How high can you go?

Rules that stop you using your property as you see fit are bad. Rules that stop other people using their property ... are less so.

There's no particular reason to assume that the Resource Management Act is perfect or cannot be improved upon. It's some twenty-five years old now. It's been tinkered around with quite a bit in the interim. That's a bit of a recipe for ending up with poor legislation.

So arguments that it needs an overhaul to streamline it/make it fit for present purposes don't surprise me greatly. I do suspect that much of the rhetoric around that need for change is overblown - there seems to be a lot of argument by anecdote involved, and many of the ills it is blamed for (local body consenting requirements, etc) actually have little-or-nothing to do with it and more to do with avoiding liability for negligence. But for the current National Government the mantra of RMA reform serves at least three purposes:

  1. It targets a bit of law that most NZers seem to dislike, even if they don't really understand what it is or how it works;
  2. It delivers to business something that business wants;
  3. It shows it is "doing something" about the housing crisis, even if that something may not achieve very much.

David Farrar, unsurprisingly, welcomed Nick Smith's announcement of proposed changes, albeit with a caveat:

The question will be whether they will do enough. The greater weight to property rights and prioritisation of housing affordability look the most promising.

Right - people should be able to use their land as they see fit and loosing the market will create new housing supply to meet demand and thus make houses "more affordable" (more on what that might mean in a moment). Bog-standard orthodox, small-l liberal reasoning.

So, for example, if you look at the MOTU Consulting report that Nick Smith released as evidence of the need to change the RMA (more on this report in a moment), you'll see that it estimates that "Building Height Limits" add some $18,000 - $32,000 to the cost of new apartments. So, remove the restrictions on how high developers can build on their land (as well as other constraints on building design) and you'll get more and cheaper apartments, which is what John Key says first home buyers should now be considering instead of "proper" houses. Hooray!

But this is where things start to get a bit weird. Because under the proposed Unitary Plan for Auckland first released back in 2013, a document that was created under the auspices of the dreaded RMA, restrictions on building heights were going to be (marginally) relaxed in various parts of Auckland to allow more high-density housing to be built. What a good thing to have happen, right?

And yet ... here's David Farrar two years ago with a sympathetic cut-and-paste copying of a John Roughan article reporting on the concerns over what lifting such restrictions might mean, in which he laments:

The impact of higher rates is tough on people, but not devastating. Losing your view and being forced out of your family home does instill as Roughan says, a deathly quiet.

That's some pretty emotive language, right there. Of course, no-one is going to be literally forced out of their houses - there's no suggestion that the Public Works Act or similar will be used to compulsorily acquire anyone's land. What David Farrar instead means is that the result of having some developer construct an apartment block next to your villa is so intrusive that you would no longer wish to live in it. So apparently the free use of property rights isn't an unqualified good. If that use is going to impose undesirable consequences on others in terms of reducing their enjoyment of their property, it needs to be restricted through the imposition of rules on land use ... rules that are created under legislation that will look something like the RMA we already have. 

(Just to try and forestall the inevitable - you do not have a "right" to a view under common law, and it is not a "nuisance" to build a (say) three story apartment block next door to someone's house. So if you want to leave the issue of urban development to the common law to sort out, then that's fine - but note that you are just substituting judicial rule making for legislative/local body rule making.)

Of course, David Farrar is hardly alone in being a bit conflicted in his approach to property rights when it comes to urban development (especially when the development is taking place under a Center-Left mayor with links to the Labour Party ...). Here's Transportblog outlining the ACT Party's deep confusion on why property owners in Epsom shouldn't be allowed to develop their land as they choose.

The problem is, of course, that collective restrictions on the use of property can create an individual benefit as well as impose a burden. A simple thought experiment will illustrate. How much would you pay for a three bedroom house in inner-city Auckland on a road full of similar single/two story houses, knowing that it will remain such a road for the foreseeable future? Now, how much would you pay for it knowing that there is a substantial chance that the road will gradually be converted into multi-story, multi-dweller apartments? The gap between those two figures is the value that development constraints adds to each property on that street ... or, in other words, its the amount that all the property owners on the street get made richer.

Now, I know that this analysis is limited. The "value" has only been "created" by imposing a wider cost on anyone who would wish to move into the neighbourhood to dwell in one of the buildings that cannot be built under the planning rules. So the rules may still be a net loss for society as a whole - but note that the MOTU Consulting report didn't attempt to off-set the costs it found development restrictions imposed against any benefits created. Oddly enough, given his previous criticism of "look at the costs, ignore the benefits" reports, Eric Crampton doesn't seem too bothered by this fact ... but I digress.

Because irrespective of its source, the value conferred on a property by restrictive planning rules is perceived by the home owner as being "theirs", which then creates the problem for RMA reform that Rob Salmond outlines here:

Per unit apartment costs in high-demand areas line (sic) Parnell would certainly be lower if the developer could build 30 or 40 stories of apartments there, right. And the homeowners of Parnell hate the RMA and its requirements for consent before making a greenhouse, right? But I'm willing to bet the homeowners of Parnell aren't at all in favour of having their tomatoes' sun blocked by a series of large apartment blocks. Dilemma, dilemma.

Which actually is a part of a wider dilemma. Because everyone wants "affordable housing", so long as it doesn't cause the current value of their home to go down. Which, in a housing market that in Auckland is looking more and more like a bubble, poses a real problem for policies that are aimed at increasing housing affordability.