City planners have done terrible things to housing affordability. While improving the RMA is an important step in stemming the madness, it’s only a first step. So long as the underlying incentives for city councils do not change, the benefits that come from changing the RMA are likely short-term.

When the RMA was introduced, it was meant to simplify things. It provided the framework within which councils developed District Plans and the mechanism for enforcing those plans. The RMA did not force councils to introduce absurd requirements on new developments ramping up costs. But it enabled them to do it, and gave councils something external to blame whenever they were criticised for doing silly things.

And boy have councils done some silly things. The Motu working paper by Arthur Grimes and Ian Mitchell, commissioned by Treasury and cited extensively in Nick Smith’s speech on the RMA, tallied some of the costs. Auckland Council’s decisions around mandatory ceiling heights add about $20,000 per apartment. Mandatory balcony areas tack on another $40,000 to $70,000. At the same time as Council has made it hard to expand on the Auckland’s fringes, they’ve also banned building tall buildings: building height limits add $18,000 to $32,000 per apartment.

If councils are determined to commit absurdities, they’re going to do it regardless of fixes to the RMA. After whatever legislative tweaks are enacted, and new Environment Court rulings come through, it will take councils a little while to figure out how to restart the micromanagement that pushes up costs and helps make New Zealand the seventh least affordable place to live in the world.

Councils don’t care about the effects of their planning rules on the macroeconomy, what it does to Reserve Bank policy, or whether it utterly ruins the economy. For them, that’s all under a great big Somebody Else’s Problem shield of invisibility. Councils’ problem is making sure that councillors get re-elected. That means not hiking property taxes too much (and so loading costs onto new developments) and making sure that the short term interests of current voters, and of the loudest voters, are prioritised over the interests of those who might be in town after the next election, if development were allowed. Dumb rules that hike costs could be the desired outcome, not an unintended consequence.

This basic calculus will not change much until councils’ incentives are fixed. Until councils see development – industrial, residential, and commercial – as a profit centre rather than a source of NIMBY hassles and infrastructure costs, they will find a way of blocking development. Whatever fixes Nick Smith proposes might only work until councils again find a way of routing around it. The New Zealand Initiative consequently will be studying local government finances over the coming year.