Reduce developer charges, reduce housing costs

Monday 9 November 2015

Infrastructure payment bonds are a move in the right direction for housing developers.

By Miriam Bell

The Labour Party plans to change the way infrastructure, such as sewerage systems and storm water drains, is funded for new developments.

Housing spokesperson Phil Twyford said that, under the party’s new planning policy, infrastructure will be funded by local government bonds.

The bonds would be paid off over the lifetime of the asset through a targeted rate on the owners of properties in the new development.

Twyford said this will substantially reduce the cost of new housing.

“Currently, those costs are either subsidised by the ratepayer or passed by the developer onto the price tag of a new home. That makes houses much more expensive.”

The provision of infrastructure in new developments has become a hot topic of late - as part of the dialogue around affordable housing.

Auckland developer and investor David Whitburn said Labour’s proposal was a great way to address the issue.

He said the amounts developers are currently expected to pay for infrastructure are huge.

The development contribution amounts to about $20,000 per dwelling plus Watercare charges. There is also an infrastructure growth charge which comes to $13,000 plus GST.

Those costs are then passed on to house buyers, he said.

“In a sense, councils have conspired to make housing less affordable through infrastructure charges. Bonds are a good move towards the provision of cheaper housing.”

However, there needs to be a climate of certainty around the provision of infrastructure, he said.

“As well as costs, time is crucial when it comes to getting things done. Currently, there is too much uncertainty around timeframes – largely due to all the complex rules.”

Whitburn also said there is a legacy of neglect surrounding existing infrastructure and these costs can have a detrimental impact on plans for housing developments in brownfield areas.

The Labour Party’s plans were announced as part of its new policy on the reforming of planning rules.

Density and height controls will be freed up to allow for more medium density housing, while the use of urban growth boundaries will be reformed so they don’t drive up section costs.

Auckland Council is trying to address density and height controls through its Unitary Plan, but Twyford told media it is “facing pretty staunch opposition from some nimby groups”.

He said Labour would change the Local Government Act to restrict the controls and require councils to give priority to the need for more affordable housing.

Meanwhile, just last week, the government commissioned the Productivity Commission to undertake a review of New Zealand’s planning system

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