The recent release of the report arising from the Finance and Expenditure Committee’s Inquiry into Climate Adaptation (Adaptation Report) provides some welcome direction for the future management of the impacts of climate change on buildings and land. 

Key takeouts

• While there is reform in the pipeline that will bring potential to plug the current gaps in the legislative framework for managed retreat, there are highly complex policy decisions yet to be made.
• Indications as to the scope of the developing legislation to replace the Resource Management Act 1991 (RMA) suggest that it will be unlikely to empower pre-emptive managed retreat, with that being left as an issue for another day (and potentially another Government). 
• The new National Policy Statement on Natural Hazards (NPS-NH), and its more uniform direction for applicants and decision-makers on hazard issues, will be welcomed, but it will not support pre-emptive retreat or prevention of land use activities without other, complex, amendments to the RMA and other legislation.
• Finding support for a policy framework that enables mandated managed retreat will be a significant challenge because it involves issues for multiple sectors and landowners.
• An enduring approach to compensation is critical, as the current ad hoc, bespoke models which result in costs falling on ratepayers, taxpayers and insurers (with a resulting impact on national premiums), are not sustainable. 
• There is a place for cautious optimism given the objectives and principles identified, but progressing the further work and new legislation in a timely way will be critical.

What did the Adaptation Report say?

The purpose of the cross-party inquiry was to develop and recommend high-level objectives and principles for the design of a climate change adaptation model, to support the development of policy and legislation. The focus on this work was therefore broader than the former Government’s Expert Working Group, which was tasked with considering the policy that might support “managed retreat”. 

While lacking definitive recommendations on various issues, the Adaptation Report has provided direction on the way forward, and importantly emphasised the need for clarity and national consistency around the roles of local and central government in climate adaptation (particularly for planning and compensation). Despite broad terms of reference, the Adaptation Report has focused on residential property, leaving owners of other types of property somewhat in the dark. 

Some key recommendations in the Adaptation Report are: 

• Guiding objectives and principles must be determined: while the terms of reference tasked the Committee with developing objectives and principles, and to some extent it has, more work has been recommended in a number of complex areas. Notable recommended principles include ‘minimising long-term costs’, ensuring any ‘response is predictable and consistent’ and ‘managing market failures’ that have slowed climate adaptation to date. 
• Determine the Government’s role in climate adaptation: there needs to be clarity on the role of central government in climate adaptation, which addresses local and central government involvement, resourcing and financing arrangements. 
• Establish funding pathways for climate adaption (particularly for residential property retreat): the Committee broadly endorsed the 2023 Expert Working Group’s report on Managed Retreat, agreeing that compensation should differ depending on the nature / status of land. The Committee agreed that avoiding hardship is important, with compensation needing to provide adequate housing to those who must relocate, and include an ‘ability to pay’ element. 
• Provide bespoke arrangements for whenua Māori: this recommendation acknowledges the current bespoke approach to whenua Māori, due to the often complex land ownership structures, and the potential significance the whenua may have to Māori. 
• Prepare accessible data on natural hazards and climate change: which is to ensure that Government, local authorities and landowners are informed about climate change-related risks and effects, when making decisions. Ongoing data collection and research will be required to achieve this objective.

While promising, the policy implementing these recommendations will require significant further work. The Government’s response will be publicised in relatively short order (within the next two months), and should provide an indication of if, and when, new legislation might commence development.

In parallel to this work, there are other opportunities to start changing the approach to natural hazard management, including through the new NPS-NH, which is expected as part of the RMA Phase 2 reform package.

National Policy Statement for Natural Hazards

The RMA Phase 2 reforms are to include the development of the NPS-NH, for implementation by mid-2025. 

This new NPS-NH is intended to provide national policy direction to local authorities on how to identify natural hazards, assess the risks they pose and respond through planning measures. Submissions on an equivalent new NPS were made under the former Labour Government, but that NPS did not progress at that time given the Natural and Built Environment Act (NBEA) and Spatial Planning Act (SPA) reforms taking place (and the NBEA’s National Planning Framework). While we have not yet seen the policy detail, it is expected that the new NPS-NH will be a positive step toward a more uniform regime for natural hazard assessment and management. 

The lack of any uniform, national direction in this space has seen a varied approach across the country with, in some cases, reliance on the relatively vague requirements of the RMA alone. This has led to development being located in at-risk or prone areas, or areas that are now clearly subject to high risk (as the recent severe weather events and Cyclone Gabrielle have exposed).

Based on the current announcements, it is not expected that this NPS-NH will provide new powers to assist with longer term adaptation (or managed retreat), but it will hopefully assist to clarify local authorities’ response to identified hazards. Depending on how directive it is expressed, it could potentially result in decisions that preclude activities in certain locations, which may engage with the difficult issue of compensation for affected landowners. 

We expect that other key sectors will be interested in this new NPS-NH, in particular insurers and lenders, who have a key interest in the safety of building and property assets. 

Legislative gaps and the tools required to support climate adaptation / managed retreat

It is well accepted that New Zealand’s current legislative frameworks are not well geared to support climate change adaptation and managed retreat. There are clear gaps, and a lack of statutory tools, that leave decision-makers wanting, particularly in terms of giving teeth to a proactive approach to managing longer-term risk.

Based on our work supporting many councils through their recovery from the recent weather events, some of the gaps the Government should be focused on addressing are: 

• Clarifying roles and responsibilities, and providing statutory frameworks that support the necessary decisions: at present there is uncertainty as to who has the primary responsibility for retreat decisions, given that local authorities lack the essential tools to achieve meaningful retreat. Shoe-horning retreat into a combination of the Local Government Act 2002 (LGA 02), Public Works Act 1981 (PWA) and RMA is not a viable long-term approach, and there are good arguments for greater central government involvement, to reduce the risk burden to other decision-makers.
• Removing current obstacles to ‘down-zoning’ properties, or extinguishing existing activities: across the Cyclone affected areas in New Zealand, including Auckland, there is a need to formally extinguish residential use in certain areas, which may involve “down-zoning” of land. This is a vexed issue under the RMA, as there is a means to challenge decisions that render land “incapable of reasonable use”. Providing a framework which supports retreat decisions, relocation of affected communities (with meaningful compensation), and then a process to determine the future use of at-risk areas, will be critical. 
• Allowing infrastructure providers to proactively relocate for resilience reasons: at present, both the LGA 02 and the Electricity Industry Act 2010 constrain providers of water and electricity, respectively, from ceasing supply to customers. Providing a solution for infrastructure in areas vulnerable to natural hazards will be essential, to avoid enduring costs and legal challenges where it is clear that retreat will be required. Similar complexities exist for the stopping of roads under the Local Government Act 1974, where local authorities may no longer be able to safely maintain and provide access via public roads to areas impacted by natural hazards. 
• Clarifying the Public Works Act’s role in managed retreat: the extent to which the PWA can (if at all) be used to progress managed retreat remains unclear. This is largely due to uncertainty around whether ‘managed retreat’ is a public work. The extent to which powers under this Act can be used to assist with retreat, and recovery efforts, needs to be clarified, particularly in respect of the compulsory acquisition of land. The PWA is currently subject to its own (limited) review, and it remains to be seen whether that review will address any issues related to managed retreat. 

Other reforms, and what they may bring to the hazard management toolbox

The Government has recently initiated other reforms which address hazards and the response to future emergency events. These reforms are running in parallel to the Finance and Expenditure Committee Inquiry and the new NPS-NH, but may provide opportunities to assist, or at least clarify, issues for landowners and decision-makers.

• Natural Hazards - Land Information Memoranda (LIM) Regulations: from 1 July 2025, LIMs are required to include broader information about natural hazards that may affect a property. In September the Government released an exposure draft of the new LIM Regulations, which will prescribe how local authorities are to meet these new requirements. If the Government is aiming for synergy across the new NPS-NH and LIM Regulations, we would hope to see the national policy direction provide clear guidance on when and how natural hazards should be identified, and in turn specified in LIMs. 
• Development of a Permanent Buy-Out Framework: Emergency Management and Recovery Minister, Mark Mitchell, recently announced that buy-out related legislation would be introduced in 2025. The intention is to create a standardised approach to responding post natural disasters and move away from the ad hoc, bespoke solutions we have seen over recent years.^[1] Whether this process will be focussed on providing one piece of legislation that can empower orders in council, as per the Severe Weather Emergency Recovery Legislation Act 2023, or whether it will seek to plug some of the more complex gaps that local authorities are grappling with, remains unclear. However, it would seem more likely that the vexed issue of compensation would be addressed through the scope of the Climate Adaptation Inquiry, given the testing policy decisions that will need to be made on that front.

Conclusion

While it was hoped that the Finance and Expenditure Committee would provide additional clarity on the direction of future legislation, it has instead only reinforced the need for new and complex policy to be developed.

Critically, the compensation approach remains a work in progress - and the suggestion that funding support is “predictable, principled, fair, and rules-based” - does not provide any clear way forward. If pre-emptive retreat is to have a place in New Zealand, the compensation to support that needs to be meaningful, and have buy-in from across multiple sectors. Given the current challenges the insurance industry is facing, and costs being passed on to property owners, clarity over the role insurers will play (or not) will be important.

The Government now has 60 days to respond to the recommendations, with an announcement expected before Christmas. How this announcement will align with the draft LIM Regulations, consultation on the new NPS-NH, and the progressing replacement of the RMA (which is to be based on the protection of property rights), will be a Christmas present potentially worth waiting for.

Get in touch

Please reach out to us if you would like to be involved in the consultation/ submission process.

Special thanks to Natalie Wilson and Jack Apperley for their assistance in writing this article.

[1]       Buyout blueprint on the way - Emergency Management and Recover Minister Mark Mitchell, RNZ, 7 October 2024.