Councils have a statutory responsibility to promote the social, economic, environmental and cultural well- being of their communities. As such, councils must make trade-offs between multiple objectives.
There are many reasons that can be advanced to support Smart Growth policies, urban limits or restrictions on building. These include limiting environmental effects such as pollutants, protecting farmland, or loss of amenity from the loss of open countryside, and maintaining the character of existing neighbourhoods. However these wider ‘environmental impacts’ need to be set against the stark reality that these policies result in people paying more for housing than they otherwise would have, with the additional costs and consequences quite possibly outweighing the potential benefits of more restricted urban form. There is a significant body of evidence that the policies of urban containment have negative consequences for
F7.6
Promoting greater affordability of land and houses and providing for diverse demand canbe addressed by:
An active approach to the identification, consenting, release, and development of land for housing in the inner city, suburbs, and city edge.
Adopting a strategy that allows for both intensification within existing urban boundaries and orderly expansion beyond them to promote efficient urban
development, offer a range of lifestyles, and avoid imposing unreasonable and costly constraints on individual segments within the housing market by recognising the benefits of advancing multiple forms of development.
Identifying substantial areas of brownfield and greenfield land for development, (acknowledging that greenfield development also provides an opportunity to achieve medium-density development) and provision for more efficient use of existing suburban areas through infill where practical.
Promoting competition between developers for the sale of construction-ready sections.
R7.8
Territorial authorities: Take a less constrained approach to the identification, consenting, release, and development of land for housing in the inner city, suburbs, and city edge.
Adopt a strategy that allows for both intensification within existing urban boundaries and orderly expansion beyond them.
Develop strategies that promote adequate competition between developers for the right to develop land.
housing affordability. Indeed, some researchers have concluded that Smart Growth and affordable housing are inconsistent goals for a single community to pursue simultaneously (Downs, 2005, p. 371).
It is concerning that councils may be unaware of the impact of policies that constrain or limit the supply of land for housing; dispute the “disproportionate weight given to the effect of local government policies” (Auckland Council, sub. DR142, p. 3); or claim that “other factors will play a significant and more immediate role in improving housing affordability” (Tauranga City Council, sub. DR77, p. 3). In some councils there are restrictive land covenants (including minimum house or lot size), or rules for sunlight access, height controls, boundary setbacks, road reserve and encroachment licences that undermine an overarching policy of containment. Even if other factors (for example, a decline in construction costs) favour lower-cost housing, they cannot be expected to be fully reflected in house prices if land for housing is in short supply relative to demand.
The introduction to this chapter outlined a history of urban planning – an evolution from a narrow focus on land use provisions, through a heightened concern with environmental matters, to today’s holistic
consideration of multiple dimensions of wellbeing. There is a question as to whether the planning discipline is equipped to evaluate and reconcile these dimensions.
Making trade-offs is difficult. It is made difficult if councils do not have the tools or information to make informed decisions. It is made even more difficult if there is a complex set of institutional arrangements in which decisions must be made. Planning must take account of the LGA, the RMA and the LTMA. These statutes have different legal purposes, timeframes, processes and criteria. With multiple participants and decision-makers, there is no single mechanism for facilitating engagement, securing agreement among participants, and providing information for robust decision-making.
A consequence of local government planning policies is the spill-over effects for central government. Unaffordable housing increases the requirement for state-sponsored or subsidised housing while high rentals and house prices increase the demand for welfare assistance by way of the Accommodation Supplement. The other manifestation of housing shortages – overcrowding and dependence on poor quality housing stock – impacts adversely on health, education and community outcomes, as identified in submissions by the Ministry of Social Development (sub. 5), the Families Commission (sub. 9), the Auckland Regional Public Health Service (sub. 10) and others. This stores up long-term fiscal liabilities and potentially undermines productivity and national wealth. There appears to be an absence of a suitably balanced framework in which the impacts of local government decisions – in this case relating to urban land use – on wider government policies, programmes and objectives can be examined.
Resolving the issues surrounding the legal, institutional and decision-making frameworks in which urban planning occurs will take time. However, there are a number of measures that councils should progress that will remove impediments to the supply of housing. Specifically, a more balanced approach to urban
planning is required in the interests of housing affordability. Land for housing can come from the development of brownfields sites, by infill development in existing suburbs, and by making suitable greenfields sites available, ideally in a complementary manner and in a way that provides for substantial short-, medium- and long-term capacity.
This chapter has made a number of recommendations that councils could adopt to increase the amount of land for housing and speed up the process of land release. In Auckland new institutional arrangements, with the mandate to assemble and develop land and facilitate provision of infrastructure, might be needed to respond to the urgency of the situation.
8 Paying for infrastructure development
8.1 Introduction
Housing developments require infrastructure services such as roads, water supply, sewerage and electricity, as well as community facilities such as parks and libraries, much of which needs to be in place before houses are built. This infrastructure is typically expensive and it has to be paid for. The incremental costs of
providing some kinds of infrastructure can vary significantly between areas, depending on factors such as the nature of the terrain, distance from other infrastructure assets, and the age and state of repair of related network assets. For example, the costs of infrastructure in ‘greenfields’ areas may be pushed up if these areas are remote, but on the other hand it can be expensive to build infrastructure to service less remote infill developments if this involves retrofitting assets in already built-up areas.
Key points
In principle, the case for development contributions is strong. Linking the payment made for some types of additional infrastructure to the benefits received helps to ensure that investment reflects its opportunity cost and that locational decisions are efficient. Linking benefits and payments is also likely to be equitable.
Development and financial contributions are applied widely in New Zealand to recover some infrastructure costs. The level of charges varies considerably, but can be significant. They are not large enough to explain the surge in house prices in the early 2000s, but have affected
affordability.
Designing and implementing charges for infrastructure that accurately reflect incremental costs is difficult, and there is concern about the way these charges – particularly development
contributions – are applied. These concerns relate to their efficiency, impacts on housing affordability, whether they should be levied up-front or over time, the transparency of the processes through which they are determined, and the capabilities of councils to set charges. Given the benefits of properly structured development contributions, a strategy is required that
helps local government to improve continuously the way it implements these charges and strengthens its incentives to do so.
The Government should update the Best Practice Guidelines to Development Contributions written in 2003 and enhance training in their implementation.
- The process for developing the guidelines should be based on broad consultation, and cover matters such as when the contributions should be applied, how they should be calculated and how costs should be recovered.
Conformity with the guidelines would be encouraged by:
- making it a legal requirement that councils have regard to the guidelines and with broad principles that would be legislated;
- better reporting by councils of how they are complying with them;
- external assessment of performance to encourage continuous improvement.
Increasing the scope for mediating disputes about development contributions would further strengthen incentives for good outcomes. The Department of Building and Housing should monitor how well this is working and whether there is a need to facilitate access to legal appeals.
Since the 1970s, growing numbers of local governments internationally have been charging developers directly for infrastructure, rather than recovering the costs through their general property rates or other tax revenue (Appendix E). This is justified partly on the basis that it is equitable that those who require the infrastructure should pay for it. Charging for infrastructure can also foster efficient location decisions that reflect the incremental costs of servicing particular locations. This can be particularly attractive for councils seeking to control the costs of providing infrastructure by encouraging expansion into areas that are less costly to service:
In principle, efficient provision of infrastructure would be encouraged where its users pay for the construction of infrastructure that would be avoidable (that is, not needed) if the development did not proceed. By levying infrastructure charges that reflect these costs … governments provide signals to develop housing in ways and places of greatest value … in the absence of pricing, developers build without regard to such costs, and governments are likely to rely on other policy instruments, such as planning regulations, to limit the costs of infrastructure associated with housing developments. The absence of effective infrastructure pricing increases the need for development regulations. (Australia’s Future Tax System 2010, pp. 423-424)
Similarly, the Australian Productivity Commission argues that:
…linkage between the benefit received and the payment made is particularly important in helping to ensure that the level of investment in housing reflects its opportunity cost and that efficient locational choices are made. (Australian Productivity Commission 2004, p. 166)
It is, however, difficult to design and implement charges that accurately reflect the incremental costs of providing infrastructure to particular developments. Parts of the housing industry are concerned that infrastructure charges fall short of the theoretical efficiency and equity ideal, and diminish affordability. This chapter examines these concerns and suggests a way forward.
Section 8.2 describes the nature of infrastructure and different ways to fund it, and section 8.3 explains how infrastructure charges are used in New Zealand. Section 8.4 considers how these charges affect affordability and section 8.5 summarises problems that submissions and commentators have identified with them. Section 8.6 suggests ways to address these problems.