The Infrastructure Funding & Financing Bill – which will enable councils to impose separate charges on property owners in newly developing areas – passed its third reading in Parliament last week.
It will get councils around the obstacle of their maximum debt levels by creating a separate tool to pay for major infrastructure servicing new suburbs.
Urban Development Minister Phil Twyford said the new law was a breakthrough for housing developments in high-growth areas.
It’s an issue that has dogged the development of new suburbs for decades, as councils & developers have fought over who should pay for various aspects of infrastructure.
Developers on-charged costs to buyers of new homes, but also argued that network extensions such as piping shouldn’t be a charge on them & new-home buyers alone.
This new law establishes the infrastructure levy model, which the Government has developed in partnership with high-growth councils.
A key feature of the model is the establishment of a special purpose vehicle (SPV), a financing tool that enables debt finance to be raised from the private sector and ring-fenced from a council’s balance sheet so it doesn’t affect the council’s debt levels or credit rating.
The special purpose vehicle will be responsible for financing & constructing the infrastructure. Post-construction, the infrastructure will be transferred to the relevant council for its ongoing operation & maintenance.
A central element of the model is the annual levy future homeowners who benefit from the infrastructure will pay, for up to 50 years, to fund the finance raised for construction.
Mr Twyford said: “This new tool will complement, not replace, the existing funding & financing tools available to local government. With cross-party support, New Zealand now has a new tool that will allow our cities to grow & provide more affordable housing.
“Too often, a major constraint has been the ability of councils in these areas to fund the necessary infrastructure to support such housing.
“Several of these areas, including Auckland, Hamilton, Tauranga & Queenstown, are not always able to provide the water services & transport infrastructure necessary for much-needed urban development because their councils are up against their debt limits.
“This ultimately restricts housing supply in areas with fast-growing populations, which in turn drives up the cost of development, making housing more expensive.
“This initiative promises to get more New Zealanders into homes they can afford, while helping reduce the housing shortage and improve affordability.’’
Attribution: Ministerial release, historic coverage.