Tenure review must stop
The best, easiest, and cheapest thing New Zealand could do for the land and water of the South Island is to stop high country tenure review, writes Dr Ann Brower, of Lincoln University.
SOMETIMES the best thing to do is to just stop doing something bad. A recent Environment Court decision says there’s a strong case to stop freeholding the South Island high country. The new Minister of Lands, Mark Mitchell, and the acting Commissioner of Crown Lands, Craig Harris, would do well to listen.
South Island high country tenure review is a land reform that has been quietly transforming the South Island high country since 1992. Though obscure, it affects
10% of New Zealand’s land mass, or onefifth of the Mainland.
The Crown has owned the high country since the 1850s, and leased it to about 300 pastoral runholders. The leases grant very narrow use rights, of pastoral sheep farming, at low rent for 33year renewable terms. While under lease, runholders cannot irrigate or develop without Crown consent. Subdivision is prohibited.
In 1992, the Crown started offering an option to purchase the freehold rights under tenure review. In tenure review, the Crown and runholder negotiate to divide the leasehold — some is privatised as freehold, some shifts into public conservation land administered by the Department of Conservation. The Crown purchases the runholder’s interest in land going to conservation, and the runholder purchases the freehold.
In 25 years, the Crown has purchased leasehold rights to more than 330,000ha for about
$117 million; and leaseholders have purchased freehold rights to more than 370,000ha with higher production potential for about
$62 million.
On average, the Crown price to purchase leasehold rights is about 3.5 times the runholders’ price to purchase freehold. This translates to large payouts to runholders at the end of tenure review — more than $50 million so far.
If you’re confused by this, it means you understand. If you’re thinking, ‘‘hang on, aren’t freehold rights worth more than leasehold rights? When the Crown sells freehold, shouldn’t we make money?’’, it means you understand.
The Environment Court case concerned land conversions in the Mackenzie. In the Basin itself, the Crown has freeholded 65,000ha in tenure review. For that freehold, runholders have paid about
$28 million (or $423/ha). This land is, by law, capable of development and commercial production. It’s the valley floors and the lakefronts. At the same time, the Crown has shifted 54,000ha from pastoral lease to public conservation. To retire the pastoral rights, the Crown paid runholders
$36 million (or $656/ha).
In total, the Crown has freeholded 10,000 more hectares than it conserved, and paid runholders more than $8 million on net.
This is not farmers’ greed, it’s Crown actions. An old cartoon springs to mind: ‘‘We have met the enemy, and he is us.’’
Even worse is what happens to the land after freeholding. In the Mackenzie, more than 10,000ha of the new freehold has onsold for more than $18 million ($1800/ha).
Just south of the Mackenzie lies what’s left of Ben Avon Station. In the early 2000s the Crown freeholded 3400ha, conserved 4900ha, and paid $1.2 million on net. Since then, the new freeholder has onsold 719ha in three different sales for $7.7 million. One of those sales went through the Overseas Investment Office.
If you’re scratching your head, you understand tenure review.
What’s more, after land is privatised, it takes on a whole new life — from irrigation in the Mackenzie to subdivision in
Central Otago. What used to be about 120 leaseholds is nearly 4000 parcels of freehold.
About 20% of the new freehold land has been onsold. Onefifth of what the Crown sold for
$62 million, has onsold for more than $300 million. On average, new freehold land sells for 493 times the Crown selling price. The Crown realised none of that capital gain.
By all appearances, the Crown is subsidising the conversion of the South Island high country at our expense.
Though land on the shores of Lakes Wanaka, Wakatipu, Pukaki, Hawea, and Tekapo certainly sells at a premium, it’s not just runholders near lakes who are making windfall profits. Of the 73,000ha onsold, only a quarter (just over 17,000ha) is within 5km of a lake (but not necessarily within view of it). This quarter sold for $111 million of the $300 million.
High country tenure review continues to be a huge transfer of land and money from the Crown to a few hundred runholders. To call it anything but a boondoggle is strategic hypocrisy. Good on the Environment Court for calling for it to stop. Let’s hope the Commissioner of Crown Lands heeds the call.
The best, easiest, and cheapest thing New Zealand could do for the land and water of the South Island is to stop high country tenure review. Better late than never.
❛ By all appearances, the Crown is subsidising the conversion of the South Island high country at our expense❜
Dr Ann Brower is senior lecturer in environmental management at Lincoln University and author of Who Owns the High Country?