Wednesday, November 23, 2022

Eric Crampton: Wine, bottles, and Resource Management Reform

Last week, the government released the first parts of its proposed overhaul of the resource management system. If passed into law, the Natural and Built Environment Bill will, over a transition period, replace the Resource Management Act. The Spatial Planning Bill would shift planning up from local councils to new regional planning committees.

The existing Resource Management Act is not fit for purpose. It fails to deliver satisfactory environmental outcomes. At the same time, district plans set under the RMA have made it far too difficult to get housing built.

The RMA was intended to shift resource management away from prescriptive planning. The effects of activities on the surrounding environment would be controlled instead. Activities imposing little effect and little risk were not supposed to be hindered.

It did not turn out that way in practice. The Act’s main outcome has been a layering of substantial cost on anyone proposing to do anything. As early as 1999, Waikato University economist Veronica Jacobsen suggested that the mounting cost of the system was building a case for radical reform. Two decades of tinkering followed.

The Bills introduced last week had been due in July. A desire to see the legislation implemented before the 2023 election will mean little time for deliberation. The Environment Committee is likely to close off submissions on the Bills in early 2023. For better or worse, legislative processes can run a lot more quickly than current resource consenting processes.

But critical pieces of the future system are still missing. And without change to the incentives facing councils, even a well-designed new system risks pouring sour old wine into new bottles.

Let’s start with incentives.

Perverse incentives facing councils seemed to underlie many of the problems with the existing Resource Management system.

Nothing in the RMA forced councils to set restrictive district plans, though it did make it difficult to modify existing ones. Nevertheless, district plans often made it very difficult to build either apartments and townhouses in inner suburbs near the amenities where a lot of people want to live or new subdivisions and lifestyle blocks on the edges of cities.

When cities can neither grow up nor out in response to changes in demand for housing, prices adjust instead.

The reason for restrictive district plans is simple. When cities grow, central government enjoys the increase in income tax, company tax, and GST. But councils experience urban growth as a cost to be mitigated, rather than a benefit to be sought. And councils at or near their debt limits have extreme difficulty in funding and financing the infrastructure necessary to support it.

Consequently, councils have used their zoning, planning and consenting functions to protect their balance sheets. Preventing or slowing down new housing construction mitigates the costs councils experience. Over decades, these incentives build a planning culture that is not friendly to urban growth and that is difficult to change.

Some of the costs councils experience in supporting urban growth are likely to be eased, but not because of resource management reform. The government’s Three Water’s proposals would shift water infrastructure costs up to new amalgamated entities. Alternatively, an incoming government undoing the Three Water reforms could provide better ways for councils to fund and finance the infrastructure necessary for growth, including water infrastructure.

But without changes enabling councils to share in the benefits of urban growth, council planning cultures are unlikely to improve. Council representatives will bring existing planning cultures to the new regional planning committees that will set regional spatial strategies.

There they may well be looking for new ways to frustrate urban growth.

How that plays out will depend, part, on the National Planning Framework – which is to be developed through a Board of Inquiry Process through 2023.

The Natural and Built Environment Act requires that Regional Spatial Strategies weigh some eighteen different outcomes and sub-outcomes, ranging from the protection or restoration of environmental amenities, to reducing greenhouse gas emissions, achieving housing choice and affordability, protecting highly productive agricultural land, conserving cultural heritage and more.

Those outcomes will inevitably conflict. The National Planning Framework is where any direction on balancing conflicting outcomes might be found. But it has not yet been developed.

Eighteen different outcomes and sub-outcomes to weigh means a lot of degrees of freedom for blocking development in politically sensitive areas.

The Act bans some ways that councils have blocked urban growth – most viewshafts are prohibited, for example. And plans are required to set corridors for urban growth.

But there could well be ways of replicating the effects of measures like viewshafts by appealing to other objectives that regional planning committees are required to consider. Planning committees might discover that properties currently encumbered by viewshafts are also particularly important in conserving cultural heritage, and that land needed for urban growth corridors is especially important for growing potatoes. If they wished to stymie growth.

The National Planning Framework will need to provide very strong direction to regional planning committees to prioritise flexible urban land markets over other objectives.

But the game of whack-a-mole in which central government legislates against each new way that councils find to obstruct growth seems likely to continue – unless councils are made to welcome urban growth by sharing in its benefits. For example, councils could receive grants from central government reflecting a share of the increased tax take that growth provides to central government.

Without that kind of change to the incentives councils face, any wine that eventually pours from the new planning bottles may taste remarkably, and depressingly, familiar.

Dr Eric Crampton is Chief Economist at the New Zealand Initiative. This article was first published HERE

1 comment:

Unknown said...

In my experience the well meaning intentions of the RMA - and no doubt- replacement legislation is easily hijacked by (i)corrupt, and (ii) envious, bureaucrats manning the Council barricades. (With reinforcements available from the army of consultants and lawyers with snouts in the trough) The experience I speak of is at (i) having Auckland Council behave inconsistently with leased land disposals to a Councillor's relative, and equally mysterious approval, without notification, of a development on my boundary contrary to earlier decisions, and (ii) rejection of a small scale development I proposed on a property in family ownership for 50 years, despite the Council appointed planner who reviewed the proposal agreeing with my planner it was good to go. I wish I had had deeper pockets to counter those using my and other ratepayers money to exercise their moment of power. RC