New Zealand: Affordable housing – a consent requirement on some developments

Brief Counsel

As part of Auckland Council's drive to increase housing affordability, the proposed Auckland Unitary Plan (the PAUP) contains a requirement that at least 10% of new dwellings in residential developments over a certain threshold must be "affordable" in perpetuity.

These provisions, although well-intentioned, are untested in Auckland and have potential implications for medium to large-scale property developers.

We recommend that, if you might be affected, you consider making a submission. Submissions close on 28 February 2014.

The context

Steps to address the lack of affordable housing in Auckland have been moving forward quickly.

  • The Housing Accords and Special Housing Areas Act 2013 (HASHA) came into force in September. It sets the process for entering into Housing Accords, identifying "Special Housing Areas", and provides a fast-track resource consenting process for qualifying developments. One of the qualifying criteria can be a requirement for affordable housing.
  • The Auckland Housing Accord was signed by the Government and the Mayor of Auckland in October 2013. The Accord is intended as a temporary measure to implement HASHA, until the PAUP is finalised in 2016. The Accord gives the Auckland Council additional consenting powers and sets development targets.
  • The Council announced the first 11 Special Housing Areas in early October, with more announcements expected before Christmas. The first consent application for development in a Special Housing Area was made in October at Weymouth, for 282 homes and approved in November. The Auckland Council has established a Housing Project Office; a one-stop shop to deal with consenting for qualifying developments.
  • The PAUP was publicly notified on 30 September 2013. It contains affordable housing provisions which were broadly discussed in a March 2013 addendum document. These rules come into force when they are finally decided (likely to be three years from notification).

The 10% rule

The PAUP proposes to require that at least 10% of housing be affordable for new residential developments within the Rural Urban Boundary containing at least 15 dwellings or sites. Any fractions will be rounded down. These dwellings must:

  • be spread through the development (no more than three in any one cluster and, for apartments, no more than one third on a single floor)
  • have a floor area similar to the market rate dwellings, although section sizes may be smaller, and
  • have a similar range of dwelling types and sizes to the rest of the development.

Eligibility

To be eligible for such housing, a household must:

  • have at least one member who is a New Zealand resident or citizen
  • have at least one person who, at the time of application to the council, is employed for more than 20 hours a week with an Auckland employer
  • use the dwelling exclusively as their primary residence
  • be able to provide the required deposit, and
  • have an income between 80% and 120% of the regional median household income.

Affordability maintained

To ensure that the housing continues to be affordable in perpetuity, dwellings must be protected by a legally enforceable retention mechanism, including a covenant supported by a Memorandum of Encumbrance registered on the certificate of title or consent notice.

Off-site provision allowed in some circumstances

Location of the 10% quota off-site may be approved where:

  • the alternative sites are within close proximity to the development (within 1km) and offer "a superior outcome in terms of access to services and transport and community mix", and
  • the applicant has entered into a legally binding agreement with a community housing provider who can demonstrate that on-site provision will not meet their operational requirements.

Land may be offered in lieu but the value will need to be at least equal to what the housing would have been worth. And, a community housing provider will need to attest that the land will provide a superior outcome.

Comment and options for involvement

From a social policy perspective, the aspiration of more affordable housing seems admirable. However, the new requirements are also undoubtedly a significant regulatory intervention, and have not been tried before in Auckland.

They are used extensively in the United Kingdom where they require the support of a very sophisticated industry, involving banks, housing associations, economists, valuers, planning consultants and lawyers. It is unclear yet how 'ready' Auckland is to deal with this complexity and the impact that these mandatory requirements may have on delivering the necessary increased housing in Auckland.

There is an obvious question as to who should fund the new policy. Will the region pay by giving developers a development contributions offset or some other incentive? Will developers be forced to shave their margins? Or will the buyers of new 'non-affordable' homes pay through higher house prices?

The Council's section 32 analysis suggests that developers could absorb these costs without making developments "unfeasible". Developers would be wise to crunch their own numbers on that front.

The potential creep effect is also live. Affordable housing requirement ratios have crept beyond 50% of a development in many areas of the United Kingdom. Will that also be the experience in Auckland? And will other councils around the country adopt Auckland's model?

Other issues appear unresolved, such as how consented, but as yet undeveloped subdivisions will be treated when the new rules take effect. Memories of the impact of the National Environmental Standard for Assessing and Managing Contaminants in Soil to Protect Human Health (re Hastings District Council) will still be keen for some.

If you are planning on undertaking medium to large scale residential development in Auckland, these provisions will affect you. Submitting on the PAUP is the only way to have your say on the affordability provisions.

The information in this article is for informative purposes only and should not be relied on as legal advice. Please contact Chapman Tripp for advice tailored to your situation.

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