Going for broke?

 

The coalition government’s Going for Housing Growth (GfHG) policy announced on 4 July 2024 is another attempt at trying to fix the housing crises through stimulating housing production by reducing barriers. The policy builds on/replaces at least four other attempts at trying to stimulate housing supply through zoning reform:

1. NPS-UDC 2016 – national direction to positively plan for housing growth

2. RMA changes 2017 - amendments that modified section 31 to include reference to housing capacity / supply 

3. NPS-UD 2020 – introduced the concept of well-functioning urban environments, which is really more about well-functioning land and housing markets

4. MDRS 2023 – mandatory requirements around more capacity is suburban areas and intensification of centres and rapid transit stops.

The intention of the GfHG is apparently to ‘flood the market’ with development options. Whether this will lead to a flood of new houses or a drought of new houses is unclear. You would have thought that after four (not very successful?) attempts at trying to solve the housing crises through zoning reform, a different solution would be looked at. 

Figure 1 shows the number of dwellings added per 1000 new residents between 2018 and 2023, by city, based on census data. While there is no set number that determines if there is an under or oversupply of housing relative to population growth, you would have thought that anything above 500 new dwellings per 1,000 new residents is pretty good going. Yet the housing crises persists.

Figure 1 housing production per 1000 new residents, 2018 to 2023

There are some larger laggards in the housing production profile (such as Tauranga/Western Bay of Plenty) which may deserve some sort of targeted intervention, but otherwise the census data suggests a responsive housing system. It is, however, a system that is not easy to manipulate to produce a housing surplus (over-build). 

Note that Wellington City (not region) is not in the graph as it lost residents between 2018 and 2023 but added some 4,000 dwellings. It should also be remembered that the new dwellings will not all be occupied by new residents. Many new dwellings will be absorbed by existing residents as average household sizes reduce. 

If you then compare housing production between 2018 and 2023 with house price increases over the same period, you get Figure 2. 

Figure 2: Housing production versus house price growth, 2018 to 2023. 

While it is easy to look at the outliers of cities that either saw high house price growth and below average housing production or the reverse (lower house price growth and high housing production), the main story is the grouping of towns and cities in the middle. Average housing production but increased house prices. 

Given this context, there are three points in the housing announcement that I want to look at. I will leave out the minimum apartment size and optional balconies as a bit of a distraction (got everyone going on about shoe box apartments while the big-ticket items got less attention). 

1. New Housing Growth Targets introduced for Tier 1 and 2 councils, requiring them to enable 30 years of feasible housing capacity in their district plans, using ‘high’ population growth projections. Government is investigating options to require councils to plan for 50 years of growth (up from 30). 

What is ‘feasible’ in 30 years time, let alone 50 years time? Who knows? I guess the detail of what is feasible is not really at issue. Its more about having a large bucket of capacity. Rather than push out planning horizons (to 50 years) to create a bigger bucket, would a better strategy be to set a ratio between expected demand and plan-enabled capacity. If expected demand is 50,000 dwellings over the next 30 years, then plan enabled capacity should be three times that demand, or 150,000 dwellings, or something similar. This would avoid the need for endless recalculating what is ‘feasible’.

A danger is that a lot of fake capacity will be generated – lots of capacity in one corner of the city, well away from the NIMBYs, not where demand is. To counter this tier 1 councils are expected to enable appropriate levels of density across their urban areas, having regard to demand and access to different services. In fact a good spread of housing options across a city may be more important than the aggregate picture.

Perhaps there needs to be a focus on neighbourhood level outcomes, rather than city or district wide targets. Cities need mixed density, mixed income neighbourhoods with a good sprinkling of mixed uses and open spaces in these neighbourhoods. As city’s expand outwards and upwards, new neighbourhoods should develop and redevelop. Some neighbourhoods will need to shrink as climate change accelerates. Time of use charging for use of roads may lessen demand for far flung neighbourhoods but increase demand for closer in neighbourhoods. There is likely to be a lot more shuffling around of housing demand and capacity within cities. City-wide housing targets don’t really get to grips with the changes needed in urban form.  

2. Councils prohibited from imposing rural-urban boundary lines in planning documents (but can still have rurally zoned land). 

I presume that plans can also still have ‘no go areas’ in rural areas - areas where urban expansion would have negative impacts and should be excluded. If there is no ability to impose a rural-urban boundary, then there is likely to be a need to review various overlays and precincts where avoidance policies should prevail. Most notably this should be around coastal environments where the National Coastal Policy Statement applies, but also highly productive land.   Natural hazards are the other obvious example where policy needs to be strengthened before Rural-Urban boundaries are removed. 

Who pays for the resulting expansion of infrastructure? This bit is critical. The GfHG ‘fact’ sheets say that a wider range of funding sources can be used to meet medium-term infrastructure requirements including a levy under the Infrastructure Funding and Financing Act 2020, a development agreement, or through central government funding streams. None of these are new tools, they do not widen the pool of available methods. 

The Minister’s speech says that the government will work towards embedding an effective “right to build” on city fringes, on the condition that the infrastructure costs of new development are covered and growth pays for growth. Exactly what bits of growth have to be paid for is not clear – motorway and rail line extensions, trunk sewers, regional parks ?? These types of infrastructure are super expensive and occur in big lumps, not small add-ons or extra capacity here or there.   

The policy will also say that Councils would not be able to turn down a development on the grounds that perceived demand isn’t there, or that the infrastructure costs are too high. 

The last bit about not being able to turn down urban expansion because costs are too high is a bit confusing, given talk that growth must pay for growth. I guess the idea is that all infrastructure costs get totted up and a bill sent to the developer and their funders. If that is too much for the developer/funder/subsequent owners, then the development doesn’t go ahead because demand evaporates. But you can already hear the calls that affordable housing cannot be delivered if all costs have to be recovered. 

So, some mixed messages there and nothing very concrete. 

3. Tier 1 councils must: 

a) enable appropriate levels of density across their urban areas, having regard to demand and access to different services. 

b) deliver housing intensification along 'strategic transport corridors' (e.g. key bus routes). 

c) directly offset any housing capacity lost due to reasons such as ‘special character’ elsewhere. 

At some point I think there will be a big debate about density and where to put it. Density around amenity rather than transit-orientated density, for example. The announcement could have said that density should be increased within walking distance of the coast – in Auckland at least this would have been a sure winner in terms of feasible capacity (but a vote looser of monumental size!). 

There is a link with plans for ‘time of use’ charging for motorists. Increasing or reducing transport costs faced by households will change their location preferences. In theory, higher charges should see households shift closer to work. But it may also spur on hybrid working patterns. There may be a rebirth of the importance of the ‘local’.  

The principle of an off set for lost capacity is good, but like environmental off sets, the off set needs to be real and be in close proximity to the lost capacity. Otherwise will the off set capacity be on the other side of town where nobody wants to live? No mention of City Deals, but perhaps this is what the off-sets could be tied to – investment in areas that need a helping hand to regenerate and redevelop. The national party website says a $1 billion fund for Build-for- Growth incentive payments for councils that deliver more new housing will be established. The funds should be directed to promoting intensification rather than expansion. 

At some point it will also be necessary to find room to rehouse all the people who live in flood prone areas and areas subject to coastal inundation, as climate change takes hold, and retreat (managed or otherwise) occurs. In addition will be finding replacement space for all of the coastal reserves and open spaces that will gradually be eaten away by rising sea levels.  

4. Tier 1 and 2 councils must enable activities such as cafes, dairies, and other retail across their urban areas, and especially in areas where Tier 1 councils are required to enable six or more storey developments. Industrial-type activities can still be kept away from housing. 

Talk of mixed uses often elicits concerns about town centres being hollowed out, with mainstreets left with empty shop fronts. Perhaps a reasonable concern if mixed uses just end up being a series of unconnected strip malls – groups of 4 to 6 shops side on to the street with parking out front. There is a big difference between mixed uses associated with old tram routes through the Isthmus and new arterial roads like Lincoln Road in Waitakere.

I think mixed uses are good and helpful and more should be enabled as areas intensify. But their layout and design need to be carefully controlled – perhaps maximum car parking rates should apply so demand is based on the amount of passing foot traffic, rather than reinforcing car dependency. Mixed use buildings should be built close to the street edge and ideally span from side boundary to side boundary, with access to rear parking. Ideally, the mixed uses are the ground floor  of the new apartment blocks to be built, not stand alone 'mini-malls. Some strong urban desig guidance is needed. 

Can the Centre Hold?

Things fall apart, the centre

cannot hold.....

The top line results from the 2023 census are out and the results pose some interesting questions on Auckland’s growth and development.

First up, as a share of the total population of New Zealand, the Auckland Region slipped slightly between 2013 and 2023. In 2013, Auckland was home to 33.4% of the country’s population. By 2023 this has slipped to 33.2%.

Table 1: Population Share Auckland 2013 to 2023

	2013	2018	2023
AK population	1,415,550	1,571,718	1,656,486
NZ population	4,242,000	4,699,719	4,993,851
AK Share	33.4%	33.4%	33.2%

Not a big drop, but is it the start of a trend towards slower growth relative to other areas? Certainly high house, rent and transport costs in Auckland will make other areas more desirable. Others have pointed out that fast growth of Waikato may in part be a displacement of growth out of Auckland, for example. 

Auckland is supposed to demonstrate a productivity gain from its larger size and deeper labour market, meaning that there is in theory a reduction in overall productivity if a household shifts out of Auckland.  Is Auckland’s productivity premium (which should be seen in higher incomes) no longer large enough to off-set higher housing and transport costs?  

But per capita GDP data suggests that Auckland has experienced reasonable productivity gains over the past few years, at least relative to other areas. Figure 1 is GDP per capita for Auckland, Northland, Waikato and Bay of Plenty. Auckland is ahead of the pack. 

Figure 1 GDP per capita 2000 to 2022

After a period of limited growth between about 2010 to 2015 (when Auckland’s per capita GDP premium was about 106% of national GDP), post 2015, Auckland saw per capita GDP grow so it sits at around 112% of the national figure. 

Figure 2: Auckland GDP per capita as a % of NZ per capita 

Turning to housing, in terms of housing production, between 2013 and 2023, Auckland added 436 dwellings per 1,000 new residents, above the national figure of 399 dwellings per 1,000 residents. 

Table 2: Dwellings per1,000 new residents 

	Population change 2013-2023	Total additional dwellings	Dwellings per 1,000
AK	240,936	105,084	436.15
NZ	751,851	300,309	399.43

So is the much debated role of zoning and planning in constraining Auckland’s growth a reality? 

Perhaps not at the regional level, but may be at the local level.  Looking at population growth by Local Board area shows a strong pattern of growth on the edges of the city, and (small declines) in the central areas. See figure 3.

Figure 3: Population change by Local Board area 2018-2023

This is hardly the picture of a consolidating, more compact urban area.

But house growth has not been static in the central suburbs. For example, the Waitemata Local Board area added about 5,000 dwellings, but lost 1,300 residents. Possibly that loss is due to fewer international students. It is also possible that the central city suburbs are going through a demographic transition towards empty nesters, with average dwelling occupancy declining as the population ages. At some point that will turn around.  

Figure 4: Population and housing growth 2018-2023, by Local Board

But nevertheless the data on population, housing and GDP present something of a paradox. It is often stated that greater density of urban development - with that density concentrated into central areas - will support increased productivity.

Even more perplexing is comparing job growth with population growth. Figure 5 is growth of employment by Local Board area between 2018 and 2023. What stands out is the stellar performance of the Waitemata Local Board area - employment rich but population growth wise a desert.

Figure 4: Emplpoyment and resident population growth 2018-2023 by Local Board

Auckland displays increased productivity but reduced pace of growth and a de-concentration of, at least, population. Is the city starting to experience a structural shift in its organisation?  A shift to the edge in search of more space and cheaper housing may have been facilitated by working from home. Will the “donut effect" accelerate? And how to respond with more public transport and greater housing diversity and density in suburban areas. 

Or is the 2018-2023 pattern of limited population growth in the centre a covid induced temporary ‘blip’? 

The Inside Track?

 

The Fast Track Approvals Bill (or is that the “Inside Track Approvals  Bill”?)  is currently before a select committee who are hearing submissions on the Bill. There is much focus on the powers to be given to select Ministers to approve projects accepted under the Bill.

 At a more techincal,  planning level, an interesting feature of this bill is the weighting to be given to various aspects in decision making. Some form of weighting of the importance of various matters in decision making is generally seen to be a good thing. But how do you set weights/importance when trying to enable development while managing environmental impacts?

Part 2 of the BIll  covers the assessment of consent applications and notices of requirement by an expert panel. The expert panel must give weight to the following matters, in the order listed (from greater to lesser):

                     (a)  the purpose of this Act; and

(b)the purpose of the Resource Management Act 1991 set out in section 5 of that Act; and

(c) the matters for consideration in section 6 of the Resource Management Act 1991; and

(d) the matters for consideration in section 7 of the Resource Management Act 1991; and

(e) the provisions of any of the following, if relevant, made under the Resource Management Act 1991:

(i) any national direction:

(ii) operative and proposed policy statements and plans:

(iii) iwi management plans:

(iv) Mana Whakahono ā Rohe:

(v) joint management agreements; and

(f) the relevant provisions of the Resource Management Act 1991 or any other legislation that direct decision making under the Resource Management Act 1991 (see, for example, sections 104 to 107 of that Act and the provisions referred to in clauses 31 to 35).

 So the purpose of the Act is the most important consideration. The purpose of this Act is to provide a fast-track decision-making process that facilitates the delivery of infrastructure and development projects with significant regional or national benefits. 

 Many people making submissions have noted that this is a pretty open ended clause. 

 Section 17 of the Bill perhaps narrows down a bit  what is a “significant benefit” . This clause says that in considering whether the project would have significant regional or national benefits (and hence be eligible for the fast track process) , the relevant  decision making Ministers may consider whether the project:

• has been identified as a priority project in a central government, local government, or sector plan or strategy (for example, in a general policy statement or spatial strategy) or central government infrastructure priority list:
• will deliver regionally or nationally significant infrastructure
• will increase the supply of housing, address housing needs, or contribute to a well-functioning urban environment (within the meaning of policy 1 of the National Policy Statement on Urban Development 2020):
• will deliver significant economic benefits
• will support primary industries, including aquaculture:
• will support development of natural resources, including minerals and petroleum:
• will support climate change mitigation, including the reduction or removal of greenhouse gas emissions:
• will support adaptation, resilience, and recovery from natural hazards:
• will address significant environmental issues:
• is consistent with local or regional planning documents, including spatial strategies.

 Plenty of room to manoeuver in that list also. 

Setting weights in decision making is helpful. Weights help decision makers focus on the important outcomes. 

 There may be no need to set weights if there is agreement as to the equal importance of each decision making criterion in contributing to the desired outcome, and if decision making criteria are appropriately differentiated and do not overlap or double up.

 Generally in environmental decision making there is no agreement over the importance of different factors, while there are plenty of double ups.  So setting weights is important. 

Setting weights is one of the more complex and overlooked matters when preparing plans and analyzing options.  Societal values are never far from the surface of most decision making crtieria and setting weights inevitably involves judgements. It is often easier at the plan making stage to give everything equal weight so that all the different interests in environmental management get acknowledged without picking a winner.

 Having said that, it could be argued that plans have steadily made progress on placing more weight on some outcomes rather than others. Some newer plans recognise the importance of infrastructure for example. Spatial strategies are supposed to help determine priorities for development in different areas, with plans setting out “go” and “no-go” areas. Section 6 of the RMA helps set bottom lines for particularly important resources. National directions (like National Policy Statements) have also sought to elevate the weight given to certain outcomes (like freshwater or urban development). But progress in up dating plans is slow and variable across the coumtry.

 When it comes to consideration of specific applications, things get murky as to the role of weights. On the one hand there is the avoid- remedy - mitigate approach. Each adverse effect of a proposed development is considered in isolation and a decision made as to whether the various individual adverse effects are adequately avoided or mitigated. Plans help in this assessment but are not the final answer. There is no need for weights, its more a matter of getting to (an often moving) finish line - or is that the start line?

On the other hand, increasingly assessment of specific projects is being pushed into more of a cost-benefit type analysis. Can benefits off-set costs? That is, some effects of a development may not be able to be appropriately mitigated, but in the total scheme of things can be traded off for the benefits the scheme or development may bring. Some effects may not be able to be traded off - the bottom lines, but others can - like changes to urban amenity. 

The fast track bill feels like it falls into the second, emerging approach.  So does the fast track bill’s weights help? If the Bill recreated the approach of plans trying to find the appropriate balance between development and environmental management, then the Bill doesn’t really add much. This could be said to be the weakness of the previous Covid Fast Track Act. The previous fast track act had a dual purpose to urgently promote employment to support New Zealand’s recovery from the economic and social impacts of COVID-19 and to support the certainty of ongoing investment across New Zealand, while continuing to promote the sustainable management of natural and physical resources. The main benefit of the fast track act (was in theory) a faster process of comments, not submissions; no hearings and limited appeal rights. 

The Fast Track Approvals Bill is not unlike a previous attempt to speed things up - Special Housing Areas. That legislation - Housing Accords and Special Housing Areas Act 2013 - gave most weight in decision making  to theAct’s purpose, which was to enhance housing affordability by facilitating an increase in land and housing supply in certain regions or districts identified as having housing supply and affordability issues.

The problem that the current Bill runs into is that all decision making on urban and environmental management issues are context specific. In some cases, environmental bottom lines should prevail. In other cases not. It is not helpful to set a broad ranging priority that seeks to work in these different contexts. At least the Special Housing Areas Act worked in the context of some sort of 'balanced' pre-selection of areas to be urbanized / intensified, with the Act more focused on “how” these areas were to be developed, rather than whether they were to be subdivided and developed in the first place. 

 The Fast Track Approvals Bill trys to do both. It seeks to re weight decision making in favour of developments like infrastructure and housing while also speeding things up. 

In the right place, more housing and better infrastructue are good things to support, but I think a more lasting approach to imbedding these outcomes would be through considered changes to district plans that could provide the right context for the application of variable weights: In some cases weight could be given in plans to development, in other cases weight could be given to environmental outcomes.  By cutting across good plan making, the Bill may actually result in plans getting more strident about envioronmental protection to help re balance the Bill's perceived focus on development. 

If it is to proceed, should the Fast Track Approvals Bill adopt a more classical cost-benefit approach; that is whether the benefits of the project outweigh the environmental costs, but with some safeguards built in. For example, that only larger scale projects (say, over $50 million) should be eligible; that the benefits should be independently verified by the regulator; that the decision making criteira  should ensure proper account of the necessary mitigation of adverse effects. By proper account, I mean appropriate consideration of intangible values, cumulative effects and future effects - aspects that often get little attention in assessments. To get the tick, should benefits exceed costs by a factor of 2 to account for likely systemic under reporting of environmental costs?

Sounds like an overall broad judgement!  Structured Decision Making is perhaps a better term.