Government seeks to rapidly accelerate housing supply, but will it work?

15 December 2021

If there is one thing in New Zealand that our major political parties can agree on, it is that the Resource Management Act 1991 (RMA) needs a shake-up.  Over its 30-year history, both major political parties have regularly passed piecemeal amendments.  The result has been a complex and unwieldy piece of legislation, not helped by implementation issues and a lack of strategic direction, that has created barriers to building more homes.  It was fitting, then, that both Labour and National stood side by side in October this year to announce another amendment to the RMA: the Resource Management (Enabling Housing Supply and Other Matters) Amendment Bill (Bill).

The purpose of the Bill is to accelerate the supply of housing in urban areas by permitting intensification in residential zones.  Throughout the process of the Bill no issue has been raised that we need more housing supply in Aotearoa New Zealand.  For many the dream of owning their own home has well and truly passed (and the costs of renting pose serious challenges).  Tier 1 councils are already considerably increasing supply in line with the National Policy Statement on Urban Development 2020 (NPS-UD).  Those same councils face significant infrastructure shortfalls and costs (as do other infrastructure providers) in providing the critical services to enable that supply to be delivered. 

Will the Bill achieve its purpose?  The condensed Select Committee process has compounded the lack of consultation through its initial development.  While the Select Committee has recommended modifications to the Bill (but had insufficient time to provide actual drafting) there remain serious concerns as to its implementation, effectiveness and ability to ensure our cities remain vibrant and healthy places to live.  Submissions (from all sides of the housing debate) to the Select Committee noted the importance of housing done right – and the major implications if it is done wrong.  If the COVID restrictions have taught us anything, it is the importance of warm, dry housing, natural light, and outdoor/green spaces to a person’s wellbeing.  The other key issue is that the Bill does not address existing infrastructure issues which are a (if not now the) major issue for enabling housing supply.

Intensification is already underway in our major cities.  Despite increased building activity and record consent numbers, prices have still risen.  The Bill is a small part of equally important changes required to the whole housing, construction (and supply chain), training and financial sectors.  Costs have increased (with consents primarily a small part of that issue).  But, done well, the Bill could play its part in delivering generational change across our suburbs.  While the Select Committee's work is an improvement, much remains to be done to ensure the Bill delivers the outcomes needed.

What are the key changes?

The key takeaway is the introduction of the Medium Density Residential Standards (MDRS).  The MDRS enable landowners to build up to three homes (of up to three-storeys) as of right across residential zones within our five Tier 1 urban areas (Auckland, Hamilton, Tauranga, Wellington, and Christchurch).  The only locations where the MDRS will not apply will be where 'qualifying matters' (including section 6 RMA matters, National Policy Statement matters and other listed matters) apply.  Density standards (as recommended by the Select Committee) have been set to enable minimum standards to provide for intensification, including building heights, height in relation to boundary, setbacks, building coverage, outdoor living areas, outlook space, landscaping requirements and glazing requirements.  As a permitted activity, the Bill ensures no neighbour or public involvement for complying developments (and for associated subdivision which will be a controlled activity with notification excluded).  To provide greater guidance to the application of these new standards the Select Committee proposes that the Bill itself contain objectives and policies to be included into district plans which focus on 'well-functioning urban environments', wellbeing, and the provision of a variety of housing types and sizes to meet need and demand.  While such policy support for the MDRS is supported, having the provisions in the Bill itself limits any potential change and the drafting intent of some of the recommended policies will need to be carefully considered.

The Bill also introduces an Intensification Streamlined Planning Process (ISPP) to implement the MDRS and intensification policies of the NPS-UD through an Intensification Planning Instrument (IPI).  The ISPP process involves independent decision-makers making a recommendation to the council.  If the council does not accept the recommendations, the Minister for the Environment makes the final decision.  While the right of appeal to the Environment Court has been removed, there is an ability to seek judicial review.

Once the IPI is notified, the MDRS rules will have immediate legal effect.  This raises two concerns – first this means developments can occur before qualifying areas may be determined through the ISPP process.  This risk is mitigated in the Select Committee's view by council's applying a first up 'precautionary approach' to identifying qualifying matters.  That is the antithesis of the policy intent of the Bill.  Secondly, and more importantly from an infrastructure perspective, any financial contribution provisions will not have immediate effect.  For councils who have not developed robust intensification financial contribution provisions, or development contribution policies, this leaves a window of opportunity for developers to avoid paying their 'fair share'. 

Lessons learned

The Government's plans are based on past success.  It has absorbed lessons from rebuild projects following the Christchurch and Kaikoura earthquakes.  A key pillar of those processes was to free up planning rules – this was seen as crucial to expediting the recovery.  In Christchurch’s case, amendments to the RMA fast-tracked resource consenting for land remediation work.  Significantly, these amendments removed the normal process of public notification, hearings and appeals.  A similar approach has been taken by this Government in relation to the COVID-19 Recovery (Fast-track Consenting) Act 2020.  The key lesson from these legislative provisions is timeframes can be significantly reduced by limiting public participation and hearing processes.  The Bill takes note of these lessons, with the new ISPP addressing the underlying disorder in zoning and consenting.

Policy settings crucial

Presently we are in a housing consenting and construction boom.  Developers have scaled up and councils have spent the last 18 months advancing planning changes to implement the NPS-UD's provisions (especially in relation to six story housing).  Councils have also adjusted their Long-Term Planning and Annual Planning funding documents to allocate funding to support that intensification.  In response, the main political parties have again changed the policy playing field and reset the clock.  We need to take time to allow existing policies to bear fruit.  Policy certainty and stability is critical in managing a 'crisis'.  We need a coherent policy plan and caution against ad hoc changes to the policy settings that may result in further delays in new housing being delivered.

The Bill takes a single policy setting: to permit housing intensification in Tier 1 city residential zones.  While most agree in principle with this Bill, the one-size-fits all approach may not sit so well.  Within residential zones, the MDRS provides a policy tool for what is a nuanced situation: stated by the Select Committee as 'to ensure that the MDRS results in liveable, well-designed homes'.  Great care must be taken to ensure policy tools are effective in delivering the outcomes wanted and the speed to enact this legislation does not result in unintended consequences in practice.  Learnings can be taken from the Auckland Council Unitary Plan which is applied in a more focused manner and has been road tested.  Further, the Select Committee mentions a 'national medium-density design guide' will be released next year, following consultation with local government and stakeholders.  What effect, if any, the guide will have remains to be seen but there is currently no statutory recognition in the Bill so its influence may be limited (and must be carefully drafted to avoid additional uncertainty). 

There is also considerable policy development needed to prioritise outcomes.  While qualifying matters are important it would greatly improve certainty if the Bill itself gave more direction for integrating intensification with other key outcomes, such as climate change, outstanding landscapes, indigenous biodiversity and wetlands/waterways.  For example, the current National Policy Statement for Freshwater Management provisions will trump affected intensification housing areas and prohibit/limit (and increase the cost of) the provision of infrastructure to support new housing.  The Bill itself must align with overlapping (and often conflicting) policy outcomes to avoid the risk of being undermined.

Finally, our ability to deliver more housing requires the right policy settings being put in place.  That is why reforming the RMA with the Natural and Built Environments Act (NBA) is a 'once in a generation' opportunity.  But the reforms must be aligned, and care must be taken to not repeat the mistakes of the past.  For instance, the proposed NBA reforms (themselves recently out of a Select Committee process) need to provide meaningful strategic support for new housing.  There needs to be policy alignment between the Bill and the draft NBA to provide long-term consistency. 

Accelerating housing supply

Will the Bill 'rapidly accelerate' housing supply?  The Bill faces two major issues to achieve its intent; it risks delaying existing intensification processes and developments; and it does not address the provision of infrastructure to unlock intensification (noting that despite being blamed for all things the RMA cannot fix all things).

First, the risk of delaying housing planning reforms (advanced by councils in response to the NPS-UD) and housing developments being advanced by developers.  The Select Committee received many submissions on these issues and its recommendations respond, at least in part, to them.  As introduced, the Bill contained specific triggers that required the withdrawal of existing plan changes that do not align with the Bill or have not had a completed hearing by 20 February 2022.  This approach would have undone a substantial amount of good work, at the expense of ratepayers, developers and submitters alike.  The Select Committee recommends a pared back approach of those processes relying on variations to notified plan changes to ensure the MDRS provisions are included.

There are also numerous developments being planned with provisions (especially Master Planning approaches) that do not match the MDRS (especially in relation to infrastructure provision).  The majority of the Select Committee decided this could be dealt with 'expeditiously' through the ISPP process (such plans to be notified in August 2022), potentially causing delay in much needed housing.

There are many existing residential zones with infrastructure at or near capacity.  Councils want the ability to ring-fence areas of limited infrastructure capacity and exclude them from the Bill.  This relates to the long-standing issue of funding.  Under the Local Government Act 2002, councils have an obligation to adopt a prudent financial strategy.  It may be challenging for councils to meet new density expectations (especially when they have already reshaped their financial planning to respond to the six-story approach of the NPS-UD).  The need for broader funding mechanisms is also a key argument raised by the Government for the need for its 'Three Waters' reform.

Presently, there are a raft of different infrastructure investment options.  Kāinga Ora is just one of several departments allocating billions of dollars of funding for infrastructure projects.  Indeed, the Government recently provided the department $282m for water, drainage, and street improvements across five developments in Auckland.  While one-off funds are useful in the short term, they are not sustainable in the long run.  There is a need to ensure that additional infrastructure will be funded, and what costs will need to be passed on to developers and ratepayers.

This article builds on our previous article, which can be found here.