Christopher Luxon ruins bipartisan accord on housing

A few years ago Labour and National worked out a truce on planning laws that radically deregulated the building of townhouses. Now Christopher Luxon says they got it wrong.

Apartment blocks at Oriental Bay, Wellington. Winder, Duncan, 1919-1970: Architectural photographs. Ref: DW-1715-F. Alexander Turnbull Library, Wellington, New Zealand. /records/22570870...

So many of New Zealand’s problems are downstream from housing.

The poor stay poor because they are unable to keep up with rising rents or build stability for their children or careers as they shift from suburb to suburb to keep a roof over their head. Every little price rise at the supermarket or preschool is that much worse because housing is eating up far more of their income than it would have thirty or forty years ago - and the housing they can afford sometimes just kills them. The better-quality flats they would usually rent are taken by young professionals in their 20s and 30s who would quite like to buy a home but can barely dream of it without either help from their parents or by moving to a centre with no jobs. This group puts off family formation or just moves overseas. Those who manage to get on the ladder find themselves with terrifyingly large mortgages, mortgages that sometimes instruct them to oppose new housing development near them - making them unwilling tools of the system that forced their house price so high in the first place. Now they have this one big asset they have to do all they can to make the market believe it is worth what they paid for it.

This graph is from this excellent FT article.

New Zealand is not alone. We have some of the least affordable housing in the world but it seems to be a problem across the Anglosphere. Some time in the late 20th century we all stopped building enough new homes to keep up with population growth, and are now reaping the consequences as the houses left become incredibly expensive.

How a YIMBY coalition built a tool to get out of this mess

Anger over high housing costs helped drive Labour to office in 2017. The party’s first attempt to fix this was a huge 1930s/1940s-style state-run housebuilding burst named KiwiBuild, but it soon found that the state lacks the capacity or mettle to do that kind of thing any more.

As that policy fell to pieces Phil Twyford started to look seriously at using the state not to build the new housing itself, but to just get itself out of the way of private developers building the housing themselves.

You see, while central government had been talking about the need to build lots of new houses for years, local government had been given an array of tools to stop that housing - principally the Resource Management Act (RMA). National had attempted serious reform of the RMA in Government but had been stymied by United Future and, well, Labour. Councils are often opposed to new housing because new housing requires expensive infrastructure and existing homeowners (who vote in high numbers) generally find some reason to oppose any more building around them - these people are what is known at “NIMBYs” (Not In My Backyard). This issue was not new and there had been a serious and partially-successful attempt to fix it with the Auckland Unitary Plan, which appears to have seriously helped.

Twyford decided to take away a few tools that councils had to stop housing - in particular the kind of dense apartment blocks that would suit young people, would not need as much expensive roading infrastructure, and would help wean Kiwis off their addiction to cars. Dense housing is also often what existing homeowners are the most opposed to - you might not mind another family living down the road, but you mind another 20.

He did this with a direction under the RMA - something called the NPS-UD (don’t worry about what it stands for). This took away the power for councils to cancel developments in certain areas around transport nodes for a few specific reasons - like that they didn’t have car parks or reached a certain heigh. Essentially Twyford was telling developers: Go ahead, build up to six storeys and don’t worry about a car park if you don’t want to. The council will no longer have the tools to stop you.

This is a profoundly market-based solution for a party that usually likes the state to get its hands dirty solving big social issues. But it also chimes with broader goals of the left: Bring down the cost of housing in urban centres and let people bike or bus to work instead of driving.

I broke the story of this new direction and called the National Party for comment. It’s hard to know what to expect with a policy like this: On the one hand National is generally against meddlesome rules stopping private entities from doing business, on the other hand they really hated Phil Twyford.

The first person I got comment from was National’s then-housing spokesperson Jacqui Dean, who said the policy was “madness”. But the row-back began almost immediately, and National’s future housing spokesman Chris Bishop, who was then infrastructure spokesman, soon got in touch to say the party actually did support removing the minimum car park requirement.

The reaction of these two MPs was indicative. Bishop is a young National MP who really does appear to believe the Government should get out of the way on most things - from abortion law to housing. It was obvious to him that regulation was a major factor stopping housing from being built and that any move to deregulate it should be welcomed by National. He had clear allies in this across the party - most crucially Nicola Willis, his political soulmate.

But much as there was an internal battle in National over abortion and euthanasia laws at the time, housing regulation was far from settled. Jacqui Dean and other MPs with seats full of homeowning National voters were not so keen to just roll over and let the Government allow for more abundant housing.

National were not the only party with this kind of division. A lot of Labour Party and Green Party people were uncomfortable with removing rules to let developers have free reign. What if the apartment block meant cutting a tree down? What if it meant a sleepy leftish suburb in Wellington like Mount Vic was suddenly “under threat”?

Despite these internal misgivings, a cross-party coalition of YIMBYs (Yes In My Backyard) seemed to have the wind behind their sales. Labour won the 2020 election and the NPS-UD was winding its slow way through council spatial plans. But it would soon be overshadowed by a much bigger win.

The truce

Behind the scenes, National’s YIMBYs eventually won over then-party leader Judith Collins to the cause.

That allowed them to negotiate with Labour on something more ambitious than just the NPS-UD. The two parties agreed in 2021 to take away far more power from councils, with a new standard that would allow all residential land across our main cities to be developed without a resource consent, up to three storeys high and with up to three dwellings.

This was huge. Property owners who would once have needed a costly resource consent to build a shed could bowl down their house and turn it into three tightly-packed townhouses without their neighbours being able to stop it. Analysis estimated it would enable 105,000 new homes. It was praised all around the world.

Crucially, it was announced at the podium of truth by both National and Labour, two parties who for the foreseeable future will always be in Government. That meant developers could allocate millions of dollars of capital into new homes without worrying that the law would suddenly shift the next time the Government changed. There was a truce - the big two would pass this together and not harness the inevitable NIMBY backlash to hurt the other.

Christopher Luxon was not leader at the time. As a candidate in 2020 he had opposed the exact type of housing the MDRS looked to enable¹. But once he became leader, the elevation of Nicola Willis to deputy looked like it would probably keep the MDRS somewhat safe - after all, she had designed it. Would he really humiliate her by welching on the promise?

The ACT factor

New Zealand does not have a two-party system, and political space vacated by one party is usually filled by another.

This was the case with ACT, who soon picked up the NIMBY anger and ran with it. Despite ostensibly being a party dedicated to freedom and in particular the freedom to do what you like with your private property, ACT voted against the MDRS and started aggressively courting NIMBY National voters. This greatly angered YIMBY National MPs who saw it as rank and irresponsible political hypocrisy, but it seemed to work for ACT, who have kept the decent chunk of voters they won over during the Collins’ period. ACT appear aware that even if it might be incredibly ideologically inconsistent for it to oppose deregulation, this opposition would be popular with the older richer homeowners it was trying to court.

Again, New Zealand is not unique here. The Conservatives in the UK have backed down significantly on planning reform because the Liberal Democrats have campaigned successfully against it.

And there was a lot of pushback.

Housing deregulation is always an easy target in the media. Those who hate it have political clout and can easily describe themselves as victims - ie their nice backyard is going to be in shadow because an apartment block is going up nearby. The potential beneficiaries are much harder to find - the people who might be able to afford an apartment in that block once it goes up probably don’t even know it exists yet. This extends to general campaigning too - property owners set to “lose” their peaceful neighbourhood know how to write to MPs, potential new residents who don’t even live in the electorate yet do not.

It seems that in recent months this pushback and ACT’s harnessing of it have won the fight inside National.

Christopher Luxon told a meeting in Birkenhead last night that National “got the MDRS wrong”. He later told RNZ that he favoured “greenfield” development and wanted councils to have more discretion about where these other new townhouses would go within existing neighbourhoods.

It’s easy to support “greenfield” development. You don’t alienate existing homeowners quite as much because the new housing is further away, and a lot of people who don’t want to live in an apartment are fine with the idea of a long drive to work every day. But greenfield development is hard and slow - you usually need new roads, new pipes, new everything. When you make dense housing in already-existing neighbourhoods it isn’t quite plug and play - but the infrastructure does at least exist already.

Now, the exact detail of the new policy isn’t out yet, and is due at some point soon. I expect National will attempt to soothe the pain somewhat by becoming more deregulatory in some sections and more restrictive in others - arguing they are rebalancing MDRS by allowing more mixed-use development in some areas but adding in some more “power for communities” in other areas.

But the truce is clearly over. Once you prise back open the law you signal to developers that planning laws can no longer be relied upon, that you could pour a lot of money into a development now only to find it illegal in a year’s time.

It is politically understandable for National to back down on this and please its voting base. A lot of voters like the theory of less government, but don’t actually want the big bad state to stop protecting their lifestyle. More important than any actual push for or against regulation is the need to maintain the status quo. And it’s hard to ignore an inbox full of emails from long-time voters saying they hate you now because you want to allow their evening sunlight to be ruined.

But eventually this will bite the political right.

The best way to breed new right-wing voters it to give them a mortgage. Renters are more likely to vote left while homeowners are more likely to vote right. That’s why Thatcher selling so many people their state homes was so important. This is probably as much correlation as causation - renters are generally younger - but homeownership is a crucial part of the wider conservative policy prognosis for a reason.

For now though, the homeowners win. Again.

1. MPs are particularly sensitive to emails from their constituents, which means a lot of local MPs have opposed housing in their own patch over the years, while simultaneously complaining about kids sleeping in cars.