Housing affordability plan misses hidden costs
Government moves to improve housing affordability ignore the hidden costs of development that make building cheaper houses severely unattractive to property developers.
Tuesday, November 6th 2012, 12:00AM 
2 Comments
by The Landlord
The Government announced last week that it would be looking at measures such as increasing land supply for new housing, introducing a six-month time limit on councils processing medium-sized consents, and measures to reduce delays and the costs of Resource Management Act processes.
All in the hopes of making housing more affordable, particularly in Auckland.
But these moves still all require someone – probably private developers – to build houses that will sell in the low to middle price brackets.
And they do not address the fact that developers have to contend with so many hidden costs along the way that it just makes good business sense for them to want to offer as expensive an end product as possible.
Council and infrastructure costs have skyrocketed over recent years.
In Auckland between 2002 and 2005, more than 12,000 residential building consents were issued each year.
But since 2005, when council development contributions were introduced, that number has fallen sharply. Since 2009, barely 4000 have been issued each year.
Development contributions are fees collected for community and network infrastructure when new houses are built. Auckland Council says they are about 8% of the cost of development.
There’s also the Watercare infrastructure growth charge. This has increased 100% over the past two years and looks likely to grow at a rate of at least 10% a year for coming years.
The Watercare infrastructure charge for the July 2012 to June 2013 year is $6900, plus GST, per home.
And that’s whether it’s a 70 sq m apartment or a five-bedroom home in the suburbs. It’s not hard to see why developers think building big, expensive homes is a more attractive proposition.
Cheaper houses should come with fewer council and infrastructure costs, if the Government is really serious about building affordable homes.
| « Prospect of Govt meddling in market alarming | Govt meddling puts economy at risk » |
Special Offers
Comments from our readers
As a matter of need, why is Council needed at all?
Sign In to add your comment
|
|
Printable version |
|
Email to a friend |
No wonder, Govt will not raise any voice with her own costs.
I just recently finished subdividing and building a 2-storey house in Mt. Albert, Auckland.
Council fee was the biggest "rip-off" in it.
Development levy 24686.82
Resource Consent 4725.9
Building Consent 5484.6
Power Vector 4047.66
Watercare 8046.5
Other council charges 5000
TOTAL 51,991.48
These costs added 15% total cost to subdivision and building costs.
How can you justify these costs?
The same council fee was only 28.1 pounds when original house on this site was built in 1956.
Developers would certainly pass them on to the buyers thus increasing the house price.