Does the NPS mean Affordable Housing?

The National Policy Statement that the government recently inserted into the RMA is designed to ensure our cities grow efficiently and effectively. The one thing it does not promise is affordable housing. Not in so many words anyway. So can we expect house prices to come back to sane levels? In most places the NPS will either be overkill or contribute to holding prices down. In Auckland it may be too late; we may need some other circuit-breaker before this measure has any effect.

As a matter of definition, affordability is an attribute of the whole market. Demographia defines housing affordability as a market where the median house costs three times the median household income. In Auckland that ratio is currently about 13. The problems caused by unaffordable housing do not go away when authorities insert a small number of "affordable" houses into a market (usually only affordable when compared to what everyone else has to pay). So we should be looking at the housing market as a whole.

Those eye-watering house prices in Auckland are not the fault of a taste for McMansions or inefficient construction or even a duopoly in the building supplies industry. It is purely because of how much it costs to buy developable land off someone who already owns it. A developer cannot survey sections, build streets and footpaths let alone sell sections for building without first buying a block of bare land. The problem in New Zealand is that there isn't very much of that land available so landowners in some markets have learnt they can hold out for a very high price for their land. Hold on, you say, there is open land as far as the eye can see. That is true but one property right you don't have is to convert your land for another purpose without the express permission of your local council. They specify very small areas where land is allowed to be converted from rural to urban uses. Unsurprisingly landowners within those tiny areas have discovered they hold all the market power and are happy to refuse to sell until they are offered top dollar. This is what the NPS might be trying to break.'

It would be great if the NPS did break that practice but there are some very high barriers:

• existing expectations - whether farmers or professional land-bankers the current owners have deeply rooted expectations of financial return
• the net is still not spread wide enough - Auckland has to have almost four years of developable land available at any one time; if not enough landowners agree to sell in any one year then the backlog will get higher and prices will be supported
• demand will remain low - this is counter-intuitive but true. As land prices rise the cost of any house built on a section rises and the number of people who can afford them get fewer. Although there is a real demand for more houses out in the real world the actual size of the development and construction market is way smaller. This market is clearing and sustainable at current levels and it doesn't really care what happens to those who are priced out.

The chances are that both insufficient demand for bare land and high expectations among sellers will conspire to keep prices high.

Urban Development Capacity 2016: A First Look at the new National Policy Statement

The current government has struggled for years to come up with a meaningful response to the housing crisis in Auckland. The latest attempt is the issuance of a National Policy Statement ("NPS") to form part of the Resource Management Act. In effect it tells councils to get ahead of the curve in terms of ensuring enough land is available for residential and commercial development in the short, medium and long term.

At first glance what's not to like about this? Some councils are notoriously slow at rezoning land or, instead, for promoting development in areas where the market doesn't want to go. Setting councils' first priority as housing their population over the prettiness of their city is not a bad idea.

At the heart of the NPS is the requirement to ensure that sufficient "development capacity" exists to meet predicted demand. This capacity includes not only land zoned for (re-)development but also "the provision of adequate development infrastructure to support the development of the land".

It is that last bit that will cause no end of problems.

Providing infrastructure is not a function or responsibility of a council under the RMA. In fact, as far as I can tell, it isn't a statutory responsibility of a council at all. We are used to the idea that councils operate water systems and roads but, technically, they do it voluntarily. All over New Zealand you can find examples of properties that opt out of those systems and there really isn't a rule that says that councils must be the provider.

So this NPS seems to be imposing a statutory obligation on councils that doesn't currently exist.

Minister Smith placed great weight on a decision of the Supreme Court (EDS v NZ King Salmon) to legitimise the use and power of an NPS. The majority opinion certainly reinforces the power of a NPS to "over-ride" the RMA. But I suspect that he glossed over para 88 in which the Court allowed for the possibility that an NPS can be invalid or unlawful. In this particular case that possibility was never raised.

Not being a lawyer I will have to leave it to others to speculate on the validity of the NPS. But it is possible that, like Minister Smith's idea to develop housing on Crown land in Auckland already promised to others, this idea will be a non-starter.

Update 13:38:

I have had some feedback from public law experts who assure me that this is all perfectly kosher. None of the lawyers who submitted on the draft NPS raised any questions of validity. 

Strangely, I am more worried now than I was. Before, I thought the whole thing could get struck down in court; now it seems the Minister for the Environment has wide-ranging, self-granted powers to intervene directly in our councils' core business. And this process sets a precedent for further unilateral controls being imposed over local government in the future in which Parliament will have no say.

Mayor Goff Doesn't Need BFF's Like These

Labour are promising to co-fund light rail from the Auckland CBD out to Mt Roskill. Others will debate the merits or otherwise of that investment. But, at the moment, Phil Goff does not need that kind of distraction. 

As the new Mayor of Auckland, Goff's feet are barely under the table and he is now facing the unenviable task of getting his head around the task ahead. The Auckland Mayor has the statutory responsibility to "lead" the budget process. Hard though it is to believe, the 2017-18 budget is likely already well on the way to being drafted. Goff will get some chances to do some nudging if he already has clear thoughts already on where the budget should go. And he doesn't have long to do it.

Remember that the budget still has to go to the full Council and then to the public before it gets finalised by the full Council in June next year. The realities of the process of pulling together such a massive budget (probably 1,000's of spreadsheet pages) mean that Goff has only a couple of months to put up any significant changes to what was signalled in last year's Ten Year Plan. And then he has has to start the political process of getting a majority of councillors to support his plan.

While it's lovely that Goff's former colleagues (isn't six weeks a long time?) are willing to promise him lots of taxpayer money, Goff also has councillors such as Cr Quax pushing hard for a massive release of new building sites to lower the price of houses in the city. Realistically, that can only happen if new transport links are built around the outer suburbs as a matter of priority.

So, Goff has some serious work to do to get his head around these issues and, then, take a position on the best priorities for the city. The last thing he needs is his old friends blowing the vuvuzela in his ear.