing stress. MBIE evidence suggests that 31% of Auckland households who rent, spend more than 30% of their income on housing. But this percentage has dropped from 40% in 2003. See the graph below.



The point is that while house prices have gone up, rents haven’t to the same extent. Between 1998 and 2019, median house prices have increased by over 350%. Rents are a better indicator of overall demand of housing as a place to live versus supply. House prices are more of a reflection of demand for housing as an asset class. So is there a supply problem?

In a good article - Tackling the UK housing crisis: is supply the answer?  - Ian Mulheirn points this disjuncture out.  Housing has two different 'values': "demand for housing is an ambiguous concept because housing has two distinct attributes: houses (and the land they sit on) represent valuable assets, but they also provide a flow of services to the occupier on a day-to-day basis".

He suggests that  the jump in house prices in the UK since 1996 was caused by the demand for housing assets vastly outpacing their supply, owing to the plummeting cost of capital. In short, housing supply has kept up with demand for housing as a day-to-day place to live, but not kept up with demand for housing as an asset. The number of houses being built will be related to demand for housing as a place to live.  Hence trying to address high house prices by more supply is not going to work very well. This is true of places like London as it is for the national housing market.

His main point is that: The distribution of housing has become more unequal. Reversing this requires distributional policies and is not amenable to general market supply.

Back to the NPS. At a simple level the NPS-UDC was just asking for housing opportunities enabled in plans to match demand for housing. But isn't this something which planning has always done? Is the new NPS-UD really going to help solve the affordability problem?   The NPS does help to push back against the NIMBYs, but the Statement seems a crude way to do this. And yes, plans constantly need updating to include new capacity. 

Anything in the NPS-UD about getting a fairer distribution of the housing pie, rather than just hoping to make the pie bigger (while not increasing the size of any of the ingredients and cutting down the time the pie is in the oven?).

Saturday, 24 August 2019

The revised national policy statement on urban development

Some early thoughts on the proposed National Policy Statement on Urban Development.

More or less planning? 


It is good to see the consultation document start to take a more comprehensive look at urban environments, rather than the previous Statement's focus on capacity. But it is a bit hard to tell if the NPS is asking for more or less urban planning. According to the consultation document cities are under preforming. Rising urban land prices, unaffordable housing, homelessness, rising household debt, traffic congestion and flat lining productivity all seem to be blamed on poor urban planning. This is quite a list. I'm surprised that climate change isn't added to the mix. 

Of course, consistent with the narrative of the past few years, the problem is seen to be that urban land markets are being held back from preforming their 'duty' to efficiently tackle these problems.  How so many problems have been shifted from being their own problem to being an urban planning problem is a bit of a mystery, but I guess its not unexpected when so many of the underlying problems  are so complex and seemingly difficult to rectify. Easier in this case to blame something else for the lack of progress.

For example, is lack of affordable housing really an urban planning problem? Isn't it, at root, a 'housing' problem (as it was back in the 30s and 50s and 70s) that needs its own set of tools, some of which can be planning related. A lack of affordable housing is a market failure, not a planning failure. The State pulled back its interventions that supported affordable (not social) housing supply in the 1980s, so it really needs to find a new set of tools, rather than hope for some sort of market fix. The Kainga Ora Homes and Communities bill hints at some tools. Inclusionary zoning may be one such tool that shapes market behaviour through the planning system.



Where is the monitoring?

Any evidence of monitoring and analysis informing the revised  NPS? For example have all the efforts made to provide more land for housing over the past five or so years (think Special Housing Areas) really made that much difference to house prices? Maybe the steep rises have been pulled back, one possible road block to supply may have been removed etc etc. But where is the analysis? One research paper (see note 1) suggests that Special Housing Areas increased land prices, not reduced them. "The results indicate that the creation of the SHA generated an average price increase of approximately 5%, and more generally that affordability did not improve, but rather worsen". In short, landowners banked the speedier consenting benefits of being a Special Housing Area, rather than passing these onto homeowners. Should we be surprised? Perhaps the faster supply of lots and houses helped, but even then, this is hard to see.  I know SHAs are history, but they are emblematic of the depth of analysis sitting behind so much of the NPS-UD.

Poor policies around housing, transport and productivity are all going to manifest themselves in sub optimal urban environments. Fixing the sub optimal urban environment is not going to be easy if you have to push up hill against a bunch of forces pushing the other way.  It would be helpful if the document could spell out the imperfections and inconsistencies within and between housing, transport and productivity policies in their own right and then line these up with urban planning to better sort out the causal relationships.  This should lead to better targeted policies.

The only feedback loop seems to be some form of self-confirmation that planning continues to be too slow and cant work out necessary trade offs and choices.

Having said all that, I am happy to make  the obligatory admission that better urban planning is a good thing. In some cases, this may mean 'less' planning, in other cases 'more' planning.  The NPS-UD helps a bit with some aspects of better urban planning. 

Up versus out?

At least the NPS-UD makes a positive lean towards going up (intensification) rather than out. Previous versions always left the choice up to local councils.  It is good to see that the proposed policies on intensification are much more formed than those about leap frog urban expansion. This suggests a subtle but important re focusing of effort by central government (and I presume, input of the Greens). But this is a case where to get less planning in place, it probably is necessary to do more planning. The proposed policies on intensification are fairly blunt and unsophisticated. They may well generate a backlash that is much larger than what they were designed to overcome.

Somethings come to mind:
  • P6A provides no definition of high density, yet this is the mandatory policy
  • The definition of what is high density in P6C are fairly open ended
  • Why stop at 'high density'?
  • Does high density mean high rise?  
  • Not much about quality urban design?
  • What about heritage areas, special character, volcanic viewshafts and all those other pesky constraints. Do they still stand or does the NPS override these due to it being a national policy?
  • Are high density residential developments going to be open to submissions and appeals?  
  • The areas listed in P6A where high density should be enabled cover most of the city - for example areas with a 'high-demand for housing" . This would apply to all of Auckland, I would have thought. 
The national planning standards provide for medium density and high density residential zones. Should these terms be referenced (wasn't that the point of the National Standards?).

Medium density residential zone means areas used predominantly for residential activities with moderate concentration and bulk of buildings, such as detached, semi-detached and terraced housing, low-rise apartments, and other compatible activities.

High density residential zone means areas used predominantly for residential activities with high concentration and bulk of buildings, such as apartments, and other compatible activities.

I would have thought for much of urban New Zealand, it is the 'medium' category that needs the push along - two and three storey town houses and flats. Apartments are really more like 4 to 6 storeys in height.

I know that there is a good intention sitting behind the intensification policies, but you do wonder.

The odd thing is the tie back to capacity, feasibility and affordability. If capacity and feasibility was the issue, then most intensification would occur in areas of high land values (think the eastern sea board of Auckland), but even then feasibility is often 'marginal' as most landowners are canny enough to know what houses will sell for and therefore what their land is worth.  But nevertheless I'm sure plenty of intensification would occur in areas with high amenity. But these areas are often not well served by public transport, so congestion would probably get worse. The process of redevelopment is likely to see social mix reduce as older and cheaper housing gets replaced by new, more expensive housing.

Most communities seek to spread intensification around, but in a clustered way; often into places were it is not 'feasible', at least in the short to medium term. The intensification policies of the revised NPS seem to be a tacit  recognition that planning is not all about commercial feasibility. Urban planning, coupled with infrastructure investment, can swing the market. But swinging the market takes time: critical mass around transport nodes needs to build, coupled with large investments on public transport. All doable, but it needs the right planning environment.

Is the capacity provided by the intensification polices going to count towards the capacity bottom lines, or is it some sort of over and above?

If affordability was the aim, then the Policy Statement should have talked about intensification in more general terms, such as across the board 'infill' rather than high density redevelopment around transport nodes. Affordability is greatest in far flung suburbs where transport costs are highest and it is easy to plonk a new unit on the back of an existing section. Not flash, but affordable.

Getting the balance right between today's and tomorrow's feasibility, affordability and public investment in infrastructure is not easy and requires a decent dose of spatial planning. I wonder if that is where the policy should have focused more. A more proactive, higher level push for plans to promote intensification first may yield more benefits.


Quality and quantity 

It is also pleasing to see a reference to quality urban environments. But there is no definition as such of what quality urban environments mean. There is a list of qualities in Objective O2, but these read more like functionalities, rather than qualities. The associated policies are silent on what quality means. They appear to lapse back into making the urban land market work more efficiently. More housing choices seems to what quality boils down to. Cant see the NIMBYs being placated by these provisions.

The two policies on amenity are equally perplexing. It is helpful to talk about changing amenity, but like existing amenity, future amenity needs to be defined and spelled out, otherwise any thing may add or detract from 'future' amenity, just as it may add to or detract from 'current' amenity.

In fact you could say that quality has taken a backward step under the NPS-UD. The current NPS UDC at least had words like the following (PA3):

When making planning decisions that affect the way and the rate at which development
capacity is provided, decision-makers shall provide for the social, economic, cultural
and environmental wellbeing of people and communities and future generations, whilst
having particular regard to:

This has been trimmed back to P2A:

When making planning decisions that affect urban development and the way and rate at which development capacity is provided, local authorities must have particular regard to: 

If the NPS-UD is serious about intensification, then it seriously needs to tackle quality urban design.  The Statement's once over lightly treatment of 'urban quality' is a major weakness.


Car parking (and urban trees)

Car parking appears to have joined urban trees as something we should not (and now can't) worry about. I think on-site car parking requirements have largely had their time, but somehow I don't think this will get passed the suburbanites, while the big commercial players will still offer heaps of car parking.


http://www.knowledgeauckland.org.nz/assets/publications/Price-effects-voluntary-affordable-housing-program-Bucaram-Fernandez-Sanchez-May-2018.pdf

Sunday, 11 August 2019

Auckland's housing market

A while back I wrote about whether Auckland has a big and growing housing shortage. I looked at building consent numbers and estimates of population growth. I thought there was a plausible explanation for the slow supply of housing that did not rely on the normal calls that poor planning had created the lack of supply. Two factors in this were questions over the make-up of population growth and the responsiveness of the house building industry to sudden surges in population growth.

On the number of building consents issued (supply of dwellings), I thought it was important to take into account a lag between population growth occurring and when a house is actually built. I thought it may take up a year for population growth to result in a house being built, for example. On the demand side, I questioned some of the migration data that feeds into the population growth estimates and in particular how many people staying for more than a year actually create demand for a house.

Since then a couple of sets of numbers have come through that shed some light on the points I was trying to make.

First up is the lag issue - the length of time taken between population growth occurring and houses being built. It is often noted that housing markets cannot react quickly to population shocks. It takes time to find sites, draw up plans and get a builder on board; more so as cities intensify and there is a shift from stand alone houses to terraces and apartments.

The Interest.co.nz website (see note 1) ran an interesting set of numbers recently, comparing building permits for new dwellings and code of compliance certificates (CCCs) issued by the Auckland Council.

CCCs are issued when a building is completed. Comparing the numbers of building permits issued with the number of code of compliance issued suggests that  there is a significant time delay between a new building consent being issued and the building receiving a CCC when it is completed.

The data suggests that the lag is about 2 years, based on the numbers in the table below, which are for the Auckland Region.



Code compliance certificates issued

Building permits for residential units 
Apr-14
4,106
4,077
Apr-12
Apr-15
5,269
4,835
Apr-13
Apr-16
6,131
6,796
Apr-14
Apr-17
7,412
8,155
Apr-15
Apr-18
9,030
9,353
Apr-16
Apr-19
10195
10,226
Apr-17




11,629
Apr-18
13,754
Apr-19

The data suggests that in 2021, up to 14,000 dwellings may be built in the region. 

Note, the 2 year lag is between the building permit being issued and the building being finished. For the building permit to be issued, a site needs to have been found, if needed resource consents obtained and building plans prepared, checked and consented. This adds further time. So the number of building consents issued in any year is likely to reflect the planning and design work undertaken during the previous year or two. But by the time the building consent is issued, these planning related issues have been addressed. The two year lag between building consent being issued and completion must be because of factors like labour shortages and possibly the growing number of multi-unit developments which take longer to build (where all units are completed at the same time). 

During the period between population growth occurring and a new dwelling being finished - perhaps 3 years at least - then there can be extra demands on the housing stock. These are short term pressures. What is important is the housing market response over the medium term. Many commentators seem to latch onto the short term pressure and use this as support for the view that planning restrictions are creating a structural housing shortfall. But what the data, and most texts on housing markets note, is that there is always a delay between demand and supply. That delay is not necessarily the result of planning. 

Next bit of information relates to whether the (delayed) supply response is sufficient to meet demands.  The question has always been, what is a reasonable estimate of demand?

Here the other interesting bit of information is the revision to the net migration numbers by Stats NZ. Stats NZ have been busy revising how they count inwards and outwards migration. As a result of these revisions the number of long term migrants (people staying for more than 12 months over a 16 month period) is lower than previously estimated. Inward migration has been the biggest source of population growth over the past 5 years or so, so a revision is important. 

The table below lists the old and new net international migration estimates, for NZ as a whole.  



Old
New
Difference
2014
38,300
32,718
-5,582
2015
58,300
53,079
-5,221
2016
69,100
63,145
-5,955
2017
72,300
59,159
-13,141
2018
65,000
49,903
-15,097


The difference is large in the 2017 and 2018 periods. 

Apart from the obvious point that revisions of this scale drive home the point that it is very hard for the building sector to estimate demand if the numbers keep on moving; the other question is over the make up of these numbers. The numbers are for all types of migrants. A migrant is an overseas resident who arrives in New Zealand and cumulatively spends 12 out of the next 16 months in New Zealand. Migrants may be NZ'ers returning, people who come to work, visit for a long period of time or for study, or to shift permanently. For example, an international student who spends the term-time in New Zealand and holiday time overseas, over successive years, will be counted as a migrant arrival at the time of their initial border crossing if they satisfy the 12/16 month criterion.

Net international migration took off in 2014 and peaked last year. Below is the ‘old’ measure of net migration, and while the numbers have been revised downward, the pattern remains. 


Migration was slowing down or negative in the period 2009 to 2012.  Based on the above data on building consents and completions, the number of house completions in 2015 most likely reflected the conditions prevailing in 2012 (ie a much more bleak picture). 

As for the causes of the lift after 2014, in June 2016 the NZ Herald ran a story that international student numbers from new migrant source countries, like India and the Philippines, are contributing to net migration numbers hitting record highs, according to analysis into arrival and departure card data.

To further complicate things, the revised net migration numbers are national figures, not for the Auckland Region. To work out what they may mean for the Auckland Region, we need to make a few adjustments. 

But before we do that, we need to understand that at the regional level migration is the difference between the number of people who have moved to, and departed from, a given area. Sub national net migration includes both international migration and internal migration gains and losses. 

There is no reliable evidence as to the number of NZ residents leaving Auckland for other regions (ie internal migrants) for the period from 2014. Between 2001 and 2006, Auckland ‘lost’ about 18,000 people to other regions. For the period 2006 to 2013, the census records a net loss of 4,650 people. So this number bounces around a lot. From 2014 to 2019, internal migration out of Auckland could have been very high. Until the census data comes out, we dont really know.  

Then there is the number of international migrants who stay in Auckland. 

Stats NZ, for their yearly population estimates, make a stab at working out how many international migrants head to Auckland, versus how many head to other regions.  Their estimate covers both internal and international migrants for the regions, but at the national level, the migration total must only be for international migrants (for internal migration, a loss from one region is made up by a gain in another region).

The following figures are Stats NZ estimates of migration gain for Auckland and NZ, and Auckland’s share.



Auckland 
NZ
Ak Share
2014
19,600
38,300
51%
2015
29,100
58,300
50%
2016
30,800
69,100
45%
2017
28,900
72,300
40%
2018
25,700
65,000
40%


The Auckland share of total migration gain for the country has dropped. This may be because of more local residents leaving Auckland, or fewer international migrants heading to Auckland. We don’t know.   

If we take the above Auckland region shares and apply them to the revised national migration figures, then we get the following:



New NZ
Ak Share
New AK
32718
51%
16,743
53079
50%
26,494
63145
45%
28,146
59159
40%
23,647
49903
40%
19,731



The revised migration gain can then be added to the estimate of natural increase to get total population growth for the Auckland region. 






Old
New
Difference
2014
33,800
30,943
-2,857
2015
43,000
40,394
-2,606
2016
44,600
41,946
-2,654
2017
42,700
37,447
-5,253
2018
38,700
32,731
-5,969



Does 6,000 fewer people make that much of a difference? At 3 people per house, this is 2,000 fewer houses. Whether the dwelling demand is 3 people per house is debatable. Many migrants are younger people - the median age of Auckland is dropping. At  2013, the average number of people per occupied dwelling in the Auckland Region was 3, but a younger age profile suggests a higher number of people per dwelling. 

If we stick with 3 people per dwelling, then the revised population estimates result in the following dwelling demand.




Pop change
Dwelling demand
2014
30,943
10,314
2015
40,394
13,465
2016
41,946
13,982
2017
37,447
12,482
2018
32,731
10,910



We can then compare the dwelling demand with dwelling supply, but with a 2 year lag built in between building consents being issued and houses being built. The table below has the dwelling  'supply' lagged by 2 years. For example dwelling demand from population growth in 2014 is matched to building consents issued in 2012. 



Demand Year
Dwelling demand
Dwelling supply
Based on consents issued in Year
2014
  10,314
4,197
2012
2015
  13,465
5,343
2013
2016
  13,982
6,873
2014
2017
  12,482
8,300
2015
2018
  10,910
9,651
2016


So there is a demand and supply imbalance, but that imbalance is because of the lag between demand becoming apparent and supply cranking up.  

If we ask “did the rising demand result in a signal that building consents needed to be ramped up”, then we can say yes, but it is not a fast process. If we add a year into the supply chain between population growth and a house being completed, so the whole process takes three years, then we can see the housing market responding in the graph below.  

Taking 2010 as a starting point, the figure below shows three things: 

1. Demand as estimated by population growth (adjusted down based on the revised migration data)
2. Building consents for new dwellings, based on a years gap between demand and the consent being issued. So the 2011 consents are probably based on population demand in the previous year, being,  2010.
3. Completions are delayed by 2 years from the year the building consent was issued, so completions are based on estimated demand three years previous.  


What is apparent is the large step up in population growth between 2013 and 2014. Consents started to rise in response, but completions were low because they were based on what was consented two years previous. By 2018, with population growth dropping back a bit, completions have almost caught up. 

There will still be a shortage of houses built up over the period 2010 to 2018, and the above suggests that the shortfall will take a while to work its way out of the system, unless population growth takes off again, or falls back quickly. 

This analysis reinforces the need for there to be sufficient zone capacity to meet housing demand, but provides some caution as to the presumed role of a lack of capacity due to zoning, and the slow pace of adding more capacity, in fueling land  and house price rises. In particular, the AUP (OP) was made operative in late 2016. By 2016, the housing market was responding to the increase in population growth from a few years back, based on the capacity available in 2013. The AUP (OP) has helpfully added capacity (as any plan review should and would have), but this is capacity for future growth. If a lack of zoned capacity was not the cause of house price growth (or only a small cause), then what is the main driver?


Notes: https://www.interest.co.nz/property/100382/number-new-homes-being-completed-auckland-could-increase-about-third-over-next-two