The government have said that reforming the Resource Management Act (RMA) is one of their top priorities and yesterday the Environment Minister Nick Smith outlined 10 major changes it was planning. This comes after they failed to make controversial changes to the RMA during the previous term but failed after losing the support of some of minor supporting parties. The major changes planned are
- Add natural hazards
- Recognise urban planning
- Prioritise housing affordability
- Acknowledge importance of infrastructure
- Greater weight to property rights
- National planning templates
- Speed up plan-making
- Encouraging collaborative resolution
- Strengthening national tools
- Internet for simplicity and speed
While we don’t have any real details on what’s planned some of these – such as making greater use of the Internet – are simply plain sense. Of the other ones a few particularity stand out.
Add natural hazards
Presumably this means giving more weight to projects that provide resilience against natural hazards. If true it could be about further making it easier to build projects such as large duplicate roads such as Transmission Gully where the government can use the threat of an earthquake in Wellington as an excuse to build it.
Recognise urban planning
I’m not quite sure what this could mean but hopefully it means there will be greater emphasis on how our planning affects our urban environment.
Prioritise housing affordability
This will be covered further on in the post.
Acknowledge importance of infrastructure
All the talk in the press release relates to the impact of housing however the RMA also covers a lot of non housing development including roads. Again could this be about making it easier for infrastructure to be built and/or making it cheaper for developers to tap into existing infrastructure.
Greater weight to property rights
One of the big issues we had with the Unitary Plan debate was that those advocating for more restrictions (e.g. height, density, carparking etc.) or for developments to happen anywhere but near their backyard are effectively restricting the property rights of others. Addressing some of the NIMBYism we saw could be a very useful change but would the government go that far?
Despite the lack of public detail, Len Brown has been quick to praise the government over the suggestions for change.
Mayor welcomes ‘pragmatic’ proposals to reform RMA
Mayor Len Brown has welcomed a review of the Resource Management Act announced today by Environment Minister Nick Smith.
“From Auckland Council’s perspective, there is considerable scope to improve the RMA, in particular streamlining the complex processes councils are required to work within, reducing duplication and providing more affordable housing,” Len Brown said.
“I particularly welcome recognition of the needs of cities and urban areas, including housing and infrastructure, which the current legislation doesn’t cover well.
“Auckland Council is working closely with the government and we have had significant input into this discussion. We welcome the government’s desire to seek broad support for any legislative changes.”
To go along with the government announcement they also released a report from Motu that had been commissioned by Treasury looking at impacts of various planning rules and regulations have on the cost of developments. The paper is based on the responses from developers on many of the regulations we’ve long thought are stupid or counterproductive such as density limits, height limits, room sizes, balcony requirements etc. If accurate some of the costs impacts are quite staggering with balcony requirements – something Stu touched on recently – being one of the worst.
I’ll go the report in more detail in the future however the cost impacts are shown below. Importantly the authors say that while they have attempted to look at the costs, that the benefits of any of the regulations isn’t something that they’ve considered. As such some of the items on the list will likely still need to happen.
While not all we would want to change, taken at face value it suggests that the regulations can add almost $200k to the cost of an apartment and around $150k to the cost of a standalone dwelling.
We’ll obviously have to wait to see just what the government proposes to see if they’re good or not but they certainly seem to have opened up a lot areas for discussion.
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Matt, your comment that “it suggests that the regulations can add almost $200k to the cost of an apartment and around $150k to the cost of a standalone dwelling” must surely be wrong. There is no way it can cost that much.
Looking at note 1 in the Motu table – which applies to the whole table – the costs given for each item refer to the cost increase where that item is the binding constraint. So they’re not (completely) cumulative.
The Motu report notes that costs of building balconies is often at about the same cost as creating actual building space itself. But surely that depends on whether a balcony is external, rather than internal to the building fabric. By that, I mean that if the balconies are inset within the structure, then yes, of course there is a large cost in building the framework – the same concrete slab floor, columns, beams etc, and then a cost for waterproofing. External wall costs are probably the same whether the balcony is there or not.
But if the balcony is clipped on the outside of the frame, then you are using Council land to encroach into the airspace, and the costs will be way different, and probably much less. Yes, you may have to pay an encroachment license, but a steel fabricated external clip-on balcony has a much lower level of cost than what is quoted. For a 8m2 balcony, fabricated in a factory and craned into place, a cost of about $30k seems more appropriate.
I think that Motu is confusing the cost of the actual balcony, with the cost of building that balcony. I was talking about a typical cost per completed installed built balcony, whereas Motu seems to be saying that the RC cost of the balcony is in the range of $40-70,000. That’s plainly 100% wrong – there is basically $0.00 charge for a balcony, unless you have to pay an encroachment fee for being above Council land. In some places that is about $100 per year. Not a large cost at all. So Motu seem to be saying that as Auckland Council is proposing to make you build a 8m2 balcony to make your apartment better to live in, that the sum involved in building the balcony is a fee. Well, no, it doesn’t work like that. You will own the balcony – it is part of your purchase cost – and you can use it. That’s very different from a fee for processing, which merely disappears into the Council coffers, and is never seen again.
“I think that Motu is confusing the cost of the actual balcony, with the cost of building that balcony.”
I had to go away and think about what they were saying with the balcony costs. Their argument boils down to *opportunity costs* – meaning we have to ask whether people would have built something more valuable if they had not been required to build a balcony. Essentially, their figure implies that:
* On the margin, building more balconies means building less indoor living space. (This is a reasonable assumption, especially in areas where you want to build out to the property boundary, e.g. in the city centre.)
* Potential buyers value indoor floorspace much more than they value balconies. (Again, a reasonable assumption given that people use indoor space much more than balconies. Smokers are the exception…)
Resource consent costs don’t really enter the picture when it comes to balconies – it’s all about opportunity costs. Also, note that a similar argument can (and should) be made for other space hungry rules such as minimum parking requirements.
Ifyou were building a house and added a deck to the same one it would increase build cost by $40,000 plus developers margin so the cost is real
Presumably the point is that in the past you could choose whether or not you wanted to pay for a balcony (and how big it could be). As Plan changes in Auckland have occurred the choice has gone to the extent that under the PAUP you MUST have an 8sqm balony minimum 2.4m deep minimum whether you want it or not.
“There is no way it can cost that much.”
A while ago, I did some back-of-the-envelope maths on the costs to build apartments. I looked at what it should cost to build NYC-style midrise apartments (http://www.propertyshark.com/img/mkt_email/Building-Class-NYC/Building_Class_C6.jpg), based on assumed land prices of around $1000/m2 and best-guess construction costs of $2,500/m2 for medium-rise apartments.
If we assume a lot of 400m2, a site coverage ratio of 0.8, and six storeys, it should be possible to construct a building with almost 2,000 m2 of floorspace for $5.2 million. If we then assume that 25% of that floorspace is lost to internal services (lift, stairwell, corridors), we get around 1500m2 of living space – or a total of thirty 50m2 apartments. [Realistically, 24 larger apartments would probably be more reasonable – 4 on each floor, each with windows.]
The final cost per apartment would be around $175,000. However, a quick survey of Trademe suggests that it’s not possible to buy an apartment of that size for much less than $350-400,000. What explains the difference? Regulations are obviously one potential explanation, given that none of the residential zones currently allow you to build something like that without going through a more involved and uncertain consent process.
Peter, thanks for that – build costs of $2,500 / m2 are probably way too low in today’s market, especially if using concrete frame. But have you also forgotten to factor in Land Costs? That will be a big factor…
…and while we’re on the subject of costs, this article on Stuff takes the cake:
http://www.stuff.co.nz/life-style/home-property/65291535/the-10millionpound-onebedroom-apartment
10 million pounds for 150m2 = about $130,000 / m2 for One Hyde Park.
Hmmm… no RMA there. Must all be land costs then and developers markup…
Mill water has a covenant that restricts housing sizes to 191 m2. If I only want to build a 100 m2 house then that covenant ups the build price by roughly $200k.
I believe that covenant was put on by the developer, not the Council.
Land costs are in there – they contribute around $400,000 to the total cost of the apartment block. I have assumed a land cost of $1000/m2, which is in the range of what you’d find in the isthmus or north shore.
With regards to the $/m2 build cost, I think I used figures for high-rise apartment costs from a recent QS handbook. Rawlinsons, maybe? Actual outcomes may vary…
One important implication of this analysis, by the way, is that land costs don’t matter very much for mid-rise and high-rise developments. In other words, we can tolerate high land prices if and only if we allow people to build up.
It’s impossible to tell if what’s proposed is good or bad so far since there’s no detail. Question re: Motu’s table – how can section sizes – density controls only add 11,000 – 19,000? Being able to put multiple dwelllings on the same piece of land rather than only being allowed to cover a certain area in a certain position would have to contribute more than that. Maybe some of these issues are somehow covered in the other categories.
re natural hazards – it may also have the opposite effect where it requires councils to essentially red-zone land due under the grounds of effects from natural hazards. This may reduce actually reduce land supply and could massively increase the cost of development buy forcing people to engineer their way out of risk….Already the Unitary Plan now requires every resource consent to be accompanied by a report from a qualified engineer on the risks of natural hazards, that certainly isnt making things any cheaper.
Be interesting to see how a Nicholas Barbon type of person will use these changes.
“Critics of mercantilism consider him to be one of the first proponents of the free market.”
“He worked on a large scale—building swathes of housing and commercial developments to the west of the City of London, where land was plentiful …… Barbon did this despite long-established restrictions on new buildings associated with various Acts of Parliament and royal declarations in the late 16th century: he often simply disregarded legal and local objections, demolished existing buildings without permission and rebuilt speculatively in search of a quick profit.”
No specific mention of minimum parking requirements in the table. I wonder if its incorporated into one of the other line items, or ignored completely? The devil is going to be in the details on RMA reforms. I suspect there would be a general consensus behind streamlining processes. However the sticking point last time was the government’s desire to change the principles of the RMA (in sections 6 and 7) to place economic development considerations on par with environmental considerations. It looks like the government might be trying to use housing affordability to implement measures that would have an impact far beyond housing.
I cant be 100% sure but I think the only reference to parking in the RMA is when you do an outline plan of works which is the detailed layout consent associated with a designation. Parking rules both maximum and minimum are created by Council’s in their District Plans so they have the status of regulation not statute. Councils could get rid of parking rules tomorrow if they wanted to and could justify it in terms of sustainable management (which I think you probably could).
Carpark minimum should be removed. With.our transit and cycle improving and sustainability.
So the deck chairs will be rearranged. The only problem with the RMA is part II the purpose and principles. In my view the mistake was idea of trying to deal with town planning issues using an ecological approach which was the very first assumption. The Courts read it and said well probably we are not meant to interpret it line by line and for 20 years that allowed development to occur and then a judge quite rightly said that was wrong so the government if forced to make changes. In my view there is a point where you start again and write an act that reflects the simple fact we all need somewhere to live and work and that can occur efficiently or not. Leave the ecological approach to shellfish beds and forests where it makes sense.
Development contributions are not included in the RMA, but as part of the local government act. Reform of these was undertaken last year, which affected councils budgets, and means ratepayers need to put more funding towards new development. I think including this is very misleading. The other issue I see is that Auckland has built large amounts of low quality apartments, we need more higher quality ones. Most of the restrictions affect cost of low quality apartments, but would come standard as part of higher quality apartments.
they still form part of the planning rules and regulations however and are an integral components to the exercise of a resource consent. But yes your correct about those previous changes which have prevented DC’s going towards any social infrastructure (e.g. libraries). Further reductions in DC’s will invariably force rates for everyone up – many people opposing intensification and wanting much more greenfield land dont actually realise it will cost them personally through increased rates.
I agree reserve , watercare and development contributions pay for network infrastructure needed for developments. This is probably less than the true cost of development and ratepayers need to top up rest. How can we open up all this land etc unless next to high functioning transit and cycle. Nik you need your counterpart Simon to focus 100% on PT and cycle, not clogged up arterials and motorways and going backwards. Maybe the transport bubble of a car only solution needs a reform also? Actually it definitely does. Less reliance on cars and carpark optional for houses./ apartments affects building costs as per Melbourne post the other day. Both housing and transport very interrelated.
Considering the amount that even small, low quality apartments will rent for, I disagree that we have built too many. We need more apartments, of all sizes, if we’re going to bring the price of housing down to affordable levels.
If you demolish one old house and build two do you still pay DC’s on both houses or just one house?.Why are Watercares fees so high?, why aren’t the council encouraging people to install water tanks for their grey/garden water as that would lower the load on the water system dramatically. My uncle was going to subdivide a piece of land he had in Glen Eden a few years ago ( when alot of tradesmen were out of work after the recession) so he could build another rental property but by the time he had paid off the council and put a driveway in it was going to be 65k before he even turned a shovel, it simply made it uneconomic to build a new rental and quite a few people and the economy missed out on a few months worth of work.
Watercare’s fees are so high because that is what it costs for increasing the density of existing suburbs. Perfectly good pipes have to be replaced by bigger ones while keeping existing users supplied with water and wastewater. Every connection has to be disconnected from the old pipe and reconnected to the new, bigger pipe.
Come on people, this is The Minister of something, Nick Smith, master of doublespeak and at best a man who talks in riddles. From the Herald this morning he says that “environmental regulations added $15,000 to the cost of a new home and $30,000 to the cost of a new apartment” . Well lets rewrite the RMA for these super duper mega savings, none of which the buyer will likely ever see anyway. And since 2013 and their grand announcements the government have been useless on the subject of affordable home building much less the buyers who can afford a home anyway in our low earning economy
On the face of it these RMA reforms have little to do with affordable housing but everything to do with some other as of yet unseen reason.
“environmental regulations added $15,000 to the cost of a new home and $30,000 to the cost of a new apartment” .
So that $480K apartment will now cost $450K? Yeah that makes it soooo much more affordable – and of course the so called ‘reforms’ will not knock 30K off the price in the first place.
They are tinkering and pretending to do something whilst doing FA. All the mechanisms that will really reduce housing cost are anathema to the nat’s ideology, so we await the inevitable crash.
CGT, stamp duty, intensification and the most effective of all – the government itself building homes – and lots of them.
“CGT, stamp duty, intensification and the most effective of all – the government itself building homes – and lots of them.”
Yup. In particular I’m amazed that there has been no public discussion at all of CGT as a solution to these problems over the last few days (if I’ve missed it, would be grateful if someone could point it out).
Item 3: ‘Prioritise housing affordability’, is merely a euphemism for opening up yet more greenfield sites on the city boundaries to enable developers to build even more oversized and overpriced McMansions with high profit margins.
The claim that houses are expensive because we aren’t allowed to access new land areas is standard in every discussion of housing affordability and turns up in many guises and the RMA is routinely accused of being the reason for the lack of available land.
I do not expect that attempts to emasculate or abolish the RMA will cease in my lifetime.
Granny Heralds ridiculous article today http://www.nzherald.co.nz/property/news/article.cfm?c_id=8&objectid=11389827
10 ways to stop skyrocketing NZ house prices?!
Breathless, I read the list waiting for the the single simplest thing that would stop the rocketing- limiting the demand by banning all residential sales to foreigners.
Strangely, and as usual it was not there.
So 10 things that will make bugger all difference and not the one that would. Thanks Nick Smith, thanks a billion…
Missing from the list of reforms is limitations on consultation requirements. As an American, I was shocked when I came here to see how restrictive are the community participation limits. Now they are proposing to limit them even further. Back home there is no such restriction that only “interested parties” can comment on a development proposal. *Anybody* can. If you’re really interested in transparency and fairness, that is how it should be.
I also believe the RMA is incredibly permissive. That standard of impact no more than minor has been litigated into oblivion. A four year old could come up with language to show that an impact is no more than minor (no pun intended).
Having said that, I was also shocked at how lengthy the RC process is and how litigious. What hasn’t been factored into those costs is legal costs, and going to Environment Court. That’s a black hole of money and time. When I was seeing bathroom expansions taking 18 months to get consented it was clear to me that the system is badly broken. It has also forced RC planners to work defensively with regard to court findings and or the threat of litigation. That stifles innovation (innovations that would be common anywhere else). Yes, the RMA needs reform but I don’t see the right ones. My time in development review in Phoenix (very high growth, very pro-development, property rights oriented) showed me that quick approvals are possible without compromising public good, including the environment.
Phoenix even had what they called “permit by appointment” for small projects. Get all your docs in order, make an appointment for a review, and two hours later you walk out the door with your building permit (consent). Even a radical environmentalist like me thinks that’s a good idea. OK, so take 4 hours. It doesn’t matter.
Another thing, something I don’t know enough about. What about manufactured housing? Is it allowed? Is it in fact cheaper? I know Lockwood Homes does something that looks like manufactured housing to me. Anyone else? It seems an obvious answer to high building costs
This is an area where the US doesn’t do well at all. For a long time, the building code standards used in most cities made manufactured housing illegal, whether inadvertently or not. It’s a good answer for high housing costs.
BTW, I have never believed that a supposed lack of available land had a huge impact on housing costs. People equate land supply with supply and demand of Toyota Corollas, or other manufactured product. I don’t think the supply and demand equation holds up with land, at least not in the same way. Nor does anyone seem to want to talk about affordability of ownership as well as purchase price. This housing cost thing is way complicated. It does not and never did come down to how much land is available. Auckland, to my knowledge has never been fully built out.
There are a number of companies that supply manufactured houses and in the 1960s and 1970s many suburbs were almost all houses build off site and transported after completion. Keith Hay will still build such a house, but the buyers do not want to put a $100k house on a $400k section. It is harder to pre-build a 2 story house.
The costs for balconies seem a bit far-fetched. Using figures from Australia
Rawlinsons Construction Manual estimates the cost of a balcony (in Brisbane) at $490-850 per sq m. So the construction cost would be around $6,500 per unit at most. The addition of a balcony would add some value to the property – just not as much as a room. For the sake of this exercise (because I do not know the answer) I will assume that it covers its costs. It probably adds more value.
Presumably, the opportunity cost is the lost value of being able to use that 8sq m as an extra room. This would add some extra value – perhaps as much as $14,500 when we take into account the loss of the balcony. However, it would cost more to build – an extra $9,000 in Brisbane according to Rawlinsons.
In the above example, the balcony rule has cost an extra $5,500 (opportunity cost).
It’s not insignificant, but it is not $40,000 – $70,000.
Of course, you could build an extra 40sqm apartment for every 5 balcony’s you convert. The building cost would be an additional $55,000 (at $2,000 / sqm) plus council charges, marketing, holding costs etc (probably bringing it up to $125,000). The cost of loss of value in other apartments without balconies would be $32,000, bringing the total production cost of that apartment to $157,000 (plus any on-site parking).
If that apartment could be sold for $240,000 (and I think that would be a reasonable estimate, based on similar apartments on Real Estate), then the cost of the balcony rule is around $16,500 per apartment.
Again, its a lot different to the cost claimed.