For years the government has been targeting increasing land supply in an attempt to improve housing affordability.

The first attempt was by introducing new national direction under the Resource Management Act 1991 (RMA) with the National Policy Statement on Urban Development Capacity 2016, which shone a spotlight on urban centres with high demand for growth and required councils to identify and plan for urban development capacity.

The National Policy Statement on Urban Development Capacity 2016 was quickly replaced by the National Policy Statement on Urban Development 2020 (NPS-UD) as part of government’s Urban Growth Agenda.

The NPS-UD took a more direct approach. Among other things, it mandated that highest growth (tier 1) councils provide as much development capacity as possible in city centres and allow development of at least six storeys in metropolitan centres and areas near rapid transit stops.

RULE BOOKS

Still not satisfied, as David Parker put it, the government “drew Excalibur” and slashed further constraints on land supply. With cross-party support the government introduced the Resource Management (Enabling Housing Supply and Other Matters) Amendment Act 2021. The act amends the RMA and requires tier 1 councils to amend their planning rule books to enable up to three, three-storey dwellings on any residential zoned land without requiring resource consent.

In addition to enabling intensive development on residential land, the act provides enabling development standards known as the Medium Density Residential Standards (MDRS), which address matters such as height in relation to boundary, setbacks, building coverage etc. The MDRS must be implemented unless a “qualifying matter” applies, meaning less intensive development is enabled.

Provided a proposal meets the MDRS, resource consent is not required, so there can be no scrutiny on issues like urban design.

The 14 tier 1 district councils were required to notify amendments to their district plans by August 20, 2022, and most did.

WHAT’S HAPPENING?

The Intensification Planning Instruments (IPIs) that implement the NPS-UD and the MDRS have been notified, and hearings are beginning. Over the coming months independent hearings panels will grapple with how best to intensify tier 1 cities.

Battle lines have been drawn and it’s clear intensification is not necessarily going to be a fait accompli. Leaving aside regional quirks like Auckland Council’s love of “special character” suburbs and its yet-to-be-determined light rail corridor, the most common and most contentious “qualifying matter” seems to be infrastructure
capacity.

This won’t be a surprise. The property development industry has long flagged that the timing and cost of infrastructure delivery is one of the main constraints on
residential development.

SAVVY DEVELOPERS

Savvy property developers and investors might also be alarmed at the attempts by councils or submitters to introduce other changes to district plans under the guise of financial contributions regimes or provisions that “support” the implementation of the NPS-UD or the MDRS.

The Waikato IPIs, for example, face submissions seeking that property developers contribute land or money to fund affordable housing development. This is a social vs economic conversation that is beyond the reach of the NPS-UD and MDRS.

Now we are part-way through the process of implementing the NPS-UD and MDRS, assessing the success of the Resource Management (Enabling Housing Supply and Other Matters) Amendment Act 2021 involves slightly less crystal-ball gazing.

Welcome changes are likely to result for developers or investors considering subdividing or building in the backyard. However, infill development can only provide so much additional capacity.

While land supply is often blamed for housing affordability issues, the reality is that there are other short, medium and long-term impediments to delivering
quality affordable housing at scale.

Enabling three, three-storey dwellings in residential areas will not address the cost of building materials, shortage of skilled labour, nor miraculously build roading and Three Waters infrastructure. That said, for shrewd investors following the process, it is likely there is money to be made, at least until markets are flooded with cookie-cutter developments of three, three-storey dwellings.