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The NZ Housing Crisis Silver Bullet

2020-12-14

Helping councils will help solve the housing affordability crisis in New Zealand.

Housing crisis solution Ian McComb Small Time Developments

Our current RMA (Resource Management Act, 1991) and LGA (Local Government Act, 2002) mix just does not work.  It is not facilitating improved housing conditions (as discussed in this article),  or even infrastructure maintenance as suggested here.  

Housing needs have changed, and our system needs to change too.  The Government will argue that they are doing it BUT the recent National Policy Statement on Urban Development continues the “push” (telling rather than helping) approach from central government which I don’t believe will ever solve the problem.

I’m sure you have seen many articles on the subject. I have too and believe this one is the closest to the mark on the current situation.

Note: see end of article for all hyperlinks in full

Council needs money and the incentive to act.  In a nutshell, I believe that councils do not have the money to:

  • adequately plan growth;
  • fund infrastructure to support growth;
  • employ (and retain) enough staff to process consents efficiently; or
  • deal with any unanticipated side effects of growth, e.g. unexpected congestion, and demand on parks and other council facilities.

As a result, councils often slow all the processes down.  The thing is, this is not their fault as they are operating under the rules, laws and funding mechanisms set by central government.

Even when a local council is doing its best to support the development of housing, under the current system they simply do not have the resources available to do the job well or in a timely manner.  Local Government New Zealand has been campaigning on this issue for some time, as discussed here.

This graph shows one aspect of the issue – the increasing gap between central government tax revenue and local government rates revenue.  Rates income is not designed to cover all the costs of growth planning and delivery, and the supplementary methods of Development and Financial Contributions also fail to solve the issue as these systems often require
pre-funding of works by councils and they have regulatory limits on the total debt that they can take on.

housing crisis solution Ian McComb Small Time Developments
housing crisis solution Ian McComb Small Time Developments

The Productivity Commission has also identified the significant financial pressures on councils. 

We need to focus on changes to the existing system rather than divert our attention to creating a new, elaborate funding system or a new government housing agency, as suggested in this article.

We need to make a simpler and more effective change that incentivises action:

Councils should be granted funds on the basis of square metres of completed buildings in their area.

The idea is that once a Code of Compliance Certificate is created, councils are paid say $100 per square metre of completed building consent, within their jurisdiction, via their monthly GST return.  Simple.

This significant, additional funds transfer would give councils the cash flow they need to solve most, if not all, of their funding issues related to growth, and to manage associated social and environmental impacts of development.  This would be a significant carrot to those councils who are currently resisting development, because there would be a clear relationship between new development and councils having additional funding to upgrade infrastructure and services. 

This is a simple and balanced approach whereby central government still gets the GST income associated with infrastructure, commercial development, and the ongoing higher GDP in areas of housing growth – hence the net effect to the Government’s balance sheet would be minimised.

I believe most councils would actively provide for new development in this new financial environment.

Housing crisis solution Ian McComb Small Time Developments

There are other key difficulties which are adding to our housing shortage at a council level:

  • the generally adversarial nature of the relationship between developers and councils;
  • the resistance to change at community and council level (the recent NPS cracks some of this - as discussed in this article); 
  • the minimum lot sizes required by some councils, which are hampering the provision of affordable housing; and
  • the legal “joint and several” rather than “proportional” liability exposure for councils for errors, which makes them very risk adverse. This article discusses how Auckland Council has lobbied for a change.
Other actions to resolve the housing crisis

The good news?  Well, there are many ideas already on the table to assist us in this crisis.  For example, the large-scale powers of the Urban Development Authority, and the Government’s proposed RMA reforms to improve urban planning are part of the solution.  Another example is the aim to streamline district plans around the country, so they are mostly the same, which is a very good idea.

However, I believe the biggest challenge is still the conversation between central and local government.  Local government needs more incentives to develop rather than further rules and policy direction from central government. 

And finally, I was convinced pre-COVID that the world situation was going to lead to more Kiwis coming home.  Now I believe that the Government should expect that many Kiwis will be returning home and the housing crisis could become very significant to the point where quick but poor-quality solutions (such as 20 storey concrete flats) are proposed.

This country is suffering from a massive shortage of affordable and, in particular, smaller houses.  Hence, we need as many high quality yet affordable houses as we can get, as soon as possible. 

 

The funding relationship between central and local government is a major part of this problem.  It’s not going to be solved by simply replacing the RMA either (which will result in years of inaction as councils adjust to the change), or other changes that seek to push councils to take action.

The silver bullet solution needs to include a loosening of Wellington’s purse strings in a way that incentivises councils to take action. 

Let’s sort it out!

I’d be happy to hear from any of you who can help get this message across to Cabinet.

Housing crisis solution Ian McComb Small Time Developments

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