Local body levies on new sections may be capped

Last updated 05:00 11/02/2013

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A cap on local authority levies adding as much as $64,000 to the cost of a section is among the options the Government has put out for consultation.

Housing Minister Nick Smith and Local Government Minister Chris Tremain announced yesterday the Government was reviewing the way councils charge for new sections and other developments after charges soared from an average $3000 per section to $14,000 over the past decade.

That was an increase of 360 per cent and could be as high as $64,000 a section, Dr Smith said.

It had contributed to a doubling in the cost of section prices over the same period.

"These costs need to be contained if more Kiwi families are going to be able to afford their own home."

Development contributions are charged by councils to fund infrastructure including water treatment plants and storage facilities, sewage treatment plants, roads, public transport, footpaths, traffic signals and lighting and neighbourhood parks.

Mr Tremain said they were necessary to enable councils to provide the necessary infrastructure for new developments, but the costs had to be "fair and well-justified".

A discussion paper canvasses options from abolishing development charges altogether - which would put the costs back on all ratepayers - to tighter criteria, appeal rights for developers, discounts for certain types of housing, and more privately-funded infrastructure, such as the type provided at the Hobsonville Point development in Auckland.

The discussion document suggests while development contributions make up a comparatively small proportion of housing costs in most territorial authority areas, there are districts or sub districts where the average development contribution charges are 50 per cent to 100 per cent higher than the national average.

Up to 10 territorial authorities have average total development contribution charges over $20,000 per section, while some districts are charging between $30,000 and $65,000, it says.

In those instances, development contributions could make up between 10 per cent and 17 per cent of the average house price in that local authority.

Nationwide, however, the cost is much lower, and estimates of the cost of building a 145 square metre house in Auckland show development contributions make up just 4 per cent of the total cost. Consents and legal fees make up 3 per cent. But the biggest costs are land, 36 per cent, materials, 30 per cent, Labour, 19 per cent, and builder's profit, 6 per cent.

The Government has warned that it will step in to force down new home prices if councils won't - and has both local authority charges and council zoning laws in its sights. The Government is urging builders, councils, developers and ratepayers to have their say through the consultation paper.

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- Fairfax Media

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