It's refreshing that the Labour-led Government is not so shy that it won't steal the best of its predecessor's policies when it comes to infrastructure funding.

Urban Development Authority? Tick. Special Purpose Vehicle to fund infrastructure? Tick.

It is not yet clear if Crown Infrastructure Partners — which was one of former National Cabinet Minister Steven Joyce's brain children — will be the special purpose vehicle that Cabinet finally adopts when it looks to operationalise the plan for the Urban Growth Agenda which was unveiled by Cabinet Minister Phil Twyford in Auckland last night.


But Twyford, via Finance Minister Grant Robertson, has Treasury working on a financing model which, at first blush, would appear to be based on the Crown Infrastructure Partners platform announced by the National Government just weeks out from the September 23, 2017 election.

Where the Minister, who holds both the housing and transport portfolios, has lifted the overall game is by the announcement of a National Urban Development Authority which he promotes as a "powerful new delivery organisation, capable of driving real change, renewal and opportunities for New Zealand's urban areas which will be the Government's lead developer".

Again, the previous Government looked at creating urban development authorities — particularly in Auckland — but never managed to get it done before its final term in Parliament expired.

Fundamentally, the Government needs to up the tempo on this body of work. Particularly with Auckland housing where its initial projections for KiwiBuild have proven heroic.

It was politically smart to get the announcement out ahead of the upcoming Building Nations Symposium organised by Infrastructure New Zealand which takes place on August 16-17.

The sector is looking for leadership from Government. But also some realism given the problems with bank funding for developers which will now see the Government step in with backstop financing for apartment blocks and other intensive developments.

This is a risky use of taxpayer funds which will require sensible governance but with the Government also facing a political imperative to deliver affordable housing, this opportunistic move gained legs.

Phil Twyford. Photo / File
Phil Twyford. Photo / File

The UGA is also highly reminiscent of Joyce's Business Growth Agenda which wrapped six different growth pillars into an overarching umbrella of initiatives.


It is designed to improve outcomes for New Zealanders by addressing the fundamentals of land supply, development capacity, and infrastructure provision.

In speech notes for last night's event, Twyford said the UGA would deliver medium to long-term changes needed to system settings to create the conditions for the market to respond to growth and bring down the high cost of urban land.

He believes it will also improve housing affordability and support thriving communities which it will need to do to support funding objectives. "Our main objective for the UGA is to improve housing affordability, underpinned by affordable urban land," -Twyford said.

This will be supported by wider objectives to improve choices for the location and type of housing, improve access to employment, education and services, assist emission reductions and build climate resilience and enable quality built environments, while avoiding unnecessary urban sprawl.

As spelt out in a recent Cabinet paper, the UGA has five pillars of work:

• Infrastructure funding and financing — to enable a more responsive supply of infrastructure and appropriate allocation of cost.
• Urban Planning — to allow cities to make room for growth, support quality built environment and enable strategic integrated planning.
• Spatial planning (initially focused on Auckland and the Auckland-Hamilton corridor) — to build a stronger partnership with local government as a means of developing integrated spatial planning.
• Transport pricing — to ensure the price of transport infrastructure promotes efficient use of the network.
• Legislative reform — to ensure that regulatory, institutional and funding settings are collectively supporting the UGA objectives.

Financing urban infrastructure, like transport and water, is key. Some council balance sheets are at their upper limits when it comes to taking on more debt.

When National was touting Crown Infrastructure Partners, it said the advantage of a special purpose vehicle model is that it allows landowners and developers to bring forward the infrastructure projects that would otherwise not have started for a number of years due to councils' financial constraints.

This is because a key feature of a SPV is that the debt it takes on is reflected on the SPV's balance sheet, not the council's. As such, it does not affect councils' debt limits, and frees up the local infrastructure funding bottleneck.

Servicing that debt, which is expected to involve long-dated bonds, is expected to come from long-term revenue streams through targeted council rates and volumetric charging for use of the infrastructure by new residents.

A special Cabinet committee is supervising the development of the Urban Growth Agenda.

Apart from Minister Twyford wearing his Housing and Urban Development hat, the group includes Environment Minister David Parker, Infrastructure Minister Shane Jones and Associate Transport Minister Julie Anne Genter.

They expect to report back to Cabinet in the first half of 2019 and present reform options including potential legislative changes.

"This may have wider implications for the way we plan for and enable development, the way we manage our natural resources and the roles of central and local Government," the Cabinet paper notes.

There will be financial implications. Expect funding to be sought through Budgets 2019 and 2020.