New housing rules create dilemmas

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Don’t expect a rush of developers drawing up plans for new intensified development just yet, despite new rules allowing it.

Monday, October 31st 2022, 10:58AM 1 Comment

Building denser housing is a divisive issue. The new Medium Density Residential Standards (MDRS)  legislation permits developers to build three, three-storey townhouses in existing urban areas without resource consent, while the National Policy Statement on Urban Development (NPS-UD), which runs alongside the MDRS, allows for apartments of six storeys, even on small suburban sites, within 20 minute walkable distances of city and metropolitan centres and rapid transit stops.

The new Labour/National bipartisan rules remove overly restrictive barriers to development as well as increasing the number of residential units on brownfield and greenfield development sites and frees developers from car parking requirements.

However, the jury is out on what impact the cost, infrastructure and demand will be.

Already most of the Tier 1 councils - Auckland, Hamilton, Tauranga, Wellington and Christchurch - have rejected some or all of the rules and have been accused of exploiting the MDRS’s qualifying matters clause to avoid intensification.

Christchurch City Council has voted against the entirety of the Government’s intensification rules and will not introduce them.

Auckland councillors voted to stick with protecting much of the city’s areas of historic housing, in suburbs such as Kingsland, Grey Lynn, Mt Eden, Ponsonby, and Devonport, while rezoning other areas of intensification.

Hamilton City Council has claimed the entire city is a qualifying matter because all of it feeds into the Waikato River catchment.

Wellington City Council has reduced walking catchments – the boundaries within which six-storey buildings can be built – from 20 minutes’ walking distance of areas around the central city, to just 10 minutes.

This has set the councils on a collision course with the Government which is having to decide whether to appoint commissioners to the councils to force the changes through. Environment Minister David Parker will have the final say as the process does not allow for appeals to the Environment Court.

Too late

Christchurch-based Servus Consultants owner Hamish Frizzell, says the Government is five years too late in introducing the medium density rules.

“In reality Auckland doesn’t need them at all as intensification has already been adopted through the 2016 Unitary Plan, which provides for an extra 900,000 homes in the country’s biggest city.

“Many three-storey townhouse developments with more than three units have already been built or are under construction in suburbs close to Auckland’s CBD – some without carparks which are now proving hard to sell.

“Also nationwide developers are pulling back from the housing market because of low sales, higher building costs and material supply issues.”

Frizzell says one good thing to come out of the new rules is land values will probably even out as there are more than enough zoned properties to satisfy the new density rules and developers won’t need to pay over the odds as they have in the past.

Developer scope

Bayleys land sales specialists say first glance the NPS-UD offers greater scope for developers to intensify their projects and potentially maximise their value.

However, they say an immediate development free-for-all is unlikely as developers and investors test the practical application of the new rules against market demand, the availability of investment and infrastructure pressures such as transport and wastewater.

In Bayleys latest Total Property, development land sales director Gerald Rundle says just because higher-density housing can be provided, doesn’t mean the market wants it.

He says many sites, particularly brownfield areas, won’t have the services necessary to allow for higher density in the short term. “Developers are looking at the opportunity from the NPS-UD against things like will the pipes be good enough? Will there be issues that come from everybody parking on side streets?

“It sounds great, but there is a lot to consider and the advantages could be very site specific.”

Costs skyrocket

Another glitch is that the major house affordability issue across the country can’t be undone any time soon either, says Frizzell.

“As soon as developers build above one level the cost skyrockets. Apartments and townhouses are far more expensive to build than stand-alone homes. Just because they are marketed as affordable, doesn’t mean they are for most people.”

He says the new rules will be of most use to mum and dad property owners, who in some council areas have not been able to put another home or small unit on their property because of restrictive planning rules. This will allow them to do it.

Planning consultants Cato Bolam director Peter Raeburn agrees. He says this Is where most of the development under the MDRS will come from.

For professional developers with an average 800m2 site, three, three-storey houses are not enough to justify the development costs – they are developing  5, 6 or seven units on a site.  Any developments above three untis still need resource consent and input from the council’s design panel.

Since the new rules were introduced, Christchurch-based Servus has had only four inquiries from property owners in Waimakariri and Selwyn District Councils’ areas wanting to intensify their properties with new housing. “We are not expecting a slew of inquiries because it is not wanted or needed,” says Frizzell.

“In our experience property owners do not want to be overlooked by three-storey buildings next door blocking out their sunlight and views.”

Raeburn says there is concern right across cities about what sort of development is possible under the new rules and the impact on neighbours. “It comes down to what is enabled vs what should happen. We encourage our developer clients not to go to the ultimate extent of the rules. The framework creates rules for developers to build good projects that will sell. However, not all developers will do this and build to the limit.”

Raeburn says although the government’s intention with the new NPS-UD/MDRS rules is the creation of more affordable houses around town centres, metro areas and near transport nodes, other things come into it.

“Do these changes enable major changes to how Auckland looks? Yes. What are the ramifications?

Raeburn says while developers are now in a position to build three, three-storey buildings without consent on virtually any site, they have to consider where it is sensible to build and how difficult will it be? For example, it is more expensive to develop on a slope than a flat site and it is difficult to develop sections that don’t have access to on-site stormwater pipes. “There has to be thought given to the costs and returns and paper thin margins on some projects.”

Less parking

Parking is an interesting part of the new rules, says Raeburn. It is not required or wanted by the Government or councils. Their aim is to get people out of their cars and on to public transport, cycles or walking. 

Raeburn says it will create a dilemma for many developers.  “Is it better for developers to include parking to get a better return and sell properties more easily or maximise the building site and leave people to park on the street?

“If one development excludes cars and others nearby follow suit, the streets around them will be filled with cars and residents will have to find bus or train stations to go about daily life. If so, do developers turn to sites further out and hope shopping and amenities might be provided if enough houses are built?” It is social engineering to some extent, he says.

“While the Government and councils are taking a big step reducing residents’ dependency on cars, they have calculated the tough leap to bring social change will be through the MDRS rules that don’t require housing developments to have off-street parking.

“However, it is going to be difficult to persuade many people to buy into these developments if they work shifts or live on the other side of the city to their place of work and don’t have any choice but to have a car.”

Raeburn says it is no wonder councils became upset when they were already working on planning rules to achieve desired density and other changes and the government comes along and tells them what to do.

Tags: Housing rules

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