to have "a housing market with prices shaped by New Zealand-based buyers"

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2 213 submissions were reeived. 28 were generally supportive and 37 generally opposed. The majority of submissions foused on speifi issues. Submissions were assessed in light of the Bill's key objetive. That is: to have "a housing market with pries shaped by New Zealand-based buyers" It has been important to balane this objetive against the need to ensure that large-sale developments to inrease housing supply proeed. 2

3 In response to submissions and further analysis, 47 reommendations for hange have been made. These an be broadly ategorised as working to: - Expand the definition of "ordinarily resident in New Zealand" and expand the range of onsent pathways for persons demonstrably ommitted to New Zealand; - failitate large-sale housing developments that are partiularly sensitive to finaning onstraints, in line with the Government's affordability objetives; and - redue ompliane osts for businesses and individuals where risks of reating 'loopholes' are low. 3

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5 Key reommendations - expanding the pool of ordinary residents What? Allow all resident visa holders to aquire residential land without onsent, as long as they have resided in NZ for the past 12 months and been present in NZ for at least 183 days. Why? - The Bill must balane the objetive of restriting overseas ownership of sensitive land, while providing those that have made a signifiant ommitment to NZ with the ability to aquire residential property. - Permanent resident and resident visa holders have equal rights to live and work in New Zealand and must demonstrate a signifiant ommitment to NZ to obtain those visas. - It is appropriate that both lasses of visa holder be treated the same. 5

6 Key reommendations - supporting supply: large developments What? Allow developers of large apartment buildings (20 units+) to sell up to 60 /o of these units to overseas buyers with onsent, but without a requirement for them to on-sell. The proportion should be variable between 0 and 100 /o via regulation. Why? - Large developments often rely on pre-sales to satisfy finaners of projet viability and therefore to aess suffiient funding. - On-sell requirements would redue the attrativeness of pre-sales to overseas persons, potentially damaging projet viability. - The ability to vary the proportion will ensure that the Government an respond to hanges in the market, while supporting large developments that an be subjet to binding finaning onstraints. 6

7 Key reommendations - supporting supply: innovative developments What? Allow overseas persons building signifiant additional rental housing, or housing through shared equity arrangements, (20+ units) to aquire residential land without the requirement to on-sell the units as long as the units are rented out or maintained as a shared equity development. Why? - On-sell requirements ould limit overseas persons from developing new, large-sale developments (aross one or multiple sites), under build-to-rent, rent-to-own or shared equity models. - Strit limits on the way that the overseas person an use the property avoids reating additional demand for residential housing. - This hange will treat these developments in a similar way to retirement villages and other similar developments. 7

8 Key reommendations - supporting business: tourism What? Allow overseas persons to aquire units in large hotels (20+ units) to without requiring onsent, as long as the buyer enters a lease-bak arrangement with the developer/operator at the time of purhase and the unit annot be used by the purhaser more than 30 days per year. The aquisition of sensitive land by an overseas person to build a hotel will require onsent. Why? New Zealand has a shortage of hotel aommodation. This is limiting the growth of our tourism setor. - Large developments often rely on foreign investment to bridge gaps between total projet ost and bank funding. - On-sell requirements would redue the attrativeness of pre-sale and lease bak arrangements, damaging viability. 8

9 Key reommendations - supporting business: network ompanies What? Allow residential land to be aquired by some network ompanies (eletriity and gas distributors, teleommuniations ompanies, and transmission network operators) for business purposes without onsent. Why? - These businesses - many of whih are overseas persons - provide essential servies to New Zealanders. - Requiring these businesses to obtain onsent to aquire residential land for ore business purposes would generate osts that would need to be borne by all New Zealanders through their utility bills. - Risks are low. Utility servies are learly defined in law and relevant ompanies have limited inentives to irumvent the OIA. 9

10 Key reommendations - supporting business: streamlined approval path What? Create a streamlined test to allow residential land to be aquired for business purposes, or residential purposes inidental to a ore business purpose (e.g. housing staff), as an alternative to the "benefits to New Zealand" pathway. Conditions will be applied to ensure outomes onsistent with the appliation for onsent. Businesses would still need to satisfy the investor test to protet New Zealand's interests and would remain subjet to 010 onditions. Why? - The "benefits to NZ" pathway is ordinarily subjet to ounterfatual analysis by the 010. This ould impose signifiant osts on businesses looking to use residential land for ommerial purposes. - The new pathway will be straightforward to redue ompliane osts without inreasing demand for the residential use of residential land. 10

11 Key reommendations - reduing ompliane osts: onveyaners What? Do not require onveyaners to ertify that, to the best of their knowledge, a purhase of residential land will not breah the OIA. Require purhasers to delare to onveyaners that they are ompliant with the OIA. False delarations will onstitute an offene. Offenes by onveyaners are to be a ivil rather than riminal. Why? - The Government is ommitted to ensuring that regulatory osts assoiated with the OIA regime remain ommensurate with the risks of non-ompliane. - What onstituted 'best of knowledge' and the extent of onveyaners' liability was unlear to onveyaners. 11

12 Key reommendations - ommenement What? Provisions not essential to the introdution of the regime should ommene no later than two months after Royal assent. Regulation-making powers and other neessary provisions should ommene immediately after Royal assent. Why? - Having the Bill ommene 1 O days after Royal assent would have risks. In partiular, there were onerns that: - agenies would not be able to make operational hanges that quikly; and - appliations made prior to ommenement (in relation to other types of sensitive land) would be delayed at signifiant ost. - A staged approah allows these risks to be managed, while ensuring suffiient flexibility to respond to the ratifiation of the CPTPP. 12

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14 Definition of 'ordinarily resident' Require non-new Zealand itizens to meet a 183 day tax resideny rule to qualify as 'ordinarily resident' (as well as the Bill's 12 month/183 day test). Interations with the TTWM At Align the treatment of land adjoining wahi tapu land in the OIA with the TTWM At. Exempt Maori persons aquiring an interest in Maori freehold land from the need to obtain onsent. Clarifying the treatment of leases Clarify that residential tenanies of less than five years will not require 010 onsent Transitional exemptions Allow overseas persons with preexisting requirements imposed under the Resoure Management At to purhase residential land neessary to satisfy those requirements without onsent. Provide an exemption in relation to Te Arai property development in Mangawhai for 15 years. 14

15 Clarifying the "ommitment to reside in New Zealand" pathway In February, Cabinet agreed to amend the Bill to inlude additional detail on the "ommitment to reside in NZ" pathway in the Bill. Subsequent reommended hanges inlude: - In line with our obligations, allow Australian permanent residents to aess this pathway. - Allow Ministers to pre-approve an extended absene from NZ by a onsent holder in exeptional irumstanes, without selling requirements being triggered. - Exempt an overseas person from OIA sreening requirements in respet of aquiring or dividing relationship property, if their partner has reeived onsent under this pathway. Proteting privay Limit the OIO's ability to obtain information to irumstanes where the 010 has reasonable ground to believe that it is neessary to monitor ompliane with the At et, rather than the broader administration of the At. 15

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17 Unsupported submissions - luxury, lifestyle and resort exemptions What? Many submissions reommended broad exemptions for luxury homes (for example, those valued at more than $2 million), homes built on "lifestyle" land, and resorts. Why is the submission not supported? - Submitters suggested that the markets for luxury homes and subluxury homes were not onneted and that exempting these homes from the OIA would not affet affordability. - Offiials disagree. Demand in these markets redues land supply and the availability of onstrution resoures, thereby affeting priing in other market setors. - Exemptions would also funnel overseas demand into small market segments with potentially negative onsequenes for partiular regions, suh as Queenstown. 17

18 Unsupported submissions - exemptions for retirement villages and infrastruture What? Allow residential land - and other sensitive land - to be aquired for retirement villages and large infrastruture projets without onsent. Why is the submission not supported? - Submitters suggest that obtaining onsent to aquire sensitive land for retirement villages and essential infrastruture imposes unneessary osts on business and will delay projets. - Offiials disagree. There are lear approval paths for the types of developments identified (for example, the inreased housing path). - Ahieving the Bill's objetives requires sreening of aquisitions and the ability to impose onditions on aquisitions. - An exemption would reate signifiant opportunities to irumvent the law. 18

19 Unsupported submissions - exemptions for the purhase of any new dwelling What? Allow any new dwelling on residential land to be aquired by overseas persons without onsent. Why is the submission not supported? - Submitters suggest exempting the purhase of any new dwelling from the OIA regime to support inreased housing supply. - Offiials disagree. This would mitigate the benefits of inreased housing supply by ommensurately inreasing demand. Offiials prefer targeted onsent pathways to allow overseas persons to add to supply while minimising their impat on demand. - Conentrating demand in new dwellings would likely inrease the prie that New Zealand-based buyers must pay in that market - they may be pried out. - This would be inonsistent with the Bill's objetives. 19

20 Unsupported submissions - narrowing liability for offenes What? Narrow the offene provisions to ensure that entities suh as banks and real estate agents annot be 'involved' in a breah of the OIA. Why is the submission not supported? - Submitters suggest that the Bill as drafted will impose onerous onditions on entities suh as banks and real estate agents due to the legal risk of suh entities being found to be 'involved' in a subsequent breah of the OIA. - The Bill as drafted already ensures that this should not our. The definition of a person 'involved' is onstrained to persons who aided, abetted, indued, onspired in, or was knowingly onerned in the breah et. 20

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23 Example 2: NZ residene lass visa holder aquiring a property to live in A residene lass visa holder will be deemed to be "ordinarily resident in New Zealand", if they: - meet the 12 month/183 day test; and - meet a 183 day tax resideny rule. If the relevant overseas person meets these requirements, they will be able to aquire residential land without onsent. 23

24 Example 3: Overseas person purhasing a new unit An overseas person will require onsent to aquire a new unit on residential land. However: They must omplete the purhase 'off the plans'. If the omplex has fewer than 20 units they will be required to on-sell the unit as soon as development is omplete. If the omplex has 20+ units they may be able to retain the property, subjet to the relevant ap in the regulations. They - or their assoiates - will not be able to live in the unit. 24

25 LO N - (]) > - 0 a~ ~ ~ (]) :J Q.. O> CJ) ro <D (j) CJ) '-- >< (]) (]) > 0 ro ~ O> ~ en a. ro E.. ro ~ >< :J LU a. Q) -.. ro a>..0..., ~..., Q) en 0 (.) ro..., s... - ::J Q) (J) 0 Q) > , - - Cl 0 ~ ' -" =E -~ ::J Q.. g E s Q) +-' (.) a. -~ +-' en x : ro CD ::J Q) Q) en o.. s... Q) ~ :: > Q) <( N - en

26 Example 5: Overseas person building a house to lease out An overseas person an aquire residential land to develop into housing with onsent. Unless they are developing at least 20 units (aross one or more loations) and their business involves ompleting suh projets they annot retain the property after onstrution is omplete. Even if they retain an interest in the property, they - or their assoiates - will not be able to live in it. 26

27 ro...; :J ~ 0 - :J (.) ~ ro o +-' +-' 0 - ro o - (.) - ~ -~ - +-' - ~ Q) Q) "'O Q) CJ) 0) ~ CJ) ro Q) ~ Q) > - 0 en x <( Q)

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29 Example 8: Foreign student entering a residential tenany An overseas person, regardless of visa status, an enter into a residential tenany of up to five years (periodi or fixed) without obtaining onsent. 29