Launching vacant Crown land programme Moire Road recommendation. number:

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1 BRIEFING Launching vacant Crown land programme Moire Road recommendation Date: 22 May 2015 Priority: High Security classification: In Confidence Tracking number: Action sought Hon Dr Nick Smith Minister for Building & Housing Action sought Agree to the recommendations. Note the supporting material for the 29 May launch event in Auckland. Forward the attached briefing to the other housing ministers. Deadline 29 May 2015 Contact for telephone discussion (if required) Name Position Telephone 1st contact s 9(2)(a) Michael Pead Executive Director (04) Andre Anderson Principal Advisor, Housing Markets (04) The following departments/agencies have been consulted [double click box & click checked ] Treasury MoJ NZTE MSD TEC MoE MFAT MPI MfE DIA TPK MoH Other: Minister s office to complete: Approved Declined Noted Needs change Seen Overtaken by Events See Minister s Notes Withdrawn Comments:

2 BRIEFING Launching vacant Crown land programme Moire Road recommendation Date: 22 May 2015 Priority: High Security classification: In Confidence Tracking number: Purpose This briefing: i. recommends that the Government purchase a 9.5 ha site at Moire Road and procure a development partner to develop it for residential housing; ii. iii. iv. reviews the options for the associated Cabinet paper, including the potential for Cabinet to delegate further decision-making authority to the Ministers of Finance and Building & Housing; provides supporting material for the launch event scheduled on Friday 29 May 2015 that will further introduce the vacant Crown land work programme to developers; and reports on our progress towards facilitating the development of other parcels of vacant Crown land in Auckland, which can also be discussed at the launch. Recommended action The Ministry of Business, Innovation and Employment recommends that you: a Direct MBIE to prepare a Cabinet paper seeking: i. an appropriation to purchase the Crown land at the corner of Moire Road and Granville Road in Massey East, Auckland from the Ministry of Education; ii. iii. iv. permission to issue procurement documents seeking a registration of interest from potential development partners for the wider vacant Crown land development programme (including Moire Road); approval of the broad terms on which the Moire Road site will be offered to developers; and delegated authority from Cabinet for the Ministers of Finance and Building & Housing to progress the activities of further sites. Agree / Disagree b Agree that the broad terms on which the Moire Road site is offered to developers be: i. s 9(2)(i), s 9(2)(j), s 9(2)(k) ii. In Confidence 1

3 iii. s 9(2)(i), s 9(2)(j), s 9(2)(k) Agree / Disagree c d e f g h i Note LINZ has given MBIE until Thursday 4 June 2015 to confirm whether we wish to purchase the Moire Road site, before LINZ will proceed to offer the land to iwi under their right of first refusal. Direct MBIE to confirm with LINZ by Thursday 4 June 2015 (i.e. in advance of the Cabinet decision) that we wish to purchase the Moire Road site. Agree / Disagree Note the only significant limitation for the development of the Moire Road site is the capacity of the wastewater network in the area, which will not prevent the development proceeding, but which is likely to mean that Auckland Council seeks to manage the pace and volume with which new dwellings are built on the site until additional wastewater capacity becomes available in Note that, if the Government commences procurement in June, it would be possible to sign a development agreement in respect of Moire Road by the end of October. Note this timetable is likely to be too late to have earthworks consented and completed during the earthworks season, which would mean that the first new dwellings are unlikely to be completed until towards the end of the summer (although it may be possible to secure consent to undertake winter earthworks during 2016 that would accelerate this timetable). Note that, if you would like to publicly announce the Moire Road site at the launch event, you may wish to provide advance notice to the Chair of the Tamaki Collective, Paul Majurey, who is expecting to be offered the land in June Note that: i. ii. j Forward this briefing to Ministers English and Bennett. Agree / Disagree Michael Pead Executive Director Construction & Housing Markets, MBIE... /... /... Hon Dr Nick Smith Minister for Building & Housing... /... /... In Confidence 2

4 Background 1. You have asked us to lead a work programme to facilitate the development for housing of suitable vacant or near vacant parcels of Crown land in Auckland. The Government has set aside $52 million in a capital contingency fund to progress such developments, principally to finance the purchase of suitable land parcels from the Crown agencies that currently hold them. 2. After our March 2015 briefing [BN refers], you asked us to report back to you seeking decisions on sites to offer developers together with the terms of that offer and raising any relevant issues. 3. Following on from the announcement of the vacant Crown land development programme at the Budget, you will further introduce the programme at a launch event on Friday 29 May 2015 to which we have invited Auckland developers. You have asked us for supporting material for this event. 4. You also asked us to identify other potential development opportunities and to advise you on the status of the six examples of vacant Crown land that we introduced to you in our March briefing. As further background for the 29 May launch, we describe the process that we are undertaking to identify these other development opportunities. Purchase and development of Moire Road, Massey 5. In our March briefing, we identified that the Crown owns 9.5 hectares of vacant land on the corner of Moire Road and Granville Road in Massey East, which has the capacity to carry 210 dwellings and is worth about s 9(2)(j) million We recommend that the Government purchase this site and facilitate its development for housing. 7. Maps and photos of the site are annexed to this briefing. They show that the site is in an attractive location, adjacent to parks, open space and a bush walk, and close to the coast, a primary school, supermarket and major shopping centre. Accordingly, we expect that developers will be attracted to developing the site for residential housing. Availability 8. The land is currently held by the Ministry of Education. It had been set aside for a new high school, but was declared surplus to the Ministry s requirements in 2012 because Hobsonville Point Secondary School was built instead. 9. LINZ advises that the land is available for immediate purchase for an alternative public purpose, but will shortly be offered to iwi under their right of first refusal. LINZ has asked us to confirm whether we wish to purchase the land by Thursday 4 June Because the land will otherwise be offered to iwi if we do not purchase it, there is no opportunity to ask the Ministry of Education to continue to hold the land while we facilitate its development. 1 LINZ has commissioned a valuer to provide a definitive valuation of the site, expected at the end of May. In Confidence 3

5 Due diligence 10. We have undertaken due diligence on the site that indicates no significant barriers to residential development. In particular, the site already has access to storm, waste and clean water services that have available capacity. It is within 1km of the Royal Road on-ramp to the North-western Motorway and is located on major bus routes that connect to the CBD, Westgate shopping centre and the local high school. Wastewater network capacity 11. The only significant infrastructure limitation is the capacity of the wastewater network in the region. Auckland Council advises that there is wastewater capacity for a further 2,000 dwellings over the next six years across the entire north-western growth area, including Massey, Hobsonville, Whenuapai, Kumeu, Huapai and Riverhead. Further capacity will become available in 2021 when a bulk sewer that can divert wastewater flows from the northern end of this area to another treatment plant will be completed (called the Northern Interceptor ). 12. Consequently, while there is sufficient capacity for the Moire Road development to commence, Auckland Council is likely to seek assurances with respect to the total number of dwellings and the timing of when those dwellings will be completed (the stages of the development). This means that building a higher number of dwellings on the site (i.e. higher density) is likely to be resisted unless it is staged over more than 6 years. Flood plain 13. The site is on the lower bank of Lawson Creek, so part of it falls within the creek s flood plain. Its location on the river bank also means the site isn t flat, but the gentle gradient is not considered a barrier to housing development. State housing purpose 14. The Moire Road site would need to be set apart for state housing purposes by notice in the Gazette under the powers of the Housing Act The definition of state housing purposes includes the acquisition and sale of land by the Crown as sites for dwellings. Provided we put sufficient protections in place to ensure that the land is developed in a manner consistent with a scheme of development approved by the relevant Minister (currently Minister English), these powers mean that the Government can on-sell the Moire Road site without triggering the obligation to offer the land back to its previous owner. Right of first refusal 15. Once held for state housing purposes, it is also possible for the Crown to sell the land without first offering it to Auckland iwi under their right of first refusal. To do so in most areas of Auckland, the responsible Minister must notify the Whenua Haumi Roroa o Tāmaki Makaurau Limited Partnership that, in the Minister s opinion, the disposal assists in achieving the Crown s social objectives in relation to housing. 3 We are exploring to what extent we can rely on this option when developing the Moire Road site. 2 Section 4, Housing Act Section 136, Ngā Mana Whenua o Tāmaki Makaurau Collective Redress Act 2014 In Confidence 4

6 Appropriation and Cabinet decision 16. To purchase the land from the Ministry of Education requires a Cabinet decision to appropriate against the programme s capital contingency. We recommend that you submit a Cabinet paper to EGI for consideration at its meeting in mid-june As we anticipate identifying other sites with development potential, we recommend that the Cabinet paper seek delegated authority for the Minister of Finance and Building & Housing to take all further decisions in respect of the sale and development of each site. This will include approving: a. relevant stages of the procurement process; b. the relevant business case; and c. the particular outcomes being sought from each development. 18. Because this will be the first and possibly only Cabinet decision in respect of the rapid development of vacant Crown land for housing in Auckland, we propose that the Cabinet paper also seeks your colleagues support for the programme s objectives and proposed approach to development. Development model and objectives 19. We recommend that the Government employ the same development model that it used in Christchurch, as described in our March briefing. Consequently, we recommend that the Cabinet paper seeks authority to sell the land to a development partner on the following broad terms: a. b. s 9(2)(i), s 9(2)(j), s 9(2)(k) c. 20. In comparison, the median sales price of the 75 houses that sold in Massey during the three months to February 2015 was $567,000. This means that the more affordable housing in the development will be priced at just below the prevailing median price. Procurement 21. We recommend that we replicate the general procurement approach that the Government adopted for the Christchurch developments. There are two broad stages to the procurement process: Invitation to partner a. The first stage is an open registration of interest to pre-qualify developers with the right mix of skills and capabilities, including across a range of development types (e.g. for both terraced housing developments and stand-alone housing developments). If we commence the registration of interest in early June, this process is expected to be completed by mid to late July In Confidence 5

7 Request for proposals b. The second stage is to invite pre-qualified developers to develop and submit proposals for a specific site. This stage will allow for dialogue between the developers and the Government to enable the developers to refine their proposals. This is a more involved process that we anticipate will take a further three months, after which the development agreement is then negotiated and signed. 22. In the case of the Moire Road site, immediately following the registration of interest, we propose to invite pre-qualified developers to submit proposals for developing the site. 23. We recommend that the Cabinet paper seeks authority to publish the registration of interest documents immediately and seeks delegated authority for the Ministers of Finance and Building & Housing to approve further stages in the procurement process. Timing 24. If the Government commences procurement in early June 2015, it would be possible to sign a development agreement in respect of Moire Road by the end of October This timetable is likely to be too late to have earthworks consented and completed during the earthworks season, which would mean that the first new dwellings are unlikely to be completed until towards the end of the summer at the earliest. However, it may be possible to secure a resource consent to undertake winter earthworks during 2016, which would avoid that delay. Special housing area 26. Auckland Council advises that the dwelling capacity under the current zoning of the existing district plan is higher than that under the proposed zone in the Unitary Plan. Consequently, declaring the Moire Road site to be a special housing area offers no greater dwelling capacity. Nevertheless, we will explore whether there is any other benefit in the site becoming a special housing area and report back to you. Stakeholders 27. Before you announce the Moire Road site publicly, you may wish to provide advance notice to the Chair of the Tamaki Collective, Paul Majurey. Iwi are aware that the Moire Road site is in the Crown land disposal process and is due to be offered to them next. Launch event 28. You are presenting to developers at the launch of the vacant Crown land development programme on Friday 29 May In support of your presentation, we have attached the following DRAFT material as annexes to this briefing: a. speech notes; b. slides for the presentation; and c. questions and answers. In Confidence 6

8 Agenda 29. We propose that the launch follow the broad agenda set out below: Time Description Who 2.30pm 3.00pm 3.10pm People to arrive tea and coffee available Launch Welcome and Introductions: Proposed Agenda Key Purpose of Launch Government Offers Scaled Housing Development Opportunities: Developers want scale and an opportunity to develop Packages of initiatives to grow supply: o Housing Accords / Special Housing Areas o Homestart o Tamaki regeneration / HNZ Developments o Waimahia (Weymouth) Development o Christchurch Developments (Awatea; Welles; Colombo) Broad objectives of this programme Respective role(s) between Crown and Developers and the value of Developers commitment to the programme Key facts on Auckland land developments High level map of Crown land opportunities Andrew Crisp / Chris Bunny MBIE Minister Smith 3.50pm Auckland Councils Initiatives Mayor Brown or Deputy Mayor Hulse 4.10pm Land opportunity Alignment and procurement process Land opportunity identification and readiness Example sites and opportunity Procurement process and timing Chris Bunny MBIE 4:30pm Development Auckland Stephen Town Auckland Council CEO 4.45pm Any Questions Audience / MBIE Facilitate 5.00pm Network Opportunity In Confidence 7

9 Other development opportunities 30. The process for identifying development opportunities takes the vacant land parcels that we have identified, assesses them against key criteria and then examines the particular issues that need to be addressed in respect of the best ones, particularly with respect to the Crown s statutory obligations and the land s availability for development. The final step is to offer the best opportunities to developers via the procurement process. 31. We describe the process before identifying other potential development opportunities that we are passing through the process. Because we have only partially applied the criteria, we don t know yet which of these sites we will be able to progress further. In particular, we are yet to approach the Crown agencies who hold this land to ask them whether they still need it. Criteria 32. We are assessing land parcels against the following criteria, ranked in order of priority: Availability a. Because the Government s objective is to identify sites that can be developed quickly, the most immediate determining factor is whether the relevant land parcel is available for development: i. In the case of vacant Crown land that has already been declared surplus to its current purpose, its availability depends on what stage it has reached in the disposal process. Land that is currently being offered to another part of central or local government, to its former owner under the Public Works Act 1981, or to iwi under a Treaty of Waitangi settlement is not available unless and until the government entity, previous owner, or iwi has declined to (re)purchase the land. ii. In the case of all other land, it depends on whether the Crown agency that currently holds the land still needs it for another purpose. Size b. Larger land parcels generally offer greater dwelling capacity than smaller parcels. Thus, in the first instance, we are restricting our search to parcels that are greater than 2 ha in size. Zoning and dwelling capacity c. To be developed quickly, the land parcel must have current operative zoning that supports residential housing. Higher density zoning that supports greater dwelling capacity is preferred over lower density zoning. Infrastructure d. The land parcel must have bulk infrastructure available at its boundary that has capacity for the likely number of dwellings that will be built. Land e. The nature of the land must be able to support residential housing, meaning: i. manageable gradients; In Confidence 8

10 ii. iii. stable soil; and that any contamination can be managed. Market attractive f. The amenities that the site offers must outweigh any limitations or disadvantages. To test this, we are measuring each site s proximity to amenities such as supermarkets, schools, open space, the coast and public transport; and balancing that with the site s exposure to undesirable factors such as sources of noise and being prone to flooding. Statutory obligations 33. The process that determines the availability of Crown land and its ability to be used for housing development must comply with: a. relevant statutory requirements, including the requirements of the Public Works Act 1981; and b. the Government's obligations under the Treaty of Waitangi. Public Works Act 1981 and Housing Act Section 40 of the Public Works Act 1981 (PWA) provides that where any land that was acquired for a public work is no-longer required for that public work, or any other public work, endeavours must be made to offer the land back to the person from whom the land was originally acquired or their successor. 35. Some of the sites we are investigating are already part-way through the offer back process. In other cases, we will be asking the current Crown agency that is holding the land to transfer it to us before the land is offered to previous owners or iwi. 36. Having acquired the land for a public work, when we then on-sell the land to a developer we need to be able to do so without being bound to offer it to previous owners first under section 40 of the PWA. As noted with respect to the Moire Road site, the Housing Act 1955 provides the method. Provided we acquire the land for state housing purposes and ensure the land is developed in accordance with an approved scheme of development, the Act defines state housing purposes to include the acquisition and on-sale of land by the Crown as sites for dwellings. Treaty obligations 37. Several iwi and settlements apply across the Auckland region. Accordingly, we are undertaking further work to fully understand how the Crown s treaty obligations may apply to any one land parcel, particularly with respect to rights of first refusal. 38. For example, the Nga Mana Whenua o Tamaki Makaurau Collective Redress Act 2014 includes a carve out that enables the Crown to dispose of land held for state housing purposes without triggering a right of first refusal for iwi, provided that the relevant Minister has given notice to the Tamaki Collective that, in the Minister's opinion, the disposal is to achieve, or to assist in achieving, the Crown's social objectives in relation to housing or services related to housing. The Tamaki Collective represents the interests of the thirteen Auckland iwi and hapu who received redress under that Act. In Confidence 9

11 39. Separate to this, the Government has also negotiated a protocol under which the Government is obliged to offer the Tamaki Collective an opportunity to be the developer (on the same terms offered to the private sector) unless this would substantially frustrate the Crown's housing objectives, increase costs or reduce efficiency for the Crown Further engagement with Maori may also be required to determine whether specific sites need to be set aside pending further Treaty negotiations ( the Protection Mechanism ) or protected because of their historical, spiritual or cultural significance (the Sites of Significance process). Availability 42. The Moire Road site is the only one of the six sites discussed in our March briefing that is immediately available for development. Two of the others may yet become available in the middle of the year, plus another towards the end of the year, while the other two are not available at all. 43. If you wish to discuss particular sites in your public announcements, you are free to discuss the sites that have been formally declared to be surplus However, please do not refer to any other land parcels as being surplus, as even the suggestion that land may be surplus can create difficulties for the Crown agency who currently holds the land and for the Government s commercial position in any subsequent procurement process, and would pre-empt our engagement with relevant iwi. Examples of sites in the Crown land disposal process 44. Three of the other five sites we highlighted in our March advice demonstrate the three main stages of the Crown land disposal process, have been formally declared to be surplus and can be referred to in public announcements: a. Step 1: Offer to other central and local government agencies: Once an agency has formally declared its land to be surplus to its purposes, the first stage is for that land to be offered within government for another public work. The site ( ha) has been offered to Auckland Council, who have until the end of July 2015 to decide whether or not to purchase it. b. Step 2: Offer back to previous owners: If surplus land can find no further use as a public work, it is then offered back to its previous owners, who are given two months to decide whether to purchase it. In Confidence 10

12 The site ( ha) is an example of Crown land that has been offered back to its former owners, who have just entered an agreement to purchase it, meaning this land cannot be used for a Crown facilitated development. c. Step 3: Offer to iwi under a right of first refusal: If not acquired for another public work or sold to its previous owner, the last stage of the process is to offer the land to iwi under their right of first refusal. The site ( ha) has been offered to the Tamaki Collective, which has until late June 2015 to decide whether or not to purchase it. Land outside the Crown land disposal process 45. Neither of the remaining two sites that we highlighted in our March briefing have been declared surplus to their current purpose and so are not in the Crown land disposal process. Consequently, they should not be described as being surplus simply because all or parts of them are vacant. 46. In these and other such cases, the first step is for us to ask the relevant Crown agency to determine whether they still need the land for its stated purpose. If not, the agency will need to formally declare the land surplus to that purpose, which triggers the Crown land disposal process. We can then acquire the land at the first stage of the process, when it is offered within government for other public works: s 9(2)(f)(iv), s s 9(2)(f)(iv), s 9(2)(g)(i) a. 9(2)(g)(i) (27 ha): currently holds most of the site that we described in our March 2015 briefing s 9(2)(f)(iv), s 9(2)(g)(i) s 9(2)(f)(iv), s 9(2)(g)(i) advises that it is unlikely to be in a position to make a final decision in respect of this site until towards the end of the year. If it does decide that it will no longer s 9(2)(f)(iv), s 9(2)(g)(i) s 9(2)(f)(iv), s 9(2)(g)(i) this land will then be declared surplus and become available for housing development. b., Papakura ( ha): Other Crown land outside the Crown land disposal process 47. We are in the process of applying our criteria to other parcels of vacant or near vacant Crown land and will report back to you with our recommendation of the best land parcels to pursue further. In the meantime, we provide you with some further examples of land the Crown owns that might be suitable for rapid development in Annex 1. Please note, however, that we are yet to approach the Crown agencies who hold this land to determine whether they still need it. 48. Given that land availability is the most critical factor and that these opportunities are land parcels that have not been declared surplus to their current requirement, once we identify the next best opportunities we will recommend that you write to the Ministers and Chief Executives of the Crown agencies that are holding the land to encourage them to relinquish it for housing development if they possibly can. In Confidence 11

13 49. Meanwhile, unless and until the relevant Crown agencies agree they no longer need the land for their purposes, we cannot describe it as being surplus. Annexes Annex 1: Other potential development opportunities Annex 2: Overview of the Moire Road site Annex 3: Speech notes for the launch event on Friday 29 May 2015 Annex 4: Draft slides for your presentation on Friday 29 May 2015 Annex 5: Q&As for the launch event on Friday 29 May 2015 In Confidence 12

14 Annex One: Other potential development opportunities We have identified the following examples of vacant Crown land that might have development potential, depending on whether the land is available. In each case, the land has not been declared surplus and so we would need to identify and approach the Crown agency responsible to ask whether they still need it for its original purpose. Consequently, we cannot say at this stage whether any one of these land parcels can actually be offered for development. In selecting the following examples, we have endeavoured to illustrate the range of land in the Crown s portfolio, from larger to smaller, suburban to business zones, central city to neighbourhood locations and in various parts of the Auckland urban area. All but one land parcel has operative zoning, with the exception included to illustrate the larger land parcels often available on the fringe of existing urban areas. Land zoned Future Urban does not have operative zoning so cannot be developed until there has been a plan change, which will take at least 18 months. As best we can tell from a desktop exercise, each of these land parcels is vacant and has at least some features that would make it attractive for residential development. However, as we haven t examined these land parcels in detail, there may well be issues we are yet to identify that mean this land is unsuitable. Maps and aerial photos of these examples follow the table. Location Size Use Value Zoning s 9(2)(f)(iv) 2.50 ha Vacant s 9(2)(f)(iv) Mixed Housing Suburban 2.48 ha Mixed Housing Suburban Dwelling capacity Availability 120 Unknown Unknown 2.01 ha Lifestyle vacant 1.89 Utilities vacant 1.40 ha Transport vacant Mixed Housing Urban Business Park Metropolitan Centre 200 Unknown Unknown Unknown 1.34 ha Lifestyle Mixed Housing Suburban 70 Unknown 1.09 ha Transport vacant 0.32 ha Transport vacant Mixed Housing Suburban Mixed Use 50 Unknown Unknown 0.14 ha Carpark City Centre Unknown 0.04 ha Vacant City Centre Unknown 10.6 ha Transport vacant Future Urban Unknown In Confidence 13

15 [maps and aerial photos withheld] In Confidence 14