The Eye of the Fish

January 22, 2015

RMA vs Affordable housing

So the National Party’s pet pit bull, Nick Smith, has launched the first attack on the RMA last night in Nelson. According to Smith, the RMA has been the cause of 40,000 houses not being built, and has cost taxpayers 30 billion. As well as that, the RMA apparently adds on about $30,000 in cost per house. Wow. It sounds terrible. Let’s delete this rogue legislation immediately.

But hold on.

Is it true?

Is any of that true?

Have you ever been charged $30,000 for a Resource Consent application? Has anyone? Is that not, like, an exaggeration? Or just a lie? Apparently, at the present time, 94% of Resource Consent applications for a new house go through in a Non-Notified manner. And of course, by far the vast majority of houses go through the system not needing to apply for Resource Consent at all. That has already been done at Subdivision phase (where, admittedly, they will have paid for a Consent fee for Subdivision), and they may have also paid a fee for a Development levy, which goes to the Council to help them afford all the new infrastructure that goes with the subdivision. That helps pay for the roads, the sewerage drains, the fresh water and electricity to the property etc. Sometimes developers put all that in themselves, so they don’t have to pay the Council to do it, which can be good if they want a higher standard, but sometimes backfires if they are trying to skimp on matters. There are fees here, but I don’t have figures on how much this phase costs.

For the most part though, it seems that no RC fees are required at all. Most houses won’t need RC, and of those that do, most go through as Non-Notified. So only a tiny fraction of houses actually need to pay a large RC fee for a full Notified RC application. How much is that? Surely, it must be huge, for Mr Smith to get so excited at the prospect of saving so much money? The Councils must surely be clawing it back, charging like a wounded bull, beating the poor defenseless homeowner with a huge levy cost?

Let’s have a look, shall we? What does Wellington charge? They say:
Non-notified: $ 1,500
Limited notification: $ 8,000
Full notification: $ 15,000

Well, that seems like a lot, but it’s only half of what Smith says. And have you ever had a full notification charge levied against a single house? As far as I am aware, I’ve not seen a single house get Fully Notified, in Wellington in the last decade. Yes, some apartment buildings do, but this $15,000 fee is spread out over the whole lot of apartments, so the amount per apartment is pretty small.

And Porirua? They say:
Non-notified: $ 1,450
Limited notification: $ 4,350
Full notification: $ 4,350

What about Hutt City? Their page says:
Non-notified: $ 1,200
Limited notification: $ 4,650
Full notification: $ 6,150

So, not much truth there then. What about Auckland, the world’s 8th most unliveable city? How much does it cost there? Their council website says:
Oh God, kill me now. 9 pages of figures. Life is too short.

I think I have discovered the true reason why nobody is building in Auckland. It’s not the RMA. It’s the paperwork. You need the patience of a saint and the tenacity of a bulldog to get through that. How much is it? Well, it depends. By the time you have finished the process, to ascertain how much the process will cost, your time will be up.

Aucklanders. Your super city super stinks.

Post-Script: if you want to read the original report by Motu, which Smith bases his figures and rhetoric on, then click here for a link.

22 - 01 - 15

Ok – my apologies for the way that last post ended – I had fully intended to accurately research how much it was that Auckland charged, but honestly – 9 pages! – how are people meant to wade through that? Why not just 3 figures as per the cities above, and a sum for an hourly rate if you go over? Auckland, why do you make it so hard for us? So hard for yourself?

22 - 01 - 15

Ok – after manning up to the task and actually reading the 9 pages, the raw info is:
Non-Notified : $2,500
Limited Notification: $10,000
Full Notification: $20,000

So, expensive though it is (come to live and work and develop in Porirua or the Hutt, you poor down-trodden Jafas!), it’s still not $30,000 and certainly we are nowhere near getting an Average of $30,000 as Smith says.

22 - 01 - 15

Nothing like a bit of exaggeration to make a point!

On this topic, kind of, well, the RMA part at least, I recalled posting on the issue a few years ago over at the Arch Centre blog – it all feels a little like groundhog day. Seeing as that blog seems broken right now, I’ve found the post, placed an updated comment, and share it here for your reading pleasure:

I made the comment before I heard Smith’s underwhelming speech – it appears, from what he’s saying atm, that the changes aren’t going to be anywhere near as far-reaching as I feared. But then, the devil will be in the detail, and we haven’t really seen any of that yet…

22 - 01 - 15

To be fair though: the report is not just talking about direct costs like fees. Doesn’t mean the 30K are correct. But you’d have to dig deeper into the Motu analysis to be able to judge this.
The argument then becomes whether the indirect costs, e.g. caused by demanding certain standards are justified or not.


22 - 01 - 15

Nick Smith didn’t say $30k per house he said $15k.

“The paper by Motu Economic and Public Policy Research said a number of housing projects had been abandoned because of the delays and uncertainties in the RMA.

For projects which proceeded, regulations such as height limits added $30,000 in extra costs to each new apartment.

Councils’ section size requirements and urban design considerations added an extra $15,000 to the cost of a new home.”

22 - 01 - 15

I’m not sure the only cost he was referring to was the RMA effect on house costs… There’s also the cost of the land.

I’m sure his ear has been bent by developers wanting to convert open space and farmland into sprawling suburbia and they are upset when they have to go through the RMA process to ensure what they are doing is well considered… I’m sure that adds to the land costs and it would be so much easier if developers could bung these things where they could make the most dough.

It’s certainly worth asking for real figures

22 - 01 - 15

Eric Crampton has posted a similar breakdown of costs:

23 - 01 - 15

Peter – yes, sorry, I meant $30k per apartment, not per house. My bad. But yes, honestly, I think that Minister Smith and the Nats are totally barking up the wrong tree. Howling to the moon and howling to the wrong answer in fact. There is no one who denies that we have a ridiculous housing problem in NZ, especially in Auckland. But my gut feeling is that it is totally pointless to expect cost reductions in house prices, by fiddling with the RMA. Just doesn’t stack up to me.

24 - 01 - 15

Three things to note.

The $30,000 cost is compared to no RMA AT ALL. There will always be a cost in any planning laws, so the figure is meaningless. It would have been useful to know how much the RMA process cost compared to, say, the old Town and Country Planning Act, or what they do in oz.

There was no mention of the benefits of the RMA. What is the benefit to society in preventing unsustainable development or adjoining inappropriate activities.

Development contributions are not under the RMA, they’re under the Local Govt Act, and can imposed on building consents (Building Act, not RMA), land use consents (RMA) and applications to connect to Council services. They cover the cost of funding those services and providing new libraries and parks and roads and pools. None of that can be blamed on the RMA.

24 - 01 - 15

The fees noted on Council websites are deposits – they will never be the full fee unless it’s for the most simple basic consent (like if site has a soils warning so you have to pay for a geotech report to say it’s ok and council write a report saying the geotech engineers say it’s ok). The council fees also do not include consultant fees for drawings/reports council might want (which they then charge you to peer review/assess). So every $10k of council fees will have another $20K, $30k, $40K plus of applicants consultants fees.

Fees are also not the big hit – it’s implications of rules. E.g. – apartments – halving the maximum height on a site (which is happening in parts of Auckland CBD under PAUP) in conjunction with outlook controls will halve number of units = double land cost per unit – + $40-$60K. Deck size used to be optional so you could choose to have no deck or a juliet balcony if you wanted a cheaper unit. PM2 removed the choice requiring 5sqm minimum (+ $30K). PAUP increases this to 8sqm (+even more). There’s all sorts of complexities – if decks are GFA then every 5 8sqm decks loses a studio apartment so that adds 20% of all land and fixed costs to other units. Minimum floor heights in combination with maximum heights mean a floor of units can be lost every 10 floors = +10% to be covered by other units.

Where I live my site could easily have 2 200sqm terrace houses with big back gardens. But this is not allowed by a whole raft of rules. Land cost on my house is over 900K. If the RMA enacted Plan allowed 2 dwellings on that site land value per dwelling could be $450K less.