A preliminary business case submitted by the council for $132.5 million was under consideration by Treasury last year, but failed to get over the line before the government was voted out.
Leaked in full to the Otago Daily Times this week, the business case pitched a plan to acquire property at a rate of 1% a year for the next five years to move people progressively in the face of flooding due to climate change.
The rate was calculated, the business case said, because "land use change could be up to 100% in the next 100 years".
South Dunedin has 6500 properties, more than 95% privately owned, including old and poor quality homes. About 60 would be bought per year.
A senior source told the ODT that a ministerial-level meeting with the council would be held in Wellington next week and a council spokesperson confirmed that the business case submitted last year "continues to evolve".
A spokesperson for the Treasury said the council’s proposal remains under consideration.
The business case said the plan to buy properties was necessary and "the only approach that satisfactorily addresses key problems of current and future natural hazard risk, status quo investment risk, and downstream systemic shocks."
The funding would enable gradual voluntary sales to the council from now on, rather than people seeing their property values plummeting as floods became more frequent.
The risk of the housing market collapsing is mentioned in the business case and being investigated by a multi-disciplinary project at the University of Otago called Strand. It is modelling when properties could become unmortgageable and lose their value. It expects to publish next year.
Project co-leader and geographical information science expert Associate Prof Tony Moore said the work was necessary to "understand and improve social solutions, followed by developing appropriate equitable policy".
Efforts to mitigate the impact of water would affect timelines.
South Dunedin Future manager Jonathan Rowe, who authored the business case, said getting started on South Dunedin’s plan was a bit like trying to push a car.
"It’s hard to get it moving, but once it’s going it is easier."
Relocation of people was part of all solutions, he said. The council could buy properties that are most flood-prone and also properties currently at lower risk where denser housing could be developed. The council is planning no net loss of population in the area over the next 30 years.
Mr Rowe suggested there could be opportunities for the council to "innovate" and address inequalities, by using capital gain or rental income from housing development to purchase at-risk houses and also "replace terrible housing that people straight up shouldn’t be living in."
Land could also be purchased for water mitigation measures, for example space to store water or for equipment to pump it out.
The council already shelled out $13.2m from its own capital expenditure budget for Forbury Park earlier this year. Plans for it are unknown.
Taieri MP Ingrid Leary — thought to have helped broker meetings about the funding need between council and ministers last year — said people had waited long enough since the 2015 floods for a tangible plan and funds must land.
"There is now enough of a framework, local political will and community buy-in to justify the funding.
"South Dunedin people are intelligent and rational and will be able to see the benefits.
"The fact the approach is over the long term shows people have been heard and can feel reassured this is almost the opposite to what was proposed in 2015 which was a knee-jerk, holus-bolus, speedy retreat that bulldozed over rights of people most affected."
The gradual purchase of properties would enable South Dunedin to be a "poster child for climate adaptation for the rest of New Zealand and the world".
Environmental Defence Society policy director Raewyn Peart said there was a "critical need" for government to help councils plan and fund plans. Councils should not have to make "ad hoc" approaches to government.
The government commits to pay 60% of infrastructure costs after a disaster, but had no mechanism for providing adaptation funds. A National Party promise to develop a climate change adaptation framework is pending.
