Productivity Commission report builds case for planning reform

Wellington (17 June 2015): The Productivity Commission’s latest report on how overly tight land supply feeds the housing affordability crisis is a pressing reminder of why the planning system and local government funding arrangements need reform, according to The New Zealand Initiative.

The draft report, Using Land for Housing, notes that while New Zealand has one of the fastest population growth rates in the OECD, the supply of land for housing has not kept pace.

The report lays much of the blame at the feet of New Zealand’s overly complex planning system, which the Commission says makes it difficult for local councils to make effective decisions on zoning, infrastructure, and transport.

The report also notes that councils struggling with population growth try to limit the amount of infrastructure they provide to limit the risk to their balance sheets, but as a result severely limit the amount of developable land in their jurisdictions. This boosts house prices and hurts affordability.

“Councils, through their planning decisions and the infrastructure they provide, play a crucial role in determining what a new house will cost on the market,” said Oliver Hartwich, Executive Director of The New Zealand Initiative.

“If we continue to maintain a local government funding system that effectively sees new residents to cities as a cost we are never going to tackle the housing affordability crisis.”

The public policy think tank said it broadly supported the Productivity Commission’s other recommendations, which included a call for better cost-benefit analysis on land regulations, making more effective use of infrastructure and long-term funding mechanisms, and better use of public land.

Hartwich however remained cautious about the inclusionary zoning recommendations, a consideration which the report explored if the primary recommendation of full planning system reform were not feasible. Inclusionary zoning is a policy whereby developers are required, or incentivised, to provide a tier of low-cost housing as part of any new development.

“Inclusionary zoning can have a number of negative spill-over effects into the broader housing market, but probably the biggest concern is that it allows local government to endlessly tinker around the edges of the supply problem,” said Hartwich. “These schemes only make sense where you have a major supply problem in the first place, and councils would be better served focusing on this first order problem instead of second-best housing affordability band aids.”

The Productivity Commission’s report comes a week after the OECD’s bi-annual report on New Zealand, which called for urgent action on Auckland’s housing market to avoid fiscal risks to the economy, and echoed many of the Initiative’s own housing recommendations.

ends

© Scoop Media