I've had a couple of recent columns explaining the in-principle case for compensation for regulatory takings.
Such compensation is recommended in the Regulatory Standards Bill, and is likely to be part of proposed Resource Management reform.
The shorter version of the argument was in our Insights newsletter; the longer one in The Post, ungated here. A snip:
The Regulatory Standards Bill sets a principle that legislation should not take or impair property without fair compensation. And, where practicable, that compensation should be provided by those benefitting. Parliament remains free to ignore that principle.
In some cases, the beneficiaries are the broader public and compensation should be provided by the government. In other cases, a smaller group would benefit. Where practicable, that benefitting group should be the one to provide compensation.
Done sensibly, none of this would prevent beneficial regulation. Instead, it would help solve an imbalance and inequity in how things are currently done.
Governments can be tempted to use regulation in cases where a spending measure would be more effective for achieving some desired purpose, simply because government can ignore the cost that regulation imposes on others. Compensation would bring a more level assessment.
And requiring that the beneficiaries compensate those harmed from loss of legal rights accords with many reasonable views of equity. Where the gains to the winners exceed the losses to the losers, those gaining can compensate those losing and everyone is better off.
The excellent Brent Layton emails with a fun Wellington Council regulatory takings case. He writes (I've bolded one bit):
Dear Eric
I “enjoyed” reading your recent article on the logic behind the Regulatory Standards Bill containing provisions pointing decision makers towards consideration of compensation to those subject to a regulatory taking. I also “enjoyed” watching on a streaming service you and Bryce interact with two Labour MPs and a TPM MP at a Select Committee hearing on the Bill. If any group in the country should be supporting compensation for regulatory takings it should be the TPM, but she clearly did not get this. The Labour MP’s seem to not realise that principled regulation will be in the interests of everyone, but particularly those without wealth to exploit regulatory loopholes and inefficiencies.
Earlier this month my partner and I were among a smallish group of landowners in Wellington subjected to a significant regulatory taking over collectively a large area of land. The Wellington City Council adopted its new District Plan. Under it approximately 20 hectares of our backyard in Karori is designated an SNA. The Wellington CC SNA restricts the rights of landowners to use and develop the land subject to it very materially.
For us, the impact is not as great as for most other owners for three reasons. Most of our land subjected to the SNA is already subject to a QEII Trust covenant that constrains its use and development anyway. In addition, I made submissions on the Council’s initial proposal and got most of our non-QEII Trust land out of the SNA designated area. Most of my neighbours did not make submissions, some, at least, because they mistakenly thought the change of government had put an end to councils imposing SNAs. The proportion of their land now covered by an SNA designation is in many cases very high. We had also done quite a bit of development in the area affected by way of putting in tracks, drainage of tracks, building reinforcement to stop the stream eroding areas, etc. knowing that Wellington CC was determined to effectively “take” the land. Maintenance rights are better than development rights under the SNA.
Our experience illustrates a point you made very clearly; that the absence from a need to consider compensation to those adversely affected impacts adversely the area taken. The initial Wellington CC proposal relating to our place contained a lot of land that was covered in gorse, blackberry, Darwin’s barberry, and buddleia. The extent to which there was natural vegetation it was limited to immature mahoe pushing their way up through the pest plants. There was also an area containing a cluster of very mature macrocarpa. The land had been farmed with goats until the 1990’s.
The council had arrived at its proposed SNA’s through looking at articles, some very old, on where a botanist thought there was significant natural coverage or something else worth protecting and from looking at aerial photographs. Anything that looked like bush from a few thousand feet, was included. I think that no compensation would be paid meant the “planners” were able to take a wide view of what should be an SNA and wait for the landowners to complain and provide evidence that the area did not contain significant natural features.
In my submission I argued that, if there was a net benefit to the community, those adversely affected should be compensated. This would ensure the land designated is properly scrutinised. I also included photos showing that a lot of the areas on our land the planners wanted to include were not areas of natural vegetation. The Chair of the Hearings Panel organised for an independent botanist to come out and view the land in detail. The panel itself also paid us a visit but did not do a detailed inspection of the site. They looked along the valley from a good vantage point where you could see that the vegetation in the areas I had identified in the photos was not natural.
The upshot was that after receiving the botanist's report 3 of the 4 areas I had pointed out did not contain significant natural vegetation were excluded from the area designated as an SNA. The fourth area was still included in the SNA, this included an old but still used farm track flanked by gorse and the cluster of macrocarpas. I wrote to the Chair of the Hearings Panel and pointed out the inclusion of this area in an SNA was clearly a mistake. He replied there was no appeal until after the Wellington CC had adopted the plan. However, when I checked the plan released with the adoption I found the land containing the macrocarpas and the gorse flanked track are outside the legally imposed SNA. Possibly I misread the earlier map. I wish I had of taken a screenshot.
We have decided we will not appeal because the costs would be high and we think we may be net beneficiaries of Wellington’s regulatory taking, or, alternatively, we think it possible the SNA will become redundant by legislation as the impact on land and house prices gets wider recognition. We own in total a block of approximately 65 hectares in Karori. The area - approximately 30 hectares - that could in future be developed for residential subdivision is outside the SNA. The effect of Wellington’s SNA designations is to severely restrict the supply of alternative land that could be developed. If the SNA designations remain, our developable land will be a scarcer asset and probably significantly more valuable. If the SNA designations get over-ridden by legislation, then it would have been pointless to have spent the money to appeal.
From society's perspective, I think the SNAs should be over-ridden by legislation and a regime be introduced by which Councils that want to protect areas have to negotiate and reach agreement with landowners, including over payment of lump sum or annual compensation. From a personal point of view, we suspect we have been winners from the actions of the Wellington Council. To hell with those wanting and needing affordable housing; we are boomers and deserve to fly business class.
Keep up the good work.
That last line of the penultimate paragraph is very clearly tongue-in-cheek - Council has restricted the supply of land that might compete with Brent's when developers want to build more greenfield housing in Karori. Which likely makes him better off all-up, but he'd clearly prefer that the SNAs hadn't happened.
If council wants more land in parks in the green belt, it should buy land and add it to the green belt. Stealing it via SNA isn't right.
The map of the SNAs, at least as of the draft district plan, is here.
