Landbanking by developers could be targeted by the Government as part of an initiative aimed at increasing housing developments in high growth areas of the country.

On Sunday, Prime Minister John Key announced a new $1 billion fund to fast-track infrastructure development by councils in high growth areas.

He also signalled the Government was considering establishing Urban Development Authorities for specific areas of high housing need, under which the Government could potentially take land off a landowner resisting development.

Tauranga deputy mayor Kelvin Clout said landbanking was certainly happening.


"History has shown us that often developers drip feed land on to the market in stages. Therefore we can argue there's a degree of landbanking going on at the moment. As council, we don't know the exact extent of that."

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Mr Clout said the potential for land to be taken from landowners showed the Government had serious intention in tackling housing issues.

"If they feel councils or developers are dragging the chain, they are showing every intention of coming down quite hard. That's their prerogative."

Gaining what was in effect an interest-free loan from the Government was a good incentive for council to put in proposals for new developments, but Mr Clout said this would depend on whether the council would have to mark the financing down as a loan on its balance sheet. "In Local Government, there is a debt-to-income ratio that is a ceiling of 250 per cent. At the moment our ratio is at 160 per cent. Although interest-free, it will still push us up to that ceiling."

Tauranga property developer Paul Adams, of Carrus Group, said Tauranga City Council should be welcoming the initiative.

"By the Government now providing funding to get on with core infrastructure, most developers and land owners will want to immediately get on with doing land development."

Tauranga should be applying for its entire share of the fund, Mr Adams said.

Tauranga MP Simon Bridges said Tauranga would be a winner from the housing infrastructure fund.

"It's going to help bring forward local roads and water infrastructure necessary for the new houses."

Why the fund?

- Housing Minister Nick
Smith said a major barrier
to greenfield development
was infrastructure cost.

- The councils eligible to
access the $1 billion
infrastructure fund are
Auckland, Hamilton,
Tauranga, Christchurch
and Queenstown - cities
predicted to have more
than 10 per cent population
growth in the next 10 years.

- Charging an extra rate on
unimproved land as a
disincentive to land
banking is also a possibility.

- The fund will own or
finance the infrastructure
until the councils receive
rates revenue from the new