The Initiative has, since its founding, undertaken substantial research into housing supply, zoning, and local government. About a third of the Initiative’s work for the past decade has been devoted to housing and local government. It includes over sixty reports, research notes, policy briefings, and submissions.
We strongly support the intentions of the Bill. This submission explains why we think it is important, how New Zealand came to require this kind of measure, and what complementary policy initiatives will be necessary to enable this Bill to have its desired effect.
- In summary, New Zealand has far too few houses. We have too few houses because councils have zoned against increasing housing supply in the places where people want to live. When cities are not allowed to grow up or grow out, or both, in response to population change or population increase, shortages develop and prices increase.
- Councils engage in this kind of zoning behaviour because it has been strongly in their interest to do so. For a council at or near its debt limit, funding and financing the infrastructure necessary to support growth is difficult. And when infrastructure costs fall on the community more generally, rather than on the beneficiaries of that new infrastructure in particular, existing residents’ opposition to growth
- The tools available to councils to finance this growth were removed in the Bassett reforms. Since then, councils have come to use zoning and consenting policy to protect their balance sheets. When central government draws the lion’s share of the benefits when councils enable growth through increased company tax, GST, and income tax, councils are left with an infrastructure bill that is difficult to fund or finance. Conflict between central and local government is inevitable.
- Allowing more building is critically important. There is arguably no greater first-order problem facing the country. The effects of housing shortages are pervasive. Councils face incentives that cause them to use zoning and consenting to protect their balance sheets. Forbidding more intensive development in places where people want to live is one way councils avoid the trunk infrastructure upgrade costs that can come with urban growth. Requiring councils to zone for more intensive development, as the Bill proposes, closes off that option. But where the underlying incentives facing councils have not changed, councils will look for other tools to protect their balance sheets against the costs they face.
- Consequently, we urge the government not only to enable greater housing supply by banning low-density zoning in Tier 1 cities, but also to encourage councils to welcome growth as a benefit to be sought rather than a cost to be mitigated through zoning and consenting.
- Central government can do this by enabling better infrastructure and financing tools for local councils. Councils need the ability to issue debt that is backed by the revenues that flow from new infrastructure projects, with no recourse to councils’ main balance sheets if the revenues from the project are less than expected. Central government should also consider sharing some of the benefits of urban growth with councils.
Finally, the legislation should be strengthened to allow a broader range of activity. More intensive urban forms will require more services in local communities. At the same time, the Commerce Commission identified zoning as a substantial barrier to competition in its market study into the grocery industry. We consequently urge the government to amend the legislation to allow property owners to build more homes on their property by-right, and to build a supermarket.