Toward an agreed managed retreat strategy

29 August 2023

The Environment Committee has been asked to begin an inquiry into the design of a proactive community-led retreat and adaptation funding strategy for Aotearoa New Zealand.

The request came from Climate Change Minister James Shaw, as a way of preparing the ground for a cross-party consensus post-election. And it seems to have worked, with National’s climate change spokesperson Simon Watts telling NBR that he agrees with the approach and that the conversation needs to involve all parties.

The inquiry will support the development of the long-awaited Climate Adaptation Bill to deal with how central and local government assist communities to adapt to the effects of climate change. 

The Bill is expected to include compulsory powers of acquisition so that land can be retired from use (accompanied by some form of compensation or other financial support), powers to withdraw services from areas formally designated as ‘at-risk’, some protection from liability for decision-makers, and the provision of as much choice as possible for those needing to relocate (accepting that this will likely be limited to when and how to leave, rather than whether to leave).

The task is large. A recent estimate suggests that more than 282,000 houses with a replacement value of more than $213 billion are located in flood hazard areas across Aotearoa.

This Brief Counsel looks at the likely process from here and provides a summary of the two documents informing the inquiry – an issues and options paper from the Ministry for the Environment (MfE) and the technical report of the Expert Working Group on Managed Retreat.  Both extend the discussion to managed retreat arising from the risks of other natural hazards, e.g., earthquake and tsunami.

Process for the inquiry

The suggestion is that every party in the House will engage in the inquiry. James Shaw has suggested that the Terms of Reference include:

  • Lessons learned from severe weather events and natural disasters;
  • Effective mechanisms for community-led decision-making;
  • Potential institutional arrangements, including roles and responsibilities of central and local government agencies, iwi and hapu;
  • Māori participation and how to give effect to the principles of te Tiriti o Waitangi;
  • Alignment with the existing legislative and regulatory framework, and any changes needed;
  • Regulatory arrangements and economic or other incentives;
  • Funding approaches and sources; and
  • Targets or indicators for assessing progress to more resilient communities and infrastructure.

Among other things, the proposed inquiry would inform the development of the Natural Hazards Planning Framework, which will provide nationally consistent direction on:

  • Mandatory consideration of natural hazards for land use;
  • Methodologies for undertaking risk assessment and risk tolerance assessments;
  • Standardised terminology and definitions;
  • Community engagement during a risk assessment process; and
  • Enabling Māori to assess natural hazard risks in a culturally appropriate manner, and to respond in a way that works for them.

The overall purpose is to allow relocation to be managed collectively and proactively. As the Expert Working Group notes:

“Allowing individuals to remain in any capacity would not adequately achieve the overall objective of risk reduction and would raise further difficult questions about the safety of those who remain, those they invite onto their properties, and responsibilities when a natural disaster occurs”.

Key points from the MfE paper and Expert Working Group report

Both MfE and the Expert Working Group:

  • Are strong on the need for early action to avoid a presumption that waiting for disaster to strike will result in greater public financial support;
  • Identify that Māori are particularly affected as applying a retreat system to Māori land is complex due to historical dispossession, the significance of land to Māori, special rules under Te Ture Whenua Māori Act 1993, Treaty settlements, customary marine title rights and collective ownership models; and
  • Discuss the need for an element of compulsion. When residents elect to remain in an at-risk area, some of the costs of that decision will inevitably be met from the public purse.

The Expert Working Group expressly did not include preserving wealth as an objective of the funding system.  However, the Group outlines a set of principles for funding, including that the scheme should be fair and contribute to compensatory, restorative and distributive justice. 

MfE suggests that the amount of financial support available to individuals is partially determined by risk exposure, ability to pay and the level of existing protection.  Other considerations might include:

  • Capacity and capability to plan and act to address risks;
  • Existence of socio-economic and other challenges;
  • The location of the assets; and
  • The extent to which people could reasonably have been expected to anticipate the risk – e.g., sea level rise was not widely understood even a few decades ago, but it is for those buying now.

The Expert Working Group didn’t make a firm recommendation as to how the relocation should be paid for (options being through a special levy, a dedicated fund, and/or periodic contributions from general tax revenue).  But the Group said the funding should not be subject to the vicissitudes of the annual budget round as that would too easily result in deferment and delay.

MfE observes that the level of central government contribution toward councils at the centre of locally-led responses might be calculated according to average income, population density, debt levels and risk exposure.  It might also be influenced by specific central government responsibilities – e.g., Treaty commitments, overwhelming scale beyond what local government could be expected to handle, or where the benefits of action are national in scale (no example is offered but perhaps where there would be a national economic impact as in the disruption of Rotorua’s tourism industry). 

MfE’s paper also identifies the potential for central government to support councils in raising additional revenue through new funding tools (giving examples including value capture targeted rates, volumetric charging and central government paying rates on its properties).

The role of the banking and insurance sectors in assisting with the transition is also highlighted with potential contributions including: innovative new products, ways to encourage (reward) risk reduction, initiatives to enable greater transparency around risk assessment, industry agreements on data sharing, agreeing to a consistent approach for loans secured against properties subject to a managed retreat, and providing time-limited support to those affected by abrupt or severe pricing changes.

From here

Clearly there are some very important decisions to be made in the design of these policy settings, the implications of which will be widely felt throughout the economy.  Chapman Tripp will continue to monitor developments and will be happy to assist you to participate in the policy-making process across all stages.

Related insights

See all insights