The Kākā by Bernard Hickey
The Kākā by Bernard Hickey
The 'Townhouse Nation' bipartisanship lasted just 112 minutes

The 'Townhouse Nation' bipartisanship lasted just 112 minutes

National sabotages housing bipartisanship move by saying 112 minutes later it would repeal Three Waters and hand assets (and debt) back to councils, slashing borrowing capacity for infrastructure

TLDR & TLDL: It all seemed too good to be true, and it turned out it was. We didn’t have to wait long to find out.

Only 112 minutes elapsed yesterday before the structural (and bipartisan) underpinning of our housing supply blockages was again revealed and we understood we were back at square one, which is: voters still don’t want to pay now (or ever) for the housing and transport intensification needed to house future generations and reduce climate emissions.

The bottom line emerged quickly in my view: neither Labour or National will allow the Crown’s balance sheet to be used to fill the nation’s gaping infrastructure deficit and ‘pay it forward’ in a way that rightly smears the costs over the next 50-100 years with debt. Neither party really wants to reverse the 30-year-long transfer of wealth now worth $1 trillion to today’s home owners from renters and the generations of non-home owners to come. Without a consensus on this, nowhere near enough houses can get built to return housing costs to affordable level. Even the bipartisan deal’s own analysis shows it will not lower prices, only slow the inflation a bit.

(FYI I’m making this one open to all and sending to both paying and free subscribers, given the public interest involved. But I’d love the free subscribers reading the detail and analysis below to subscribe fully to make my version of accountability and explanatory journalism financially viable.)

An example of a three-storey development suggested as an example by the Government of what could be built under the new rules. Photo: Supplied.

But hang on a minute. Wasn’t this a huge deal?

Let me explain, because there’ll be plenty of people, both home owners and renters, who think the rules of the game were changed fundamentally yesterday with the bipartisan accord announced at midday to allow three three-storey townhouses to be built on virtually any section in the country as of right.

On the face of it, this would mean open slather. ‘Old leafy’ NIMBY home owners in Ponsonby, Grey Lynn, Herne Bay, Parnell, Remuera, Mt Eden, Mt Victoria, Mt Newtown, Thorndon, Mt Cook Kelburn, Fendalton and Merivale would not be able to oppose neighbours building townhouses to the horizon. This announcement would further intensify the National Policy Statement on Urban Development (NPS-UD), opening up the prospect for their sun to be blotted out by next door neighbours building rows of townhouses to the horizon. That’s on top of the six storey apartments allowed on transport routes and around bus and train stations in the original NPS-UD, which they are already up in arms against.

The NIMBYs would be correct in fearing ‘Townhouse Nation’ if their councils, NZTA, the Crown and lines companies allowed this by funding the rebuilding and beefing up the pipes, roads, cycleways, walkways, bus services and train lines to handle this intensification. (Spoiler alert: Don’t worry. They won’t. This is all mostly for show).

But at first glance, it would be understandable for NIMBYs to think the worst and pro-development urban activists to celebrate, given the optics of the first joint National and Labour announcement since 2007 (when John Key and Helen Clark agreed to pass anti-smacking legislation). It is rare and notable when any minister shares the Beehive Theatrette stage with the Opposition. It looks transformational and inter-generational, and that’s how it’s supposed to look.

These bipartisan announcements have led to multi-decade settlements of deep divisions and entrenched those settlements in law and the Crown’s balance sheet. Examples include:

  • the deal Winston Peters did with Labour in 2005 (not 1999 as earlier published) to lock in NZ Superannuation at 66% of the average wage (up from a 60%-and-sinking level under National in the 1990s and 65% earlier) and for it to remain un-means-tested, which National agreed to in 2008 — that arrangement now costs us billions extra each year and no one bats an eyelid;

  • the effective bipartisan agreement in 1989 to create an independent inflation-targeting Reserve Bank with a mandate to crunch inflation down to between 0-3% (in various ranges and guises), which is still in place and has dominated how our economy and housing market has developed since then;

  • the launch in 1989 under then-Labour PM Geoffrey Palmer and the enacting in 1991 under then-National Minister Simon Upton of the Resource Management Act, which was designed to stop arms of the state and other powerful interests over-riding local interests and hurting the environment, and has dominated city planning and the housing market since;

  • the Local Government Act of 1987 and the use of the Local Government Commission from 1989 onwards in tandem with the RMA and the creation of NZTA to amalgamate 625 local authorities into 94 bodies that are governed by centrally-set financing rules and where transport is effectively run and funded centrally;

  • the Government Roading Powers Act of 1989, which led to the eventual creation of NZTA, the hypothecated National Land Transport Fund, and the arrangement that means local roads and public transport are effectively governed and half-funded centrally; and

  • the grand-daddy of them all, the Public Finance Act (1989), which forces Governments to run surpluses and repay public debt in all but the worst crises, and then only for a year or two, which has effectively created a long-run debt ceiling of around 20-30% of GDP in perpetuity and has meant the Government can’t grow to be much more than about 30% of GDP without big new taxes.

At first glance…

I initially thought this bipartisan deal to pass under urgency the Resource Management (Enabling Housing Supply and Other Matters) Amendment Bill by the end of the year might be one of these epic ground-shaking deals too. On the face of it, it seems to radically change the ability of owners of traditional single-storey stand-alone homes on suburban sections to create enormous amounts of new homes, by being able to build three brand new three-storey townhouses on the section without needing a resource consent.

It effectively removes the ability of neighbours to block these homes through the RMA, except for under some very strict and rare purely procedural methods. This really does strip NIMBYs of their power to say no relatively easily. It also turbo-charges and brings forward the National Policy Statement for Urban Development (NPS UD) by a year. It is designed to allow six-storey buildings on major transport routes and around bus and train stations, and has already caused conniptions among the old leafies and the councillors they vote for.

But then I dug beneath the surface with a few of these council and Government politicians and found the same old (and big) blockage is there and unresolved: infrastructure funding. Councils, lines companies and the Government itself will still be able to block large-scale and fast housing supply growth by starving them of infrastructure funding. You can’t treble the number of houses on a street without widening pipes, creating new public transport options and green spaces.

Councils and lines companies will be able to whack huge development contributions and capital charges onto home owners and developers in ways that deliberately stunt growth, along with changing parking rules and starving public transport of funds, as they have done for 30 years. They already do for the larger apartment developments taking advantage of the somewhat looser rules brought in for some areas in the Auckland Unitary Plan.

Just look at what’s happening in Drury in South Auckland at the moment, where neither the Government or the Auckland Council want to pay for roads, pipes and parks for new houses because it would breach their PFA-driven debt limits. The Council announced last month it would increase its development contribution charge for sections in Drury from $11,000 to $84,000, which developers and the Property Council said would simply increase the cost of new homes and reduce the number built.

In short, nothing much has changed, but it’s worth showing how nothing much has changed, if only to show what really needs to change.

What everyone else sees as a transformational deal

Firstly, back to how yesterday’s announcements played out and have been portrayed in the media elsewhere here:

Labour and National join forces for housing crisis fix, ending decades of standoff (Thomas Coughlan in the NZ Herald)

Labour, National announce sweeping housing density law, three-storey homes without consent (Henry Cooke in Stuff)

Labour and National's plan to increase housing density by cutting regulation and sticking it to NIMBYs (Henry Cooke in Stuff)

Labour and National's latest housing fix will only make a small dent in the number of new houses, says Auckland councillor (Bernard Orsman in the NZ Herald)

New rules could mean thousands of new homes in Wellington (Joel McManus in the Dominion Post)

Medium density housing law proposal greeted with tentative support (RNZ)

Housing density plan: Mayors caught off guard by announcement (Charlie Dreaver at RNZ)

What was behind Labour-National united housing stand against Nimbys? (Claire Trevett in NZ Herald)

David Seymour not keen on housing bill, promises he is still a libertarian (Thomas Coughlan in NZ Herald)

There were celebrations and welcomings

The pro-intensification activists at Generation Zero, Renters United and A City For People were thrilled collectively in this statement, prematurely in my view:

“This is huge for renters, young people and anyone at the sharp end of the housing crisis. This is really going to turn Wellington around. Right now it’s stagnating, it’s hard to live here, and it’s getting hard to love.” Generation Zero’s Marko Garlick in The DomPost.

“The Govt's housing announcement about fast-tracking and expanding the NPS-UD is a huge win towards guaranteeing affordable and quality homes for all.” Renters United in this tweet.

Even some business leaders, including Wellington Chamber of Commerce chief executive Simon Arcus, saw the bipartisan announcement as helping growth (although the Chamber is part of a lobby group ‘Progress Wellington’, which opposes public transport and roading changes to enable housing densification)

"Too often, developers ready to make change are held back by high costs and restrictive planning laws. The proposed changes recognise that business is ready to help, and is best placed to solve Wellington’s housing crisis.” Simon Arcus in the DomPost

The NIMBYs were clearly unsettled

Mt Victoria Planning Group convenor Rob Brown said the new rules stripped away the rights of homeowners in character suburbs and risked new homes blocking out the sun on pre-1930s villas, which would make them cold and damp…

“The NPS-UD just says ‘to hell with you, little old people’ – and gives developers the right to build regardless of the damage or adverse impacts." Rob Brown in The DomPost.

Auckland Character Coalition spokeswoman Sally Hughes said she was concerned the bringing forward of the NPS-UD by a year would give supporters less time to protect heritage.

The NPS-UD seeks to remove the suburb-wide character and single-house overlays in the Auckland Unitary Plan (AUP) that currently protect almost all of Ponsonby, Grey Lynn, Birkenhead, Devonport, Mt Eden, Parnell and Grey Lynn. (They are the light olive and grey areas in this map.)

Hughes said the Character Coalition had found just 11,000 of the 70,000 homes currently protected on Auckland’s isthmus could be carved out as ‘character’ under the new NPS-UD.

"It would be losing a lot of historic neighbourhoods that tell the story of Auckland to gain very little housing, let alone affordable housing. Intensification in those areas will not produce one affordable house.” Sally Hughes in the NZ Herald.

It turns out David Seymour is right, even if apparently hypocritical

National’s decision to join up with Labour to apparently throw its own ‘old leafy’ supporters under the bus was amplified for ACT Leader and Opposition partner David Seymour, the MP for Epsom.

He has regularly called for the controls on housing development in the RMA to be cast aside in libertarian way that allowed property owners to do what they wanted with their own land.

However, Seymour has always been in a difficult position in his leafy and mostly suburban electorate of Epsom, where he has knocked on every door and been told by most constituents they were not just NIMBYs: they were BANANAs (Build Absolutely Nothing Anywhere Near Anyone).

Seymour contorted yesterday to oppose the unlikely coalition to cast off the shackles on development of single home sections close to the centre of Auckland, or anywhere for that matter. He rejected the accusation his opposition was because his Epsom constituents didn’t want development.

“That's a very cynical thing to say - my view is if we want to solve a very serious problem of housing affordability, those are real problems we need to solve. We've been thinking about this for years now, and planning law is part of the solution, but planning law alone is not going to solve this. If it did, the AUP (2016) would have solved it years ago.

"The Auckland Unitary Plan has said for the last four years 420,000 additional dwellings are theoretically possible but prices went up 35 per cent - why? Because councils don't have the funding for the infrastructure and they'll do everything they can to stop development.” David Seymour in the NZ Herald.

Seymour then pivoted to saying land owners wanted certainty and had bought land on the basis of the rules at the time (which would suggest zoning could never change, the RMA would never be repealed and is effectively an argument for conservatism and the status quo, rather than the view of a red-tape-cutting libertarian.

"This is not so much deregulation, it is sweeping aside a system of rules that Auckland agreed to over a pretty tumultuous three or four years for the Auckland Unitary Plan, which already allows 420,000 additional dwellings." Seymour

Even if it is extremely convenient for Seymour to point to the funding issues, it is also very true. The ultimate calling of Seymour’s bluff would have been for National and Labour to agree some sort of new revenue stream for Councils linked to housing development, which would have expanded the Councils’ borrowing limits set by the Treasury-run Local Government Funding Agency of 280% of revenue by expanding their revenue bases.

ACT itself called in July for Councils to get a 50% share of the GST from house building, and for the creation of a public-private-partnership ‘Nation Building Agency’ (combining the already existing Infrastructure Commission and Crown Infrastructure Partners New Zealand) to fund infrastructure for housing and transport through issuing debt funded by user-pays charges. That same policy proposal also included the removal of the RMA and its replacement with an Urban Development Act that would “significantly expand the rights of property owners to build on their own land.”

ACT is now in a right mess. It wanted to repeal the RMA’s restrictions on land development. National and Labour has called its bluff, and now ACT has to keep its Epsom voters happy, as well as its younger urban professional voters who want all these new townhouses.

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Is it truly historic without infrastructure funding changes?

National Leader Judith Collins and Housing spokeswoman Nicola Willis painted the deal as a game changer.

"Today is truly a historic moment for New Zealand: a time when our two major political parties stepped up together to give Kiwis the Right to Build.

But they and Housing Minister Megan Woods were coy about whether it solved the infrastructure funding issue, or whether it would deliver the supply shock that forced down prices.

“What it doesn’t do is get the houses built, so there are other things involved. And those are things for another day, which are around building supplies, training trades, all those sorts of things, all of which are important to getting a house built in terms of value. I think what we’ll find is that there will be some people who will feel that their lawn is now something of value, and some people will find that they can sell that lawn.

“But in terms of house prices, so I think that that’s going to suddenly bring about a drop? No, I don’t see this as a supply shock. I believe it is a shot in the arm to make sure that the country doesn’t continue down a path whereby housing is something that other people own, and our kids get to rent.” Judith Collins

Woods was equally cautious about the idea of a supply shock driving down prices.

“It's actually about sending a very strong message to people making quite long-term investment decisions in many cases that are going to stretch over 10, 20, 30 years. It is about giving that long-term signal and long-term certainty to people so that we can start to see the planning and the investment that we need to come on stream to get the houses that we need to solve our housing crisis." Megan Woods in the news conference in answer to my question (20:20 in) about a supply shock.

I also asked Woods whether the Government would ease the debt limits for councils so they could pay for the infrastructure and transport to back such an intensification (42:20) She would only say the current $3.8b Government grant fund would help, even though it was not enough and had been applied for many times over by councils.

No new funds for council infrastructure

So by the end of the news conference it was clear the bipartisan accord didn’t extend to helping councils pay for the infrastructure.

One solution put forward by the Government to get around its current 20-30% PFA-driven debt limit is through the Three Waters reforms, which are at a delicate moment. They would see water assets and debt extracted from council balance sheets, allowing councils to borrow more for other infrastructure, and putting the cost of new infrastructure into new Crown-backed vehicles able to borrow more than councils.

Three Waters is essentially a Labour fudge to get around the PFA rules stopping both the Government and Councils to borrow more. The new water bodies would be similar to Kāinga Ora and NZTA in that they are able to borrow outside of the rules, albeit this is more of a figleaf type of side-step. The much simpler option would be to amend the PFA to remove the requirement to run surpluses whenever it can outside of crises, and instead allow the use of debt to deal with intergenerational inequities.

And then came the coup de grace

So the bipartisan ‘coup’ was shaky after an hour. Then at 1.52pm came the final nail in the coffin. Collins sent out a press release pledging that National would repeal Three Waters and hand back the water assets to councils, along with their debts.

That leaves the councils without the flexibility to use up the just-created room under their borrowing limits.

“Labour’s proposal to centralise council water assets into four mega-entities, taking them away from local ratepayer control, is hugely unpopular with a majority of councils across New Zealand.

“It’s clear the Government plans to imminently legislate their Three Waters Reforms and make them compulsory for all councils, forcibly seizing ratepayer-owned water assets and bundling them into these new entities.

“If Labour do try to ram their changes through Parliament, National will unwind the four entity model when we form the next government in 2023.” Judith Collins statement.

Game over.

Back to square one.

I welcome your comments and questions below.

Ka Kite ano


PS: Collins also made the Three Waters statement in her own name, rather than that of Local Government spokesman. That is Christopher Luxon.

(Updated to correct date of Superannuation Accord between Winston Peters and Labour)

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