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NZ Govt reviews levies in housing overhaul

Property Here - Tuesday, February 26, 2013

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The Government is investigating an overhaul of the way councils collect money for their annual $3.6 billion new infrastructure spend.

Scrapping development contributions, the levies collected from developers on properties they are building on, is one option.

Local Government Minister Chris Tremain said the system was "complex, difficult to understand and applied inconsistently".

So the Department of Internal Affairs issued a discussion paper calling for submissions by March 15 and floating options including abolishing contributions, reinstating Environment Court appeals, tightening the range of infrastructure funded by the payments and allowing discounts for a type and location of development creates less demand for services.

The Productivity Commission found charges of up to $20,000/section for housing and the contributions are seen as one factor affecting housing affordability and shortage.

Evan Davis, Todd Property chief executive, says his company had to spend so much on its 160ha Long Bay development on Auckland's northern outskirts that cheap housing was not an option.

"When you've paid what we've paid for infrastructure that nobody else provided and when you've taken 13 years to get here, the possibility of providing that kind of [affordable] outcome is precluded.

"It's just taken too long and cost too much," he said, describing roading, a new pump station, settlement ponds and pipelines.

Property Council chief executive Connal Townsend welcomed an overhaul of the system.

"We've been advocating these changes for seven years. We've been in despair and our arguments have not been listened to and this report goes to the nub of every single issue and we can't fault the analysis," he said of the document.

"We're delighted by it. Development contributions killed the Auckland apartment market stone dead. If the changes Internal Affairs are advocating were enacted, it would make it a lot cheaper."

The paper says Auckland Council spends $1.6 billion of the $3.6 billion and this pays for roading, transport, water supply, waste water, solid waste, recreation and sport.

Contributions are used by 45 councils and 18 councils do not charge them. Only 4 per cent of costs to build a 145sq m Auckland house are development contributions, Internal Affairs says.

What it costs

145sq m Auckland house
*36 per cent land, zoning, subdivision, infrastructure
*30 per cent materials
*19 per cent labour
*6 per cent builders' profit
*4 per cent development contributions
*3 per cent consents and legal fees
*2 per cent plant