Item 8: Options for
increasing housing supply
|
|
Urban Development Subcommittee
2 March 2021
|
REPORT R22552
Options
for increasing housing supply
1. Purpose
of Report
1.1 To
consider options to help address housing supply in Nelson.
2. Summary
2.1 This
report follows a workshop with the Urban Development Subcommittee on 26
November 2020 on options for increasing housing supply. It responds to a
request at that workshop for more information on how Council might positively
influence housing supply.
3. Recommendation
|
That the Urban Development Subcommittee
1. Receives the report Options
for increasing housing supply (R22552); and
2. Approves that officers will;
a. continue
to work with Kāinga Ora to explore potential Specified Development
Projects within the current work programme; and
b. report
to Council any land purchase opportunities with potential to leverage housing
supply as they arise; and
c. assess
Council owned properties to see which have potential to leverage housing
supply and report these to Council; and
3. Notes that Council will be
considering a change to the rating policy to address inequities in rating on
large residentially zoned landholdings and provision for one Full Time
Equivalent (FTE) staffed position in support of intensification in the draft
Long Term Plan 2021-31.
|
4. Background
4.1 Housing
supply is one of the key Council priorities and is of high community and
Central Government interest. There are a number of further opportunities
that can be pursued should Council wish to take a more active role in
supply.
4.2 The
Council has made housing intensification and affordability a priority in the
Annual Plan 2019/20 and the draft Long Term Plan 2021-2031.
5. Discussion
Housing Capacity, Supply and
Demand
5.1 Although
interrelated, capacity, supply and demand of housing means different things;
5.1.1 Housing
capacity – means land that is zoned residential, and is provided with (or
planned to be in the Long Term Plan) wastewater, water, stormwater and
transport infrastructure to support its development capacity.
5.1.2 Housing
supply – means the supply of housing brought to the market, including
both rental and private ownership.
5.1.3 Housing
demand – means the demand for dwellings to meet population growth.
5.2 When
demand for housing supply increases, so too do prices. This price increase is
exacerbated when supply cannot keep up with demand. Some of the factors that
affect housing market supply include mortgage rates, cost of building
materials, employment, household incomes, migration and population growth
rates.
5.3 House
prices and rents have continued to increase in Nelson. For example, data
produced by the Ministry for Housing and Urban Development indicates that in
December 2020 house prices have increased by 54% over five years to now be a
median of $672k (compared to $436k in 2015). Rents have also increased by 30%
over five years to now be a median of $428 per week (compared to $328 per week
in December 2015). Furthermore, as the average household income in Nelson is
lower than the national average, housing at an affordable price point is
constrained.
5.4 The
National Policy Statement on Urban Development (NPS-UD) requires that Council
ensure it has adequate housing capacity over the short, medium and long
term. Housing capacity is met when adequate zoning and rules under the
resource management plan, and adequate infrastructure servicing under the Long
Term Plan and 30 Year Infrastructure Strategy are provided.
5.5 To
plan for this the NPS-UD requires Council to undertake a Housing Capacity
Assessment (a stocktake of current housing, including by type and location,
projected 30 years into the future) and adopt or review a Future Development
Strategy (FDS) (that sets out long term growth planning) every three years.
5.6 Council’s
last Housing Capacity Assessment was undertaken in 2018 and indicated that
demand would outstrip capacity in 2027 under current Plan settings. Officers
are currently updating Council’s Housing Capacity Assessment in line with
the requirement to have it completed before 31 July 2021. The updated
assessment will identify if the capacity/demand relationship from the 2018
assessment still applies.
5.7 A
workshop on the assumptions underpinning the assessment model is planned for
this Subcommittee on 31 March 2021.
5.8 This
report focuses on options available to Council to take a more active role in
housing supply that sit outside of its current work programme.
Urban
Growth Agenda
5.9 The Government has recognised the need for a more
active role in housing supply, establishing its Urban Growth Agenda and
introducing a range of additional urban growth initiatives that bring together
a toolkit of development powers to assist with complex urban development. Key
changes are set out below.
National
Policy Statement on Urban Development
5.10 The
Government gazetted its new NPS-UD in July 2020 replacing the previous 2016
statement on urban development capacity. The NPS-UD imposes several new
requirements for Council, which has been assessed as a Tier 2 Urban
Environment. The Government’s objective under the NPS-UD is to direct
local authorities to enable sufficient development capacity for housing and
business so that urban areas can grow and change in response to the needs of
their communities.
5.11 The NPS-UD directs councils to address potential
barriers to development. It has a number of methods to influence housing
capacity, the key provisions are set out below:
Plan
provisions
5.11.1 Requires
amendments to the district plan and regional policy statement, for example, to
remove on-site parking rate requirements and to zone in a manner that allows
development across a range of areas and rules that permit a range of housing
types to be built.
5.11.2 Following
preparation of the Housing and Business Capacity Assessment (HBA) in July 2021,
Council will be required to immediately notify the Minister for the Environment
if it determines there is insufficient housing capacity. The expectation in
this scenario is that Council will then be directed to make changes to its
Resource Management Act (RMA) planning documents to address and alleviate
constraints.
5.11.3 The
housing bottom lines policy requires local authorities to put the amount of development
capacity sufficient to meet housing demand plus the competitiveness margin from
their HBAs into their regional policy statements and district plans.
Decisions /strategies are
based on evidence
5.11.4 Imposes
a number of additional requirements on Housing and Business Development
Capacity Assessments (HBAs), monitoring and reporting functions.
Including assessment of how well the current and likely future demands for
housing by Māori and different groups in the community are met, as well as
the demand for different types and forms of housing, an affordability
assessment, future estimates of housing demand, and monitoring and reporting of
demand uptake across set criteria.
5.11.5 Requires
preparation of a Future Development Strategy (FDS) to ensure sufficient
development capacity (meaning for the short term capacity that is plan enabled
and infrastructure ready) to provide for both standalone and attached dwelling
types over the short, medium and long term.
5.12 The
NPS-UD and current capacity assessments have raised a question as to the best
way forward to meet the City’s future demand and whether the City would
benefit from Council taking a more active role in housing supply, or in support
of that supply by others. Options that are not part of Council’s current
work programme are discussed in the following paragraphs.
Kāinga Ora- Homes and
Communities
5.13 Kāinga
Ora was established through two separate pieces of legislation. The Kāinga
Ora–Homes and Communities Act 2019 that established Kāinga Ora as a
Crown agency and the Urban Development Act 2020, that gave Kāinga Ora
access to a range of existing development powers previously spread across
multiple statutes and agencies.
5.14 Kāinga
Ora is the Government’s primary housing and urban development delivery
arm with two key roles, firstly to be its own public housing landlord and
secondly, to partner with the development community, including local
government, on urban development projects.
Specified Development Project
5.15 The Urban Development Act provides for the Specified
Development Project (SDP) process that supports Kāinga Ora to initiate
large urban development projects upon approval from the Minister. Kāinga
Ora now has access to a range of development
powers:
· that shorten planning and consenting processes; and
· give them the ability to construct, move and change transport and water
infrastructure; and
· fund new infrastructure and other development activities; and
· bring together parcels of land for development via compulsory purchase;
and
· reconfigure reserves for better use.
5.16 Under this provision, there is an opportunity for
Council to propose an SDP as a way of advancing and enhancing housing supply
through a streamlined process in partnership with Kāinga Ora.
5.17 The advantages of potentially partnering with
Kāinga Ora on a SDP is that it could help to de-risk the Council
development process while bringing large scale housing supply to the Nelson
market. The process is likely to involve the amalgamation of properties
to achieve intensification goals via compulsory purchase, actively increase
uptake rates and demonstrate market feasibility of a new model of housing for
Nelson.
5.18 Council
officers have an ongoing relationship with Kāinga Ora and have had
exploratory conversations as to potential projects that might meet its urban
development project objectives. Kāinga Ora is currently working on a
strategic plan for Tasman/Nelson/Marlborough and business cases on potential
specific projects. Officers can provide an update at the meeting on
recent advice from Kāinga Ora in relation to this option.
5.19 If
a SDP proposal was potentially able to be advanced, officers will bring a
report to this Subcommittee, outlining the proposal and its costs and benefits.
5.20 Officers
support further exploration with Kāinga Ora on opportunities for a SDP to
be progressed. The advantages and disadvantages of this option are discussed
further under the options table (option 2) on
page 10 of this report.
Other mechanisms
Urban Growth Partnerships
5.21 Urban
Growth Partnerships have the potential to bring together Council and Government
investment in an area.
5.22 Urban
Growth Partnerships between Crown, local authorities and mana whenua have
resulted in joint plans and shared spatial planning programmes aligning
investment in order to unlock housing potential. For example, this method has
been used in the Hamilton-Waikato metropolitan area, Tauranga-Western Bay of
Plenty and Queenstown Lakes.
5.23 Nelson
and Tasman are both unitary Councils and already work together on a Future
Development Strategy. Seeking an Urban Growth Partnership between the two
Council’s and Government might be more attractive to Government and help
encourage its investment in large infrastructure projects (such as transportation)
that also leverage housing growth as benefits would be experienced across both
areas.
5.24 Officers
have not recommended this option because of the additional time and resource
that would be involved and due to it replicating some of the functions of the
Future Development Strategy. The advantages and disadvantages of this option
are discussed further under the options table (option
3) on page 10 of this report.
Crown Entities
5.25 A
crown entity is an organisation that is established under the Crown Entities
Act 2004. Crown entities remain a public body although are at arm’s
length from Ministers as they are governed by a board of directors.
5.26 A
successful example is the Tamaki Redevelopment Company Ltd (trading as Tamaki
Regeneration Company – TRC) that was established in 2012 by the
Government (59% shareholder) and Auckland Council (41% shareholder) to deliver
the Tāmaki regeneration programme. This resulted in Housing New
Zealand’s Tāmaki portfolio of public housing (valued at
approximately $1.6 billion) being transferred to TRC in 2016.
5.27 As
noted above, this model has been used successfully in Auckland where there is a
significant scale of development demand and capacity. Further research
would be required to see if this model would work in Nelson should Council want
to be directly involved in development, however the size of Council’s
land portfolio for this would be a limiting factor as would the
Government’s potential willingness to partner in this manner.
5.28 If
Council wanted to explore this option further funding would be required to
engage a consultant to assist officers to investigate and report on potential
benefits of this option and requirements for its success.
5.29 Officers
are not supporting exploring this option further believing it unlikely that
Government would consider the potential scale of development in Nelson would
warrant this type of intervention. More advantages and disadvantages of
this option are discussed under the options table (option 4) on page 10 of this
report.
Urban Development
Authorities
5.20 Urban
Development Authorities (UDAs) are usually Council Controlled Organisations
(CCO) with independent governance structures that have been established to
advance urban development aspirations and objectives.
5.21 UDAs
are common overseas where they have been used successfully, when there has been
a market failure, to facilitate positive change in environments. Auckland and
Christchurch have established UDAs. Wellington City Council has also
taken steps to establish one however a change in governance direction led to a
different approach being taken.
5.22 While
UDAs based in New Zealand do not have special development powers they are
well-positioned to partner with Kāinga Ora who can facilitate larger more
complex projects, or progress projects in other ways. For example, Kāinga
Ora could use its compulsory acquisition powers to consolidate properties
within a development precinct and the UDA could leverage the acquisitions to
attract development partners. UDAs can retain a relatively high degree of
control over the housing and urban outcomes within a development precinct while
relying on partnerships for delivery.
5.23 The
most referred to example of a UDA in New Zealand is the Panuku Development
Agency. Panuku is a council-controlled organisation set up by Auckland
Council to manage its property portfolio and lead urban development projects.
Panuku’s main focus is on enabling and incentivising intensification in
existing town centres by leveraging the Council’s property portfolio.
Priority development projects fall into three groups: full suburban
regeneration (transform); facilitating revitalisation through a few key
properties (unlock); using Council land to build houses (support). Panuku
partners with other entities rather than building properties itself. The
programme is funded by a mix of Council funding (through the Long Term Plan)
and reinvestment of proceeds from property sales programmes. Additional funding
for development projects comes from partnerships with Government, iwi,
not-for-profit and commercial developers.
5.24 If
Council wanted to explore this option further funding would be required to
engage a consultant to assist officers to investigate and report on potential
benefits of this option and requirements for success.
5.25 Officers
are not recommending this option due to the cost implications involved in
establishing a CCO. However, the advantages and disadvantages of this option
are discussed further under the options table (option 4) on page 11 of this
report.
Housing Strategies
5.26 Staff
have undertaken a desktop review of other councils with housing strategies. A
small number of councils have adopted a strategy with a focus on homelessness,
social housing and equity of housing, and on bringing together key partners and
stakeholders, such as government agencies, iwi and community housing providers,
for example, to assist with housing supply in these areas.
5.27 Housing
strategies by themselves do not directly enable a more direct role for council
in enhancing housing capacity, although they can be a tool to bring together
and make explicit the roles and responsibilities of the many parties involved
in housing for communities.
5.28 Council,
as a Tier 2 Urban Environment, is required to have a Future Development
Strategy, undertake Housing Capacity Assessments and develop
action/implementation plans. The information from these processes can be shared
with other parties to inform their work and will reveal if there will be
insufficient housing capacity, including by typology, in the near future.
5.29 For
these reasons officers do not see the value in producing a Housing Strategy as
a means to take a more direct role in housing supply. However, the advantages
and disadvantages of this option are discussed further under the options table
(option 5) on page 11 of this report.
Assess Council Owned
Property for potential to leverage housing supply
5.30 Council
has a property portfolio that includes a number of underutilised sites that may
be able to be used for Council to bring housing supply to the market and
demonstrate exemplar housing developments.
5.31 Officers
receive expressions of interest from developers for Council owned sites for
housing developments, particularly in and close to the city centre. The
Betts Carpark process was a way for Council to de-risk development and provide
developer certainty, and express interest in participating in such a
process. Many of Council’s properties are, however, subject to
Public Works Act or other constraints on their sale and use.
5.32 A
stocktake of Council property was undertaken by officers in 2016. The stocktake
could benefit from an assessment of properties that have the potential to leverage
housing supply. This could be undertaken by officers within existing resources
but would require a joined up approach between this Subcommittee and the
Strategic Development and Property Subcommittee which has delegation of
Council’s strategic property portfolio.
5.33 Officers
are recommending this option. The advantages and disadvantages of this option
are discussed further under the options table (option 6) on page 12 of this
report.
Work with developers on
opportunities for Council to purchase property that leverage housing supply
5.34 Officers
are also contacted by property owners from time to time who wish to sell
inner-city property to Council. This represents an opportunity for
Council to enhance supply by purchasing city centre properties to leverage
residential outcomes and that could be delivered through a range of models.
5.35 Under
this option officers would report to Council on any proposal to sell land that
has potential as a housing development, for consideration.
5.36 Officers
are recommending this option. The advantages and disadvantages of this option
are discussed further under the options table (option 7) on page 12 of this
report.
6. Other
options currently being considered through Council’s Long Term Plan
process
Customer Journey
6.1 Council
has identified intensification as a key housing outcome and has adopted an
action plan in support. However, for intensification to be successful it will
need to involve a much higher number of single landowners adding to housing
stock than with greenfield development.
6.2 Therefore,
Council is proposing an additional resource of 1FTE staff member through its
draft Long Term Plan 2021-31 to support these landowners to navigate the
resource and building consent process. This is important especially for the
level of uptake for one-off developments that Council is seeking through the
FDS.
Rating
policy
6.3 Council
is also considering changes to its Rating Policy through its Long Term Plan
process. The current policy in the Funding Impact Statement in the Long Term
Plan provides for properties greater than 15ha but zoned residential to be
rated as if they are zoned rural, while sites under 15ha and zoned residential
are rated as residential zoned land.
6.4 The
suggested amendment to the Policy, if adopted following consultation, is
expected to assist to incentivise the conversion of currently undeveloped
residential zoned land to market and increase housing supply.
7. Options
7.1 Options
for Council to take a more active role in housing supply are set out below.
Council could choose any one, or a combination of, these options. Adequate
resourcing needs to be provided if any options are to fit into the current work
programmes.
7.2 Officers
recommend options 2, 6 and 7 have merit in enabling Council to have a more
active role in housing supply in the short to medium term.
|
Option 1: Do nothing. This is
the status quo option.
|
|
Advantages
|
· No
further resourcing required.
|
|
Risks and Disadvantages
|
· Although
there is an action plan to support intensification, its actions are focused
on operational matters to enable intensification, and will on its own not
significantly impact housing supply.
· Council
does not make use of all the tools available to it, in seeking to achieve a
change in housing supply and its intensification outcomes.
· Council’s
priority of housing intensification and affordability is not adequately
resourced and is reliant on implementation through the housing reserve which
does not address all types of housing capacity that is required.
· Government
mandated housing capacity may not be able to be met, requiring notification
to the Minister of the Environment.
· Housing
supply continues to be a significant issue in Nelson affecting business,
employment and migration growth.
|
|
Option 2:
Work with Kāinga Ora in 2021 to investigate any sites with the potential
to be considered as a Specified Development Project.
|
|
Advantages
|
· The
tools provided under the Urban Development Act could have benefits in
increasing housing supply in Nelson.
· De-risks
the development process from a Council perspective as Kāinga Ora or
Central Government take the lead.
· Has
the potential to provide large scale supply to the Nelson market.
· Has
the potential to amalgamate properties to achieve intensification goals via
compulsory purchase, actively increase uptake rates and demonstrate market
feasibility of a new model of housing for Nelson.
|
|
Risks and Disadvantages
|
· Action
depends on Kāinga Ora having the capacity and willingness to prioritise
Nelson in their work programme.
· Will
require allocation of officer resource to assist with business cases,
administration of the process and provide a local government response.
|
|
Option 3:
Enter into an Urban Growth partnership with TDC and the Government.
|
|
Advantages
|
· Demonstrates
a unified approach to housing across the regions which may attract Government
investment.
· Results
in coordinated infrastructure and investment provision to support housing.
|
|
Risks and Disadvantages
|
· Would
require additional staff and budget.
· Replicates
work achieved via the Future Development Strategy.
· Would
require significant setup time and potentially involve a public consultation
process.
· Decision
making across two Councils could be slow and time consuming.
|
|
Option 4: Investigate the potential benefits of establishing
a Council-led urban development agency (UDA) and/or Crown Owned Entity
to enable Council to participate in the local property market and/or partner
with private developers to assist with housing supply.
|
|
Advantages
|
· Enables
Council to have sufficient information to make an informed decision about
whether this tool could have real benefits in increasing housing supply in
Nelson.
|
|
Risks and Disadvantages
|
· Both
of these options would be a long term tool as significant setup time would be
required and the process would potentially include a public consultation
process.
· The
size of Council’s property portfolio may be a limiting factor.
· The
Government may not wish to partner via these particular tools, especially
considering the urban growth agenda provides Kāinga Ora with the ability
to have some of the powers of a UDA.
· Requires
resources for investigation and
longer-term
investment costs.
|
|
Option
5: Develop a Housing Strategy in collaboration with the community.
|
|
Advantages
|
· Has
potential to formalise the commitments of a number of stakeholders that can
help with housing.
· A
Housing Strategy will include actions from a range of partners which may
reduce Council being seen as the provider of all the necessary functions.
· Wide
community engagement can lead to enhanced community and stakeholder buy-in.
|
|
Risks and Disadvantages
|
· Greater
community and stakeholder involvement is likely to lead to a slower process.
· May
not create the change in housing supply that is sought.
· May
require allocation of additional officer time and resource.
|
|
Option 6: Assess Council owned properties to see
which have the potential to leverage housing supply.
|
|
Advantages
|
· Enables
Council to consider if it can maximise use of its own assets to assist with
housing supply.
· Would
help to identify what properties have potential to be developed for housing.
|
|
Risks and Disadvantages
|
· May
require allocation of additional officer time and legal resource.
|
|
Option 7: Continue to work with developers on
opportunities to leverage housing supply, and report to Council on these
opportunities as they arise.
|
|
Advantages
|
· Supports
ongoing relationships with developers and projects that enable more housing
and/or different housing types.
|
|
Risks and Disadvantages
|
· May
require allocation of additional officer time and legal resource.
|
7.3 Officers
have provided recommendations based on the ability to undertake projects within
current resourcing.
8. Conclusion
8.1 Council
has a number of options to have a more active role to address housing supply in
Nelson. Officers consider that options 2, 6 and 7 have merit in enabling
Council to achieve a short to medium-term increase in housing supply.
9. Next
Steps
9.1 Programme
any of the options selected by Council into the work programme.
Author: Lisa
Gibellini, Team Leader City Development
Attachments
Nil
|
Important considerations for decision making
|
|
1. Fit
with Purpose of Local Government
The recommendations in this report support
Council’s role to promote the social and economic well-being of
communities in the present and for the future by identifying how Council can
take a more active role in housing supply within its existing work programme.
|
|
2. Consistency
with Community Outcomes and Council Policy
This report supports the following community
outcomes: Our urban and rural environments are people-friendly, well planned
and sustainably managed; our infrastructure is efficient, cost-effective and
meets current and future needs; our communities are healthy, safe, inclusive
and resilient.
|
|
3. Risk
This report seeks guidance on the options for
increasing housing supply that can be achieved within officers current work
programme, therefore the risk is considered to be low.
|
|
4. Financial
impact
The options in this report have a range of financial
implications as outlined in the options section of this report.
|
|
5. Degree
of significance and level of engagement
This matter is of low significance because it is
outlining options for Council to have a more direct role in housing supply
and therefore no formal engagement has been undertaken. If any
significant options are selected they will need to be reported back to
Council consultation with the community may be required.
|
|
6. Climate
Impact
Climate impact has not been considered in
preparation of this report.
|
|
7. Inclusion
of Māori in the decision making process
No engagement with Māori has been undertaken in
preparing this report.
|
|
8. Delegations
The Urban Development Subcommittee has the
following delegations to consider options for urban development and
housing
Areas
of Responsibility
· City Centre Programme, including
the City Centre Spatial Plan
· Statutory tools, initiatives and
projects relating to Urban Development and Housing
Powers
to Decide
· Developing, monitoring and
reviewing strategies, policies and plans, with final versions to be
recommended to Council for approval
Powers
to Recommend to Council
· Approval of final versions of
strategies, policies and plans
· All other matters within the areas
of responsibility or any other matters referred to it by Council
|
