Nats’ housing policy change: What does it mean for developers?

Wednesday, 31 May 2023

National’s new housing policy will not create the cities New Zealand needs, one apartment developer says.

The Opposition has abandoned much of its support for the bi-partisan housing intensification deal it announced with Labour in late 2021.

That agreement allowed the construction of buildings of up to three storeys on most sites in Auckland, Hamilton, Wellington and Christchurch without the need for resource consent.

It supplemented the Government’s National Policy Statement on Urban Development (NPS-UD), which banned height limits of less than six storeys and removed car parking requirements in urban areas.

But last week National leader Chris Luxon said his party was “wrong”, and National housing spokesperson Chris Bishop subsequently announced the party’s new policy, which would force councils in major towns and cities to zone for 30 years’ worth of growth immediately.

Councils could do this through greenfield development or greater density, particularly along transport corridors, but they would also be able to opt out of the Medium Density Residential Zone law, Bishop said.

National still supported the NPS-UD, and it would introduce a $1 billion fund for councils to incentivise the delivery of new housing, he said.

Ockham Residential co-founder Mark Todd said the policy would be a boon for greenfield development, but would not lead to the construction of compact, well-connected cities for the next century.

New Zealand’s construction sector was not about home building, and making innovative use of available land, rather it was about speculative land development, because it was easier and more profitable, he said.

“But how many cities do you have to look at to see that sprawl does not work?

“And will it lower the cost of housing overall, or the actual cost of a house? No, because greenfield development needs new infrastructure to support it, and that is expensive.”

Private interests were the “tail wagging the dog” and pushing for subdivisions in areas such as Kumeu and Pukekohe in Auckland, and against the construction of high quality apartments in the city, he said.

Todd said New Zealand’s cities were not going to run out of urban land for redevelopment, and pointed to London as an example of a city a thousand years ahead, which continued to regenerate.

In Auckland, it would take 60 years to fully develop all the land around public transport corridors which was zoned for denser building in the Unitary Plan, he said.

“But getting rid of the medium density rules is a good idea because they make it easier for people to build lots of poor-quality, terraced housing, and do not encourage more efficient and innovative use of land.”

To support better development in areas already zoned for it, there needed to be increased funding to upgrade existing infrastructure, which was suffering due to decades of under-investment, he said.

“National’s $1b fund is also a good idea, but there should also be incentives to encourage developers to build good apartment buildings, rather than car-centric subdivisions.”

Property developer and commentator David Whitburn said National’s opt-out of the medium density rules would have little impact on developers because many still worked to the rules in place before the policy’s introduction.

There had been resistance to the medium density rules from councils, and resident associations, and the changes to local district plans required by the rules largely remained under negotiation, he said.

In Christchurch the council voted not to adopt the rules, the Government appointed a Crown observer, and the process was delayed. In Auckland the council was given a one-year extension on the introduction of the rules due to the January floods.

Whitburn, who was a supporter of the medium density rules, and of more compact cities, said many developers were waiting to see what the end results were at a local level before rushing into anything.

National’s new policy would make it harder to subdivide large sites in brownfield areas, and to build townhouses to three levels anywhere, he said.

“That won’t be good for smaller developers, or investors who subdivide sections and do small developments, but it won’t be a big issue for professional developers.

“In Auckland under the Unitary Plan, and the NPS-UD, there is plenty of existing urban land zoned for denser development anyway, although National’s policy will encourage more expensive sprawl.”

Additional infrastructure funding was welcome, as issues around it were holding development back, but developers still had to pay development contributions, and they were more for greenfield development, he said.

Southeast Auckland valuer Rene Mclean, who recently completed a small development, said if someone had bought a section in a former single house zone suburb, such as Cockle Bay, to build townhouses on that would be difficult under National’s new policy.

But he had not seen evidence of developers buying up large sections in suburbs, such as Cockle Bay, following the announcement of the medium density rules, so such situations were likely to be rare, he said.

“Purchasing of sections suitable for development has eased up a lot anyway, because in the current environment it is very hard to make the numbers work.That is particularly the case for developers who bought land for high sums at the peak of the market.”

National’s backtrack on the medium density rules was sensible in Auckland at least, because the Unitary Plan meant there was scope for denser development in most of the city, he said.

“It will always be contentious in certain walkable catchment areas, but most people don’t realise just how much of Auckland’s urban land is already zoned for denser housing.”

The big issue with housing development, even small-scale development, was that it invariably took longer, and cost more than planned, and that was not going to change, he said.