Minister for Housing and Infrastructure Chris Bishop plans to replace the way councils charge for new infrastructure developments to a new levy system.
Bishop appeared at Local Government New Zealand’s (LGNZ) metro, rural and provincial sectors meeting on Friday to announce new changes to infrastructure funding settings.
The changes are part of an update on the Government’s ‘Going for Housing Growth’ policy which Bishop announced last year and are made up on the following pillars:
- Pillar 1: freeing up land for development and removing unnecessary planning barriers
- Pillar 2: improving infrastructure funding and financing to support urban growth
- Pillar 3: providing incentives for communities and councils to support growth
Bishop said on Friday that “good progress” had been made on the first pillar but he had heard from local Government and housing experts that freeing up urban land wasn’t enough on its own and a “timely provision” of infrastructure was also needed.
Housing came as a package with land, water, transport, and other community infrastructure, but councils and developers were facing significant challenges to fund and finance enabling infrastructure for housing, he said.
Bishop doesn’t believe existing tools like development contributions (DCs), and the Infrastructure Funding and Financing (IFF) Act are fit for purpose and announced the following changes to NZ’s infrastructure funding settings:
- Replace DCs with a development levy system
- Establish regulatory oversight of development levies to ensure charges are fair and appropriate
- Increase the flexibility of targeted rates
- Improve the Infrastructure Funding and Financing Act
- Broaden existing tools to support value capture
Development contributions are fees councils charge for new developments that developers have to pay to councils.
Bishop said under the status quo, councils can only recover infrastructure costs for planned, costed, and in-sequence developments.
“In effect, this means councils can only recover costs if they have certainty about when, where, and what development occurs,” he said.
“Under the new development levy system, councils and other infrastructure providers will be able to charge developers for their share of aggregate infrastructure growth costs across an urban area over the long-term.”
Bishop said the new levy system will restrict local authority discretion as councils can have “monopolistic pricing power” when they are the sole provider of certain infrastructure.
“But it is important that prices are fair and appropriate, so we will also establish regulatory oversight of development levies, which will be integrated with the regulatory oversight of water services and rates,” he said.
Bishop acknowledged that some councils, especially smaller ones, will be reluctant to use the new levy system so the Government was also making changes to targeted rates in order to support urban growth.
“We will allow councils to set targeted rates that apply when a rating unit is created at the subdivision stage. This will enable councils to set targeted rates that only apply to new developments. And, for small councils, this could be used as a good alternative to development levies,” he said.
Infrastructure Funding and Financing (IFF) Act changes will also include levies being charged for major transport projects.
“As a general principle, those who benefit from publicly funded infrastructure should help contribute to the cost of it,” Bishop said.
Act MP and Infrastructure Under-Secretary Simon Court who made a separate announcement on Friday about changes to the IFF Act said levy deferrals would be enabled. This means if affordability is an issue for some property owners, there will be options to defer levy payments until a later date.
Property Council New Zealand CEO Leonie Freeman welcomed Bishop’s announcement and said the DC changes would support the construction of more homes and pave the way for “greater commercial viability”.
“With housing affordability becoming an increasingly pressing issue, this reform could go a long way in ensuring that development is not unnecessarily hindered,” she said.
More from Bishop’s announcement can be read here and Court’s full announcement can be read here.
38 Comments
I had heard this was coming at a boxing day BBQ....
I had also heard that central gubermint wanted to control this levy to make sure it got spent directly on the applicable infrastructure... not cycleways. Looking for details now.... I have a direct view on how this will play out, it WILL mean more land for sure at lower prices on edges of places like Milldale etc etc. Not sure how watercare issues will be resolved.
"not cycleways" - why not?
they 2 woke
If cyclists must ride on the road (which is dangerous and frustrating), why not make cars drive on an old dirt track (also dangerous and frustrating). That would also cut down the cost of new housing.
Let our children ride their bikes on dangerous roads besides some of the worst drivers in the world.
Because hardly anyone uses them, and some of them f-up traffic flow.
Yeh I really don't get it.
On my rates bill, there is nothing stating that my contribution for local roading is for motor vehicles only. If I'm riding a bike instead of driving my car I feel confident I've paid my bit.
So roads will be forced to completely pay their own way? One doubts... many seem to have terrible business cases.
And green paint outlawed as woke. Wonder if we'll also see continuation of the Footpath Fatwa Simeon Brown carried out on Warkworth's traditionally firmly blue-leaning voters.
The reality is large scale developers have been getting away with sweet deals from Councils for too long. Development Contributions have been designed by developers for developers...
Development contributions are determined by Council budgets with no forward cost escalation, which are typically way more conservative than the actual costs concerned. The result is the wider ratepayer picks up the tab for cost overruns, due to the Councils under collecting on development costs in the first place.
Councils current approach results in under collections, and are taking on some of the development risk when it doesn't need to. I recommended the solution to Councils central planners, some years ago, is to over collect by charging more than budgeted, and refund the balance including interest to developers. They didnt go down this track, which suggests they have got too friendly with developers.
Councils also split the costs of infrastructure between land developers and builders, so if sections remain vacant for years, Council has to absorb the holding cost of non collection; effectively becoming the banker for the developers.
You have to ask yourself why would Council take this approach of risk, when if they charged the developers the full cost of infrastructure on section delivery Council wouldnt have to carry the debt of deferred collection. A number of large scale developers have landbanked these sites for years and sometimes decades, so the extra charge in the beginning should be peanuts to the profits they make...
As I see it, the current payment arrangements only benefit the large scale land developers, and Councillors and their staff dont have the guts to challenge the status quo.
This is current way of staff in central and local government, to make it easy for themselves rather than bad headlines...
There's a general lack of understanding by the wider public of the rort that is taking place, and its time this was aired in public, so the small guy stops subsidising these big boys...
In my opinion, the levy Chris Bishop is proposing does nothing to address the current rort that is taking place. Government will be using a report written by one of the big four global accounting firms; which is impossible to challenge, to keep the status quo for their big clients...
DC’s can also be awful if a major development fails or doesn’t progress as planned. Council incurs a whole lot of debt to provide Infrastructure, and then doesn’t recover it. I suspect Drury in Auckland will play out like this.
I've been more impressed by Bishop than any other National MP.
Not a very high bar unfortunately.
Higher than many others
The announcement states that currently councils don't always get all of the development costs back by way of development contributions (and have to top up their infrastructure spending through general rates) and it's hard for them to figure out what they should be charging and will get more difficult as more development happens faster. This levy seems to be a way of making it easier for councils to get the money they have to spend back, without having to plan and cost all the infrastructure works in advance of permitting a development.
I can't help but think that the uncertainty around costs (which will increase, not diminish, without pre-planning) has to go somewhere and as the developers are paying the costs, it has to go on them? And does it also mean that the uncertain costs might be payable at an uncertain point in the future, maybe even over time, rather than as a known lump sum at an agreed point in time?
I'm struggling to understand how it will work for the developers. I'm not making a political point; I'm very keen for it to be a better system...and asking if someone can please explain it for me? (Thanks in advance).
I am interested to read further - tonight
Thanks. Maybe that is what they have in mind. (Not sure I'd support areas paying a levy to get their own 24-hour police presence!)
It seems to be something that councils or large-scale developers could do; pass on their costs to the buyers (and future property owners) by way of a levy.
I wonder what is intended when something of a much smaller scale occurs, e.g. a property owner adds a minor dwelling or subdivides their section into two. That sort of thing wouldn't justify setting up the legal and financial instruments, I would have thought. Better for that developer to just pay a fee as they do now.
Value capture is BS.
Properties with enhanced amenity around them or better PT or transport access will rise in value reflecting those improvements and thus the rates will rise as well.
VC is simply double dipping and logically absurd.
Should simply raise the unimproved land value component of rates, to reflect that value increase provided by the manifold efforts and investment of many other ratepayers and society parties to that land.
Increase in capital value from improvement of amenities is one off - so a one off levy seems appropriate.
Most councils have a fixed and variable portion of their rates that is a percentage of cv, and this is all based on the relative values of everyone else's cv at the time of cv valuation. Increases in rates are therefore 2 steps removed from being proportional to cv... Very watered down.
Value capture isn't... At face value
“Under the new development levy system, councils and other infrastructure providers will be able to charge developers for their share of aggregate infrastructure growth costs across an urban area over the long-term.”
that's all good, except the good councils just waste those monies away like they always do.
The story goes here in NP and probably for other councils as well that the accumulated development funds suddenly reduced the 3-waters amount to zero after 3-waters was announced as the Labour govt earmarked all those funds for 3-waters development. The council 3-waters development funds were then earmarked for other projects which I'm not sure were associated with 3-waters. Anyone else heard such a story or can corroborate this.?
When I look at NP DC charges per HUE (housing unit equivalent) they comprise Parks and Open spaces, Community Infrastructure, Transportation Network, Wastewater Network, Water supply, Water catchment, two lots of Stormwater, (another waste water charge for waimea area, ~15k)
After years of complaining about the nanny state in one foul swoop he's removed the ability of democratically elected councils to have their own local fit- for-purpose development contributions policy. Expect debt backed by general rates to soar as we're forced to subsidise developers under the guise of affordable housing. We're all supposed to clap like trained seals as these hypocrites screw future generations that little bit more.
As the stated purpose is the exact opposite - to make it easier for councils to get all the money they need for infrastructure, where current processes mean that general ratepayers subsidise development - what makes you say this?
I rate the so called council democracy worse than central govt. and that the local councilors do not stick to their knitting of 3-waters, roads, with the minimum of recreational amenities. The council deep state is just as bad if not worse than the central govt deep state with Councillors having little sway or being bamboozled by the non-elected officials. So I would like to see more directives from Wellington to focus councillor's minds.
You want to live in a nice city, you just don't want to pay for it?
NP is already a nice City. Council going haywire over new sporting amenities. Potential upgrade of the cricket ground at ratepayers expenses, not NZ Cricket with threats of no more cricket matches for you. As if cricket matches are the be all and end all of sport in NP.
It's almost as if a newly elected council need to embellish what the previous one did.
Infrastructure Funding and Financing (IFF) Act changes will also include levies being charged for major transport projects.
“As a general principle, those who benefit from publicly funded infrastructure should help contribute to the cost of it,” Bishop said.
I think this means that a levy can be placed on all existing rating units for major transport projects. In other words, take the Transmission Gully motorway. Every rating unit from Porirua north to Levin would likely have to pay some additional rates to part-fund a project like that. It's a way to directly charge local land/property owners for NZTA works. Councils will collect the levies via their rating systems and then pass on the levies to central government.
Thanks. That might be right. I'm not sure. There were four information sheets released with the announcement, but we're still left trying to figure out how this is going to work!
I had missed that Simon Court had also made a statement. The links in the article above are broken. But here is the correct one: https://www.beehive.govt.nz/release/going-housing-growth-infrastructure…
(I still need someone to explain it to me...or maybe the details are yet to be worked out and we must wait for draft legislation to be able to understand).
Only had a very quick read, so I might potentially modify my view.
on the surface, it sounds good. It’s trying to solve the ‘finance’ problem, which is much more of an issue than the ‘funding’ problem. It seems like it could address the pressing finance issue that councils are up to their limits.
one issue I have with it, philosophically, is that I think it’s much more of a greenfield supporting tool than a brownfield supporting one.
Do you agree that it's proposing something like in the MUDs PIDs and PUDs video Kate posted above (https://www.youtube.com/watch?v=EUEyddJoDRE)?
If so, I think you're right that it is a finance tool. And that it would best suit large-scale greenfield development.
I think it would be nice to still have an option to just pay a development contribution for smaller-scale infill type stuff, or brownfield re-development.
Yep
And I don’t think it will make any meaningful difference to affordability
It will just enable things to ‘potentially’ happen more readily
someone still has to pay!
"No new taxes"
This is reporting, Ella, but it is a long way short of journalism
Please read my posts, this site, and ask whether GROWTH is (a) possible and (b) desirable?
Bishop is too late - he's trying to kick-start a motorbike which has stopped running, and had been on reserve.
Come on...
ask whether GROWTH is (a) possible and (b) desirable?
(a) not on the scale they are hoping for
(b) only in places where there is excess capacity on the existing networks (and maybe that's no where).
None of this is going to reduce infrastructure costs so how do they anticipate it will either increase supply or reduce development costs and subsequently property prices?
That would seem to be the obvious question...
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