Published 23 August 2006
Property Council national director Connal Townsend charged yesterday that local bodies are abusing the legal power to levy development contributions, which in turn was stifling job-rich economic growth and making home ownership an unaffordable dream for thousands of young New Zealanders.
Releasing the Property Council’s policy on development contributions, Mr Townsend said the Local Government Act 2002 must be amended to force local bodies to play fair: “Dozens of local authorities throughout New Zealand are distorting the purpose of development contributions and using millions of dollars collected from new property owners to fund capital expenditure which is not growth-related. Not only is this not legal, it is unfair and artificially driving up the cost of commercial & residential development.
“The act needs to be amended to provide for appeal rights. Developers & property owners who are confronted with a bill which can run into 10s & 1000s of dollars should have the right to appeal the development contribution charged by local authorities. The current lack of appeal rights gives local authorities carte blanche power to charge a development contribution which is often grossly excessive & not reflective of true growth-related costs.
“Local authorities are not and should not be entitled to levy development contributions for any reason other than to recoup the cost of growth-related capital expenditure. New residents and businesses should not be required to pay development contributions which are then channelled into funding deferred capital expenditure.
“While the Property Council acknowledges that existing communities suffer because many local authorities are inefficient and have failed to build infrastructure, new communities should not be legally responsible for picking up the tab for decades of political neglect & mismanagement.”
Mr Townsend said the Property Council acknowledged that development contributions were a compliance cost that would be passed on to the property owner. “However, the Property Council considers that development contributions have a wider economic & social impact, which is manifest in terms of:
(a) housing affordability, particularly for younger people (who are sensitive to changes in the cost of housing)
(b) demand for transport infrastructure as people seek affordable housing in remote locations, often far removed from paid employment, and
(c) the inflationary impact of more expensive housing and increased transport costs (resulting from development contributions).
“Parliament must amend the act to force local authorities to behave responsibly. Unless Parliament intervenes, local authorities will continue to administer development contributions policy scams which make housing & commercial property development unaffordable and drive up transport costs.”
In a letter to Property Council members, Mr Townsend said the Auckland Regional Council tried unsuccessfully this year to secure a late amendment to the Local Government Law Reform Bill, which would have extended the power to collect development contributions to regional councils. “The ARC failed on that occasion, thanks in part to the Property Council’s opposition.”
Mr Townsend said many territorial authorities had elevated development contributions to become the main source of funding for future asset development and an increase in the capacity of existing assets. “This preference does not give adequate recognition to the benefits of capital expenditure which will accrue to existing ratepayers as improved levels of service and through extending infrastructure life. It consequently loads a disproportionately high share of costs on to residential & business growth.
“The Property Council supports a regulatory environment that forces territorial authorities to demonstrate that their development contributions policy:
(a) correctly allocate the costs of the territorial authority’s asset development programme between growth (new) & deferred capital expenditure (catch-up), and
(b) spread the costs of growth-related capital expenditures so as to ensure that those who benefit from improved levels of service & infrastructure pay for it.”
Mr Townsend said the Property Council considered that only city & district territorial authorities, as the owners & providers of capital expenditure, should be entitled to charge a development contribution. “Regional authorities, council-controlled organisations, Transit NZ, Land Transport NZ & Watercare Services Ltd should not be entitled to charge a development contribution. In the view of the Property Council:
(i) the function of regional authorities is to act as an environmental regulator. Regional authorities are not the owners of capital expenditure
(ii) territorial authorities should apply principles of causation & benefits received when considering whether a project is a development against which a development contribution should be charged. The territorial authority should recover the â€˜growth’ component of a project cost if it can demonstrate that the cost recovery reflects only the marginal cost of growth.”
Mr Townsend laid out a proposal for local bodies to define what they would be charging money for: “Before commencing the formation of any development contributions policy, each territorial authority should first be statutorily required to assess whether each of the projects codified in its long-term council community plan & asset management plan is a â€˜development’ as defined by the act. If a project is not deemed to be a â€˜development’ as defined by the act then the territorial authority should not require the payment of a development contribution.
“When assessing whether a project is a development pursuant to the definition of the act, the territorial authority should also be statutorily required to determine whether any defined development generates growth-driven demand. If the territorial authority cannot demonstrate how a development creates growth-driven demand, then no development contribution should be levied against the property owner or developer.”
Mr Townsend said territorial authorities should be statutorily required to establish a standard for reserves: “The standard should determine how much reserve land the territorial authority requires to meet the demands of its current & projected future population. This standard should be subject to review every 3 years, concurrent to the adoption of each territorial authority’s long-term council community plan.”
To address the absence of review rights, Mr Townsend said the Property Council supported the inclusion of an independent appeal process.
“The only possible legal remedy currently available to developers & property owners is judicial review through the High Court. Due to the prohibitive cost of judicial review proceedings, justice is literally unaffordable to the vast majority of potential appellants at present.”
Attribution: Property Council release, story written by Bob Dey for this website.