Urban Development Capacity or Urban Growth? Why the National Policy Statement Misses the Mark. UPDATED

Also comments from Deputy Mayor, and Mayoral Candidates Mark Thomas and Phil Goff


UPDATE: Includes material from Dr Larry Murphy of the University of Auckland to the Unitary Plan Hearings Panel

As mentioned in the Government’s Weak Willed Attempt at National Policy Statement Does Things We Can Already Do #AKLPols post yesterday the National Policy Statement for Urban Development Capacity was extremely weak and basically states what is already being done with the Unitary Plan. To make this NPS Urban Development Capacity even more weak it does not come into effect until 2018 some two years after the Unitary Plan goes live.


From the Office of the Mayor Len Brown:

Auckland says NPS could be useful tool

 Auckland’s Mayor and Deputy Mayor believe the proposals contained in the National Policy Statement on Urban Development Capacity (NPS) will provide a useful tool in measuring and meeting demand for land for both housing and business. 

Mayor Len Brown and Cr Penny Hulse say Auckland Council’s planning and legal teams will now look closely at the document and the council will be developing a submission. However, at first glance, they say there is nothing is inconsistent with the work Auckland Council has been doing through its Future Urban Land Use Strategy and the Proposed Auckland Unitary Plan. 

Cr Hulse says tools Auckland Council had developed, such as residential capacity modelling and the Future Urban Land Supply Strategy are reflected in the NPS. She said that while she’s confident that the UP will address any concerns around future land supply that adequate funding for infrastructure still remains a critical issue for Auckland.   

Len Brown notes that the Proposed Auckland Unitary Plan, which is currently before the Independent Hearings Panel, already includes proposals to open up 11,000 hectares of land (that’s about one and a half times the size of Hamilton) outside the current MUL to cater for growth over the next 30 years, with the potential to build 110,000 new homes.  

Submissions on the NPS close on 15 July.



Remembering that the Council through the Regional Policy Statement that will be set in the Unitary Plan as well as the Future Urban Land Strategy will be setting seven years worth of Greenfield land aside for residential, commercial and industrial development. We also have to remember that the same Regional Policy Statement in the Unitary Plan must give weight to allow enough capacity for Brownfield urban development capacity as well (a topic that was very much vexed before the Unitary Plan Hearings Panel). Furthermore the Regional Policy Statement must not only factor in Brownfield urban development capacity but Brownfield and Greenfield Urban GROWTH.

So what is the difference between Urban Development Capacity and Urban (Development) Growth? I’ll theorise on this further down.


Bit first from Mayoral Candidate Mark Thomas:

Urban Development Statement No Circuit Breaker

Urban Development Statement No Circuit Breaker

The Government’s draft Urban Development National Policy Statement isn’t the circuit breaker Auckland needs says Auckland mayoral candidate Mark Thomas.

“That needs to come from Auckland Council.”

“Infrastructure funding and consent processing issues still remain to be fixed. Current council frustrations with how National Policy Statements work also need to be sorted out.”

“Auckland has made provision for 110,000 new houses in greenfields areas around Auckland, however these can’t be brought forward because of funding constraints.”

Thomas says some of is caused by poor council spending such as the $20million spent on a white water rafting park, but another key issue is council’s reduced ability for developers to pay more.

“The statement implies council should be charging developers more for the cost of new developments, yet recent government development contribution policy changes have gone in the other direction. Council can no longer charge developers for libraries and swimming pools.

“A further issue is that the NPS’ comments on council advancing infrastructure bonds seems to ignore the debt constraints council currently has.”

“Council is also still far too slow processing consents. Despite claims the statutory time-frame is met 97% of the time, last year’s Government Rules Reduction Taskforce highlighted that this is misleading. The Taskforce also found the NPS process unclear and confusing for councils.” 

“I meet developers every week who are prevented from building houses in Auckland by council’s slow processes. Auckland Council needs to sort this out.”

Thomas said there were some positive aspects to the draft NPS. The requirement in the statement to recognise the national significance of Auckland land supply decisions was sensible.

“The statement helps had further pressure to Auckland Council to resolve land supply problems, and that is also a very good thing. But it needs more effort by Auckland Council to be the genuine circuit breaker Aucklanders need.”


Source: http://www.scoop.co.nz/stories/AK1606/S00094/urban-development-statement-no-circuit-breaker.htm


While Mayoral Candidate Phil Goff said:

Mayoral candidate Phil Goff said Auckland’s infrastructure simply couldn’t cope with 800 extra people arriving in the city every week.

“If the Government wants to maintain supercharged immigration levels – currently at a record high of 70,000 a year – it has to ensure that the infrastructure is in place to cope with that growth,” Goff said.


Source: http://www.stuff.co.nz/auckland/80668907/Business-as-usual-says-Auckland-Council-as-Government-housing-policy-panned


The draft National Policy Statement in summary:

  • Provide sufficient land for new housing to match with projected growth
  • Monitor and respond to housing affordability, building and resource consent data and value of land in the urban boundaries
  • Over supply housing by about 20 percent in the medium term so as to ensure competition
  • Councils must work together to coordinate infrastructure and ensure consenting processes are “customer focused”.
  • When considering projects housing affordability and land supply must be considered alongside “local interests”.


Source: https://www.tvnz.co.nz/one-news/new-zealand/councils-told-abide-govts-national-policy-over-housing-crisis-face-action


The draft National Policy Statement Urban Development Capacity as in summary above basically does what the Regional Policy Statement in the Unitary Plan will do once the Unitary Plan goes live in October.


Southern Rural Urban Boundary with Future urban zones in yellow
Southern Rural Urban Boundary with Future urban zones in yellow


National Policy Statement Urban Development Capacity or National Policy Statement Urban Growth?


The difference between the NPS Urban Development Capacity and NPS Urban Growth is quite stark in what each would try to achieve as an outcome especially in Auckland. As I see it a NPS in Urban Development Capacity (something the Regional Policy Statement will have in it when the Unitary Plan goes live after intense debate during the Hearings) will only compel a Council to provide enough theoretical capacity for the development of residential, commercial and industrial facilities.

So in theory I can apply all my zones down on a map, set the development controls for the respective zones in a rule book to cater for ‘X’ amount of development over ‘Y’ amount of time. Each zone has a maximum development capacity to it and added all up together you get that Urban Development Capacity. The problem is that zones as applied in Auckland act as ceilings to what you can build up to. There is nothing stopping me building a two storey house in the five storey Terraced Housing and Apartment Zone or building a single storey retail store in a Metropolitan that allows 18 storeys of mixed use on a given site. What I am getting at is that Urban Development Capacity states the maximum  we can build but that is it. The Urban Development Capacity provides no other incentive to actually build to that maximum to realise that capacity.

Result? Without other incentives like Land Taxes and especially Vacant Land Taxes the National Policy Statement Urban Development Capacity does sweet bugger all in addressing the housing situation in Auckland – in other words we are stuck with the status quo. Simply put we can not live in zones with theoretic capacities, we need actual physical houses and the NPS Urban Development Capacity Growth does nothing to address this. In any case looking at Unitary Plan Regional Policy Statement – Urban Growth commentary suggested we have more than enough capacity for housing, it is the distribution is unequal and there is no incentive to actually build anything en mass in a hurry (see: Latest #UnitaryPlan Feasibility Modelling Shows Enough Residential Capacity. Distribution Unequal).


A NPS Urban (Development) Growth has a two-step method unlike the NPS Urban Development Capacity which is a single step. The first step is like the Urban Development Capacity giving the theoretical maximums according to projects growth. The second step is where Urban Growth starts to kick in and is mentioned in the Regional Policy Statement. That second step being using levers available to either encourage or coerce development to get to that actual maximum capacity more quickly.

At Regional Policy Statement level that could be either Council moving faster with infrastructure, providing incentives for developers to develop more towards the maximum a zone allows than the developer would otherwise, or develop caveats through Panuku Development Auckland when Panuku partners with developers to develop public land at its maximum potential. An example would be Panuku attaching conditions to developers in developing a Council owned site in Manukau City Centre that “incentives” such a development to be mixed use and go the full 18 storeys allowed under the Metropolitan Centre Zone. Effectively going best bang for buck with a multi use 18 storey development on a plot of land inside Manukau City Centre.

The NPS Urban Growth at national level the Government become compelled to act as well as Councils as mentioned above. The Government in order to meet its own NPS Urban Growth must use its powers to make sure urban growth is not hindered at their end. This means infrastructure that Government provides must be provided ahead of time to encourage or facilitate urban growth. This is the opposite to an NPS Urban Development Capacity where Government would only move if that capacity was ever reached (and most likely not). Thus with an NPS Urban Growth the Government has to forward think and be proactive while a NPS Urban Development Capacity the Government is reactive. The NPS Urban Growth also compels the Minister of Finance to make sure they are using levers to make sure that urban growth is facilitated rather than hindered (so again the Government has to be proactive to prevent a stalling). In such a case to prevent land banking stalling urban growth (thus contravening the NPS Urban Growth) a Vacant Land Tax could be set into law to “encourage” development on blank land in existing urban areas.

With infrastructure the NPS Urban Growth could also compel the Government to make alternative infrastructure funding mechanism live so that the cost of infrastructure does not slow down urban growth needed for population growth. A NPS Urban Development Capacity would provide no such compulsion given the maximum may never be reached to trigger such a situation given infrastructure expense would often result in a development being down-scaled away from the maximum (a Catch 22 just about).

The NPS Urban Growth especially in high population growth could also compel Housing New Zealand to maximise its land use according to the zone the land sits on. Given Housing NZ is part of the State apparatus they are compelled as much as the Government is to adhere to the NPS Urban Growth unlike the private sector. That said Housing NZ is pushing for quite high density limits in Auckland so that they can maximise their land use with developments but there is no incentive from the Government right now to start a mass building program. An NPS Urban Growth could coerce the Government to undertake such a program via Housing NZ to accommodate urban growth caused by population growth.


The following Unitary Plan Evidence from Dr Larry Murphy of the University of Auckland goes into detail about how boosting housing supply (at least from the private sector end) will not lower prices let alone stabilise them.


Key Points from the Evidence:


6.1. The organisational characteristics of developers in conjunction with their profit maximising strategies condition housing supply responses to price increases.

6.2. Even if zoned land for residential development was in abundance, developers will only proceed with production under certain conditions. In particular, price growth expectations have a significant bearing on developer perceptions of expected profitability8 and risk. 9

6.3. A leading UK researcher commenting on the literature on land development under conditions where planning is not a binding constraint argues: 10 that it would not be realistic to expect either (a) that all land would be developed quickly if freed from planning constraint, or (b) that the supply of housing would be infinitely elastic in this situation.

6.4. An international study of housing supply elasticities, drawing on evidence from the USA, Britain and Australia found that housing “supply is more responsive to the change in house prices than their level”. 11 This suggests that expectations around future house price inflation, rather than house prices per se, are a key feature in developer decision making and thus rising house prices are an important driver of supply.

6.5. This study also found that “supply elasticities are greater for large firms than for small firms”. 12 Given the character of the New Zealand building sector, with its predominance of smaller developers, 13 this finding suggests that the New Zealand residential development sector is less responsive to price increases


Source: Dr Murphy to Topic 061 of the Unitary Plan


Effectively it confirms what I have said above. A National Policy Statement Urban Development Capacity goes nowhere in addressing our housing concerns as developers have no incentive to hit that capacity limit. Where as a National Policy Statement Urban Growth does provide incentives to the point a mass State Housing building program with developers partnering up is the viable option in stabilising prices.


In the end the National Policy Statement Urban Development Capacity is about theoretical capacities to cater for population growth. There is no incentives beyond the theoretical maximums to encourage development to hit that capacity limit. While the NPS Urban Growth compels authorities at National and Local level to not only factor in maximum capacities but how to actually get there to cater for that growth.


In a cynical way this is why the Government is not going to pass a National Policy Statement Urban Growth as it would actually compel them to do something for once in their eight years of Government.


Housing Nick Smith in front of a roaring fire while interview on The Nation. This is while people freeze in substandard homes (or cars)
Housing Nick Smith in front of a roaring fire while interview on The Nation. This is while people freeze in substandard homes (or cars)