Housing Minister Chris Bishop still has some work to do on the implementation of his policy. Photo / Mark Mitchell
The Government is looking at a suite of new tools to make sure its housing reforms do what Housing Minister Chris Bishop promised and make housing more affordable by freeing up land for development.
In July, the Government announced a raft of big policy changes in housing, including making Medium-Density Residential Standards (MDRS – often called “sausage flats”) optional for councils, forcing councils to immediately zone 30 years of development-ready land (called a housing growth target under the plan), abolishing councils’ ability to set urban-rural boundaries or minimum floor requirements, and making it far easier to develop mixed-use housing.
Bishop said this would “flood the market” with affordable land for development. In a Regulatory Impact Statement, officials warned it might not be that easy and said the Government would need to monitor progress in land markets to make sure the policy continued working.
The officials were critical of the Government’s decision to make the MDRS optional. The MDRS dates back to 2021 and was the result of an accord between the then-Labour Government and National on housing. Both parties agreed to it as a blunt but powerful tool to intensify cities and make housing more affordable. After much criticism from its base, National backed out of the accord in 2023 and campaigned on making the MDRS optional for councils with the proviso that they immediately live-zone 30 years of development.
Officials’ overall assessment of this change was that it was worse than the status quo with the main problem being implementation and ensuring councils did what they promised in replacing the MDRS with 30 years’ worth of development capacity. The MDRS takes those decisions out of council hands.
Officials warned it would be “complex to determine compliance” with the new rules. They said it would be particularly complicated for councils that had not yet completed intensification plan changes.
Speaking to the Herald Bishop said “all of this stuff is complicated - there’s no getting away from that issue”.
Alongside the requirement to zone for 30 years of demand, officials recommended the Government look at developing price indicators to ensure the effectiveness of the policy did not deteriorate over time. Bishop took up this recommendation and is looking at it.
“We’re not in a position to say much more than what is released, which is to say we’re doing work on it,” Bishop told the Herald.
The idea has two legs: the first is developing a measurement that fairly indicates whether there was a market failure in the supply of land for housing; the second leg is a mechanism to intervene in that market to get it working properly again.
Officials said central and local government would need to do work to develop “price efficiency indicators” and that these “may result in contestability over the methodologies for determining the indicators themselves and how to interpret them”. Indicators could include urban-rural price differentials that look at the different values of land inside and outside of a city.
Officials looked at two different options for what should occur if pricing indicators suggested “local land markets are not functioning well”: one was to use these price indicators as an “automatic trigger” for the release of more land.
Under this option “councils would be automatically required to undertake a plan change process to provide additional development capacity”. Officials were lukewarm on this idea because councils would have no certainty about the amount of development capacity they would need to release to maintain a stable price. It might also look like central government was bluntly reaching over local government.
Another option was to mandate that price indicators must not deteriorate over time by setting targets for councils. Those councils would have the freedom to decide how they met those targets. As a last resort, under this option, central government would have tools under the RMA “to respond to deteriorating indicators”. These tools would include requiring councils to undertake a plan change to release more land.
The Ministry of Housing and Urban Development preferred the second option, as it would give central government some discretion to consider why prices were changing rather than simply forcing plan changes. However, officials warned that this option was “unlikely to result in substantially more capacity being enabled relative to the status quo”. The problem is clear: “infrastructure will remain a key barrier to housing supply,” officials said, warning that without more infrastructure, it would be difficult to free up significantly more land for development.
Bishop told the Herald that the Minister for the Environment or the Minister for RMA reform “has extensive power through the RMA to direct various things including plan changes and various things like that”.
He said any mechanism to respond to price indicators would likely take “some legal form like that”.
“The proposal is we would direct some streamlined planning process,” he said.
These price indicators respond to another concern of officials, which is that strict numeric indicators do not always give a clear idea of housing demand. They said there was some concern that there was less demand forecast in councils where housing was expensive, not because of a lack of actual demand, but because that housing was unaffordable. Officials said the inverse was also true, that councils where housing was cheap might have inflated demand because people were attracted to the cost of that housing, rather than actually wanting to live there.
Another challenge for the policy is the increased weight put on HBAs – Housing and Business Development Capacity Assessments. HBAs are a measure of development capacity in a particular council. Councils are already required to collate this information, but the Government’s new policy puts far greater weight on them as the key determinant for determining a council’s 30 years of development capacity “housing growth target”.
Officials said that the extra weight given to HBAs under the new plan should encourage the Government to put extra effort into ensuring councils are transparent when drawing them up. Under the current regime, central government “reviews” HBAs, but officials say it has taken a “light-touch approach” to them.
“It is important that there is greater rigour in the assessment process and greater transparency in modelling methodologies, assumptions, and inputs used,” officials warned.
There is currently no standardised methodology for drawing up HBAs. Officials noted they were “highly technical” and some smaller councils without technical expertise outsourced them to external contractors. This creates transparency concerns because the methodology of those contractors is not always available for scrutiny.
“There is also no requirement for councils to ‘show their working’ regarding the preparation of HBAs. These factors can undermine the confidence that central government has in the capacity being enabled,” officials warned.
Bishop told the Herald this was a challenge. He said if you got every council’s HBA and put it in a table, that table would show “wildly divergent” numbers from each council based on their different methodology.
He said the Government would be “much more directive” in what it was requiring of councils. He would also require councils to “essentially show their working to central government, to MfE [Ministry for the Environment],” Bishop said, adding he was working on what this looks like in practice currently.
The clock is ticking. Policy changes will be implemented through amendments to the RMA and the NPS-UD [National Policy Statement on Urban Development] and are expected to be in place by mid-2025.
Thomas Coughlan is Deputy Political Editor and covers politics from Parliament. He has worked for the Herald since 2021 and has worked in the press gallery since 2018.
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