Minister floats GST share on new builds

A109 Light Utility Helicopter flight with mayor Gisborne City from the air in November 2023.

Opinion

A possible sharing with councils of GST revenue from the construction of new houses was warmly received by the local body sector yesterday, after Infrastructure Minister Chris Bishop told Wellington’s Chamber of Commerce he was contemplating this — a policy of coalition partner Act — as part of a suite of measures he had taken to Cabinet to implement the Government’s housing policy.

Local Government NZ said it looked forward to progressing this much-needed new revenue source with the Government, pointing to its advocacy for “a range of funding levers to meet the growing needs of communities”.

“Councils’ share of overall tax revenue has remained at 2 percent of GDP for the past 50 years, despite our ever-increasing responsibilities,” said LGNZ president Sam Broughton.

“That’s not sustainable.”

He also noted recent commentary by S&P Global Ratings that local government rates had not increased, as a percentage of the New Zealand economy, in the past 100 years; while central government taxation had gone up 200 percent in the same period.

“Continuing to rely so heavily on household and business rates is not a sustainable funding approach for local government . . . . Sharing of GST on new builds acknowledges the key role local government plays to deliver the infrastructure needed as our regions grow and will be an important piece of the funding puzzle.”

In his speech, Bishop said the measures he was proposing would free up more land for development and make housing more affordable.

The thrust of the changes was to liberalise planning and encourage infrastructure development to allow more houses to be built. This included its campaign promise to “require councils to zone enough land for 30 years of housing growth”.

The mechanism to achieve the latter was still being worked on, but it would come with a carrot of allowing councils to then opt out of the Medium Density Residential Standards which National agreed with Labour in 2021 and made it easier to build up to three homes of up to three storeys on existing sections in cities across New Zealand; Luxon signalled a backdown on this last year, saying he preferred greenfield developments and densification around transport corridors, but councils having more discretion for the rest of their cities.

Act’s plan was to give councils 50 percent of the GST revenue from new housing, which it estimated would cost central government $1 billion.

The NZ Herald pointed out that a previous National local government spokesman once pondered a similar policy, returning a portion of GST collected on rates bills back to councils, in an op-ed in the paper; that spokesman was Christopher Luxon.