Saturday, August 25, 2012

Frank Newman: RMA and land prices

Last week the Economist magazine ran an article reporting New Zealand has one the world's most over-valued housing markets. This may explain why. It involves a well-intentioned individual and a scruffy piece of land on the Tutukaka Coast 30 minutes north east of Whangarei.

The 6.6 hectares (16 acres) had been a forestry block that backed onto a coastal settlement. The pines were removed in 2005, and Pampas grass has been thriving ever since. He bought the land in 2006, with the intention of rezoning it from Coastal Countryside to Living. The proposal was for a low density residential development comprising 24 sections. A substantial area was to be set aside as a reserve for native revegetation, and included covenants preventing residents for owning dogs and cats, lest their pets prey upon local Kiwi which have been returning to the Coast is significant numbers.

All well a good, one would have thought, after all people do want to live on the coast and nowadays we all care about Kiwi.

In the last six year he has spent $1.4m going through the consent process (significantly more than the land cost). Last week consent was declined by the Environment Court. He is now exhausted emotionally and financially. To make matters worse, costs are likely to be awarded against him. Good intentions and a common sense approach has he says, “ruined” his life.

Unfortunately this experience is all too typical. Good intentions and a practical view of the life count for nothing in the world of planning and regulation. The reality is it’s an industry built around a complex web of rules and regulation, perpetuated by those who profit from it. The players include councils, planners, commissioners, lawyers, judges, iwi and hapu, activist organsations like DOC and the Environmental Defence Society, an endless queue of experts writing voluminous reports on largely immaterial issues, and others. Each is in there extracting a pint of blood, a pound of flesh, or advancing their cause at the expense of those brave or foolish enough to propose a development.

Unlike these industry players, developers must live in the real world. Should they actually get through the consent process with their finances and sanity intact, they have to turn a profit.

In this example the landowner not only earned nothing while their capital was tied up for six years, they have paid rates, and $1.4m in consent fees. These costs need to be recovered in the section price.

The truth is doing anything that involves the RMA and council consent is gamble. There is a high probability that things will go wrong and cost money. A rational business person faced with those risks will only proceed with a project when the returns justify those speculative risks, and few developments pass that hurdle.

That limits the supply of new sections and what is created comes at a price that includes the developers risk premium and the excessive consent costs. That’s why the average section price is about twice what it should be.

That’s also why development activity has virtually ground to a halt. Is it any wonder those with a bit of get up and go, get up and go to Australian or Christchurch, taking their spending power with them? Given the multiplier effect, for every dollar they don’t spend here, costs society $5.That’s why our welfare is one of the biggest industries, and that’s the real cost of excessive and environmental and obstructive district councils.

The RMA was created as an enabling Act. It has become disabling as case law has evolved through the courts. Unfortunately much of that case law has been shaped by resolute environmental activists pursuing their narrow agenda, and for that we are all paying the price.


Anonymous said...

You know, I read things like this and just want to rip my hair out!

To me this is a blatent assault on Joe Blog citzen and the progress of our country by authorities.

The Government is sitting back while its feral departments are letting loose on NZ citizens and I ask myself where the hell is the Knight in shining armour who is sticking up for us?

Our Government and its departments have turned on New Zealanders!

Where is the team of Lawyers, the Human Rights advocates, the fancy accountants and lord knows what else sticking up for us?

Can the people sack Government?

Anonymous said...

I agree with anonymous above, I will never try to expand my business again after the beating I have had the last few years. We are encouraged by district and regional council rules to do nothing, knowing that eventually even this policy will catch up with us as they make our business life harder and harder with new regulations. I keep wondering if it is better in Australia?

NZ Rural said...

Frank is right on the money, as these beauracrates are insulated from the real world. Nothing that they do can affect them personally and the more they tie up process the safer they make there and there idealist workmates positions, These over zealous types should be held accountable as if they themselves were on the recieving end of there own actions.
When will the minority ever get there heads above the water to get some redress?
It is the minority industries and businesses that are combining to keep this country afloat and not the consumer cities as this Govt is backing.

Anonymous said...

The person mentioned in this article brought land not suitable for development then failed to develop it then complains! Answer is he should not have brought the land!!!
If developers had there way they would cut down every tree on our coastline and build apartments from Cape Reinga to Bluff. NZ left in the hands of developers would be a very sad place... how do I know? I am a developer!

Colin said...

I Live in Dunedin. Our beloved council down here wants to get 10000 new jobs and raise average incomes by $10000 per year by 2022. I say there no chance at all because they cannot give a building owner cosent to pull down an old tumble down building in South Dunedin that is on a lean in 14 months.

Anonymous said...

So much for National Governments policies on promoting employment and cutting down red tape

Cath H. said...

On the face of it, this is another commentary which provides what appears to be rational comment in relation to what will undoubtedly be a much more complex issue.

As a consultant planner based in the Auckland region, I often hear (media/client) comment regarding the price of land due to the RMA.

It is always helpful to remember that the daily control of land is managed through District and Regional Plans. These Plans are put forward by Councils and then, through (often) many years of appeal and 'public' input, molded to fit the communities views.

This public process is designed to give everyone in the community input. Whilst this process is not without issue, my experience is that there is strong input from both pro and anti development sectors so one hopes for some balance in the end.

The tale portrayed in the article hints to me somewhat of a person who did not do their homework before investing rather than a failure in the RMA.

atrout said...

It strikes me that Cath H just might be one of those comfortable consultants who are very pleased that the process is long, costly and uncertain. She should also remember that ordinary ratepayers rely upon their elected representatives to provide reasonable outcomes in terms of guiding the development of rules and regulations to care for both the community's needs and the environment. More and more, we are seeing that our Councillors are inadequate and led by staff who happily keep the barriers up and their jobs secured.

Frank Newman said...
This comment has been removed by the author.
Frank Newman said...

In response to Cath H.
Cath, your response demonstrates some of the fundamental problems with the RMA.
One such problem is you actually believe District and Regional Plans reflect public opinion. They don’t. While a councillor, I regularly attended public consultation meetings. Invariable the public turnout was poor and those that that did turn up were the same faces with the same activist agendas. The “feedback” that came back from those meetings was therefore invariably biased.
Planning staff within the councils invariably have an environmental bias instead of real world experience, so they are delighted to report the views expressed by the activists at these sparsely attended meetings, and represent it to councillors as public opinion.
“Real” people actually can’t be bothered turning out to what are largely tedious meetings and listen to environmental idealism. That does not mean to say they don’t care. They speak out once they personally become affected by the radicalism.
For you to suggest the views expressed during the consultation meetings are balanced would suggest to me you have not attended any.

The second fundamental flaw in your comments is you seem to assume the consenting process is fair. The truth is its onerous and because it’s onerous it is a huge barrier to development. During the submission process developers lay themselves bare to government funded organisations like DoC and the EDS, and blackmail from Iwi. That’s why this guy got tangled up for 6 years and the consent process alone cost him $1.4m! No rational person would put their financial health at risk. The result – good people do nothing, and other good people stay on the dole.
It’s actually planner like you Cath H that are responsible for poor economic performance, high unemployment, and high property prices in Auckland. You should reflect on the social cost of your environmental zeal.

Frank Newman said...

In response to "Anonymous...
The person mentioned in this article brought land not suitable for development then failed to develop it then complains! Answer is he should not have brought the land!"

The property in question is a scruffy piece of land and does not measure up to what any reasonable person would regard as "significant". A reason the judges refused consent was the potential for those visiting the property to bring their dog, which may happen to get off the leash, which may happen to kill a Kiwi. I don’t need to spell out the stupidity of that logic and the implications for human habitation on land or visitation of public reserves if that logic were to be applied universally.

The issue is, what is the best use for the land? Allowing low density housing, with the balance to go into protected habitat was so logical and sensible that the owner proposed it genuinely believing the “system” would also see the sense. He did not know the process would take 6 years and cost $1.4m. Had he realised he would have done what most rational people who do - nothing.

gbijohn said...

Yes Frank, you are accurate in every point you make. The RMA driven planning process has produced an industry of corrupt official practices which destroy communities. Our area is enduring the first ten year district plan review, notified in 2006 and not yet complete. Despite over 8500 submissions, mostly in opposition, council disregards any opinion that does not coincide with the bureaucratic view. The Environment Court process is impossible to navigate and mediation is useless. The present government seems to be listening but very slowly. Somehow we need to turn up the volume.