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Image: Getty Images / Archi Banal
Image: Getty Images / Archi Banal

OPINIONPoliticsDecember 9, 2022

How Queenstown makes property developers share the wealth

Image: Getty Images / Archi Banal
Image: Getty Images / Archi Banal

When rural land gets rezoned for home building, developers make a killing – all while local workers find it harder and harder to find affordable housing. Enter ‘inclusionary zoning’, a wealth redistribution policy that could be coming to a council near you soon.

This article was first published in Bernard Hickey’s newsletter The Kākā.

How can Aotearoa redistribute the massive wealth gains on land in order to help solve our housing affordability, poverty and climate crises? It’s a debate that appears frozen for now.

The prime minister’s “never in my political lifetime” stance on wealth and capital gains taxes, the Greens’ lack of leverage over Labour, and National and Act’s long-held opposition to capital or land taxes have closed down the Overton Window on the issue. The debate being reopened in the foreseeable future depends largely on whether The Opportunities Party and Te Pāti Māori get enough (or any) leverage in government-forming negotiations to force the window back open. But even that remains impossible while Jacinda Ardern remains Labour leader and sticks to ruling out taxes on wealth and capital gains, as she did at the 2020 election.

Given the current polls currently show voters want a National/Act government in its own right, the chances are fading for any sort of centralised attempt to begin wealth redistribution and solve the funding blockages in local government.

But there is a glimmer of hope emerging at the local level, led by the Queenstown Lakes Community Housing Trust and its founder, the Queenstown Lakes District Council, which have been quietly operating an inclusionary zoning system since 2003. Inclusionary zoning is a non-threatening phrase to describe landowners benefiting from a zoning change being required to hand over a certain percentage of the sub-divided land, or a monetary equivalent, to a community housing provider in order to build affordably priced homes for rent or sale. It is a common practice in the United States, the UK and Australia.

An artist’s impression of the Jack’s Point development during the planning phase (Image: Supplied)

It was introduced to New Zealand in 2003 by a young American town planner working for the Queenstown Lakes District Council named Scott Figenshow, who went onto become the long-serving CEO of Community Housing Aotearoa. Having seen how effective the practice was in the United States, Figenshow ensured the Jack’s Point development was required to put aside around 5% of the rezoned land value for a Community Housing Trust developed specifically for the purpose by the council.

This practice has been kept going since then, helping to fund the building of homes for 244 families in Queenstown. Inclusionary zoning, or “inclusionary housing” as the trust now calls it, has already built 109 homes from the 5% contributions of land or money by developers, with a further 215 in planning or building stages across the district.

The council decided to formalise the practice in its new district plan and put a proposal out for consultation earlier this year. However, the proposal as it stands would actually expand it to include “Mum and Dad” redevelopments of large sections into two or three plots for infill housing. Contributions would range from 1% to 5% and also include the triggering of a new contribution when an empty plot is built on.

‘Don’t tax my land. Tax someone and something else.’

That’s when the trouble started. The issue was picked up in the local election campaign, with some calling the practice a new tax. Here’s an example of the reaction from Kinloch Wilderness Retreat owner John Glover, quoted in Crux:

“Using the RMA to deliver inclusionary zoning, which is basically a tax, is really quite perverse, and it’s actually probably stretching the scope of the RMA…the revenue raising path in the RMA is about cost recovery. How does that help with affordability of housing?

“You’re not proposing to tax the businesses and the tourism operators…whose rapid growth in the district has been a significant factor underlying the housing shortage.”

Essentially, land owners, fearing some of their unearned gains were about to be taken away, said other people and other activities should be taxed, rather than their capital gains on land values generated by rezoning decisions.

The Queenstown Lakes Community Housing Trust purchased 50 apartments in the Toru development. Eight were then sold on the open market to finance the supply of the remaining 42 units as a mix of assisted ‘Secure Homes’ and affordable rentals. (Photo: Lynn Grieveson/TheKaka)

They could also see the potential for the practice to spread. One councillor, Nikki Gladding, even opposed the plan on the grounds it would cost a lot of money to defend in the courts once developers challenged it:

“It’s going to go through the courts and we won’t get any money out of this, if we ever do, for five, six years…and it’s going to take all that time and money to get there.”

Understanding the sensitivities, the housing trust has made a submission to the district plan suggesting paring the inclusionary housing contributions back to brand-new and full scale developments.

The council is now in the final stages of considering the submissions and is expected to vote on the final form of inclusionary housing/zoning in the coming months.

Why including inclusionary zoning feels so dangerous (and hopeful)

Why is everyone being so sensitive about a practice commonly used overseas? Because it feels like the thin end of a wedge that might touch the biggest wedge of wealth of all: unearned gains on private land values driven by rezoning and public infrastructure investment.

We are the only developed economy in the world that does not tax this wealth. No wonder the owners of that wealth feel a little nervous.

Being taxed on earnings is painful. But being taxed on a lottery win feels like more like theft, given the government is benefiting from the good fortune for an individual. There’s something in that process of taxing a lottery win that seems to trigger a particular level of outrage.

Ideas like inclusionary zoning represent a profound threat to New Zealand’s traditional approach to wealth-building, based as it is on rising land values created out of land use restrictions, infrastructure under-spending and falling interest rates. And that’s all before we even get to the original provenance of the land and how it came to owned by settler families and farmers. Deep down, most land owners know they don’t deserve their huge profits and that if justice was done, that unearned wealth would be redistributed to those who owned the land to begin with, and to those who have to rent the land and service the landlord/rentier class.

Why the Queenstown situation matters so much

The reason the Queenstown example is so important is that the current RMA reforms could be the vehicle for wider adoption of the Queenstown way. The reforms could see every district plan rewritten to include inclusionary zoning, effectively bypassing the frozen debate at the central government level.

Why shouldn’t every district plan include inclusionary zoning? Lots of councils are watching Queenstown closely and the RMA rewrites look to be perfect opportunities to adopt the practice more widely.

Two podcasts about inclusionary zoning

I spoke to the Queenstown District Housing Trust CEO Julie Scott about the concept for my Spinoff podcast, When the Facts Change, a couple of weeks ago.

Also, on her podcast Right at Home, Community Housing Aotearoa CEO Vic Crockford talked with her predecessor Scott Figenshow and Roy Thompson, co-founder and managing director of New Ground Capital, about the use of inclusionary zoning.

Keep going!
Wayne Brown, Auckland’s invisible mayor. (Image: Toby Morris)
Wayne Brown, Auckland’s invisible mayor. (Image: Toby Morris)

OPINIONPoliticsDecember 8, 2022

Who needs art galleries when you could have a city of piss-soaked parking buildings

Wayne Brown, Auckland’s invisible mayor. (Image: Toby Morris)
Wayne Brown, Auckland’s invisible mayor. (Image: Toby Morris)

Auckland’s mayor might not see the point of the city’s art gallery, but he’d find plenty to admire about the parking building across the road.

Yesterday I parked in a car parking building right across the road from Auckland Art Gallery. I got out of my car, went downstairs to try a sandwich I had been highly recommended for a treat, and came back to my car about 35 minutes later. The sandwich, as it turned out, was really good. (Thanks, Swings.)

The parking, however, cost me $13.50. And as I thought about that and regretted my decision to park there, I realised something on the ground floor where I paid my $13.50 was emitting a high pitch frequency that was giving me an instant headache. It might have been some kind of mechanical fault, or it may have been an attempt to stop homeless people congregating there, but either way the noise and the dark, dank atmosphere was giving me clear signs to leave as fast as I could.

So I caught the lift, which was covered in graffiti and smelt like piss, back up to the 12th floor to find my car, and as I did I thought “Wow, what a hostile space. What an unwelcoming, unpleasant, anti-social shitsmear of a building”. Then I drove my car back down the 12 floors and looked at all the cars parked there and thought about how much money this terrible place must make.

Another thing that happened yesterday was that Auckland mayor Wayne Brown pondered wildly and publicly about the utility and purpose of the building across the road – the Auckland Art Gallery Toi o Tāmaki. He looked at the number of visitors between July and September (9,516), and the number of staff (122) and wondered what the point of it all was. “9,500 wouldn’t run a dairy in terms of turnover,” he said. ”How do we get to have 122 people looking after a few paintings in a building that nobody goes to?”

Brave council members tried to point out the gallery’s value might be broader than just gate takings, but Brown wasn’t having that. “We’ve got billions of dollars of value in the cellar that no one is looking at – do we have to own all that? They are not New Zealand pictures,” he said, being an actual mayor of an actual city, with a straight face.

He’s been elected, of course, on a platform of “fixing Auckland”. It’s unclear if the problem he wants to fix is specifically clearing up the council’s debts and spending, or a more broadly post-kindness era sense of getting rid of perceived wishy-washy nonsense, a sort of vague handwavey snarl at “these days” in general. The approach has been blunt to say the least – a heavy hammer swung at all ill-defined target, assuming the worst about every aspect of council operation before learning what it is they actually do. He wants to smash something. Exactly what seems irrelevant.

But this blinkered focus on cutting costs before anything else misses the big picture about why the council does the things it does in the first place. What are institutions for if there’s no value in anything past dollars on the budget sheet. By Wayne Brown’s measures, that horrible piss soaked rip-off carpark is the more successful building.

It’s hard to believe the selfishness, the short sightedness, the ignorance that leads to thinking that “I don’t go there” means “no one goes there”, or “doesn’t appeal to me” means “we don’t need it”. Auckland Art Gallery isn’t perfect; they’ve faced big internal challenges in recent times, but they’ve had triumphs too – just look at 2020’s landmark survey of contemporary Māori art, Toi Tū Toi Ora, which pulled huge audience numbers and made bold statements for the history books about the past, present and future of Māori art. Some of the impacts of a show like that are immediate, changing careers and perceptions. Others will be seeds that are planted now that might take 10 or 20 years to flower. Somewhere out there is a kid who saw that show who in 2037 will create an artwork that redefines us all again.

And this doesn’t just apply to art galleries – it’s parks, museums, public art and libraries, things that bring a city to life. Cities are places to feel at home in, to grow up in and feel safe and inspired and make a life in, and institutions like the gallery give us that in a way that will never be reflected in visitor numbers or lines on a budget sheet.

So sure, cut the budget. But if you don’t like the gallery and you’re purely judging usefulness on running costs and profitability you can always go and admire the ear-splitting, stinking car storage facility next door. They’re not struggling for visitor numbers, and they like money too.

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