Senior political journalists John Armstrong in the Herald and Vern Small in Stuff have both chosen to pan Nick Smith’s proposed RMA changes announced this week. Both of them criticise Smith’s use of dodgy numbers to justify the reforms. And interestingly both of them refer to his past use of dodgy numbers to ram through changes to the Accident Compensation Corporation.
They could have been referring to a Standard Post written by Eddie when three years ago he presciently said about Smith:
Part of Nick Smith’s problem is that he doesn’t understand how to build public support for change before trying to implement it. Instead, he pulls out some dodgy numbers and tries to trick the public. This backfired in the debacle over ACC levy changes when he provoked one of the first big protests against the National government.
If you want to get more of the detail have a read through past Standard posts about Nick Smith and the ACC. The collection provides comprehensive analysis and a recording of the history of the matter. Essentially there was no crisis. There was a change in ACC’s numbers because investment values had softened and there was also a change in accountancy standards which changed the value of anticipated future liabilities. But the claim that Labour had mismanaged ACC was and still is an utter lie.
Both Armstrong and Small have identified Smith’s tactic. Armstrong said:
The tone and strength of [Smith’s] language in his savaging of the RMA this week prompted immediate concern in the environmental lobby that he was trying to manufacture a crisis where there wasn’t one – just as he did at ACC in 2009 – in order to implement ideologically based changes.
The fear was that Smith was using the same blueprint in order to throttle the environmental principles in the RMA to the advantage of big business.
And Small said:
It is the same tactic he used as ACC Minister when National first took office in 2008, when he used a downturn in the state insurer’s investments to talk up a major crisis in its books – in that case to lambast the outgoing Labour government’s financial management.It hit the political mark then.
But today the no-fault insurer is in fine shape (Smith will no doubt claim more than his share of the credit) and the main embarrassment for the Government is not being able to lower the premiums as fast as ACC would like – in part because they have been used to protect Budget surplus forecasts.
Fast forward to his speech in Nelson on Tuesday, and it is again likely his high-octane rhetoric has overstated the problem.
They both also refer to the Motu Report and its troubling methodology and conclusions. Armstrong commented:
How convenient, then, that research on the impact of the RMA on apartment construction and the building of new dwellings conducted by Motu Research, a private sector-based firm which undertakes economic analysis on behalf of clients, should suddenly surface and appear to make the connection which Smith has had so much trouble finding.
Smith seized on Motu Research estimates that the RMA has added $30,000 in extra cost to each new apartment and at least $15,000 for each section. It is notable that Smith restrained himself and chose to quote these figures which are at the lower end of the estimates and thus more credible.
In his speech on Wednesday night unveiling the broad details of his overhaul of the RMA, Smith also noted Motu Research had suggested that the RMA had reduced “development capacity” by 22 per cent, thereby cutting housing supply in Auckland by some 40,000 homes while adding $30 billion in cost to developments.
Those latter figures appear startling. But those 40,000 homes would have only been built in the absence of planning controls such as height restrictions on apartment blocks or minimum floor areas.
Bar Act, however, no one in politics is arguing there should be no restrictions on what you can or cannot build.
There are other question marks hanging over Motu Research’s findings, the most pertinent one being that they are in large measure based on a survey of Auckland property developers – hardly a neutral audience. The report’s authors – who include former Reserve Bank chief economist Arthur Grimes – are totally upfront about that. They caution that their report is not a cost-benefit analysis of the pros and cons of planning rules.
And Small states:
Exhibit one is the Motu report, prepared for Treasury, that Smith used to vamp up the costs imposed by regulation and the RMA. No blame to Motu.
They did what they were asked to do and were upfront about the methodology. But when you look at the approach it raises a slew of issues. Firstly, it was not a cost-benefit analysis of the RMA and planning laws.
As Motu said: “Rather it documents the costs of the rules and regulations – as perceived by developers – to provide a basis for benefits to be compared.”
So the various figures the report threw up – $30,000 extra on the cost of an apartment, $15,000 for a house and 40,000 fewer homes in a decade than would otherwise have been the case – are well shy of a full and balanced picture.
For a start they are the impressions of a limited number of developers – akin to asking poachers how much food has been kept off the family table by the pesky gamekeepers. Secondly they do not weigh the countervailing benefits to the environment, social outcomes or even such concrete things as where expenditure by developers offsets local body rates.
Thirdly, though this is not totally clear, it appears the extra costs are those imposed by all planning and RMA-type rules.
Achieving that level of savings – if you believe them in the first place – would presumably require all the regulations and RMA rules in Smith’s pile of documents to be torched.
They both address the unreliability of the figures offered by Smith and analysed by Rob Salmond in this post. Even if the figures are true and Smith can deliver all of the identified savings the reforms will provide but temporary relief against Auckland’s out of control housing inflation.
National is clearly buying a fight with these changes. The prevailing logic seems to be that removing all planning controls will solve our housing crisis and halt run away housing inflation. This may be so but I fear that the consequence will be that Auckland will look like the picture below. And I am pretty sure most kiwis would rather not live there.
Update: As pointed out in comments Fran O’Sullivan has a go too, calling Smith’s argument that the RMA caused the housing crisis “barking”.
That’s because Smith’s 40,000 figure conveniently lines up with the identified shortage of 39,000 new homes in the city.
But it is barking to imply that all those 40,000 houses would have been built during that past decade if the RMA requirements hadn’t resulted in additional costs.
The housing environment is much more complex than that and Smith knows it.