Lawrence Yule: New powers could boost housing

An Urban Development Authority could be empowered to compulsorily purchase land for development. Photo / NZME
An Urban Development Authority could be empowered to compulsorily purchase land for development. Photo / NZME

Lawrence Yule is the President of Local Government New Zealand.

The Government has released for consultation a draft National Policy Statement on urban development capacity and last weekend it announced a $1 billion fund for infrastructure to support new development. It signalled it is also looking at the role Urban Development Authorities might play.

Given the extent of housing affordability problems in some of our districts and cities we are pleased to see further policy direction on this matter of national importance.

The Government's announcements are important because, in our view, a National Policy Statement alone is not sufficient. It is local government's view that a co-ordinated approach is needed on a range of other matters critical to increasing the supply of land and new houses, and to address rapidly escalating housing prices.

We advocate a shared plan that should address the many complex factors driving the housing shortage - and that needs to be agreed between central and local government and key players in the construction industry as a matter of urgency.

In particular, we see a focus needed on six areas: funding and financing of infrastructure, land-banking, allowing for Urban Development Authorities controlled by local government to speed up development, tax regimes that de-incentivise speculation in residential property, addressing a skills shortage in the construction industry and finally, addressing an uncompetitive market for building supplies.

One of the most important priorities for local government is to address the question of why residential-zoned, serviced land is not being released to the market at the rate sufficient to meet demand. There are two main reasons for this: the challenge of financing essential trunk infrastructure such as roads, water and sewage to ensure that land is "ready to go", and the practice of so-called "land banking".

Mayors whose districts are experiencing high growth have said publicly they are already doing what the proposed National Policy Statement will require them to do and it is not just a land supply problem. In Auckland, there is sufficient "ready to go" greenfield land, zoned, with bulk services in place, to meet housing development needs for the next 7.4 years.

Under Auckland Council's proposed unitary plan, Auckland will have a Rural Urban Boundary (RUB) with enough land for around 30 years of expansion outside the current metropolitan urban area but inside the RUB.

Local Government NZ's funding review highlighted the need for funding options that will incentivise councils and communities to invest in infrastructure to enable more growth. One way of achieving this would be to allow councils to retain a share of any value uplift arising from a change in economic activity, including a change of zoning from rural to residential. The value uplift could be used to fund new infrastructure.

Currently, that gain goes directly to landholders (hence the incentive to landbank).

At present, to finance the construction of new infrastructure, councils will generally raise debt. Yet a number of the councils facing growth pressures are already at, or close to, the debt levels prescribed in the Government's financial benchmarks. While these are not mandatory caps, exceeding them exposes councils to a range of risks and to criticism.

In Local Government NZ's view the debt benchmark is too conservative for fast-growing cities. The Government's announcement of $1 billion to finance new infrastructure acknowledges this issue.

Councils and the Government will need to continue to look for innovative solutions to fund and finance infrastructure.

Public Private Partnerships were re-introduced in 2010 and greater use could be made of partnerships with the private and the not-for-profit sectors.

Land banking occurs where developers hold on to land, releasing it only gradually in response to increases in land prices. The problem is acute in some fast-growing areas. We need tools that act as incentives to release the land.

We should look to the overseas jurisdictions that have the same issues as New Zealand to consider what other powers might be needed. The most obvious is to change the law to allow a targeted rate to be applied to land in these circumstances, currently not allowed by law.

The approach taken by this Government is to require additional supply of serviced land with the intention of creating a competitive land and development market.

Development and zoning of "brownfield" commercial sites, well suited to infill housing, is often hampered by land being in small titles, with multiple different owners. The United Kingdom is addressing this problem through Urban Development Authorities.

Urban Development Authorities have the power to compulsorily purchase land, which is particularly useful when an area is under many small titles (often found in commercial or inner-city areas) in order to offer developers a consolidated area where economies of scale can be achieved. We will want to work with the Government on what the powers and governance arrangements for these authorities in New Zealand could be.

United Future leader Peter Dunne has recently called for a national conference with all affected parties. We agree. Such an approach could be a springboard for developing a shared national strategy to address the housing supply. A shared strategy could also help end the impasse over funding and financing of bulk infrastructure.

Our local government funding review launched last year focused, through its representative working group (including business groups and local government experts), on key actions and policy decisions needed to provide more tools for councils for funding and financing.

This could be a medium-term approach but New Zealand's housing shortage is driven by many complex factors. Addressing them together is the only way forward.

- NZ Herald

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