It has also recommended that individuals should be responsible for knowing the risks and making their own decisions about whether to move away from high-risk areas.
In a new report, it suggested a transition period of 20 years, to provide people with time to make decisions and spread any cost.
The independent reference group, which includes economists, representatives from the banking and insurance sectors, local government and iwi, was set up by the Ministry for the Environment to help inform forthcoming climate adaptation legislation.
Successive governments have grappled with how to adapt to and pay for climate change risks to communities as the frequency and severity of weather events increases.
Cyclone Gabrielle and the 2023 Auckland floods are estimated to have cost a combined $14.5 billion in infrastructure damage and business losses.
The previous Labour-led government failed to draft adaptation laws, and the current coalition government has still not introduced a planned climate adaptation bill that would set out how communities, individuals and businesses will respond.
The latest report follows a cross-party select committee inquiry completed last year, and an expert working group report published in 2023.
It said climate change was already affecting New Zealanders and there was an “urgent need” to change how the country adapted to the risks.
“It is currently underprepared. This is leading to larger and more frequent recovery costs, unmanaged financial strain, and disproportionate impacts on some groups.”
If climate change risks were not addressed, it could lead to insurers withdrawing cover from some areas, and property values in high-risk areas declining over time.
It recommended that people should be responsible for knowing the risks to their own home and acting accordingly.
“Unless there is risk to life, some people may choose to stay in risky locations. In that case, they should be responsible for bearing the costs of their decision,” the authors said.
However, people would not be able to make informed decisions until much better, nationally consistent information about those risks was made available, they said.
Along with better hazard information and communication, the report recommended mandatory adaptation planning at local government level, along with reducing councils’ exposure to lawsuits “so that hard decisions can be made”.
Some of those hard decisions could include withdrawing services from some locations, it suggested.
The government should continue to provide hardship support after large-scale weather events, the report recommended.
However, it also believed that financial compensation to home and landowners for their properties should gradually reduce over the transition period, with no buy-outs after that time.
Adaptation funding itself should follow a ‘beneficiary pays’ approach in most cases, the report said.
“This would mean those who benefit most from these investments contribute more.”
Central government should only invest in adaptation if it would protect Crown assets, “or where broader national benefits can be realised”.
“Central government investment or other financing strategies may be appropriate to help overcome challenges in particularly vulnerable areas, where there is less ability to pay.”
The government should also provide some financial support to Māori communities to protect infrastructure like marae and urupā, which were often in higher-risk areas, the authors said.
“Māori land and assets are particularly exposed to climate-change-related risk, as are rural communities that may have small ratepayer bases or be dependent on critical infrastructure assets such as a single bridge.”
It also noted the effects of climate change risks on lower socio-economic communities.
“As prices of properties that are highly exposed to climate-change-related risks fall, lower socio-economic communities will be more likely to live in them, increasing their financial and physical vulnerability.”
The report’s recommendations are a departure from a previous expert report, which recommended an ongoing framework for compensating home and business owners in order to move high-risk communities out of harm’s way.
Environmental Defence Society policy director Raewyn Peart was previously involved in helping write recommendations for designing adaptation law, and told RNZ’s Nine to Noon programme the first priority was to stop building new houses in high-hazard areas like floodplains.
A National Environmental Standard could be put in place with immediate effect to stop councils allowing that to happen, she said.
She had not read the Independent Reference Group’s report but said the proposals in it were unlikely to go far enough, because people in difficult circumstances through no fault of their own would need help.
On the other hand, there had to be a point where councils could stop providing services if people chose not to move, she said.
