Wairakei development under threat

Tauranga's development cornerstone introduced to stop ratepayers subsidising developers is under threat after a dismal financial scenario was unveiled for a planned 370 ha township at Papamoa.
Tauranga City Council has announced that it intends to review its fundamental philosophy that growth pays for growth.
The grim recession-induced future facing the planned 8000-population Wairakei development has forced a rethink of issues that go to the heart of why Tauranga was the most unaffordable city in New Zealand.
With the council being squeezed by the twin forces of the recession driving down development and a crushing debt burden, a stark report on the future prospects for Wairakei has added fuel to the pressure for a radical rethink.
Uncertainty surrounding 100 ha of Wairakei ending up in Maori ownership also emerged as a significant concern.
The council decided yesterday to embark on a comprehensive review of how to make Wairakei more affordable to lower and middle-income families wanting to own their first home.
If a significant number of affordable owner-occupied or rental houses costing up to $400,000 were to be built in Wairakei, it would require a "concerted effort by developers, builders and the council", the report said.
The magnitude of the report saw Cr Larry Baldock complain bitterly to meeting chairman David Stewart that the debate was being rushed so some councillors could attend a meeting with the Western Bay of Plenty District Council. However Cr Stewart was not prepared to adjourn the debate in which three councillors were absent.
Pressure from Tauranga's hard-pressed development community was behind the decision to review the growth-pays-for-growth philosophy. Council's review will take account of the likely impact on housing affordability, population growth, economic growth, and financial risk.
The huge slowdown in development, in which revenue from fees has plunged by half in three years to $11.5 million, also fuelled a decision to investigate the financial implications and risks of low growth. The council further agreed that its growth management planning should put more emphasis on the feasibility of development.
Although Cr Stewart virtually conceded that shifting more of the financial risks and costs on to ratepayers was a political dead duck, the council decided to leave all options on the table to try to make Wairakei more viable.
Land prices and council fees were signalled as the biggest barriers to affordability. The council has already made a big concession to developers by agreeing to change the basis of subdivision impact fees (SIFs) in Wairakei. Instead of SIFs being charged on a per lot basis, the council has agreed to charge per hectare.
The report was the summary of months of work by a project team set up to assess the viability of Wairakei. It included council staff and representatives from three land development companies, with input from the building industry along with banking and property valuation professionals.
The project team's 40-page report concluded residential development was marginally viable - and this was based on financial assumptions for section sales that may be "moderately to significantly over optimistic".
The report also highlighted the potential dampening effect on development from the Office of Treaty Settlement being a major land owner in Wairakei.
Once surplus land purchased for the construction of the Eastern Link was added to the Office's landholdings, about 100 hectares of Wairakei will end up going to iwi or hapu as part of the Crown's Treaty settlement package. "There is a significant risk that the development of this land will not occur, or will occur at a much slower rate than is currently envisaged," the report said.
It said the desire for the land to be retained in Maori ownership by leasehold rather than freehold development may not be "desirable to the general public - especially for residential product".
The report further warned if Maori land remained undeveloped for a long time, infrastructure to service Wairakei would be used inefficiently and development contributions would increase markedly due to higher than expected interest costs from the little or no contributions coming from the Maori-owned portion.