Background
Development Contributions (or DCs) are a fee charged to developers to recover a contribution of the costs of new or expanding infrastructure that supports growth.
Revenue from these fees is used for new or upgraded infrastructure for transport, parks, sportsgrounds, drainage and stormwater systems or community facilities.
Auckland Council’s last contributions policy became effective from 1 January 2019. The Council is now proposing a new development contributions policy, with effect from 10 January 2022.
What is being proposed?
The draft contributions policy has various proposed changes, some of which suggest changes to fees to match the requirements of investment in the 10-year Budget. The key change to the policy will allow Auckland Council to plan for the delivery of infrastructure beyond 2032. The purpose is to try and ensure that future development have the same level of infrastructure as the rest of the city and can therefore, better manage the impacts of growth.
The policy also proposes that payment of contributions due at building consent is payable at the grant of the consent and will apply to all development. This proposal is earlier than currently required and shifts more onus onto developers and we urge the Council to keep the status quo.
The Council will amend the contributions policy in stages for each investment priority area as further information on infrastructure requirements become available, starting with Drury.
We agree with Council that development happening now pays an appropriate share of the costs of infrastructure that it will benefit from in the future. However, we are concerned that some of these projects will have a significant impact on the level of contributions in the areas where they are imposed.
Drury
In the draft policy Council has included $2.1 billion in local and arterial roads and parks in the Drury area. Under the new draft policy the price of contributions would rise from the current price of between $11,000 and $18,300, to a new price of $84,900. We have strongly urged Council to review these proposals for Drury.
Our view
The cost of infrastructure has to be funded somehow. If it is not being funded by the taxpayer, it is either the ratepayer, developer and/or the purchaser of the new build that pays. We agree with Council that it is fair that developers pay for an appropriate share of the infrastructure their developments require, however, we don’t agree that community infrastructure such as parks, libraries and museums should be included as ‘required infrastructure’. We recommend the Council look at alternative funding and financing options such as; rates, targeted rates, Special Purpose Vehicles, and partnering with others (Government, and the private sector) for joint funding options.
Property Council believes it is absolutely critical to have a robust development contribution policy that would allow the industry to make informed long-term investment decisions and ensure a fair distribution of fees amongst all ratepayers. However, the proposed changes do raise some serious concerns in the sector.
Given the lack of evidence provided by Auckland Council, the Property Council has commissioned independent research to test the data that has informed development of the Council’s DC policy. The independent report highlights a real concern that the impact of the development contribution charges will have on developer businesses will lead to issues around housing supply and housing affordability.
The latest lockdown in Auckland and access to skilled people and building materials have contributed towards ongoing uncertainty and increase costs. We urge Council to consider the broader impact that the proposed changes will have not only on the property sector, but also on the wider industry – namely housing affordability.