It has vowed to "go again" in the battle to get more families in the district into affordable houses.
The variation would have required most new residential subdivisions and developments to make contributions of either land or money to the Queenstown Lakes District Council.
That, in turn, would have been used by a registered community housing provider — for example, the Queenstown Lakes Community Housing Trust — to develop housing to help low to moderate-income earners.
The trust has a waiting list of about 1300 families.
The panel of Jan Caunter (chairwoman), Jane Taylor, Ken Fletcher and Dr Lee Beattie had a week-long hearing into the variation. They had recommended withdrawing the variation, saying it was better to have a mix of regulatory and non-regulatory options, preferring a package of targeted measures over the variation alone to increase affordable housing provision in the district.
The proposed variation was a first for the country.
Queenstown Mayor Glyn Lewers acknowledged he was frustrated, but he supported withdrawing the variation.
He wanted to take a "glass half-full" stance and "go again".
"In my position you always have to look on the bright side. The bright side for me was the panel found the variation lawful and the case was valid. That is a very important start for the case for whatever happens next ... [We have] a very good base to start again on an issue of high importance to the district," Mr Lewers said.
Deputy mayor Quentin Smith, from the Wānaka-Upper Clutha ward, said affordable housing was one of district’s greatest challenges.
The variation had been a strategic approach to addressing one of the greatest issues people talked about: "will our kids have jobs; can they afford to be here?"
"We have been left on the back foot. We don’t have any leverage now ... I am really uncomfortable with this recommendation because I believe it was outside the delegation of the panel that made it."
Cr Lisa Guy, who represents the Arrowtown-Kawarau ward, apologised to council planning staff, the trust and families looking for an affordable house.
"To the team that gave this a shot, thank you. It was an out-there call and an election issue for many of us.
"I want the housing trust to feel heard today and I respect ... how disappointing this is for all of them ," Cr Guy said.
Despite the disappointment, he was proud the council was tackling affordable housing, he said.
"Failing is trying and trying is awesome ... [let’s] bring the community with us ... We can try to figure it out ... I am proud we are constantly fighting the good fight," Cr Tucker said.
Cr Barry Bruce, of Wānaka-Upper Clutha, said he supported withdrawing the variation because "such a charge will inevitably be passed on by the developer and make it akin to a Robin the Hood tax, neighbours subsidising neighbours. I don’t think that is fair or equitable".
Council chief executive Mike Theelen said it was not correct to describe the contribution as a "tax", because the contributions were not held by the council and were all passed on to the trust.
At a glance
THE HEARING PANEL
WHY DID THEY SAY?
The commissioners said in a report dated June 5 they were not satisfied the variation was the most efficient and effective way of achieving the council’s objectives and it did not meet the tests of section 32 of the Resource Management Act in regard to assessing other alternatives to funding affordable houses. Alternatives included using rates, limiting residential visitor accommodation and enabling more housing.
WHY WAS THE HEARING SPECIAL?
The Queenstown Lakes District Council was the first in the country to propose inclusionary housing provisions in its district plan. The variation would have allowed the council to require developers to contribute land or money to the Queenstown Lakes Community Housing Trust for affordable housing.
WHAT NEXT?
Despite recommending the variation be withdrawn, the panel said it was lawful and the QLDC had an economic case. Mayor Glyn Lewers took heart from that and is urging the council to "go again".
