In 2012, the Government promised Auckland Maori that they would have first dibs on any new housing developments on its land. So why aren't they involved at all in Nick Smith's 500 hectare vision?

Further to my previous post on the Government's housing plans for Auckland and the problem that iwi and hapū rights under the Ngā Mana Whenua o Tāmaki Makaurau Collective Redress Act 2014 may cause, my attention has been drawn to the following matters.

When the Ngā Mana Whenua o Tāmaki Makaurau Collective Redress Deed was signed back in 2012, it contained a "Property Redress Schedule" (you can see it in PDF here, from p.21 on). And that Schedule contained a specific "Department of Building and Housing Protocol", which is at p.46 of that document.

Under that Protocol, the Crown agreed that:

If the Crown intends to:

7.1.1 develop land it owns that is subject to the [right of first refusal] RFR to achieve, or assist in achieving, the Crown’s social objectives in relation to housing or services related to housing; and

7.1.2 involve a party other than the Crown (including a private buyer or Crown body) in that development,

the Department [of Building and Housing] shall first provide the [iwi and hapū's] limited partnership the opportunity to be the developer, subject to meeting the intended Crown social objectives in relation to housing or services related to housing, and on such terms as might be offered to the private sector.

Which the Department just hasn't done. So, on the face of it, the Government's announced plans are a breach of the agreement it made in its settlement deed with the Tāmaki Makaurau Collective only three years ago.

Having said that, there's a further complicating factor. The Protocol goes on to say:

The Crown will endeavour in good faith to provide the limited partnership with the opportunities set out in this protocol. The Crown reserves the right to trigger the RFR exception or transfer land to a Crown body without first making an offer under this protocol in circumstances where:

7.1.3 achievement of Crown’s social objectives in relation to housing or services related to housing in the opinion of the Department would be frustrated in whole or in part by exercising the protocol; and/or

7.1.4 Crown’s social objectives in relation to housing or services related to housing would be achieved, but applying the protocol would substantially increase cost or reduce efficiency for the Crown.

So it isn't the case that under this Protocol the Crown must in every case give the iwi and hapū's limited partnership the first chance to be the developers of housing on Crown land in Auckland. But, by the same token, can the Government possibly be acting in "good faith" by making a sweeping decision that the iwi and hapū's limited partnership is not to have first dibs on any of the 500 hectares of Crown land that is allegedly being made available for new housing? Without, it should be noted, apparently even informing the iwi and hapū's limited partnership that it is intending embark on this new policy?

For how would allowing the iwi and hapū's limited partnership to be the developer of any of the housing "frustrate" the Government's plans? What evidence does the Department have that allowing the iwi and hapū's limited partnership to be a developer would "substantially increase the cost or reduce efficiency"? Is there a paper trail to show that the Department carefully considered these matters before announcing the policy and had good grounds for reaching such conclusions? How could those conclusions be reached without having talked with the iwi and hapū's limited partnership at all?

Interesting questions. Let's see what answers come of them.

Comments (5)

by Alan Johnstone on June 05, 2015
Alan Johnstone

This is what happens when ignore problems for years and then develop ad hoc policy in response to disappointing focus group results.

Yet again this administration is caught out by the deal making instincts of senior members who short cut process.

 

by Che Nua on June 06, 2015
Che Nua

Even if by some miracle 500ha do get developed for housing in our lifetimes NZ's population is likely to be well over 5,000,000 by 2020 so Nick Smith's vision of intensive urban sprawl wont realise any social benefit unless the demand side is sorted too - very unlikely under our current political leadership

by Donald Ellis on June 07, 2015
Donald Ellis

Thanks for the analysis, Andrew. It is difficult to imagine how the government could defend not offering the RFR land to the limited partnership. It looks like their only option is to pass this programme off as delivering social housing or achieving social objectives. In the absence of any statutory definition of social housing we would have to fall back on the common use of the phrase, basically rental housing provided by the public sector to those who are unlikely to be adequately housed any other way. And this programme doesn't look anything like that.

 So, at first glance, it looks as though the limited partnership could mount a very strong case in court. And it would be very much worth their while to do so. My rough calculation is that they should be expecting somewhere in the region of $100m-$300m out of this programme. Funds a lot of litigation.

 I assume that the government are quietly holding private negotiations with the limited partnership. It would actually be to everyone's advantage if the two parties signed a single agreement with the partnership accepting an ex gratia payment in return for waiving their rights of first refusal over the land. The problem is that the government is in a weak position and the partnership will lose little by stringing the process along, hoping to achieve more.

Let's not disguise this as anything other than an asset sale. If the government was hoping to flood the market with new houses and drive general property prices down in Auckland it won't happen this way. Even if they get 10,000 dwellings out of this programme (extremely unlikely) that number is not big enough to make a noticeable difference. Besides which, if that was their goal, there are better and easier ways.

 The government is looking for two outcomes: lots of subdivision consents issued by Auckland Council within the next 15 months (30 September 2016), and, of course, a pile of cash to pour into the election year budget in 2017. Despite the upbeat press releases the Auckland Housing Accord is on track to be a failure. It is already over halfway and, although there was initial talk of building 39,000 dwellings during the Accord, the actual number will be closer to 25,000. The targets are pretty soft so the parties can include consents to subdivide and include the consented lots in the targets. At the moment the chances are high that they won't even meet the soft targets.

I haven't seen any detailed explanation of how the partnerships between the government and developers will work and this is where the fun really begins. We know that the government will sell their land to the developers before they are sold to the end buyers. There are four places in the process where that can take place:

1. when the subdivision design is complete but before an application for resource consent to subdivide is lodged

2. after the subdivision consent is granted but before siteworks begin

3. around the time siteworks are complete and the Council issues the Certificate of Completion

4. after titles are granted but before building begins

 The sweet spot for the government is at about the second point. If they are to get 10,000 lots consented before September 2016 they have to force the pace which they can only do if they are still the landowner. Administratively it is a lot easier to off-load the large blocks rather than lots of little titles also it ensures that the money is in the pot in time for Budget 2017.

 The sweet spot for the limited partnership is at stage 4. Whereas the value of the undeveloped land at the start will be roughly $100K per lot (1bn for the whole 500ha) by the time they are developed those sections will be worth somewhere between $300K and $400K (the current median price for a section in Auckland is $475K but let's assume these will all be below median sections). Even after taking out the cost of siteworks, financial and development contributions, legal costs, developers margins etc the raw land value will have increased to $200K-$300K. The fight will be how to divvy all those gains up between the government, the developers and the limited partnership. I would have thought that the limited partnership would be expecting about a 10% cut yielding anywhere between $100m and $300m. I imagine that extra is worth fighting for,

 If my guesses are close then the government has put itself in a delicate position. It actually can afford to give up a fair bit to the limited partnership. Whatever the government make off the land sales is kind of bonus money because it has never been factored into forward projections. But the political reality is that they will suffer some backlash if the amount of taxpayer money they "give away" to Maori is seen as excessive. But if they are to stuff the development pipeline quickly then they can't afford to let the process drag on.

It will fascinating to see how this plays out.

 

by Donald Ellis on June 14, 2015
Donald Ellis

How wrong could I be? Turns out the government have not bought off the local iwi and hapu. Andrew, your analysis is about to hit the limelights.

by Donald Ellis on June 15, 2015
Donald Ellis

And we are off to court. Yahooo!

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