Hamilton’s “growth pays for growth” philosophy is unsustainable
Hamilton City Council’s “growth pays for growth” phrase is often used as a blanket principle to increase development contributions.
The 2019 proposed policy update is no exception, with Property Council opposing the high increase in development contribution costs on the back of the 2018 policy increases. Property Council’s submission urges Hamilton City Council to define what “growth pays for growth” means for development contributions. In particular, the phrase “growth pays for growth” is vague and has not been further defined, and seems to be used as a blanket statement to increase development contributions. As a result of these increases our members feel their developments will no longer be viable and they will likely look elsewhere.
In Hamilton, development contributions are a significant cost to development. In some cases, the council are charging more in development contributions than the cost of the overall project. Our submission has three clear examples of developments that have been cancelled, stalled or would be unfeasible due to the recent 2018 and proposed 2019 policy changes.
Example 1 - If this development was subject to the 2019 policy, it would not proceed
Our development has consent based on an earlier development contributions policy. Under the 2018/19 policy development contributions increased by approximately $500,000. Under the 2019 proposed policy the development would require an additional $20/m² in rent to cover the cost (or be absorbed by the developer). If this development was subject to the 2019 policy, it is unlikely it would proceed.
Example 2 – Social infrastructure projects put on hold as development contribution fees exceed the cost of the actual work
The development contribution fees well exceeded the cost of actual work. This has occurred on more than one social infrastructure project. As a result, the projects have been placed on hold while the development contributions are either challenged or alternative options are explored. This feels wrong that key social infrastructure is not differentiated under the policy due to the overall benefit that these projects would bring to the community.
Example 3 – Temporary storage units cheaper than buildings, either you want us in the CBD or you do not
Temporary storage units are cheaper than a permanent building structure due to the high costs of development contributions (ranging from $2.5m to $3.5m). Our company competes on an international scale and is active in other regions of New Zealand. Barriers such as high development contributions on top of high rates contribute towards us cutting costs by having temporary structures or bringing in buildings from overseas. There is only so much cost cutting that can occur. The 2019 policy will likely force us to move our business elsewhere. If our unique business leaves Hamilton, so too will its employees. Either you want us in the city, or you don’t.
Our 2018 member survey saw 79% of member respondents believe that the 2018 policy would likely result in decreased development and 85% of member respondents said developers would see Hamilton as an unattractive option. As a result we urged Hamilton City Council to reconsider its policy. (Note: Hamilton City Council did make minor adjustments in line with two of our recommendations – see full submission for details). However, instead we continue to see development contributions rise significantly with the reliance on the “growth pays for growth” principle.
Development contribution policies can either enable or stifle growth. Property Council’s member examples and member survey all come to the same conclusion…it is now up to Hamilton City Council to decide which path to take.
Author | Katherine Wilson
With a law and arts degree from Otago University, coupled with five years’ experience as a policy analyst and policy advisor at Auckland Council and the Wellington Employers’ Chamber of Commerce, Katherine is perfectly placed to support the advocacy needs of the Wellington and Waikato Branches. Katherine is also supporting our advocacy work at a national level, including working with members on the proposed increase to fire levies.
Katherine was appointed as a Senior Advocacy Advisor in 2017, and since then has proven herself to be hugely dedicated, highly intelligent and committed to ensuring the voice of our members is heard at all levels of governance.