Land developer Winton is suing the Crown's housing agency Kāinga Ora, accusing it of anti-competitive conduct.
The High Court proceedings follow Kāinga Ora's refusal last November to consider Winton's planned Sunfield housing development in South Auckland for assessment as a "Specified Development Project" (SDP).
The SDP designation is designed to help streamline complex urban development projects.
Crucially, projects approved as SDPs will be able to sidestep the Resource Management Act development process, which is susceptible to expensive delay.
Publicly-traded Winton and subsidiary Sunfield Developments Ltd alleged Kāinga Ora refused to use its statutory powers to facilitate private sector-led property developments like Sunfield and reserved those powers for its own benefit. The company alleges this puts the housing agency in breach of the Commerce Act.
Kāinga Ora has decision-making power over which development projects are selected for assessment as potential SDPs (for those for assessment, the agency makes a report, either recommending or not recommending projects to ministers for approval).
Kainga Ora is also a landowner, or seeks to be a landowner, in the only two projects which have been selected to date for assessment as SDPs.
SDPs were provided for by the Urban Development Act of 2020. No projects have yet been designated SDPs and Kāinga Ora's website shows it has considered just three proposed projects for selection as candidates.
Winton's Sunfield development in Papakura was not selected for assessment (November, 2021).
And the Northern Growth Area in Porirua and Western Corridor in Tauranga were selected for assessment in August and September of this year respectively.
In an interview, Winton CEO Chris Meehan said Kāinga Ora was "misusing its market power.
"It won't even assess our application, they're too busy with a pipeline of their own projects," he said.
"We want to be treated equally to Kāinga Ora [as a landowner] and see them process UDA [Urban Development Act] applications like the local council would process resource consents."
A Kāinga Ora spokeswoman said as the country's Urban Development Authority, one of the agency's functions was to buy and develop land to bring on much-needed housing.
"We do this in partnership with Māori, local and central government, and the private sector, including developers such as Winton. Establishing an SDP under the Urban Development Act should not be seen as a "fast-track" process."
She said the SDP was designed to overcome barriers to development in areas with complexities, such as multiple landowners.
Kāinga Ora said another complex area could emerge when co-ordination was needed across numerous parties in collaboration with local authorities and other project partners.
In the Northern Growth Area, Kainga Ora was considering purchasing land for development within the area of the proposed project.
"Kāinga Ora is in the early stages of considering potential options to support delivery of affordable housing within the Plimmerton Farms area, including use of the Kāinga Ora Land Programme," the agency added.
"These options are being considered separately to any potential SDP processes," Kāinga Ora disclosed in its decision to assess the Northern Growth Area application.
In the Western Corridor, Kāinga Ora owns a 95 hectare parcel of land known as Ferncliffe Farms within the proposed development area.
Kainga Ora outbid private sector developers, including Winton, and purchased Ferncliffe last year for $70.4m.
The purchase was contentious because Kāinga Ora bid a huge upfront payment which, unlike some competitors, did not spread payment over a period of years to take account of the risk of delay or difficulty in rezoning.
A Kāinga Ora spokesperson said the agency rejected Winton's claim it repeatedly overpaid for land purchases, and suggested that Winton provide evidence to substantiate these claims.
The agency said that it believed competitors bid higher sums than the Crown for Ferncliffe.
Documents released under the OIA showed Kāinga Ora based its offer price on two land valuations with extraordinary caveats.
One was calculated on the assumption the land was already zoned for urban development when it was zoned rural.
The second was based on a land area 30 per cent greater than the area subsequently deemed usable.
In August, an agency spokesperson said Kāinga Ora was very confident rezoning would be achieved.
"Kāinga Ora is an active member of the region's SmartGrowth partnership and we have a very close working relationship with Tauranga City Council.
"Therefore, conversations around rezoning prior to purchase are entirely probable and the assumptions made were not baseless. We were, and are, confident that rezoning can be achieved."
Tauranga City Council spearheaded the Western Corridor SDP application which Kāinga Ora approved for assessment last month.
In declining Winton's Sunfield project, Kāinga Ora wrote to Winton in November 2021.
The letter, posted on the agency's website, read in part: "Kāinga Ora has carefully considered your proposal against the selection framework as set out in the attached report, along with your stated expectations regarding the process in the Act.
"Kāinga Ora does not consider that it would be able to add value to this proposal by utilising the powers under the Act," it added.
"A partnership with Kāinga Ora as anticipated by the Act may add complexity and uncertainty to the project, which generally appears well-suited to the traditional RMA authorisation pathways."
Planned suburb would house thousands
Winton's Sunfield development is envisioned as a self-contained suburb of 23 hectares, including 4,400 homes, both attached and detached.
It would also have office and commercial spaces including retail, rest homes, two schools, provision for solar power, and a fleet of autonomous electric shuttles to minimise car use, garaging and roads.
In April, Housing Minister Meegan Woods declined Winton's request that she direct Kāinga Ora to undertake a project assessment of Sunfield.
A Winton statement said the company was seeking sought court declarations that Kāinga Ora's conduct was unlawful and in breach of the Commerce Act.
It also wanted an order requiring Kāinga Ora to consider Sunfield for assessment under the UDA, and "substantial damages for Kāinga Ora's conduct to date".
National's Housing spokesman Chris Bishop said the legal action reflected deep frustration "at the Government's incompetence over housing development".