Planning Regulations and Costs

16/04/2015

Yesterday, Grant Spencer, the Deputy Governor of the Reserve Bank of New Zealand made a speech about reducing housing imbalances. His speech quoted a working paper by Motu Economic and Public Policy Research - a not-for-profit, non-partisan research institute - titled Impacts of Planning Rules, Regulations, Uncertainty and Delay on Residential Property Development. The paper was funded by The Treasury and the Ministry of Business, Innovation and Employment.

In writing the paper, Dr Grimes and his co-author, Ian Mitchell, talked to developers about the costs imposed by regulation and regulation-related uncertainty in Auckland.

Excluding the cost of Watercare and reserve and development contributions, the study found that the typical cost range of the total impact of regulations in Auckland varied between $32,500 and $60,000 per dwelling in a subdivision. In terms of affordable apartments, the impact on total cost typically was estimated to range between $65,000 and $110,000 per apartment, assuming the total internal floor area remains the same and no deck is built.

“This study wasn’t a cost-benefit analysis of council planning approaches. Instead it documents developers’ perceptions of the costs of the rules and regulations. The aim of the paper was to provide a basis for benefits to be compared,” said Dr Grimes.

“Regulators should consider the costs and benefits of new and existing regulations, but in this case that doesn’t appear to have happened. Our paper was really the first step and Auckland Council is now examining the benefits and costs of regulations and planning rules that affect residential property development.”

-ends-

1. See page 4 (footnote) of Auckland Economic Quarterly (March 2015), Auckland Council.