Finance Minister Bill English gave local authorities an ultimatum yesterday: free up enough land to allow the construction of more affordable homes or the Government will force them to do it through legislation.
Increasing the supply of land for building was one of the key planks in the Government's response yesterday into the Productivity Commission's inquiry into home affordability.
However, the package also includes significant changes to the Resource Management Act (RMA) which will have effects well beyond the housing market, and an inquiry into the building industry that will consider Fletcher Building's dominance.
Mr English said the Government had no control over the housing market where rising prices had helped fuel household debt and contributed to damaging imbalances in the economy.
But local authorities could exert considerable influence on the market with planning decisions and the consent process.
He said the Government preferred to work with councils if possible to improve the supply of land for building because they had a local mandate and a better understanding of their area.
But if they were to ignore the Government's objectives, "then we'd be looking to exert a bit more control over their planning process".
"We're making it pretty clear, on behalf of the community, actually, that if we can make housing more affordable just by changing the rules, then why wouldn't you?"
Mr English said he was referring to "well-informed changes in the Resource Management Act and Local Government Act that would promote more affordable housing".
The Government also plans to introduce a six-month time limit on councils processing consents for medium-size projects, including housing developments of more than 20 to 30 homes.
Environment Minister Amy Adams said the limit would avoid "unnecessary costs and long, drawn-out processes for all parties".
However, Ms Adams also said the Government was considering a proposal to allow consents for "large regional projects" to be more easily directly referred to the Environment Court. At present, that ability is only available for projects of national significance. Mr English also announced a "market level study of the construction supply industry".
Fletcher Building's dominance of the construction and building supplies industries has frequently been cited as a reason for New Zealand's high building costs and Mr English confirmed the inquiry would examine that issue.
Labour's housing spokeswoman Annette King said the package sounded "ominous" for councils.
"They seem to be expected to 'share the commitment' of addressing housing affordability at the very same time that government is placing constraints on their core services.
"The Government doesn't look to be offering any revenue sharing to pay for its policy. Ratepayers will again be picking up the bill.
"There is nothing in National's response today that will make housing more affordable. It will do nothing to put the missing rung of the housing ladder in place and give people a leg up to it," said Ms King.
Four key aims
* Increasing land supply. This will include more greenfield and brownfield developments and allow further densification of cities, where appropriate.
* Reducing delays and costs of Resource Management Act processes associated with housing. This includes introducing a six-month time limit on council processing of medium-sized consents.
* Improving the timely provision of infrastructure to support new housing. This will include considering new ways to co-ordinate and manage infrastructure for subdivisions.
* Improving productivity in the construction sector.