The Productivity Commission is to expand on its housing affordability report with an investigation into improving land supply and development capacity, particularly in areas with strong population growth.

The government is interested in the scope for improving local and regional authorities' land-use regulations, planning and development systems, and wants the commission to work out how best to deliver adequate supply of land, Finance Minister Bill English wrote in a letter to commission chairman Murray Sherwin. The commission will examine and compare rules and processes for local government around freeing up land for housing, and providing necessary infrastructure, and will also draw on international experience.

"This new inquiry will delve deeper into how councils take decisions about making land available, as well as decisions about increasing the capacity for housing in existing urban areas through rules around such things as subdivision and intensive development," Sherwin said in a statement. "Capacity for more housing is not the single answer for housing affordability, but it is an essential component of a policy response, especially where demand for housing is outstripping supply."

In its 2012 report, the Productivity Commission made a slew of recommendations for improving housing affordability, and was especially critical of Auckland Council's proposed compact city approach, which it said undermined that goal.

Rapid gains in house prices in recent years have put pressure on regulators to take the heat out of the property market after the collapse of New Zealand's mezzanine finance sector cut funding for developers, meaning the nation's housing stock was static for several years.

As the local economy started to gather pace, a combination of low interest rates, increased net migration and delayed house buying decisions after the global financial crisis saw demand for housing outstrip available supply, particularly in Auckland, driving up prices.

The new inquiry's terms of reference set by the finance, housing, local government and environment ministers want the commission to identify leading practices that "enable the timely delivery of housing of the type, location and quality demanded by purchasers." The inquiry should make recommendations to policies for urban land supply and provision of infrastructure; funding and governance of water and transport infrastructure; governance, transparency and accountability of planning systems; implications of best practice on existing laws; and the involvement and engagement with the community.

The ministers excluded processing of building consents from the terms of reference, saying it's not a review of the Resource Management Act, and also carved out consideration of changes to the ownership of infrastructure assets, while including funding and governance of those assets.

The commission was also told to draw on the early experiences from the Housing Accords and Special Housing Areas Act 2013, which empowers local councils to fast-track building consents in designated areas, and was part of the government's response to the 2012 housing report.

(BusinessDesk)