Explainer: Development Contributions Review

Explainer: Development Contributions Review

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The amount of housing growth in Auckland is unprecedented. 10 years ago, fewer than 4000 dwellings were being consented in a year and in the last year we consented close to 20,000 dwellings. A lot of development is happening and all of this requires infrastructure to support it such as wastewater, stormwater, roads and community facilities.

Infrastructure is expensive.

Contributions are one of the ways the council recovers this cost. It needs to be funded one way or another - either by the taxpayer, the ratepayer or the developer. We think it is fair that developers pay an appropriate share.

The council is conducting a review of its contributions policy. Here’s everything you need to know.

What are Contributions?

Contributions (also known as Development Contributions or DCs) are a fee charged to developers to recover the cost of infrastructure caused by or that will benefit from the new development.

Revenue from these fees is used for new or upgraded infrastructure for transport, parks, sportsgrounds, drainage and stormwater systems or community facilities to support growth.

The last contributions policy became effective from 1 January 2019.  We are now proposing a new contributions policy, with effect from 10 January 2022.

Why are we reviewing the policy?

The council has had a contributions policy since amalgamation and it is regularly updated to account for updates to projected growth, revision to the capital budgets and any relevant policy changes. We’ve made some big and exciting commitments in the 10-year Budget so we need to update our contributions policy in order to fund these.

What is the process to finalise a new policy?

The Finance and Performance Committee is responsible for considering changes to the contributions policy. The committee will consider the draft policy recommended by council staff on 16 September 2021. If the committee approves the policy for consultation, Aucklanders will be able to have their say on the proposed policy from 20 September 2021. Once the committee has considered the feedback from our communities and made any necessary changes, the final policy will be agreed and adopted in December and any changes will come into effect on 10 January 2022.

Our staff provide expert advice to councillors to help ensure balanced and well-considered decisions are made. Elected members are in charge of making decisions. It is up to them whether they make decisions and that may or may not align with Auckland Council staff advice.

You can keep up with the progress by viewing agendas and committee meeting minutes on infocouncil.

What is being proposed?

The draft contributions policy has various proposed changes, some of which simply suggest small changes to fees to match the requirements of investment in the 10-year Budget. The key changes to the policy being considered are as follows:

Inclusion of capital projects beyond 10 years
  • The 10-year Budget commits significant investment to support growth in priority areas. However, this is not enough to address the cumulative impact of growth. More infrastructure will be required to cope with the expected growth. Currently, contributions are charged to recover the cost of infrastructure planned in the next 10 years.
  • The council proposes to plan for the delivery of these needed investments from 2032 onwards and include them in our contributions policy. This will ensure future development has the same level of infrastructure as the rest of the city and can better manage the impacts of growth, including climate change.
  • All development over the next 30 years will benefit from this. We consider its fair that development happening now pays an appropriate share of the costs of infrastructure that it will benefit from in the future.
  • We will amend the contributions policy in stages for each investment priority area as further information on infrastructure requirements becomes available,  starting with Drury.
  • These projects may have a significant impact on the level of contributions in the areas where they are imposed.
Drury
  • For the Contributions Policy 2021 we propose starting with Drury. Drury is the area where we have the best information in order to implement the changes. Others will follow as work progresses.
  • In the draft policy we have included $2.1 billion in local and arterial roads and parks in the Drury area. Under the new draft policy the price of contributions would rise from the current price of between $11,000 and $18,300, to a new price of $84,900.
  • Our proposal is to gradually update the contributions policy to include the infrastructure required to support growth in Auckland over 30 years, focussing first on the other investment priority areas.
Payment timing
  • We are proposing that payment of contributions due at building consent is payable at the grant of the consent. This will apply to all development (residential and non-residential). This is earlier than currently required. The council’s finances were significantly impacted by COVID-19. Requiring contributions to be paid earlier will mean council can recover the cost of infrastructure sooner.
Māori Land
  • For Māori land we are proposing to continue to support the development of marae and papakāinga and Māori housing on Māori land through grants available through the Cultural Initiatives Fund.
  • We propose an exemption for not-for-profit development on Māori land from reserve contributions.
  • We propose retaining the current payment timing for contributions payable at building consent for non-commercial development on Māori land, if changes are otherwise made to payment timing.

The cost of infrastructure has to be funded somehow. If it is not being funded by the taxpayer, it is either the ratepayer or the developer that pays. We think it is fair that developers pay for an appropriate share of the infrastructure their developments require.

Why is the council proposing an increase to contributions in some areas?

The 10-year Budget includes a substantial increase in investment in infrastructure to support growth and allow development to proceed. In the draft policy, contributions do not increase on average but across the region some areas will see increases depending on the level of investment we have committed to and the growth we are expecting. This allows us to fund investment. 

Raising the price of contributions:

  • better aligns contributions with the actual cost of infrastructure
  • increases certainty that infrastructure will be delivered
  • ensures ratepayers don’t have to bear all the cost of growth
  • encourages developers to more accurately price land purchased for development to reflect future contribution costs

How can I have my say?

Once the Finance and Performance Committee has approved the draft policy for consultation, the Consultation Document will be live on the Auckland Council website, where you can register for Have Your Say events.

Who has to pay contributions?

Developments that require a subdivision consent, land use consent or building consent are assessed for contributions.  This includes:

  • new subdivisions
  • new house builds
  • student accommodation
  • granny flats
  • new retail space
  • new office space
  • commercial premises
  • new apartments in old buildings.

Extensions to a house don’t have to pay contributions. Different types of development pay different contributions.  Contribution prices are set at different levels depending on the demand they place on the need for the council to invest in infrastructure.

For example, a shopping centre will require more transport investment than a house. The transport contribution will therefore be higher. However, shopping centres don’t require investment in parks and community facilities. These are only charged to residential development such as a granny flat.

You can read more about the different development types and associated costs in our contributions policy.


How are DCs calculated? 


DCs are calculated by dividing the council’s capital expenditure for growth by the estimated number of new residential and non-residential developments.

To understand how the council calculates DCs, read How we set Development Contribution charges.

How does this affect house prices?

National and international evidence shows us that an increase in contributions fees does not cause house prices to rise over time.

The price of housing is not determined by the cost of land and building but by supply and demand for houses.

Over time the Development Contribution costs are deducted from the price paid for land.

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