Brian Rudman: Gently weeping for my bungalow's bill

local politicians have been seeking new funding streams for decades, with little sympathy from successive central governments who set the rules. Illustration / Peter Bromhead

Bonkers valuation rises restate need for fairer revenue system than rates.

Nothing quite brought home to me the bonkers state of the Auckland housing market as Monday's release of Auckland Council's revaluation of my modest 212sq m slice of Ponsonby. It seems that in the three years to July, while I scribbled away for a living, my geriatric two-bedroom home was by far the primary income earner in this relationship.

Just by sitting there and doing nothing, it earned me more than $260,000 a year in untaxed capital gain or $790,000. And all I had to do to keep it happy was put on a new roof to replace the one I'd installed 30 odd years before. Since 2014, it had jumped 74.5 per cent in value - from $1.06 million to $1.85m.

This was a much better return than in the three years prior to that, when it earned me a more modest $100,000 a year, again, by just staying upright. Is it any wonder that the whole world has been seeking a bit of the Auckland action? I guess I should be excited by this "on paper" windfall.

But that's not why I bought the place and to recoup it I'd have to sell up, flee Auckland and become a refugee in the provinces. And who in their right mind would voluntarily walk away from the cultural and social advantages of living in the country's only big city?

As a semi-retiree, I'm more concerned about its effect on next year's rates bill. Prior to the announcement, Auckland Council's head of rates Debbie Acott tried to sweet-talk central Aucklanders into believing that the inner suburbs had got stung by a big increase in value at the time of the 2014 readjustment and that the new CVs "are now moving roughly along the [city-wide] average" of 45 per cent. Therefore there'd be no sudden adjustments upwards in my rates.

Further reassurances came in the council chart reporting the "indicative residential average change in CV since last revaluation" for Ponsonby was a rise of 38 per cent. Yet with the aid of the Herald's online valuation tool, it became obvious that at my end of the street we were mostly well above average, ranging from my 74.5 per cent through the 60s and 50s down to - admittedly - the odd 34 and 27.6.

The council wrote in the Herald that because it's impossible to inspect all 549,000 homes, "mass appraisal techniques" were employed such as sale prices in the neighbourhood, type of property, rental trends and changes to the property since the 2014 revaluation. This doesn't begin to explain the dramatic house-to-house variations around me.

However it does highlight the craziness of the Auckland property market, and raise again the perennial question of whether the main source of local government funding should be a land-based tax, linked to the vagaries of a highly speculative, internationally fuelled property market.

Only last week, Local Government New Zealand president David Cull was calling for "swift action" from the new Government to review funding sources of local government.

"Relying primarily on property rates and the current development contributions regime to fund incredibly expensive new infrastructure for new residents is not sustainable or fair," he said, pointing out that many councils are reaching their debt limits.

The problem is, local politicians have been seeking new funding streams for decades, with little sympathy from successive central governments who set the rules. The most recent attempt was in 2015, when LGNZ launched a 10-point funding review plan, which included in its wish list the right to levy local fuel taxes and tourist levies and even a share of mineral royalties from the local area.

They wanted mandatory rating exemptions on central government property like schools and hospitals and office blocks - and even conservation land - removed, and that when central government imposed costs on local government, such as enforcing regulations, then central government should start sharing the cost. There were also calls for the right to levy a value uplift tax on businesses that gain from public expenditure adjacent to their enterprises, such as, for example, Auckland's new rail tunnel.

As I wish them luck in their quest, history is not on their side.