Auckland Council's economists argue full development contributions are unlikely to result in higher house prices, will be absorbed by land owners who currently receive windfall gains from ratepayer-funded infrastructure

By Harshal Chitale*

• Increasing the contribution developers make for infrastructure to reflect the true cost of providing that infrastructure, rather than continued subsidies by existing general ratepayers, is unlikely to increase the cost of housing.

• Developers in Auckland, particularly in greenfield areas, pay only a fraction of the cost of infrastructure to serve the new development through development contributions (DCs).

• Setting the price paid by developers at a full cost-recovery level could unshackle infrastructure development from the limits of ratepayer funding, and reduce planning incentives to regulate land use.

• In this paper, we examine the international evidence and the economic theory that suggests more accurate DCs are unlikely to result in higher house prices, but will be absorbed by land owners who currently receive windfall gains from general ratepayer-funded infrastructure.

At their current levels, DCs do not fully recover the cost of building growth infrastructure, and the funding gap is made up by existing general ratepayers. Auckland Council’s Future Urban Land Supply Strategy (FULSS) suggests the subsidy by ratepayers of new greenfield development in future urban zones is likely to be about $50,000 per dwelling over and above the current level of DCs. This $50,000 subsidy per greenfield dwelling from general rates could instead be used for critical maintenance and renewals of our existing assets.

But increasing DCs to a level that recovers costs fully may have consequences for home buyers. In fact there will be impacts on at least one of the following three players: undeveloped land owners, developers, or house buyers.

The added DC costs must either be passed on to home buyers or land owners – or absorbed in developers’ profit margins. But who might eventually pay the increase in DCs – undeveloped land owners, retail purchasers or developers? And how do increased DCs affect the quantity of housing development?

Nice in theory…

In a previous Insights paper, we said that if DCs accurately reflect the full costs of new infrastructure , they help:

• incentivise development where it is “least costly”

• fund growth infrastructure more fairly from those who benefit most from it

• faster sequencing and delivery of infrastructure, which would expand development opportunities faster than if funding was dependent on general rates revenue.

Economic theory says that if retail property prices are already near the limit of what the market can bear or if buyers have other housing options to choose from, the developers’ ability to increase prices to pass on DC increases is restricted.

Are property prices already at levels the market “can bear”?

Very likely so. If prices were not already the maximum the market could bear at this particular point in time, this would mean developers are acting irrationally and “leaving money on the table”. Also, the Auckland housing market is likely at price levels that are at or close to the ability to pay limits of home buyers, as evidenced by the flat lining of prices over the last year or so.

Further, potential buyers’ willingness to pay does not increase if the developer pays a higher portion of the infrastructure costs rather than ratepayers – the house purchaser is still just buying the same product - a home with taps that run and toilets that flush, regardless of who funds the infrastructure.

Do buyers have other choices?

Yes. New homes made up about a third of all the houses sold in Auckland over the last three years. Developers of new homes must compete with the stock of existing homes on price. This means their ability to increase prices is limited beyond what the new build can command over an older home – and that too only up to the level the market can afford.

…and supported by real-world evidence

So theory says the developer will not be able to pass an increase in DCs on to house prices. But does real-world evidence suggest they absorb the cost themselves, pass it upstream to raw land owners or downstream to property purchasers?

Land owners benefit from infrastructure…

Evidence shows that rural land in Auckland that gets re-zoned as future urban receives a significant uplift in value. The announcement of impending infrastructure development and then building that infrastructure multiplies land values by a factor of 40 or more, from around $50,000 per hectare to between $2.25 and $3.25 million a hectare.

At the assumed FULSS density of about 10 dwellings per hectare, an increase of $50,000 per dwelling in DCs to cover the cost of FULSS infrastructure would thus be around $500,000 per hectare. Even if developers lower their bids for land by the full $500,000 per hectare, land owners would still be to sell at prices well above farm land values, generating a healthy profit.

…but when DCs go up, the cost passes upstream…

Empirical evidence on what happens when DCs change in New Zealand is limited. A report produced for Waitakere City Council found that a 25% increase in DCs had little or no impact on house prices (or rents) and a small negative impact on building consent growth, after controlling for other variables that might affect these indicators.

Murray (2016) looked at the impacts of a policy change by the Queensland government in 2011 that introduced caps for DCs as a response to the property development lobby that had argued that high DCs led to high prices. This meant that some local councils were forced to lower their DCs for some dwelling types, but it also allowed them to increase their DCs for other dwelling types.

The four year transition period involved multiple upwards and downwards revisions to DCs for different dwelling types. This provided the natural variation to isolate the effect of DCs on prices and new dwelling supply. Murray found no impacts from changes in DCs on prices and positive impacts on quantity of new dwellings consented in Brisbane and on the Gold Coast. Murray also critiqued other empirical work on this issue for not controlling for the fact that the DC structure there meant that larger dwellings pay higher fees.

Burge (2014) looked at the relationship between specific impact fees (similar to DCs) and the values of undeveloped land parcels using more than 1.5 million residential parcel sales and over 130,000 commercial parcel sales between 1994 and 2009. He found that school impact fees (which were levied only on residential construction and not on commercial development) lowered the price of residentially zoned undeveloped parcels but increased the value of commercial parcels. In other words, developers passed the cost increases up to land owners, but could charge more for commercial properties because of announcing the benefit of a new school, which would generate more passing traffic for businesses.

Nelson (1994) documents a practice by developers in the Atlanta metropolitan area who routinely inserted a paragraph in their land purchase option agreements requiring land owners (from whom they purchased) to reduce their sales prices by any impact fees (similar to DCs) charged. Nelson also documents responses from developers who said that after a transition period, impact fees would be mostly paid by the sellers of land.

...usually

Not every study found that all costs passed upstream to land owners.

Delanay and Smith (1989) used two samples in Florida to test whether impact fees are associated with higher prices for both new and existing homes. They found that developers passed on the impact fees to buyers in the short run but over a significant period of time, increased new home prices were observed in one of the four cities that imposed impact fees.

Evans-Cowley et al. (2005) examined the relationship between impact fees and land values in forty-three Texas cities. They found that developers absorbed around 60% of the increases themselves, passed on around 31% of the increased cost to retail purchasers, and around 11% up to land owners on the average lot.

Other common objections

Won’t more accurate DCs discourage development?

If developers are able to pass on the higher DCs to land owners, there should be no significant impact on the quantity of development. If developers have to accept a lower margin, this may reduce the amount of development.

But Nelson argues that funding new infrastructure via more accurate impact fees may in fact speed up the supply of buildable land and help make the housing market more competitive. Further, if growth self-funds new infrastructure, the political economy of planning decisions has less of an incentive to restrict land-use through planning controls and can encourage the adoption of progrowth policies.

Aren’t developers price takers?

Some developers argue that they do not have many options of developable land on the market that they can buy at any given time. They might argue that higher DCs will make land owners less likely to sell (at a lower price). If this is indeed the case in Auckland, then more accurate DCs could be followed by moving towards a targeted rates regime that recovers the equivalent amount of money over the duration of the targeted rate.

This could incentivise land owners to bring land to market faster, among other benefits we have previously discussed. Moving to targeted rates would also add to the revenue base that Council can borrow against (Council is unable to borrow against DC revenue), helping speed up infrastructure provision on greenfield land, making land markets more competitive, faster.

In conclusion

Charging accurately for infrastructure such that those who benefit from it pay for it, is fair. When we undercharge, land owners receive a windfall gain they don’t pay for. Economic theory and majority of the evidence shows that the market price for housing is unlikely to rise by charging more accurately for infrastructure, particularly in the longer term.

Some developers who have already purchased undeveloped land at prices that reflect the infrastructure subsidy from general ratepayers will be impacted in the short term by a shift to more accurate DC pricing. But an announcement that signals a move to cost recovery will allow more “correct” pricing of land in future transactions, and would stop exisiting ratepayers from providing a windfall gain to raw land owners.

Over a period of time, unshackling infrastructure development from the limits of ratepayer funding can help speed up the rate at which land is serviced with infrastructure, providing developers more options and reducing the ability of land bankers to hold development back.


Harshal Chitale is a senior economist in the Auckland Council's Chief Economist Unit. This is a repost of one published an their Insights series, here. It is reposted with permission.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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53 Comments

What a load of tosh.

Developer contributions are a tax and they should be assessed against other possible taxes as to their efficiency for funding infrastructure. As a tax they have a lot of flaws including, high transactions costs, double taxation as property rates should be paying for the depreciated lifetime costs of local infrastructure, inconsistent and arbitrary tax effects favouring/penalising different types of housing, they are an unreliable revenue source that the Council cannot borrow against. This debt limit is the true barrier to fixing the likes of Auckland's infrastructure deficit.

If developer contributions are not a tax -then a developer should be able to opt out of these infrastructure charges by providing their own amenities -storm water collectors can be built, STEP wastewater devices can collect the sewerage, water is already commercially charged. Transport instructure is heading towards congestion road charging so should not be a concern of housing developers/councils.

Auckland council economist is lying , and he knows it.

DC levies are a tax

All the roads , drains driveways , conduit piping , water connections , etc and other infrastructure IS paid for by the developer .

AUCKLAND COUNCIL PAYS FOR NOTHING

The DC LEVY is a tax .......... so let just call a spade a spade .

When did he say that they are not a tax?
I missed that bit.

Here I was thinking the argument was that demand elasticity in Auckland currently meant that any tax/levy/cost increase wouldn't impact the end purchaser.
The economic theory under that is sound due to the positions of the developer and the (individual) land owner.

Obviously it's not clear whether the levy is the most productive revenue policy.
Intuition would tell us that capturing a contribution period on period, would likely be the better approach.

I am happy to pay more rates if it gets houses built and families out of cars, garages and motels. We ought to be funding not taxing developers. They are the good guys not Darth Varder. However a major contribution at the time the new house is inhabited (usually it is sold) to refund the cost of some council infrastructure and inspections would be fair.

However please do not insult me by telling me that the infrastructure spending in my Area of North Shore has done me any good. Glenfield road has been made 4 lanes; it took a decade and cost a fortune but the congestion is far worse than when it was 2 lanes before they started 15 years ago. Our electricity still comes down the road on ugly 3rd world power poles instead of underground. And that despite laying fibre underground. Given a choice I would reset the time machine back about 2 decades.

Another question for Auckland Council. Is it fair that existing house prices have gone from about 3x median household incomes to 9-10 times incomes?

Auckland Council has played a part in this productivity and inequality disaster due to its restrictive planning rules and poor advocacy for proper infrastructure financing.

Auckland Council needs to think a bit deeper about its problems rather than advocating for past solutions -developer contributions is old hat -that if they were going to work would already done so.

Personally I think they should read my report on how to improve Auckland's urban performance to get some fresh thinking....
https://www.interest.co.nz/opinion/93194/brendon-harre-sees-many-reforms...

Thank you Brendon ............. you rightly point out that Auckland council actually makes housing way more expensive

1) Development Contribution levies , where zero development is paid for by Council , all the infrastructure is paid for by the developers

2) Water meter connection costing almost a 1 years minimum wage in after tax Dollars ( the actual meter costs around US$ 360 ) , and they have audacity to charge around $20,000 for a water connection.

You obviously have no clue as to how much watercare are spending on infrastructure to cater for growth.

Would you prefer watercare get rid of connection charges for new households and massively hike your water rates instead?

Or perhaps you would prefer more sewerage in the harbour, more permanent swimming bans at our beaches, and more summer water restrictions?

Hear hear.

Do they actually think that increasing development costs will provide more affordable housing?

Actually this is not a load of tosh. It is sensible and reasoned. Its conclusion should be actioned.

So what should be actioned? Should planners add greater uncertainty into the planning system by increasing the values for their guesses of what will happen in the future cost and benefit wise and how this should be allocated back to individual new housing units?

Targeted rates will be added into the mix along with all your other expenses when the bank assesses what size of mortgage they are willing to offer you. Thereby reducing the number of people who can afford these new properties.
Less demand.

AUCKLAND COUNCIL ARE LYING ................. plain and simple .............. the DC levies are never used to improve infrastructure where they are collected .

Its a TAX nothing else , and they simply use the money in the general fund and pay inflated salaries

One just has to look at Kyle Road in Greenhithe , where hundreds of really expensive houses were built and millionsof dollars paid in DC Levies by the developers

Not a single cent was spent on Kyle Road, or anything else for that matter .

All the streets in the subdivision were paid for by the developers , the former North Shore City Council simply raked in the loot and did nothing.

Now Kyle road is a steep narrow lane, the only access to Upper Harbour school which has exploded in headcount . The street is hopelessly congested .

The economists at Auckland council are speaking with forked tongue

Where do you think the $285M for new watermains on the north shore came from? Watercare managers pocket the connection charges, and then their fairy godmothers pay for the necessary infrastructure?

https://www.watercare.co.nz/CMSPages/GetAzureFile.aspx?path=~\watercarepublicweb\media\watercare-media-library\reports-and-publications\tapped_in_autumn_2018_final_web.pdf&hash=9ba1e3bf74678ba574e255d4f1c06aa78832967af5e785ac28c3ef86d9645897

I know its not de rigueur to call a guest a liar , and its very un-Kiwi , but this guest is not being frank with us at all .

We are not stupid for goodness sake, and we know when we are being cheated or lied to .

We know that the DC Levies are a tax , nothing else .

Just ask any Land Surveyor or Town Planner in Private practice , and they will all tell you the same story ......... its a TAX , for which they get nothing back whatsoever .

AND whatsmore the councils have been taken to court by developers in 2008 or so , and the Councils had to repay the developers for the rort

You need to calm down, read the article, and understand what it is saying.

Don't blow a gasket in anger over something you misunderstand.

@nymad A few years ago I had to pay a DC Levy ............... and what was developed at council expense in that case , nothing ,zippo.

The council did not have to pay for a single thing.

Everything was extra and we just paid and paid , sewage connection , water connection , electrical connection , plan submission fees , subdivision costs , the driveway.

I am told that if I was to do the same thing today it would cost around $200,000 in fees, costs, levies and taxes

In our case the DC Levy was just another cost that ultimately was borne by me by way of our Mortgage at the time and the mortgage rate was at 10% per annum at the time

The problem with Auckland Council and its inability to live within its means , results in the city becoming unliveable for anyone other than the very wealthy .

And it widens the wealth gap by ensuring only the wealthy will ever own their own homes

I don't disagree that the levy isn't fair or efficient.

What I was objecting to is the fact that you have gone on a witch hunt trying to label the author a liar under a premise of misunderstanding.

The argument in this article is that the burden of the levy is not on the retail customer.

So, take some time to compose yourself and re-read the article.
Then clearly articulate a relevant rebuttal.

I've been there. Had the audacity to develop 3 apartments some years ago. I will never ever do it again.

And there are many like me who have a bit of a go, get totally shafted by the council and never touch development again.

Infrastructure growth charges, and the excessive connection fees that Vector and Watercare charge directly make all new builds significantly more expensive, and that's not even including the fact that the stormwater system has been neglected so much that most new builds require expensive underground stormwater retention tanks. This has the added effect of making existing housing more expensive, and suppressing development. These costs should all be covered by the landholders through rates levied against unimproved land values only if you actually want to incentivise development, and recover the cost of economic growth in the community from the landholders.

If you want to spur efficient and productive use of land, encourage development and make land more affordable, you would pay for these services through land value rates.

If these concepts are confusing I recommend looking into the effects of land taxation, and Henry George's "Progress and Poverty".

Okay , so come commentators are saying they agree with the Economists reasoning that developer's would never pass on the cost of the DC Levy / Tax, and simply absorb the cost .

Anyone who believes that is just plain delusional.

Do they think that Property Developers are running a local version of the Benevolent Society ?

Can anyone give me a single example of an instance where a new tax or an increase in an existing tax has ever made something cheaper

Who ever heard of a tax making something cheaper or more affordable ?

Its an oxymoron.

And anyone who thinks that the cost will be borne by the developer is an ordinary moron

Geezus. You just keep going.

The developer isn't bearing the cost, either - it is the original land owner.

The author is not saying it makes it cheaper for the retail customer. He is saying that the retail customer is unaffected by the tax because of the elasticity of their demand curve at a given price point. Without explaining this in a detailed manner (because you won't understand) it simply means that increasing the price over current levels results in (effectively) zero demand.

Similar logic (plus other intuition) is utilised to argue that it is in fact the origional land owner that bears the cost of the tax.

Nope, it is determined by supply of land. If there is an under supply, the developer is bearing the costs. If there is an over supply of land the land owner bears the cost.

The author arrived at his conclusion by assuming there is an over supply of land to Auckland City which does seem high grade manure.

Yes, and the individual landowner faces a huge incentive to sell his land - he has windfall profits and he faces huge uncertainty over the return of holding. The landowner is faced with huge competition - he is small, and the threat of removal of the RUB is forever looming.
He is the only one that is facing an elasticity in his supply curve.
The developer is operating at marginal cost and the retail customer is at a position where the derivative of the demand curve is zero.

For someone who is constantly commenting on these urbanisation threads, you frequently misunderstand simple economic mechanics.

No, the DC is not a good thing.
The DC can be levied in a much better manner.
Will the retail customer bear the burden? No - This isn't to say that they don't face a welfare burden further down the road, though.

The landowner is faced with huge competition - he is small, and the threat of removal of the RUB is forever looming.

Good grief.

The Auckland Council has slashed land supply to Auckland City by 50%, eliminating most of the land owners competition. This is a legally enforced rule and planned to continue for the next 25 years. The land owner faces virtually no competition under the current rules.

Phil Twyford may remove the RUB at some point and this theoretical change can cause land prices to fall. But there is a very good chance it will never happen, because politicians change policies after elections all the time.

Currently there is very little competition. I and the rest of the property market deal in current reality and hence the land price is high. You prefer fantasies of there being "huge competition" and a low land price in Auckland.

[The landowner] is the only one that is facing an elasticity in his supply curve.

Huh?

The developer can build on any land in Australasia, you can tell this because for the past decade developers have invested in other places instead of Auckland. The potential supply for any developer is vast. In what sort of weird scenario does a developer have to build in Auckland?

The land owner is small. He also faces competition.
Just because the AC has reduced real land supply, it doesn't mean that the land owner doesn't still face competition. Perhaps less, but not none at all.

That is the justification for the argument here.
The land owner is the only person who can absorb the cost in the (partial) equilibrium.

Your last point - exactly.
That's why the developer doesn't absorb the cost of the levy. He operates at marginal cost.

The argument of the article is that the retail customer isn't burdened by the levy. The land owner is.

That is not exactly what the article says, because as the article's 5th to last paragraph points out:

Some developers argue that they do not have many options of developable land on the market that they can buy at any given time. They might argue that higher DCs will make land owners less likely to sell (at a lower price). If this is indeed the case in Auckland, then more accurate DCs could be followed by moving towards a targeted rates regime that recovers the equivalent amount of money over the duration of the targeted rate.

We know that the land supply constraint criteria does exist in Auckland. The author however ignored the evidence and made an argument based on large amounts of land available.

The land owner is the only person who can absorb the cost in the (partial) equilibrium.

Not really.

The land owner (perhaps fearful that Twyford keeps his promise to remove the RUB) does not need to sell to a developer, they might instead sell to a speculator. The speculator might think the planned supply constraint on land around Auckland City for the next 25 years will cause a woeful undersupply of housing in Auckland. And that some future council will subsidise the development of the land.

The speculator might be right.

Sorry, bad wording on my part.
The argument is that the retail customer doesn't bear the burden. I shouldn't have put the clause in about the developer.

Your second point.
Luckily in economics (unlike property development, obviously) we understand that the market isn't characterised by a singular hypothetical agent such as a speculator.
Good on him if he does that, but it is very unlikely that he is representative of the distribution of agents demanding land.
The smart speculator is the one buying land outside the growth boundary, not inside the future urban zones.

I have heard that around about when I was born (early 90s) the brits raised taxes on investments to over 100% resulting in a lower overall tax take and a reduction in the cost of some financial products to do with transferring wealth overseas.

The infrastructure has to be paid for in some manner. There are 3 basic mechanisms

1) Developer contributions
2) Targeted rates
3) General rates

Everything else being equal, & barring inefficiencies, the end cost should be similar. Its a matter of how the costs are distributed.

Given that it is the end user that generates the demand for the services personally I think targeted rates are a more appropriate mechanism. They keep the front end cost of housing down as the costs are paid through cashflow.by the actual user.

I don't see much wrong with the combination of these to fund necessary infrastructure, indeed. We do need to insure that contributions are used for what they're intended, obviously. (E.g. I'm aware Auckland's previous assortment of councils didn't always do this. No idea about the super-dooper-efficiency-city.)

Auckland council should just keep issuing fines ............... $1,27 million in fines for using the bus lane for example .

Thats only $1 per person in the Auckland region.. sadly that is nowhere near enough to bail out the Auckland council. Just throw a 15% rates increase out there and get it over with. Then take the axe to the ACC salary bill. cut 20% off it across the board, and it the head of dept says he can't find 20% to cut, he's first on the line.

They have overspent and are now broke. So they are looking at every single way to wring money out of us ratepayers.

With Auckland suffering under very high land prices, which degrade its ability to build housing.

The council decides preferred solution is enforce a massive tax against the development of land.

Wow, just when you think Auckland Council can't get any more useless, they prove you wrong.

It's because land owners don't want to pay what it's going to take to manage infrastructure for their land. Thus, a different target has to be found. Can't just put up rates to a realistic level for a "global city".

As an existing land owner in an area that is fully developed and benefits from next to nothing of the new infrastructure why should I pay anymore in rates? Target the areas benefiting from the new infrastructure and see how quickly the support disappears.

As an existing land owner in an area that is fully developed and benefits from next to nothing of the new infrastructure why should I pay anymore in rates?

Because you benefited from the contributions of others toward the infrastructure that serves you too. This is how NZ society works and how you've benefited from it.

Or did you pay the entire cost of infrastructure that serves your house? How much was that? Roads too, and the bus stops you use?

(I am not saying current rate payers should replace infrastructure contributions on new developments. Just pointing out that even maintaining existing infrastructure and bringing it up to speed requires greater ongoing investment than we've been making. e.g. incl wastewater.)

If my rates increases only reflect maintenance then the budget director deserves to be shot. The house was built in the 1980s. How long does it take to pay off the infrastructure I use?

It is very unlikely you are "an existing land owner in an area that is fully developed". When the council rezones your land for greater density, there would be a development charge associated with any building that occurs in your neighbourhood to pay for the upgrades to the area. This charge will depress price increases in your area.

This charge will depress price increases in your area.
So now the land owner absorbs the cost?

You have just been arguing with me about how land owners don't absorb the tax...

Evidence shows that rural land in Auckland that gets re-zoned as future urban receives a significant uplift in value. The announcement of impending infrastructure development and then building that infrastructure multiplies land values by a factor of 40 or more, from around $50,000 per hectare to between $2.25 and $3.25 million a hectare.

I call BS.

The announcement that the land has been blessed with the magnanimity of the great Phil Goof, so at some point it may be developed causes the price to rise. The luck inherent is avoiding the fate of almost 90% of the land surrounding Auckland, where development is banned forever is represented in the price increase. The funding for development is of minor benefit compared to the land supply restrictions his Goof-ness imposes.

More accurate DCs will discourage development, because there is not a sufficient amount of land. His Goof-ness has cut land supply and now wants to tax the land to make it even less attractive to invest in. Auckland's current utterly pathetic building rate will slow even further.

Yes notice how they say "more accurate" - not "higher".

Development Contributions didn't even exist until 2005 - somehow we got a long before that. And with a lot less debt.

The main point I want to make though is that rural land only becomes worth a lot more with residential zoning because there's bugger all of it zoned for residential. If you zoned it all residential for say 50km around Auckland, watch how cheap it suddenly gets. Supply and demand is all it is.

If you zoned it all residential for say 50km around Auckland, watch how cheap it suddenly gets. Supply and demand is all it is.

I agree with your sentiments, but it is supply and demand specifically to Auckland City and the actual distance is 4 km.

Ironically in 2016 Phil Goff did open up most of the useful land 50 km away from Auckland. The latest modifications to the AUP added 50% to exurban sprawl and stripped the RUB protections from every town (except Auckland).

Only in places adjacent to Auckland has development strictly forbidden.

http://www.waihekegulfnews.co.nz/protections-islands-rural-land-rubbed/

The 'economist' has also forgotten the time value of munny. If a DC of x is levied at the start of the dev cycle, then assuming a WACC of 10% and a total time lapse of 7 years from pony paddock to sold plots, the DC component of the carry is 2x. But public servants, in general, neglect this basic ECON101 aspect.....

This is so incorrect for many reasons as others above have already pointed out.

And quite rightly there has been strong criticism, this is not idle personal idiocy, but a ACC economist dreaming up ways to rort the ratepayer. His only evidence is that councils are so inefficient that they create so much extra cost it has to be subsidized. And this is not the first time ACC economists have promoted this line.

The cost of DC's won't come out of the original tranche of development land that has already been bought off the land bankers (Ie the next 5 to 10 years) because that land has already been paid for by the present owner without the burden of the development contribution ie it wasn't built into the price they paid and they would lose money if they had to pay DC's when they go to develop, so the new incentive is to sit on the land, and by default create a further shortage, with higher prices to help recoup the cost of the DC's.

I'm all for letting the the DC cards fall on those that cause them, but they should be allowed a competitive market to purchase the infrastructure from. Not the present council monopoly.

You would be surprised how much cheaper the DC's would be.

The economist works for Auckland council, not the accident compensation corporation.

Don't argue with an urban blogger, dtcarter.
They know best, mate.

In the posts I have seen recently, I hold them in no higher regard than the flat earth society.
With the exception of Brendon Harre.

These MUD set ups, do they normally build the sewerage treatment too? I would have thought you'd want a more regional approach there to get economies of scale.

Yes, they do, but they can do stand alone, down to the individual house level, to staged growth ie 20 to 50 households at a time to 500+ developments, and can also have hybrid schemes that can link into local council systems if that make sense. This makes it far more economical as you only pay as you grow, ie no need to over develop on the off change growth will occur at the rate you planned for.

The biggest inefficiency with the 'old school' wastewater systems is that they use water as a transport mechanism, so once you get the waste to the treatment plant, the biggest problem is separating the water back out. New systems keep and treat the solids very close to the source, leaving minimal water needed to be moved anywhere, which can also be treated very close to source.

CHCH for example had to fix pipes to over 20km distance to take waste from one side of the city to the other, when at either end of the system ie the house 20 kms away and the treatment station, there was very little damage.

Re economy of scale. In many cases with modern STEP wastewater systems, it is no more expensive to do one house or 100 hundred. Also economies of scale is a U shaped curve in that the 'economy' has a sweet spot, after which it gets further inefficient. Council's are at the far end of the inefficient end.

Also many people make the mistake in thinking scale is the solution to fixing the inefficiency of not enough volume, but the inefficiency issue they have is normally inherent regardless of volume, so if you build one house inefficiently, then you only multiple the problem the more you build, ie get less efficient.

Have we been misleading ourselves? Are we really a very environmentally destructive nation, but think we are not? It occurs to me that we have had successive governments that have sponsored lots of population increase, both from immigration and via tourism. How many thousand hectares have we thus despoiled over the last 20 years?

Are we just a bunch of pious hypocrits, banning anything distasteful and ugly to other less fortunate lands, whilst enjoying the fruits of our forefathers' efforts?

The green Lie Roger. When i fly Nth to Sth I look at the tiny remnants of NZ bush. Every bit of flat land in the Nth Island has been captured by agriculture. To have any wilderness experiance in the Nth Is requires one to climb steep hills and ridges. Farming/forestry has been allowed to dominate thinking in this country without challenge for far too long....irrigation being the latest death knell to our landscapes and ecosystems.

We are an environmentally destructive species fullstop.
We take any energy source we can and disperse it.
And we disperse 1000 times + more energy per person than 100 yrs ago...
True environmentalists must
- live like bushman
- limit their population

NZers are anything but environmentalists.

"subsidising - not taxing or prohibiting - secondary suites in residential houses."
"In Vancouver almost half of all new residential homes now contain one or more secondary suites. And many older houses in well established residential areas have built secondary suites within their homes. A major policy change came in 2004 when City councillors reformed the zoning laws to legalise the large and growing stock of "grey market" secondary suites in the city. In Edmonton, new policies involved subsidising - not taxing or prohibiting - secondary suites in residential houses."
https://www.stuff.co.nz/nelson-mail/opinion/84790755/secondary-kitchen-t...