The Government fired another shot in its battle to control rising house prices yesterday, announcing law changes it says will curb charges levied by local authorities on developers for providing infrastructure such as roads and sewerage to new subdivisions.
Housing Minister Nick Smith and Local Government Minister Chris Tremain said they would change the Local Government Act to rein in council development contributions.
Development contributions are fees levied on property developers by councils to help cover the costs of services such as water, sewerage, and roading to new housing, commercial and industrial developments.
"We are going to narrow the charges councils can put on new sections, provide an independent objections process and encourage direct provision of necessary infrastructure to get costs down," Dr Smith and Mr Tremain said.
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Dr Smith said development contributions had trebled over the decade. "This huge increase can be attributed to the local government law change in 2002 that gave councils carte blanche to charge whatever they liked and removed any check or appeal on these charges."
The charges average $14,000 per section but can be as high as $64,000.
Speaking on behalf of councils, Local Government NZ said it agreed with a regime that provided transparency and a standardised method of calculating the charges. But it warned that the Government's proposal to narrow the charges that councils could put on new sections "may result in ratepayers having to meet the cost of new developments".
Local Government NZ president Lawrence Yule said the charges had increased in line with building costs. "Development contributions represent around 4 per cent of the total cost of building an average 145sq m house in Auckland, while 36 per cent of the cost is related to land and 49 per cent is for labour and materials."
The Property Council's Connal Townsend welcomed the move, saying the charges had been used by councils to raise revenue without hiking rates. However, that meant developers and ultimately homebuyers ended up paying more than their share for services.
He cited examples of apartment developments in Auckland being hit with charges of more than $60,000 per apartment when the infrastructure they were being hooked up to was already in place. He said in some instances the excess money was then used to fund the council's development of parks and reserves in other parts of the city well away from the apartments whose occupants were paying for them.
The law change will be included in a Local Government Reform Bill to be introduced to Parliament this year.