What might change in housing and urban development

One of the more surprising events during 2021 lockdown was the bipartisan agreement between National and Labour to address New Zealand's housing crisis. This agreement resulted in the Resource Management (Enabling Housing Supply and Other Matters) Amendment Act which set in motion Intensification Planning Instruments (IPI) to give effect to new, enabling Medium Density Residential Standards (MDRS).

The new standards enable significant housing intensification in most residential zones in New Zealand's cities by allowing three houses at three storeys as of right (with even more permissive standards around rapid transit).

While the MDRS has created immediate opportunities for development (a number of the provisions have immediate effect and the tight timeframes have sped up Council plan change processes), it has proved to be a blunt instrument for a problem which is much more nuanced. Increasing density in existing areas has benefits for the patronage of public transport but in some areas poses a problem for infrastructure providers who are now faced with the need to service unknown amounts of development that could pop up without notice anywhere in an MDRS area. This potentially imposes a significant burden on infrastructure services that are already at capacity. Different local authorities have attempted to deal with these issues by including infrastructure constraints as a qualifying matter.

The severe weather events of this year have also put squarely in focus that intensified development is not appropriate for all areas. Allowing such development as a permitted activity means local authorities do not have any control over development in flood plains and other areas at risk of the effects of climate change. Auckland and Hamilton have received extensions to the statutory timeframes to reassess their IPI plan changes to address such issues. However, there remains a real concern that the MDRS will allow unrestrained development that has not been thoughtfully planned in inappropriate areas.

The National Party has announced that it proposes to retain the rules requiring councils to zone for at least six storeys in catchments near rapid transit, but otherwise let councils opt out of the MDRS and remove or weaken urban limits. The stick for councils choosing to opt out is that they will need to demonstrate they have enough land zoned for 30 years of development, and with such land immediately available for that purpose.

The support for MDRS amongst councils has been lukewarm at best and we can see several councils seeking to withdraw their plan changes if the Enabling Housing Supply provisions are repealed post-election. However, any withdrawal will not reverse development that has already been undertaken in reliance on the MDRS provisions that had immediate legal effect. A number of the IPI processes will either have had decisions issued or hearings completed and awaiting decisions at the time of the election. For councils that have already completed the process, the MDRS provisions will remain in place unless any new government introduces legislation that automatically removes plan provisions included under an IPI process (which we consider unlikely). This could mean that we end up with a situation where the MDRS is applied in Kāpiti, Selwyn and Lower Hutt but not in Auckland and Hamilton.

In our view, the MDRS experiment has created some positive impetus around what is actually required to address New Zealand's housing shortages, but ultimately the MDRS lacked balance. Likewise, balance is required in any proposal relating to urban limits. Allowing carefully considered expansion of urban limits is sensible, particularly in light of the NPS-UD's requirement for responsive planning. However, entirely removing urban limits will create uncertainty for both developers and infrastructure providers, as well as undermining the benefits of compact urban form by potentially enabling urban sprawl. Requiring councils to have zoned land for 30 years of development is likely to create similar issues to the MDRS, with rushed decisions on zoning in potentially inappropriate areas and a lack of integrated and proactive planning, as well as potentially significant development contributions as councils grapple with development that is not aligned with planned infrastructure investment.

Providing for flexibility and nuance to appropriately cater for the variety of local circumstances and community needs would be a sensible course correct. The NPS-UD provides overall direction to local authorities on the need to assess demand, and then provide adequate housing supply, with a focus on development around transport nodes. We think it reasonable that Central Government reserves powers to use levers in the event local authorities are not acting, but it needs to be a high threshold with the realisation that changes in plan settings take a while to filter through to the market.

Other articles in this series

You can access article one in this series here: What would we change in freshwater policy?

You can access article two in this series here: A rethink of the NPS-IB

You can access article three in this series here: how can we improve the National Policy Statement for Highly Productive Land