Housing affordability plan misses hidden costs

The Government announced last week that it would be looking at measures such as increasing land supply for new housing, introducing a six-month time limit on councils processing medium-sized consents, and measures to reduce delays and the costs of Resource Management Act processes.

All in the hopes of making housing more affordable, particularly in Auckland.

But these moves still all require someone – probably private developers – to build houses that will sell in the low to middle price brackets.

And they do not address the fact that developers have to contend with so many hidden costs along the way that it just makes good business sense for them to want to offer as expensive an end product as possible.

Council and infrastructure costs have skyrocketed over recent years.

In Auckland between 2002 and 2005, more than 12,000 residential building consents were issued each year.

But since 2005, when council development contributions were introduced, that number has fallen sharply. Since 2009, barely 4000 have been issued each year.

Development contributions are fees collected for community and network infrastructure when new houses are built. Auckland Council says they are about 8% of the cost of development.

There’s also the Watercare infrastructure growth charge. This has increased 100% over the past two years and looks likely to grow at a rate of at least 10% a year for coming years.

The Watercare infrastructure charge for the July 2012 to June 2013 year is $6900, plus GST, per home.

And that’s whether it’s a 70 sq m apartment or a five-bedroom home in the suburbs. It’s not hard to see why developers think building big, expensive homes is a more attractive proposition.

Cheaper houses should come with fewer council and infrastructure costs, if the Government is really serious about building affordable homes.