The Government’s deal with National yesterday to ease planning restrictions on housing rests on a series of what are likely to be highly contestable assumptions.
However, as a political move, it is likely, in the short term anyway, to be a win-win for both Labour and National.
And in a cultural sense it is likely to end the longtime New Zealand love affair with the suburban lawn memorably satirised in Austin Mitchell’s 1972 “Half Gallon, Quarter Acre, Pavlova Paradise.”
Simply, the policy is projected to increase dwelling numbers by 14.6 per cent by 2043 by allowing residential homeowners do not require planning approval to build up to three dwellings, up to three storeys high, on any property in Auckland, Hamilton, Tauranga, Wellington and Christchurch.
Some properties, within walking distance of an urban centre or regular public transport, will be able to go to six storeys.
In the process, it is forecast to cut back future housing price increases to 2043 by $198 billion.
But there will be costs. A cost-benefit report released with the announcement yesterday forecast that the increased intensification could significantly impact other homeowners’ views (reducing property values by an average of $5,816.74) and reduce the amount of sun their dwellings get.
And it will add to Councils’ infrastructure bills.
There will also be big questions about whether an already-overstretched construction industry can step up its activity to meet the proposal’s most optimistic forecast, which would require an additional 17,583 dwellings a year over six years.
Last year 39,420 dwellings were consented. But there are currently substantial cost pressures on the industry. Statistics NZ says construction costs are currently rising by 12 per cent a year.
Nevertheless, National Leader, Judith Collins, appearing on the same Beehive Theatrette stage as Housing Minister Megan Woods and on a video link from Auckland, Environment Minister David Parker was eager to claim credit for the policy.
“It’s so good to be here today announcing a bipartisan commitment to cutting red tape and the regulation that makes it so hard to build houses in New Zealand,” she said.
“I have been convinced for a long time now, in fact, for many years that rolling back the council resource consenting rules is the key to addressing many of our housing woes.
“It is crazy to me that existing planning rules in New Zealand may actually make it harder to get houses built; harder and more expensive.
“In the last term of Parliament, I wrote to the Minister for the Environment offering to work together on Resource Management Act (RMA) reform for this very reason.”
To a large extent, therefore, Collins can claim that Labour has adopted a National Party policy.
But by agreeing to the Government using a National Policy Standard to implement it, National have undermined their own argument that the RMA reforms being implemented by Parker are a substantial shift to centralisation of the planning process.
For Labour, and particularly Housing Minister Megan Woods, who doubles as the party’s election campaign chair, the agreement yesterday offers the possibility that housing will now diminish as an election issue in 2023.
“We need stable, enduring solutions to fix the housing crisis that has been decades in the making,” she said yesterday.
And her speech at the presentation was a straight-out pitch to the Labour heartland.
“New Zealand has a serious housing shortage, and it has simply not built enough homes to meet the needs of New Zealanders,” she said.
“This is making housing increasingly unaffordable, with its effects felt most strongly by New Zealand’s poorest vulnerable and younger generations.”
There were two parties conspicuously absent from the Beehive stage; ACT and the Greens.
The absence of Greens co-leader, Marama Davidson, was particularly notable.
“This is work that has been worked through between Labour and National,” said Woods.
“And so, of course, I deal almost on a daily basis with the Green Party on other housing issues.
“Marama Davidson as an Associate Minister of Housing and someone that I have a huge amount of contact with.
“But on this piece of work, this is work that we worked through with the National Party.”
National’s political ally, ACT, however, were critical of the policy.
ACT leader David Seymour told Stuff the policy was a “hollow stunt” without more infrastructure funding for councils and would cause “chaos” as people had bought into neighbourhoods, not expecting the rules in them to change massively.
Because the proposal is all about intensification, Infrastructure funding is an issue.
The cost-benefit analysis shows that in some cases where the proposed intensification of an existing suburb is low, existing developers’ contributions could exceed the extra cost of the infrastructure, whereas, in greenfields developments, the reverse would be the case.
But the authors, PWC, admit their estimate might be an optimistic estimate.
“Mass transit can cost tens of billions of dollars, and recent experiences of Kainga Ora on large-scale renewal projects can show the scale of water infrastructure is not immediately available,” their report says.
Because all land will be able to accommodate more dwellings, the proposal could actually raise land values when land is valued on the basis of its “highest and best use”.
That could have several implications; it could provide windfall gains to landowners who choose to sell or develop, or it could impose higher rates on owners who chose to keep one dwelling on the
The cost-benefit analysis suggests that the land value for single homes on sections within 10 km of Britomart could rise in value by as much as $1500 per square metre because this land would be desirable for intensification.
That could mean a typical Ponsonby villa on a 500 square metre section could see its current valuation rise from $1.6 million to $2.35 million.
Most suburban housing, more than 10 km away from Britomart, would be likely to see no change in land values, or they could even drop.
But Collins had a caution about getting too bullish about what might happen.
“Obviously, this deals with land and people getting consents to build on it,” she said.
“What it doesn’t do is get the houses built, so there are other things involved.
“And those are things for another day, which are around building supplies, training trades, all those sorts of things, all of which are important to getting a house built in terms of value.
“I think what we’ll find is that there will be some people who will feel that their lawn is now something of value, and some people will find that they can sell that lawn.
“But in terms of house prices, so I think that that’s going to suddenly bring about a drop?
“No, I don’t see this as a supply shock.
“What I do believe is that it is a shot in the arm to make sure that the country doesn’t continue down a path whereby housing is something that other people own, and our kids get to rent.”
Woods said that densification would allow more opportunities for innovative building techniques such as off-site manufacturing.
“We have to keep our push up around training. We need to encourage more young people into the building and construction sectors, and that is what we will continue to do and have been doing over the four years that we have been in Government,” she said.
“The supply chains, of course, there is an ongoing issue, and it isn’t as contained to New Zealand, and it’s one that we’re actively working through the construction sector accord with our build partners thereto find ways that we can take a New Zealand Inc approach to how it is that we ensure that we have the supplies that we need to solve our housing crisis.”
And Collins was quick to remind the briefing of National’s track record on housing.
“I think for those who are wondering how it all works, this is very similar to what we did in government after the Christchurch earthquakes, where we enabled housing to get built,” she said.
“This will also give confidence to builders, will give confidence to those who can bring in building materials and will give confidence to people, young people and others who might want to enter a building trade that there will be work for them.”
Parker has frequently talked about growing wealth inequality in New Zealand, and he referred to that again yesterday when introducing the policy proposal.
“There are improved equity outcomes for first home buyers and for renters, and there’s a slowdown in the transfer of wealth to existing property owners from renters and first-time buyers,” he said.
But at this stage, it is only a policy proposal.
It will require legislation to allow Councils to speed up their implementation of the National Policy Statement on Urban Development which contains the Medium Density Residential Standards. (MDRS)
The Bill, the Resource Management (Enabling Housing Supply and Other Matters) Amendment Bill, was introduced yesterday, and Councils will be required to notify their plan changes to accommodate the MDRS by August next year with implantation in August 2023.
The National Policy Standard ill by then be likely to run head-on into the reformed Resource Management Act (RMA), the Natural and Built Environments Act, and its accompanying Spatial Panning Act.
The proposed Natural and Built Environments Act contains provisions for a national planning framework that would effectively replace the National Policy Standards and would be able to lay down basic elements to be included in regional plans.
However, today may go down in history as the day that marked the beginning of the end for Austin Mitchell’s “Half Gallon, Quarter Acre, Pavlova Paradise.”