Property lawyer Lauren Semple reviews the proposed NPS on Urban Development Capacity, and shows how it will change how Councils respond to housing needs

By Lauren Semple*

Housing Crisis or Housing Challenge – whatever one calls it, it is clear that the Government is under pressure to respond in some way to the increasing demand for housing in a number of locations throughout New Zealand.

Part of that response is the first draft of the proposed National Policy Statement on Urban Development Capacity (pNPS) released on 2 June 2016.

It is not yet operative but has simply been released for consultation. The pNPS aims to provide direction to decision makers under the Resource Management Act 1991 (RMA) on urban planning, with a particular focus on ensuring that planning enables development through providing sufficient development capacity for housing and businesses, both in the short (3 years), medium (10 years) and longer term (30 years).

An NPS has teeth

It is what is known as a “higher order” document. It sits above regional and city plans and by virtue of section 55 of the RMA, local authorities are required to amend their planning documents to include specific objectives or policies where directed to do so by the NPS, together with making all other amendments in their plans required to give effect to the NPS. In this way, an NPS can stand on its own (by publishing in the Gazette). However, in the case of this particular pNPS, accompanying amendments to the RMA are also proposed. As part of the Resource Legislation Amendment Bill 2015, it is proposed to include references to “development capacity” to strengthen the effect of the pNPS.

The language in the pNPS is, at times, strongly directive, which, if retained, will make it difficult for local authorities to fudge compliance with it as a higher order document. As currently drafted, it will require almost all local authorities and regional councils to make changes to their planning documents as well as significantly increasing their monitoring and research functions in respect of household and business land demand. The direction for local authorities to ensure/enable sufficient development capacity is supplemented by the requirement for local authorities to maintain and update accurate data to inform and support how it achieves those targets.

The pNPS uses four categories of objectives and policies to “enable urban development” and “reduce the barriers to increasing housing supply”. The four categories and the focus of their application are set out in further detail in the tables below.

The first category sets out the outcomes for decision making by all local authorities. These generally relate to and supplement a requirement on local authorities to provide at all times sufficient residential and business development capacity in the short (3 years), medium (10 years) and long terms (30 years). The terms in bold are defined quite comprehensively, with “development capacity” incorporating the term “demand” which is also defined. Demand refers to the short, medium and long term, having particular regard to:

– Total numbers of dwellings required to meet projected household growth;

– Demand for different types of dwellings;

– Demand for different locations within the urban area; and

– The demand for different price points.

The reference to demand relating to different price points will be of interest given the significant media attention recently towards the lack of housing and particularly affordable housing for the most vulnerable. While there is no explicit direction in the pNPS relating to the provision of affordable housing, the Government contemplates that the pNPS will result in the reduction of consenting barriers and the subsequent increase of housing supply to assist in driving down the price of housing (in conjunction with other measures).

The second category relates to evidence and monitoring to support decision making and the third category contains directions relating to co-ordination of evidence and implementation between local authorities and infrastructure providers. The fourth category is responsive planning. Some of the strongest language is used in the fourth category with the objectives being to ensure that planning decisions enable urban development and ensure that in the short and medium terms, local authorities adapt and respond to market activity. The policies require local authorities to consider specific measures at their disposal under the RMA to address development capacity where a short-fall is anticipated by the assessments the local authorities are required to carry out. While the choice of which mechanism the local authorities use is ultimately theirs, the pNPS requires active consideration, in some instances, of specific mechanisms under the RMA.

The pNPS also adopts a tiered approach to the application of the policies in the four categories, depending on whether the local authority has a Medium Growth Urban Area or a High Growth Urban Area within their jurisdiction. These urban areas are defined by reference to Statistics New Zealand data included in the pNPS. The tiered approach ensures that the centres experiencing the highest levels of growth are subject to the more stringent requirements under the pNPS particularly in relation to target setting and responsive planning. Currently there are 5 urban areas which would qualify as High Growth Urban Areas – Auckland, Tauranga, Hamilton, Christchurch and Queenstown.

The Government is proposing a package of non-statutory guidance to assist local authorities in implementing the pNPS. The requirement to provide development capacity to meet demand in 3, 10 and 30 years time, and to enable competitive operation of the land and development markets are two examples of the more challenging aspects of this pNPS which will require further clarification. There will undoubtedly be instances where increasing development capacity in high growth areas facing high demand will not be possible (i.e. constraint on land because of existing development), or at least, incapable of being addressed under the RMA. It must be remembered that neither central government nor local government have particularly large landholdings in the high growth area and as such providing sufficient land depends heavily on the private sector. If holders of rural land are not interested in conversion to business or residential it is difficult to see whether the courts will be prepared to uphold rezoning of their land anyway In those instances, there is a question of whether local authorities and decision makers will be able to comply with the pNPS.

The Government has consistently flagged its intentions to develop and use National Policy Statements to address some of the broader concerns with the RMA. This pNPS, as currently drafted, will provide the development community with a strong tool to challenge Council decisions to refuse applications for new housing developments or the intensification of existing developments. The quality of the information gathered and used by the local authorities to make decisions as required under the pNPS and how local authorities are responding to short-falls in development capacity will likely also be subject to challenge.

The pNPS is scheduled to become operative in October 2016. A number of requirements to develop a more comprehensive evidence base and setting minimum targets must be implemented within three years of the pNPS becoming operative. Consultation on the pNPS is now open with submissions closing at 5:00pm on Friday 15 July 2016.

This is a significant document – perhaps one of the most significant National Policy Statements to have been issued under the RMA.

Lauren Semple is a partner at Greenwood Roche, project lawyers. She is based in Christchurch. You can contact her here.