First home buyer Abhishek Mukherjee will not be able to afford to build his house if the proposed increases to building impact fees of $16,000 goes ahead on Aug 1, 2021. Photo / George Novak
First home buyer Abhishek Mukherjee will not be able to afford to build his house if the proposed increases to building impact fees of $16,000 goes ahead on Aug 1, 2021. Photo / George Novak
A Tauranga couple could lose their first home before construction begins if a council plan to increase building impact fees by $16,000 goes ahead.
The Tauranga City Council wants to increase Citywide development contributions, also known as building impact fees, from $12,200 to $28,150 by August.
The council says it is necessary to help offset the infrastructure pressures associated with the city's residential building boom - in the past financial year it approved $450.4 million of new dwelling consents.
The extra money would help pay for the Waiāri Water Supply Scheme and without the fees, borrowing for such projects would have to be repaid by ratepayers.
However, the move has sparked outrage from construction industry leaders who say the price hike will keep first-home buyers – such as Abhishek and Debjani Mukherjee – out of the market.
Open up the latest news from Bay of Plenty
Get daily Bay of Plenty headlines straight to your inbox.
"I've used up all my savings just buying the section. When the bank approved our loan, it was fixed. We can't get any more money from the bank."
"If contribution fees go up, we won't be able to build our house because it's more than $16,000."
The scenario had caused a lot of stress, the 38-year-old said.
"We can't sleep. We've invested so much money into this - more than $650,000."
"The trouble is all the other builders that were planning to build a house – they're all rushing to get their plans through to try and make the August 1 deadline.
"It's impossible for us to submit our plan on time."
The couple were in limbo as they waited for advice from their builder. The builder declined to comment.
"We're hanging – I don't know what's going to happen if we can't build our house, " Abhishek said.
''Even if we pull out, we're going to lose at least $20,000."
First home buyer Abhishek Mukherjee has bought a section in the Lakes. Photo / George Novak
Abhishek said the council invited him to talk at a Long-term Plan submission hearing and provide feedback consultation today.
But he said, "I don't think it's going to make an impact".
Classic Builders director Peter Cooney said, in his view, the increase was excessive and ''this is what helps keep housing out of reach for the first homeowner''.
''I believe the speed with which it is being introduced is totally unfair as titles to some developments will issue after this date while sales have been made prior leaving the owner substantially out of pocket.
''It's not acceptable in this day and age for the council to simply keep increasing costs and expect that they will not impact on house prices.''
In his opinion, the council needed to re-evaluate the extent of the Waiāri project and seek value engineering solutions to reduce costs, not increase them.
''Tauranga City Council needs to have another look to see where savings can be made.''
Classic Builders director Peter Cooney. Photo / Andrew Warner
Shane McConnell from GJ Gardner Tauranga South said he had 56 homes that could be affected by the proposed increase.
"The rollout of this increase is very hard on people who may be at their maximum building budget or lending capacity. These increases should have been phased in gradually over the course of a few years and the costs should have been shared by the land developers through subdivision impact fees," McConnell said.
"The cost of land has already escalated substantially in the last couple of years, pushing ownership of new homes out of the reach of a lot of first home buyers."
Carrus managing director Scott Adams said he had put in a submission for the Urban Task Force on the City-Wide Contributions.
''I said they have taken the market by surprise. We are used to a one or two thousand dollar increase a year but $16,000 is a huge jump.''
Adams said he recommended the council defer the increase for 12 months or adopt some kind of transitional increase.
Carrus managing director Scott Adams. Photo / George Novak
Venture Developments director Mark Fraser-Jones said considering the council was trying to promote affordability, the increase seemed crazy.
''Potentially there needs to be an increase and potentially there is some justification behind it but, realistically, the implementation has been horrendous.''
Fraser-Jones said anyone who had sold houses that did not have title yet would be copping "$16,000 that you can't recover".
''You multiply that by how many contracts you have out there and it's a big hit.''
Tauranga City Council corporate services general manager Paul Davidson said development contributions were important because they provide a funding mechanism for growth infrastructure, which is not paid for by general ratepayers.
The market price of residential property had significantly increased in Tauranga, which was partly due to demand and supply and partly due to increased costs.
Meanwhile, the costs of the infrastructure needed to service residential land also continued to increase.
''Without these fees, borrowing for such projects would have to be repaid by ratepayers.''
The council was also exploring alternative ways of funding and financing infrastructure, including private and public options.
This includes using newly-passed infrastructure funding and financing legislation, which allows levies to be charged to fund infrastructure outside of the council's balance sheet, he said.
The council had received about 50 submissions on the development contributions proposal and would be discussed during the Long Term Plan deliberations next week.
What other contribution fees are up for discussion
* Wairakei sub catchment B could increase by 20.5 per cent and Pyes Pa West could increase by 10 per cent. Increases were due to capital expenditure costs for a few specific capital projects remaining to be delivered in these areas.
* The new fees if adopted will apply to any building consents lodged on or after 1 August 2021.
