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Councils should be granted funds for completed building floor space

Overview

The Productivity Commission has also identified the significant financial pressures on councils. 

We need to focus on changes to the existing system rather than divert our attention to creating a new, elaborate funding system or a new government housing agency, as suggested in this article.

We need to make a simpler and more effective change that incentivises action:

Councils should be granted funds on the basis of square metres of completed buildings in their area.

The idea is that once a Code of Compliance Certificate is created, councils are paid say $100 per square metre of completed building consent, within their jurisdiction, via their monthly GST return.  Simple.

This significant, additional funds transfer would give councils the cash flow they need to solve most, if not all, of their funding issues related to growth, and to manage associated social and environmental impacts of development.  This would be a significant carrot to those councils who are currently resisting development because there would be a clear relationship between new development and councils having additional funding to upgrade infrastructure and services. 

This is a simple and balanced approach whereby the central government still gets the GST income associated with infrastructure, commercial development, and the ongoing higher GDP in areas of housing growth – hence the net effect on the Government’s balance sheet would be minimised.

I believe most councils would actively provide for new development in this new financial environment.

There are other key difficulties that are adding to our housing shortage at a council level:

  • the generally adversarial nature of the relationship between developers and councils;
  • the resistance to change at the community and council level (the recent NPS cracks some of this – as discussed in this article); 
  • the minimum lot sizes required by some councils, which are hampering the provision of affordable housing; and
  • the legal “joint and several” rather than “proportional” liability exposure for councils for errors, which makes them very risk-averse. This article discusses how Auckland Council has lobbied for a change.

Other actions to resolve the housing crisis

The good news?  Well, there are many ideas already on the table to assist us in this crisis.  For example, the large-scale powers of the Urban Development Authority, and the Government’s proposed RMA reforms to improve urban planning are part of the solution.  Another example is the aim to streamline district plans around the country, so they are mostly the same, which is an excellent idea.

However, I believe the biggest challenge is still the conversation between central and local governments.  The local government needs more incentives to develop rather than further rules and policy direction from the central government. 

And finally, I was convinced pre-COVID that the world situation was going to lead to more Kiwis coming home.  Now I believe that the Government should expect that many Kiwis will be returning home and the housing crisis could become very significant to the point where quick but poor-quality solutions (such as 20 storey concrete flats) are proposed.

This country is suffering from a massive shortage of affordable and, in particular, smaller houses.  Hence, we need as many high quality yet affordable houses as we can get, as soon as possible. 

The funding relationship between central and local governments is a major part of this problem.  It’s not going to be solved by simply replacing the RMA either (which will result in years of inaction as councils adjust to the change), or other changes that seek to push councils to take action.

The silver bullet solution needs to include a loosening of Wellington’s purse strings in a way that incentivises councils to take action. 

Smallhome support

I’d be happy to hear from any of you who can help get this message across to the Cabinet.

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