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"Scandalous" red-tape charges are preventing much-needed affordable housing from being built around New Zealand, real estate experts say.

Figures released by one developer reveal almost 40 per cent of the $250,000 cost of building a pair of two-bedroom units in Auckland went on a staggering array of bureaucratic fees, consents and permits.

The anonymous developer, who builds in Auckland suburbs with housing shortages, said the fees were blocking new low-cost housing projects.

Of the $93,750 in fees he was charged, $46,000 went to the Auckland City Council as a financial contribution. The resource consent cost $23,000 and an ACC consent, $8500. Water connection was $8300 and an electricity connection fee $5500. Other fees were paid for a right of way consent charge and vehicle crossing permit.

"This is why affordable medium density housing is a myth in Auckland city," the developer said. "It really is a ... scandal."

Real estate blogger Gavin Hamilton, who writes the Live from Howick blog, agreed low-income earners were being priced out of the market.

"People can not afford the finance, they can't get in and that's only going to get worse," he said. Figures from Statistics New Zealand show residential building consents have been declining since a peak of $690m in June 2007 to just $387m in May 2009.

A report from the Department of Building and Housing released earlier this month states that while housing consents are expected to rise in 2010 to 18,000, they are not expected to reach 20,000, a figure industry commentators believe is the minimum required to meet New Zealand's basic housing needs.

Despite the shortfall, consents for 18,000 homes is still a 25 per cent increase on 2009 levels.

Kevin Mara, general manager of assets for Housing New Zealand said the department had noticed a "significant increase" in the last few years on fees and charges.

"This increase in costs has affected the number of houses that we can build."

But Local Government New Zealand environment and regulation manager Irene Clark defended the charges, saying that they were an "actual and reasonable" cost.

She said they went towards processing applications, inspections and administration costs.

Couple's costly rejection

Property developers Jennifer and Mark Dent have been left in limbo after their plans to develop an Auckland section were rejected by a council, despite being charged $44,000 in fees.

The Auckland couple bought the waterfront site of 119 Fisher Parade in Pakuranga for $1.95 million in 2007.

They planned to build four apartments on the site.

The Manukau City Council's urban design panel asked for numerous changes to their design before asking residents for submissions.

That took two years and the costs mounted up. Eventually the Dents received a $44,000 bill but no consent.

Jennifer, above, said the couple don't know what to do with the land. "I expected some trouble, but nowhere near the trouble we got. It's just got too hard."

Her husband added: "We ended up with a hat full of nothing at the end of it. We ended up thinking why did council make us do all those changes?"

The couple plan to move away from residential developments because the costs have got too high.

The council's manager of resource consents and compliance, Brett O'Shaughnessy, said the Dent's costs were probably twice as much as a typical consent process, but that was because the land was considered unstable and needed a lot of assessments by engineers.