Auckland Council Consultation On Development Contributions
Council are proposing to raise development contributions by around 30%!!
What Are Development Contributions?
They're the levy we pay for every additional dwelling we create to help fund infrastructure like roads and drainage. Currently, this is around $21k and is projected to rise to $27k, and in some cases up to $70k per dwelling in greenfield (outer regions of Auckland) subdivisions.
Andrew Duncan (Council’s financial policy manager) clearly lives on another planet as he contends that developers will factor that into their ‘cost structures’. Yes, naturally that will have to be the case. But here’s the thing, somehow he believes land prices will go down rather than house prices going up! WTF!!?
Typically, greenfield subdivisions are where the ‘affordable’ houses are created. How can an ‘affordable house’ absorb an additional near 50k levy?
You don’t need a PhD in economics to figure out that these costs will only pass on to the eventual home owner.
I accept that Auckland needs to rapidly invest in infrastructure to cope with our growing population. Though I’d advocate exploring infrastructure bonds which match the duration/life of the asset as being a more sensible strategy to get us out of the mess we’re in.
The consultation phase is open and there’s an opportunity to ‘Have Your Say’ until May 14. I certainly intend on doing so!
On the basis of a contribution rise, one thing’s for sure, house prices will not be coming down anytime soon if Council’s brains trust have anything to do with it. And less not more houses will be created, with fewer developments becoming financially viable as a result.
For a copy of the consultation paper, drop me a line.