Local Government Act 2002 Amendment Bill (No 3)

I am going to speak to the parts of the Local Government Act 2002 Amendment Bill (No 3) that relate to the issue of development contributions—that is, the way that councils levy developers for the cost of infrastructure and services for new residential developments. This bill had a close shave. It almost did not make it back to the House for a third reading before the House rises for the general election campaign. It was a surprise to us that a few weeks back, the Prime Minister basically tried to blame Labour for not supporting this bill and said that it therefore could not be passed. After 5 years of talking about the need to reform the regime on development contributions and trying to make housing more affordable, this Government almost failed to pass this bill before the end of the parliamentary term.

We are supporting this bill because of the provisions on development contributions. We are supporting them not because we think they are fantastic—they are not; they are actually pretty weak and inadequate—but because they are better than nothing. In a housing crisis like we have now in New Zealand, where there is an acute shortage—particularly in Auckland and in Canterbury, where not enough houses are being built—we think that the right thing to do is to try to remove the obstacles to new homes being built and try to make new housing more affordable. So that is why we are supporting this bill. We do not think it is going to achieve that much and it does have some negative, unintended consequences, but in the context of a housing shortage we think that it is worth supporting.

What does the bill do? It has two main provisions. One is that it sets up an appeal process, whereby developers will be able to appeal development contributions that are being levied on their project if they believe that the levies are inconsistent with the council’s policy. The second thing that it does is prohibit councils levying these development contributions in order to pay for libraries and swimming pools and other community infrastructure. That has been a controversial provision. Some colleagues in this House have argued—and I put some weight on those arguments—that this may lead to new developments being put in place that do not have those kinds of vital community facilities.

The Government hopes that these reforms may knock something like $3,000 off the cost of a new house. We have not seen any rigorous analysis of how it came to that figure, but what we do know is that development contributions generally, on average, amount to about 4 percent of the cost of a new home. They can, in fact, add anything between $10,000 and $15,000 on to the cost of a new house.

Our view is that this bill, in regard to development contributions, is a wasted opportunity. The effect of these provisions will be to shift the cost from the purchasers of new homes to ratepayers. You know, we actually need to reduce the cost of new housing, so you could make an argument that in the current housing shortage?

that is worth doing, but it is a pretty insignificant gain.

I just want to say that Labour believes that this was an opportunity to think far more thoughtfully about more fundamental reform of the way that we pay for infrastructure and services for new residential developments. I want to give the House three examples of things that the Government could have done when thinking about this issue.

The first is that this was a great opportunity to consider how development contributions could have been restructured to incentivise different kinds of development. So instead of levying development contributions on a single dwelling to recover a share of the cost of all the infrastructure and services that that new dwelling would need, why not apply those development contributions spatially? Why not apply them per square metre to the lot size or to the house size, and by doing that thereby encourage medium-density developments? This is the greater density that we need, particularly in our towns and cities. So why not give councils that kind of flexibility? Why not apply, for example, a differential that would allow councils to apply development contributions at a different rate for greyfields and brownfields developments? In our major cities we desperately need to encourage more intensification and more urban development within the city, and not out on the fringes, which encourages more and more sprawl. But, no, I do not think the Government even considered those kinds of options.

The other idea that should have been considered is, instead of loading all of the cost of the infrastructure and services—and it is a significant amount of money, because, as I have said, development contributions might be $10,000 or $15,000, but it is not uncommon for houses being built in a new greenfields development to have to pay another $30,000, $40,000, or even $50,000 to lay infrastructure such as the roads, the footpaths, the drainage, the water supply, the broadband, the electricity, the street lights, the parks—you name it. All the cost of that infrastructure and services gets loaded on to the cost of the new house. That is not only a cost to the person who purchases that house. No, that cost is capitalised into the market value of that house and of every other house on the market.

So if you add $50,000 or $60,000 on to the cost of new houses, that is a significant addition to the marginal cost of new housing in that town or city, and that gets capitalised into the market value of not only new housing but all housing. That has a really significant inflationary effect on the cost of new housing and, as we know, it is a huge barrier to first-home buyers. If you think about the fact that house prices in Auckland now are, on average, hitting $700,000—they are increasing by $72,000 a year—and that is a huge barrier. It is no wonder that homeownership rates are dropping. It is no wonder that first-home buyers have almost disappeared from the market.

If the Government had been willing to consider more fundamental reform, it would have had a look at the municipal urban development entities that are part of the institutional scene in Texas, for example, where, when new residential developments are happening, they create this new development entity. They fund the infrastructure. All of the roading, the street lights, the drainage, the water, the electricity, and so on gets funded through issuing 30-year bonds. So that is funding the lifetime of that infrastructure, and people pay that back through a targeted rate. Sure, someone still has to pay for that infrastructure, but the value in it is that you are spreading it over, say, a 30-year or 40-year lifetime of the infrastructure. You are not loading it all on to the price tag of the new house and seeing that extra cost capitalised into the value of that house and all other housing.

The Government did not take this opportunity to reform development contributions. It is simply shovelling the cost on to the ratepayers in a way that ratepayers and councils all around this country will, I am sure, resent. It typifies the kind of tinkering, superficial approach that this Government has taken to the issue of housing affordability. It has been in office for 6 years. This bill is the best that it can do for reforming development contributions. That is sad—that is really sad.

On the Resource Management Act, the Government has been talking about reforming it for housing affordability and urban development. It has not even been able to bring a bill back to the House in this parliamentary term to speed up the consenting for new residential construction. On building materials, which it has also been talking about for the last few years, the best it could do was that pathetic little bit of legislation that it passed during the Budget to take tariffs and anti-dumping duties off some building materials. That will, it hopes, reduce the cost of a new house by $3,500, which is about 2½ weeks of house-price inflation in Auckland.

This is the sort of tinkering approach, and the manic effort by the Minister of Housing, Nick Smith, to look busy and to look as if he is doing something. It is a wasted opportunity. The people of New Zealand deserve much more.

I rise to speak to the Local Government Act 2002 Amendment Bill (No 3) at its third reading. As the previous speaker, Phil Twyford, noted, this is a bill that is going to improve housing affordability through the changes made to the development contributions. There has been a number of changes that occurred through the select committee process. We as a Government want people to be able to afford to buy houses. We needed to be able to make sure that the development contributions were fair and no higher than they actually needed to be. Nor did we want the local authorities unable to invest in the sort of infrastructure that is going to help our communities grow. So, as part of the Local Government and Environment Committee recommendations, a transitional clause was added to allow councils to continue to collect development contributions for community infrastructure that has already been built or is currently under construction. That makes a lot of sense, I think.

When you look at the provisions that this bill includes, extending the local boards model outside Auckland is one that needs some careful examination. Under the model that we have got currently, our local boards share governance with the council’s governing body. In the first phase of the local government reform we allowed the local boards model to be copied but only when the population was over a certain level, of more than 400,000 people. That was what was proposed in the reorganisation. But the bill that we are debating now will allow local boards to be an option during proposed reorganisations. They can either be part of a unitary authority, if that is what is required, or be a part of existing authorities, if that is deemed to be the better outcome. So whether to have local boards or not will be able to be determined on a case-by-case basis by the Local Government Commission and that will be very much in consultation with local communities.

This bill is going to encourage much greater collaboration and also shared services between the local authorities, which I think is a very good thing as well. It is going to allow easier transferral of responsibilities from the territorial authorities through to the regional councils as well. So, as with much of our legislation and much of the programme that we have put in place in this past term, it is about better consultation, better decision-making, and better planning overall.

This is a bill that will give councils more flexibility and also more clarity about how and when to consult. The current law does not really allow very much scope for flexibility. It makes it quite hard, actually, for councils to tailor their consultation so that it is proportionate with the matter being considered. Most requirements to use the special consultative procedure are going to be removed, so we are getting rid of some of the barriers to councils and local communities making the best decisions for their future, for their community.

The bill also—I am relieved to see—provides for a new plain English consultation document for long-term and annual plans. A number of my constituents have come to me and said that part of the problem they feel in making submissions on the Auckland Unitary Plan is that it is buried under a wodge of enormous fluff and highfalutin language that does not actually mean very much and needs to be translated. So going for a new plain English consultation document has got to be a good thing. Councils are not going to be bogged down either in needing to consult on detailed draft plans containing a lot of technical material. Instead, the long-term consultation will focus on major issues and major choices.

This is a bill that will improve the development contributions regime because it is going to be clarifying and narrowing the range of infrastructure that can be financed by development contributions. It will also at the same time provide greater transparency of development contributions policies, allowing that greater private provision of infrastructure through the use of development agreements. All in all, this is a very tidy piece of legislation that is going to make it a lot easier for individual councils to make informed decisions that their communities would like to see them make for the future of those communities. I commend the Local Government Act 2002 Amendment Bill (No 3) to the House.

I recognise the honourable member Jacinda Ardern.

And I recognise you Mr Assistant Speaker. Thank you very much for the opportunity to speak on the Local Government Act 2002 Amendment Bill (No 3). It is a pleasure also to follow on from my colleague Phil Twyford who, as housing spokesperson, has outlined the reasons why, after really careful consideration, Labour has decided, with some significant reservations, to support this bill. I want to spend just a little more time canvassing some of those for the benefit of the House but also for those who may be directly affected by this bill, particularly those working in a local government context.

I want to start off by addressing the context that, it feels to me, local government is operating in. It feels not too dissimilar to the environment that our teaching profession is operating in. There seems to be a bit of a habit with this Government. When it receives bits of feedback that it feels might be negative from a taxpayer it immediately looks for an alternative way to blame some other group or entity for the problems that that ratepayer or taxpayer group may be facing. A perfect example is the housing crisis in Auckland. It felt at times in that debate that there was an almost immediate attempt for the Government to say “Well, it’s council planning regulations that are causing that issue.”, or “It’s the fact that the council hasn’t released enough brownfields and greenfields sites.”, or “It’s the urban metropolitan limit that’s the problem.”

The Government has no real desire within itself to look at the systemic issues that are causing the housing crisis. Rather, it finds bandaid attempts to paper over them. But a lot of those statements were directed—sometimes unclearly—at local councils, particularly in Auckland. Look at the debates that councils have been having about how they deal with the growing bill of providing the services they need to provide to their ratepayers without increasing rates. It is an issue than any major Government department is facing in the wake of the global financial crisis and increasing inflation.

Everyone is meeting those various cost pressures, but the Government seems to want to heap blame on local government for that by implying that it was overspending on areas that were not its domain—and that was exactly the intention of removing the four well-beings from local government legislation. It is a way of sending this message to residents: “Look, your local government, your local council, has been spending money on things that we do not require them to spend on. We will be the saviours and we will put these restrictions on local government on your behalf.”

Not only was that a completely inaccurate way to portray our hard-working local councils around the country and local government generally but it has now restricted their ability to do their job—a double whammy. And you can see the difference even in the way the two parties have approached regional economic development: on the one hand a text message service, and on the other hand a genuine partnership with local government through a regional economic development infrastructure fund—a sizable fund; $200 million worth—as a way of ensuring that we partner genuinely with local councils to try to provide the kinds of projects that will really make a difference to their local communities. In the same way, we believed in things like the Mayors Taskforce for Jobs as a genuine way of partnering with local government to address the needs of local communities. So it is a very different approach from the two major parties.

But speaking specifically to how this plays out in this bill, as I have already said, this bill splits into two parts. One is the more omnibus set of reforms. One part of the more controversial reforms—actually, the omnibus reforms are controversial as well—sits around development contributions. This is in part an attempt by the Government to paper over what is a significant issue. Its view seems to be that one of the ways to address the housing crisis is to restrict the use of development contributions in an attempt to bring down the cost of those contributions on those who are trying to bring on stream new housing.

When you look at the scale of the issue in a place like Auckland, though, and at the fact that this change might bring down the cost of a new build by about $3,500—the equivalent of about 2 to 3 weeks of Auckland house-price growth in the grand scheme of things—you can see that it is hardly going to change the rules of the game. It hardly is. It is a small drop in the ocean. But we have become so desperate in the situation we have there, where under this term of government we have seen an increase in housing prices of $200,000 in Auckland alone. We are in a situation that is so desperate that we in the Labour Party found ourselves feeling like there were very few options for us other than to allow what is a rather piecemeal and potentially difficult piece of legislation to go through. That is how constrained we now feel and how bad we now feel about this situation—that we were willing to make that compromise. It is a very significant compromise on our part, and I want that to be put on the record.

We have put forward to the Government the kinds of initiatives that we think will make a difference in this space. A capital gains tax is a way of addressing the demand from speculators. There is the plan to build 100,000 houses. We know through KiwiBuild and the work that we have done that the way to start bringing down costs to a much more significant degree than the changes in this bill will do is to start building houses on the kind of scale that we are talking about: 100,000 houses over 10 years. When you reach that kind of scale you start seeing the economies of scale that we need. We just do not have them in New Zealand right now. No more than five companies, I understand, are building more than 20 or 100 houses a year—somewhere in that range, anyway. A very small number of significant construction companies are building to scale in the way that we need, and they are not, therefore, reaching those economies of scale.

When you couple that with the fact that we just do not have enough affordable housing coming on stream—in fact, something like roughly 5 percent per year if new builds are considered affordable—you can see that we need that systemic change. A capital gains tax, the building of 100,000 houses ourselves, and a clamp down on overseas speculators—who have no intention of living in New Zealand but simply want to make money off our market—are the systemic changes that we need to see, not piecemeal little changes to the way that the development contributions are used.

We have said, as well, that, actually, this bill is a missed opportunity. Within this framework we had the ability to try to look at other ways of addressing this particular issue. In fact, Phil Twyford spoke just before he sat down about the idea of the cost of infrastructure being spread over the lifetime of a project rather than front-loaded to first-home buyers at the start. You could do that through things like long-term bonds. In fact, there is a model, I believe, that is based on the municipal - urban development entities in Texas that does this very thing. That does not mean you do not have the cost in its entirety, but you do spread it over, potentially, up to a 30-year period. We do this in other sectors for significant infrastructure projects. I am asking why we cannot do it at that level as well, in order to spread that cost over the lifetime of a project, because, ultimately, what we are trying to overcome is that front-end loading that is occurring in development.

We also raised the question as to whether there were ways to improve the productivity of developing infrastructure through improved process management and agreements with developers. Can we also look at ways as to how we can make cost recovery an incentive for better urban design? There were so many issues that we could have looked at within this framework, but we just simply have not. So we wanted to highlight that we do believe that that is a lost opportunity.

Now I want to come briefly to some of our significant concerns in the rest of this bill. “Amalgamation” is one of those words that, for good reason, sends terror up the spines of both ratepayers and local government. Auckland was a different case. Auckland needed something to be done. We instigated the royal commission. We believed that change was needed. We were sceptical about some elements of the redesign that this Government implemented, though—not least the power of council-controlled organisations. Our concern now is that this bill is another attempt by the Government to spread out the model of Auckland Council before we have even had a proper attempt to review the way it is operated in the Auckland context, which is probably the best suited for some of the reforms that we saw.

Local boards, for instance, were very much designed for an Auckland model, and yet some of the issues we have seen at a local level are that some of these local boards have become the scapegoats. They deal one to one most often with local communities, and yet they are quite disempowered in terms of the changes they are able to make and the funding that they have to operate. Do we want to inflict that at a wider level for local government when the expectation of ratepayers is that they have very direct lines of communication with their representatives who have the direct ability to make change? That is not what has happened with our local boards in Auckland. We must learn those lessons. We should not force amalgamation on local communities, and we stand opposed to that. We have truly missed an opportunity with this bill.

Tēnā koe, Mr Assistant Speaker. I am pleased to take a call on the Local Government Act 2002 Amendment Bill (No 3). Local government has got a critical role in ensuring a democratic society, and the Green Party obviously supports democratic processes and democratic governance arrangements. We support public ownership and public control of assets and services. We want fair and efficient decision-making in service delivery and we want sound asset-management. This bill imperils quite a few of those principles, because citizens’ right to elect local representatives to make decisions about local matters is a fundamental part of our democracy. It is a way of constraining the power of the executive. But this bill, like so much of National’s meddling with the local government legislation—and this is the third amendment bill—shows contempt for that right. It is an attack on local government and an attack on local democracy. It is another reason why we need a new Government.

In the bill we see the Government increase the power of Ministers and increase the power of central government to override the decisions of councils or to constrain them. We strongly oppose the policy basis for this bill, which is why we are voting against it—because it undermines local democracy, because it deprives councils of significant and important revenue from development contributions, and because it will compromise councils’ ability to provide facilities and infrastructure for their communities. It is absolute nonsense for Government members to claim that it improves the law around development contributions. It does the opposite. Local Government New Zealand said the provisions around development contributions were some of the provisions that were of most concern to councils across New Zealand.

The Green Party believes that councils are in the best position to determine the link between population growth and what sorts of facilities should be provided to meet the needs of the growing population, whether they were swimming pools, libraries, art galleries, or museums. Yet, this bill cuts right across that because it narrows the definition of community infrastructure to which development contributions can be applied. It limits that to community halls, to play equipment on neighbourhood reserves, and to public toilets. So the bill will effectively prevent councils from using development contributions from new subdivisions in development to fund things like aquatic centres, swimming pools, libraries, art galleries, local museums, and the like.

There is scant evidence that there was any need for these changes. The three regulatory impact statements acknowledge that these changes to development contributions are unlikely to significantly improve housing affordability, which is the excuse that the Government keeps giving. Indeed, there was a development contributions working group, which produced quite a thick report. It noted that development contributions make up only a very small portion of the total cost of new housing. There was a discussion paper that the Department of Internal Affairs did. It highlighted that development contributions make up 4 percent of the total cost of a new 145 square metre house and land package in Auckland, and similarly in other areas such as Tauranga. So the development contributions working group said that these changes in this bill will do very little to reduce the development contributions charges. They are likely to reduce them by between a few hundred dollars per dwelling or lot and a few thousand. Will those be passed on to the consumer? It is quite unlikely. They are more likely to be built into increasing the margins of property developers and building companies.

Yet what the provisions in this bill around development contributions—that narrowing of the definition of community infrastructure—will mean is that councils are likely to shy away from growth-related expenditure to provide these facilities in greenfield areas, because they will not be able to recover so much revenue from the contributions. It means that the Minister, with his Housing Accords and Special Housing Areas Act, has been zoning large areas for a new subdivision, and these areas will potentially become ghettos if councils do not fund the facilities that give these greenfield subdivisions a heart.

The Green Party wants a society where children thrive—that means free doctors visits for all children to age 18. It means extending 20 free hours’ early childhood education to the under-twos, but it also means that children can grow up in communities where they can walk or cycle to their local library, where they can play indoor basketball in a local gym, where they can swim in rivers that are not polluted—[Interruption]

The ASSISTANT SPEAKER (H V Ross Robertson): Order! Courtesy please, colleagues.

So these changes around development contributions mean that there is much less likelihood that councils will be able to afford to fund such facilities.

We have got the National Government on the one hand railing against councils and their increases in rates, yet it is depriving councils of a significant source of revenue as an alternative to rates to fund such facilities. The submissions showed that the changes in the bill are going to have severe impacts on councils. Auckland City Council estimated that its funding for community infrastructure from development contributions was in the order of $394 million, and Christchurch City Council estimated it at $322 million. So it is a major source of revenue that the Government is constraining. So that is one reason that the Green Party is opposing the bill.

Another one is the changes around local boards. What the Government is doing in the bill is encouraging the replacement of competent councils with local boards with much more circumscribed powers. Local boards, as in Auckland, cannot employ staff, they cannot levy rates, they cannot hold or dispose of property, and they cannot make by-laws. This is all part of the National Government’s plan to centralise power in large unitary councils. The bill allows the Local Government Commission to establish local boards in any reorganisation, not just in areas of over 400,000 people, as the law currently provides. That means that we are going to get fewer councils throughout New Zealand, with the National Government’s agenda to reorganise and amalgamate in Northland, Hawke’s Bay, and Wellington, and that reduces local democracy because it shrinks the number of councils.

We are also opposing the bill because we think it encourages privatisation and contracting out of council services by very prescriptive provisions around the review of service delivery. The Minister of Local Government, Paula Bennett, says she is against loopy law, and wants people to identify areas of loopy law. Well, this is one area of loopy law because it is telling councils how to do things that they are perfectly capable of doing themselves. The Government does not have a mandatory review of its services on a 3-yearly or other basis, but it is making it mandatory for councils to do such reviews. That creates ongoing uncertainty amongst staff as to whether they are going to have their jobs or whether the services that they are currently employed to provide are going to be contracted out and they will lose their jobs.

We also oppose the bill because it removes the mandatory requirement for councils to use the special consultative procedure on significant decisions, such as whether they are going to establish council-controlled organisations or sell off regional parks. It provides very little guidance on what decisions are significant and that means there is a lot of opportunity for minimal consultation.

The other area where there is a lost opportunity is around the infrastructure plans. Certainly it is a good idea to encourage strategic thinking about the maintenance of infrastructure, but as the chief executive of the Insurance Council said, these provisions around infrastructure plans may be well intentioned, but they do not focus on natural hazard management, which is a critical issue in terms of the provision and maintenance of infrastructure.

We are opposing this bill because it undermines local democracy, it severely constrains councils’ ability to fund community infrastructure, it potentially reduces consultation on quite significant council decisions, and it means that there is going to be much more likelihood of big unitary councils with weak local boards. It is a bad bill.

I rise in support of the third reading of the Local Government Act 2002 Amendment Bill (No 3). There are constituents in my electorate—I was speaking to some very recently, a Mr Bryn and a Miss McKenzie, who were in contact with me about the costs of local government and particularly development charges. They were concerned that when they are old enough to buy their home, they will not be able to afford it.

This is, of course, one of the pieces of legislation that National has brought to this House to address the issue of housing affordability. The Green Party has opposed them all. It has opposed reform of the Local Government Act, reform of the Building Act, and reform of the Resource Management Act, and it opposes this bill as well. This bill will improve housing affordability through the changes to development contributions. National does not want future generations like Miss McKenzie and Mr Bryn’s to be unable to afford homes and nor do we want local authorities to be unable to invest in the infrastructure necessary to help our communities grow. We want development contributions to be fair and no higher than what they need to be, just like the tax take—fair, but no higher than what it needs to be. A transitional clause, it must be noted, has been added to this legislation to allow councils to continue to collect development contributions for infrastructure that is currently in train, and we consider that to be fair enough.

I would like to point out one thing that has not been highlighted in this legislation, and that is the action in this bill to see more efficient delivery and governance of local authority services. The bill will encourage greater collaboration and shared services between local authorities. So in Northland, Kaipara District Council, Far North District Council, Whangarei District Council, and Northland Regional Council will be able to more easily share services. It will allow easier transferral of responsibilities from territorial authorities to regional councils, and this will provide local authorities with a range of practical ways to achieve efficiencies, better ways of doing things, and more cost-effective ways of doing things. I do not know why the Green Party would oppose such a move. I commend this bill to the House for future generations and for those concerned, whom I have been meeting with, like Miss McKenzie and Mr Bryn, and I ask that other members of the House support it, as well.

It is a great pleasure to come after the Hon Phil Heatley, who just ridiculed the Greens for opposing this bill, the Local Government Act 2002 Amendment Bill (No 3). I have got sad news and bad news for Mr Heatley, because New Zealand First is opposing it as well. So this is not going to make your day, I am sorry, Mr Heatley—it is not going to make your day at all.

We do so on the basis of a little bit of knowledge and experience in this area rather than what has come out of the National Government. We also do it on the basis of the submissions that were made to the Local Government and Environment Committee. We work on the basis that there if there are submissions from the public—interested parties and affected groups—we pay heed to what they say.

In this case I sat on the Local Government and Environment Committee hearings on this bill and we travelled around New Zealand to quite a few different places—in Auckland, Wellington, and other centres—and we heard from the grassroots. We heard from them, and from the likes of a developer in Tauranga who was there, and he spoke just before the Mayor of Tauranga and representatives of the Tauranga area. The developer in Tauranga I would have actually picked as being a National voter, because he gave me that impression; he was a fairly well-heeled gentleman and he looked like he had made a donation or two to the Tories over his time. He said in his submission that this legislation was crazy, that it was madness, and that it was just stupid to be going ahead with it.

The reason he gave was that in the case of Tauranga this would have a difference of about $750 per section in Tauranga. He said that in removing the ability of councils and local authorities to charge development contributions against community infrastructure, which is what this bill is partly about—and when I say “community infrastructure”, I am talking about sports fields, recreational facilities, swimming pools, libraries, children’s playgrounds, all sorts of community infrastructure that we expect in any decent town, city, or district in this country—it is madness to be taking $750 off the development of a section when, he said, in a place like Tauranga, $750 is neither here nor there. The market in Tauranga will determine the cost of a section and will determine the cost of the development of a house. Whether that levy is there or not there will not mean that that house becomes $750 cheaper.

But what it does mean, and he said this, is that when councils such as the Tauranga City Council are potentially approving subdivisions, approving sections, and approving expansions and developments, they will not necessarily go ahead with provision for sports fields or recreational facilities or local—

💬 Jacqui Dean: Yes, they will.

They will not, and you know that, Mrs Jacqui Dean. Council after council said to us that this will create a huge difficulty for many of them. They will have to put a clamp on. In the case of Mr Paul Goldsmith, he had the cheek to say to some of those submitters that they could just stop spending money on those sorts of things. They do not have to have these things. They do not have to have these things in their communities. It is very nice for Mr Goldsmith, coming from Epsom—does he come from Epsom? I am not sure. He comes from somewhere. It is very nice for people who live in central Auckland who have got all the parks, all the recreational facilities, and all the sports fields. But in new areas, out the back of Flat Bush, out the back of west Auckland, out the back of South Auckland, where they are developing new subdivisions and that sort of thing, if the council says: “Sorry, but we are not getting sufficient contributions from the developers to go towards the infrastructure in this area.”, they may well put the clamps on what they can provide.

In the case of the Auckland Council, we heard submissions from it about the next 10 years, as a result of this—and this was under the original bill. The Government has backed off and said: “Oh no, we will concede. We will let existing projects that are already in the pipeline go ahead.” So already the Government concedes that it made an error. It already knows it is wrong. So it is going: “OK. We’ll let things that are already approved go ahead, but anything in the future we will stop.” The Auckland Council said that under that original legislation it was going to cost the council $450 million in the next 10 years, and in order to continue providing community infrastructure in areas of Auckland—and you are talking from Tahuna up in the north, right down to Pukekohe in the south—it said it would be the equivalent of 8.5 percent over the 10 years, on top of the rates in Auckland, if it were to continue providing that community infrastructure. The council gave a sound warning. It is not good, sensible economics, by anyone’s standard, to then try to impose that amount of money, $450 million, on the existing ratepayers of Auckland.

New Zealand First very much opposes this, because what it basically will do is set up two tiers. The Government has said that existing schemes can go ahead, the ones that are already in place, but any new schemes, any new proposals, any new community projects that councils have will not be allowed to do this. It means that a lot of newer communities, the growth communities in New Zealand, the ones that are really needing it—not the old Dunedins of this world, which have got everything; they have been there for 100 years—the new growth communities, the likes of Christchurch going ahead and growing and needing all sorts of new facilities, the likes of north of Auckland and the north-west of Auckland, which is the fastest-growing area in Auckland, need community infrastructure, and a lot of that will be cut back. If it goes ahead, and if they continue to provide it, it will go on to the ratepayers. The ones who will most fear this will be those on fixed incomes, particularly the elderly and the seniors who are in their homes and have been there for often many, many decades. They in turn will have to suffer increased rates because this National Government has seen fit to remove a legitimate levy that was being imposed on the developers by the councils to ensure that new development was paid for out of that.

But it is typical of this Government, because last year, as the people of New Zealand will know, it changed the Local Government Act to withdraw the four well-beings from that Act as well. It was in an earlier tranche of these reviews. Those four well-beings covered social, cultural, economic, and environmental considerations by councils. The Government took those out. It just wants councils to do footpaths, roads, sewerage, and a few other hard-structured things. But by telling councils not to get involved in their communities, it is saying to communities all across to New Zealand that that is no longer the job of councils; they should not be doing it. I can assure you that councils around New Zealand are the community.

We have two tiers of government in this country. We have central government, and most of that is sitting here in Wellington, in vast ministries, vast bureaucracies, dreaming up the next thing that it can impose on local government, but it is local government that is the administrator and deliverer of services throughout this country. They are the ones that are the glue in the communities of this country. They provide the community well-being. They ensure that a good community is a safe community, a healthy community, and a community where people want to live. If they do not want to live there, they move out. Well, I am sorry, but this Government has a real downer on local government and is creating it into such a despised entity within government in this country that I am surprised that local councillors, local mayors, continue to stand. I am surprised that local mayors who are National Party supporters continue to support the Government, because, quite frankly, it spends half its life absolutely putting the boot into local government. It is time it stopped.

These development contributions were devised over many years—over the last 10 years—with the then North Shore City Council being one of the first councils to bring them in. Many High Court cases were held to get the case studies in place, so that there was fairness in the system. As a result of this, and putting this Act through, well-proven case studies through the High Court to show the legitimacy of it will be cast aside.

It is a nonsense that this Government says this will save costs to housing. We are surprised that Labour is supporting the bill. It should not be supporting the bill. It is so minimal—in the order of $750 to $1,000 is neither here nor there on a $400,000, $500,000, or $600,000 house in Auckland. It is absolute chicken feed for the overall thing, but I can assure you what it will do is impose increased pressure on councils. The next thing we will be hearing is more criticism from National about rates imposed by councils. The Government wants it on both sides. It wants councils to maintain and constrain rates. Fair enough. We all want them to do that. But how can they do that if this Government, in the same breath, takes away other mechanisms—mechanisms that it should have in place to ensure that the growth in their communities is covered not only by the existing ratepayers but by the incoming ratepayers as well?

I am sorry, but New Zealand First will most certainly be voting against this bill. We can assure the public of New Zealand that if we have any influence in the next Government, we will reverse these moves, including the four well-beings and including these community infrastructure levies. We will turn them round and get them back on track.

That was a very good “the sky is falling” speech from New Zealand First—a valedictory—telling local government how bad it all is. Actually, my interaction with local government is not on the basis of how bad it all is, but on what a really good job they are doing on behalf of their local communities. This bill, the Local Government Act 2002 Amendment Bill (No 3), adds to the armoury of those good local councils that are doing such a great job for New Zealanders.

I will just go through those provisions one last time, in this final reading. Extending the ability to have local boards outside of Auckland is a very fine idea—I was going to say a damn fine idea, but I do not think I can say that—because those added delegations to community boards will enhance democracy in some rural and provincial areas in New Zealand. I think it is a fantastic provision that we are going to be bringing in.

Greater collaboration for shared services—what is not to love about that? It happens already. Many local authorities are doing it already because it just makes good sense for certain activities. There is to be more flexibility, more clarity, about when and where to consult with their communities. Let us not have endless consultation just for the very sake of it; let us have targeted consultation, where people feel as if they want to be engaged with their local authorities.

Development contributions—let us really target the range of infrastructure that can be financed by development contributions. It has been abused, or it is a provision that has not been used at all by local authorities. It has been extremely patchy.

Finally, a greater focus and a better focus on asset management, looking out 30 years—again, what is not to love about that? Provide some certainty about forward spending, about what communities might need in terms of infrastructure for growth or for maintaining what they have already.

This is a great bill and I recommend it to the House.

Actually, we are very fortunate that this bill, the Local Government Act 2002 Amendment Bill (No 3), made it to the House. It was going to be pulled because National did not realise that the Labour Party was supporting it. It was going to be pulled, and finally National came to its senses and had a look at what we were talking about. As a result of that, the bill is going forward today.

There are some good things about this bill. Jacqui Dean just mentioned a couple of them, such as shared services and asset management. Nobody can argue with that. But when it comes to issues such as the amalgamation, people are very passionate, and I want to just start on the amalgamation issue, because this is something that the people on the East Coast of the North Island, around Napier, are very passionate about. I want to thank National for being so forthright on the issue of amalgamation in Napier. It has made Stuart Nash’s job of getting across the line just that much easier. Wayne Walford has not got a show as a result of this Government going through, Minister after Minister, saying: “We support the amalgamation in the Hawke’s Bay.” It is wonderful stuff.

💬 Hon Chris Tremain: Leader after leader.

It is a really sad day for Chris Tremain, I am sure. He has been working so hard, only to have that seat lost to the Labour Party, as it inevitably will be.

I just want to touch on the point that Phil Heatley mentioned a little bit earlier, and that is the development contribution—the development contribution that is going to save so much money for developers. He just could not quantify it. We were asking whether it was hundreds of dollars, or thousands of dollars, or tens of thousands, or hundreds of thousands. We calculated it to be around about $1,000. This is the huge amount—huge amount—that the development contribution is going to save those developers when it comes to building houses, and that is what is going to change in terms of housing affordability.

Well, let us think about this. What difference will that make? What difference will that make when house prices are going up by 22 percent across New Zealand under this Government, and are going up by 40 percent just in Auckland itself? A development contribution levy saving of $1,000 is going to make very little difference. In fact, it is not even going to cover about a third of the cost of the lawyer’s fees. This is negligible, and yet this Government is touting it as some sort of saving grace, and it shows, in the area of housing, just how desperate the Government is to dupe New Zealanders into thinking that houses are going to be that much more affordable. What does that mean for ordinary—[Interruption]

The ASSISTANT SPEAKER (Lindsay Tisch): Order! I am sorry to interrupt. Look, can Government members please show—[Interruption] Order! Please show some courtesy—[Interruption] Order! Just show some courtesy, please, to the speaker. It is very difficult to hear.

Thank you, Mr Assistant Speaker. Look, that is what we have come to expect, really. You have got a piece of legislation coming through the House at the moment that is going to save our house-buyers—people who want to be homeowners—$1,000, and all we can hear over here is a whole lot of chatter about what colour shoes those members are wearing, or whatever it is that they are talking about.

In New Zealand there are couples—and I will tell you about one couple in particular—who have been renting a house for a long time. As they have been renting it, they have been making some real changes to that house, such as putting in a vegetable garden and putting in a barbecue, and what happens? They get told to move. So they move further out from the inner city—where they want to live—their kids have to leave school, and they are renting another house. They have come to the conclusion that there is no way that they are going to be able to afford to buy a house.

This is a couple with two incomes and two kids. They are working like crazy and saving as hard as they can, but they are not going to get over the line. Why is that? It is because the average price to buy a house in Auckland is now $700,000—$700,000—and the Government has slapped the loan-to-value ratio on it, which will mean that they have to get a 20 percent deposit. If you do the maths around that, that is $140,000 that this couple has got to come up with. Everybody, except those who have got wealthy parents, is going to struggle to find $140,000. It is impossible.

Another couple whom I know were looking around at a house out in west Auckland. They looked at one house out in Glen Eden for $410,000. They went into this house. There was literally mould growing on the walls and on the carpet and on the ceilings. They simply could not put their children into that house. That was $400,000—that was the cheapest house you could buy. They are still looking. They are still looking for a house that they can afford.

This issue is affecting young couples, young people, right across this country. All they want is what everybody else in New Zealand has been promised, which is that if you work hard and you save hard, you will be able to get into your own home—but that dream has gone. That dream has gone. You simply cannot do it any more. Here is another couple, who have three young boys. They have already got a house. They have got a very small house and they want to get a larger house, because they have got a bigger family now. They bid on a house. It went. They could not afford the $500,000 price tag. It went to a buyer whom they kept track of. They went and saw this buyer and, a year later, the buyer agreed to have a private sale of this $500,000 house and sold it to them for $620,000. That was just 1 year later—just 1 year later. So this couple are now paying $120,000 more for the house that they missed out on the first time.

What does that tell you? It tells you that house prices are out of control, and this piece of legislation is being touted and held up to increase housing affordability in some way. Are we crazy? There is no way you can increase housing affordability with a bill like this. There is no way you can increase housing affordability with the policies that this National Government has come up with. It is afraid to take on the big issues. It talks about its housing accord with local government, and yet not one house has been built in the whole time that that housing accord has been there—not one house has been built. It has been in force now for nearly a year, and we still have no progress, whatsoever.

I want people to think about those young couples who do not have a chance to buy their own home, and then I want to say that we in the Labour Party are willing to step up, roll up our sleeves, and do what young people need in order to address the housing affordability issue—not pass this legislation and say that in some way it will enhance housing affordability, because it certainly will not. We will bring in a capital gains tax, and we know, because the bankers have told us, that that will take 22 percent out of the speculative value of houses today—22 percent will come out. That is the effect of having a capital gains tax—a 15 percent capital gains tax. [Interruption] The member interjects over there, the member from Epsom—well, I should say that the member is from Epsom; he is not representing Epsom. He squats in Epsom, but he does not stand for Epsom in any meaningful way. You would not get a $700,000 house in Epsom, Mr Goldsmith.

We will build more affordable houses—a range of houses—but we will use the ability to build large numbers of houses to get the value that will enable affordable houses to come into existence, and that will meet some of that demand. We will ban offshore people who are not residents in New Zealand from buying New Zealand houses. The housing market is not the stock market. It is not about buying and selling pork bellies; it is about houses where people need to live, and we do not want them to be a piece of speculation on the international market. So we will ban offshore speculation.

The ASSISTANT SPEAKER (Lindsay Tisch): I am sorry to interrupt, but the member’s time has expired.

Well, unlike the Opposition members, who think that the answer to every problem under the sun is the capital gains tax, we are very much concerned about the question of housing affordability in Auckland. But we are realistic enough to know, following the detailed research of the Productivity Commission, that there are many, many issues underlying it. The supply of land is so important, and that is why Nick Smith has been making such an effort around the housing arrangements. There are the materials, there are the Resource Management Act reforms, and another one of the many factors is the development contribution.

One of the things the Local Government Act 2002 Amendment Bill (No 3) does is try to get some basic discipline around the charging of development contributions, which everybody knows has been rather loose in some areas. So this bill clarifies and narrows the range of infrastructure that can be financed by development contributions, brings greater transparency, and delivers a reasonable objection process with independent commissioners so that developers can have some assurance about the quality of the decision making.

I cannot understand why anybody would oppose these practical measures. If parties are legitimately concerned about housing affordability I am sure they would be supporting this bill as I do. Thank you.

I understand the next call is a split call—5 minutes.

I just want to say, on this Local Government Act 2002 Amendment Bill (No 3), that Labour will support it, but Labour has some concerns, and has had some concerns from the beginning, about some provisions of the bill.

As I discussed in the second reading of this bill, I believe that the intent is to facilitate effective processes and governance arrangements that are fair and efficient, and sound asset-management planning by local authorities. We on this side believe in local democracy and the right of communities to have a say in major decisions affecting them. We believe local decisions are best made locally, and we are committed to a close and collaborative working relationship with local government to ensure that it is empowered and resourced to meet the needs of its communities. Our vision is to ensure that local government is responsive and accountable to local communities, is affordable for its residents and ratepayers, and is effective in dealing with local issues.

During the Committee stage we discussed a particular clause in reference to the long-term planning processes at a local level. Good, effective planning achieves a great deal more for the local community when local boards set out their long-term goals for that community and where, in the local board annual planning, they can then match their progress against their long-term plans. In fact, I believe many of our local boards do this work very well and that what we need is to have mechanisms in place to support our local community leaders to do their job well. We obviously differ, on this side of the House, on what that support should look like.

We had some concerns about aspects of the bill and, in fact, put up several Supplementary Order Papers on these aspects to cover off our concerns. In particular, one that I supported was about reinstating the four well-beings in the legislation to ensure that our communities have their social, economic, environmental, and cultural well-being maintained now and into the future and that there are clearly defined community outcomes that, rather than meet the needs, promote those well-beings, which I describe above.

Labour is committed to developing more affordable housing. We have already heard some of our speakers talk about the development contributions and how that may make some of the housing developments that are planned more affordable. But this requires changes, we believe, that are more meaningful so that reforms like our KiwiBuild programme can go ahead.

We also support monetary policy reform—lowering interest rates and tackling speculation through measures like the capital gains tax and restrictions on offshore purchases. This Government could have thought about some wider options, too, for looking at tackling infrastructure costs, such as how cost recovery could be used to incentivise better urban design, how to cut costs like discounts for smaller dwellings or brownfield developments, how the cost of infrastructure could be spread over the lifetime of a project rather than front-loaded to first-home buyers at the start, like long-term bonds, or how to improve the productivity of developing infrastructure through improved process-management and agreements with developers to ensure that projects are completed in a coordinated and efficient way.

During previous readings of this bill we have discussed the importance of community engagement, as I have said, in the local government processes; namely, that the consultation processes are addressed, adding alternative methods such as some non-traditional ways of accessing community views. Community consultation is vital for good governance and any opportunity to make and increase accessibility is welcomed. I welcome the day when we are able to receive submissions in languages of the presenters. It would certainly make it easier for ethnic groups, for example, to engage in the democratic process if they could present submissions in the languages they are most articulate in. We should be trying to make it easier to hear and consider the views of our people in whatever form that may be, and for whoever wants to submit. Our disability community, for example, are potentially left out of the consultation process, and we should ensure that we provide suitable access to this process for them. But it is not just about the ability to present, it is about how the information is provided. Thank you.

Tēnā koe, Mr Assistant Speaker. Tēnā koutou e te Whare. In my community in the electorate of Auckland Central at the moment, the local boards are calling for submissions on the local board plans. Once those submissions have been heard, they will then need to negotiate with the governing body to set up the local board agreement. Our local boards—and there are three in that electorate, the Great Barrier Island one, the Waiheke Island one, and Waitematā Local Board—will negotiate, they will advocate, they will engage with our communities, they will put forward ideas, and they will get a local board agreement. But they will not be able to do a whole range of things, including make decisions around how the rates are spent or make by-laws.

We oppose the Local Government Act 2002 Amendment Bill (No 3) because we do not see that local boards are the panacea for all ills in local government that the current Government may have its concerns about. We do not believe this is going to fix anything, and certainly, where I live, although our local boards do their very, very best, they are not the same as having councillors being able to decide for themselves and for their communities how they will develop.

We will also be opposing this bill because of the whole issue around development contributions. Having an ability for developers, particularly, to challenge how much development contributions shall be if they disagree that the development contributions fit with the council purposes actually creates a huge amount of bureaucracy and turmoil for councils. The major winners in this situation will be lawyers and planners. It is estimated in Auckland that Auckland Council might spend up to about an extra $1 million per year basically fighting the opposition from developers to the contributions regime. Auckland Council also estimates that it could potentially lose around $3 million to $4 million a year in development contributions if this bill goes ahead, and that means about $40 million over a 10-year period. Over 95 percent of the submitters on this bill opposed this part of the bill around development contributions, and I think nearly every council raised their concerns about it.

The main beneficiaries of reducing the development contributions are actually the developers. It does not reduce the price of houses that much, and the biggest losers in the whole equation are the councils.

There is also the issue of how development contributions can be spent. Developers create more than houses. They create homes and communities when people live in those houses, and councils understand this. That is why they are concerned about the social well-being, the economic well-being, the cultural well-being, and the environmental well-being of their citizens. The impact of the restrictions will be to restrict provisions for the infrastructure that actually makes a community and keeps it cohesive—things like libraries, swimming pools, museums, and reserves.

On the weekend on Waiheke Island we had the opening of the Waiheke Pātaka Kōrero, our new library, which was 9 years in its creation. It cost around $5.1 million. That was not something that we all could have borne from the rates from our 8,000 residents, and so as a prized place for developers and people wanting to build there, we were able to build this through some of the development contributions that came our way.

We believe that we should be creating communities where our people can thrive. We believe that we can have a diverse, smart economy, a cleaner environment, and a fairer society, and that councils have a huge role to play in that. This bill undermines councils’ ability to do that. We will be opposing it. Thank you.

It is my privilege and pleasure to give the final speech on the third and final reading of the Local Government Act 2002 Amendment Bill (No 3). This bill will bring down the cost of building new homes. This bill will improve housing affordability. This bill will provide more effective local government services.

May I first thank the Local Government and Environment Committee, which was ably chaired by the now Hon Nicky Wagner. The committee wrestled with some difficult issues. I believe its multi-party approach brought about some useful amendments to the bill that we have tabled tonight. I also salute the officials from the Department of Internal Affairs as well as other Government departments who contributed to the progress of the bill.

Although my name is on this bill, I recognise that many other Ministers played a role in advancing the bill, including the Hon Chris Tremain and the Hon Nick Smith. Local government touches each and every one of us. We are a set of communities who are passionate about our neighbourhoods. I want to thank the 120 submitters on this bill who presented some strong thoughts and ideas. They played a vital role in influencing the final bill as read tonight. Local government reforms were needed to make sure that all public services are delivered in a cost-effective and efficient manner. This bill reforms the Local Government Act 2002 to encourage and facilitate improvements in how local government operates. My constituents in Maungakiekie demand this. I know, going around the country listening to residents and ratepayers, that this is important to all New Zealanders.

By supporting councils to operate more effectively we help build a more competitive and productive economy. By doing that we are able to increase jobs and opportunities and allow New Zealanders to live and prosper independent of the State. By doing that we improve the delivery of better public services. By doing that we improve housing affordability. With housing pressures on the rise, even more focus is needed to make sure that all the costs of building new homes are kept under control and minimised. There is no easy way to do this but there is a way. This is part of a suite of measures to improve housing affordability. These measures are done alongside increasing land supply, removing tariffs on building materials, implementing special housing areas, and one day reforming the Resource Management Act.

Everyone, including councils, needs to work differently to collectively deliver the savings to help make houses more affordable. When development contributions were introduced in 2002, it was another decade before they were reviewed. This Government had the courage to make the decisions to make the development contribution scheme fairer, more balanced, and more transparent. It does this by introducing new purpose and principles provisions. This bill takes the difficult but necessary task of changing the landscape for the way local councils work to a better way of working.

The changes include encouraging more collaboration between councils so that they can more easily share services. This will save time, energy, and costs for councils around our nation. The changes provide for flexible consultation processes between councils and stakeholders. Consultation is still required, but councils can choose the best approach appropriate for the circumstances. This will allow the right approach for the right matters at hand, and this improves the effectiveness of decision making, consultation, and engagement.

The bill narrows the definition of “community infrastructure”. It avoids inappropriate charging and improves fairness. Developers should pay only for the necessary infrastructure for their developments. This will provide transparency for the council, fairness for the developer, and ultimately less cost for the homebuyer.

The homebuyer, the ratepayer, the community—they are at the heart of what is critical in this bill. That is why I stand here compelled to tell you that this bill is ultimately about people. Every day I get a new letter asking me about local government issues. People are passionate about their children, their families, their communities, and ultimately their homes. In New Zealand we need to build council infrastructure to a standard that supports the current and future needs of New Zealand’s communities. That means making decisions for the long term with careful financial management; for this, future-focused and prudent management of council-owned community infrastructure is critical. Council-owned infrastructure can often have a lifespan of over 50 years. The current 10-year long-term plan requirements provide an inadequate time-horizon to manage many of the assets owned by our communities. That is why this bill introduces a requirement for a 30-year infrastructure strategy to provide for the prudent management of those assets. There is a need for decision makers and the public to have a good overview of the key infrastructure issues and options to make informed decisions.

The select committee took on board councils’ suggestions to improve the proposed infrastructure strategy. The amended provisions in the bill anticipate that the 30-year infrastructure strategy will focus on each of the first 10 years and then the remaining 20 years in 5-year blocks. This will allow councils to think ahead, to game-plan for likely scenarios. It does this without imposing an unnecessary administration burden on councils by requiring detailed year-by-year financial and circumstantial estimates. The increased focus on long-term planning means decisions about local infrastructure will be timely, considered, and will lead to better short, medium, and long-term outcomes. You see, good strategic planning is an important ingredient in the success of any organisation. Local government reform is needed to make sure that all public services are delivered in a cost-effective manner.

The Local Government Act 2002 Amendment Bill (No 3) is needed to ensure we are continuously improving our local body systems and services. The implementation of this bill and what lies ahead will ensure that we are doing the best we can for the benefit of every New Zealander. We have heard from people who want the best for their families, their communities, and ultimately our country. This bill will help councils to meet the fundamental needs of our changing communities now and into the future. I am proud of this bill. I commend it to the House.