Submission on the Illustrative National Policy Direction

Chris Parker, Director, Principal Economics 16 October 2026

New Zealand’s planning reforms will shape where homes can be built, how infrastructure is provided and how the costs and benefits of development are shared. Principal Economics’ submission on the illustrative National Policy Direction (NPD) considers how national direction can support housing affordability, investment certainty and productivity through clearer economic principles and more accountable decisions.

We welcome the emphasis on private property rights, abundant developable land, competitive urban land markets and simpler national rules. Our submission recommends changes before statutory consultation to make these objectives effective in practice. National direction should settle substantive policy choices, explain when public intervention is justified and give councils and investors clear expectations.

Land markets, zoning and infrastructure

Competitive urban land markets require a credible response when councils’ actions or omissions restrict competition. We support defining land abundance by the absence of sustained, material price premiums and propose a binding compliance framework, triggered by the independent statutory officer’s findings, with clear council obligations, response deadlines and public reporting. Councils would retain responsibility for choosing how to achieve the required outcomes. We also recommend a clearer link between zoning and infrastructure: when investment removes the binding infrastructure constraint on development, it should trigger corresponding increases in permitted development, subject to environmental limits and other relevant constraints. Regional spatial plans should concentrate on strategic coordination, such as major transport and trunk water corridors, with detailed land-use and investment decisions addressed through the appropriate local plans and infrastructure providers.

Property rights, environmental limits and risk

Our discussion of reverse sensitivity considers how planning should allocate costs when new neighbours raise concerns about an existing activity. We recommend preserving common-law nuisance remedies and assessing protection for operators case by case, considering who benefits, who bears the costs and whether mitigation or compensation is appropriate. We also seek clearer economic guidance for setting environmental limits, subject to statutory requirements, and allocating natural resources. This should account for benefits, opportunity costs, uncertainty, irreversible effects and economic adjustment, including opportunities to trade and retire resource-use permissions where justified. For natural hazards, national direction should clarify responsibilities and compare the costs and benefits of avoidance, protection, adaptation and relocation, including the value of access to jobs, customers and infrastructure.

Conclusion

A durable planning system needs clear responsibilities, transparent choices and incentives that support development while addressing the costs it imposes on others. Our recommendations aim to make land-market competition enforceable, connect infrastructure investment to development opportunities and establish a more consistent approach to property rights, environmental protection and risk. National policy direction should make these substantive choices, with national standards providing the technical methods to implement them.