The Government's plans to use the Crown's land for houses for Aucklanders face a bit of a problem - it may not be able to sell them the land on which those houses sit.

It may be a reflection of just how quickly the Government's recently announced plans to free up some 500 acres of land for housing in and around Auckland were developed, but it looks like no-one stopped to ask themselves "can we actually do this?" before embarking on the exercise.

Because, as is now belatedly becoming obvious, there's as pretty big tangata whenua shaped elephant standing in the Government's path in the form of the Ngā Mana Whenua o Tāmaki Makaurau Collective Redress Act 2014.

This legislation gives force to a collective settlement reached between the Crown and a bunch of iwi and hapū that have overlapping Treaty claims in the Auckland region. (The background to it is described here.) Most of the content of the settlement was to do with the status of the Auckland area's iconic maunga (volcanic cones), as well as the ownership and management of Rangitoto, Motutapu, Motuihe and Tiritiri Matangi in the Hauraki Gulf.

None of that is at issue under the Government's plans. But also included in the Act  giving force to the settlement were provisions aimed at providing some commercial redress to the various iwi and hapū groups that are party to it. This is described in the legislation's explanatory note as follows:

The Bill provides for commercial redress and provision is made for certain properties to be available to the trustee under rights of first refusal (i.e. Right of First Refusal or RFR land). In particular, the Bill provides the Whenua Haumi Roroa o Tāmaki Makaurau Limited Partnership (the Limited Partnership) and the rōpū entities with a right of first refusal in relation to RFR land. The owner of RFR land must not dispose of the land to a person other than the Limited Partnership (without offering it to the Limited Partnership on the same or better terms) unless a specified exception applies. The right of first refusal lasts for different periods depending on the type of RFR land. The Bill also contains provisions relating to the transfer of former deferred selection properties and provides for the creation of computer freehold registers for the properties and other related matters.

Now, the way that this is put into practice in the legislation is a bit confusing (it's set out at Part 4 of the Act here, if you want to look). So I'll simplify a bit, hopefully without oversimplifying too much.

In essence, all Crown owned land (except for that occupied by tertiary institutions) in an area that stretches coast-to-coast from Massey in the North to the mouth of the Waikato River in the South is classified as being "right of first refusal land". (There's a map of exactly where is covered on p.59 of this pdf of the Settlement Deed.) This right then means that if the Crown wants to pass on title to that land to anyone else (whether by selling it or otherwise), it first must offer to let a body representing the various iwi and hapū have it on those same terms.

Note that this isn't just a polite suggestion. It's a rule of law:

121 Restrictions on disposal of RFR land

(1) [The Crown] must not dispose of RFR land to any person other than the Limited Partnership or a rōpū entity (or the Limited Partnership's or rōpū entity's nominee) unless the land is disposed of under subsection (2) or (3).

Subsection 2 then excepts some situations in which the Crown is allowed to spin off its land to others, one of which has some relevance and so I'll discuss it shortly. And subsection 3 says that if the various iwi and hapū haven't acted on the offer within 12 months, then the Crown can go ahead and do what it likes with the land.

Which looks to be a big problem for the Government. For even if the various iwi and hapū eventually decide not to exercise their right of refusal, they have 12 months to sit and think about it. And note when the right of refusal kicks in - when the Crown "disposes" of the land by transferring title.

Under the Government's current proposal, they want developers to build houses on its land, with title then being transferred once the development is completed. But how's that going to work if, once the development is done, the body representing the various iwi and hapū then gets a peremptory right to purchase the land in question? What sort of developer is going to enter into the house building game under that cloud of uncertainty?

However, Nick Smith seems confident that everything will be OK:

"There is first right of refusal in the Tamaki Redress Act that Parliament passed last year, but it specifically makes reference to the capacity for the Government to be able to develop and sell land for housing purposes and what the Government is doing is absolutely consistent with what's in that Act."

With all due respect, he might want to double check this. Because it is true that one of the exceptions to the legal bar on the Crown disposing of its land without giving the various iwi and hapū first refusal does relate to "housing purposes". It's contained in s.136:

[The Crown] may dispose of RFR land that is held for State housing purposes if the Minister of Housing has given notice to the Limited Partnership that, in the Minister's opinion, the disposal is to achieve, or to assist in achieving, the Crown's social objectives in relation to housing or services related to housing.

Let's charitably assume that the Government's proposal for setting up its fast-build development policy does "assist in achieving the Crown's social objectives in relation to housing or services related to housing." That may be a stretch, but we'll allow it for present purposes. You still see the problem, right?

This exception only applies to "land that is held for State housing purposes". And all the land that Nick Smith has so far identified as being suitable for the Government's policy isn't of this sort - indeed, the whole point of the policy is to make use of Crown land that isn't presently being used for housing. Take, for example, the jewel in Nick Smith's crown, which he bussed a whole lot of reporters up the Northern Motorway to gaze on:

“The most advanced site is at the corner of Moire and Granville Roads in Massey East, consisting of 10 parcels of land totalling 9.5 hectares. The Government has authorised my Ministry to purchase it from the Ministry of Education and to gazette it for housing purposes under the Housing Act 1955. The land had originally been set aside for a new high school but a better site was subsequently found at Hobsonville,”

Now, of course, it may be that Nick Smith is thinking of trying to pull a swifty here. Maybe he's thinking that once the Government says "we're going to use this land of ours that was set aside for something else for housing", then this immediately makes it into land "that is held for State housing purposes" as per s.136. All I can say to that line of thinking is ... good luck getting it past a High Court judge on judicial review proceedings!

[Update: I wrote the bulk of this late into last night, so didn't have time to address the "State housing purposes" point fully. It is true that under the Housing Act 1955, a Minister "may from time to time determine either generally or in any particular case what land or classes of land may be acquired for State housing purposes...". So doesn't this mean that Nick Smith can just deem the surplus Crown land in Auckland to be held for "State housing purposes" under this Act?

A few problems with that position. First of all, under the definitions section a State housing purpose "means the erection, acquisition, or holding of dwellings and ancillary commercial buildings by the Crown under this Act...". That's not the plan for this land - the building of the houses is to be done by private developers.

Second, there's the question of whether the Government can even let private developers build houses on land it says is held for State housing purposes. Under the Housing Act there is power to develop such land using public money, or to build houses on it using public money, but no express power to let private interests build houses on it. So if this land is deemed to be held for State housing purposes, then the entire development plan may be contrary to the scheme and policy of the Housing Act 1955.

Third, there's a problem of the Minister's reasons for acting. Why exactly does he think it necessary to designate this land to be held for State housing purposes? After all, the Crown already owns it and it's already zoned residential - nothing at the moment stops the Crown from simply striking a commercial deal with developers to move in and start building. So if the Minister is just determining that the land is needed for "State housing purposes" in order to defeat the Tāmaki Makaurau Collective's right of first refusal, then that is an improper purpose and so unlawful.

Fourth, this whole issue is going to be interpreted in legal terms through the lens of the Crown's duty to be a good Treaty partner. That weights it heavily in favour of the iwi and hapū's favour.]

So it looks to me like, at the very least, the Government has got some pretty urgent negotiations with Auckland's iwi and hapū ahead of it. And given that it took from July 2009 to June 2012 to reach the original settlement agreement, there's no reason to think that those negotiations will reach a speedy conclusion. After all, the right of first refusal was included precisely so that the various iwi and hapū could have time to consider what, if any, economic benefit may accrue to them from making use of this resource. Why should they be hustle and bustled into making that decision quickly just because the Government finds itself in a politically problematic position in relation to housing in Auckland?

Or, alternatively, there's always s.131 of the Act:

[The Crown] may dispose of RFR land in accordance with an obligation under any enactment or rule of law.

What odds a Foreshore and Seabed Act for the Auckland property market?

Comments (10)

by Che Nua on June 04, 2015
Che Nua

In their rush to appear like they are handling the Auckland housing crisis the John Key government has dug itself another hole here.  They will be inclined to impose an FnS type "legislatve solution" but know the downstream price is potentially pretty high, such as costing them a coalition partner next election

The only face saving way out is to negotiate an arrangement whereby a tangata whenua entity becomes proprietor over a significant portion of any new houses that are built on these supposedly surplus lands

by John Allen on June 04, 2015
John Allen

A big step forward in terms of housing affordability would be achieved were the land not sold, instead being leased to the owners of the houses that builders build on it.  The lease need not be onerous, after all, the land is not earning a lot at the moment and capital value will not be lost.  Not relinquishing title to the land will retain it in public ownership and so avoid the need for enabling legislation for the government to sell the land.  Likely?  Not at all.

by Andrew Geddis on June 04, 2015
Andrew Geddis

@John,

Under the Act in question, a lease of more than 50 years is a "disposal" of land that then triggers the right of first refusal provisions. And how much will people pay for houses on land that they won't have a right to for more than 50 years?

by Paul McBeth on June 04, 2015
Paul McBeth

How does the claim by Ngati Whatua Orakei work in conjunction with this? My read of the legislation and the Hansard is that the right of first refusal is with the collective entity, which is kind of where things get confusing for me as to what Ngati Whatua Orakei can achieve by seeking legal advice. 

by Andrew Geddis on June 04, 2015
Andrew Geddis

@Paul,

Ngati Whatua have no individual claim as such - their settlement Act has no right of first refusal in it (precisely because the claim to so much of this land is contested between the various iwi and hapū in the region). So the collective settlement was made in order to circumvent this problem - no one iwi or hapū gets the right to first refusal, instead a body called the Whenua Haumi Roroa o Tāmaki Makaurau Limited Partnership (the Limited Partnership) gets it on behalf of all the iwi and hapū involved. At the moment, that Limited Partnership is taking a "let's just see what's being suggested" line - its head (Paul Majurey) was on Morning Report discussing the matter.

But, of course, that Limited Partnership has to represent Ngati Whatua interests (along with those of all the other iwi and hapū who were part of the collective agreement). And what is more, under the Limited Partnership's Agreement, the "Nagati Watua Ropu Limited Partnership" has "junior partner" status. And under Schedule 3 of this Agreement, if the Limited Partnership itself decides not to take up a right of first refusal over some land as a collective matter, the junior partners then get to decide whether or not they want to take it up as an individual matter.

So - I guess Nagati Whatua are talking to their lawyers because their subsidiary rights to first refusal under the Ngā Mana Whenua o Tāmaki Makaurau Collective Redress Act 2014 - rights they possess as junior partners in the Limited Partnership set up to manage the right to first refusal - are implicated by the Government's actions.

by Paul McBeth on June 04, 2015
Paul McBeth

Thanks Andrew - that makes perfect sense....

by Richard on June 04, 2015
Richard

@Andrew "...And how much will people pay for houses on land that they won't have a right to for more than 50 years?"

Well, if the goal is to create immediate, cheap, high quality housing in Auckland to deflate the property bubble, then surely it's a feature if the housing is cheap?

On the other hand, if the goal is to create profits for private developers and property investors, and to further inflate the property bubble, then yes, it would be bad if the property is cheap.

by Nick Gibbs on June 04, 2015
Nick Gibbs

This is a really ugly situation for the govt to find themselves in, and entirely of their own making. It will be interesting to see which of the opposition parties is able to make to most of the situation. My money's on Peters.

by william blake on June 04, 2015
william blake

Bill Englishes' paradoxical turn of phrase, about gifting the unwanted state houses to Iwi, that "state houses are meant to be for everybody so we can't give them away." Is either cunning pre bargaining on land sales, or is about to turn around and bite him.

by Matthew Whitehead on June 04, 2015
Matthew Whitehead

Were this policy just about the housing situation, the logical thing to do would have been to design the policy so that the Iwi and Hapu groups in question could be the developers themselves or subcontract to the developers in question, and to have approached the relevant groups before pushing the policy.

Of course, if the law was intended as a sop to the government's property developer mates, then this approach would not be workable.

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