To:
Vida Christeller
From:
Andrew Wharton and John
CC: John McSweeney, John
McSweeney
McDonald, Phil Becker; Kate Pascall
City Design and Place
Planning
Date:
09/04/2021
Purpose:
Advice
Mandatory inclusionary zoning in the district plan - suggestion to
Inclusionary zoning means land use planning rules that require or enable a share
discuss with Liam Hodgetts
of new housing construction to be affordable by people with low to moderate
incomes. The term implies that most district plan zoning is “exclusionary”.
Background
Residential zones’ minimum lot sizes, single house requirements, maximum
heights and yard setbacks prevent affordable houses from being built.
1.
Adam McCutcheon and Andrew Wharton’s initial 25 February memo set
Affordable housing for Wellington City is explained in our 25 February memo.
out how the new district plan could help address housing affordability. The
The Council uses the Wellington Housing Affordability Model (WHAM) to
memo recommended:
understand what housing is affordable, and for whom. Many demand and supply
• The district plan should not include mandatory inclusionary
factors influence house rental and buying affordability, while the district plan can
zoning.
only affect a few of the supply factors.
Andrew would like to use a different term for the housing product created by
• The district plan should include some voluntary inclusionary
inclusionary zoning specifically. Houses may be generally “affordable” at a
zoning and supporting objectives and policies for assisted and
market price or rent due to their location, quality or size. Other methods in the
social housing. Our current district plan does not have these
district plan and Housing Action Plan already promote affordable housing.
provisions.
“Assisted housing” has been suggested for the category between social housing
•
and market housing. It would include long-term rentals at a lower than average
Partnering with Ministry for the Environment on how the new
market rate, shared ownership/equity houses, and leasehold houses where the
Natural and Built Environments Act can have new planning and
financial tools to better enable a range of affordable housing
land is owned by the assisted housing provider.
products.
However, Build Wellington is concerned that this new term will be more
confusing, and is too close to “assisted living” i.e. rest homes. The Council is also
2.
Adam, John McSweeney and I met with you on 10 March to discuss the
expecting provisions for “affordable housing”, not “assisted housing”.
memo. Your direction was to progress with assisted housing (inclusionary
Social housing means houses owned by the government, local government or
zoning) provisions.
non-profit provider that are rented for free, or at low rates based on income or
need.
3.
We met with you and staff from Build Wellington and Place Planning, and
lawyer Nick Whittington, on 23 March to discuss a “piñata model”1 for
assisted housing that included an inclusionary zoning option.
4.
The actions from this meeting were for Andrew to draft up some district plan
provisions for internal and legal testing, and to draft a report for the Planning
for Growth Steering Group and Executive Leadership Team (ELT) to
consider. The reviewed ‘skeleton’ draft provisions are attached to this
memo.
5.
However, a report asking for wider organisational and councillor support for
mandatory inclusionary zoning is in conflict with our advice to you, which is
that the district plan should not have these rules at this time.
Action requested
6.
We support Council’s involvement in assisted housing, but consider it is
better enabled through partnerships with developers and central
government, district plan incentives, controlled activity rule for 100%
assisted housing, and targeted funding options.
7.
As ELT and Council will need to consider the mandatory inclusionary zoning
option, we suggest that this memo and our earlier advice be discussed with
Liam Hodgetts before proceeding further.
An indicative mandatory inclusionary zoning model
8.
The numbers and thresholds in the model below are only indicative. They will change based on advice from Build Wellington and others. The
gist is that all large apartment buildings in the city centre (including Te Aro and Adelaide Road) would be required to sell/lease/give at least
10% of their apartments to WCC or an assisted housing provider. Multi-unit developments in other Centre Zones and the Medium Density
Residential Zone that exceed height or bulk standards would be required to sell/lease/give half of the extra apartments/terrace houses enabled
by exceeding those standards to WCC or an assisted housing provider. The text in red was not included in the draft district plan provisions as
New Zealand’s build-to-rent industry is nascent, and introducing rent controls here would add extra complexity and legal risk.
1 Piñata model is like a straw-man, but the participants testing the model are unsure of its form.
Discretionary or non-
Developments with
In the other Centre Zones
complying activities due
>1,500 m2 residential
and Medium Density
to being over height,
floor space
Residential Zones
sunlight, bulk or density
In the City Centre
standards
Zone, all
developments with
>3,000 m2 residential
Must provide affordable houses, if granted consent. To calculate the number of houses:
floor space must
provide 10% of its
houses as affordable
houses
% of gross floor area that
Total number of houses
is over the height,
50%
in the development
sunlight, bulk or density
At least one third of the affordable houses provided must be 2 or more bedrooms.
Options to meet affordable housing obligations:
Lease the houses to an
Sell or lease houses in
For build-to-rent
Sell the houses to an
Pay Council $100-150,000
affordable housing
another building in the
developments, the
affordable housing
per affordable house not
provider at an agreed
same or adjoining suburb
affordable houses are
provider at an agreed
provided, to help fund
price, for long-term
to an affordable housing
rented at <80% of
price
other affordable houses
affordable rentals
provider
average market rent
Mechanism: list of
Mechanism: list of
Mechanism: list of
Mechanism: consent
Mechanism: financial
providers in the Plan,
providers in the Plan,
providers in the Plan,
conditions, and
contribution, formula
copy of signed
copy of signed
copy of signed
consent order placed
and purpose stated in
contract in application
contract in application
contract in application
on the title
Plan
9.
Our concerns about proceeding with mandatory inclusionary zoning in this district plan, prior to any new functions and powers in the Natural
and Built Environments Act, are summarised below.
Risk 1 – fairness
10.
Mandatory inclusionary zoning requires the environmental issue (affordable housing) to be subsidised by multi-unit housing developers. But
these housing developers are not causing the issue, and in fact are helping resolve the long-term issue by putting more, and more variety, of
houses into the market. This targets the wrong people to fix the issue.
Risk 2 – effect on overall supply and affordability of housing in Wellington
11.
Inclusionary zoning could act as a tax on new medium and high-density housing. This risks reducing the overall supply of housing due to lower
developer margins. In overseas examples, this has happened sometimes, and sometimes not. The risk reduces when inclusionary zoning is
paired with density bonuses, financial incentives and use of public assets. In New Zealand, our options to use these as part of consenting
housing developments are limited under the RMA.
12.
The Productivity Commission’s report Using Land for Housing 2015 found that inclusionary zoning policies have little impact on the overall
supply of lower-priced housing. The lower-priced homes are often off-set by higher prices on non-targeted affordable homes.
Risk 3 – administrative costs and constraints
13.
Council would have to invest considerable effort to run and monitor processes to ensure assisted housing remains affordable, only goes to
eligible households, and houses are not on-sold or sub-let for market prices. Contracts and covenants may be needed as well as consent
conditions to keep house values or rental returns at an affordable level long-term.
14.
WCC would need to decide whether it wanted to manage this assisted housing, share the housing with other providers (Kāinga Ora, Salvation
Army etc.), or set up a non-profit housing trust. Queenstown-Lakes has created a non-profit housing trust to manage their “community housing”.
Auckland Council found it had a wide range of existing providers who could be used. Selecting one or a few would not be fair to the others.
Wellington City is in the same situation. However, we have drafted the provisions so that the negotiations about who would manage the
assisted housing happens is negotiated between the developer and the assisted housing provider
before the resource consent application is
lodged. This should reduce some administrative costs.
Risk 4 – legal challenge
15.
Mandatory inclusionary zoning has not been tried before in New Zealand. The exception is Queenstown, but its affordable housing system
applies only to development beyond what is enabled by their district plan (as a discretionary/non-complying activity). Also, Queenstown’s
rationale for requiring affordable housing2 does not apply to Wellington.
16.
The three risks above make it highly likely that mandatory inclusionary zoning provisions will be challenged in the Environment Court. Even if
the district plan provisions are found to be
vires, Environment Court appeals are merit appeals. Provisions can be overturned on this basis.
The RMA Section 32 appropriateness, effectiveness and efficiency analysis, including the cost benefit analysis, may not be sufficient to justify
the mandatory inclusionary zoning.
2 Queenstown Lakes District Council’s justification for its affordable housing rules is that, as a resort town, its high-income houses and holiday homes, tourist accommodation and businesses
generate a demand for workers who need housing. Normally a town/city would be able to zone for increased density in brownfield and greenfield areas to enable this housing. But
Queenstown’s growth is limited by its outstanding landscapes which must be protected under the RMA. So the development causing the affordable housing issue is required to provide some
land for affordable housing, affordable housing units or money, part of which goes to a non-profit assisted housing trust.