GUEST OPINION: How the RMA subverts community welfare

GUEST OPINION

Many economists are puzzled that New Zealanders are not more prosperous given the country’s high rankings on international measures, such as ease of doing business, economic freedom and human development.

Sometimes I respond that perhaps anyone who is puzzled might usefully have a closer look at the Resource Management Act 1991 (RMA). International agencies cannot accurately assess the degree to which this, and much other, legislation wastes resources, impairs investment and undermines the resilience of the economy.  (Resilience encompasses the ability to change resource use quickly and flexibly in good times and bad, with minimal inflation on the one hand or unemployment on the other.)

I am using recent actions by the Kapiti Coast District Council (KCDC) to illustrate this, not because it has been worse than anywhere else but because of family reasons for following developments closely.  

In the past 2-3 years the KCDC has variously:

• Declared 1800 beachfront property owners’ homes to be at risk of coastal hazard due to assumed, rather than predicted, sea-level rise, egregiously amended Land Information Memorandums (LIMs) and proposed serious restrictions on owners’ ability to use their own money to improve the amenity value of their properties;
• Proposed restrictions on what rural property owners can do to develop their properties on the absurd grounds that in future the world might need more arable land for food production;
• Prosecuted (unsuccessfully) two elderly tree lovers for having a professional arborist cut down three native trees on their own property; and           
• Remove some native plants from alongside the Waikanae River that had been planted by a local community group on the grounds that they were not natives of the region.

Such actions demonstrably impair investment decisions and land-use flexibility.

Note in particular that the first three of these examples were disputes about the best use of private property. A civil solution for resolving such disputes is to offer to buy the property. This procedure confronts both parties with the value the other sees in the disputed use. Both parties can benefit.  

To reject this option on the grounds of cost implicitly concedes the benefits of achieving one’s preferred use are less than the costs. To use regulation to force all the costs to be borne by an existing owner fails to achieve a mutual benefit.

At least three of the four actions were distressful and costly for those most directly affected. No alleged beneficiary was being confronted with the costs being imposed on the affected owners. 

Yet the failure to confront contending parties with the costs can be expected to reduce overall community welfare, as is widely accepted in environmental pollution and exploitation situations.

In a less legalistic world, local authorities would not impose costs on ratepayers unless a sound case was made that ratepayers would be more than compensated by way of offsetting benefits. Cost-benefit analysis is the formal technique economists use to make this assessment. 

Yet, as far as I have been able to ascertain, no such assessments, recognisable to an economist, were made. Why not? Perhaps I have overlooked them but a deeper reason is that the law directs attention elsewhere.

S32 of the RMA requires local authorities to make an assessment of benefits and costs of proposed rules. But it does not distinguish between benefits and costs to members of the community and costs to the environment. Moreover, it focuses on determining whether a proposed rule is efficient and effective in achieving a plan objective. S32 is clear the chosen objectives must be “the most appropriate way to achieve the purpose of the [RMA].”

If the purpose statement was unequivocally to improve the overall well-being of members of the community, plan objectives would have to be aligned with that purpose. Instead, the prime stated purpose is “to promote the sustainable management of natural and physical resources.” This potentially dictates everything we can do with our property.  

More happily, the second part of the RMA’s purpose statement acknowledges the well-being of New Zealanders is a relevant consideration. But this concession is vitiated by specified constraints on its pursuit. 

These include sustaining the “reasonably foreseeable needs of future generations,” “safeguarding” ecosystems and “avoiding, remedying or mitigating any adverse effects of activities on the environment.”

The RMA thereby allows, or even requires, the well-being of New Zealanders to be sacrificed to the pursuit of inherently arbitrary, fuzzy and open-ended goals. The required judgment calls are inherently arbitrary because neither future generations nor abstract constructs such as “ecosystems” and “the environment” are capable of speaking for themselves. 

Back in 1900, the reasonably foreseeable needs of future generations would not have included microwaves, TV, the telephone, electricity, cheap air travel and all manner of other modern household appliances and conveniences. Yet, today we are told that such things are necessities; the poor are those who do not have them in some abundance.  

Are well-landscaped and well cared-for private trees and gardens an adverse effect that should trump the pleasure they give to New Zealanders? As far as the RMA is concerned the answer appears to be “why not?”  

As long as the RMA remains ambiguous as to whether its purpose is to enhance the well-being of New Zealanders, or to sacrifice it on the altar of “sustainable management,” there is no hope decisions under it will need to demonstrate net benefits.  

Housing affordability is a serious problem and the RMA has a strong bias against subdivision. But MMP politics has stymied the government’s ability to achieve real reform. 

None of this should be read as defending the KCDC. It has been increasingly apologising to the local community for its many egregious decisions. 

But the RMA will continue to induce councils to continue to take decisions that do not plausibly increase community welfare. Confronting people with costs of achieving their preferred use of someone else’s property is often the best way to conduct a cost-benefit analysis.

Bryce Wilkinson is senior research fellow at The New Zealand Initiative.