Local autonomy ends when it wrecks housing affordability

Dr Eric Crampton
14 February, 2023

Chris Bishop asked an excellent question during last week’s Select Committee hearings into the government’s proposed Natural and Built Environment Act. “Where does local democracy stop and the legitimate …national interest kick in?”

The question cuts to the heart of one of the debates around resource management reform. The reforms’ scope is vast. Probably too vast for the proposed Bills. But a substantial part of the proposed reforms pulls town planning up to Regional Planning Committees, further gutting local councils while taking decisions farther away from affected communities.

Federated Farmers were in the hot-seat for Bishop’s question as one of a small number of early invited submitters. The Feds’ submission covered a long list of failings in the proposed legislation, including the potential impossibility of reconciling eighteen different competing objectives against each other. When no direction is provided, judges will wind up deciding. If the Bills are passed, it could take years to find out what the actual rules are, with projects large and small on hold in the meantime.

The Feds illustrated the problem of regionalised planning by pointing to changes in Taupō’s downtown when the motorway was rerouted. The decision, for better or worse, was made locally. Local councillors would earn kudos or brickbats as appropriate. But under the proposed planning rules, those decisions would be made in Hamilton, by a committee including one representative from Taupō. Does that seem likely to work well?

But failures in the status quo are what led to Bishop’s question. If cities’ planning rules manage to create a national housing crisis, surely central government should have something to say about it.

The urge to regionalise is not completely mad. Taking decisions away from local communities is one way of circumventing NIMBYs. And there is reasonable argument in the urban economics literature in the United States that shifting some decisions away from local communities up to the state level can help.

In 2017, Professor Edward Glaeser, arguably the world’s foremost urban economist, suggested two approaches. Higher tiers of government should override local land use controls if want of building in those places resulted in high prices. And local councils should have stronger incentives to encourage growth.

For the former, he cited Massachusetts Chapter 40B which allows builders to bypass local rules if a community has too little affordable housing.

For the latter, he pointed to other Massachusetts models that see taxes on places that consent too few houses to fund state-level transfers to places that allow more building.

Labour’s urban growth agenda, including the National Policy Statement on Urban Development and minimum residential density standards, have already started us down this path – but in blunter fashion. Both rules limit councils’ ability to block new housing.

But current restrictions are indiscriminate – applying equally to Auckland, where the median house costs about ten times median household income; Wellington, with a median multiple just over 7, and Christchurch, with a median multiple of 6.6.

Finer-tuning of national policy statements, ensuring that councils share in the benefits of growth rather than just the costs, and better infrastructure funding and financing models, could make more sense that regionalising planning.

How could it work?

Central government is already working on national standards for zoning. Currently, councils both define zoning rules and draw zoning lines on maps. But bespoke zoning rules can make consenting more difficult. A house or apartment that meets zoning requirements in one city might not elsewhere.

The government could look to Japan as model for defining urban zones. There, central government defines twelve zones and local councils decide which zones apply in which places.

But rather than prescribe which specific activities are allowed within each zone, zones instead set a maximum amount of allowed nuisance. The lowest-density residential zone allows low-rise residential – as well as schools and small shops. The next zone allows taller residential buildings as well as larger shops. And so on up the line.

Interesting options start opening up. A city that has maintained affordable housing could be allowed flexibility to draw zoning lines on maps as it liked. But one where housing is too expensive could face restrictions on the proportion of usable land under different designations.

Cities could then regain more autonomy by restoring housing affordability or lose it by being too restrictive.

It’s also a better answer to Chris Bishop’s pointed question at Select Committee. Both National and Labour have been frustrated when local councils have blocked housing growth. But pulling planning up to regional planning committees isn’t the only answer.

Improving the incentives councils face would help, but changing planning cultures within councils could take years. In the meantime, local democratic planning autonomy could be maintained – but under restrictions preventing it from contributing to a national housing shortage and affordability crisis.

Regional Spatial Planning is only a small part of overall resource management reform. The legislation currently being considered by Select Committee is vast. Too much of it heads off on the wrong path entirely, risking making things worse. The New Zealand Initiative’s submission echoed Federated Farmers’ call for a do-over. There are better alternatives – including ones that could be implemented while having a broader re-think of resource management.

Read more

Stay in the loop: Subscribe to updates