Section 32AA Report on Changes to the National Policy Statement on Urban Development Capacity

Section 32AA report on changes to the National Policy Statement on Urban Development Capacity

This document may be cited as:Ministry for the Environment and Ministry of Innovation, Business and Employment.2016. Changes to the Proposed National Policy Statement on Urban Development Capacity.Section 32AA evaluation. Wellington:Ministry for the Environment and the Ministry of Business, Innovation and Employment.

Published in October 2016 by the
Ministry for the Environment
ManatūMōTeTaiao
PO Box 10362, Wellington 6143, New Zealand

ISBN: 978-0-908339-65-5(online)

Publication number: ME 1271

This document is available on the Ministry for the Environment website:

Contents

1Introduction

Section 32 analysis of the proposed NPS-UDC

Evaluation approach used in this report

2Overview of key changes

Key elements of the NPS-UDC

Key changes to the NPS-UDC

3Analysis of individual changes

High and medium growth urban areas

Development capacity and infrastructure

Objectives

Enabling competitive markets

Assessing the effects of urban development

The requirement to provide sufficient development capacity

Housing and business assessments

Monitoring indicators including price signals

Consenting processes that enable development

Minimum development capacity targets for housing

Future development (land release and intensification) strategy

Coordination between local authorities and with infrastructure providers

Timeframes

Review

4Summary of analysis

Tables

Table 1: Key changes to the NPS-UDC

Table 2: Changes to medium and high growth urban areas

Table 3: Analysis of changes to medium and high growth urban areas

Table 4: Changes to development capacity and infrastructure

Table 5: Analysis of changes to development capacity and infrastructure

Table 6: Changes to the NPS-UDC objectives

Table 7: Analysis of changes to the NPS-UDC objectives

Table 8: Changes to notified policy PA1

Table 9: Analysis of changes to notified policy PA1

Table 20: Changes to notified policy PA3

Table 31: Analysis of changes to notified policy PA3

Table 42: Changes to the sufficient and additional margins of development capacity

Table 53: Analysis of changes to sufficient and additional margins of development capacity

Table 64: Changes to housing and business land assessments

Table 75: Analysis of changes to housing and business land assessments

Table 86: Changes to monitoring requirements

Table 97: Analysis of changes to monitoring requirements

Table 108: Changes to the consenting processes

Table 119: Analysis of changes to consenting processes

Table 20: Changes to development capacity targets for housing

Table 212: Analysis of changes to development capacity targets for housing

Table 22: Changes to the future land release and intensification strategy

Table 23: Analysis of changes to the future land release and intensification strategy

Table 24: Changes to coordination policies

Table 25: Analysis of changes to coordination policies

Table 26: Changes to timeframes for implementation

Table 27: Analysis of changes to timeframes for implementation

Table 28: Changes to review of the NPS-UDC

Table 29: Analysis of changes to review of the NPS-UDC

Figures

Figure 1: s32 analysis versus s32AA analysis

Box 1: Assessment criteria for NPS-UDC

Glossary of terms

LGA / Local Government Act 2002
MBIE / Ministry of Business, Innovation and Employment
MfE / Ministry for the Environment
NPS-UDC / National Policy Statement on Urban Development Capacity
RMA / Resource Management Act 1991
RPS / Regional Policy Statement

1Introduction

This report provides an evaluation under Section 32AA (s32AA) of the Resource Management Act 1991 (RMA) of amendments to the National Policy Statement on Urban Development Capacity (NPS-UDC) since it was notified for public consultation in May 2016.

S32AA requires further evaluation to any changes that have been made to a proposed national policy statement since the original evaluation report was completed. This further evaluation must be undertaken in accordance with the requirements of Section 32 of the RMA, with a level of detail that corresponds to the scale and significance of the changes.

Section 32 analysis of the proposed NPS-UDC

This report should be read in conjunction with the s32 analysis of the notified NPS-UDC prepared on behalf of the Ministry for the Environment (MfE). It updates that report and draws upon its findings where necessary.

In order to meet the requirements of s32, the following steps were undertaken:

identification of the status quo and problem definition, including a quantification of the problems arising due to existing urban development policies under the RMA
identification of policy objectives and evaluation criteria
a review of several alternative NPS-UDC options to address the problem
a quantitative analysis of the costs and benefits of achieving the aims of the proposed NPS-UDC
an assessment of the consistency of the options with the purpose of the RMA
a qualitative assessment of the relative performance of alternative policy options in terms of their ability to deliver the overall benefits quantified in the report.

The key conclusions reached were that:

There is evidence that current policies are inappropriately constraining development capacity in growing New Zealand cities, especially for housing. This contributes to high and rising housing costs and limits the ability of communities to provide for their current and future social, economic, cultural, and environmental wellbeing.
Policies that ease constraints on urban development will tend to enable more competitive and responsive urban land and development markets. Over time, this will allow growth in demand for cities to be met at a lower cost. The benefits of doing so (in terms of lower prices for new entrants to cities’ housing or business markets) are likely to outweigh the costs (in terms of additional negative external effects of development). In other words, an NPS-UDC that contributes to reducing these constraints will tend to provide net social benefits.
An NPS-UDC option that provides more specific policy guidance to local authorities with medium-growth and high-growth urban areas is likely to be more effective and efficient in achieving these overall benefits. The reason for this was that additional direction in the NPS-UDC, and potentially also in supporting non-statutory guidance, will assist councils in developing a more complete and consistent evidence base for planning decisions, as well as increasing the likelihood that they respond appropriately to the evidence.

There were some minor wording differences between the version of the NPS-UDC discussed in the s32 report and the notified NPS-UDC released for public consultation. These wording differences do not affect the overall conclusions reached nor the relative ranking of the alternative NPS-UDC options.

Evaluation approach used in this report

The difference between an s32 analysis of a notified policy and an s32AA analysis of subsequent changes to the proposed policy can be summed up as follows:

an s32 analysis should assess the overall costs and benefits of the proposed policy relative to the status quo established by existing policies and features of the market
A s32AA analysis should assess the marginalcosts and benefits of changes to the proposed policy, relative to the version assessed in s32 analysis.

This is summarised in the following diagram.

Figure 1: s32 analysis versus s32AA analysis

Consequently, this evaluation focuses on the key areas where the final NPS-UDC varies from the notified NPS-UDC released for public consultation.

In order to do so, we:

identify and describe the key changes to the NPS-UDC, excluding minor wording changes that clarify the meaning of the NPS-UDC but do not affect the substance (Section 2)
assess the effects of individual changes to objectives and policies in the NPS-UDC, focusing on the five assessment criteria used to assess the notified NPS-UDC (Section 3)
provide a summary assessment of the changes, including the degree to which they are likely to improve the effectiveness and efficiency of the NPS-UDC, and whether there are any impacts on the conclusions of the reports quantitative cost benefit analysis (Section 4).

We consider whether each change is likely to increase, decrease, or result in no change to each assessment criteria. The assessment criteria used in this analysis are summarised in box 1.

Box 1: Assessment criteria for NPS-UDC

Consistency with the purpose (Section 5) of the Resource Management Act 1991 (RMA).
Effectiveness—the extent to which any policy meets the objectives of increasing capacity for urban development.
Efficiency—whether the policy option has benefits that exceed the costs.
Feasibility—the practicality of the policy.
Degree of risk—the likelihood that the estimated costs and benefits will be materially different from the primary estimate.

2 Overview of key changes

Our s32AA analysis of changes to the notified NPS-UDC draws upon a report prepared by the Ministry for the Environment (MfE) and the Ministry of Business, Innovation and Employment(MBIE) (2016) summarising submissions and amendments to the NPS-UDC (Report and recommendations on amendments to the notified National Policy Statement on Urban Development Capacity, following public submissions).

In this report, MfEand MBIE recommend that “the scope and much of the content of the NPS-UDC, as notified, be largely retained. However, amendments to the NPS-UDC are recommended, to respond to many of the submission points and to maximise the effective implementation of the NPS-UDC.”

Key elements of the NPS-UDC

The notified NPS-UDC contained the following key elements:

a preamble setting out the context for the NPS-UDC and its objectives, including how it meets the objectives of the RMA
an interpretation section that defines key terms, including “demand”, “development capacity”, “infrastructure”, and “sufficient”
a statement of the matters of national significance addressed by the NPS-UDC
Objectives and policies that address four key elements:
outcomes for planning decisions
evidence and monitoring to support planning decisions
responsive planning
coordinated planning evidence and decision-making.

The objectives section and the policies related to outcomes for planning decisions; the other policies relate either to medium- and high-growth urban areas or to high-growth urban areas only.

These sections are all included in the final NPS-UDC. The drafting of specific objectives and policies, however, has changed in some cases.

Key changes to the NPS-UDC

In its analysis, MfE and MBIE highlight a number of key changes to between the notified NPS-UDC and final NPS-UDC. Some of these changes affect multiple policies or definitions, and alter the numbering of objectives and policies. The key changes are summarised in Table 1. Sections of the NPS-UDC that are not listed in this table are considered to have experienced only minor changes that do not affect their meaning.

On the whole, these changes preserve the overall intent and key elements of the NPS-UDC. In particular:

there have been some changes to the preamble and statement of national significance to clarify the links to the RMA and the issues of national significance at hand
most of the changes to objectives are minor in nature, focusing on refining wording rather than changing the meaning of the objectives
several definitions have been changed to better clarify their meaning or to shift requirements on local authorities into the policies
there has been a number of changes to policies; however, the majority of these reflect minor changes to wording. In some cases, policies have been added or amended to clarify how or when requirements apply to local authorities
two new sections have been added to clarify implementation timeframes and identify when the Minister for the Environment will review the NPS-UDC.

We analyse substantive changes in further detail in the following section.

Table 1: Key changes to the NPS-UDC

Key change / Notified NPS-UDC ref / Final NPS-UDC ref

Preamble

Amend the notified preamble to reflect the final NPS-UDC, strengthen the links made to the definition of “sustainable management” in the RMA, and articulate more clearly the problem that the NPS-UDC seeks to address. / Preamble / Preamble

National significance

Amend the National Significance statement in the notified NPS-UDC, to better reflect the focus of the NPS-UDC on development capacity and enabling development. / National significance / National significance

High and medium growth urban areas

Amend the definitions of high growth urban area and medium growth urban area to tie them to the 2016 Statistics New Zealand Urban Area classification.
Clarify that the most recent Statistics New Zealand medium population projections should be used, for the 2013 (base) to 2023 period.
Note that these definitions will be reviewed by 31 December 2018.
Clarify that the application of Evidence, Responsive Planning and Coordination policiesis not restricted to the boundaries of the Urban Area. / Interpretation, Appendices A1, A2 / Interpretation, Review

Development capacity and infrastructure

Amend the definition of development capacity to clarify that it only includes the provision of development infrastructureto support the development of land.Split the definition of infrastructure in the notified NPS-UDC into two:

Development infrastructure, which is water and transport infrastructure controlled by local authorities or their council controlled organisations
Other infrastructure, including that which is not controlled by local authorities.

/ Interpretation / Interpretation

Objectives

Amend the objectives related to outcomes for planning decisions and responsive planning in the notified NPS-UDC by incorporating where relevant a statement about wellbeing that is consistent with the definition of sustainable management in the RMA. / OA1-OA3, OD1-OD2 / OA1-OA3, OC1-OC2

Enabling competitive markets

Amend notified policy PA1 in the notified NPS-UDC to replace it with a new policy PA3, which requires decision-makers to have particular regard to “limiting as much as possible adverse impacts on the competitive operation of land and development markets” (rather than “enabling” competition). / PA1 / PA3

Assessing the effects of urban development

Replace notified policy PA3 with new policy PA4 to include a new requirement that decision-makers take into account the benefits and costs of urban development at an interregional scale (as well as at a district, regional and national scale). / PA3 / PA4

The requirement to provide sufficient development capacity

Amend the definition of “sufficient” in the notified NPS-UDC, which applies to all local authorities, to remove the quantitative margins over and above projected demand. Incorporate said margins into new policiesPC1 and PC2 that apply to medium and high growth urban areas.
Replace policy PA2 in the notified NPS-UDC with new policies PA1 and PA2 that require local authorities to:

provide feasible development capacity in the short, medium and long terms
ensure development capacity is supported by development infrastructure that is, in the short-term in place; in the medium-term identified in a 10-year Long Term Plan; and in the long-term is in a 30-year Infrastructure Strategy
satisfy themselves that other infrastructure required to support urban development will be provided.

/ Interpretation, PA2 / Interpretation, PA1, PA2, PC1, PC2

Housing and business assessments

Amend notified policy PB1 to require a combined housing and business assessment that includes information about the links between housing and business land.
Amend notified policy PB4 in the notified NPS-UDC to require local authorities to “seek and use the input of” iwi authorities, the property development sector, significant land owners, social housing providers, and providers of development infrastructure and other infrastructure when preparing housing and business development capacity assessments, rather than “consult with” those parties. / PB1, PB4 / PB1, PB5

Monitoring indicators including price signals

Amend notified policy PB5 to require local authorities to:

monitor housing affordability, prices and rents, and consents relative to population growth on a quarterly basis
use indicators of price efficiency, such as land price differentials across zones, to understand the functioning of the market and the impact of planning on this, and whether more development capacity is required.

/ PB5 / PB6, PB7

Consenting processes that enable development

Amend notified policy PD3 to require integrated and coordinated consenting processes that facilitate development. / PD3 / PC4

Minimum development capacity targets for housing

Insert new policies (PC9-PC11) that require territorial authorities to set minimum targets as a proportion of RPS targets (PC5-PC8), and incorporate these targets into their district plans outside of the RMA Schedule 1 consultation process.
Insert a note encouraging local authorities with a medium growth urban area in their region or territory to give effect to the policies to set minimum development capacity targets for housing in their RPS and district plans. / N/A / PC9-PC11

Future development (land release and intensification) strategy

Amend notified policies PD7-PD9 to rename the future land release and intensification strategy the “future development strategy”, make it explicit that this can be incorporated into a non-statutory document prepared under other legislation (ie the Local Government Act 2002), and clarify the requirements for the future development strategy.
Insert a note encouraging local authorities with amedium growth urban area in their region or territory to also prepare afuture development strategy. / PD7-PD9 / PC12-PC14

Coordination between local authorities and with infrastructure providers

Amend notified policies PC1-PC3 tostrongly encourage local authorities that share jurisdiction over an urban area to:

prepare a shared housing and business development capacity assessment
agree on provision of sufficient development capacity
agree on minimum targets in the RPS and district plans
prepare a shared future development strategy.

These changes also require local authorities to work with providers of development infrastructure and other infrastructure to:

provide sufficient development capacity
prepare a future development strategy.

/ PC1-PC3 / PD1-PD4

Timeframes

Insert a new timeframes section that clarifies the timing for the policy requirements in the NPS-UDC. This would require local authorities to:

begin monitoring indicators in a new policy PB6 (prices, affordability, and consents) within 6 months of the NPS-UDC being made operative
begin monitoring indicators in a new policy PB7 (price efficiency) by31 December 2017
prepare the first housing and business development capacity assessment by 31 December 2017 (for high-growth urban areas) and31 December 2018 (for medium-growth urban areas; this represents a change from the notified NPS-UDC)
require the future development strategy under policies PC12-PC14 to be prepared by 31 December 2018
include minimum targets required under Policies PC5 and PC9 in relevant plans or regional policy statements by 31 December 2018
Clarify that local authorities that become newly classified as a medium growth urban area as a result of revised population projections begin monitoring indicators in policy PB6 and using indicators of price efficiency under PB7 by March 2018
Clarify that local authorities that become newly classified as a high growth urban area as a result of revised population projections must complete the housing and business assessment required by policy PB1 by 30 June 2018.

/ Various objectives and policies / Timeframes

Review

Insert a new Review section noting that a review of the definition ofmedium and high growth urban areas will be undertaken by 31 December2018 and that a full review of the NPS-UDC will be undertaken by 31 December 2021. / N/A / Review

3Analysis of individual changes

In this section, we review the changes between the notified NPS-UDC and final UDC on a case-by-case basis, focusing on the five assessment criteria outlined in Section 1. These changes are discussed in the order they appear in Table 1 in the previous section.