Recommendations and Decisions Report on the National Policy Statement on Urban Development

Recommendations and decisions report on the National Policy Statement on Urban Development Capacity

This document may be cited as: Ministry for the Environment and Ministry of Business, Innovation and Employment. 2016. Recommendations and decisions report on the Policy Statement on Urban Development Capacity. 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: 978-0-908339-60-0 (online)

Publication number: ME 1263

© Crown copyright New Zealand 2016

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

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Contents

1Introduction

Background

Submissions

Major themes from submissions

Summary of recommended amendments to the notified NPS-UDC

2Scope and focus of the national policy statement on urban development capacity

Other urban issues

Reverse sensitivity

Addressing housing affordability

3Relationship to sustainable management, and to other national direction

4Medium and high growth urban areas

The boundaries of the urban areas

Uncertainty caused by urban area population projections

5Development capacity

Infrastructure

Short, medium and long terms

Sufficient

Intensification

6Evidence and monitoring

Housing and business land assessments

Monitoring indicators including price signals

7Responsive planning

Customer-friendly consenting practices

Minimum development capacity targets for housing

Future land release and intensification strategy

8Coordinated decision-making

9Timeframes

10Review

Tables

Table 1:Summary of submissions by stakeholder group

Table 2:Summary of significant recommended changes to notified NPS-UDC

Table 3:Medium and high growth urban areas and related local authorities, based on Statistics New Zealand 2016 urban areas and population projections for 2013-23

Figures

Figure 1: Development capacity: plan-enabled capacity, serviced with infrastructure, feasible and actually developed.

Glossary of terms

LGALocal Government Act 2002

NPS-UDCNational Policy Statement on Urban Development Capacity

RMAResource Management Act 1991

RPSRegional Policy Statement

1Introduction

1. This report outlines the recommendations that were provided to the Minister for the Environment on the notified National Policy Statement on Urban Development Capacity (NPS-UDC) in accordance with section 51(2) of the Resource Management Act 1991 (RMA), and specifies the Minister’s decision on each recommendation in accordance with section 52(3)(c) of the RMA. Each section of this report provides:

• an explanation of the proposal as notified
• a summary of the submissions received relating to that section of the proposal
• recommendations to the Minister for the Environment in light of the submissions received and other evidence
• the Minister for the Environment’s decision on the recommendation

1. The full Summary of Submissions to the Proposed National Policy Statement on Urban Development Capacity (Ministry for the Environment, 2016a)report, the cost benefit analysis reports (meeting the requirements of section 32 and 32AA of the RMA), and the Regulatory Impact Analysisare available on the Ministry for the Environment’s website.

Background

1. The proposed NPS-UDC is part of the Government’s broader package of options to improve urban planning and improve housing affordability, including:

• the proposed changes to the RMA in the Resource Legislation Amendment Bill
• responses to the Productivity Commission’s inquiries into using land for housing, and urban planning (as outlined in the reports Using Land for Housing[1] and Better Urban Planning[2])
• the Better Local Services reforms.

Process for developing the National Policy Statement

1. The statutory requirements for developing a National Policy Statement (NPS) are set out in the RMA. For the development of the proposed NPS-UDC, the Minister for the Environment chose to establish a process in accordance with section 46A (1)(b). This process includes:

• public consultation
• written submission
• a report and recommendations to the Minister for the Environment on the submissions and subject matter of the NPS-UDC (this report, and the Summary of Submissions to the Proposed National Policy Statement on Urban Development Capacity (Ministry for the Environment, 2016a).

1. The Minister for the Environment must consider this report, and may then make changes or no changes as he sees fit, or withdraw all or part of the proposed National Policy Statement.
2. If the Minister for the Environment decides to proceed with the recommended NPS-UDC, a further evaluation must be undertaken in accordance with section 32AA of the RMA. The Minister for the Environment must have particular regard to the further evaluation when deciding whether to recommend the NPS-UDC to the Governor-General. If approved by the Governor-General, the NPS-UDC will be issued by notice in the New Zealand Gazette, provided to the House of Representatives, and publicly notified.
3. As soon as practicable after a NPS is has been approved , submitters must be provided with a summary of recommendations and a summary of the Minister’s decisions on the recommendations (including reasons for not adopting any recommendations) under section 52(3)(c) of the RMA. These requirements have been combined into this report.

Submissions

1. The NPS-UDC was publicly notified on 3 June 2016, and submissions were invited for a period of six weeks, until 15 July 2016.
2. In total 140 submissions were received. The majority of these were from local government (including submissions from both individual local authorities and local authority partnerships such as the Canterbury Mayoral Forum). The breakdown of submissions received by stakeholder group is shown in Table 1.

Table 1:Summary of submissions by stakeholder group

Stakeholder group / Submissions
Local government / 49
Property sector / 21
Individuals / 17
Infrastructure providers / 13
Business / 12
Advocacy groups / 12
Professional bodies / 10
Central government / 3
Iwi / 3
TOTAL / 140

1. Most submissions indicated support for the notifiedNPS-UDC, with some concerns and suggestions for improvement. Of the small proportion of submissions that expressed opposition to the NPS-UDC, most were made by the business sector or local authorities that would, under the notified NPS-UDC, have to give effect to policies that apply to ‘medium growth urban areas’.

Major themes from submissions

Scope of the proposed NPS-UDC

1. Wider urban planning issues:There was an appetite for national direction to address wider urban planning issues, in addition to development capacity (for example, more substantive direction on integrated planning, urban form, urban design and creating liveable communities). Some submissions also highlighted the importance of addressing population decline, and not just growth.
2. Reverse sensitivity:Many business and infrastructure providers strongly recommended that the proposed NPS-UDC provide direction on how to manage reverse sensitivity[3], even though the consultation document stated that this had not been addressed because of its complexity and the timeline of this work.
3. Other contributors to housing affordability not addressed by the proposed NPS-UDC: A large majority of the submissions noted that the NPS-UDC on its own would not achieve the Government’s stated intention of addressing worsening housing affordability. Submissions listed other key factors affecting housing affordability as:

• infrastructure availability and funding
• monopoly land ownership and land banking, covenants
• the scale and capability of the construction sector and its labour force
• provision of social housing
• immigration and foreign investment.

Relationship to sustainable management, and to other national directions

1. Some submitters considered that the way the notified NPS-UDC is drafted requires development at any cost and is not consistent with the principle of sustainable management embedded in the RMA. Submitters suggested that there should be stronger ties between the purpose of the NPS-UDC and its objectives and policies, and the purpose of the RMA.
2. Some submitters identified the potential for the objectives of the notified NPS-UDC to conflict with other national direction (in particular, the National Policy Statement on Freshwater Management, the New Zealand Coastal Policy Statement and the National Policy Statement on Electricity Transmission), creating difficulties for local authorities about which to prioritise, or imposing unreasonable costs to achieve both.

Medium and high growth urban areas

1. Some submitters expressed support for the use of mediumand high growth urban areas in the NPS-UDC to target policies, and to indicate where local authorities should work together.
2. Many local authorities misinterpreted (and therefore opposed) the use of Statistics New Zealand’s ‘urban areas’ to define the medium and high growth urban areas in the NPS-UDC, however. There was concern that urban areas formed a boundary for how growth should be accommodated, and would undermine existing local agreements about the future extent of growth.
3. Some local authorities also expressed concern about basing the medium and high growth urban areas on population projections that change over time. They noted that this created uncertainty about whether NPS-UDC policies might apply to them in future, and that there would be costs associated with local authorities “moving in and out” of the requirements.

The requirements to provide ‘sufficient’ development capacity

1. Provision of infrastructure: many submitters stated that the definition of ‘development capacity’ in the NPS-UDC was unclear, and open to interpretation in that it includes infrastructure that exists or is ‘likely to exist’. Many submitters (including many local authorities) also commented that the definition of ‘infrastructure’ in the NPS-UDC was too narrow and that it should be expanded to include social infrastructure such as schools, and open space and reserves to promote good quality, liveable communities. On the other hand, some submitters noted that including infrastructure in the definition of development capacity would increase pressure on local authorities to provide infrastructure without addressing the funding or financing challenges of doing so. Auckland Council submitted that ‘actual or likely funding sources and mechanisms’ should be added as another factor to the definition of development capacity to mitigate this.
2. Short, medium and long terms: Submitters noted that the definition of ‘development capacity’ and related policies do not spell out very clearly what is required in the short, medium and long terms. Some submissions also argued that it was unreasonable to expect local authorities to assess and provide for ‘feasible’ development capacity over the long term, as this is too distant to have any idea of what might be commercially feasible.
3. Sufficiency margins: some submitters considered the definition of ‘sufficiency’ (which applies to all local authorities) to be too onerous, as it includes margins over and above projected demand. Low growth and substantially rural local authorities in particular noted that this could have significant and unnecessary costs, as they would need to increase infrastructure expenditure to support growth that would not eventuate. Conversely, some submitters (primarily from the development sector) submitted that the margins embedded in this definition were not high enough to take account of the fact that only a proportion of the development opportunities provided by plans are actually taken up.

Assessment and monitoring requirements

1. Some local authorities had concerns about the costs of carrying out housing and business land assessments and monitoring, relative to the benefit achieved. This was particularly the case for local authorities that would be considered “medium growth”. Some local authorities thought that the requirement to produce housing and business land assessments every three years was too frequent. Some submitters argued that the NPS-UDC requirement to monitor indicators should be expressed in terms of outcomes, with the actual indicators only specified in guidance.

Coordination between territorial authorities and with infrastructure providers

1. Some councils, particularly those without strong relationships with related councils, considered that the requirements to work together to agree on data to be used in assessments, and about how growth should be accommodated, would be difficult to achieve. Conversely, many local authorities assumed that each council should produce an assessment, rather than working together on assessment and monitoring requirements as intended (which should help to reduce costs).
2. Many submitters (including local authorities, infrastructure providers and the development sector) commented that central government should also be “bound” by the requirements in the proposed NPS-UDC to work with local authorities to plan for growth, as the infrastructure they provide is also critical to development (such as schools).

The implementation programme

1. Most of the submissions received on the notified NPS-UDC highlighted the importance of the Government providing support for local authorities to implement it. Local authorities particularly sought data and guidance to help them prepare the housing and business land assessments and to monitor indicators (including price signals). They emphasised the benefits of consistency, sharing of best practice and reducing compliance costs for individual local authorities.
2. Some of the submissions requested that guidance on how to carry out housing and business land assessments and monitoring should be released at the same time that the NPS-UDC becomes operative, to help councils meet the requirements in time.

Consistent and clear drafting

1. A number of submissions noted the need to consider some of the language in the proposed NPS-UDC in light of relevant case law (and in particular the Supreme Court’s decision on the King Salmon appeal in Marlborough).

Summary of recommended amendments to the notified NPS-UDC

1. Having analysed the submissions, it is recommended that the scope and content of the NPS-UDC as notified be largely retained.
2. Amendments to the NPS-UDC are recommended, however, to respond to many of the submission points and to effectively implement the NPS-UDC.
3. The most significant recommendations made in this report are summarised in Table 2, along with the Minister’s decision on those recommendations. Significant recommendations and other recommendations are discussed in more detail in the following sections. Minor or technical drafting changes to clarify the intent of the proposed NPS-UDC are not included in this report.
4. Advice has been provided separately on an implementation programme for the NPS-UDC.

Table 2:Summary of significant recommended changes to notified NPS-UDC

Notified NPS-UDC / Submission point / Recommended change / Minister’s decision
Medium and high growth urban areas
Target different policies to different local authorities.
Based on Statistics NZ urban areas classification and population projections for growth over the next 10 years.
Medium growth = 5% to 10%.
High growth = over 10%. / Uncertainty and costs created as local authorities “move in and out of” policies applying to medium and high growth urban areas, when growth rates change or projections are revised. Statistics NZ urban/rural classification review compounds this.
Policies should not be confined to the Statistics NZ urban area boundaries. / a)Tie medium and high growth urban areas to Statistics NZ’s urban area population estimates in 2016
b)Tie population projections to those for 2013-2023 period (as at 2016)
c)Amend this by end 2018, after Statistics NZ completes its urban/rural classification review and revises projections
d)Clarify what local authorities should do if they are newly classified or declassified due to review of medium and high growth urban areas
e)Clarify that application of policies is not restricted to urban area boundaries / Agree in part
Agree: a) c) d) and e)
Disagree: b)
Reasons for disagreement
The definition of high and medium growth urban area should allow local authorities to be reclassified with revised population projections to ensure that all local authorities that are facing higher levels of growth respond appropriately.
Development capacity
Development capacity includes “infrastructure, existing or likely to exist”.
‘Infrastructure’ includes water and transport.
‘Sufficient’ includes additional margins above projected demand of at least 20% short - medium term and 15% long term, which apply to all local authorities.
Medium and high growth urban areas must provide ‘feasible’ (commercially viable) development capacity when evidence shows it is insufficient in the short, medium or long terms. / It is unclear what is meant by “likely to exist”.
Definition of infrastructure should include parks, schools, energy, etc.
Short, medium and long term requirements are unclear.
The ‘sufficiency’ margins are arbitrary, will have unreasonable infrastructure costs in low growth areas, and are too low in already urbanised places.
It is not possible to know what development capacity will be ‘feasible’ in the long term. / a)Split ‘infrastructure’ into:

• ‘development infrastructure’, which is water and transport controlled by local authorities
• ‘other infrastructure’, including that which local authorities don’t control.

b)Require all local authorities to provide sufficient development capacity:

• Short term: feasible with development infrastructure in place.
• Medium term: feasible with development infrastructure in place or in long term plan.
• Long term: future zoning and development infrastructure in infrastructure strategy.

c)Require all local authorities to satisfy themselves other infrastructure will be available.
d)Move 20% and 15% margins from definition of ‘sufficient’ into policy applying to medium and high growth urban areas.
e)Allow local authorities to use another margin if their evidence shows this is appropriate / Agree in part
Agree: a) c) d)
Disagree: b) e)
Reasons for disagreement
b) As feasible development capacity is a proportion of development capacity, it should be provided in the short, medium and long term to ensure that the development capacity provided will be sufficient to meet demand.
e) Local authorities should not be allowed to use a margin of additional development capacity that is less than the 20% and 15% specified.
Local authorities should use an alternative margin if their evidence shows a higher margin is needed to account for the likelihood of development being taken up, and to support the efficient functioning of competitive markets.
Objectives and outcomes and sustainable management
Objectives and outcomes require decision-makers to enable urban development, referring to “social, economic and cultural wellbeing”. / NPS-UDC appears inconsistent with the principle of sustainable management. / Incorporate statement about wellbeing consistent with the RMA definition of ‘sustainable management’. / Agree
Enabling competitive markets
Requires decision-makers to enable competitive operation of land and development markets. / Unclear what action is meant by “enable”. / Require decision-makers to limit, as much as is possible, adverse impacts on the competitive operation of land and development markets. / Agree
Assessing national effects of urban development
Requires decision-makers to regard the positive effects of urban development including at the national scale. / Unclear how local decision-makers can assess national effects of urban development. / Rephrase as taking into account the costs and benefits of development. Retain at a national scale, and also add at an interregional scale. / Agree
Monitoring price signals
Medium and high growth local authorities must monitor specified price signals quarterly. / Concerns about specific indicators, monitoring frequency, data availability, capability and costs. (Confirmed by report on monitoring price signals commissioned by MBIE). / Require the local authorities to:
a)Monitor housing affordability, price and rent changes, and consents relative to population growth 6-monthly.
b)Use indicators of price efficiency to understand how well market is functioning, impact of planning, and whether more development capacity is needed. / Agree in part
Agree: b)
Disagree: a)
Reason for disagreement
Local authorities should be monitoring these indicators on a more frequent basis than 6 monthly so they can respond more quickly to emerging trends. Retain quarterly monitoring for a).
Setting minimum targets in RPS outside RMA Schedule 1
Regional councils in high growth urban areas must set minimum development capacity targets for housing in their RPS, based on assessments and outside of RMA Schedule 1. / Territorial authorities wanted ability to give effect to RPS targets without going through RMA Schedule 1.
It would be beneficial for medium growth local authorities to also set minimum targets. / a)Require high growth territorial authorities to also set minimum development targets in their district plans, based on the housing and business development capacity assessment and outside of RMA Schedule 1.
b)Strongly encourage medium growth local authorities to also set targets in their RPS and district plans. / Agree
Future land release and intensification strategy
High growth local authorities must prepare future land release and intensification strategy outlining the broad location, timeframes and sequencing of development capacity long term / Appears to duplicate other documents (such as Auckland Plan, infrastructure strategies).
May need to use both LGA and RMA consultation processes.
It would be beneficial for medium growth local authorities to also prepare a future strategy. / a)Clarify that future development strategy can be incorporated into an existing and/or non-RMA document.
b)Clarify that either RMA or LGA consultation processes can be used in preparing strategy.
c)Strongly encourage medium growth local authorities to also prepare a future development strategy. / Agree
Timeframes
Take immediate effect:

• Objectives
• Outcomes
• Monitoring
• Coordination
• Some responsive planning policies

By end 2018:

• Housing and business land assessments
• Minimum targets in RPS
• Future land release and intensification strategies.

/ Concerns about ability to do monitoring straight away.
Concerns (from medium growth councils) about timeframe for housing and business land assessments.
Housing and business land assessments can’t inform minimum targets in RPS and future land release and intensification strategy because they are all due on the same date. / Require local authorities to:
a)Monitor housing affordability, price and rent changes and consents within 6 months of NPS-UDC being operative.
b)Use indicators of price efficiency by 31 December 2017.
c)Stagger the requirement for medium and high growth local authorities to complete their assessments by one year.
d)Require medium growth local authorities to complete their assessment by 31 December 2019
e)Require minimum targets in RPS and district plans by 31 December 2019.
f)Require future development strategy by 31 December 2019. / Mostly disagree
Agree: a) b) c)
Disagree: d) e) f)
Reasons for disagreement
Local authorities should complete their assessments as soon as possible so that they have good information to respond to the acute shortages in development capacity that we are currently seeing.
Bring forward timeframes for high growth local authorities to complete housing and business assessments to the end of 2017 and leave the other dates as consulted on.
Review
No provision for review. / Review NPS-UDC in 2021. / Agree

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