The Productivity Commission has released a draft report into the processes that New Zealand’s fastest growing cities use to provide land for housing. The report finds that more could be done to enable cities to accommodate growing populations and includes 38 draft recommendations.

1. Using land for housing
Draft 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
2
Council planning
and consenting
Provision of
infrastructure
Community
involvement and
engagement
International
practices
Identify
leading
practices

3. 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

4. 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
5Source: Productivity Commission based on Auckland Council data.
Building consents and projected housing demand in Auckland

6. 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
6

7. Consequences of a poorly performing
housing market
7Source: 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
8

9. Most intensification in Auckland has
occurred outside the isthmus
9

10. 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
10
Impact of different levels of land readiness on the housing supply chain

11. 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
11

12. 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
12

13. 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
13

14. How a UDA can address barriers to
resolving land supply
14

15. 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 them15

16. 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
16

17. 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