A shift in how property development levies are collected in Tasman district threatens to "slam the building industry shut" and ruin the dreams of people wanting to build at a critical time, building companies say.
They say the consequences from changes to the Tasman District Council's development contribution policy – which many in the industry claim to have only recently been made aware of – will mean some owners of sections who have yet to build will have to pay anything up to and beyond $10,000 more in levies to build their homes in subdivisions for which development levies have already been paid.
The head of GJ Gardner Homes in Nelson, Graham Vercoe, said the move was "outrageous" and meant the council could now retrospectively "back-grab" levies from section owners.
"The issue is that for older subdivisions where the developer has paid the contributions as were specified at the time, the purchaser will be liable for paying the balance caused by the increase.
"I had two people this week who've backed out of a deal because they can no longer afford to build," Mr Vercoe said.
He said the industry understood that development charges were necessary, but the council's move was incomprehensible.
"It will slam the building industry shut. There are 10 major building groups here who employ around 1500 people, excluding suppliers, and it's now at risk."
Richmond real estate agent Ben Cooper – who was alerted to the situation after selling several sections in recent weeks in the Washbourn subdivision – said the amount would differ depending on the amount the developer paid at the time of the subdivision.
As of yesterday, a portion of the cost of a consent to build on a section in Brightwater, for example, was $3200. From Monday, it will exceed $8000. The cost of levies to build on a section in Richmond could go from $7400 to $18,000, towards the cost of inground infrastructure and roading. It is an almost $11,000 jump, and a 663 per cent increase from 2004 figures.
"They claim it's a repositioning of payments and the removal of an unfair discount in place, but I don't know how they can justify this," Mr Cooper said.
Feedback already was that some owners of sections had been denied bank loans to build their homes because the increase had taken them over the borrowing threshold, leaving them without a home and now a section they probably could not sell, said Jennian Homes managing director Simon Collett and Endeavour Homes owner Dick Baker. They knew it was affecting people looking to move up from Christchurch, and who had backed out as a result.
"The council has decreased the general levy, but the crucial part is the impact of the removal of the `first dwelling' discount," Mr Collett said.
"It's going to have a major impact on families and business.
"The new home market is slowly improving after four to five very, very hard years."
He said it threatened to set the region back in terms of growth.
"We have lost a lot of labour and skilled people to Christchurch, as well as operating on very low margins to keep a lot of people employed throughout the region in very hard times."
Mr Collett said the impact on his Jennian and Milestone businesses meant seven building jobs would stop going ahead after "months and months" of work.
"I understand things need to go up to cover infrastructure and future growth, but these increases should come into force on new developments and not introduced retrospectively, which will always fall on the end user."
Tasman Mayor Richard Kempthorne acknowledged that the change in policy would affect the end user – people who buy sections in existing developments – and not the developer, who paid the necessary fees at the time of subdivision, but there was nothing new in that.
He said levies were needed to support population growth in the district. This would place a strain on network and community infrastructure, which would need to expand.
"Growth is an important driver of our budget, and it is only fair that those who benefit contribute proportionally, therefore lessening the impact on the general ratepayer.
"People do lose sight of the principle of what these levies are for," Mr Kempthorne said.
He said levies were reviewed every three years, but he was unaware of the type of fallout beginning to happen, particularly around people being turned down for home loans.
Mr Cooper said there had been nothing obvious in council information to suggest the scale of the changes. It was serious enough that if a company had acted in the same way, it would be in breach of the Fair Trading Act.
"We are marketing the Washbourn subdivision, and in just the last four weeks we have sold three sites, with another two going under contract.
"These purchasers made their buying decisions based upon the figures that council gave. We then gave [the buyers] the figures that the developer had paid, and they used these to form their budget and make their buying decision," Mr Cooper said.
Mr Vercoe said the industry was unaware of the degree of change.
"We were not aware of it. Council always says it advertises these things, but a 600-plus page document – it's unlikely the average person would understand. Unless you know exactly what you're looking for, it's impossible for people to come to grips with the intention behind the levies."
Mr Baker of Endeavour Homes said he spoken with a number of people throughout the wider industry who knew nothing about the change.
"I would like to think our council might have approached us about this. We have flagged a problem, and the responsible thing to do now would be to have a meeting in which we can express concern about this. "
Mr Kempthorne said the pending changes had been well publicised throughout the recent discussion about local government costs.
"It was workshopped with councillors twice, and there were no dissenting views on what should happen."
He said a meeting with the industry would be arranged within the next two weeks, with a date to be confirmed.
- © Fairfax NZ News