Chris Bishop takes control of planning appeals, floats GST sharing as solution to housing crisis

Housing Minister Chris Bishop announced a suite of measures he had taken to Cabinet to implement the Government’s housing policy. Photo / Marty Melville

Housing Minister Chris Bishop says New Zealand’s housing crisis is “is a moral issue” that is costing the Government the equivalent of 15 Transmission Gully motorways every four years in emergency support, and is driving people to Australia.

Speaking to Wellington’s Chamber of Commerce, he announced a suite of measures he had taken to Cabinet to implement the Government’s housing policy, which he argued would free up more land for development and make housing more affordable. He also said the Government was considering what would be one of the biggest changes to the GST system since it was introduced in the 1980s — sharing a portion of GST revenue with councils.

Bishop also made a delicate intervention in Wellington’s planning wars, where an independent hearing panel has, with some controversy, been going over the capital’s district plan changes that are designed to encourage densification. The panel has been criticised for its conservative approach to the hearings.

No matter what the panel decides, the final right of appeal is to the Beehive. Under the NPS-UD, the set of planning rules that the panel and council are trying to implement, the final right of appeal is to the Beehive, specifically to the Environment Minister, Penny Simmonds.

Bishop announced this morning this would be changed, making him the final decision-maker on questions where the council and hearing panel did not agree. It is likely to lead to a far more permissive interpretation of the rules, if Bishop’s speech is anything to go by.

“I will be the decision-maker on relevant district plan changes relating to housing where councils and independent hearings panels do not agree — for example, the Wellington IHP process depending on where the Wellington City Council lands on it, or any requests for extensions to timeframes — in my role as the Minister Responsible for RMA Reform,” he said.

Bishop said the housing crisis was wasting government money through support and subsidies, trapping New Zealand in low productivity and encouraging people to leave.

“The taxpayer subsidises rents for people in social housing, we pay for emergency housing grants, we pay for transitional housing, we help people with their bond payments, and so it goes.

“A failure to reform housing has made it extremely expensive for government.

“Every dollar spent on subsidising rents is money that isn’t spent on improving schools, on more police, and on better cancer treatment.”

He said the market was so broken, many young people “think they have no hope of ever owning their own home”.

“And for many, they’re right. They don’t. Are we surprised that so many are leaving New Zealand?”

He said the lost productivity from expensive housing and dysfunctional cities would eventually cost New Zealanders in lost incomes and poorer public services.

Bishop announced the Government was moving forward with housing changes it had campaigned on. The thrust of these changes is that the Government should liberalise planning and encourage infrastructure development to allow more houses to be built. This is in contrast to the former Government, which had a reputation for centralisation and control.

However, this pivot really began under the former Government. After it did away with KiwiBuild, it shifted to a housing strategy based on liberalising planning rules and forcing councils to zone for more housing, first through the NPS-UD, a set of permissive planning rules from 2020, and then through the MDRS, a set of even more permissive planning rules ushered through thanks to a bipartisan deal between the Labour Government and the National Opposition.

Bishop announced National was progressing with a campaign promise to “require councils to zone enough land for 30 years of housing growth”.

“New Zealand is not short of land, but artificial constraints on using it have driven the price far higher than it should be.

“For example, each square metre of urban land at Auckland’s fringe costs 4.2 to 4.4 times more than nearby rural land. This zoning premium doubled between 2011 and 2021,” he said.

“These differentials are the product of artificial supply constraints due to restricted zoning in plans, delays and uncertainty due to resource consents, and infrastructure.

“The idea that zoning and land supply does not affect housing affordability is frankly nuts. The evidence is as plain as day: cities that make it difficult to build more housing have housing affordability problems. Cities that legalise housing find it is more affordable,” he said.

The mechanism by which the Government would require this zoning was still being worked on.

The policy came with a carrot for councils. Those that zoned for 30 years of housing growth would be able to opt out of the sometimes controversial MDRS.

The merits of this opt-out were fiercely contested by Labour, who warned that National’s zoning changes were no guarantee houses would get built. Labour believed the best way to get houses built was to force councils to forge ahead with the MDRS, which encouraged infill: the construction of more-dense housing on existing sections.

The Government wants to allow cities more freedom in how they develop. Photo / Jason Oxenham

Bishop said councils that had already modified their plans for the MDRS would be required to ratify those changes.

“In other words, they will get a chance to have a look at them again if they can prove they have sufficient development capacity,” he said.

“The Government position is that the MDRS tools were too blunt and one size fits all. They met with considerable hostility from many councils and many communities.

“So to put it bluntly, we are going to let councils have more discretion over where they have density, but they’re going to have more housing. It’s as simple as that. In some cases that will mean more greenfields development, where the infrastructure costs can justify it. In other cases it will mean more density. In most places it will mean a combination of both,” he said.

Tantalisingly for cash-strapped councils, Bishop said he was contemplating an Act policy that would incentivise councils to get new housing built by sharing a portion of the GST the Government gets from the construction of new houses back to local government.

“In the coming months we will be looking at the best mechanism to give effect to our Build for Growth policy, where councils gain a financial windfall from new housing. Act campaigned strongly on sharing a percentage of the GST of new housing with councils. That will be part of the mix as we ponder how to get the incentives right,” Bishop said.

Act’s plan would have given 50 per cent of the GST revenue from new housing back to councils, which are so cash-strapped they face disincentives for allowing new housing to be built, which in many cases costs councils more in service delivery than they can recoup in rates.

Act reckoned the policy would cost $1 billion a year. This would be a huge gift to councils, but one that would cost central government, itself struggling with an enormous deficit, dearly.

National’s one-time local government spokesperson once pondered a similar policy in an op-ed for the Herald, that was to return a portion of the GST collected on rates bills back to councils as another source of revenue.

That spokesman was Christopher Luxon.

Thomas Coughlan is Deputy Political Editor and covers politics from Parliament. He has worked for the Herald since 2021 and has worked in the press gallery since 2018.