At the beginning of May, Council notified their intention 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! Excuse me, did I hear that right!!?
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 had a short two weeks until 14 May 2018 with an opportunity to ‘Have Your Say’. And I certainly had mine! Two barrels full.
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.
On more positive news, we had an apartment scheme finally obtain Resource Consent after a ‘lightning fast’ 8 months in Council and wanted to thank our consultant team (you know who you are!) for all their help in nursing this across the line.
It was no walk in the park. But needless to say, we’re very, very excited!
Onwards and upwards!