The Government's taking aim at section charges levied by local councils.
“We are going to narrow the charges councils can put on new sections, provide an independent objections process and encourage direct provision of necessary infrastructure to get costs down,” Housing Minister Dr Nick Smith and Local Government Minister Chris Tremain said.
Development contributions had trebled nationally over the past decade and had gone up more than any other component cost of a new house, the two said.
"This huge increase can be attributed to the local government law change in 2002 that gave councils carte blanche to charge whatever they liked and removed any check or appeal on these charges. These charges now average $14,000 per section but can be as high as $64,000 per section,” Smith said.
Changes to development contributions were recommended by the Productivity Commission’s 2012 report into housing affordability and are included in the Government’s Better Local Government reform programme. A discussion paper was released in February and final decision on the policy changes made by Cabinet on Monday. The law change will be included in a Local Government Reform Bill to be introduced to Parliament later this year.
There was "no magic bullet" to improving housing affordability and action was needed on "many fronts" to get costs down, Smith said.
"This initiative restricting development contributions is part of a package of measures the Government is taking including substantive reforms to the Resource Management Act, the Housing Accords legislation, the inquiry into building materials costs, changes to the Building Act to reduce compliance costs, and the expansion of the Welcome Home Loans and KiwiSaver First Home Deposit Subsidy,” he said.
Tremain said development contributions needed to be set in a way that fairly balanced the costs that should rightly rest with a new development and those of community benefit that should be paid by general ratepayers.
"There will always be pressure on councils over rates and we need a check on development contributions to ensure the new home owner is not over-charged," Tremain said.
"These changes will also restrict what councils can charge in respect of commercial and industrial developments. These charges, if applied beyond the costs of providing the necessary infrastructure, end up as a tax and discouragement on new investment and jobs. The changes mean that councils will only be able to charge for new infrastructure and not recreational facilities or reserves for developments that do not involve residential housing."
Tremain said councils would still be able to charge for infrastructure and resources directly associated with a new subdivision.
"These changes are about improving transparency, encouraging councils and developers to work innovatively on minimising costs through development agreements and ensuring funds collected for infrastructure in an area are spent as intended."