LGNZ’s Submission on Housing Affordability

Introduction

Local Government New Zealand (LGNZ) represents the collective voice of local councils across New Zealand. In their submission to the Productivity Commission’s Inquiry into Housing Affordability, LGNZ emphasizes the critical role of local government in addressing housing challenges while highlighting systemic barriers that hinder progress.

The submission argues that housing affordability is not just a supply issue but a complex problem influenced by infrastructure funding, planning regulations, financing mechanisms, and central-local government coordination. LGNZ calls for a whole-of-system approach, stressing that councils alone cannot solve the crisis without central government support, regulatory reform, and sustainable funding models.

Key Themes in LGNZ’s Submission

1. The Role of Local Government in Housing

Local councils play a pivotal role in enabling housing development through:

• District planning (zoning, land use regulations)

• Infrastructure provision (water, transport, community facilities)

• Consenting and compliance (ensuring development meets standards)

However, LGNZ argues that councils face structural constraints, including:

• Limited revenue tools (reliance on rates, development contributions)

• Unfunded mandates (central government policies increasing costs without funding)

• Capacity challenges (staff shortages, especially in high-growth areas)

2. Infrastructure Funding as a Major Barrier

A recurring theme is that housing cannot be built without adequate infrastructure, yet funding models are broken. Key points include:

• High upfront infrastructure costs (roads, water, wastewater) deter development.

• Development contributions (fees on new builds) are contentious—developers argue they inflate prices, while councils say they’re essential.

• Alternative funding models (like value capture, public-private partnerships, or shared central-local funding) are needed.

LGNZ suggests that central government should co-invest in infrastructure, particularly for high-growth areas, rather than leaving councils to bear the burden alone.

3. Planning and Regulatory Challenges

The Resource Management Act (RMA) and other planning rules are often blamed for delays and inefficiencies. LGNZ’s perspective includes:

• Complex consenting processes slow down housing projects.

• NIMBYism (Not In My Backyard opposition) and community resistance can block higher-density housing.

• The proposed replacement for the RMA (the Natural and Built Environment Act) must balance environmental protection with enabling development.

LGNZ supports simplified planning rules but warns against removing local voice entirely, as communities should have input into their own growth.

4. Land Supply and Urban Development

While increasing land supply is important, LGNZ notes that greenfield development is not always the answer:

• Sprawl increases infrastructure costs (extending pipes, roads, and services is expensive).

• Brownfield development and intensification (building up, not out) should be prioritized, but requires better design standards and community buy-in.

• Speculation and land banking (holding land without developing it) can distort the market—LGNZ suggests tax reforms or use-it-or-lose-it policies.

5. Affordable Housing and Inclusion

LGNZ highlights that affordability is not just about ownership but also rental stability and social housing:

• Councils support inclusionary zoning (requiring affordable homes in new developments).

• Community housing providers need more support to scale up.

• Māori housing needs must be addressed, including papakāinga (Māori land) development.

6. Central-Local Government Partnership

A recurring frustration is the lack of alignment between central and local government:

• Top-down policies (like the National Policy Statement on Urban Development) sometimes ignore local realities.

• Better collaboration is needed—for example, joint ventures on large-scale housing projects.

• Revenue-sharing models (e.g., GST on new builds returned to councils) could incentivize housing growth.

LGNZ’s Recommendations

To improve housing affordability, LGNZ proposes:

1. Reform Infrastructure Funding

• Central government co-investment in water, transport, and community infrastructure.

• Alternative financing tools, such as municipal bonds or value capture (where landowners benefiting from infrastructure pay a share).

• Review development contributions to ensure they are fair but still fund necessary infrastructure.

2. Improve Planning Systems

• Streamline RMA reforms to reduce delays but retain local input.

• Encourage medium-density housing through clearer rules and design standards.

• Address NIMBYism with better community engagement and benefits-sharing.

3. Strengthen Partnerships

• Central and local government should work together on housing strategies, rather than councils being left to implement unfunded mandates.

• Māori and iwi partnerships should be prioritized to unlock Māori land for housing.

4. Increase Housing Diversity

• Support build-to-rent, co-housing, and papakāinga developments.

• Boost social and affordable housing through targeted funding.

5. Address Market Distortions

• Tax reforms to discourage land banking.

• Incentives for prefabricated and innovative construction to lower costs.

Conclusion

LGNZ’s submission underscores that housing affordability is a systemic issue requiring coordinated action. While councils are committed to enabling development, they cannot do it alone. Central government must step up with funding, regulatory reform, and genuine partnership.

The key takeaway? Sustainable housing solutions require both "more houses" and "smarter systems"—balancing supply with infrastructure, planning efficiency with community voice, and private market dynamics with public good outcomes.

Without these changes, New Zealand’s housing crisis will persist, leaving future generations locked out of homeownership and struggling with high rents.