Submission on the Urban Development Bill
The Urban Development Institute of New Zealand (UDINZ) is pleased to present this submission on the Urban Development Bill (Bill). UDINZ is a national organisation recently established to champion great urban design and urban development. By providing a platform for collaboration and advocacy, UDINZ is working to achieve resilient, affordable, healthy and sustainable communities for all New Zealanders.
We started recruiting members just prior to the end of 2019 (December) and already our membership reflects a cross-section of people and organisations involved in building New Zealand communities – from developers to contractors, designers, planners, architects and engineers, through to research agencies, lawyers, accountants, and local and central government agencies. More about UDINZ can be found on our web page – www.udinz.nz – or is available on request. The breadth of experience and expertise amongst our membership provides us with a significant body of knowledge to draw on when considering legislative and/or policy change affecting urban development and it is within this context that our submission on the Bill is made.
General Comment
1.1 UDINZ supports the establishment of special purpose legislation to better enable large-scale developments which create resilient, affordable, healthy and sustainable communities. In particular, the legislation should clearly enable innovative and affordable housing. 1.2
1.2 UDINZ also records its support for the provisions within the Bill that recognise and provide for the role of Māori in relation to housing and urban development. The Bill represents an opportunity to respond to urban challenges such as quality housing shortages (which disproportionately impact Māori), and to partner with Māori to deliver effective solutions to those challenges.
1.3 We further agree that transformational change is needed to address the challenges that our urban centres are facing, and that the existing legislative framework is not fit for purpose in terms of facilitating such change. In particular, we acknowledge that the “tools” and processes within the existing framework are inadequate to reduce and/or remove the volatility, uncertainty, complexity and ambiguity (colloquially known in the industry as the “VUCA”) that consistently threaten the delivery of large-scale projects in New Zealand. To that end, UDINZ strongly supports the creation of an urban development authority (UDA)equipped with ready access to a “toolbox” of development powers able to respond to these issues.
1.4 Put simply, the model of a UDA which acquires developable land and related (potentially problematic) infrastructure; resolves and delivers Specified Development Projects (SDPs) including all necessary upgraded/new infrastructure to enable development to proceed; provides clear rules for development within the SDP (including design, public and affordable housing ratios, access to targeted rates and the like), and then on-sells sites or groups of sites/superblocks within the SDP to private developers to develop (within the restrictions of the SDP rules) has been shown to be effective in other jurisdictions and, in our assessment, would be effective at addressing many of the challenges urban development in New Zealand currently faces.
1.5 To be effective, however, the establishment of such a UDA must ultimately be supported by effective strategic policy, adequate funding and financing (including funding to enable development studies and preliminary work), provision of (and appetite to use) powers to recover the initial investment (value capture, infrastructure levies and the like) and, most relevantly in this context, a legislative process that will create real value for the development partners and the communities within which the UDA is operating.
1.6 Unfortunately, for the reasons set out in this submission, UDINZ has strong reservations over whether the Bill in its current form will achieve that outcome. Specifically, it is our view that the length and complexity of the process around establishing an SDP and a Development Plan (Plan) threatens to significantly undermine, if not entirely negate, the value gained from deployment of the UDA powers. While recognising that checks and balances are required in any legislative framework (and particularly in one with the wide ranging powers contemplated here) it is considered that the current draft mandates an overly prescriptive and complex process with too many points of Ministerial oversight to deliver the nimble and proactive response needed from an effective and empowered UDA.
1.7 These deficiencies (as further described in this submission) are, in our view, not merely mechanical; rather they are fundamental to Kāinga Ora’s ability (or otherwise) to successfully deliver its urban development mandate and functions, and more importantly, to the ability of the New Zealand development sector to address the significant urban challenges the country is facing. Comprehensive review and modification of the Bill is therefore considered necessary to address these deficiencies. As such, UDINZ calls on the Select Committee to recommend such modification, taking every opportunity to simplify and de-risk the processes in the Bill in order that its overarching purpose can be met.
Purpose and Principles
2.1 UDINZ supports the purpose of the Bill in principle and recognises that a broad purpose provides the necessary scope to pursue a wide range of development initiatives. We are, however, concerned that the absence of any definition as to what constitutes a “sustainable, inclusive, and thriving community” could present challenges for those performing functions under the Bill. This is particularly so given the requirement for such persons to apply the principles set out in clause 5 in achieving that purpose. In that regard:
(a) The principles for a SDP in clause 5 point to a wide range of outcomes which could, in turn, be used to inform an interpretation of what constitutes a “sustainable, inclusive, and thriving community”. However, it is inevitable that not all of those outcomes will be achieved within any single large-scale development project and, in fact, it is more likely that some of those outcomes may be in conflict. There is no guidance on how such a conflict is to be reconciled, or what particular outcome is to be prioritised in that event.
(b) This inherent uncertainty can be expected to create delay, increased cost and increased risk of successful challenges to decision-making. These outcomes undermine the intent of the Bill, which is to reduce or remove such hurdles.
2.2 Further clarification (for example, as to what “sustainable, inclusive, and thriving communities” means) and/or the use of weighting, should therefore be considered either as a mandated requirement within the Government Policy Statement (GPS) or by means of amendment to the Bill.
2.3 UDINZ supports the requirement for all persons performing functions or exercising powers under the Bill to take into account the principles of the Treaty of Waitangi.
General statement regarding the sdp and plan process
3.1 A robust process is required before an SDP and a Plan are established and access to development powers for that SDP can be enabled. To that end, UDINZ:
(a) supports the relevant Minister(s) having a level of oversight over urban development projects undertaken through the Bill;
(b) supports mandated engagement with affected communities;
(c) supports the imposition of appropriate checks and balances on the exercise of urban development powers.
3.2 Drawing on the experience of other jurisdictions (particularly the direct experience of some of our members with the Queensland UDA equivalent), it is considered that the rationale for preparation of a SDP must be clear with unambiguous criteria capable of evaluation (including subjective and often controversial aims such as improving health outcomes and the like). This will ensure that both the UDA and its partners are clear as to the definition of success.
3.3 Whilst the project objectives mechanism in clause 29 goes some way towards providing this, improved clarity prior to the development of an SDP, as to the sort of development that the UDA might consider eligible for an SDP (location/size/need), would give certainty to landowners and developers and ensure that the limited resources of the UDA are not spent responding to inappropriate requests. This might usefully be mandated for inclusion in the GPS or otherwise set out in the legislation.
3.4 Critically, while UDINZ supports the intent of the SDP process, we do not support the procedure in the Bill for establishing an SDP and a Plan. We consider the process to be unduly extensive and onerous, with multiple steps and points of decision-making which all introduce complexity, uncertainty and risk to a project. The overall process is, in our view, so complex that it would be difficult to envisage a project of sufficient intricacy such that the use of this legislation would be warranted, compared to what could be achieved under the existing legislative framework. In its current form, the Bill as “the cure” runs the risk of being worse than the “ailment” - i.e. the current volatility, uncertainty, complexity and ambiguity that pervade large-scale urban development projects in New Zealand.
3.5 By way of example, every decision given to a Minister under the Bill (whether it is approval of an SDP or including a specified conservation-related area in a project area) introduces both the inherent prospect of political influence that arises when democratically-accountable members are asked to exercise authority, and also the threat of judicial review at each decision point. Experience both nationally and internationally has consistently shown that the manner in, and end to which any such power is exercised is regularly influenced by the existence or otherwise of political will (which is in turn influenced by constituency pressures). That creates uncertainty and risk that is difficult to mitigate. For private developers and investors looking to partner with the UDA, the level of uncertainty associated with the project will be a critical determinant on whether to proceed and, in our experience, the multiple ministerial decision-making points will likely significantly – and adversely – impact on their willingness to do so.
3.6 In short, UDINZ considers that the processes for establishing an SDP and a Plan must be significantly simplified (particularly in terms of the number of steps and decisions required) in order for the Bill to work in practice and for its purpose to be realised. Opportunities to streamline these processes may include:
(a) reducing the number of approvals and/or consultation required, or streamlining how those are provided (for example, greater use of specified timeframes or using a “panel” where all necessary approvals are provided at once);
(b) reducing the number of steps in the process or considering whether there are other opportunities to streamline the process by enabling steps to be undertaken concurrently. For example, could a proposal for an SDP and a Plan be prepared and submitted to the Minister(s) for approval contemporaneously rather than sequentially;
(c) further reducing appeal rights, in particular in relation to the content of a Plan. The prospect of a potential appeal again introduces uncertainty which is likely to have a detrimental impact on the willingness of the private sector to participate. Experience with the recovery and regeneration legislation in Christchurch has shown that the loss of any participation or oversight enabled through appeal rights can be mitigated through a strong emphasis on consultation and engagement with communities during establishment and development of the Plan.
Development Plans
4.1 In principle, UDINZ supports the use of Plans as mechanisms to effect and shape the delivery of SDPs. However, we request that the following matters are considered and/or addressed in the next iteration of the Bill:
(a) Whether more than one Plan can be prepared in relation to an SDP. Clause 61 of the Bill requires a Plan for the project to be prepared in accordance with subpart 2. While there is the ability to amend a Plan once it has been approved, it is less clear whether more than one Plan could apply in relation to an SDP. We request clarification of this matter.
(b) The relationship between the establishment order and its features (project objectives, project areas, key features) and the Plan. Clause 61 provides that the Plan must enable the project objectives to be achieved, but it does not otherwise require the Plan to enable or provide for the key features in the establishment order. It is also unclear what relevance (legal or otherwise) the material required in clause 41 has in relation to the preparation of the Plan. For example, clause 41(2)(c) requires the preparation of a concept plan that shows, generally, the layout of the land within the recommended project area after the project is delivered. The legislation should clarify whether the Plan (or more particularly, the structure plan) needs to reflect or “be consistent with” that concept plan.
(c) “Broad assessment of the likely effects on the environment”. It is not clear what this assessment, which must be provided under clause 73(c), might entail, particularly compared to what is currently expected in an assessment of environmental effects under the RMA. We request that the expectations for this assessment are made more explicit.
(d) Approvals by Minister of Conservation. In considering whether to give approval under clause 75(8), the Minister of Conservation should be required to have regard to subpart 1 of Part 1 (purpose and principles of the Bill). We recommend that an amendment is made to reflect this.
(e) Matters Minister must consider. UDINZ recognises that the purpose and principles of the Bill will automatically apply to the Minister’s decision on whether to approve a Plan. However, the rationale behind the requirement for the Minister to have regard to the additional matters in clause 85(a) is not clear. Those instruments will have already informed the development of both the SDP and the Plan. This results in unnecessary duplication for no apparent benefit. The relevant considerations for the Minister in his/her decision should be whether the Plan is consistent with the project objectives and whether it meets the purpose of the Act. We recommend that the existing clause 85 is replaced with that requirement.
(f) Appeal rights in relation to Plans. UDINZ considers that appeal rights in relation to the approval of Plans should be removed. This legislation is intended to reduce uncertainty and risk associated with large scale development projects. Appeals (even those on a question of law) introduce significant uncertainty, delay and cost and, in view of the already extensive public consultation required as part of this process, the removal of this right is considered appropriate. Legal remedy via judicial review remains available for submitters, and appeal rights exist for decisions made in accordance with the Plan.
Urban development powers
5.1 Subject to our comments below, UDINZ in principle supports the development powers which will be made available to Kāinga Ora under the Bill. However, we request that the following matters are considered and addressed in the next iteration of the Bill:
Planning
(a) Transferring consenting functions. Under clause 100, local authorities have the ability to transfer consenting functions to Kāinga Ora. There is no apparent statutory authority for Kāinga Ora to refuse or negotiate that transfer. Given the potentially significant resource that performing those functions would entail, UDINZ considers that Kāinga Ora should be authorised to refuse that transfer and/or agree a compromise arrangement with the local authority.
(b) Compensation for exercise of veto. During the transitional period, Kāinga Ora may effectively decline a plan change or a consent application. Given that the power is to be exercised immediately prior to a plan change becoming operative or a consent granted, an applicant is likely to have invested significant time and incurred significant cost to achieve that outcome. The exercise of these powers could therefore result in significant adverse outcomes for an applicant. Consideration should therefore be given to possible compensation in the event that Kāinga Ora declines a plan change under this section.
(c) Declining consent applications. Clause 106(d) should be deleted. As currently drafted, it invites Kāinga Ora, in absence of hearing any evidence and within a reasonably short timeframe, to undertake a full RMA assessment of the consent application to inform its decision. That should not be Kāinga Ora’s role. There is no need to repeat the exercise already undertaken by the consent authority – the ability to decline a consent should be limited to whether it is reasonably necessary to achieve the project objectives under subsection (2).
(d) Kāinga Ora’s capacity and capability. Once a Plan is notified for an SDP, Kāinga Ora becomes the consent authority for all resource consent applications in the project area. It must also perform the functions of monitoring, enforcing and promoting compliance in the project area for resource consents it has granted, and all permitted activities in the district or development plan (as they relate to the project area). These are significant responsibilities that will require a (potentially large) team of skilled planners and technical support with expertise in processing consent applications. Considering many local authorities are already under-resourced in such areas, it is possible to envisage that Kāinga Ora will either:
(i) struggle to resource itself accordingly;
(ii) appoint local authority planning officers, which will in turn place resourcing pressure (and consequential delays) on local authorities
UDINZ therefore requests that greater consideration is given to how Kāinga Ora might, in practice, perform these functions; what implications this might have on other consenting authorities and developments outside project areas; and how these might be better addressed. Particular regard should be had to whether local authorities might be more appropriately mandated to process consent applications in keeping with the aim of the legislation (as opposed to simply transferring the function).
Precedent for this approach can be found in post earthquake Christchurch where the Council retained its consenting function but was required to exercise it within defined timeframes and with the assistance of Crown appointed decision-makers.
(e) Resource consent – building consent. In situations where responsibility for resource consenting has been transferred to Kāinga Ora, the Council will be required to rely on the adequacy of that consenting process when issuing building consents. This opens the developer up to risk gap should one or both parts of that process fail. Disputes (either via insurers or otherwise) as to where responsibility lies will likely adversely impact the development sector with no provision within the legislation as to how to resolve such matters.
INFRASTRUCTURE
(f) Roading and non-roading powers. The nature and inclusion of these powers in the Bill is strongly supported by UDINZ. The delivery of infrastructure to support development is one of the key mechanisms that can reduce and/or remove uncertainty and risk for a project which will in turn incentivise private development and investment. UDINZ does, however, request that consideration be given to enabling Kāinga Ora to access these powers for any urban development project not just as they apply to SDPs. As set out above, the current length and complexity of the SDP and Plan processes will, in our view, prevent their use, except in the most challenging of projects. These powers are, however, useful tools which could be deployed to reduce uncertainty and complexity for a wide variety of urban development projects. UDINZ considers that the critical legal safeguards on the use of these powers already exist within the Bill (in terms of the purpose and principles) and, consequently, the ability to use them outside of the SDP process is appropriate.
Betterment
(g) Adjoining or nearby land. If Kāinga Ora forms or widens a road or develops transport infrastructure and the value of adjoining land increases by reason of that infrastructure, then the owner of the adjoining land must pay the amount of that increase to Kāinga Ora.
This only applies where land has been acquired or taken for an SDP. However, land adjoining or near a project area will also indirectly benefit from such infrastructure but will have no liability for betterment. This will incentivise owners to object to land being taken so that land remains outside a project area but still benefits from the infrastructure without liability for betterment. UDINZ recommends that options for addressing this are considered in the next iteration of the Bill.
General land ACQUISITION powers
(h) General policy statement. The General Policy Statement to the Bill notes, in relation to the power to acquire (either through agreement or compulsory acquisition), that this power can be used for the purpose of acquiring land in future development areas prior to any uplift in land values following an urban development project’s announcement. This potentially encourages Kāinga Ora to landbank before a Minister has made a decision about an SDP. It also potentially transfers future wealth to a Crown entity to the detriment of landowners, based on inside knowledge. Further consideration should be given to whether this is appropriate.
(i) Compensation. Kāinga Ora may offer any amount to a person who is entitled to compensation for the taking or acquisition of land for a specified work. Kāinga Ora is not bound to the compensation regime under the Public Works Act 1981. This alternative compensation option may result in delay to the negotiation process. Again, consideration should be given to whether it is desirable to have inconsistent legislative provisions where land is taken for a public work.
FORMER MAORI LAND
6.1 If land within an urban development project is former Māori land then:
(a) once acquired by Kāinga Ora, it can be developed only if Kāinga Ora has made reasonable efforts to engage with former owners and the hapū associated with that land to understand their aspirations and it has first been offered to the former owners; and
(b) the land can subsequently be transferred outside the Crown or local authority only if it has first been offered to the former owners.
6.2 While we understand the rationale for these provisions, UDINZ considers that the requirement to offer back could be an obstacle to a project if the time it takes is protracted. We suggest that a time limit could be considered for acceptance or otherwise of the offer back.
Right of resumption
6.3 The title to land acquired by Kāinga Ora and transferred to a developer for a specified work will be subject to a notation that it is held for a specified work and that it is subject to the Crown’s right of resumption. The right of resumption takes precedence over any other interest registered on the title and it remains live until the development is completed in accordance with the development agreement entered into with the developer or until the land is no longer required for a specified work. Only Kāinga Ora can request the notation be removed.
6.4 UDINZ recommends that the landowner should also have a right to request removal and apply to the Registrar-General of Land, with supporting evidence, to remove the notation.
6.5 The risk presented by the right of resumption will likely impact the availability and cost of development funding. UDINZ recommends that an appeal right for developers is provided where Kāinga Ora purports to exercise the right of resumption.