Resource material › Building Sustainable Urban Communities › 4. Ideas, options and issues

The Role of Government in Urban Development
The role of central government in urban development
The role for government within sustainable urban development projects


Having considered a range of international models and New Zealand barriers and implementation difficulties, six main areas have been identified for further discussion. In this section, a number of different ideas are discussed, and a range of non-regulatory and regulatory ideas and options outlined for each area. Some of the ideas are for tools or powers that may require legislation to allow development organisations to use them.

We want you to tell us what you think about these ideas and options, and their possible impacts.

Some of the other ideas are about exploring the issues and looking for any particular opportunities or factors to be considered in designing an approach to sustainable urban development.

The Role of Government in Urban Development

Urban development is an important issue for local and central government. The role of local government as policy-makers, regulators, developers, investors and capability-builders is well recognised. Central government’s influence on urban development at the local level is less well recognised. Local authorities lead and represent their communities. They engage with their communities and encourage participation in decision-making, while considering the needs of people who are currently living there and those who will live there in the future. Central government actions also have a significant influence on urban outcomes. For example, central government invested $14.4 billion in Auckland in 2005 through health, education, transport, policing, etc. It also affects urban areas through its broader policy-making and implementation role.

How central government influences urban development As a policy maker Central government’s policy role includes the development of legislative frameworks (such as the Resource Management Act, the Local Government Act, the Building Act, the Unit Titles Act, and the Land Transport Management Act) as well as policies that influence the delivery of its own programmes and funding, and guide the provision of local government services. Examples of major government policies with a strong urban component include: Climate Change, the New Zealand Energy Strategy, the New Zealand Transport Strategy, the New Zealand Urban Design Protocol, the New Zealand Energy Efficiency and Conservation Strategy, and the New Zealand Housing Strategy. As a developer and investor Central government and its Crown entities are significant providers of urban infrastructure such as hospitals, schools, roads, public transport, social housing, prisons, courts, and police stations. Government also invests significant resources into urban areas through funding for transport delivered through regional bodies (e.g. Environment Canterbury or Auckland Regional Transport Authority). As a capability-builder (promoting knowledge and skills) Central government is also engaged in building capability, knowledge and skills in the urban environment. This includes funding urban-related research through the Research, Science and Technology portfolio, government-run research organisations in the housing and health areas, and government-commissioned research to support policy and programme development.

The role of central government in urban development

The box describes how some of central government’s current activities support sustainable urban development. Those roles are likely to continue in some form, but there could be an opportunity for central government to adopt a more explicit urban development policy at the national level that:

• reflects the implications of urban issues for New Zealand social, economic, environmental and cultural outcomes
• brings a whole-of-government approach to urban issues, with the potential for a national framework or agenda for urban development and redevelopment (to recognise the national and local implications of urban development on community wellbeing, and provide a more planned and systematic approach to urban development and redevelopment).

Within that policy advice role, central government could also work with local government on the interaction of local urban issues and national objectives/programmes to achieve greater co-operation and collaboration. Many regions have already started developing this approach through regional strategies and processes. Some opportunities in this area are discussed under the co-ordination and integration section.

Through the ‘Agenda for New Zealand research, science and technology’, central government is increasing opportunities for research, science and technology to play a role in the transformation of New Zealand’s economy, environment and society. The creation of new knowledge and partnerships to effect transformational cities and towns has been signalled for new investment.

Central government could also support the building of capability and capacity of both central and local government urban development practitioners by generating and sharing information, and by strengthening links between academia, the private sector and the public sector. An international example of this approach is the UK Commission for Architecture and the Built Environment. Future urban development projects could provide opportunities to put into action some of the research and innovative thinking on urban issues developed by our universities and other research institutions.

Another option would be to establish a Sustainable Urban Development Taskforce at the national level. This would provide advice and support to development organisations and local authorities initiating or implementing large-scale developments in their own area. This type of approach would enable lessons learnt in one project to be transferred to other projects around the country and would have some similarities with the Advisory Team for Large Applications (ATLAS) operating in the UK. The ATLAS team advises local authorities and has developed a number of tools to help them deal with large, complex developments.

Other initiatives, such as the development of a National Policy Statement on Urban Design (providing guidance to developers and local authorities on urban design issues) may also be useful.

• How can central and local government support sustainable urban development?

The Government Urban and Economic Development Office The importance to the national economy of Auckland as New Zealand’s largest city-region has been reflected in central government's establishment of the Government Urban & Economic Development Office (GUEDO) in Auckland. GUEDO has a multi-agency structure, including the Ministry of Economic Development, Ministry for the Environment, Ministry of Transport, and Department of Labour, and associate membership from the Department of the Prime Minister and Cabinet, Treasury, Department of Internal Affairs and the Ministry of Agriculture and Forestry. This enables it to integrate policy work across the full range of urban management issues. GUEDO acts as a central government conduit into Auckland strategic processes and initiatives. The emerging Government Social Sector Office in Auckland intends to bring together social sector agencies in a similar arrangement that complements GUEDO.

The New Zealand Urban Design Protocol The New Zealand Urban Design Protocol represents government’s vision to help achieve successful New Zealand towns and cities through quality urban design. The Protocol is a voluntary commitment to specific urban design initiatives by signatory organisations that include central and local government, the property sector, design professionals, professional institutes and other groups. The signatories champion urban design and have developed action plans that promote urban design practice within their organisation. The Protocol identifies seven areas that characterise quality urban design: Context — building on the social, cultural, economic and environmental context with an overall long-term vision Character — reflecting and enhancing the distinctive character, heritage and identity of our urban environment Choice — ensuring diversity and choice for people Connections — enhancing how different networks link together for people Creativity — encouraging innovative and imaginative solutions and activities Custodianship — ensuring design is environmentally sustainable, safe and healthy Collaboration — communicating and sharing knowledge across sectors, professions and with communities

The role for government within sustainable urban development projects

Local and central government may also decide to participate in sustainable urban development projects.

Within these projects, local government could have a number of roles and interests – as a developer, provider of infrastructure and services, landowner, promoter of community well-being and regulator.

Within these projects, central government could have a number of roles and interests. These interests could include:

• the level of current or potential investment in infrastructure (such as schools, health facilities and transport facilities)
• the services it provides (including housing, community funding, welfare payments, etc)
• how the project may be able to address social disadvantage within the community, enhance employment and economic development, and improve environmental outcomes (for example, by reducing carbon emissions from transport).

Central government may also have a significant investment in land and buildings (such as Housing New Zealand Corporation holdings) that could support a redevelopment project.

Each of these factors will influence central government’s role in governance, funding, monitoring and accountability for a development project.

An urban development project might be undertaken:

• by the Crown itself (through a Crown entity company)
• through a joint Crown/Council organisation
• in joint venture with the private sector
• by a council-controlled organisation or a local authority itself.

Those options reflect the controlling interests central government might have, depending on its level of investment or interest — ranging from full government control to local authority control.

The Hobsonville Land Company is an example of a Crown subsidiary company involved in sustainable urban development. Examples of council-controlled organisations involved in urban development projects include Waitakere Properties Limited, Wellington Waterfront Limited and Tomorrow’s Manukau Properties Limited.

Hobsonville Land Company The Hobsonville Land Company is a subsidiary of Housing New Zealand Corporation. It has been formed specifically to oversee and facilitate the development of land at a former airbase. It will work with private sector partners, local councils and other agencies and interests to bring about the development. Hobsonville Land Company is master-planning the development and has prepared a more detailed Comprehensive Development Plan for the first stages of development. This will be notified for public comment by Waitakere City Council.

Monitoring the sustainable urban development approach

Understanding both the effect of a sustainable urban development approach on specific projects and any implementation difficulties is an important aspect of refining the approach and improving outcomes for all New Zealanders. Central government could monitor the impact of any sustainable urban development approach on urban development. This might include monitoring:

• the effectiveness of any legislation governing or affecting sustainable urban development
• the extent to which any sustainable urban development approach is being applied throughout New Zealand
• the impact of the sustainable urban development approach on the achievement of outcomes.

A further potential role for central government may be in securing the future supply of land for sustainable urban development (land-banking) — purchasing land at a fair price before the development process starts, then making the land available for sustainable urban development. Ensuring that there is sufficient land in the planning process — and land available for release to the market — is an important component of demand management for sustainable urban development and the availability of a good supply of housing to meet changing population needs.

• What role should the following players have in sustainable urban development projects?
  • Local government
  • Central government
  
  
  

Improving Co-ordination and Integration

Sustainable urban development needs co-ordination across the national, regional and local planning systems, involving agencies including central government, local government and utility providers. Each of these has different drivers for their individual planning and decision-making. It is important for sustainable urban development that their decisions and investments contribute to a shared (rather than competing) vision of the future.

Some regions have sought to develop a shared vision for the future through regional strategic processes. These processes involve developing a localised vision for the development area, which lines up with broader regional objectives. All parties must have a chance to take part early in the vision and planning processes. This helps decision-makers to understand the processes and constraints other organisations operate under, and how decisions affect the whole community.

Sustainable urban development also needs more effective integration between land use and transport planning, and transport, utility and other service providers (including health and education services). For this, an area must be developed in a way that is consistent with an agreed plan. Infrastructure and services must be prioritised, and delivered in the right place, at the right time and for a fair price. Transport-oriented development, where higher-density communities are built around transport nodes, offers opportunities to improve integration.

More effective integration is also about understanding how initiatives affect the social, economic, environmental and cultural dimensions of well-being. This could include determining how investment to increase employment levels improves longer-term social outcomes by reducing crime and enhancing social connectivity. It also involves recognising how local and central government’s total expenditure can be prioritised to get the best possible outcomes.

Regional development strategies One response to New Zealand’s urban development challenges and opportunities is the emergence of regional development strategies. Developed to manage growth pressures or encourage sustainable economic development, examples include the Auckland Regional Growth Strategy, SmartGrowth Western Bay of Plenty, the Wellington Regional Strategy and the Greater Christchurch Urban Development Strategy. Common themes and approaches include: a strategic intent to increase economic competitiveness, enhance community well-being and protect the environment communities planning and working together toward agreed priorities the development of stronger local-central government relationships the importance of leadership and sustained commitment across agencies and sectors to achieve long-term planning, investment and development certainty a shift toward more compact, mixed use and connected development Integrating regional strategies into key legislative planning requirements, (particularly the Resource Management Act (1991), Land Transport Management Act 2003, and Local Government Act 2002 — and making use of the full range of tools in different legislation to support integrated management of growth, infrastructure provision and funding identifying and gathering consistent, accurate data on the growth drivers in the area — population, employment and growth trends a growing commitment to long-term and formal collaboration and shared implementation among key agencies.

A sustainable urban development approach offers significant opportunities to improve co-ordination and integration, particularly through the processes that involve organisations and individuals across the community, such as creating a vision and planning.

Options for making the process more effective include:

• asking a Minister to co-ordinate central government agencies’ participation in urban development processes. This could include:
  • promoting co-ordination across government agencies
  • ensuring appropriate central government engagement in local processes
  • providing a contact point for development organisations that believe a government agency is not engaging appropriately.
• enacting legislation to require greater co-ordination between central, regional and local planning instruments. This could be similar to the Local Government (Auckland) Amendment Act 2004, which requires territorial authorities in the Auckland region to amend their district plans to reflect the growth concept set out in the Auckland Regional Growth Strategy
• establishing Development Area Agreements between the development organisation and key partners to the development. These could include central government agencies, local authorities, utility providers or other community groups. The Agreement would set out the services and timing of investment each would make in the development area, and any funding for those services to be provided by the development organisation. These would be similar to Local Area Agreements in the UK. The Development Area Agreement would give greater certainty as to when and how the area would develop. That certainty is important to the development organisation, the community, and to developers and other businesses in the development area
• establishing a process to ‘declare’ strategically significant urban development areas as focus areas for government planning and investment.

Integration under the Local Government Act 2002 All councils are required to develop Long Term Council Community Plans (LTCCPs) to help them promote the social, economic, environmental and cultural well-being and sustainability of their communities/towns/cities. LTCCPs are a vehicle to enable councils to work with their communities to identify their aspirations and prioritise activities and expenditure over a 10-year period, so they have an important bearing on how urban areas develop. There is also a trend for councils to extend the scope of the LTCCP to better integrate long-term planning and funding requirements of regional transport strategies, Resource Management Act plans and other LTCCP activities. This requires developing mutually supporting strategies and plans that can be linked to an over-arching strategic growth management framework. The benefits of this approach include enhanced co-ordination and integration, better asset management, improved long-term planning, and more effective capital and operational expenditure. The three partners to the Western Bay of Plenty SmartGrowth Strategy provide an example of this. The councils use their LTCCPs to help formalise their SmartGrowth relationship, and to identify, fund and phase the implementation of SmartGrowth initiatives. A different approach has been taken in Auckland, where integrated planning at the local level has been driven through the enactment of the Local Government (Auckland) Amendment Act 2004 (LGAAA). The LGAAA requires all Auckland region’s seven local councils to integrate their transport and land-use policies to give effect to the growth concept established by the Auckland Regional Growth Strategy.

UK Local Area Agreements Local Area Agreements (LAAs) set out the priorities for a local area agreed between central government and a local area (the local authority and Local Strategic Partnership) and other key partners at the local level. LAAs simplify some central funding, help join up public services more effectively and allow greater flexibility for local solutions to local circumstances Through these means, LAAs are helping to devolve decision-making, move away from a ‘government knows best' philosophy and reduce bureaucracy. LAAs are about what sort of place people want to live in. They set out the local priorities that will make towns, cities or communities a better place to be, and they are negotiated between all the main public sector organisations in the area, along with the local authority and central government.

A sustainable urban development approach is also a chance for central and local government and utility providers to collaborate in the development of an area. Collaboration involves the various parties jointly ‘owning’ the outcomes for the development area. This is achieved through joint strategic planning and aligning policies, which in turn leads to the co-ordinated delivery of services.

Collaboration is important where a network utility operator (such as an electricity or telecommunications company) has ‘requiring authority’ status under the Resource Management Act 1991. This is because a requiring authority can use a ‘designation’ to restrict the use of land, including land not owned by the requiring authority. The planned development of an area by a development organisation depends on all parties working towards a shared vision. Building network utility support for the preferred pattern of land use, and commitment to the necessary investments to help bring that pattern of land use about, is an important function of any development organisation.

A development organisation might have a range of mechanisms available to it — including joint strategic planning, Development Area Agreements and contractual arrangements — to build support from network utility providers for the development area.

• How can co-ordination of investment and integration of planning be improved?

Funding

Urban development is expensive. It requires significant amounts of funding in the early stages before income streams from development or land sales become established. This ‘start-up capital’ can be significant. Many parties have expressed concern about how to raise these funds when there are higher priorities for spending on core services. The level of risk is also difficult to quantify given the longer-term nature of projects.

Within sustainable urban development projects, development organisations might require funding for:

• operating costs to cover organisational capacity and capability to develop an area ‘master development plan’ and facilitate integration of central/local government and utility investments in the area
• considering and determining land use/zoning change applications from private owners
• assembling enough land to enable effective redevelopment
• undertaking infrastructure and/or social investment projects to achieve the objectives of the area redevelopment
• delivering affordable housing
• economic development, social rejuvenation and/or sustainability programmes
• environmental, economic and social sustainability, including energy efficiency.

A major objective in sustainable urban development projects is to realise the financial benefits of co-ordinating capital and operating inputs from a range of agencies — such as transport systems, schools, economic and social development investments. Getting funding commitments from a range of central government agencies, along with local/regional councils, is an important part of any project and could be supported either by ‘contractual’ commitments to funding or by designating particular funding for specific sustainable urban development projects.

• How could sustainable urban development be funded?
  
• Who should fund infrastructure assets, services or amenities required in a sustainable urban development project?

Funding principles

Arrangements to fund urban development by the public sector would generally be expected to be:

• sustainable — funding options should meet the revenue needs of the development project on a sustainable basis.
• autonomous — some degree of independence of funding is central to being able to undertake a development over an extended period.
• accountable — options should preserve the link between choice, accountability and funding.
• replicable — funding options should be designed to be used across a range of project types.
• easy to administer — compliance costs should be minimised.
• efficient — options should minimise the effect on resource allocation decisions, both now (allocative efficiency) or in the future (dynamic efficiency).
• equitable — options should treat like circumstances alike and different circumstances differently. This concept is often referred to as ‘fairness’.

Sustainable urban development can increase land values

The size of the land value uplift resulting from master development planning, zoning changes and the provision of capital works will vary, depending on the location and specific features of each project. The increase in value is mainly the result of using land more intensively (i.e. more dwellings per site) but will also be affected by the perceived quality of the development and amenities, and proximity to transport networks, employment and wider public amenities. In New Zealand, the difference in land value between lower-density stand-alone housing and terrace or higher-density apartment housing (for ‘greenfield’ developments on the urban fringe) ranges from 20 to 300 percent. The value difference for more intensive redevelopment of existing residential or brownfield areas may be higher but would be off-set by the need to pay for existing improvements/houses.

In part, the community creates this value by subsidising certain items of infrastructure that will service the area (such as roads, schools, police services and health facilities), and/or by developing the planning regime that allows development to occur. Increases in land value also occur when public agencies intervene in an established urban area to improve transport or other amenities using funds from a broad tax pool. As an example, major investments in rail infrastructure (new stations, new rail links etc.) can create an increase in the value of nearby properties. US studies show that homes located near rail stations have a sale price premium over similar homes further away.

The use of government-owned land

In contrast to jurisdictions such as Australia, where urban development organisations often use government land, New Zealand does not have large tracts of government- or council-owned ‘greenfields’ land on the fringe of urban areas for future urban expansion and development; nor are there large tracts in areas targeted for redevelopment. Sustainable urban development projects with little or no government/council-owned land may still be able to be partly or fully funded through capturing some of the increase in value (value uplift) on privately owned land in the project area.

Funding for sustainable urban development — international models In Australia, funding for urban development projects has been achieved mainly through the increase in value on government/urban development organisation-owned land. This has been enough to support development organisation borrowing to fund the master-planning process (including community consultation), any essential capital works such as roading/services/public amenities, and capitalised interest costs on that borrowing. Where government-owned land was not available, some Australian urban development organisations have captured the increase in land value by charging a value uplift levy to private owners seeking planning permission for more intensive land use.

Value uplift levies

Value uplift or value capture refers to a process designed to reserve, for community use, part of the increase in land value created when the scope for, or intensity of, development on a site is increased by a zoning change or development approval and/or the provision of infrastructure and/or other public amenities. A levy to capture value uplift on privately owned properties could be applied on consent applications — i.e. where an existing owner seeks approval for developments. No legislative authority currently exists to charge a general value uplift levy in New Zealand.

• Some advantages of the value uplift levy are that it:
• provides a funding source for larger-scale sustainable urban development
• captures (part of) the unearned value gain created by public decisions and investment
• enables re-investment of value gain in public services/amenities.

Disadvantages include:

• It can be administratively complex. For example:
  • At what rate should such a levy be set to minimise risk of deferral/reduction of new development?
  • How should the size of any change in value be determined?
  • At what point should such a levy be charged (on sale or when the gain occurs)?
  • What about the interaction with existing tax liabilities for private landowners (see s.CB 14 of the Income Tax Act 2007 for tax liability, in some circumstances, on value gain from zoning changes) and existing income tax liability for property developers?
  • Would it contribute to rising housing costs (if passed forward into house prices)? Charging such a levy at the point of consent for a changed land use may mean it is more likely to lower land prices than increase housing prices.
  • How would the levy be integrated with existing development contributions (and other existing charges)?
• It may not be widely understood initially
• The cumulative effect of adding a value uplift levy to existing levies and contributions needs to be carefully considered. The following diagram illustrates how these levies and contributions might fit together.

Some infrastructure costs are currently recouped by the ability of a territorial authority under the Local Government Act 2002 to charge development contributions to (partly) fund the cost of population growth. Development contributions are usually lump-sum cash contributions, and must be related to the direct additional costs associated with the development proposal. Income from rates is used for operating costs and depreciation. However, many of the services provided for new residents will exist for some time and will be used by existing and future communities, including new ratepayers. Population growth also benefits the wider community through an expanded rating base, employment growth, and so on. Local authorities can also currently charge ‘financial contributions’ (under the Resource Management Act) to mitigate the effects of development. There are mechanisms to prevent both types of contribution being collected for the same purpose.

There is an element of commercial risk that future increases in land value (and/or any value uplift levy) from sustainable urban development activity will not be enough to cover the costs incurred. This may be the case during periods of property market downturn or where land development costs have not been controlled. Robust business case development and the inclusion of commercial property skills in management and governance positions could help manage such risks.

• To partly or fully fund sustainable urban development, do you support a value uplift levy to capture ‘unearned’ gain resulting from public actions to increase scope for development? Please explain your view.
  
• What issues would need to be considered when designing and implementing a value uplift levy?

Possible funding options

The table below summarises a range of existing and possible funding tools in sustainable urban development projects. The funding options described below are not mutually exclusive.

Project stage	Existing funding tool	Potential funding tool
Urban development project development	local and/or central government agency ‘baseline’ funding (from taxes/rates)
Creating a master development plan for the project and land use/development control	local and/or central government agency contributions application fees or user charges	debt funding secured against development organisation-owned land and supported by value uplift (with interest costs capitalised and repaid on the sale of land to developers)
Land assembly	direct transfer of land/assets/cash from government and/or councils debt funding secured against development organisation-owned land, supported by value uplift. Debt funding for land purchase would be repaid when land is sold to developers.	private landowners becoming equity partners/shareholders in the development (refer land readjustment) levy mechanism to capture a proportion of value uplift on privately owned land redevelopment
Infrastructure provision	the ability to charge ‘development contributions’ direct government or council provision of roading, etc (including subsidies) debt funding secured against development organisation-owned land — repaid when land is sold to developers, or passed back to the council up-front lump-sum infrastructure contribution by private developers in return for rates exemption on that infrastructure cost the ability to charge targeted rates depreciation charged against capital investment in infrastructure	levy mechanism to capture a proportion of value uplift on privately owned land redevelopment
Economic and/or social rejuvenation/ development projects	operating and/or capital funding from central/local government for the delivery of specified services (e.g. grants for services to be provided)	potential reinvestment of development profit from land the development organisation owns and eventually sells for development levy mechanism to capture a proportion of value uplift on privately owned land redevelopment
Delivering affordable housing	direct operating (rent and/or interest rate subsidies) and/or capital funding subsidies from government/councils	using the Affordable Housing (Enabling Territorial Authorities) Bill provisions to fund the provision of affordable housing (and possibly subsequently transfer ownership to not-for-profit housing providers) levy mechanism to capture a proportion of value uplift on privately owned land redevelopment
Regulation		require, as a condition of land/ development right sales and/or planning consent, that developments include a mix of housing styles and costs that cater to mixed tenure and income communities

• Are there funding mechanisms that would provide incentives for private involvement in sustainable urban development?
  
• What other funding mechanisms could be used in sustainable urban development?

Land Assembly

Urban development designed to deliver economic, environmental, social and cultural improvements requires an integrated and co-ordinated process of land-use change, across a geographical area both large enough and joined-up enough to deliver significant results.

For example, a transit-oriented development near a railway station must increase residential and/or employment density (and thus patronage) enough to increase the viability and frequency of train services. Amenities and services such as schools, GPs, shops and cafes also need sufficient population density to stay viable. These amenities often attract people to live in intensified areas. Achieving the kind of self-sustaining, critical mass of population that supports such activities usually requires development on a relatively large scale.

Large-scale development will usually require enough landowners, in the right location, to sell their properties, develop/permit development of their land, or amalgamate their landholdings with others. However, landowners may be unable or unwilling to participate in a development for a variety of reasons. They may:

• have a personal attachment to their house, land or area, or be unable to relocate
• want to undertake their own lower-risk, small-scale development (i.e. infill)
• not have access to sufficient capital to develop, or not wish to carry the financial risk of development
• wish to land-bank an appreciating asset, or use their position to extract higher prices from purchasers
• be absentee and un-contactable, or simply uninterested.

Because of this, fragmented patterns of existing ownership or land use can make it difficult to assemble land into large enough blocks for sustainable urban development. Consider some land near a railway station in a suburban town centre — perhaps a run-down commercial site, a parking lot and some low-density house lots. This land could permit development of 100 or more dwellings in medium to high-density townhouses or apartments, housing 300 or so residents, including parks, retail and public spaces. Such a development might result in a significant boost to local economic activity, as well as an increase in patronage of the train service. Importantly, it may also catalyse development around the rest of the town centre.

However, if the land is in fragmented ownership, and without a planned ‘transformational vision’ or certainty around important infrastructure investment (such as public transport), a higher-value land use may not be considered viable by developers or land owners. In an assembled form, however, the land may be more valuable and able to contribute more to public-good outcomes (such as reduced car-use, increased local economic activity, or increased public transport use) than as individual pieces of land, or isolated development on individual sites.

Sometimes the land assembly issue is not fragmented ownership, or achieving adequate scale, but acquiring a particular site of strategic importance. This might be a large lot close to a town centre or near public transport, which by itself might unlock sustainable urban development opportunities within an area.

Options for land assembly

Fragmented land ownership can prevent land from being used for higher-value or important community purposes. Where the urban development project cannot be re-designed to exclude unavailable property, and the land cannot be purchased, nor development rights gained through voluntary, market-based negotiation, two options for land assembly are used in international urban development projects:

• last-resort compulsory land acquisition powers
• land readjustment (instigated property exchange).

Compulsory land acquisition

Central and local government in New Zealand has a long history of acquiring land to support economic and social development. Currently the Public Works Act 1981 enables land to be acquired for building schools, prisons, power lines and other important public works. Acquisition is generally with the landowner’s agreement. If agreement cannot be reached (or the landowner cannot be located or is deceased), the land may be acquired without their consent (compulsory acquisition).

Compulsory acquisition under the Public Works Act is rarely used and can be controversial as it involves taking away private property rights. Landowners can object to a compulsory acquisition in the Environment Court before land is taken for a public work. Compensation for acquisition is provided for in the Public Works Act. The compensation principles are well established in New Zealand, so no one should be either better or worse off due to the acquisition of their land.

In addition to the public works described above, some countries recognise the importance of compulsory acquisition for urban redevelopment. Those countries provide access to compulsory acquisition powers, in some form, to local authorities and to special-purpose urban development authorities. Australian experience suggests that even though the power to compulsorily acquire land is available to some urban development authorities, it is very rarely, if ever, used.

If compulsory acquisition powers were available for sustainable urban development purposes in New Zealand, they should be exercised only in special circumstances — i.e. to buy strategically important sites or where the sites are critical to realising the overall urban development vision. The preferred option will always be voluntary participation of landowners in the urban development process, or agreement to willingly sell their land. Compulsory acquisition is always a power of last resort.

If compulsory acquisition is used, the rights, obligations and acquisition and appeal processes must be clear to all parties involved. It is suggested that a number of criteria should be satisfied before the application of compulsory acquisition powers is considered:

• The overriding public interest (in undertaking the proposed development) has been proven.
• The land is genuinely required to realise the proposed urban development vision (it has strategic significance).
• It can be shown that all other avenues have been exhausted before resorting to compulsory acquisition (e.g. negotiation).

These types of factors are already considered by the Environment Court when inquiring into objections to land acquisition under the PWA.

• Are there circumstances in which powers to compulsorily acquire land for urban development purposes would be warranted? Please describe these circumstances.

International compulsory land acquisition powers In the United Kingdom, Urban Development Corporations (UDCs) can be established under the Local Government, Planning and Land Act 1980. UDCs have a broad remit to secure the regeneration of a defined area by bringing land and buildings into effective use, encouraging the development of existing and new industry and commerce, creating an attractive environment, and ensuring housing and social facilities are available to encourage people to live and work in the area. To achieve this, they have powers to compulsorily purchase land as well as a general power to do anything necessary or expedient in the interests of their objectives. In Australia, a range of special purpose urban development or regeneration corporations exist at state, regional or metropolitan levels. Some of these have compulsory acquisition powers available to them. For example, the Victorian Urban Development Act 2003 allows the State Government to mandate ‘declared project areas’. The State urban development corporation (VicUrban), when acting in a declared area, has access to a range of extraordinary powers, including — with the approval of the Minister of Planning — compulsory land acquisition.

Protection of Maori interests in land

If central government land were to be used for sustainable urban development, an important consideration is the link with government mechanisms to retain land for Treaty settlements, such as the Protection Mechanism, Significant Sites process, or existing and future Rights of First Refusal.

There may also be parcels of land within sustainable urban development projects that are in Maori ownership and are inalienable — leases have been used in some areas as one option to provide opportunities for appropriate development, a financial return for the owners and the retention of ownership.

• Where the use of central government or Mâori land is important to a sustainable urban development project, how could Maori interests in that land be protected?

Compulsory acquisition and urban renewal Under the Public Works Act, the Minister for Land Information can acquire any land required for a government work (usually on behalf of other government agencies). A government work is any work that a government agency is authorised to undertake. A high level of control by the Crown over the intended work is required. A local authority is empowered to acquire land for any local work for which it is authorised to undertake and for which it has financial responsibility (s16). The financial responsibility clause does not apply to the Crown. The Local Government Act 2002 (s189) authorises local authorities to compulsorily acquire land that “is necessary or convenient for the purposes of, or in connection with, any public work that the local authority was empowered to undertake immediately before 1 July 2003” — the date on which the repeal of the bulk of the previous legislation was effective. The previous legislation (the Local Government Act 1974) gave local authorities an explicit power (s644B) to “undertake and carry out urban renewal in the district”. ‘Urban renewal’ was defined in the Local Government Act 1974 (s644A) as: “the conservation, repair, or redevelopment of any land, or of any building on any land, within any urban part of the district, the standard of which should in the opinion of the council be improved; and includes the improvement, reconstruction, extension, development, and redevelopment of the utility services, roading, the landscape, and community and social facilities and services within that part”. The Local Government Act 1974 also explicitly declared urban renewal to be a public work for the purposes of the Public Works Act, and therefore an activity to which the compulsory acquisition powers of that Act could be applied. Therefore, ‘urban renewal’, as it is defined above, is still authorised as a public work under s189 of the Local Government Act 2002.

Section 224 of the Public Works Act A further avenue for exploration is s224 of the Public Works Act, which empowers the Crown to contract with local authorities to engage in undertakings of local and national importance. Where the Crown and a local authority have entered into an agreement under s224, ss(3) provides that any land required for the undertaking covered by the agreement “may be taken or acquired as for a public work under this Act either by the Minister or by a local authority which is a party to the agreement”. In other words, if the Crown believes an undertaking, whether or not it is a public work in the established or accepted definition, is of national and local importance, the Crown and a local authority may enter into an agreement for allocating responsibility for undertaking the work, acquiring or disposing of land, managing and funding it. A disposal of land in accordance with a s224 agreement may not trigger the offer-back obligation under s40 of the Public Works Act.

Existing mechanisms

In New Zealand, the exact nature of acquisition powers available in urban development situations is unclear. Some powers exist under the Public Works Act and Local Government Act 2002 in ‘urban renewal’ situations (see box), but because they are not well understood or tested, they are seldom, if ever, used.

Some case law indicates that if any project involves a public element, but includes land that is privately owned, it cannot be considered a public work for the purposes of the Public Works Act.(1) The exception is private network utility operators, authorised under s186 of the Resource Management Act 1991. This suggests that if an urban development project involves an element of private ownership of land, then it is unlikely to be classified as a public work under current provisions.

This would restrict situations in which the current powers could be used, which is significant, as the sustainable urban development approach is intended to be available to joint ventures between the public and private sectors.

Offer-back obligations

The Public Works Act (ss40-42) also includes ‘offer back’ provisions to return land no longer required for the public work for which it was held. This land must be offered back to the previous owner, or the previous owner’s successor. The existing legislation does not provide an exception where the disposal itself is part of the public work.

This has significant implications for sustainable urban development projects which aim to create well-serviced parcels of land to sell to an end-user (e.g. a developer, an owner-occupier, or an institutional investor in affordable rental housing). Any land acquired for an urban development project or existing council or government-owned land within that project is likely to be sold. So even if it could be argued that a particular site should be compulsorily acquired for an urban renewal project, the offer-back obligation may still complicate matters when it comes time to sell the land.

Some exemptions to the offer-back obligation may apply. If there has been a significant change in the character of the land since it was acquired from the owner, or if the chief executive of the local authority or the chief executive of Land Information New Zealand considers it would be impracticable, unreasonable, or unfair to make the offer, then land does not need to be offered back. These, however, are likely to be subject to various interpretations, appeals and timing issues. Because they create uncertainty, they are not ideally suited to the sustainable urban development approach envisaged.

Compulsory land acquisition options

There are three broad options for the compulsory land acquisition issue:

• Do nothing. Compulsory acquisition powers would still be used only where there is a defined ‘public work’ in the currently accepted sense.
• Amend the Local Government Act and/or Public Works Act (including offer-back obligations) to make compulsory acquisition a more viable option for acquiring land for sustainable urban development. This option could include a clarification of and/or amendment to s224 of the Public Works Act.
• Create separate enabling legislation, similar to that in the UK and Australia, which permits compulsory acquisition powers to be used in specially declared urban development areas, subject to defined criteria and/or ministerial approval. There would be no offer-back obligations in this approach, except where the land is no longer needed for the purposes of the urban development.

• What are the advantages and disadvantages of these options?
  
• Are there other options? Please describe them
  
• Who should have the power to make compulsory land acquisitions?
  
  • A minister
    
  • A local authority
    
  • A company
    
  • An urban development organisation
  
  

Land readjustment

Another international model used to address land assembly problems is ‘land readjustment’. In this process, also known as ‘instigated property exchange’, land is exchanged for land or property rights in a development, as part of a collective action. It involves landowners grouping together to assemble and develop their land holdings, taking individual equity in the overall project and realising a share of the resulting uplift in value and quality.

In theory, it is possible for this to happen without the need for a co-ordinating agency. In practice, however, private market players and landowners may lack the mechanisms and incentives to co-ordinate and integrate a land readjustment opportunity.

In most overseas examples of land readjustment, an agency takes a central coordinating and/or land development role and invites property owners to become stakeholders and contribute their real assets to the project as investment capital. In return, the agency contracts to give each owner land or buildings of at least equal value, but possibly greater, in the vicinity of the original site once the redevelopment is complete, while the agency takes a proportion of the value uplift generated from the project (usually in land). This land is used to directly provide, or sold to fund, the public-good activities of the project — the public spaces and amenities, infrastructure and roads, social and community services, affordable housing, etc. This is an alternative to the development organisation buying out all the existing property owners, or using compulsory acquisition powers to force a sale.

Land readjustment is a well-recognised tool of land management in many countries, but it relies on several pre-requisites. Perhaps most importantly, the density must increase enough to allow the mechanism to work. It also generally requires a robust land market, trust and goodwill.

The advantages of the land readjustment process are that it:

• does not require the development organisation to have substantial upfront capital for buying out existing owners, or government assistance to acquire land compulsorily
• enfranchises local landowners, allowing them to enjoy some of the financial gain from redevelopment, thus maintaining or increasing their interest and participation in the local community
• requires only temporary relocation of residents and/or businesses, rather than permanent relocation, and land only needs to be vacated when the works actually begin
• can be attractive to residential landowners, who are often ‘asset-rich’ but ‘cash-poor’
• creates certainty for developers, knowing that the community is a partner in the outcome.

The disadvantages and implementation challenges that could potentially impede land readjustment include:

• the reliance of the process on co-operation amongst landowners, and between landowners and the development organisation
• the risk of property owners refusing to participate, and freeloading on the benefits that accrue to those who do participate. A freeloading landowner gets all the benefits but none of the risks. If they own a key site, it may jeopardise the whole project.
• landholders unsure about how they are involved in the process. In other jurisdictions, the co-ordinating agency creates a ‘readjustment plan’, to use as a basis for community involvement. This plan demonstrates the potential of swapping land for land within the planned area.
• the extent and significance of community participation in the decision-making process means that, depending on the number of landowners involved, land readjustment is not necessarily a ‘time-saving’ tool
• the co-ordinating agency may also need coercive powers to get ‘hold-out’ landowners to participate.

Joint venture with an iwi governance body or development company

Where mana whenua hold land assets in a sustainable urban development area, they could decide to enter into some form of land readjustment — contributing land to the development in return for a share of the profits or for revenue-generating assets arising from the development. This contribution could involve transferring land, or providing a long-term lease over land. An iwi development company might also consider working in a joint venture with a development organisation for it to undertake the physical development of land owned by the iwi development company.

• What is required to support land readjustment as a way to assemble land for sustainable urban development?

Sreamlining Planning and Development Control

Successful implementation of sustainable urban development is dependent on development happening at an appropriate speed. Local authorities, council-controlled development organisations and private sector developers have identified that the length and nature of planning and development control processes is a barrier to implementing sustainable urban development.

Some parts of the Resource Management Act planning and development control processes, in particular, can add long waiting periods to development timeframes and create high levels of uncertainty around what development will be allowed. Delays and uncertainty:

• add to public or private sector developers’ holding costs for developable land;
• make it difficult to predict the timing and full costs of development (including potential legal costs, increases in material and labour costs over time)
• make projects vulnerable to shifts in market demand, away from the planned product.

Local authorities have also said they have limited tools to achieve social outcomes and public benefits through market mechanisms. Reducing delays and uncertainty may result in increased financial viability of urban development projects, but these projects will not necessarily deliver desired government outcomes, such as affordable housing or urban sustainability.

Urban development organisations may need an enhanced set of development controls to create a development package that is both attractive to developers and capable of delivering sustainable communities.

• Are changes required to planning and development control processes to support sustainable urban development?

Making development happen in sustainable urban developments

Streamlining development plan processes

Internationally, one of a development organisation’s key tasks is to create a master development plan for a declared area. This plan is like a zoning for the area that sets out the development vision, supported by planning rules that might replace any existing local authority plans for the area. Under a sustainable urban development approach, and given an appropriate level of community involvement in the development planning process, the transition from the existing district plan to a development plan for the area could be streamlined.

Options for this transition range from a council plan change, to the Minister being able to direct that the development plan replaces the district plan for that area. If the transition were carried out through a council plan change, the process could be streamlined by prescribing that the decision on submissions and hearings could be appealed to an independent commissioner, the council or the Crown, but not to the Environment Court. The requiring authority model under the Resource Management Act may also be an option for consideration.

Consultation and accountability

The existing plan change process has a number of opportunities for supporters and objectors to submit on development proposals. Replacing a district plan with a development plan raises questions about how the community could be involved in the development plan process, including resolving any concerns they have about the development plan.

Recognition of legal provisions affecting the rights of Mâori

Some legislation requires decision-makers to give special consideration to Mâori interests or perspectives. For example, the Local Government Act 2002 explicitly requires local authorities, when taking decisions in relation to land or a body of water, to take into account the relationship of Mâori and their culture and traditions with their ancestral land, water, sites, waahi tapu, valued flora and fauna, and other taonga.

If a development organisation were to have similar decision-making powers to a local authority, it might be appropriate for the development organisation to have regard to those matters. If this does not occur, Mâori may consider their rights within the decision-making process diminished, in contrast with existing legal rights. Other rights under the Resource Management Act or other legislation may also be affected.

Streamlining consenting requirements

Sustainable urban development is likely to be largely mixed-use, with a wider range of permitted activities than the surrounding area, and a number of conditions for developers to meet. Widening the range of permitted activities may lead to fewer resource consents being required for individual buildings or spaces within the development. Projects that do not meet the rules set out in the development plan will require resource consent.

There are a number of options for streamlining the resource consent application process within sustainable urban developments. Options include:

• simplifying and clarifying further information provisions to encourage applicants to provide all relevant information in their initial application
• reducing processing and reporting requirements for controlled activities
• reducing rights of objection and appeal to certain decisions with minor environmental effects, e.g. requests for further information.
• These measures could be implemented alone or in combination, and would require amendment to the Resource Management Act.

Consultation and accountability

Current requirements can result in inefficient use of officer time, or too much documentation relative to the impact of the activity. A high level of community input to the development plan means it is less likely that minor consents would create public concern. However, reducing rights of objection and appeal to certain decisions may reduce opportunities for community input into resource management decisions.

• To encourage sustainable urban development, how could planning processes be simplified or streamlined?

Streamlining consenting processes

As well as changes to rules surrounding permitted and controlled activities, there are options for changing responsibilities for processing and making decisions on development consents.

Under the Resource Management Act, local authorities hold responsibility for processing resource consents. However, within a sustainable urban development project, responsibility for processing land use consents, subdivision consents or regional consents could be delegated to the development organisation to:

• ensure integration of the various consent processes
• focus additional processing resources as needed to deal with higher periods of demand.

Section 33(2) of the Resource Management Act allows a local authority to transfer any one or more of its functions, duties or powers to another public authority. Redefining a public authority to include a development organisation would permit a local authority to delegate these planning functions and powers to a development organisation.

Accountability

An underlying principle of the Resource Management Act is that decision-making is best left to those directly affected by the results of those decisions. In some circumstances, it may be appropriate to delegate these responsibilities to a Crown-owned entity, particularly where significant government investment is planned. However, a development organisation may not have the same accountability requirements as a local authority. Shifting responsibility for resource consent processing to a development organisation risks creating demand for more consultation and appeal rights, rather than fewer. For this reason, efforts to streamline this process, to improve certainty and confidence for developers and the public, may meet opposition.

If responsibility for processing consents remains with local government, the territorial authority, regional council and development organisation would need to maintain close links, to ensure consents for development within a declared area are processed in a timely and co-ordinated way.

• To encourage sustainable urban development, how could consenting processes or requirements be simplified or streamlined?

Limiting submission and appeal rights on resource consent applications

A further option is to limit who can lodge submissions on resource consents, and how these submissions are assessed. Resource consents are currently notified generally or to a targeted range of potential submitters. Any member of the general public, notified or not, can make a submission on an application for resource consent. Consents for development, particularly intensification, can attract a considerable number of submissions, including commentary from people who may not be directly affected. Within a sustainable urban development project, the right to make submissions on resource consents could be restricted to residents and/or landowners within the project.

Restricting who can submit on resource consent applications may mean that some groups with particular interests, but without a local representative (e.g. environmental groups or commercial companies), may be excluded from commenting on development.

Rights of appeal on resource consent submissions could also be changed for applications within a sustainable urban development project. Decisions on resource consents can currently be appealed to the Environment Court. One option, given broad community support for a development plan, is for appeals on resource consents within a sustainable urban development project to be referred to an independent commissioner rather than the Environment Court.

• Are there other options to streamline or simplify planning and development control processes for sustainable urban development?

Housing Supply, Choice and Affordability

A key objective for sustainable urban development projects could be to ensure they result in mixed communities (communities with a range of household types and income groups) and that some proportion of the dwellings delivered by the project would be affordable to the intermediate market (for both rental and first home ownership). Social housing providers should also be able to acquire some properties in the area.

More people are actively seeking housing smaller in scale than the traditional suburban three- or four- bedroom house. Many people — for a variety of social and economic reasons — are choosing town house or apartment alternatives closer to public transport and employment centres. Because well-designed and well-located medium- or high-density dwellings can use less land, be more energy- efficient and lessen the need for commuting, they are often more affordable over time.

The particular contributions to affordable and mixed community housing that a large-scale sustainable urban development project might deliver include:

• providing economies of scale in land development and building construction costs. The likely scale of these projects enables planning and delivery of ‘mixed communities’ (including a range of incomes and household types) and ‘mixed tenure’ outcomes (including rental and ownership housing), as well as social and economic development. The mix should be determined within the specific features of each project
• requiring provision of affordable housing (or contributions of land or money to acquire affordable housing), either through provisions such as those in the Affordable Housing (Enabling Territorial Authorities) Bill, or as a condition of selling land or development rights to developers
• reducing regulatory compliance costs by simplifying the land use consenting process
• being able to bring together a number of separate design, regulatory, scale and co-ordination elements to get a better overall community structure and outcome
• being able to pass cost and quality benefits through to targeted groups. This would include a mechanism to realise value uplift and use that funding to cross-subsidise the provision of affordable (or public) housing options. The extent of such a provision would depend on the specific features of each project
• providing opportunities to support workforce supply in areas where affordable accommodation is an issue for employers seeking workers.

Greater diversity in the design, price, location and tenure of housing will help to address the problem of housing affordability and help strengthen local communities. Increasing housing supply is not enough by itself — housing must also be well located and supported by jobs, public transport and social and community infrastructure. The way to improve housing affordability is not to build cheap houses on the outskirts of cities, away from employment, services and public transport links, and with low levels of energy efficiency. This simply shifts costs from housing to transport and energy.

Australian experience demonstrates that sustainable urban development projects can be used to:

• demonstrate commercially viable sustainable development, high-quality design, and community regeneration
• facilitate the provision of affordable housing, community facilities and services
• kick-start redevelopment in strategic locations where there has been little market interest.

  
  

• What options could be used to increase the supply of affordable housing, or improve housing affordability, in sustainable urban development projects?

Footnotes

1. Auckland City Council v Taubmans (New Zealand) and Others [1993] 3 NZLR 361

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