New Zealand recently adopted a major change in urban environment planning that is expected to lead to significant upturns in the world of property finance.

Gazetted on July 23rd and pushed into effect on August 20th of 2020, the National Policy Statement on Urban Development (NPS-UD) is an evolution on previous government documentation surrounding development in urban areas.

Developed by the Ministry for the Environment and the Ministry of Housing and Urban Development, this new statement contains objectives and policies that councils must give effect to in their resource management decisions.

The NPS-UD is aimed at improving development capacity for housing and business – putting New Zealand communities on the path to well-planned urban areas and ensuring a well-functioning urban environment is created for all. With some 86% of New Zealanders living in urban areas, the need for considered planning rules has never been greater.

For developers, homeowners, and stakeholders alike, the release and implementation of this statement heralds some significant changes to both development capacity and development rates. Understanding the intention behind the NPS-UD 2020 will be key to delivering projects that not only maximise development potential but enhance the urban environment. 

The Major Policy Breakdown for NPS-UD 2020

In simple terms, the NPS-UD seeks to “improve the competitiveness of New Zealand’s urban land markets through greater flexibility in urban policy”. It is wide reaching and applies to all local authorities that have all or part of an urban environment within their district or region.

A targeted approach has been adopted to ensure that policy objectives and planning responses are matched to areas of high growth and base populations. This has been done by categorising territorial authorities into three Tiers; where Tier 1 is comprises the larger cities of Auckland, Hamilton, Tauranga, Wellington, and Christchurch. It is these authorities that are poised for the greatest change.

Most of the provision in the NPS-UD are aimed at developing urban areas in a way that combat high land prices, unaffordable housing, and improved access, however, three are key.

(1) Intensification (Polices 3, 4 & 5)
(3) Responsive Planning (Policy 8)
(2) Car parking (Policy 11)

Other policy’s outcomes more broadly address the ‘who’ and the ‘how’ of the policy package.
will be key to delivering projects that not only maximise development potential but enhance the urban environment.

Intensification (3, 4 & 5)

The intensification policy places minimums on development capacity required to meet expected demand for housing over the short, medium, and long term.
This required territorial authorities to provide land that is plan enabled (zoned), infrastructure ready and feasible.

Expect greater building height and density requirements in urban regions, particularly in areas of high demand (i.e. brownfield development).
One such example is the requirement for Tier 1 urban environments to enable:

“building heights of least 6 storeys within at least a walkable catchment of the following:

  • existing and planned rapid transit stops
  • the edge of city centre zones
  • the edge of metropolitan centre zones”

Intensification policies are essential to the uncoupling of land prices from dwelling prices in high amenity areas. An image of success for this policy would be a city centre with taller, denser buildings, allowing more businesses and apartment dwellers to live where productivity is highest.

Car parking (8)

Territorial authorities will be required to remove minimum car parking requirements; enabling developers to determine the appropriate number of car parks (if any) for their development. With land prices at record highs, the goal of this policy is to enable the private market to determine the highest and best use of land.

At ASAP Finance, we are already seeing a number of projects being planned with minimal to no car parking. These developments have been well located and have had easy access to public transport.

Another sector of the market expected to benefit from this policy is small format retailer, where bulk retailers such as Bunnings and the Warehouse have traditionally enjoy benefited from minimum carpark requirements as they have possessed the scale and balance sheet to acquire larger parcels of land.

Responsiveness (8)

The responsive development policy is targeted toward increasing land use flexibility and improving land supply through greenfield development. This specifically targets areas that are expected to fall within high labour market catchment areas but where the underlying land is not currently zoned.

Councils are now required to consider private plan changes in places where development was not previously planned. This only applies where the said development would increase development capacity, contribute to a well-functioning urban environment, is well connected to transport corridors and other broader considerations that would contributing to a good community outcome.

Strategic planning

In addition to the direct initiatives described above, compliance and reporting regimes will indirectly influence NPS-UD outcomes. Housing and Business Assessments (HBA) and Future Development Strategies (FDS) have been created and are supportive of wider policies. As previously mentioned, these polices concern the ‘who’ and the ‘how’.

Where the purpose of the HBA is to provide information on demand & supply of housing and business land. It also quantifies what is considered sufficient development capacity. The HBA feeds into the FDS which broadly stipulates how councils are to plan for growth.

Evidence and engagement

The final major policy stipulates that councils must provide a strong evidentiary basis to substantiate all development decision making. Notably, these decisions must always be in consultation with local iwi (per Te Tiriti O Waitangi), as well as local developers and infrastructure providers. This will ensure communities are progressing in a way that reflects the ever-changing needs of their inhabitants.

Why change it now, and what is different from the NPS-UDC 2016?

While the NPS-UDC 2016 was created as the precursor to this new policy statement, the objectives and policies laid out in 2016 have not been as effective as projected. An overly constrained development landscape and property market have made it tough for people to build the homes they want, where they want them to be.

Therefore, certain spots in urban environments become more coveted than others, driving up the price, thus making them accessible only to those with a certain level of wealth. These pieces of land are usually located in convenient places with high amenity.

The natural progression of these events is that people below a certain level of wealth have poor access to transport, employment, and social services. This disproportionately impacts on vulnerable communities, showing some major gaps in the thinking that led to the NPS-UDC 2016.

Key changes in the NPS-UD 2020

This new policy is more directive than its predecessor, giving councils clear guidance and oversight to ensure all regions are working toward better urban outcomes. In other words, to make sure cities are built with all people in mind.

Key changes to the policies include:

  • a requirement for planning decisions to contribute to well-functioning urban environments (as defined in Policy 1 of the NPS-UD), which is at the core of all the policies in the NPS-UD
  • specific reference to amenity values, climate change, housing affordability and the Treaty of Waitangi (te Tiriti o Waitangi)
  • a requirement for local authorities to enable greater intensification in areas of high demand and where there is the greatest evidence of benefit: city centres, metropolitan centres, town centres and near rapid transit stops
  • removal of minimum car parking rates from district plans
  • a requirement for local authorities to be responsive to unexpected plan change requests where these would contribute to desirable outcomes.

Each council will be required to produce a Future Development Strategy, with clearly outlined steps to achieving an urban environment that meets the above requirements. The earliest deadline for the FDS is in 2024.

Implications for Urban Property Developers

“Such collaboration will allow the sector to move beyond the never-ending cycle of sole-planning stages and into the implementation and delivery of developments that shape cities and enable communities to thrive.”

Leonie Freeman, Property Council CEO

With the recent advent of COVID-19, the New Zealand economy has been in a state of perpetual flux. While property developers have not been as deeply impacted as other sectors in New Zealand, this flux has resulted in a certain degree of uncertainty for anyone investing in property.

Now that the NPS-UD has been pushed into effect, Tier 1 local authorities (including Auckland), have two years to implement the intensification policies laid out. They will also have eighteen months to remove all car parking provisions from any plans or developments. However, expect the National Policy Statement on Urban Development (NPS-UD) to influence Resource Management Act consenting decisions immediately.

The door is now open for Kiwi property developers to work collaboratively with their local authorities to meet a certain level of intensification. Similarly, councils will be more likely to approve urban development plans that meet their needs, and more likely to work with the developer to rectify any issues should the plans not quite measure up.

Councils are now required to consider developments in both greenfield and brownfield areas, so long as they could contribute to fulfilling intensification and improve housing outcomes. Car parks will no longer be a requirement, easing development cost and enabling larger buildings and more green space.

It is now up to the private sector to determine how they can have a hand in shaping the future of New Zealand cities. With luck, developers should be able to shift their focus away from the minutiae of bureaucracy and onto the planning, implementation, and construction of buildings that advance New Zealand cities forward. With surety like this, attaining development finance will be more likely. It all comes full circle.

For more information on the NPS-UD 2020 or Future Development Strategies, follow the links below:

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