Executive Summary
1. Property rights have been broadly defined as the social pattern of rights and duties established through custom, convention and law. In this study, the term "property right" is used in its broader social and economic context, rather than as a pure legal term conferring ownership.
2. The key issue with a property rights framework is that it is not the property which is owned, it is the rights to use the property which is owned. The nature of the rights affects the behaviour of people managing and using a resource that we have to the property define the way that we use it. Importantly because property rights distinguish the rights of an individual from the rest of society, they have scarcity and therefore value. Rights are typically defined and enforced by the State, and in the case of water we are interested in the set of private property rights which have been created in public property (the water resource) through a resource consent.
3. Property rights are an integral element in the management and use of resources. The government's Sustainable Development Programme of Action has identified problems with how water is allocated and used in New Zealand and it may be that these problems are related to the way in which property rights are held in water. This study was commissioned as part of that programme to address the practice and perceptions of property rights in water.
4. The six characteristics of the property rights used as a framework in this study were:
Table 1: Characteristics of property rights
| Characteristic | Definition | Comment |
|---|---|---|
|
Flexibility |
The extent to which the owner can change the mode or purpose of resource use without forfeiting the right |
Examples such as tying consents to application rates and land use constrain flexibility |
|
Divisibility |
The ability to create joint ownership, to divide the asset spatially or by function, to construct temporal succession of rights |
Community schemes typically operate under a divisible consent. |
|
Quality of title |
Enforceability, certainty, security, ease of establishing ownership |
Defines how secure the property holder can feel that the specified property will continue to be available in the future. Issues such as changes in the resource and pressures from other stakeholders affect the security that consent holders feel in the quality of their title |
|
Exclusivity |
Specificity, excludability, how many other parties to agree with on use |
Unauthorised takes and other consent holders exceeding their consent conditions |
|
Duration |
Permanence, length and arrangements for renewal |
Length of consent and potential for renewal |
|
Transferability |
Assignability, exchangeability, tradability |
While consents are typically traded with the land, can it be transferred separately from the land? |
5. The study involved four focus group meetings and six individual interviews. Three focus group meetings were undertaken with irrigators and a further meeting was held with public/non extractive users. The irrigation groups were configured to cover surface, stored and groundwater, with meetings in Canterbury (Dunsandel/Te Pirita groundwater primarily with some surface water), Tasman (groundwater primarily with some surface in the Motueka valley), and Marlborough (Awatere valley - surface and stored water). The domestic, industrial and hydro viewpoints were covered by individual interviews. The focus group meetings and interviews aimed to identify the beliefs of the groups about the nature of their property rights; and identify the way in which those beliefs affect behaviour in relation to the resource. The scope of this report does not specifically examine the perceptions of Maori in relation to water allocation and use, or address whether those perceptions would raise any further issues. An additional process is required to specifically investigate these issues.
6. The study did not develop a detailed understanding of the behavioural implications of the participants' beliefs, and used a relatively small sample. The report and its conclusions should therefore be read with some caution. However it has generated useful understanding of how property rights are working in water consents. The key findings are:
- We do not believe there is a significant mismatch between consent holders' understanding of their rights and an objective assessment of these property rights. Some differences exist in respect of transferability, but this is relatively minor in terms of current management of the resource.
- The quality of title is the most affected of the rights. This is associated with lack of specification of the resource from which the water was drawn, which creates uncertainty over future access. While quality was the aspect of the property right identified as most attenuated by extractors, their management response by and large appeared minimal. We believe that they rationalised the risks posed by lack of quality and duration in the title, and it is likely that they had good reason to do so as custom and practice probably support their position. The exception to this was the claw back and use it or lose it provisions in the Tasman district, which appeared to be having significant impact on beliefs and behaviour.
- Flexibility of the consent was significantly affected by specification of rates of application and land use. This was of varying concern to landholders with some considering it could be managed, and others worried about impact on their ability to change land use and subsequent effects on land value. Flexibility did not appear to be significantly affecting management at present, but many consent holders could see that there could be problems in the future.
- In terms of duration, most extractors understood the length of their consents. They also felt that the probability of renewal was high, and this did not register as a significant concern in the short to medium term. Duration did not appear to affect investment or management behaviour. We have some concerns in the longer term over issues of duration - particularly expectations of renewal - and believe that this area could be made more transparent for all stakeholders.
- Transferability was the main area where there was a mismatch between consent holder's understanding and the real situation. Despite most councils having policies which allowed or encouraged transfer, many participants (other than Tasman district) believed that this was not allowed or did not approve of the practice except where land ownership changed. This did not appear to have affected behaviour significantly at present because of limited opportunity for trading.
- Exclusivity was discussed, and there were some minor concerns, but neither this issue nor divisibility were major issues for consent holders.
- Beyond quality of title we felt that flexibility and transferability had the greatest scope to distort investment and management behaviour in respect to the property right. In particular constraints on flexibility, were already distorting actions by some of those spoken to.
- The influence of other stakeholders on property rights of consent holders was perceived by holders to be increasing and would be of greater importance in the future. The other stakeholders however perceived consent holders to have a very high level of security with their right. These other stakeholders face high transaction costs in maintaining their perceived property rights, and it may be that better definition of their rights would reduce transaction costs throughout the system.
