Is local government all about taxes, or is there something more?

When I think of local government I always think taxes and resource consent.  But, if this all it is, why aren’t these functions managed our nation’s capital?

These questions and more are answered in the latest offering from the NZ Initiative,
“The Local Formula Myths, Facts & Legends”

Here is a short excerpt from the Foreward of the report  by the head of the NZ Initiative, Dr Eric Crampton.

Krupp and Wilkinson began this work this year so we could start better to understand why local government pursues policies that, to an outside observer, seem utterly daft. Why set zoning rules that ruin housing affordability? Why run consenting processes that seem designed to give every objector the power to veto while putting little or no weight on the voices of those who could have lived in the new apartments or subdivisions? Even simple things, like consenting for a gravel pit, becomes tied down in difficult processes, as Krupp’s report last year on New Zealand’s mineral estate demonstrated.
In short, why does local government sometimes behave as though growth is something to be prevented or contained rather than something to be welcomed?

The Initiative’s new report canvasses some potential explanations but the fundamental problem seems to be political economy. When local government is potentially financially liable for any flaws in buildings that they consent, but sees little upside from faster consenting processes, we should not be surprised that things move slowly. Local political pressures mean councillors supporting new development risk being voted out of office before new residents can move in. Consenting processes empowering Not In My Back Yard objections entrench the status quo and prevent growth. As a bottom line, when local councils bear most of the costs of new development, but the benefits largely flow through to central government, we might reverse the usual conclusions about local government. If anything, it is perhaps surprising that local councils function as well as they do, given their constraints.
This report does not develop policy conclusions…  But a report developed in parallel with this one pointed to a process for unblocking regional growth. As Krupp and Wilkinson became increasingly convinced that political economy rather than current financial constraints were the fundamental drivers of some councils’ reluctance to embrace growth, Khyaati Acharya and I proposed regionally based policy reform as potential solution.

Abstracting from the political constraint, restoring housing affordability is a solved problem: allow greater density within our cities’ centres; abolish rules like minimum apartment sizes and minimum parking requirements that push up housing costs;
and end the rules that stop cities from expanding at the fringes.

But abstracting from the political constraint is too much like the proverbial economist’s assuming the existence of the necessary can-opener. The more interesting remaining problem is how to change the underlying political economy so that both local and central government can embrace
growth and change.

Italics mine…

This is a great conversation starter.

If you would like to download the full report head over to the NZ Initiative website.

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