Housing affordability: Nick Smith leaps on council development charges

Newly appointed Housing Minister Nick Smith has wasted no time on returning to Cabinet with the announcement of a fundamental review of the way local governments charge developers for infrastructure like roading, drainage and water.

The growth in so-called "development charges" by councils was identified as one of several reasons for too many New Zealanders facing unaffordable housing costs in a report by the Productivity Commission last year.

In a joint statement with Local Government Minister Chris Tremain, Mr Smith released a discussion paper intended to respond to what he said was a major cause of section prices more than doubling over the last decade.

The government is already warning local councils, especially in Auckland and Christchurch, to take action to free up available housing land or face central government intervention to require it, as the issue of affordable housing gains political heat.

"A significant factor (in rising development contributions) has been the sharp rise in the development contributions charged by councils," Mr Smith says.

"The average charge nationally has increased from $3000 per section to $14,000 per section over the past decade, an increase of 360%, and can be as high as $64,000 per section.

"These costs need to be contained if more Kiwi families are going to be able to afford their own home," says Mr Smith, who authored major changes to the Local Government Act 2002 last year, just before resigning from Cabinet over the Bronwyn Pullar scandal.

The Act will require changes again to reflect whatever the government decides to implement.

The discussion paper includes options to cap the charges, tighten the criteria, reinstate appeals, provide discounts for types of housing, change the timing of charging, enable alternate provision of infrastructure and abolish the charges.

"Development contributions are needed to enable councils to provide the necessary infrastructure to support new developments, but we also need to ensure the costs are fair and well justified," Mr Tremain says.

While there were "pockets of excellence" in local governments' infrastructure procurement, "we want to build on this to achieve greater consistency and certainty".

The paper builds on the recommendations of the Productivity Commission inquiry into Housing Affordability and of the Urban Design Technical Advisory Group that raised concerns about the way the system of development contributions has been working.

Submissions are due by March 15. The Department of Internal Affairs is managing the process.

(BusinessDesk)