New Zealand Legislation: Bills
Bills are proposed Acts
This Bill enables (but does not require) territorial authorities to assess the level of affordable housing in their districts. Following its assessment, a territorial authority may, if it wishes to, develop an affordable housing policy and implement that policy.
Affordable housing policies will promote the provision of housing affordable to low and moderate income earners and in a manner that takes account of the need for a variety of housing sizes, tenures, and costs.
The Bill provides for full public participation in the development of affordable housing policies, including rights of objection and appeal.
Before a territorial authority can implement an affordable housing policy, it must—
undertake a housing needs assessment that identifies the level and type of need in its district (affordable home ownership and/or affordable rental stock, as relevant to a particular region); and
develop, in consultation with its community, an affordable housing policy that sets out—
the outcomes and objectives that a territorial authority wants to achieve via its affordable housing policy:
the criteria for determining developments to which the affordable housing policy will apply:
what actions a developer may be required to do to facilitate the provision of affordable housing (there is no limit on the options a territorial authority can consider in this context, but options that must be considered include requiring a proportion of affordable housing in the development or in another development, including a particular kind of housing in the development, or requiring the developer to pay (land or money) to the territorial authority):
what actions the territorial authority may do to help a developer that is facilitating the provision of affordable housing (there is no limit on the options a territorial authority can consider in this context, but options may include excusing payment of a development contribution, excusing payment of rates under a territorial authority’s rates remission policy, providing assistance under a territorial authority’s funding or financial policy, or providing a density bonus):
eligibility criteria for allocation of affordable housing:
how affordable housing is to be retained:
the objection and appeals process.
Certain territorial authorities have recognised there is a problem with the lack of affordable housing in their districts and have asked for legislation to assist them to resolve this problem. The Bill provides those territorial authorities with regulatory tools that will assist them to do so.
The Bill also addresses the use of restrictive covenants whose principal purpose is to stop the provision of affordable housing or social housing, such as housing for people on low incomes or housing for people who need supported accommodation. The Bill would prevent the imposition of such discriminatory covenants from the date the Bill comes into force, but would not affect any existing covenants.
Affordable housing is becoming more difficult for low and moderate income earners to obtain, particularly in Auckland and other high growth areas in New Zealand. Affordable housing is defined as housing for low to moderate income and asset households and priced so that the household is able to meet its housing and other essential basic living costs.
This Bill enables (but does not require) territorial authorities to increase the supply of affordable housing, in a manner that takes account of the desirability of having a variety of housing sizes, tenures and costs in an individual community. In order to do so, a territorial authority must first conduct an assessment of the local need for affordable housing. If that assessment indicates that there is not enough affordable housing in the district, a territorial authority can develop an affordable housing policy. It must do so in consultation with its community. The transparent public participation process includes rights of objection to the policy and rights of appeal.
Affordable housing policies must include options to facilitate the provision of affordable housing - including options for how developers can be required to facilitate the provision of affordable housing, and must state how territorial authorities might assist those developers that are facilitating the provision of affordable housing (as further expanded upon in the following two paragraphs).
Territorial authorities will be able to, on the grounds of affordable housing need, require developers to facilitate the provision of affordable housing. There is no limit on the options a territorial authority can consider in this context, but options that must be considered in the policy development phase include: requiring a proportion of affordable housing in the development or in another development; including a particular kind of housing in the development; or requiring the developer to pay (land or money) to the territorial authority. Where a developer provides land or money to a territorial authority, that authority must use that land or money to provide affordable housing in the district.
Councils will be able to provide incentives to help off-set costs borne by those developers that are required to make an affordable housing contribution. Possible incentives include reduced development contributions, density bonuses, rates remissions or postponements, or other financial assistance.
Other than any financial relief that may be available to developers via an affordable housing policy, there is no further compensation to developers for limitations on the use of the relevant land. This approach is consistent with the approach under the Resource Management Act, whereby the impacts of district and regional plans and/or resource consents on a person’s interest in land do not translate into a right to compensation.
International and New Zealand evidence demonstrates that the new regulatory tools enabled by this Bill will be important to facilitate the provision of affordable housing. This evidence also indicates that these new tools can effectively complement and optimise other dedicated funding for affordable housing supply.
International evidence and consultation with New Zealand territorial authorities indicates that the use of these new regulatory tools will vary across the country. These new tools can, if properly designed, be effective particularly over the long term, although the timing of uptake of these tools is difficult to predict.
Covenants that have the principal purpose of preventing affordable housing or social housing, and which are entered into from the time this Bill is enacted, will be void.
Analysis of the costs and benefits of using the powers enabled by the Bill would be required by a territorial authority that seeks to use the powers.
The Regulatory Impact Assessment Unit has reviewed the revised Regulatory Impact Statement and considers it to be adequate according to the adequacy criteria. The Regulatory Impact Assessment Unit does not consider the proposal meets the consultation requirements for Regulatory Impact Analysis.
The current lack of affordable housing is a widespread problem, internationally and in New Zealand. Nationwide, house prices have increased by almost 100 percent in the last six years, outpacing increases in average household incomes. Rapidly escalating property prices have seen the rate of homeownership fall from 74 percent to 67 percent between 1991 and 2006. If current trends continue, the rate of homeownership will fall to about 62 percent by 2016. In addition, developers are increasingly building new houses with large floor areas and modern amenities. Larger more expensive houses mean fewer people on low to median incomes can get on the property ladder. As a result, the “starter-home market”
is shrinking.
Regulatory tools currently available to territorial authorities are inadequate in their ability to promote the development of affordable housing. Territorial authorities have asked for legislation that can assist them in responding to affordable housing issues in their districts.
Rental affordability may become more of an issue in the future. For this reason, the Bill is flexible enough to enable territorial authorities to use the tools to address rental affordability, should it be an issue in the relevant district.
The Bill also addresses the growing practice of covenants being placed on properties that prevent the provision of certain types of housing. Covenants that have the principal purpose of preventing affordable housing or social housing, and which are entered into from the time this Bill is enacted, will be void. This works to avoid discriminatory practices targeted at low and moderate income families and those needing supported accommodation.
The objective of this legislation is to provide those territorial authorities who wish to address problems of housing affordability in their districts with regulatory tools that assist them to do so.
An option could be to amend the Resource Management Act 1991 (RMA) to provide for affordable housing initiatives. Officials have considered this option but concluded that simple additions to the Act would not be possible. To include the proposed affordable housing mechanisms under the RMA would require a change to the purpose of the RMA.
Changing the purpose of the RMA is not the preferred option. The purpose of the RMA is “the promotion of the sustainable management of natural and physical resources”
. Adding the promotion of affordable housing to the purpose would be likely to change the original intent of the Act. All territorial authority planning documents would have to be reviewed if the purpose of the RMA were changed. This would have significant impact on compliance costs for applicants and territorial authorities. No amendments will be made to the RMA as a result of the Bill.
Territorial authorities can use the general empowerment provisions in the Local Government Act 2002 (LGA) to promote affordable housing (for example, providing housing subsidised by rates revenue). However, the development contributions provisions in the LGA could not be used to require developers to contribute to affordable housing because the development contributions regime requires that a direct causal link is established between an individual development and the need for additional capital expenditure. While major amendment to the LGA is not preferred, a consequential amendment is required to the LGA.
An option considered was whether it would be possible to work within current legislation and develop best practice guidelines for territorial authorities on existing mechanisms available to promote affordable housing. Territorial authorities that have been trying to increase the supply of affordable houses have found that they do not have a clear mandate to do so. They have specifically requested legislation to provide legal certainty to assist them in this aim.
Best practice guidelines will be provided to assist territorial authorities that choose to use the new regulatory tools to implement an affordable housing policy. However, best practice guidance, absent the new regulatory tools, is unlikely to achieve the objective of enabling territorial authorities to increase the supply of affordable housing to meet an identified need.
Consideration was given to affordable housing policies applying only to residential developments (not commercial). This option was considered and is not recommended because many commercial developments create a need for affordable housing. For example, in tourist areas where service/hospitality workers who do shift work and are on low-modest incomes need to live in or near the community where they work. It is desirable that these developments also contribute to affordable housing in the communities in which they are built, especially if the development itself increases the community’s need for affordable housing.
In addition, if affordable housing policies applied only to residential developments, this could distort the market by creating an undue incentive to shift investment from residential to commercial development with potentially adverse implications for the supply and location of new residential housing.
Consideration was given to requiring, rather than enabling, territorial authorities to use tools and incentives to increase the supply of affordable housing. This option was rejected by local authorities consulted on the proposal, because compulsion is considered unnecessary. Those councils that have identified affordable housing needs in their district will have the opportunity to use the tools, while those councils that have not identified affordable housing needs will not need to develop an affordable housing policy. Not all regions/districts will have affordable housing needs and it would be inefficient for those councils to be required to undertake regulatory actions when they are not required.
Officials considered the option of using the resource consent or the building consent process as the mechanism to prevent the use of covenants on titles that exclude affordable housing or social housing, including housing for those who need supported accommodation. Under this option, a consent would not be able to be issued if a covenant was in place that prevented such housing being provided in the relevant area.
Analysis showed this option would be only partly effective because, even if prohibited at resource or building consent stage, there is no capacity to prevent such a covenant being placed on the title at time of on-sale.
The preferred option is a stand-alone Bill that enables (but does not require) territorial authorities to increase the supply of affordable housing. This option is the most flexible option, and is most likely to increase the supply of affordable housing and promote the development of a variety of housing sizes, tenures and costs. Consequential minor amendments are proposed to the Local Government Act 2002, the Building Act 2004 and the Housing Corporation Act 1974 to aid implementation.
Before using the tools and incentives, territorial authorities will be required to conduct a comprehensive housing needs assessment, and subsequently develop an affordable housing policy in consultation with their communities. This policy will need to include a statement of the objectives and outcomes expected, the type of development to whom the affordable housing policy applies, the type of affordable housing contribution required (houses, land or money), details of how the proportion of affordable houses (land or money) is calculated, eligibility criteria for the affordable housing created, and a mechanism for ensuring a component of affordability is retained into the future.
Although enabling rather than prescriptive, the Bill has safeguards in the form of a transparent method for developing an affordable housing policy and an objection and appeal process.
The preferred option for addressing the growing use of covenants that limit the ability for developments to include affordable, social, and supported housing is to include a provision within the Bill that prevents the imposition of such covenants after the Act has come into force.
The costs and benefits of the preferred option outlined below are based on the analysis contained in the following reports: AHURI, International Practice in Planning for Affordable Housing: Lessons for Australia, September 2007 and DTZ Affordable Housing Analysis, November 2007.
As noted above, the objective of this legislation is to provide those territorial authorities who wish to address problems of housing affordability in their districts with regulatory tools that assist them to do so. The anticipated take-up of these tools by territorial authorities is projected to provide about 1000 affordable houses a year. In order for that benefit to be provided, implementing affordable housing policies will have some cost consequences.
Territorial authorities that do not have an affordable housing problem in their districts are unlikely to incur costs - because they are unlikely to decide to undertake a housing needs assessment (in which case there is no cost consequence).
Territorial authorities that undertake a housing needs assessment but decide not to develop a policy (because no housing need is identified) incur only the additional cost of the assessment. The benefit is local decision making on affordable housing informed by a sound information base.
Territorial authorities that choose to both assess housing needs and implement an affordable housing policy will incur costs of: the housing needs assessment; developing and consulting on the draft policy; the objection and appeal processes; negotiating with developers; providing possible financial incentives to developers; retaining the affordable housing; and monitoring and reviewing the affordable housing policy. Many of these roles, such as monitoring and negotiating roles, are already undertaken by councils to some extent and it is anticipated that minimal additional local government staff resources would be required to develop and implement affordable housing policies. The benefit will be an increase in the availability of affordable housing in certain areas, to meet identified local housing needs.
While there is not universal agreement, most of the economic literature indicates that a reduction in the price of land is the most likely outcome from the use of these tools over the long term.
In the short term, implementing an affordable housing policy is likely to decrease the profit of a development to which the affordable housing policy applies. The extent of any diminished profit is difficult to estimate and depends on the following variables:
the strength of the housing market:
the nature of the policies put in place:
incentives provided by a territorial authority:
whether the developer has the ability to pass the cost of any contribution to affordable housing back to the landowner.
The evidence suggests the increase in costs over the short term will be absorbed by decreases in developer profits and/or an increase in the cost of houses across the market. Who bears the cost will vary depending on local market conditions and the relative power of the players.
Analysis was undertaken on model development sites to test the impact of an affordable housing contribution. Depending on the affordable housing policies put in place the impact of the affordable housing contribution can vary between a significant impact on the profitability of the development, to a drop in the profit margin from 17 to 14.3 percent. This analysis used basic assumptions and did not take into account any incentives, the ability of a developer to build affordable housing that is smaller than the rest of the market rate houses or to internally fit out the affordable houses with less modern amenities. These factors would mitigate the impact on developer profitability.
The benefit to the public of an increase in the stock of affordable housing is that some people who may not otherwise get that first step on the property ladder are able to own their own home. Home ownership has significant social and economic benefits. It can promote greater family stability, improve the connections with communities and create continuity of education. Home ownership also provides long-term security and a buffer against poverty before and after retirement. A lack of suitably-located affordable houses has economic and social consequences. People who live further away from work spend more time commuting, at a cost to the environment and families. Without houses with a variety of sizes, costs and tenures within neighbourhoods, people may need to move out of their community if housing needs change. Some people may perceive that there is an adverse impact on their own property values; however, international evidence indicates that this fear is generally unfounded.
Density bonuses are available under some district plans. Some communities may be concerned about the perceived environmental impact of density bonuses. Whether an affordable housing policy will provide density bonuses is a matter that may form part of the consultation process during the development of an affordable housing policy.
The benefits to the local government are an increased supply of affordable housing in areas where that housing is needed, with decisions made locally based on local need.
International and New Zealand evidence demonstrates that the new regulatory tools enabled by this Bill will be important to facilitate the provision of affordable housing. This evidence also indicates that these new tools can effectively complement and optimise other dedicated funding for affordable housing supply.
International evidence and consultation with New Zealand territorial authorities indicates that the use of these new regulatory tools will vary across the country. These new tools are expected to be effective, particularly over the long term, although the timing of uptake of these tools is difficult to predict.
Developers may benefit due to the fact they make a positive contribution to the areas in which they build, and gain the associated reputational advantages. The transparency of the policy development process and policies themselves will provide certainty and a level playing field for developers. Developers may receive financial incentives to off-set any cost of the contribution they make to the provision of affordable housing. Conversely developers may have increased costs due to their participation in the development of affordable housing policies and in complying with those policies. They may also have increased costs arising from the objections and appeals process (should they object and/or appeal).
In the short term, developers may have reduced profits from developments where an affordable housing contribution applies (if the cost off-sets that territorial authorities may provide do not compensate for cost of the affordable housing contribution). In the longer term, land prices may not increase at the same rate that they would otherwise have increased. The difference between the rates of increase would be a cost to certain landowners (those who own land in areas subject to an affordable housing policy) in the future (if overseas trends are replicated here).
In addition the profit that developers make may be diminished by the restriction on covenants that discriminate against people on low incomes or those who need supported accommodation. The benefit will be that those discriminatory practices are no longer permitted.
There will be additional costs incurred by Housing New Zealand Corporation in its role as provider of advisory material (Guidelines) for use by territorial authorities.
In addition there may be costs of appeals to the Environment Court (these being potential costs for developers/territorial authorities/members of the public/the Environment Court), although this is difficult to predict.
Analysis of the costs and benefits of using the powers enabled by the Bill would be required by a territorial authority that seeks to use the powers (this being a requirement of the LGA).
The LGA states that, when making a decision, a local authority should take account of the likely impact of any decision on the social, economic, environmental, and cultural well-being of communities.
A local authority must, in the course of the decision-making process, seek to identify all reasonably practicable options for the achievement of the objective of a decision and assess those options by considering the benefits and costs of each option and the extent to which community outcomes would be promoted or achieved in an integrated and efficient manner by each option.
Risks include—
less than estimated levels of affordable housing are generated (the estimates were conservative; it is also possible that more than the estimated amount might be generated once councils become more accustomed to using the tools over time):
few councils may use the tools (this was taken into account when the estimates of housing resulting from the use of these tools were prepared):
developer opposition - overseas experience indicates that developers have generally opposed a new power for local authorities to charge an affordable housing contribution (this varies depending on the level of the affordable housing contribution required and the extent of the off-setting incentives provided by territorial authorities):
incentives available may have little impact in off-setting development costs (once available for use in negotiations, the type and effectiveness of incentives will vary on a case by case basis and therefore cannot be forecast; the use of incentives is known to work in overseas jurisdictions):
could reduce development profitability to a level where the net effect is to slow the rate of development activity, thereby reducing overall housing supply (several decades of experience in overseas jurisdictions indicates that this risk is not borne out in practice).
Territorial authorities will be able to offer incentives to developers to help off-set compliance costs. Compliance costs can be minimised for developers by aligning affordable housing requirements with existing processes. Housing New Zealand Corporation support in the form of advice and information will assist territorial authorities with technical issues around using the tools.
The new legislation stands alone, but dovetails with other Acts and interacts with existing rules. No rules are being removed as part of the proposal.
The Bill requires that an affordable housing policy is reviewed in conjunction with the assessment of community outcomes (required every six years under the LGA). These community outcomes are relevant to the development of the long term community council plan (LTCCP).
It is intended that the Act will be evaluated three years after it is in force.
The preferred policy option of an affordable housing bill was developed by officials from the Department of Internal Affairs, Department of Building and Housing, Ministry for the Environment, Ministry of Justice, and Housing New Zealand Corporation, with a steering group providing direction and oversight that included officials from the Treasury, Te Puni Kokiri, Department of the Prime Minister and Cabinet, and the Ministries of Social Development and Economic Development, after direction by Cabinet.
Most of the comment received has been able to be incorporated into the policy put forward, but some feedback has not been able to be addressed. The Ministry of Social Development was concerned that the term “mixed communities”
is not included in the purpose of the Bill and commented that this may potentially lead to the objective of promoting a mixed community not being attained.
Officials were advised that legislative drafting practice has moved away from aspirational purpose statements (such as “promoting mixed communities”
) towards narrower, factual purpose statements that describe what the legislation does. Territorial authorities when using the tools must take into account the desirability of the community having a variety of housing sizes, tenures and costs.
The Ministry of Social Development also wanted territorial authorities to specifically consider how to avoid concentrations of deprivation. Avoiding concentrations of deprivation is an issue related to the placement of social housing, which is better addressed through neighbourhood level interventions rather than through council planning mechanisms.
Cabinet directed officials to consult local authorities on the implementation issues and compliance costs arising from the proposed policy. A workshop was held where participants specifically addressed these matters. Attendees included representatives from (most councils sent more than one, covering both planning and other expertise) Palmerston North City Council, Auckland City Council, Auckland Regional Council, Manukau City Council, Christchurch City Council, Nelson City Council, Waitakere City Council; Local Government New Zealand; and Senior Lecturer Auckland University (consultant to Queenstown Lakes District Council on their affordable housing project). The Ministry for the Environment attended as observers; Housing New Zealand Corporation hosted the workshop, which was facilitated by an independent external consultant. The views expressed were incorporated into the policy development process.
Clauses 1 and 2 state the Bill’s title and commencement date.
Clause 3 makes the Act bind the Crown.
Clause 4 contains defined terms.
Clause 5 is the purpose provision.
Clause 6 says what the Bill is about.
Clauses 7 and 8 provide for housing needs assessments.
Clauses 9 to 15 detail what an affordable housing policy must have in it.
Clauses 16 to 23 set out how an affordable housing policy is made and communicated.
Clauses 24 to 27 describe objection and appeal rights.
Clauses 28 to 31 enable territorial authorities to implement affordable housing policies.
Clauses 32 and 33 say how an affordable housing policy is reviewed and amended.
Clause 34 deals with the relationship between the Bill and the Resource Management Act 1991.
Clause 35 voids some covenants.
Clause 36 contains regulation-making powers.
Clauses 37 to 39 are transitional provisions.
Clauses 40 to 42 make consequential amendments.
