Where will cost of new property development fall?

The National Government continues to undermine local democracy and erode the autonomy of elected councillors with its plan to limit what local authorities can charge as development contributions.

Councils can currently afford the infrastructure costs associated with new subdivisions and other land developments by charging what is called a “development contribution”. This helps pays for infrastructure and essential services such as new roading, street lighting, running water and the extension or upgrading of sewage and stormwater systems.

Development contributions currently make up about 4% of the total cost of building a new house in Auckland.  Capping them and removing planning controls which establish urban limits in order to facilitate more greenfield subdivision is not the solution to housing affordability  that the Government claims.

If councils cannot recover from land developers the real costs of bringing essential infrastructure and services to new homes and commercial developments, then those costs would have to be met by increased rates, reduced maintenance, or cuts to other council services and budgets.

Once again National is interfering with local government’s ability to set their budgets and manage the services they provide with no decent justification. It is favouring one sector, property developers, at the expense of the wider community and their wellbeing.

The Government is accepting submissions until 15 March 2013. Find more information here http://www.dia.govt.nz/better-local-government.

26 thoughts on “Where will cost of new property development fall?

  1. I’m sorry Eugenie, but by god you need to wise up on this issue.

    I recommend to everyone, please, to check out Hugh’s great talk (video):

    http://www.cantabriansunite.co.nz/

    Quote: “It is favouring one sector, property developers, at the expense of the wider community and their wellbeing.”

    In case you didn’t notice, property developers BUILD HOUSES. We desperately need to “favour” them so they can get on with the job.

    As far as “local democracy” goes, try pulling that idea on the People of Christchurch. They don’t have a representative council, in effect, and are living in desperately unaffordable housing/rent for it – or in a car or tent. They can’t wait to get rid of their Bob Parker, and no doubt will.

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  2. With any luck the councils will be able to reject subdivision applications on the grounds that they can’t afford to let them go ahead.

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  3. Check out this highly readable article:

    http://www.city-journal.org/2013/23_1_texas-growth.html

    A direct quote from the article: “More than three-quarters of the cost-of-living difference between Texas and California can be explained by housing costs. As Figure Six shows, Texas mostly dodged the real-estate bubble of the 2000s: the affordability of houses in large metro areas spiked in America as a whole but rose only modestly in Texas. A major reason that Texas real estate is so affordable is that the state lacks the draconian land-use restrictions that drive California housing prices into the stratosphere. The affordable housing attracts both people and businesses. Since 2000, 1 million more people have moved to Texas from other states than have left.”

    The Greens want to take us (or more specifically, continue to allow us to be taken) in the OPPOSITE direction of Texas. And why? Because they still sign up to the discredited myths about low-density property development.

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  4. I built a large deck a decade ago for $5000 including all compliance costs.

    I built one half the size recently, and compliance costs alone were over $9000, before a single nail was hammered in.

    Compliance costs to build a house here are a rort – tens of thousands of dollars more (300% more) than an any nearby city.

    Why do you want to make it legal for councils to continue to rip off residents with impunity.

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  5. How convenient this post should coincide with Green Party intentions to run local candidates. More negative gossip about National in place of real vision and policies.

    Once again National is interfering with local government’s ability to set their budgets and manage the services they provide with no decent justification. It is favouring one sector, property developers, at the expense of the wider community and their wellbeing.

    This is why, despite our efforts otherwise, National may well get voted in again. The Green party MP’s are loosing the plot and becoming just like Labour – in pretending to care about the great unwashed masses, while coming up with every excuse in the book why it’s not politically doable to implement fixes to major problems.

    I am not interested in rhetoric – I want a property I can afford and call my own – period.

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  6. I asked a builder to add minor roof and support structure over our entrance way. He said it would be approved, but the compliance cost was eye-watering.

    I didn’t get it built.

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  7. Council Compliance costs = Cost of Council liability for Leaky Buildings.

    Every major player in the private sector has gone into receivership or otherwise folded, leaving Councils holding the risk. Who have no choice but to pass them onto you.

    Capitalism at work. Nothing to see here.

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  8. Exactly!
    like your last paragragh ” …It is favouring one sector, property developers, at the expense of the wider community and their wellbeing”

    Haven’t we all noticed that this govt’s many policies are made to favour Property developers, bankers and Corporates and few rich individuals, as always.

    The worst of all, with weakening export sector (especially small/med ones) caused by many other bad policies made by govt, therefore increasing job losses, lowering wages, etc
    Even we might have more supply of cheaper houses in a few years time; local kiwis won’t be the one who can afford to buy them…

    So many kiwis voted with their feet and moved to overseas for better life ; left a big hole for govt to fill it up with many more immigrants with more money…
    Low waged kiwis will not be able to compete in housing market with much wealthier Asian immigrants. So the problem will not be solved, still.

    Too many local kiwis will become tenants (if not pesants or slaves) in our own country if we let this govt keep doing what they did…

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  9. Council Compliance costs = Cost of Council liability for Leaky Buildings. Every major player in the private sector has gone into receivership or otherwise folded, leaving Councils holding the risk. Who have no choice but to pass them onto you.Capitalism at work. Nothing to see here.

    Idiotic legislation by politicians at work.

    The council should get out of the building business. They should create standards, rules and zones, and get out of the way. Their concern should be connections i.e. how the house connects to existing services.

    The building itself is a private matter between builder, client, bank and insurance company.

    Same as the car industry. Manufacturers manage to build perfectly good, safe cars for clients without the council needing to personally inspect, and be liable for, transmissions, linkages and suspensions.

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  10. The issue of compliance costs and that of developers contributions are two totally separate issues.

    I’m very happy that developers contributions exist; me and my fellow ratepayers paid good money for the amenities that are council managed (water, sewerage), and the resources of those systems are not infinite.

    Someone has to pay for the expansion of the system, and if it isn’t charged to the new developments, then its charged to the existing ratepayers, who have already paid for the system as it stands.

    Electrical utilities do exactly the same; you’re charged a sum for the benefit of connecting to the utility.

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  11. The building itself is a private matter between builder, client, bank and insurance company.

    Same as the car industry

    Not really.

    The car industry are knocking out cookie cutter cars; at some point their cars were tested to hell and back to ensure that the car delivers the economic value to the maker, which includes ensuring they wont get sued too much.

    Every building that is built is an individual crafted by workers, not by robots on a production line. The builder doesn’t retain liability forever and be big enough to cover the costs of remediation years later.

    Something needs to be done to ensure the quality is acceptable. The world seems to accept that inspections are the answer, but we’ve seen just how well that can work…

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  12. Yes, but there is no reason it must be the *council*. They certainly shouldn’t have liability.

    At the extreme end, I don’t care if my neighbor builds a house made of balsa, so long as it doesn’t affect me.

    If we are to have building standards, and I’m not saying we don’t, then they can be set, and for a dwelling to be constructed the architect and builder must meet them. They can be bonded via the insurance industry. The incentive will probably move towards cookie-cutter houses, vs turnkey houses, as the insurance cost will be lower.

    The inspections don’t work because the council doesn’t have skin in the game. They are spending/risking ratepayers money.

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  13. Yeah, no real disagreement there, only that ultimately, the Council are our elected representatives, and there has to be a way whereby we the local people can have influence.

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  14. It’s so amusing to hear people actually campared NZ cities/regions with Texas in US…hahaha!
    Btw, Bob Parker confirmed that the rebuild can only be done properly after the change of govt (roughly these words, in one radio interview some weeks ago)

    Best luck to CHCH residents if some blieve they will be better looked after if someone else get voted to be the new mayor and who is betterliked by National party led govt…
    It’s another joke to hear some people seem to believe National party led govt is best known for looking after small people…OMG!!!

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  15. frances:

    You are utterly behind in understanding what’s really going on.

    Comparing Auckland to Houston is a good idea, because the cost of new-build difference is so radical (3 or 4 times more expensive to build a comparable house in Auckland, all up) that it dictates the question: Why so expensive in Auckland? Which in turn, hopefully, leads the individual to an education on the issue.

    When you know the problem, you know the solution. And you then know who is talking sense and who is talking ***t. Ya dig?

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  16. Arana. Inspections and council regulation worked perfectly well. Until one of your misguided RWNJ fellow travelers decided we didn’t need most of it, and the rest could be left to private industry..

    Well. All the private providers hid behind our lack of regulation Leaving us with the liability for the leaky buildings caused by their fuckup. Socialists have to pay yet again for the typical capitalist ballsup.

    Pity politicians, building material suppliers and private building inspectors were not held to the same standard of responsibility as builders and other tradespeople. It should be those who profited from the lack of regulation who pay.

    AND. Again those who bleather on about individual responsibility do not take responsibility for anything.

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  17. Kerry says ” Inspections and council regulation worked perfectly well.”

    Nonsense.

    If that were true, you wouldn’t have the case of hundreds of leaky buildings built in one council region, and virtually none under other councils (even though they were using the same national regulations).

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  18. Worked perfectly well until you lot forced councils to privatise inspection services and took away half the regulation. Which is why canny purchasers look for houses built before the building “reforms” of the 90’s.

    Just admit it Photo. Leaky buildings are a prime example of why some things should be regulated.

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  19. Kerry “Worked perfectly well until you lot forced councils to privatise inspection services”

    Kerry makes up more nonsense – so he can get all angry about something else that never happened.

    Kerry says “Leaky buildings are a prime example of why some things should be regulated.”

    The regulation worked perfectly well here – and leaky buildings haven’t been an issue.

    Buildings have ALWAYS been required to be watertight. And if built that way, untreated timber is not an issue.

    Just like the wooden house I’m sitting in now – zero rot, and built with untreated timber, 80 years ago.

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  20. Photo. You shouldn’t post in the middle of the night. Your brain works even less well than usual. Leave that to us that are used to shift work.

    Buildings have always leaked. Water usually gets in somehow. 80 year old houses in NZ had either rimu framing (naturally rot resistant) or boric treated. (Code required from the 50’s right through to 1991).
    When i was last building, from 1998 to 2009 by the way, i saw signs of water leakage in every! house we renovated. A couple of hundred.
    The rimu or boric treated timber and the open nature of the construction meant that, usually, little damage was done before the water dried.

    Previous to the 90’s the council building inspectors, the ones Arana reckons would be ineffectual, “no skin in the game” were scary. You made sure you got it right.

    In the 90’s National had the bright idea that the industry, including material suppliers, could be “self regulating” and made the councils open up inspection to “private enterprise”. Building material suppliers were considered responsible enough to issue, ” producer statements” loosely overseen by BRANZ instead of the more rigid testing of the past.

    The next bright idea was untreated timber, and monolithic claddings, where part of “the look” was unflashed windows, flat roofs, lack of eaves and decks at floor level. Combined with the already lower air flow through houses, to comply with insulation standards, this was asking for trouble.

    When this came in, if you followed the plans, you were bound to produce a leaky house.

    Fortunately for us, we were suspicious old buggers and we did not follow the plans. We added things like flashings and drains. Havn’t had a claim for leaks on anything we built.

    Younger and more trusting builders were left holding the baby, along with their customers.
    large companies who tend to employ more cowboys and less tradesmen, made the problems worse with shoddy construction. Privatised building inspection companies meant they could get away with it. They could shop around until they found one that would pass anything.

    Those that caused the problem, Nut cases in Government, allowing building material suppliers to set their own standards, replacing the old inspectors with private companies (who just closed up shop if they were held responsible for anything) and some academics who were fixated on the idea that untreated pine, which rots if you spit at it, would last, still have escaped responsibility.

    Leaving, house owners, builders ratepayers and taxpayers to find billions to fix it. Privatisation of profits and socialisation of losses, again! Good neo-liberal business practice.

    The neo-liberal fruitloops who thought that privatisation of inspection and material specification and de-regulation of the building industry was a good idea, refuse to take responsibility for their fuckup, as usual.

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  21. Privatised building inspection companies meant they could get away with it. They could shop around until they found one that would pass anything.

    Doesn’t work that way if the Buyer, the Bank, the Insuror and Mortgage all depend on the report.

    The disconnect was that the house was still BACKED by the Council, even though they were no longer looking properly. I’ll take your word that their people were once “scary” – but you haven’t seen anything until you see a guy being paid by the buyer to find stuff that can be used to knock down the price in the negotiations, and who is liable to the bank if he misses something major. :-)

    Even now some banks here omit the buyer’s inspection. Learning that when I bought my house made it more clear that there is an disconnect.

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  22. I understand you Kerry… I am just pointing out that the problem was that they half-did something that does actually work when it is done completely. If the council was doing the inspection properly and taking responsibility that’s a worry that the banks and buyers and insurors shouldn’t have.

    However, if the inspection is privatized, but the responsibility is NOT, you get the situation we had…

    You can trust this, there isn’t anyone more picky than a private inspector whose credentials and business are on the line if he messes up and who is being paid and makes his reputation with the banks and insurors, by being the hardest assed SOB in that market. Nor is a banker, buyer or agent about to tolerate sloppiness when tens of thousands of dollars of value are on the line.

    Having lived with that and seen how this works here, I have to prefer that to this. I don’t like the British model of the council being responsible for everything. Council doesn’t seem to be a very responsive part of our democracy… and in THAT it does not differ from the US experience. County government is often the most corrupt of all.

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