Housing affordability report positive-appeal process needed

MEDIA RELEASE

16.12.2011

Housing affordability report positive but appeal process needed

Auditing councils and requiring them to make regular compliance reports on development contributions would help to keep infrastructure charges fairer and more transparent, says Property Council New Zealand.

The Productivity Commission’s draft report on housing affordability released today, recommends the Government updates the Best Practice Guidelines to Development Contributions and introduces training, regular reporting and auditing to ensure councils comply.

The inquiry found infrastructure charges, especially development contributions, can be difficult and costly to implement, affecting housing affordability.

Property Council chief executive Connal Townsend said many territorial authorities wrongly used development contributions to pay for improved service levels for existing residents and ‘catch-up’ capital projects, particularly in high-growth regions.

“The high cost of development is passed on to buyers, pushing up the cost of housing in New Zealand. The fees are often a rort, denying young New Zealanders access to home ownership.”

Mr Townsend said while he welcomed the Commission’s draft report, introducing an appeal process would be the ultimate test of a robust and fair development contributions regime.

“Previously, developers have been forced to turn to the High Court to challenge illegal practices, resulting in local authorities using taxpayer funds to unsuccessfully defend their development contributions policies – including the well-known 2007 case of Neil Construction and others against North Shore City Council.

“Let a merit-based appeal system shed light on sinister council practices.”

Tax regime needs to change

The Commission found the aptness of the Government’s decision to disallow depreciation for houses and commercial buildings should be monitored going forward, in what could be different circumstances than what led to the housing market boom of the early 2000s.

It recommended the situation is monitored to establish a durable approach across a range of circumstances.

Property Council argues the issues arising from the Canterbury earthquakes are a case in point. “Reintroducing depreciation as part of wider tax reforms would help property owners across New Zealand to seismically strengthen their buildings.

“A report to the Canterbury Earthquakes Royal Commission found the cost to upgrade about 3,867 unreinforced masonry buildings alone was about $2 billion, compared to the $1.5 billion value of those buildings.

“Unreinforced masonry buildings are the tip of the iceberg. When the bill for strengthening every existing building to meet more stringent building code requirements is tallied up, New Zealand will have a multi-billion dollar bill to pay, with no obvious means to pay it.”

Land release important

The Productivity Commission’s inquiry found the widespread planning preference for density, limiting Greenfield development, puts upward pressure on house prices, particularly in faster growing cities.

It argues councils should adopt a policy allowing both intensification and expansion beyond urban limits.

Mr Townsend said this was crucial in Auckland. “The Auckland Plan is premised on a ‘compact city’. But for intensification to work, the quality of product is important, along with its location. Incentives for development alone won’t create desirable compact housing – this will depend on how close it is to areas where people want to live, near coastlines and beaches, inner city parks and reserves.

“The balanced release of greenfield land along with intensification would also ensure affordable land is available. Auckland must be an affordable place to live if it wants to compete internationally in a fast-changing global environment and attract skilled workers.”

The Commission suggests there are disparities between the Resource Management Act and Local Government Act, which jointly and individually have purposes that are difficult to fulfil without clear frameworks.

Mr Townsend said he hoped that now having one minister responsible for both the Environment and Local Government portfolios (Hon Nick Smith) would help.

END.

Property Council New Zealand

The voice of commercial property in New Zealand, Property Council is a not-for-profit organisation representing the country’s commercial, industrial, retail, property funds and multi-unit residential property owners, managers and investors – including thousands of New Zealanders with retirement savings in listed property trusts, unlisted funds and KiwiSaver.

Our 550 member companies, with a combined $24 billion investment in commercial property, range from leading institutional investors, property trusts and financial organisations to private investors and developers.

Property Council’s lobbying ensures red tape, compliance costs and inefficiencies are minimised, to help create a vibrant commercial property market and wealth for all New Zealanders. Our efforts have helped to overhaul the country’s resource management and planning statutes and modernise Auckland’s governance. We are leading efforts to preserve the rights of property owners affected by the Canterbury earthquakes.

Property Council proudly champions quality urban design, local government efficiency and financial accountability, a friendly investment environment and an affordable property market.

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