Reciprocal intensification property rights

Solving the housing crisis in New Zealand will require many reforms and much effort. Some of the needed reforms will face opposition and be difficult to implement. There will be tension between the national or regional concern about housing supply and more local concerns about wanting to retain the status quo.

This article focuses on one particular easy to implement policy option, which I think could successfully navigate this political dynamic. The essence of the proposed reform is to establish a nationwide intensification right for situations where neighbours and neighbourhoods agree. Reciprocal intensification property rights will create a new urbanist tool for New Zealand, allowing a better housing intensification supply response, so that people can build in parts of our towns and cities where people want to live.

The first step would be to agree as a country on a height limit that all property owners would be allowed to construct up to as a right. I would suggest three stories would be reasonable, as that is still much shorter than many trees which any property owner already has a right to plant.

The ‘Six Sisters’, John Street, Ponsonby

Local areas through zoning provisions would still retain the right to vary setback and shade planes rules to reflect local preference. Setback and shade plane rules also limit building height and bulk -so local councils would still have some control over what kinds of development occurs in their local jurisdictions. Note a setback is the distance a building must be constructed from a boundary. A shade plane is an angle going inwards, which building height and bulk cannot exceed. It is taken from a certain height directly above the section boundary -2.5 metres in the below diagram. The angles vary depending on whether it is a northern, southern or east/west boundary.

The second step, which is the main thrust of my proposal is I believe New Zealand should adopt a system where neighbours can reciprocally agree to drop the shade plane and set back restrictions along their common border. This reciprocal intensification right could be implemented as a national policy statement amendment to the RMA, which all local authorities would then be obligated to implement. So in the above diagrams, if there was a section to the north or south and if the two property owners agree, then they would both have the right to build up to their adjoining boundary -utilising the appropriate building code for firewalls etc. If other adjoining neighbours disagreed, then on those boundaries the standard setback and shade plane rules would apply.

This proposed national policy statement would be written in a way to minimise transaction costs -two neighbours being able to lodge this variation on their property title records for a small nominal fee. The national policy statement would mean this reciprocal intensification process would not require an RMA consent.

Of course there would be many property owners who wouldn’t want their neighbour to build right up to their boundary. But some would see the advantage in co-operating, so they have the option of building more floor space. Making this reciprocal intensification right a choice option eliminates the major criticism of up-zoning. Being, up-zoning dictates an exchange of a property rights to sun, views and privacy for the right to intensify. Some property owners believe they will be worse off if this exchange is enforced by local government zoning dictate.

If reciprocal intensification rights were spread across a large enough area -say the Auckland isthmus or the entire country, then this would give the opportunity for a lot of intensification -in the form of duplexes if two neighbours agree and European style terrace housing if many neighbours agree. There are 1.8m private dwellings in New Zealand -if just 1% of those were intensified due to reciprocal intensification over a period of time -say ten years, so that one household dwelling became on average three, that would net an additional 36,000 new homes. I am not sure if 1% and one house intensifying into three are reasonable expectations, but it shows that even with modest assumptions this proposed policy reform could have an impact on the housing market.

The main benefits of this reciprocal intensification property proposal are;

  • It decreases transaction costs for site assembly. Currently to achieve site assembly, either neighbours would have to go through a complex and uncertain RMA application process or a property developer would need to buy up the neighbouring sections before applying for permission to construct some similar contiguous housing development type.
  • It addresses the sequencing problems that discourages neighbours using the RMA to achieve this sort of intensification. This being currently both parties need to apply for RMA consent at the same time and the RMA does not allow this consent to remain in force for perpetuity if one or both neighbours want to delay. The economist Eric Crampton, wrote a short entry on his blog-site about reciprocal intensification saying that it formalises neighbours’ Coasean bargains.
  • In my opinion this proposal encourages a more desirable urban form as it gives property owners the ability to build across their property frontage so that new housing face the street. Currently our zoning rules encourage infill housing that goes down the length of the property. There are some architectural slides from a US city, that transformed traditional standalone housing suburbs into suburbs of duplexes and terraces, by reducing allowable section sizes to only a little over 100sqm and by not having side yard setback and shade plane restrictions. The end result as can be seen is quite pleasing.
  • It gives greater housing supply options for building types with construction costs per square metre comparable to standalone housing. This will lower the median price and increase build rates for the new build market, benefiting the middle and lower ends of the market. David Chaston from Interest.co.nz has compiled some statistics showing Auckland apartment building in 2016 is no longer supplying the smaller more affordable end of the property market.
  • It allows housing supply to respond to locational demand. Jason Krupp from the NZ Initiative has written several articles, most recently with Alex Voutratvis from the Property Council arguing there is evidence that with the increase in service sector employment, the proportion of inner city (such as the Auckland Isthmus) employment versus peripheral employment in Australasian cities is rising.
  • It allows housing supply to respond to housing size demand. There is evidence of an under supply of 1–2 bedroom homes in the property market.
The largest increase in household groups are singles and couples -yet very few one or two bedroom homes are being built

In some ways this reciprocal intensification property right proposal is the generic application of a specific proposal (and this too),which I made for an alternative way to provide residential housing in Christchurch, following the earthquakes destroying much of the CBD.

The below pictures give an idea of what I was thinking, with each unit being owned and developed by a different property owner, whilst complying with some common design themes.

The reason this form of intensification is cheaper to build compared to high rise apartments is because being a maximum of three stories high they can be built as a walk-up unit using similar timber construction methods as traditional standalone housing, there is no need for an expensive concrete elevator core, mechanical ventilation, sprinkler systems, underground parking and expensive structural engineering.

Ockham Residential an Auckland building company specialising in medium density residential construction, have long argued for planning rules to be more favourable to this type of intensification.

Ockham Residential would like to see the final Unitary Plan enable the development of homes that meet the social and demographic needs of current and future Aucklanders, at price points they can afford, in places they want to live. Achieving that in our view means maximising the established suburban areas of Auckland which permit three storey structures, unlimited density (measured as dwellings per 100sqm) but with a minimum of 40 per cent retained green space.

It is possible that as residents become more familiar with intensification and in neighbourhoods where there is a high degree of trust and co-operation then bigger and more elaborate voluntary land reallocation and adjustment schemes could be attempted. For example, a large segment of a traditional suburban block could be reconfigured so that say 10 title holders with 10 houses were replaced with 40 dwellings on 40 titles. In the process section sizes and shapes could be rearranged and reallocated among the original property titleholders and common areas like laneways could be provided for.

These larger schemes may require additional legislation similar to Body Corporations. Alternatively if the Municipal Utility District idea as discussed in a David Lupton article on appropriate infrastructure charging found favour, a variation on this municipal bond/community council idea could allow the neighbours involved in intensification to finance and manage common areas and facilities, such as car parking, communal outdoor spaces, pedestrian/bike laneways and other options like centralised hot water heating schemes or centralised electricity generators -such as solar power. Some common areas such as laneways may benefit the wider public and the Council might therefor contribute financially into such a scheme. An urban development authority might also assist these sort of neighbourhood intensification schemes by providing planning, design, legal or financial advice.

There is a criticism that some parts of New Zealand, such as Auckland are unsuitable to intensification, due to the low amount of public space it has provided for roads and intersections, meaning Auckland is prone to congestion and gridlock. This criticism being based on a UN Habitat Report comparing various cities allocation of street space. I believe the best way to manage this risk is with variable road pricing as already discussed by David Lupton in his infrastructure charging article. But in some cases the creation of additional public laneways in conjunction with intensification schemes may assist in making city suburbs more porous for active transport modes like walking and cycling. This might help increase the catchment areas for more space efficient public transport services.

I believe reciprocal property right intensification and neighbourhood voluntary land reallocation schemes will be driven by both supply and demand. Demand will come from urban areas with high amenities -like proximity to employment, easy public and private transport access, cycle-lanes, markets/shops, entertainment and desirable natural environments like beaches, parks and forest.

In Auckland not all high amenity areas have been up-zoned by the new Unitary Plan. So for the city most suffering from New Zealand’s housing crisis there is an opportunity for reciprocal property right supply to increase housing supply in places where there is a demand for it.

Reciprocal intensification property rights and neighbourhood voluntary land reallocation schemes will not by itself be enough to encourage intensification. Other intensification restrictions such as minimum section sizes, minimum car parking requirements, landscaping site coverage rules, viewing shaft restrictions, absolute dwelling density per hectare limits, outlook rules, heritage restrictions, dwellings having secondary kitchens … may be as or more significant in the way they restrict the supply of housing intensification options and should also be reviewed by affordable housing policy makers.

Reciprocal intensification property rights I think would be quicker and a less controversial first step to intensification compared to widespread up-zoning, which tend to result in property owners who oppose their neighbours having the right to intensify creating residency groups to fight such measures. These local interest groups which may only represent a minority of locals, have and continue to delay reasonable efforts by regional and national bodies to address restrictions on housing supply.

I believe New Zealand should give greater weighting to the regional and national concern about affordable housing supply compared to the minority local interest in retaining the status quo. It has been my goal with this reciprocal intensification proposal to create a fair and appropriate first step to address this imbalance.