Using land for housingDraft report

June 2015

2

What have we been asked to do?

• Compare performance of high growth councils’ planning and development processes – do they deliver an adequate

supply of land for housing?

• Investigate supply of infrastructure– including funding and

governance of water and transport

Council planning and consenting

Provision of infrastructure

Community involvement and

engagement

International practices

Identify leading

practices

Some of New Zealand’s cities will continue to grow rapidly in the coming years

3Source: Productivity Commission analysis of Statistics New Zealand data.

Average annual absolute population growth , 2001 – 2013

New Zealand cities have struggled to respond to population growth

4Source: Productivity Commission analysis of Quotable Value data.

Nominal median land values in high-growth areas

5

Projected supply in Auckland is well short of what is needed

Source: Productivity Commission based on Auckland Council data.

Building consents and projected housing demand in Auckland

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Allowing cities to grow matters for economic growth and individual wellbeing

• Well functioning cities enable agglomeration benefits• City growth also creates costs, eg, pressure on

infrastructure and housing• This puts a premium on good city organisation and

on the ability to plan for growth• National and local interests regarding city size are not

always aligned

7

Consequences of a poorly performing housing market

Source: Productivity Commission analysis of Statistics New Zealand data.

Share of New Zealand’s population living in crowded and severely crowded housing, 1991–2013

8

City planning and regulation can work better

• The planning system is complex and poorly suited to fast-growing cities

• We are proposing a new planning avenue that integrates spatial planning and land-use regulation for high-growth cities

• Some land use rules help to make cities work better• But the cost of some rules exceed the likely benefits:

– Minimum parking requirements– Mandatory balconies for apartments– Minimum floor sizes for apartments– Height and density restrictions

Most intensification in Auckland has occurred outside the isthmus

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Land readiness matters

• Zoned and serviced land is needed to put competitive pressure on land and house prices

• High-growth councils should set supply targets for zoned and serviced land and report publicly on their performance

• MBIE should work with councils to identify surplus land that could be reused for housing

Impact of different levels of land readiness on the housing supply chain

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Infrastructure can be a major bottleneck

• Infrastructure is a key part of the land supply chain and accounts for a significant share of total dwelling costs

• Councils tightly control the supply of infrastructure needed to support urban growth

• There can be large benefits from unlocking land supply where spare infrastructure capacity exists

• Good information and asset management (eg, WCC) is needed for effective use of infrastructure

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Funding and governance of infrastructure

• Scope to make better use of existing funding tools:– Targeted rates– User charges

• Case for MUDs and Tax Increment Financing not strong

• Debt is an important source of finance for infrastructure assets with a long life

• CCO model has potential but councils and CCOs need to be aligned re. accommodating growth

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Incentives to put land to its best use are needed

• Councils’ approach to calculating rates affects landowners incentives to develop their land

• A land value rating system encourages land to flow to its highest value use

• The direct incentives on councils to accommodate growth are weak.

• Central government incentives used overseas (eg, UK Home Bonus) have not been effective in encouraging councils to be more pro-growth

• Core Crown land is exempt from general rates. Rating Crown land would provide agencies with a disincentive to unnecessarily hold land

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How a UDA can address barriers to resolving land supply

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Top recommendations

• Allowing large cities to undertake integrated spatial planning as an alternative to current statutory planning mechanisms

• Removing costly regulations that prevent the efficient use of land for housing, eg, mandatory balconies for apartments

• Giving greater priority to cities and housing in the RMA• More user charges, particularly for water services, and the

removal of prohibitions on tolling and congestion charges• Greater use of targeted rates to fund growth infrastructure• Levying rates on Crown-owned land• Identifying and pursuing opportunities to develop Crown and local

authority land in high growth cities • Establishing a UDA to assemble sites, master-plan scale

developments, and partner with the private sector to deliver them

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Top leading practices

• Identifying all public land holdings in high-growth areas that could be released for housing

• Local authorities setting quantified land supply targets based on zoned and serviced land

• Moving more housing-related land use activities into ‘permitted’ or ‘restricted discretionary’ status in District Plans

• Increasing the take-up by councils of electronic planning tools • Making greater use of user charges (eg, volumetric water fees) • Staged infrastructure construction and developer-led

infrastructure• Effective use of asset management information systems • Establishing ‘one-stop-shops’ for planning approvals in councils

Inquiry process

Terms of reference: 9 Sept 2014

Issues paper released: 5 Nov 2014

Submissions close: 4 August 2015

Draft report released: 17 June 2015

Final report to Government: Sept 2015

More information: www.productivity.govt.nz