Housing

Lecturing councils won’t work for Labour either

Just like its National-led predecessor, this Labour-led Government is trying to lecture and browbeat councils into growing the 'right' kinds of cities without giving them the funding tools or help to do it. Bernard Hickey analyses the latest National Policy Statement.

The more things change, the more they stay the same. 

Yet again, Wellington has given a lecture to councils about how to manage growth without changing a single incentive that got everyone into this mess in the first place. Everyone will nod sternly about the need for change, but will promptly blame each other for not paying for it, and sit happily on their hands as the Budget surplus goes up and land prices escalate.

In public everyone says they want to solve the problem, but privately they know voting ratepayers and taxpayers won't agree to changes that would allow their cities to cope with rapid population growth. Ministers and mayors wag their fingers at each other and then look over their shoulders for the approval of their voters to do nothing that would cost those voters in higher rates or forgone tax cuts.

How did we get into such a morass and why can't we get out?

The short answer is both flavours of Government in Wellington unleashed a population explosion that pumped up their budget surpluses with GST and income taxes, but refuse to fund the housing and transport infrastructure to cope with half a million extra people in half a decade. Councils, meanwhile, are held hostage by property-owning ratepayers from the leafy suburbs who have never been asked for their approval for this migration surge and won't foot the bill. 

Both sides of politics have tried to fix it with national policy statements to direct councils to do their bidding, and both have failed for the simple reason that ratepayers who vote don't give a damn about a lecture. They just won't pay, and don't think it's fair that the benefits of population growth go to Wellington, yet the upfront costs are lumped on them. 

Hence the standoff that is causing such housing affordability pain for the poor, productivity grief for businesses and has given us some of the highest per-capita climate emissions in the world. Sadly, the people who bear the pain are the least likely to vote in October's council elections, while none of the bureaucrats and politicians in Wellington are willing to break with the orthodoxy of public debt reduction to end the standoff.

Father Smith's sermon

The last National-led government tried to browbeat councils into action with its myriad directions and interventions into the rules governing development consents and development levies. National's housing and environment preacher Nick Smith introduced special housing areas, changed the rules governing development contributions by developers for new suburbs and issued a sermon on how councils should free up more land for housing. His lecture was titled the 'National Policy Statement on Urban Development Capacity 2016 or NPS-UDC-2016.

Now the Labour-led Government has published a fresh lecture on how best to build cities. It's called the National Policy Statement on Urban Development or NPS-UD. No lesson from the lectern in Wellington is complete without a snappy acronym. 

Here was the latest sermon in the introduction to the NPS-UD from the new preachers, Phil Twyford and David Parker: "As part of the Urban Growth Agenda, the National Policy Statement on Urban Development (NPS-UD) gives national direction under the Resource Management Act (RMA) to help local authorities make good decisions about making room for growth, both up and out, in suitable areas."

"The NPS-UD will ensure we develop well-functioning, inclusive and better connected cities that reflect the diversity of their current and future communities. The NPS-UD will provide certainty for developers and community members to understand the future growth in our cities, and the resulting changes to communities and neighbourhoods over time. Our Government is confident this new NPS will play an important role in helping to make this a reality."

The detail of the NPS-UD includes a sensible enough range of directives about how to build cities to make housing affordable and reduce climate emissions. It talks a good game about encouraging cities to grow "up and out" in a way that allows people to live close to work in health homes and use public transport instead of cars. 

But councils are saying 'talk to the hand'

The problem for everyone is that re-engineering our cities for continued strong population growth in a way that improves housing affordability and climate emissions requires massive investment in housing and transport infrastructure. Councils don't want to take on the necessary debt because it would increase rates even faster than inflation, which would guarantee losses for councillors and mayors at the next election, and the one after that. See more on that in Marc Daalder's report on the NPS-UD.

Wellington continues to insist that the private sector should fund the infrastructure and is continuing to turn itself inside out to encourage private lenders and builders to step into the gap. 

There's an experiment with a Special Purpose Vehicle (SPV) backed by Crown Infrastructure Partners (CIP) to build $91.3 million worth of infrastructure for 3,703 homes at the Milldale development north of Auckland. The Government-owned ACC lent over $45 million for the project, while Auckland Council contributed most of the rest. Homeowners will pay $1,000 extra per year on top of their rates to service their debt, which in theory is not guaranteed by either the Government or Council. Here's the detail.

But these SPVs and infrastructure bonds and targeted rates are still experimental and rely on large scale projects. They still need new legislation, which could take years, and for investors and ratings agencies to change the habits of a lifetime. They are vastly more expensive than simply borrowing directly by the Government 

Just like the National-led Government, this Labour-led Government has hamstrung itself with a 20 percent net debt target, which has forced it to dream up infrastructure bond and special purpose vehicles and targeted rate schemes to ensure neither taxpayers at large or ratepayers pay for the new infrastructure. 

Train lines disappear into a black hole of acronyms

It's the same for transport, with the Government wanting the NZ Super Fund to pay for the two rail lines seen necessary as the framework for Auckland's medium density housing growth ambitions. Yet nothing has happened after almost two years of chatter. The proposal seemed locked in a no man's land between NZTA, MBIE, Treasury, the Auckland Council, Auckland Transport and the enlarged group of cabinet ministers now handling housing and transport. 

The guts of this problem is a political economy problem.

Taxpayers don't want to pay. Ratepayers who vote don't want to pay. The private sector doesn't want to pay. Yet everyone says they want the houses and the rail lines and the "inclusive growth and improved wellbeing." Just quietly, the confusion and finger pointing suits everyone. Property owners rub their hands together and politicians and bureaucrats get to keep their jobs, even if they know this craven short termism will cost the wider community in the long run. They'll be long retired and on a juicy pension by then.

The truth of the matter is the ministers fearing a fiscal scare campaign want to keep their jobs, the mayors and councillors want to win the votes of the property owners in the leafy suburbs and the IRD and Treasury absolutely love the way fast migration of young workers pumps GST and income taxes into the Government's bulging coffers.

What's not to love, except for the ballooning rents, soaring carbon emissions, endless traffic queues and stagnant workforces?

Change the political mathematics

The only way out is voters at national and local level voting for the central government and councils to borrow against their strong balance sheets to build the transport and housing infrastructure. Typically, the people who don't vote are the ones most hurt by this current standoff. 

And they especially don't vote in council elections. 

Until that changes, nothing much looks like changing. 

Plus ça change, plus c'est la même chose. 

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