A New Frontier: Regulatory Takings and the RMA

The Cost of Saying No: Why Councils May Soon Struggle to Protect the Environment

The Government’s overhaul of the Resource Management Act has sparked headlines about faster consents, removing the Treaty principles, and boosting development. But buried beneath the noise is a more fundamental shift — one that could quietly reshape how regulation works across New Zealand.

At the centre of it is a concept most people have never heard of: regulatory takings. It sounds technical, but the stakes are huge. If landowners can claim compensation when the government or a council restricts what they do with their land — to protect a wetland, manage flooding, or protect historic heritage — the cost of regulating in the public interest could skyrocket. Councils and government might stop trying.

This idea isn’t limited to the RMA replacement. It also features in the Regulatory Standards Bill (RSB) — a long-standing ACT proposal that’s recently returned to the agenda. While the language is dry, the implications are far-reaching: a shift in how we balance individual (and corporate) property rights against collective responsibilities. And so far, it’s received very little public attention.

At stake is more than just a planning tweak. This is about how we protect the environment — and whether the state will be free to act in the public interest, or forced to pay for doing so.

What Are Regulatory Takings?

Regulatory takings is the idea that when a government regulation limits what someone can do with their property — even without seizing it outright — the property owner should be compensated. For example, if a council restricts development to protect a wetland or manage climate risk, a landowner could argue that their property’s value has been diminished, and they deserve a payout.

It’s a concept that for regulatory restrictions on property has never existed in New Zealand statute law, but it’s being quietly introduced through the Government’s planned Resource Management Act replacement — and was also proposed to be included in the RSB.

When I interviewed Emeritus Professor Jane Kelsey about the RSB, on my podcast Coherent, she described the regulatory takings clause as a major departure from the way public regulation has traditionally worked in New Zealand. She warns that the proposal imports a US-style model of property rights protection that gives private interests powerful tools to challenge environmental and planning rules — potentially leading to costly compensation claims and a chilling effect on future regulation.

As Kelsey puts it, “What it basically is, is a protection of the private property rights of companies, especially if governments regulate in ways that impact negatively on their investment.”

In essence, regulatory takings provisions in the RMA replacement would make it harder for governments and councils to act in the public interest — especially when that means setting limits on how land is used. Instead of weighing environmental or community needs on their own merits, decision-makers could be forced to weigh the financial risks of being sued or paying compensation. As Jane Kelsey warns, this risks turning essential protections into liabilities, and placing private profit ahead of collective wellbeing.

Where This Idea Comes From

The concept of regulatory takings has its roots in American legal thought, particularly in the work of libertarian scholar Richard Epstein. His 1985 book Takings argued that when government regulations reduce the value of private property, they should be treated like the government taking someone’s property — and therefore require compensation. Although controversial, Epstein’s arguments gained traction among libertarian legal theorists and were taken up by conservative think tanks and advocacy groups in the United States, helping to fuel a broader pushback against environmental and land use regulation.

In New Zealand, this thinking has been taken up by the ACT Party and promoted by the Business Roundtable — now rebranded as the New Zealand Initiative. As Professor Jane Kelsey explains, these groups have consistently advocated for reducing the role of the state, shifting responsibility away from collective institutions and toward market-based mechanisms. The idea of regulatory takings fits within a broader strategy of embedding legal principles that constrain the state’s ability to regulate in the public interest.

Regulatory takings provisions appear in international trade and investment agreements, where so-called “investor protections” allow foreign companies to sue governments if new regulations harm their commercial interests. Under these mechanisms — known as Investor-State Dispute Settlement (ISDS) — investors can claim compensation not only for direct losses, but for hypothetical future profits.

Kelsey warned that what is proposed in New Zealand for the RSB echoes this model, opening the door for domestic takings claims without the usual public interest safeguards. Under the RSB, legislation that "impairs property rights" could be challenged or require compensation.

How It’s Appearing in the RMA Replacement

Chris Bishop announced last Monday that, “Our goal is to completely replace it [the RMA] with new laws based on the fundamentals of a market economy, which is private property rights.”

“The starting point for the new regime will be a presumption of land use, so if you own a piece of land you can do with it what you like... But the equal principle is that when there is an impact on what you own, it is important that the system takes account of the impact of a regulatory restriction, or what is sometimes called a regulatory taking.”

The wording and scope of regulatory takings in the RMA replacement has not yet been determined. However, some early signals have emerged — both from the Cabinet press conference announcing the reforms and from the government’s recently released Blueprint for Resource Management Reform, prepared by the Expert Advisory Group (EAG).

The EAG proposed introducing compensation for regulatory takings in some circumstances, as part of a broader effort to strengthen checks and balances on regulatory powers. They noted that:

“Traditionally, government regulation in New Zealand has typically not been treated as a taking, as almost any regulation is likely to have at least some adverse impact on property rights. Government compensation for takings is normally required only in respect of physical takings, such as the acquisition of land.”

The EAG recommended that zoning and land use overlays — where identified through a national methodology — should not automatically trigger compensation. However, they suggested landowners should have the right to apply to the Environment Court to challenge that presumption, based on the scale of the impact and questions of equity, including whether the restriction was imposed after the land was purchased.

They also proposed that if a council opts to impose more onerous obligations than those set out in national standards, the question of compensation should automatically arise — with the lower threshold of significant impairment to land value.

At the announcement, Minister Responsible for RMA Reform Chris Bishop pointed to heritage laws and protections for outstanding natural landscapes as examples of regulation that might "unfairly" limit landowners, and noted that there is a whole range of different laws that fall into that category. ACT MP Simon Court, Parliamentary Under-Secretary to the Minister Responsible for RMA Reform, also referenced Significant Natural Areas (SNAs), indicating that environmental protections more broadly may be within scope.

Although the final legislative wording has not yet been determined, the Government has made its intentions clear. Given the strong similarities in language and ideological intent, it seems reasonable to consider that the RMA replacement could even align with the expansive form of regulatory takings proposed for the RSB, rather than the EAG’s recommendations.

Unless the new Planning Act introduces explicit constraints, this could mark a major shift in how environmental and planning rules are applied. Landowners may be positioned not just as regulated parties, but as potential claimants — and the system may increasingly be designed to avoid, offset, or compensate for limits placed in the public interest. This aligns with the RSB logic: shifting the burden of public good regulation from private landowners onto the state.

What’s at Stake

The introduction of regulatory takings provisions in the RMA replacement carries serious implications — not only for councils and central government, but for how New Zealand manages land, protects the environment, and understands the role of regulation in a democratic society.

Financial pressure is the most immediate risk. If landowners can claim compensation when local authorities go beyond national standards — or when planning rules reduce the value of their land — councils may face significant and unpredictable costs. This could deter them from applying necessary environmental protections, even in areas at risk from flooding, erosion, or biodiversity loss.

That leads directly to a chilling effect on regulation. The mere possibility of legal or financial blowback may discourage councils from taking bold or precautionary action. If compensation becomes a default expectation, the safest course may be to regulate less — or not at all.

The environmental consequences are likely to be subtle at first, but deeply consequential. Over time, the costs and constraints introduced by takings provisions could erode the use of the precautionary principle and disincentivise practices grounded in long-term stewardship and kaitiakitanga. What begins as a tool to protect landowners’ interests is likely to significantly weaken the very systems designed to protect natural ecosystems, cultural landscapes, and future generations.

Perhaps most significantly, regulatory takings would represent a legal and constitutional shift. New Zealand’s planning system has long been based on balancing individual property rights with broader public interests. Embedding compensation for regulation tips that balance toward individual entitlement, signalling that private interests must be protected even at the expense of collective wellbeing.

This is not a technical change. It’s a change in what we think regulation is for — and who it should serve.

Don’t Sleep on This

Regulatory takings could profoundly alter the balance between private rights and public responsibility in New Zealand. What may appear at first as a technical legal mechanism is, in fact, a shift in how we understand the role of government, the purpose of regulation, and the meaning of the public good.

The RMA replacement may be the first place we see this change take hold — but it is unlikely to be the last. If embedded here, it could set a precedent for how environmental, planning, and social regulation is approached across the legal system. It may also help pave the way for the broader constitutional changes proposed through the RSB.

The question isn’t just environmental. It’s political, social, and deeply ideological. Do we want a system that enables responsible action to protect shared resources and future generations? Or one that elevates private property rights above all else — even when those rights come at the expense of the common good?

That’s the debate we need to be having. Before it’s too late to have it.

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