Dame PATSY REDDY, Governor-General

Order in Council

At Wellington this 1st day of November 2016

Present:
Her Excellency the Governor-General in Council

Pursuant to section 52(2) of the Resource Management Act 1991, Her Excellency the Governor-General, acting on the advice and with the consent of the Executive Council and on the recommendation of the Minister for the Environment (having satisfied the requirements of that Act), approves the following National Policy Statement on Urban Development Capacity.

Preamble

New Zealand is highly urbanised, with 73% of us living in urban areas of at least 30,000 people¹.

Urban environments are characterised by the closeness of people and places, and the connections between them. They enable us to live, work and play in close proximity, giving us access to amenity, services and activities that people value. While urban environments share these common characteristics, they also have unique local variations; the traits that make one urban environment different from another. Urban environments often have high rates of population and economic growth. Reflecting this, they are dynamic, and are constantly changing to reflect the needs of their communities. This constant change can have both positive and negative impacts: well-functioning urban areas maximise the positives and minimise the negatives.

Well-functioning urban environments provide for people and communities’ wellbeing. They provide people with access to a choice of homes and opportunities to earn income, good connections between them, and attractive built and natural environments. They have good quality physical and social infrastructure and open space. They make efficient use of resources and allow land uses to change to meet the changing needs of their inhabitants while protecting what is precious. They make the most of their ability to connect to other parts of the world through trade and the movement of goods and people. Such urban environments attract people and investment, and are dynamic places that make a significant contribution to national economic performance.

Local authorities play an important role in shaping the success of our cities by planning for growth and change and providing critical infrastructure. Ideally, urban planning should enable people and communities to provide for their social, economic, cultural and environmental wellbeing through development, while managing its effects. This is a challenging role, because cities are complex places; they develop as a result of numerous individual decisions, and this often involves conflict between diverse preferences.

This national policy statement provides direction to decision-makers under the Resource Management Act 1991 (RMA) on planning for urban environments. It recognises the national significance of well-functioning urban environments, with particular focus on ensuring that local authorities, through their planning, both:

• enable urban environments to grow and change in response to the changing needs of communities and future generations; and
• provide enough space for their populations to happily live and work. This can be both through allowing development to go “up” by intensifying existing urban areas, and “out” by releasing land in greenfield areas.

This national policy statement covers development capacity for both housing and business, to recognise that mobility and connectivity between both are important to achieving well-functioning urban environments. Planning should promote accessibility and connectivity between housing and businesses. It is up to local authorities to make decisions about what sort of urban form to pursue.

This national policy statement aims to ensure that planning decisions enable the supply of housing needed to meet demand. This will contribute to minimising artificially inflated house prices at all levels and contribute to housing affordability overall. Currently, artificially inflated house prices drive inequality, increase the fiscal burden of housing-related government subsidies, and pose a risk to the national economy.

Local authorities need to provide for the wellbeing of current generations, and they must also provide for the wellbeing of the generations to come. The overarching theme running through this national policy statement is that planning decisions must actively enable development in urban environments, and do that in a way that maximises wellbeing now and in the future.

This national policy statement does not anticipate development occurring with disregard to its effect. Local authorities will still need to consider a range of matters in deciding where and how development is to occur, including the direction provided by this national policy statement.

Competition is important for land and development markets because supply will meet demand at a lower price when there is competition. There are several key features of a competitive land and development market. These include providing plenty of opportunities for development. Planning can impact on the competitiveness of the market by reducing overall opportunities for development and restricting development rights to only a few landowners.

This national policy statement requires councils to provide in their plans enough development capacity to ensure that demand can be met. This includes both the total aggregate demand for housing and business land, and also the demand for different types, sizes and locations. This development capacity must also be commercially feasible to develop and plentiful enough to recognise that not all feasible development opportunities will be taken up. This will provide communities with more choice, at lower prices.

Development capacity must be provided for in plans and also supported by infrastructure. Urban development is dependent on infrastructure, and decisions about infrastructure can shape urban development. This national policy statement requires development capacity to be serviced with development infrastructure, with different expectations from this infrastructure in the short, medium and long term. It encourages integration and coordination of land use and infrastructure planning. This will require a sustained effort from local authorities, council-controlled organisations, and infrastructure providers (including central government) to align their intentions and resources.

Another key theme running through the national policy statement is for planning to occur with a better understanding of land and development markets, and in particular the impact that planning has on these. This national policy statement requires local authorities to prepare a housing and business development capacity assessment and to regularly monitor market indicators, including price signals, to ensure there is sufficient development capacity to meet demand. Local authorities must respond to this information. If it shows that more development capacity needs to be provided to meet demand, local authorities must then do so. Providing a greater number of opportunities for development that are commercially feasible will lead to more competition among developers and landowners to meet demand.

This national policy statement also places a strong emphasis on planning coherently across urban housing and labour markets, which may cross local authority administrative boundaries. This will require coordinated planning between local authorities that share jurisdiction over urban housing and labour markets. This includes collaboration between regional councils and territorial authorities who have differing functions under the RMA, but which all impact on and are impacted on by urban development.

This national policy statement recognises that the benefits of the statement are greatest in urban areas experiencing the highest levels of growth. It takes a tiered approach to the application of policies using the Statistics New Zealand urban areas classification and population projections to target different policies to different local authorities. This classification also informs local authorities that they must work together. The boundaries of the Urban Areas do not restrict the area in which the local authorities apply the policies.

Local authorities that have a high-growth urban area within their jurisdiction are expected to meet all of the requirements of policies in this national policy statement, while local authorities with medium-growth urban areas in their jurisdiction, and all other local authorities, have lesser requirements, as per the table below.

This preamble may assist the interpretation of the national policy statement.

Title

This national policy statement is the National Policy Statement on Urban Development Capacity 2016.

Commencement

This national policy statement comes into force on the 28th day after the date on which it is notified in the New Zealand Gazette.

Interpretation

In this national policy statement, unless the context otherwise requires:

Act means the Resource Management Act 1991.

Business land means land that is zoned for business uses in urban environments, including but not limited to land in the following examples of zones:

• industrial;
• commercial;
• retail;
• business and business parks;
• centres (to the extent that this zone allows business uses); and
• mixed use (to the extent that this zone allows business uses).

Decision-maker means any person exercising functions and powers under the Act.

Demand means:

In relation to housing, the demand for dwellings in an urban environment in the short, medium and long term, including:

1. the total number of dwellings required to meet projected household growth and projected visitor accommodation growth;
2. demand for different types of dwellings;
3. the demand for different locations within the urban environment; and
4. the demand for different price points

recognising that people will trade off (b), (c) and (d) to meet their own needs and preferences.

In relation to business land, the demand for floor area and lot size in an urban environment in the short, medium and long term, including:

1. the quantum of floor area to meet forecast growth of different business activities;
2. the demands of both land extensive and intensive activities; and
3. the demands of different types of business activities for different locations within the urban environment.

Development capacity means, in relation to housing and business land, the capacity of land intended for urban development based on:

1. the zoning, objectives, policies, rules and overlays that apply to the land, in the relevant proposed and operative regional policy statements, regional plans and district plans; and
2. the provision of adequate development infrastructure to support the development of the land.

Development infrastructure means network infrastructure for water supply, wastewater, stormwater and land transport as defined in the Land Transport Management Act 2002, to the extent that it is controlled by local authorities.

Feasible means that development is commercially viable, taking into account the current likely costs, revenue and yield of developing; and feasibility has a corresponding meaning.

High-growth urban area means any urban area (as defined by Statistics New Zealand in 2016) that:

1. has either:
   1. a resident population of over 30,000 people according to the most recent Statistics New Zealand urban area resident population estimates; or
   2. at any point in the year a combined resident population and visitor population of over 30,000 people, using the most recent Statistics New Zealand urban area resident population estimates; and
2. in which the resident population of that urban area is projected to grow by more than 10% between 2013 to 2023, according to the most recent Statistics New Zealand medium urban area population projections for 2013(base)–2023.

Note that the definition of high-growth urban area is a transitional definition, and will be reviewed and amended no later than 31 December 2018.

Local authority has the same meaning as in section 2 of the Resource Management Act 1991.

Long term means between ten and thirty years.

Medium-growth urban area means any urban area (as defined by Statistics New Zealand in 2016) that:

1. has a resident population of over 30,000 people according to the most recent Statistics New Zealand urban area resident population estimates; and
2. in which the resident population of that urban area is projected to grow by between 5% and 10% between 2013 and 2023, according to the most recent Statistics New Zealand medium urban area population projections for 2013(base)–2023.

Note that the definition of medium-growth urban area is a transitional definition, and will be reviewed and amended no later than 31 December 2018.

Medium term means between three and ten years.

Other infrastructure means:

1. open space;
2. community infrastructure as defined in the Local Government Act 2002;
3. land transport as defined in the Land Transport Management Act 2003 that is not controlled by local authorities;
4. social infrastructure such as schools and healthcare;
5. telecommunications as defined in the Telecommunications Act 2001;
6. energy; and
7. other infrastructure not controlled by local authorities.

Plan means any plan under section 43AA of the Act or proposed plan under section 43AAC of the Act.

Planning decision means any decision on any plan, a regional policy statement, proposed regional policy statement, or any decision on a resource consent.

Short term means within the next three years.

Sufficient means the provision of enough development capacity to meet housing and business demand, and which reflects the demands for different types and locations of development capacity; and sufficiency has a corresponding meaning.

Urban environment means an area of land containing, or intended to contain, a concentrated settlement of 10,000 people or more and any associated business land, irrespective of local authority or statistical boundaries.

National Significance

This national policy statement is about recognising the national significance of:

1. urban environments and the need to enable such environments to develop and change; and
2. providing sufficient development capacity to meet the needs of people and communities and future generations in urban environments.

Objectives

The following objectives apply to all decision-makers when making planning decisions that affect an urban environment.

Objective Group A – Outcomes for Planning Decisions

OA1: Effective and efficient urban environments that enable people and communities and future generations to provide for their social, economic, cultural and environmental wellbeing.

OA2: Urban environments that have sufficient opportunities for the development of housing and business land to meet demand, and which provide choices that will meet the needs of people and communities and future generations for a range of dwelling types and locations, working environments and places to locate businesses.

OA3: Urban environments that, over time, develop and change in response to the changing needs of people and communities and future generations.

Objective Group B – Evidence and Monitoring to Support Planning Decisions

OB1: A robustly developed, comprehensive and frequently updated evidence base to inform planning decisions in urban environments.

Objective Group C – Responsive Planning

OC1: Planning decisions, practices and methods that enable urban development which provides for the social, economic, cultural and environmental wellbeing of people and communities and future generations in the short, medium and long term.

OC2: Local authorities adapt and respond to evidence about urban development, market activity and the social, economic, cultural and environmental wellbeing of people and communities and future generations, in a timely way.

Objective Group D – Coordinated Planning Evidence and Decision-making

OD1: Urban environments where land use, development, development infrastructure and other infrastructure are integrated with each other.

OD2: Coordinated and aligned planning decisions within and across local authority boundaries.

Policies

Outcomes for Planning Decisions

Policies PA1 to PA4 apply to any urban environment that is expected to experience growth.

PA1: Local authorities shall ensure that at any one time there is sufficient housing and business land development capacity according to the table below:

PA2: Local authorities shall satisfy themselves that other infrastructure required to support urban development are likely to be available.

PA3: When making planning decisions that affect the way and the rate at which development capacity is provided, decision-makers shall provide for the social, economic, cultural and environmental wellbeing of people and communities and future generations, whilst having particular regard to:

1. providing for choices that will meet the needs of people and communities and future generations for a range of dwelling types and locations, working environments and places to locate businesses;
2. promoting the efficient use of urban land and development infrastructure and other infrastructure; and
3. limiting as much as possible adverse impacts on the competitive operation of land and development markets.

PA4: When considering the effects of urban development, decision-makers shall take into account:

1. the benefits that urban development will provide with respect to the ability for people and communities and future generations to provide for their social, economic, cultural and environmental wellbeing; and
2. the benefits and costs of urban development at a national, inter-regional, regional and district scale, as well as the local effects.

Evidence and Monitoring to Support Planning Decisions

Policies PB1 to PB7 apply to all local authorities that have part, or all, of either a medium-growth urban area or high-growth urban area within their district or region.

The application of these policies is not restricted to the boundaries of the urban area.

PB1: Local authorities shall, on at least a three-yearly basis, carry out a housing and business development capacity assessment that:

1. estimates the demand for dwellings, including the demand for different types of dwellings, locations and price points, and the supply of development capacity to meet that demand, in the short, medium and long terms; and
2. estimates the demand for the different types and locations of business land and floor area for businesses, and the supply of development capacity to meet that demand, in the short, medium and long terms; and
3. assesses interactions between housing and business activities, and their impacts on each other.

Local authorities are encouraged to publish the assessment under policy PB1.

PB2: The assessment under policy PB1 shall use information about demand including:

1. demographic change using, as a starting point, the most recent Statistics New Zealand population projections;
2. future changes in the business activities of the local economy and the impacts that this might have on demand for housing and business land; and
3. market indicators monitored under PB6 and PB7.

PB3: The assessment under policy PB1 shall estimate the sufficiency of development capacity provided by the relevant local authority plans and proposed and operative regional policy statements, and Long Term Plans and Infrastructure Strategies prepared under the Local Government Act 2002, including:

1. the cumulative effect of all zoning, objectives, policies, rules and overlays and existing designations in plans, and the effect this will have on opportunities for development being taken up;
2. the actual and likely availability of development infrastructure and other infrastructure in the short, medium and long term as set out under PA1;
3. the current feasibility of development capacity;
4. the rate of take up of development capacity, observed over the past ten years and estimated for the future; and
5. the market’s response to planning decisions, obtained through monitoring under policies PB6 and PB7.

PB4: The assessment under policy PB1 shall estimate the additional development capacity needed if any of the factors in PB3 indicate that the supply of development capacity is not likely to meet demand in the short, medium or long term.

PB5: In carrying out the assessment under policy PB1, local authorities shall seek and use the input of iwi authorities, the property development sector, significant land owners, social housing providers, requiring authorities, and the providers of development infrastructure and other infrastructure.

PB6: To ensure that local authorities are well-informed about demand for housing and business development capacity, urban development activity and outcomes, local authorities shall monitor a range of indicators on a quarterly basis, including:

1. prices and rents for housing, residential land and business land by location and type, and changes in these prices and rents over time;
2. the number of resource consents and building consents granted for urban development relative to the growth in population; and
3. indicators of housing affordability.

PB7: Local authorities shall use information provided by indicators of price efficiency in their land and development market, such as price differentials between zones, to understand how well the market is functioning and how planning may affect this, and when additional development capacity might be needed.

Local authorities are encouraged to publish the results of their monitoring under policies PB6 and PB7.

Responsive Planning

Policies PC1 to PC4 apply to all local authorities that have part, or all, of either a medium-growth urban area or high-growth urban area within their district or region.

The application of these policies is not restricted to the boundaries of the urban area.

PC1: In addition to the requirement to ensure sufficient development capacity as outlined in policy PA1, local authorities shall also provide an additional margin of feasible development capacity over and above projected demand of at least:

1. 20% in the short and medium term; and
2. 15% in the long term.

PC2: If evidence from the assessment under policy PB1, including information about the rate of take up of development capacity, indicates a higher margin is more appropriate, this higher margin should be used.

PC3: When the evidence base or monitoring obtained in accordance with policies PB1 to PB7 indicates that development capacity is not sufficient in any of the short, medium or long term, local authorities shall respond by:

1. providing further development capacity; and
2. enabling development

in accordance with policies PA1, PC1 or PC2, and PC4. A response shall be initiated within 12 months.

PC4: A local authority shall consider all practicable options available to it to provide sufficient development capacity and enable development to meet demand in the short, medium and long term, including:

1. changes to plans and regional policy statements, including to the zoning, objectives, policies, rules and overlays that apply in both existing urban environments and greenfield areas;
2. integrated and coordinated consenting processes that facilitate development; and
3. statutory tools and other methods available under other legislation.

Minimum Targets

Policies PC5 to PC11 apply to all local authorities that have part, or all, of a high-growth urban area within their district or region.

Local authorities that have part, or all, of a medium-growth urban area within their district or region are encouraged to give effect to policies PC5 to PC11.

The application of these policies is not restricted to the boundaries of the urban area.

PC5: Regional councils shall set minimum targets for sufficient, feasible development capacity for housing, in accordance with the relevant assessment under policy PB1 and with policies PA1 and PC1 or PC2, and incorporate these minimum targets into the relevant regional policy statement.

PC6: A regional council’s minimum targets set under policy PC5 shall be set for the medium and long term, and shall be reviewed every three years.

PC7: When the relevant assessment required under policy PB1 shows that the minimum targets set in the regional policy statement are not sufficient, regional councils shall revise those minimum targets in accordance with policies PC5, and shall incorporate these revised targets into its regional policy statement.

PC8: Regional councils shall amend their proposed and operative regional policy statements to give effect to policies PC5 to PC7 in accordance with section 55(2A) of the Act without using the process in Schedule 1 of the Act.

PC9: Territorial authorities shall set minimum targets for sufficient, feasible development capacity for housing, as a portion of the regional minimum target, in accordance with the relevant assessment under policy PB1, and with policies PA1, PC1 or PC2, and PD3 and incorporate the minimum targets as an objective into the relevant plan.

PC10: If a minimum target set in a regional policy statement is revised, the relevant territorial authorities shall also revise the minimum targets in their plans in accordance with policy PC9.

PC11: Territorial authorities shall amend their relevant plans to give effect to policies PC9 and PC10 in accordance with section 55(2A) of the Act without using the process in Schedule 1 of the Act.

Note that using section 55(2A) of the Act for policies PC8 and PC11 only applies to setting minimum targets and not to plan changes that give effect to those minimum targets.

Future Development Strategy

Policies PC12 to PC14 apply to all local authorities that have part, or all, of a high-growth urban area within their district or region.

Local authorities that have part, or all, of a medium-growth urban area within their district or region are encouraged to give effect to policies PC12 to PC14.

The application of these policies is not restricted to the boundaries of the urban area.

PC12: Local authorities shall produce a future development strategy which demonstrates that there will be sufficient, feasible development capacity in the medium and long term. This strategy will also set out how the minimum targets set in accordance with policies PC5 and PC9 will be met.

PC13: The future development strategy shall:

1. identify the broad location, timing and sequencing of future development capacity over the long term in future urban environments and intensification opportunities within existing urban environments;
2. balance the certainty regarding the provision of future urban development with the need to be responsive to demand for such development; and
3. be informed by the relevant Long Term Plans and Infrastructure Strategies required under the Local Government Act 2002, and any other relevant strategies, plans and documents.

PC14: The future development strategy can be incorporated into a non-statutory document that is not prepared under the Act, including documents and strategies prepared under other legislation. In developing this strategy, local authorities shall:

1. undertake a consultation process that complies with:
   1. Part 6 of the Local Government Act 2002; or
   2. Schedule 1 of the Act;
2. be informed by the assessment under policy PB1; and
3. have particular regard to policy PA1.

Coordinated Planning Evidence and Decision-making

Policies PD1 and PD2 apply to all local authorities that have part, or all, of either a medium-growth urban area or high-growth urban area within their district or region.

The application of these policies is not restricted to the boundaries of the urban area.

PD1: Local authorities that share jurisdiction over an urban area are strongly encouraged to work together to implement this national policy statement, having particular regard to cooperating and agreeing upon:

1. the preparation and content of a joint housing and business development capacity assessment for the purposes of policy PB1; and
2. the provision and location of sufficient, feasible development capacity required under policies PA1, PC1 and PC2.

PD2: To achieve integrated land use and infrastructure planning, local authorities shall work with providers of development infrastructure, and other infrastructure, to implement policies PA1 to PA3, PC1, and PC2.

Policies PD3 and PD4 apply to all local authorities that have part, or all, of a high-growth urban area within their district or region.

Policy PD3 (a) applies to all local authorities that have part, or all, of a medium-growth urban area within their district or region and choose to set minimum targets under policies PC5 to PC11.

PD3 (b) and PD4 apply to all local authorities that have part, or all, of a medium-growth urban area within their district or region and choose to prepare a future development strategy under policies PC12 to PC14.

The application of these policies is not restricted to the boundaries of the urban area.

PD3: Local authorities that share jurisdiction over an urban area are strongly encouraged to collaborate and cooperate to agree upon:

1. the specification of the minimum targets required under PC5 and PC9 and their review under policies PC6, PC7 and PC10; and
2. the development of a joint future development strategy for the purposes of policies PC12 to PC14.

PD4: Local authorities shall work with providers of development infrastructure, and other infrastructure, in preparing a future development strategy under policy PC12.

Timeframes to Implement This National Policy Statement

The timeframes for giving effect to particular policies in this national policy statement are as follows.

Objectives OA1 to OD2, policies PA1 to PA4 (outcomes for planning decisions), policies PC1 to PC4 (responsive planning) and policies PD1 to PD4 (coordinated planning evidence and decision-making) must be given effect immediately.

Local authorities that have part or all of either a medium-growth urban area or a high-growth urban area within their district or region shall begin to monitor indicators under policy PB6 within six months of this NPS coming into effect.

Local authorities that have part or all of either a medium-growth urban area or a high-growth urban area within their district or region shall begin to use indicators of price inefficiency under policy PB7 by 31 December 2017.

Local authorities that have part or all of a high-growth urban area within their district or region shall have completed the housing and business development capacity assessment under policy PB1 by 31 December 2017.

Local authorities that have part or all of a medium-growth urban area within their district or region shall have completed the housing and business development capacity assessment under policy PB1 by 31 December 2018.

Local authorities that have part or all of a high-growth urban area within their district or region shall have produced the future development strategy under policies PC12 to PC14 by 31 December 2018.

Local authorities that have part or all of a high-growth urban area within their district or region shall have set minimum targets in their relevant plan or regional policy statement under policies PC5 and PC9 by 31 December 2018.

Local authorities with part or all of an urban area in their district or region that, through revisions to the Statistics New Zealand medium urban area population projections for 2013(base)–2023, comes to be defined as either a medium-growth urban area or high-growth urban area, shall give effect to the requirements by the dates set out above with the following exceptions:

• Local authorities with part or all of an urban area in their district or region that is newly classified as a medium-growth urban area shall begin monitoring indicators under policy PB6 and using indicators of price efficiency under policy PB7 by 31 March 2018.
• Local authorities with part or all of an urban area in their district or region that is newly classified as a high-growth urban area shall complete the housing and business development capacity assessment under policy PB1 by 30 June 2018.

Review of This National Policy Statement

The Minister for the Environment intends to review and amend the definitions of high-growth urban area and medium-growth urban area no later than 31 December 2018.

The Minister for the Environment intends to review the implementation and effectiveness of this national policy statement in achieving all its objectives and policies and in achieving the purpose of the Act, no later than 31 December 2021. The Minister shall then consider the need to review, change or revoke this national policy statement.

Regulatory Impact Statement

The Ministry for the Environment produced a regulatory impact statement on 29 September 2016 to help inform the decisions taken by the Government relating to the contents of this instrument.

A copy of this regulatory impact statement can be found at:

• www.mfe.govt.nz/more/cabinet-papers-and-related-material-search/regulatory-impact-statements/ris-proposed-nps-urban
• www.treasury.govt.nz/publications/informationreleases/ris

MICHAEL WEBSTER, Clerk of the Executive Council.

¹According to Statistics New Zealand’s most recent estimates.